This is huge news and we wanted all of you to be the first to know. It is now official, Digital Dream Labs owns all of Anki (*assets - patents, trademarks, data, social media, and domain)! We acquired these assets as the highest bidder from an auction.
Because this development is dramatically helpful to our business, and therefore investment interest may increase, we have extended our crowd-raising campaign until January 15, 2020. You will see an email come from Republic that will ask you to reconfirm your investment. You will have five days to respond or your investment will be canceled. We’ve sent you an email and will send a couple more to make certain you don't forget!
So what now? We will be reaching out to the 6.5 million customers Anki has, introduce ourselves, and inform them that it is our intention to continue operations and incorporate Anki's intellectual property into our platform. We will also suggest to the 19 million mobile handsets out there that use Anki's platform that they check out our products and offerings in the meantime! After that, we will be working quickly to establish function and control under the Digital Dream Labs umbrella by September 2020.
Why did we do this, you may ask? For a multitude of reasons, but the biggest being market presence. The issue we've had since our inception, and many investors on this platform have correctly pointed out, has been marketing. This goes a long way to correct that issue and gives us access to millions of customers for what works out to a fraction of a penny on the dollar. We could not envision a more cost-effective method of expanding our reach while, at the same time, bringing aboard beloved robots and racing games into our family of products.
We figure you will have a lot of questions and we encourage you to ask! We've been studying this opportunity since we became aware of it in September and hope we have examined it from all sides. Regardless, please post questions below and we are going to go ahead and preemptively answer some questions that deal with risk we figure some will want answered.
Q1) Why did Anki fail?
A1) There are several factors that can lead any business to go under and we can only comment as far as what we saw in the financial statements that we examined. The cost of research and development far outpaced sales in 2018. This led to a short fall that Anki financed, but then defaulted in the loan which led to the auction. As soon as this happened, it was very hard for Anki to rebound.
Q2) How will you not suffer the same fate?
A2) We are fortunate that the cost of R&D is finished, that we are in a lower cost area of Pittsburgh versus Silicon Valley, and we have a functioning platform and know how to ingrate these assets strategically. In retail, the cost of Vector, in particular, was very high and made it difficult for widespread market adoption. There are revisions to this business model we are going to apply. We think these changes we will generate bigger margins and wider acceptance in the marketplace. The sales acceleration of current products resulting from our merger will also propel our revenue to cover costs.
Q3) How much did you pay?
A3) We can't really get into specifics here just yet. We did not pay much and in fact, the biggest cost to this deal is taking on the licensing agreements from third parties like cloud services. The cost of the purchase is not significant to our balance sheet in terms of liability and does not make a serious change to our runway or cash on hand.
Q4) This all sounds too good to be true. What's the catch?
A4) Yes, this is a great deal and we are very fortunate we were in the right place at the right time. We're reminded of the quote from Thomas Edison, "Opportunity is missed by most people because it is dressed in overalls and looks like work." The catch is that this is going to be A LOT OF WORK! 2020 was going to be very busy for us already and this is going to be even more work. We are pulling additional people on and have been having discussions with former Anki employees to learn the systems that are in place to make the process more seamless when we take over. We are doing this in a stepwise fashion, however, so as to not inflate our burn rate too quickly.
Q5) How are you going to relaunch the products?
A5) Cosmo was the major reason we were interested in Anki. It will pair perfectly with our PlayTray. Now we own our own robot! We are going to launch that part of the platform first. Then we will take on Overdrive. We will need to examine the business model surrounding Vector before we can relaunch that product. In the meantime, support for all product will continue uninterrupted.
Q6) What about the debtors and other vendors left behind that Anki owed money to?
A6) We have purchased the assets from what is called "Assignments for Benefit of Creditors" which is an insolvency proceeding governed by California State Law. We think of it as "bankruptcy light". Anki is an empty shell and cannot pay back its creditors. The company is extinguished, and we do not take on those liabilities. We have only purchased the assets, which are not physical.
Q7) Is there anything wrong with these assets?
A7) We did a lot of due diligence. As in any company that fails, certain things get left unattended. There are a few patents that require maintenance fees to be paid and there are a handful of patents that the Patent Office considers 'abandoned'. There are ways to reverse some of this, but none of these patents are critical to what we consider interesting in the platform. There was also a patent infringement case logged against Anki as Anki was failing. There was a default judgement rendered. Again, this was against a company that no longer exists, and we are separate from those proceedings. However, we have reached out to the plaintiff and had a discussion. While commercial terms still need to be negotiated, we are confident we can move forward with them with a clean slate.
Q8) In your opinion, what's the worst-case scenario here?
A8) In the unlikely scenario where everything goes wrong and we are unable to anything we want to do; this acquisition becomes a glorified email list purchase that will still drive revenue.
Q9) Aren't you already spread thin, a least from a time and attention standpoint?
A9) While nothing worth doing is easy, we have already built a pipeline with our partner Wonder Workshop to control their device Dash. With this experience under our belt, we should know a thing or two about this new integration. All projects, including our chemistry game, are ahead of schedule. If we need to sacrifice anything to build more bandwidth for people, it will be a delay of the Puzzlets 3D game. The fact we know have our own robot we can use and control, expands our platform greatly.
Q10) Are the funds from Republic going to be enough to take on this project?
A10) We have analyzed the situation and we will support the growth of the platform with cash from operations. If we do need to fundraise, it will be in the form of a Series A after the Republic raise.
Ok, we think that will cover a lot of potential questions. Now we must get back to work! Thank you for your ongoing support! We are excited about what we can show you we can do in 2020! OFF TO THE RACES!