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Technology Stocks : Internet Guru Discussion

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To: Francis Gaskins who wrote (3096)10/4/2014 9:22:35 AM
From: StockDung1 Recommendation

Recommended By
Glenn Petersen

   of 4337
Mr Gaskins, when was it when you turned IPO crook? You read the same script as Thomas Heysek and where very involved with Bryan Kos in the Absolute Health and Fitness, AHFI fraud. I would ask Kos more about your involvement but he currently is in Federal prison.

Here are some of the people who paid Francis Gaskins to read from a script and tout Concorde America with Thomas Heysek

Anatomy of Stock Fraud

This is a description of the largest penny stock pump and dump fraud in US history that I'm aware of: the people involved and how it was done.
Watch Francis Gaskins read from a script promoting this fraud for criminals.

IPO Francis Gaskins with AHFI Interviews

Page 1 Francis:Hello, this is Francis Gaskins. I'm with IPO today we're talking about Absolute Health and Fitness, AHFI. And we're joined by Brian Morris. Hi, Brian. How are you?Brian:I'm fine, Francis. Thank you. Francis:Great. Thank you for joining us. Brian is CEO. And Thomas Flynn. Hi, Thomas, how are you?Thomas:Good morning, Francis. Francis:Thank you for joining us. Thomas is Vice President Sales and Marketing. We've prepared a very interesting show for you today and I think you'll find it fascinating. It involved health and fitness, of course, which impacts all of us. Perhaps we could just go over some of the highlights in the introduction. You could tell us a little bit about why we're here and about the industry and a little bit about the size and about the number of locations. Brian:Yeah, the biggest thing that we can tell is that the health and fitness is an 11 billion dollar industry. There is currently over 8,000 health club chains or facilities around the country. Approximately 4,500 of them are mom and pop smaller facilities that are not conglomerated together. So the industry is really fragmented. And our mission is to try and put them all together and to try to create a package or an opportunity for investors to make a lot of money. Francis:And what is the average revenue per location in general?Thomas:I would say probably between 800,000 to 1.2-1.3 million. Francis:O.K. and a lot of them I think are clustered at the 1.2-1.3 million. Thomas:The majority of them, yes. Francis:Quite a bit of revenue. Brian:Yes, it is. Francis:So it sounds like it's a fragmented industry. There's a lot of participants and are there other fragmented industries that you're aware of where companies have done what we call a "roll up strategy" of acquiring companies for public vehicle?
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IPO Francis Gaskins with AHFI Interviews Page 2 Brian:Yes, there is. There's two really major players in the market. The first would be Blockbuster. You know, there was a lot of convenience stores that had retail videos in those facilities. And Blockbuster came along and kind of just merged them all and bought them all. And now when you think of movie rentals you think of Blockbuster. Another great opportunity was in the early 80s there was a lot of mother-father convenience stores in small towns. They kind of dissipated and went away with the emergence of 7-11, Quick Marts, food convenience stores at every gas station. Francis:I can really remember that. I can remember there were a lot of mom and pop video stores. And then they came into the corporate vehicle, didn't they?Brian:Yes, they did. Francis:And then they acquired them. Brian:And they just took over. Thomas:Right and contrary to that, it isn't such a good strategy for some companies such as, or industries such as this lawn care, dry cleaners, where there's a low start up. There's not a lot of money to get into that market. It's not a very god strategy to roll these businesses up. Francis:So the roll ups can happen successfully in the service business but some of the service businesses aren't applicable. And the one thing that's common about some of the businesses you mentioned is there's not a lot of capital investment. Whereas in the care and fitness business, there's.... Thomas:Significant numbers, yes. Francis:How much investment is there per location on the average, do you think?Brian:For a start up I would say between $500,000 would b a nice estimated number. Francis:Between 5 and $600,000?Thomas:Sure. Francis:Right so that shows why a roll strategy has a lot of potential in your business. And you've had a lot of background and you've had a lot of management experience in the business.
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IPO Francis Gaskins with AHFI Interviews Page 3 Brian:Yes. Francis:And we'll be getting into that and look forward to that. Let's talk a little bit about the market. You were telling me before the show about the different demographics. Like 18-34 and the over 30 crowd and... Thomas:Correct. Francis:What kind of numbers do you have there?Brian:The demographics there is 180 million people which represents 61% of the population. Of that population, the Baby Boomers represent 76 million people. So that' a lot of people or a lot of potential members out there that potentially need to go somewhere. Francis:That' a big percentage. Brian:Yes. Thomas:And most of the 8,000 clubs that are in the United States, they tend to target more of a demographic between 18 and 34. So they're missing out on a large part of the population. Where we would like to target more of 18 to 80 years old. It doesn'tmatter. We target everybody. Francis:Right and I think a lot of the Baby Boomers plan to live longer and healthier by implementing an exercise program. Brian:Sure. Thomas:We're very active. Francis:A good percentage of them already do but aren't members of the health clubs. Let's talk a little bit about the profile of the centres. The average revenue per centre if you take the 11 billion dollars and divide it by the 8,000 locations is about 1.3 million?Thomas:Right, probably about 1.3 million. Some of the smaller clubs as low as 800,000. Francis:O.K. could you talk a little bit about how that business works in terms of cash coming in or accounts receivable or inventory.
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IPO Francis Gaskins with AHFI Interviews Page 4 Thomas:Well, it's definitely a cash business. One good thing about this business is you create large revenue streams. Most memberships are sold on a contract basis where automatic bank drafts, electronic payments guarantee revenue streams for 2 sometimes 3 years. So you're guaranteed a monthly income with there contracts and with these electronic payments. Brian:So you're not really starting over every month. You've got a residual effect that keeps growing and growing and growing over the years. Thomas:Exactly. Brian:And once you've created a system that grows and it continues to keep growing, the potential is unlimited. Thomas:As you build these revenue streams, it grows and grows. It covers your expenses and you could possibly get to a point where these revenue streams cover operating expenses, payroll and even make the clubs profitable without even selling a membership the next month. Francis:So it's really a subscription cash-based business?Thomas:Very much so. Francis:And there is by definition no inventory?Brian:No. The only inventory would be just the basic equipment that every facility would have but it's under contractual leases. And they basically recycle themselves and we get new equipment. So we're constantly making our facilities brand new and exciting again. Thomas:Basically operating expenses are very low, very low. Francis:As a financial analyst I'm always impressed with companies that have subscription revenue at the top line and then also have cash coming in when they don't have receivables, which is characteristic of your business. Thomas:Exactly. Francis:Good. We've talked about the markets and the segments. Let's talk a little bit about the market players. Go ahead.
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IPO Francis Gaskins with AHFI Interviews Page 5 Brian:I don't want to interrupt you but when you're talking about the 8,000 facilities around the country, you know, there's 5 major players. You know, the Bali's the Gold's Gym, the 24 Hour Fitness and the World's Gym. All those major players represent about 4,300 of the facilities. So that leaves another 3,500 potential acquisitions out there that are small mom and pop stores that need to be all conglomerated, all put together underneath one umbrella and will all work together. Thomas:Most of these clubs are run by people that are fitness enthusiasts that may have come into a little bit of money and thought well this is my hobby. Why not get involved in something I want to do? And a lot of the times the mistake these people make is they treat it like a retail store. They may do a tiny bit of advertising or they may just open the doors and wait for the customers to come to them. Where with our formula we've realized you can be successful that way but not as successful as we'd like to be. You have to go out and get the people. Everybody's a potential prospect that you have to go out and get these people. You can't just open the doors and wait for them to come to you. Francis:So you have a tried and true cookie cutter approach and we'll be getting into that. Brian:Definitely. Francis:Part of what you're saying is one of the reasons they'd want to work with you because you can overlay your proven success pattern.... Brian:On top of that. Francis:Right. Brian:Not only is the individuals that Thomas mentioned that have come into some money, which are typically younger individuals. But there's also a percentage of people that are over 50 that are looking at this as their retirement. You know, they've invested their money at the normal 9-5 job and they're using this as their means of retirement. And they don't want to take too many risks or gambles because this I all that they have left. We're going to be able to provide that we can come in there and show them that we can generate a lot of revenue and a lot of potential investment opportunities for everybody to make a lot of money. Francis:O.K. before we leave the topic, let' just talk a little bit more about the structure. How many YMCAs are included in the 8,000?
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IPO Francis Gaskins with AHFI Interviews Page 6 Brian:There's about 2,500 currently. Francis:O.K. and they really need to be included because they are a fitness centre. Brian:Yeah. A major player of the health and fitness with a number of locations. But they're kind of segmented that it's kind of a family environment not an individual environment. Thomas:Right. Brian:We really don't want to gear or focus our energy towards that market, more towards the individual clientele, the 18, not just to the 35, but more the 18 to the 50s, to the 60s. Thomas:Right we're more of a results oriented facility rather than recreation, which is what the YMCA would be. Francis:Right, so then there's about 1,800 left and I think Bali's has how many of those?Brian:420 locations. The franchisees of, which are Gold's Gym and World's Gym, represent 960 locations. There's also 300 locations which are 24 Hour Fitness. So combined that represents 1,700 of the market players, which leaves another 1,000 left over which are not really facilities that are going to be geared or structured towards what we're looking for. You know, Bali's is more of a facility that out of the realm of what we're trying to accomplish. Thomas:They have a very different formula than what we have. They have much, much larger facilities with much higher operating expenses. I think the operating expenses at most of these facilities are somewhere along the lines of 2.3-2.4 million, which makes it much larger to turn a profit, obviously, especially when they're marketing to such a smaller segment of the population like we discussed earlier - 18-34 year-olds. Francis:Alright, so most people are probably familiar with Bali's. So their average revenue to expense would be 2.3 million, which is above the average for the industry which is 1.3. Thomas:Sure. Francis:And it sounds to me from our discussion before this that you have a success
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IPO Francis Gaskins with AHFI Interviews Page 7 pattern where your financial are better or at a slightly lower revenue base. And there are a lot of companies out there and you're operating some of them now. Brian:Correct. Francis:So we'll be getting into that. Of the market players, which ones are public?Thomas:Currently there are 2 publicly traded health clubs. One of them being Bali's and the other one being the Sports Club. Bali's has about 2.3 million dollars in revenue per club whereas... Brian:The Sports Club has 10 locations, which is 13 million. The industry average is 1.3 million. There are approximately 3,500 available to us. Thomas:We're going to go after the profitable ones. Brian:And those are the locations that we're going to go after, the ones that are very profitable. Francis:O.K. there's 2 public companies. Bali's has an average revenue of 2.3 million per location. Sports Club has an average revenue of 13 million per location. So they're a lot higher. The average is 1.3 million and you said there are 3,500 locations out there. So what you're going to be doing is looking at those locations and picking the ones that are... What are your acquisition criteria? Thomas:Near profitable, good demographics, which like I said before we look for everybody, but densely populated areas, very important. Brian:Yeah, we want to look for locations where the growth is still, you know, a possibility and it's going to continue, that the facilities themselves have an opportunity to make a large amount of money with a small amount of investment so that our investors have an opportunity to make a sizeable return off what they invest with us. Francis:O.K. and you have a successful cookie cutter approach and we'll be getting into that. You'll be overlaying that. Let's talk a little bit, for the viewer, about why these owners would want to sell to you. Brian:Well, like we talked about before there's really like... of the 4,3000 potential facilities out there there's 2 types of owners: the young individual that is in their 20s that inherited a lot of money or came across some family money or the
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IPO Francis Gaskins with AHFI Interviews Page 8 individual that's 50 years old that's looking at it as their retirement opportunity. We're going to be able to go to these investors and say, "you know, this is a way out for you guys. This is an opportunity for you guys to let us take over your facility with an acquisition and create a large return for you." Thomas:We eliminate the ceiling basically that they're facing by being privately owned. By being acquired by a public company, the potential is endless. Francis:So if they join with you and you have a group of companies that are successful then it seems like it diversifies their risk a little bit too. Brian:Very much. Thomas:That's it, sure. Without having all their eggs in one basket, being the privately owned club that they may own or couple of clubs that they may own, they're now part of a much, much bigger picture, a public corporation. Francis:O.K. is there any other public vehicle out there as far as you know currently with the same acquisition roll up strategy in your business?Brian:No. In the health and fitness industry there are none. Francis:So you're a unique opportunity?Brian:Very unique. Francis:O.K. can you tell me now why you went public?Thomas:Right. Like I said before, by acquiring these privately owned health clubs, we eliminate the ceiling that may be in place to a private owner by operating one or two small facilities. They become part of a bigger picture, an expanding picture. Brian:Right and by taking all these smaller facilities together, it'll be more comfortable for them and more of an ease of sense that they can work together as big ol'family and work together with us. What that will do for our investors, it will increase our cash flow as well as increase the net value of the facilities. Francis:Could you tell us a little bit about the current operations, please? Thomas:Sure, Absolute Health and Fitness currently operates 3 facilities with a 4th business unit that's going to start operations around August 1st.
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IPO Francis Gaskins with AHFI Interviews Page 9 Brian:On top of that, we're going to be acquiring 8 existing facilities that we manage right now. Francis:O.K. do you have the numbers for the 2003 fiscal year for those 8 facilities? Brian:Yeah, for 2003 those 8 facilities generated sales of 8.2 million with a pre-tax dollar of 2.4 million. Thomas:Once the acquisition is complete, 2004 we expect revenue of around approximately 23 million. Francis:O.K. it sounds like there'll be positive cash flow. Brian:Very positive. Thomas:Very much. Francis:We discussed earlier, it's a cash business. Brian:Right. Francis:O.K. let's talk a little bit about the near term acquisition objectives. You were telling me before that there are already some chains of health club owners that have come to you and expressed an interest in being part of your operation. Brian:Yes, there are several owners that have come or have inquired about what we're doing, of maybe potentially of joining us and coming on and making that family of a lot of facilities going together at this. Thomas:Yeah, what's good for us is out of these mom and pop operations that are out there there are some people that are very successful right now and do own numerous facilities, 10+, and some of these owners have expressed an interest in what we're doing and becoming part of the larger picture. Francis:O.K. so it's a [inaudible] market in the sense that the owners know each other, don't they?Brian:Yes. Francis:So nothing succeeds like success. So they want to be part of this.
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IPO Francis Gaskins with AHFI Interviews Page 10 Brian:Part of it and they want to understand where we're going so they see getting in at the very beginning is going to be very beneficial for everyone. Francis:O.K. Let's talk a little bit about your internal growth and your cookie cutter approach because you were telling me before the show about some of the proven success patterns that you have. Thomas:Sure, I'd say our average size facility is probably about 15,000 square feet. Of course, we have some larger, some smaller. 15-18 is very successful for us. A lot of equipment. We try to get as many people per square foot as possible. That tends to lead to profit. Brian:Very good profit. What we've been able to do over the years is take our philosophy and our theory at the very beginning, which is gym number one, learn from our mistakes, which helped us on number two. Learn form one and two onto three, four and five, six and then so forth. So we're learning from our past experiences to make us stronger and better. Thomas:And now we know it's important to have a set formula to apply to these acquisitions because it's much, much easier to manage these systems rather than all the people that are involved. Brian:Correct. Thomas:So if we have a proven system that works, put it in place, it's easier to manage the system. Francis:O.K. well that leads me to the management question. I know you both have had a number of years in the business and perhaps you could share with us a little bit about your background and your management team's background. Brian:Yeah. I started 9 an half years ago. So this is going on my 10th year. I graduated from the Indiana University of Pennsylvania with a bachelor's degree in marketing and management. I started off in the fitness industry just as an enthusiast. I liked the idea of working with people and helping individuals. And I just was comfortable at what I did and took my approach and taught the staff underneath me. We became more successful. We got better and better over the years. Thomas:It's funny that he said that. Brian actually interviewed and hired me and I can
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IPO Francis Gaskins with AHFI Interviews Page 11 remember our very first conversation, we talked about things like this happening. We talked about going public. He was my manager. I was in sales for him and we talked about taking over the company and expanding. And we thought everything we wanted to do. Brian:When we first started off with the original [inaudible], our goal was to take over and just to dominate the market that we were in. And we pretty much have done that in 3 years, have just knocked out all of our competition because we have a proven method with our staff, our training techniques. We build from within, to promote from within. So we're creating opportunity and excitement for our staff which we can then take like the cookie cutter program and go to the next facility, drop that promotion and that package right in there and it's going to step right in an go. Thomas:Right. And rather than hire managers, we like to promote from within. Like he said, I'd rather train a manager, somebody that's familiar with the systems we spoke of. So it's easy for them to step up and assume a leadership role in one of these acquisitions. Brian:Managing the personnel is the hardest thing to do. We've been able to overcome that with our experiences, with our mistakes that we've made. The last 3 acquisitions that we've done have been seamless, straight through and smooth as silk. Francis:So you're from the industry. You're health fitness enthusiasts yourselves. Brian:Correct. Francis:And you've made mistakes but you're learned from your mistakes. Thomas:Sure. Brian:Most important. You can't succeed in business if you don't learn form your mistakes, if you don't have an open mind of thinking outside the box and trying to make yourself better. You're just going to stay where you were. We, at the time when Thomas and I started, we wanted to make this the best - not just in the demographic metropolitan area that we were in - but the state. Then the state would go to a region and let's see how big we can take this. And we have a system that's going to work for not just us but for all of our investors. Francis:Is there anything that you might like to add on a wrap-up basis for the benefit of
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IPO Francis Gaskins with AHFI Interviews Page 12 our viewers?Brian:Yeah. Thomas:Well, I would just like to say our formula works. We have a very proven track record in the acquisitions that we have done in the past, that we can take a struggling club to profitability. In a more recent acquisition it only took a week or two, literally, to take a struggling club and turn a profit. Francis:That's amazing. Brian:Like Thomas said, our system does work. You know, Absolute Fitness, we're a publicly traded vehicle. We also create the excitement and the opportunity for a lot of investors, not just ourselves but investors out there that want to make a lot of money, this is an opportunity for them to get in at the ground floor and step in and make a lot of money with us. Thomas:And become a part of something that's going to be huge. Brian:Something that's huge. Francis:Well, thank you. You have a lot of momentum going. And thank you very much for watching. We've been talking with two senior executives from Absolute Health and Fitness. Brian Morris, CEO. Brian:Thank you very much, appreciate the time. Francis:Thank you. And Thomas Flynn, VP of Sales and Marketing. Thomas:Thank you, Francis. Francis:Thank you. And thank you very much for watching.
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