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LottoGopher Holdings (CSE:LOTO) CEO James Morel: A Visual Podcast

— James West

LottoGopher Holdings Inc. (CNSX:LOTO) begins trading Tuesday, May 23, 2017, and CEO James Morel joins James West on a visual podcast to discuss the company’s business model and value proposition to investors. Watch, Read, or Listen!


Hey there! My name is James West, and you’re listening to and/or watching the 4th episode in my new Visual Podcast series, which showcases companies in which I am an investor. There has been no compensation received for production or distribution of this podcast, though listeners are cautioned that I do own a substantial amount of shares which have been purchased at what may be significantly lower prices than that at which this company’s shares are trading at the time you listen to this podcast. Today, my featured company is newly listed on the Canadian Securities Exchange under the symbol LOTO. And as the symbol suggests, this is a company that is in the U.S. Lottery Ticket business. LottoGopher Holdings Inc is based in Los Angeles, and California is the first state of 22 states that the company expects to launch its offering by mid-2018. Joining me now is LottoGopher CEO James Morel.

James West:    James, thanks for joining us today.

James Morel:   Thank you. Thanks for having me.

James West:    James, I’d like to start – what’s the value proposition for investors in LottoGopher?

James Morel:   Well, we like to say that the only way to guarantee that you win the lottery is by investing in LottoGopher.

James West:    Okay!

James Morel:   What our site does is allows California residents to order their lottery tickets online, so they don’t have to go to the store, they don’t have to pay cash, they don’t have to stand in line. They can use their credit cards and play from the comfort of home. People describe it as the Netflix of lottery. Everything is done digitally; you don’t have to go the old-school method, and really, it’s a chance for them to participate in a new reinvention of an age-old game.

James West:    Sure. And how does a customer, how much does it cost for a customer to participate, and what is the full range of benefits that you can offer them?

James Morel:   Well, we charge the same price as the tickets at the store. So Powerball tickets are $2; Mega Million tickets are $1. We charge that same price. In order to gain access to the features, there’s a membership, so you pay $12 a month, or $99 a year, and you can order all the tickets you want for the same price as the store. It also gives you the opportunity to play in some of our public lottery pools. So you can pitch in your ticket with up to 100 other friends and strangers on the site, and if any one of those 100 tickets wins, you win.

So this is new, this public pooling. We also have the option to take your office pool privately online. So this way, nobody has to walk around collecting a dollar from everybody, people don’t say “I don’t have the money, but just count me in”. I think we’ve all heard of the lawsuits that happened when somebody wasn’t at the office the day the pool won.

So we take it all digital. We do all the tracking, we split all the prize money equally; we don’t take any of the prize money, it goes all to the pools. Or, you can play on your own. You order a ticket for the next game, or you can get a subscription and get tickets for every drawing, so you’re always playing. You never forget. And we’ll let you know when you won.

James West:    I see. And so do you have customers now? If so, how many, and what’s the revenue picture look like?

James Morel:   So we do have customers. We’ve been in a closed beta and then an open beta for some time now, testing the features, seeing what people like, seeing what they respond to, and we’ll be able to release all of our numbers at the end of this quarter so people can see exactly how many people are playing, how many people are onboarding as word spreads about the service.

James West:    Sure. How many lotto players are there in California?

James Morel:   Well, the statistics say that a little over 50 percent of Americans are buying lottery tickets. So in California you’ve got 26 million people, so about half of that. So about 13 million people that are playing the lottery.

James West:    Wow, that’s pretty big. Are there other competing lottery services like this in California?

James Morel:   So this is a big business in Europe. There is a number of players, meaning players in the industry, that offer these services in many European countries. One of them is one of our partners and shareholders called Lottoland, and last year they did just under $500,000,000 in revenue, and they only got started in 2013. So this is – we’re looking to mimic in the United States, which is actually a bigger market than they have in Europe, entirely untapped. Right now, we are the only web service that is providing this in California. There are a few other companies that are working on different angles, but I’d say that we’re certainly the most entrenched and the only ones offering it right now on the web in California.

James West:    I see. So Lottoland, basically $500,000,000 in revenue, invested in LottoGopher because they obviously have experience in the space. Are they going to provide you with any sort of additional benefit by being a shareholder? Will they be on your advisory board or anything?

James Morel:   So their General Counsel, Lloyd Lemmon, is one of our directors, so they do sit on the Board, and part of our agreement with them, they saw LottoGopher as their way into the United States. They’re based in Gibraltar, they don’t understand the American market as much as someone who lives and grew up in America. So we got together. They said ‘we’ll go ahead and provide you with all of the knowledge that we’ve learned in acquiring our 2 million-plus customers, what works, what doesn’t work, how we do it’ and they’ve been very helpful in structuring things for us.

So again, after this IPO, when things start going, people will see exactly what’s been working over in Europe will be applied here in California.

James West:    Right. Wow. So the experience of Lottoland, so they grew from, sorry, did you say 2013?

James Morel:   Yes, 2013. Their first year revenues was about 30 million Euros, and as I said, last year they’re approaching half a billion.

James West:    Well that’s just incredible. The State of California is the only place where LottoGopher is going to be operating?

James Morel:   So right now we’ve been testing in California because that’s where everybody is from, and we know the market, we’ve met with the California Lottery, we know the vendors personally where we’re acquiring our tickets. However, the game plan is to expand to at least 22 of the other 44 lottery states. So we’ll be in a couple of months, we have a rollout plan to go into these markets the same way we did in California, and that really opens up the market size; it’s an $80 billion lottery market in the United States.

There’s a lot of business to be had for us.

James West:    Okay. So then, the buildout into 22 states, how long will that take?

James Morel:   It’s fairly aggressive; this is, for us, we’ve been planning it, so a lot of the advance work really makes it go faster. We should be, by the middle of next year, 2018, fully operating in those 22 states.

James Morel:   Yeah. So the revenue model is nice because it’s recurring revenue. Anything that’s subscription based, as you’ve seen many, many companies build themselves this way, is fantastic. So we’ve got our monthly customers, we’ve got our annual customers, and as the customer base grows, so does those membership fees.

James West:    Mm-hmm. Wow. So how does this really compare to Netflix? I guess the fact that you don’t have to get in line and pay cash is the main benefit, because that’s what you’d have to do in California?

James Morel:   Yeah. So you have to go to a store, I think we’ve all seen what some of these stores look like; they’re not the most pleasant place to hang out, at times. But as far as Netflix, what you have here is an all-digital experience. So if you go to the store and you get your ticket, that ticket you could misplace, put it in your car and can’t find it, and there are millions of dollars in unclaimed prizes every year in California.

So with us, once you place your order, we get your ticket. It’s securely stored until the drawing, and cashed in for small winnings. For large winnings, it is hand-delivered to you so that you don’t have to worry about the security of your ticket. I would say that you’re paying a monthly fee, we’re taking care of everything for you, and Netflix is the same way. Instead of going to the video store and going to pick out this big boxy tape and bringing it home, and maybe you forget to return it, Netflix just streams it to you.

James West:    Wow. Interesting. Okay, James, let’s leave it there for now. We’ll come back to you in a quarter’s time and see how the company’s doing. Thank you for your time today.

James Morel:   Great. Thank you.

Disclosure: I am a shareholder of LottoGopher. The company is not a client, and no fees have been paid for the production or distribution of this video.



James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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