Pc Tech Bp 7 3.5

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Pc Tech Bp 7 3.5

  1. 1. Business Plan Contact: Don Russell Phone: (312) 291-8317 Fax: (773) 818-6786 E-mail: drussell@piracycontroltechnology.com www.piracycontroltechnology.com www.mcvtechnology.com
  2. 2. __ CONFIDENTIAL – Do Not Distribute Without Permission 2 MISSION The mission of Piracy Control Technology is to revolutionize, reform, and restore control of music distribution by introducing technologies that eliminate piracy and increase profitability.
  3. 3. __ CONFIDENTIAL – Do Not Distribute Without Permission 3 Table of Contents Executive Summary ...................................................................................................... 4 Use Of Funds ................................................................................................................................. 5 Investor Proposition...................................................................................................................... 6 Company Ownership.................................................................................................................. 6 Company Location ..................................................................................................................... 6 Services .......................................................................................................................... 7 Product and Service Description............................................................................................... 7 Market Analysis Summary............................................................................................ 9 Market Segmentation ...............................................................................................................10 Market Needs .............................................................................................................................10 Competitive Comparison.........................................................................................................11 Strategy and Implementation Summary.................................................................. 12 Competitive Edge......................................................................................................................12 Marketing Strategy ....................................................................................................................12 Management Summary ............................................................................................. 14 Financial Projections................................................................................................... 18 Appendix ..................................................................................................................... 28
  4. 4. __ CONFIDENTIAL – Do Not Distribute Without Permission 4 Executive Summary Since the sudden arrival of Napster in the late 20 th century, the music industry has experienced an unprecedented upheaval in revenues and profits. Although companies in this sector have gone to extreme measures to combat piracy, including upending distribution chains and adding watermarks to promotional materials, experts have been unable to develop a comprehensive solution that retains consumer access to music while eliminating the pirated music market - until now. Piracy Control Technology, Inc. (also referred to as “PC Tech”) is an Illinois-based start-up business. PC Tech is the developer of Media Codec 5, or MCV, an innovative technology designed to prevent illegal piracy of music. MCV is a revolutionary new security platform that will help to control, market, measure, report and manage music. This end-to-end music licensing and entitlement management solution will allow complete control of the music from the moment it is recorded to when it is downloaded and played on any portable device. Through a comprehensive four-phase process, Piracy Control Technology will facilitate industry-wide implementation of its powerful solution, providing record labels and recording artists with an effective tool against music piracy without compromising consumers’ access to the music they enjoy. PC Tech is seeking funding to pay for its operational costs. Piracy Control Technology will commence services immediately upon receipt of funding. The music industry has suffered remarkable setbacks in recent years, experiencing dramatic declines in revenue and album sales as music piracy has soared and the monetary value of music itself has plummeted. Major label revenues continued their fall in 2010, totaling $7.5 billion, almost half of the industry’s 2001 revenues of $14.4 billion. CD singles have comprised less than 0.1% of the sector’s revenues for the past five years, and sales revenue from physical formats fell 20.8% in 2009. These indicators all confirm what industry experts have forecast for years; without drastic and immediate action, the music industry faces an unsustainable and unprofitable future. Piracy Control Technology’s powerful technology will offer an unprecedented solution to fulfill this market need. PC Tech will not experience any significant competition and will benefit from a high demand among record labels for its easy-to-integrate technology. As a result, Piracy Control Technology is positioned to instantly succeed in this market and thrive for years to come. Piracy Control Technology will engage in a variety of promotional tactics to generate interest in its unique anti- piracy technology. PC Tech’s initial marketing strategy will include meetings, direct sales calls, presentations, trade show attendance, print ads, public relations efforts, and a comprehensive website. Through these methods, Piracy Control Technology intends to develop a strong reputation and identify itself as the premier provider of anti- piracy technology for digital media. Don Russell owns and operates PC Tech. Mr. Russell has extensive experience in the entertainment industry, combined with a strong record of success that includes streamlining operations and maximizing productivity. He is the Founder and Chief Executive Officer of Piracy Control Technology, and has been responsible for coordinating all aspects of project development since its inception. Prior to launching PC Tech, Mr. Russell served as Vice President of Marketing at Rockstar Beverage Corporation. He gained further experience serving as the Creative Director of Expo Theatre Productions, and as Owner and President of PM Studios. Mr. Russell began his career working as a Personnel Relations Supervisor at YBM Enterprises. He attended Columbia College, and has years of experience as a performer, director, and producer in the entertainment field. To achieve the Company’s objectives, Piracy Control Technology, Inc. is being capitalized by $456,000 in direct owner investment, and is seeking $7,500,000 in additional funding through outside investment.
  5. 5. __ CONFIDENTIAL – Do Not Distribute Without Permission 5 Use Of Funds The table below outlines the sources and uses of funding: Loan $0 Ow ner Investment $456,000 Investor $7,500,000 Total Sources $7,956,000 Start-up Expenses Development Salaries $470,100 Administrative Expenses $143,900 Business Expenses $190,000 Legal $128,900 MCV Technology $1,289,900 TMR Web Based Softw are $425,000 PC Tech Website (Update) $9,000 Softw are Plug-in $135,000 DKM Design (Program Update) $27,000 DKM Model Construction $96,000 Operational Manuals (Drafts) $10,000 Total Start-up Expenses $2,924,800 Start-up Assets Starting Cash Balance $2,999,000 Other Current Assets $0 Office Equipment & Furniture $32,200 DKT Acquisition $2,000,000 Other Long-term Assets $0 Total Start-up Assets $5,031,200 Total Uses $7,956,000 SOURCES&USES SOURCES OF FUNDS USES OF FUNDS
  6. 6. __ CONFIDENTIAL – Do Not Distribute Without Permission 6 Investor Proposition The following investor proposition uses a number of variables to determine a hypothetical share of the Company in exchange for investment. The following scenario is up for negotiation and is dependent on operating and valuation assumptions. The investor share is based on an investor-required rate of return of 50% per year, and a Year 5 Company valuation at 5 times EBITDA. It should be noted that the rate of return is dependent on subjective measurements of risk and reward, and valuations are subject to market conditions. Investment $7,500,000 Required Rate of Return 50% Value of Investment (Year 5) $85,430,000 Year 5 Earnings $291,006,000 EBITDA Multiple 5 Projected Company Value (Year 5) $1,455,030,000 Equity Sold 6% (Value of Investment/Value of Company) INVESTORPROPOSITION Company Ownership Piracy Control Technology, Inc. is a C-Corporation registered in the states of California and Illinois. The Company is wholly owned by Don Russell (90%) David Ubeda (5%) Neil Thakker (5%) Company Location The Company is located at: 47 W Polk Street Suite 135 Chicago, IL 60605
  7. 7. __ CONFIDENTIAL – Do Not Distribute Without Permission 7 Services Piracy Control Technology is a start-up technology development business based in Chicago. PC Tech is the creator of a remarkable new solution to music piracy called Media Codec 5, or MCV. Modern music production is almost entirely processed through digital devices and software, offering engineers, producers, and musicians complete control over every song’s sound levels, arrangement, and more. Piracy Control Technology’s unique technology equips music professionals with a powerful tool that embeds security features into a song’s MIDI (Musical Instrument Digital Interface) signals. The following typical sound spectrum analysis of a song reveals the visual manifestation of the virus in a song’s digital analysis, which is audibly unnoticeable. This virus is highlighted in red lines. MCV technology does not require the use dongles or other physical media in order for the technology to correctly function. Physical devices can be lost, are much more difficult to update, and require too much on the part of the end-user in order to ensure proper functionality. Through MCV's patent pending technology, PC Tech has been able to find the ideal balance, protecting both the artist’s intellectual property and preserving the end-user’s experience. MCVs are inserted into music during production, safely embedding the files deep within the song’s data file. They are only enabled if a user attempts to make a digital copy of a song, disabling the secondary source. This dependable security measure prevents illegal music piracy while ensuring law-abiding consumers enjoy an unaffected listening experience. Piracy Control Technology intends to introduce its technology to the music industry through a comprehensive four-part process: Phase I: MCV Technology Implementation Phase II: Creating Joint Ventures Phase III: Launch The Music Room Software Phase IV: Launch MCV Advisories through Digital Kiosk Technology Product and Service Description Phase I: MCV Technology Implementation The effectiveness of MCV technology is predicated on its widespread adoption and implementation. PC Tech will work closely with record labels, recording artists, producers, and other music professionals to phase in the inclusion of MCVs into new and existing recordings. Music piracy primarily occurs during post-production, either out of recording studios, distribution warehouses, or record companies. This is why it is essential to utilize MCV technology during the recording and production processes. Phase II: Creating Joint Ventures During PC Tech’s second phase, Piracy Control Technology will partner with a wide scope of MIDI sound module and outboard gear manufacturers to develop stand-alone units capable of directly applying MCV technology to songs as they are recorded. PC Tech’s product will be a rack mount unit that will communicate event messages to digital recording studio software such as Pro Tools, Nuendo, and Cubase. By relying on MCV-based technology to safely embed MCVs into modern recordings, music industry professionals will be able to instantly
  8. 8. __ CONFIDENTIAL – Do Not Distribute Without Permission 8 protect their product without the need for additional challenging or tedious processes. This phase will also provide PC Tech with an additional stream of revenue. Phase III: Launch The Music Room In Piracy Control Technology’s third phase of operations, PC Tech will launch a software program called “The Music Room.” This program will provide record companies with an innovative administration tool capable of receiving all MCV-recorded files and performing additional tasks central to the music industry, including: Tracking album progress Viewing album layout and song structure Establishing price per record Establishing regional and national release dates for records The Music Room will feature multiple “rooms” specialized for specific departments of recording businesses, giving authorized users access to the information vital to their particular area of work, such as sales, industry feedback, album budgets, and retailer feedback. This product will be supported by a robust set of security measures and technological enhancements to provide unparalleled protection of data. The Music Room will consolidate key data into a single powerful software in order to reduce costs, protect recordings, and equip professionals with an unparalleled range of administrative options. The Music Room Software will be the only software that will give record companies the ability to access MCV music directly from the recording studios. The Music Room is also the only software that will provide access to send records and marketing materials directly to the Kiosks, as described below. The Music Room will also combat piracy by limiting access to hard copies of the records, which eliminates the possibility of the record ending up in the wrong hands. Phase IV: Launch MCV Advisories through Digital Kiosk Technology Users attempting to illegally receive, reproduce, or transfer music enhanced with MCVs will be alerted through a series of on-screen pop-ups and packaging notices. These alerts will include warnings regarding the severe damage a user can bring upon their computer or electronic device by pirating music. In order to ensure that consumers retain a broad range of options for legally receiving and enjoying music in a variety of formats, PC Tech will establish Digital Kiosk Machines through which to distribute music in addition to secured Internet downloads and hard copy sales. Piracy Control Technology will partner with various Digital Kiosk Machine manufacturers to develop remote machines capable of receiving MCV-enhanced records and promotional materials from record companies. Consumers will be able to purchase records as compact discs, MP3 downloads delivered directly to mobile music devices, or as a proof of purchase available through machines that can be used as a download voucher at a later time. Once music is purchased, however, it will not be capable of being transferred, guaranteeing that musicians and record industry professionals receive the sales revenues that would normally be lost to piracy. The Kiosks’ enormous hard drive space will store millions of mp3 files. This will give consumers access to titles that may be otherwise hard to find. Kiosks will be introduced to the general public as the new form of major and independent retail. Kiosks will also service millions of consumers and revolutionize the shopping experience.
  9. 9. __ CONFIDENTIAL – Do Not Distribute Without Permission 9 Market Analysis Summary PC Tech will primarily operate in the Major Label Music Production industry in the United States, an economic segment that has been severely impacted by falling album sales due to the systemic piracy of music on the Internet. The following information on this industry is provided by market research firm IBISWorld. 1 1 “Major Label Music Production in the US Industry Report.” IBISWorld: Obtained December 2010.
  10. 10. __ CONFIDENTIAL – Do Not Distribute Without Permission 10 Market Segmentation Piracy Control Technology will introduce its product in multiple phases, designed to ease each particular segment of the music industry toward a new standard in music protection. PC Tech will initially offer its technology to major labels for use on all new and existing recordings. Over time, Piracy Control Technology will release subsequent versions of its technology that can be sold to major label subsidiaries and branches. Eventually, the technology will be available as a stand-alone unit for musicians and producers everywhere to use as part of the production process. According to IBISWorld, there are a total of 236 major music labels and 834 independent labels in the United States, providing PC Tech with a strong and thriving base of potential clients. The final target market for PC Tech’s products will be consumers across the world. Following in the footsteps of Redbox, which redefined the video market by providing a video-rental system through automated kiosks placed strategically to attract a maximum of consumer traffic, PC Tech’s Kiosks will allow users to compile their own customizable albums that will be copy-proof and competitively priced. Market Needs IBISWorld succinctly describes the key challenge facing today’s leading companies in the music industry: 2 “Piracy was once thought to be the great threat to the industry as CD copying software proliferated and the ability to transfer larger files online improved. As intellectual property laws became more strictly enforced and legitimate digital markets grew, consumers' decreasing valuation of digital media has emerged as the true challenge to the industry. Consumers now have the opportunity to download music from an almost limitless library via peer-to-peer (P2P) websites for free or stream free music online 24 hours a day. Despite listening to greater volumes, the free music revolution online subsequently has consumers valuing their music less than ever.” Every solution that has been attempted by record labels, recording artists, and distributors has resulted in negligible effects on the gradual devaluation of music. As a result, it is clearer than ever before that the industry must develop new ways to protect its property from online piracy. PC Tech’s remarkable product provides a previously unimaginable solution to this issue by equipping the industry with a tool to immediately protect recordings the minute they are completed, preempting the piracy that commonly occurs along record distribution chains. 2 “Major Label Music Production in the US Industry Report.” IBISWorld: Obtained December 2010.
  11. 11. __ CONFIDENTIAL – Do Not Distribute Without Permission 11 Competitive Comparison Piracy Control Technology is keenly aware of the need to evaluate its competitors. A detailed analysis of the competitive landscape will prepare PC Tech for any potential market variables that may arise. PC Tech will be the first to market with its technology, fulfilling a market need that has remained unsolved for more than a decade. The slow transition of the music industry to a fully digital sector has been largely facilitated by Apple, which has leveraged the popularity of iPods to establish iTunes and its online market. Although Apple represents PC Tech’s most significant competitor, it will essentially lose its market share when record labels adopt Piracy Control Technology’s technology and successfully begin curbing online music piracy. PC Tech will initially sign long-term licensing contacts with record companies. As a result, PC Tech will be well-positioned to succeed and thrive in this market. For more information regarding PC Tech’s competitive advantages, see Competitive Edge.
  12. 12. __ CONFIDENTIAL – Do Not Distribute Without Permission 12 Strategy and Implementation Summary Piracy Control Technology will develop a brand that emphasizes its innovative technology designed to curb music piracy, thus increasing profitability in the music industry. PC Tech will also highlight its unique kiosks that allow users to purchase songs or albums on-demand and at competitive prices. To increase brand awareness, Piracy Control Technology has created a memorable logo. PC Tech will display this logo prominently on all marketing materials and kiosk signage. With its brand and guiding principles established, Piracy Control Technology will send a clear message about the advantages its product offers prospective customers. PC Tech will promote this message using a comprehensive marketing strategy that includes direct sales efforts, brochure distribution, public relations, and a user- friendly website. Piracy Control Technology intends to use this approach to accomplish the following objectives: Establish itself as a trusted anti- piracy resource for the music industry Build a customer base that is large enough to sustain business Generate enough revenue to expand operations To achieve the aforementioned operational goals, Piracy Control Technology will build on its advantages, as outlined in the following section. Competitive Edge Though PC Tech is unaware of any competing business that currently offers comparable technology, Piracy Control Technology will experience indirect competition from Redbox and iTunes, both of which incorporate technology to limit or prevent media piracy. However, iTunes recently began allowing users to purchase songs free of digital rights management (DRM) encryption, and Redbox only offers movies and video games that are in demand. Piracy Control Technology will capitalize on its competitors’ weaknesses by building on the following strengths: Unique technology mutates from album to album and is incurable Designed to prevent piracy of electronic media Knowledgeable and experienced staff Endless supply of titles, not limited by hard copy selection on hand Reinvents the music shopping experience Marketing Strategy Piracy Control Technology will use a direct sales approach and a variety of advertising channels to increase its exposure among record labels and production companies. Specific channels will include the following: Direct Sales Brochures: PC Tech will create informative brochures for distribution to prospective customers. These brochures will highlight the benefits of PC Tech’s technology and will provide its contact information. Meetings: Piracy Control Technology will use direct sales calls, presentations, and appointments with record labels and production companies throughout the United States. PC Tech will also arrange
  13. 13. __ CONFIDENTIAL – Do Not Distribute Without Permission 13 conference calls and webinar presentations when necessary. The benefits of a direct sales approach include:  Increasing sales while lowering monthly marketing costs through increased efficiency  Immediate results, as these calls and meetings can generate orders instantly  Enhanced lead generation Trade shows: PC Tech will attend relevant industry trade shows to increase brand awareness and establish valuable business partnerships. Trade show attendance will include demo sessions, PowerPoint presentations, question-and-answer periods, and distribution of informative literature. Supplemental Marketing Public relations: Piracy Control Technology intends to build a strong public relations campaign via appropriate media outlets. Public relations efforts will include advertising, community support and approval, customer relations, print articles, press releases, and events. Website: PC Tech will create a comprehensive website to generate interest in its technology. This website will be search engine optimized and contain a number of features including: product information, company profile, contact information, testimonials, and demo videos. Print media: Piracy Control Technology will place ads in industry trade publications. These advertisements will include PC Tech’s contact information and web address, as well as a brief overview of Piracy Control Technology’s capabilities. Television advertising: PC Tech recognizes that television advertising is still an effective means of reaching a large target population. For this reason PC Tech will create television commercials introducing the new Digital Kiosk Technology and providing a virus advisory regarding the MCV format.
  14. 14. __ CONFIDENTIAL – Do Not Distribute Without Permission 14 Management Summary Don Russell, Founder and Chief Executive Officer Don Russell developed PC Tech’s key concept and has been in charge of coordinating all aspects of project development up to this point. His expertise in the music and entertainment industry is what drives PC Tech and provides its competitive advantage. Mr. Russell is passionate about preserving and promoting the evolution of entertainment by creating a resource center that encourages constant development through networking and communication on each level of one’s journey to success. Mr. Russell has more than 15 years of experience and a strong track record of success that includes streamlining operations and maximizing productivity. Prior to launching Piracy Control Technology, he served as Vice President of Marketing at Rockstar Beverage Corporation. There, Mr. Russell was responsible for researching and understanding product brand study demographics, producing promotions to target key areas, coordinating product breakouts to maximize productivity, and acting as a liaison between various departments. Mr. Russell gained additional experience by serving as the Creative Director of Expo Theatre Productions, where he prepared and presented client presentations and maintained responsibility for hiring independent contractors. He was also the President and Owner of PM Studios for more than three years, and served as a Personnel Relations Supervisor at YBM Enterprises. Mr. Russell attended Columbia College in Chicago and the University of Phoenix – Chicago campus. He has extensive experience as a performer, producer, and director in the music industry. He has performed in or directed several notable productions over the past 10 years. Some of his production credits include: “Riverdance,” where he served as a principal artist “Satin Suite,” where he performed as headliner on the Olive Garden Theater stage at Walt Disney World “Broadway Soul Jam,” where he performed in Amsterdam as a headliner in the very popular and successful musical directed by Maurice Hines Mr. Russell’s innovation in the area of musical theater has captured the attention of many great icons such as: Oprah Winfrey, on whose show Mr. Russell performed Gregory Hines, with whom he has performed President Bill Clinton, for whom Mr. Russell performed for at the opening ceremony for the 1996 Democratic National Convention As sole owner of one of California’s premier recording studios, Mr. Russell has had the opportunity to work with such talents as R. Kelly, The Brat, Onyx, Ideal, 112, Savion Glover, LeVert, The Nicolas Brothers, Sinbad, Bernie Mac, and Steve Harvey. Mr. Russell has also directed or produced television commercials for such companies as Honda, Seagram’s, McDonalds, Coca-Cola, Fujitsu, Nupremis, AMD, Unisys, and IBM. Ronald E Sweeney, Ronald Sweeney is a entertainment lawyer who represents a variety of recording artists, producers and writers. Those clients include Jimmy “Jam” Harris and Terry Lewis, who collaborate on such top acts as Janet Jackson, the S.O.S Band, the Force M.D.s Patti Austin Lil Wayne, Drake, and Nicki Minage to name a few. And as a partner in Avant Garde Management Inc., Sweeney also served as agent for Klymaxx, the once popular all female band that scaled the charts in the 90’s. Sweeney has represented over a hundred major recording artists. Sweeney also, has his own practice with offices on the east and west coast, and sits on several boards. Craig A. Nobles, Once a DJ in Los Angeles, the California - bred music mogul’s journey began in 1973 entertaining the likes of David Lee Roth and Eddie Van Halen while growing up in Pasadena. Contributing to some of the most popular events in and around Greater Los Angeles, Craig Nobles fell in love with music and developing relationships with artists, promoters, and executives alike. Heeding the advice of his mentor, Maurice Warfield, Nobles jumped at the opportunity to shadow one of the greatest in the business. Though he would continue developing his skills as a DJ and Socialite/Entrepreneur, Craig Nobles was determined to get the respect from the industry his remarkable talent deserved, all while fine tuning his skills in the areas of marketing, sales, A&R, publicity, and
  15. 15. __ CONFIDENTIAL – Do Not Distribute Without Permission 15 promotions. “I thought this was it, but one day I just needed a change, so I moved to New York. “ Ironically, the fall of 1983 ushered in those changes, he moved to New York and again resumed entertaining amongst the premieres of nightlife. This would lead to other projects including an assistant position with Harry Belafonte and most notably BEAT STREET, where he taught the actors the DJ style of scratching and assisted in the A&R administration of the soundtrack. Just a glimpse of things to come...Refusing to follow trends, Craig Nobles awed his peers with his drive and passion for music. Joining Grand Jury Productions, Craig Nobles balanced his daily duties as A&R, Marketing, Promotions, Sales, Business Affairs, and Deal Negotiations on behalf of Grand Jury artists with major labels such as Interscope, Warner Brothers, and RCA to name a few. Having grown within the era of Irving Azoff, Russell Simmons, Barry Wiess, Steve Berman, Doug Morris, and Steve Rifkind – greatness was never an option. “The formula I use is real and so are the results,” says Nobles. Time will only tell, but looking at history, the future looks bright. Specialties - Experienced in budget allocation, forecasting, contract negotiating, marketing, imaging, strategic planning & project management as well as building and maintaining partnerships. - Knowledgeable on youth/pop culture and developing strategies for target demographics. - Extensive knowledge and experience in recording, engineering, production of multi media. - Experience in developing online campaigns, integrated sites, building/running online and ground street teams, and grass roots marketing. Shannon Aldridge, Project Lead Shannon Aldridge has spent more than 15 years working in Entertainment and IT-related industries. While residing in Atlanta and New York, Mr. Aldridge has worked for several well-known companies based in the United States, including the USOC, NBC, NBA, and MLB. Mr. Aldridge was part of an innovative culture that saw the rise and fall of several dot-com companies. Meanwhile, he forged ahead at NBA.com to create a subscription- based model that helped to create and capitalize on a new revenue stream called Steaming Media. In early 2000, Mr. Aldridge joined Major League Baseball to start what is now called MLB.com. With his foresight and direction, MLB.com’s streaming media division led a team of talented professionals who created, produced, and delivered to over 10 million monthly subscribers. In 2005 Mr. Aldridge moved to Chicago to take on another project of rebuilding two companies under one ownership group. Within one year both companies, NCI Technology and HiTide Media, had undergone extensive renovation, employee training and technology deliverables. As Vice President, Mr. Aldridge was given the task of assembling the right team of professionals, dedicated hardware installation and new client acquisitions. By year two, both companies on were on the leading edge of Digital Data Collection and HD Video Delivery systems in Chicago. In 2007, Mr. Aldridge started SlantMedia with the vision to bring the same expertise and skill to smaller start-up companies that need proper guidance, development, and strategies to help them navigate through ever-changing technological, social and economic business models. After four years of successful growth, SlantMedia has positioned itself as a unique company that can function within small to midsize companies’ budgets to consult, create, and produce anything its partners require. Nathan J. Tumulty, Chief Technology Officer Nathan Tumulty, MCSE, brings over 15 years of experience managing and developing software solutions for mid- to large-sized companies. He began his career as a network engineer at Aon Reinsurance, supporting the entire North American enterprise. Soon after, he then started his first company, iDesign LLC, whose first contract was for the Budnet real-time route accounting and business intelligence application for Anheuser-Busch. His company would go on to carve a niche out in the real estate industry and was instrumental in the development of the initial RETS platform for real estate property databases. Seeing the ever-increasing amounts of data, he steered the company even further toward the development of data mining tools and platforms. In 2006, in a joint project with Epsilon and Acxiom, he managed a group of over 20 software engineers in four states to complete a real-time data append technology that the companies would eventually license to their clients in the education space, a product which is still used to this day. In 2008, he sold his company and moved to Chicago. Then in 2009, he
  16. 16. __ CONFIDENTIAL – Do Not Distribute Without Permission 16 joined with SlantMedia and began work on several social media projects, including real-time applications for the mobile space. June A. Barrett, Administrative Assistant As a Business Developer Consultant with over 30 years of business experience, which started at an early age working in the family-owned retail business started by her parents, June Barrett has been providing direction in every aspect of developing a solid foundation for new and existing companies and organizations. She has worked with more than 20 businesses and not-for-profit organizations, developing business strategies that headed their operations in an upward, more successful position. Ms. Barrett worked toward her Bachelors of Science degree in Business Administration at Roosevelt University. She formed June’s Point of View Productions in Chicago as an answer to the demand for her business insight and expertise as an Event Producer six years ago. She created numerous opportunities and an outlet for local entertainers she booked to perform in events she produced. These large ethnic multi-day events attracted attendance levels of well over 100,000 people. For Ms. Barrett, becoming an Event Producer was an evolutionary process that included starting in promotions, to cash management, to office administrator, which further included vendor coordination, logistics for national entertainers, developing a family pavilion, programming the entertainment stage within the pavilion, and coordinating participating organizations and sponsors. In the process of this evolution, she found that the event business is a perfect fit with her organizational qualities, professional respectful attitude to all involved, keen sense of people's personalities, endless resources, and commitment to achieve perfection in the finished product. The concept of a resource center for entertainers was developed from a wish Ms. Barrett had to assist the weak entertainment industry in Chicago. Opportunities for artists were slowly vanishing and frustration was running high. Ms. Barrett set out to help local artists find other outlets besides yearly events to continue performing and get paid while at the same time honing their crafts. The answer was The Music Room, an online resource center to serve all professionals and artists in the music industry. The Music Room was an inexpensive and interactive easy-to-use website. The seed was planted. The Music Room became a reality. It grew into a young sprig but it just never received enough water for growth to become a tree. Ms. Barrett’s extensive knowledge of producing and business development is what every new start-up needs for a successful launch and what existing companies, too: need fresh energy to streamline daily operations and maximize productivity, putting them on a path to positive growth. Sally A. Lee, Chief Financial Officer Sally Lee brings more than two decades of organizational expertise and experience to PC Tech, and is able to provide quality service in an integrity-filled, team-oriented environment. Her managerial and communication skills have been developed through a variety of finance-related positions, most recently as Staff Accountant for The Pritzker Group in Chicago. Her duties in this position included procedure development and implementation for financial processing and analyses, increasing efficiencies without compromising established controls, and creating and generating customized reporting for ongoing strategic planning for trusts, portfolio investments, private equity, and venture capital sectors. In all aspects of this position, Ms. Lee upheld the highest degree of fiduciary standards for the ultra-high net worth family. Prior to her position with The Pritzker Group, Ms. Lee performed financial accounting and administration roles for GVW Holdings Corporation, preceded by a two-year position as Controller for Blue Pearl Stone Tech, LLC. From 1995 to 2003, she was the Senior Accountant for Spectrum Stone Group, Inc., and began her career as a Bookkeeper and Administrative Assistant for All-Line Electric Company and PaulMarc Electric Company, respectively. She holds a Bachelor of Arts degree in Sociology from State University of New York, where she additionally completed graduate-level coursework in sociology. Ms. Lee also studied mathematics and mathematics education at DePaul University. Sean Mulroney, Corporate Attorney
  17. 17. __ CONFIDENTIAL – Do Not Distribute Without Permission 17 Sean Mulroney graduated from the Loyola University of Chicago School of Law and entered the public practice of law whereby he served as Associate Regional Counsel for the United States Environmental Protection Agency, Region V. He worked at USEPA for almost 10 years, where he specialized in toxic and hazardous litigation, serving as lead counsel on several of the region’s most complex cases. Mr. Mulroney now has his own law practice specializing in litigation, corporate start-up, entertainment and city business licensing. Mr. Mulroney has been involved in several start-up companies focusing on internet broadcasting, broadband service providing, community website development, online music sequencing, and environmental consulting. Additionally, he currently is an owner of two of Chicago’s most successful nightclubs and restaurants. Mr. Mulroney performs regularly with several musical groups and the Ravenswood Community Orchestra. Neil Thakkar, Investment Consultant Neil Thakkar earned his B.A. in Business Management and Entrepreneurship. The networks Mr. Thakkar has established with other business owners and investors have allowed him to engage in a number of business and real estate endeavors. For the last four years Mr. Thakkar has become a very successful investor in the Chicagoland area and continues to grow his portfolio of properties both in residential and commercial real estate. His experience in facilitating acquisitions and implementing exit strategies is the foundation for Mr. Thakkar’s continued success. Having built strong relationships with other investors has allowed him to raise capital to fund start-up businesses and development projects while offering a competitive rate of return. He sees his role as a trusted advisor who builds stable, lifelong relationships with clients, partnering with them to meet short-, mid-, and long term financial goals. David E. Ubeda, Business Development David E. Ubeda, M.S., owns and operates World Class Acquisitions (WCA), a real estate acquisitions company based in Downers Grove, Illinois. Mr. Ubeda is a successful real estate investor, buying and selling over $50 million in real estate, and enjoys his role as a national success coach. Mr. Ubeda’s company is committed to providing win-win solutions to as many struggling home owners as possible. Mr. Ubeda is a gifted songwriter and musician and has extensive music recording and touring experience as a solo artist. He is the owner of Latin Soul Heaven Productions. Mr. Ubeda is passionate about education and enjoys teaching at the University of Phoenix’s John Sperling School of Business, where he teaches business and management courses as an associate faculty member. Mr. Ubeda is currently completing a doctoral degree (Ed.D.) at the University of Phoenix’s School of Advanced Studies. When Mr. Ubeda is not assisting struggling home owners, teaching, or coaching others to pursue their passion and purpose, he continues to enjoy spending quality time with his family and friends. He has expressed, “spending time with my family and friends keeps me rooted and I feel like the wealthiest man on earth when I am with them.”
  18. 18. __ CONFIDENTIAL – Do Not Distribute Without Permission 18 Financial Projections The following table and graph illustrate the financial goals of the Company during the next five years: Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $239,562,217 $266,341,987 $294,572,934 $324,472,733 $356,291,713 Gross Margin $239,545,133 $266,322,904 $294,551,551 $324,448,705 $356,264,643 Operating Expenses $51,363,923 $57,033,455 $63,025,024 $59,608,521 $65,394,243 EBITDA* $188,316,690 $209,424,929 $231,662,007 $264,975,664 $291,005,880 Net Profit $122,973,656 $136,038,142 $150,492,242 $172,146,120 $189,065,760 Profitability Ratios Gross Margin/Revenue 100% 100% 100% 100% 100% EBITDA/Revenue 79% 79% 79% 82% 82% Net Profit/Revenue 51% 51% 51% 53% 53% Debt Ratios Debt Ratio (Total Debt/Total Assets) 33.40% 3.75% 2.67% 2.01% 1.67% Interest Coverage Ratio N/A N/A N/A N/A N/A Debt Service Coverage Ratio N/A N/A N/A N/A N/A Net Cash Flow $187,314,754 $82,256,855 $151,719,657 $172,933,957 $190,382,085 Cash Balance - Ending $190,313,754 $272,570,609 $424,290,266 $597,224,223 $787,606,308 *Earnings before interest, taxes, depreciation & amortization FINANCIALHIGHLIGHTS Financial Highlights $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 $350,000,000 $400,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Direct Costs Operating Expenses Net Profit
  19. 19. __ CONFIDENTIAL – Do Not Distribute Without Permission 19 The following is a five-year revenue forecast. Direct costs include all costs which can be directly tied to revenue and include “cost of goods.” Year 1 Year 2 Year 3 Year 4 Year 5 Revenue MCV Chips $3,360,000 $3,864,000 $4,443,600 $5,110,140 $5,876,661 Softw are Plug-ins $2,933,333 $3,373,333 $3,879,333 $4,461,233 $5,130,418 MCV Licensing Contract $52,500,000 $60,375,000 $69,431,250 $79,845,938 $91,822,828 Technical Support $32,550 $37,433 $43,047 $49,504 $56,930 Music Room Softw are Dow n Payment $175,000,000 $175,000,000 $175,000,000 $175,000,000 $175,000,000 Music Room Softw are Balance $0 $17,105,263 $34,210,526 $51,315,789 $68,421,053 Music Room Softw are Training $7,500 $7,500 $7,500 $7,500 $7,500 Facial Recognition Add-On $58,000 $58,000 $58,000 $58,000 $58,000 Digital Kiosk Push Fees $4,167 $4,792 $5,510 $6,337 $7,288 Digital Kiosk Mechanics Fees $5,666,667 $6,516,667 $7,494,167 $8,618,292 $9,911,035 Total Revenue $239,562,217 $266,341,987 $294,572,934 $324,472,733 $356,291,713 Direct Cost of Revenue MCV Chips $0 $0 $0 $0 $0 Softw are Plug-ins $13,333 $15,333 $17,633 $20,278 $23,320 MCV Licensing Contract $0 $0 $0 $0 $0 Technical Support $0 $0 $0 $0 $0 Music Room Softw are Dow n Payment $0 $0 $0 $0 $0 Music Room Softw are Balance $0 $0 $0 $0 $0 Music Room Softw are Training $3,750 $3,750 $3,750 $3,750 $3,750 Facial Recognition Add-On $0 $0 $0 $0 $0 Digital Kiosk Push Fees $0 $0 $0 $0 $0 Digital Kiosk Mechanics Fees $0 $0 $0 $0 $0 Subtotal Cost of Revenue $17,083 $19,083 $21,383 $24,028 $27,070 Other Direct Costs $0 $0 $0 $0 $0 Total Direct Costs $17,083 $19,083 $21,383 $24,028 $27,070 Gross Margin $239,545,133 $266,322,904 $294,551,551 $324,448,705 $356,264,643 Gross Margin % 100% 100% 100% 100% 100% REVENUEFORECAST
  20. 20. __ CONFIDENTIAL – Do Not Distribute Without Permission 20 The table below shows the units and pricing assumptions underlying the revenue forecast: Year 1 Year 2 Year 3 Year 4 Year 5 Units MCV Chips 8,400,000 9,660,000 11,109,000 12,775,350 14,691,653 Softw are Plug-ins 2,667 3,067 3,527 4,056 4,664 MCV Licensing Contract 21 24 28 32 37 Technical Support 210 242 278 319 367 Music Room Softw are Dow n Payment 1 1 1 1 1 Music Room Softw are Balance 0 1 2 3 4 Music Room Softw are Training 1 1 1 1 1 Facial Recognition Add-On 1 1 1 1 1 Digital Kiosk Push Fees 8,333 9,583 11,021 12,674 14,575 Digital Kiosk Mechanics Fees 56,666,667 65,166,667 74,941,667 86,182,917 99,110,354 Total Units 65,077,901 74,839,586 86,065,525 98,975,354 113,821,657 Unit Price MCV Chips $0.40 $0.40 $0.40 $0.40 $0.40 Softw are Plug-ins $1,100.00 $1,100.00 $1,100.00 $1,100.00 $1,100.00 MCV Licensing Contract $2,500,000.00 $2,500,000.00 $2,500,000.00 $2,500,000.00 $2,500,000.00 Technical Support $155.00 $155.00 $155.00 $155.00 $155.00 Music Room Softw are Dow n Payment $175,000,000.00 $175,000,000.00 $175,000,000.00 $175,000,000.00 $175,000,000.00 Music Room Softw are Balance $0.00 $17,105,263.16 $17,105,263.16 $17,105,263.16 $17,105,263.16 Music Room Softw are Training $7,500.00 $7,500.00 $7,500.00 $7,500.00 $7,500.00 Facial Recognition Add-On $58,000.00 $58,000.00 $58,000.00 $58,000.00 $58,000.00 Digital Kiosk Push Fees $0.50 $0.50 $0.50 $0.50 $0.50 Digital Kiosk Mechanics Fees $0.10 $0.10 $0.10 $0.10 $0.10 Direct Unit Cost MCV Chips $0.00 $0.00 $0.00 $0.00 $0.00 Softw are Plug-ins $5.00 $5.00 $5.00 $5.00 $5.00 MCV Licensing Contract $0.00 $0.00 $0.00 $0.00 $0.00 Technical Support $0.00 $0.00 $0.00 $0.00 $0.00 Music Room Softw are Dow n Payment $0.00 $0.00 $0.00 $0.00 $0.00 Music Room Softw are Balance $0.00 $0.00 $0.00 $0.00 $0.00 Music Room Softw are Training $3,750.00 $3,750.00 $3,750.00 $3,750.00 $3,750.00 Facial Recognition Add-On $0.00 $0.00 $0.00 $0.00 $0.00 Digital Kiosk Push Fees $0.00 $0.00 $0.00 $0.00 $0.00 Digital Kiosk Mechanics Fees $0.00 $0.00 $0.00 $0.00 $0.00 UNITASSUMPTIONS
  21. 21. __ CONFIDENTIAL – Do Not Distribute Without Permission 21 Year 1 Revenue Monthly $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000 $200,000,000 Month1 Month2 Month3 Month4 Month5 Month6 Month7 Month8 Month9 Month10 Month11 Month12 Revenue By Year $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 $350,000,000 $400,000,000 Year 1 Year 2 Year 3 Year 4 Year 5
  22. 22. __ CONFIDENTIAL – Do Not Distribute Without Permission 22 The Company’s personnel forecast is outlined below. Personnel wages indicate the average wage per position and personnel costs are total wages for each position. Year 1 Year 2 Year 3 Year 4 Year 5 Personnel Count Chief Executive Officer 1 1 1 1 1 Chief Financial Officer 1 1 1 1 1 Chief Operations Officer 1 1 1 1 1 Chief Technology Officer 1 1 1 1 1 Senior VP of Sales & Marketing 1 1 1 1 1 Business Development 2 2 2 2 2 Investor Relations 1 1 1 1 1 Administrative Assistant 1 1 1 1 1 Accountant/Bookkeeper 1 1 1 1 1 Office Assistant 1 1 1 1 1 Secretary 1 1 1 1 1 Security Guard 1 1 1 1 1 Admin/Other 0 1 2 3 4 Total Personnel 13 14 15 16 17 Personnel Wage Chief Executive Officer $130,000 $136,500 $143,325 $150,491 $158,016 Chief Financial Officer $65,000 $68,250 $71,663 $75,246 $79,008 Chief Operations Officer $53,300 $55,965 $58,763 $61,701 $64,786 Chief Technology Officer $70,200 $73,710 $77,396 $81,265 $85,329 Senior VP of Sales & Marketing $65,000 $68,250 $71,663 $75,246 $79,008 Business Development $50,700 $53,235 $55,897 $58,692 $61,626 Investor Relations $41,600 $43,680 $45,864 $48,157 $50,565 Administrative Assistant $49,400 $51,870 $54,464 $57,187 $60,046 Accountant/Bookkeeper $35,100 $36,855 $38,698 $40,633 $42,664 Office Assistant $27,820 $29,211 $30,672 $32,205 $33,815 Secretary $28,600 $30,030 $31,532 $33,108 $34,763 Security Guard $26,780 $28,119 $29,525 $31,001 $32,551 Admin/Other $0 $40,000 $42,000 $44,100 $46,305 Personnel Costs Chief Executive Officer $130,000 $136,500 $143,325 $150,491 $158,016 Chief Financial Officer $65,000 $68,250 $71,663 $75,246 $79,008 Chief Operations Officer $53,300 $55,965 $58,763 $61,701 $64,786 Chief Technology Officer $70,200 $73,710 $77,396 $81,265 $85,329 Senior VP of Sales & Marketing $65,000 $68,250 $71,663 $75,246 $79,008 Business Development $101,400 $106,470 $111,794 $117,383 $123,252 Investor Relations $41,600 $43,680 $45,864 $48,157 $50,565 Administrative Assistant $49,400 $51,870 $54,464 $57,187 $60,046 Accountant/Bookkeeper $35,100 $36,855 $38,698 $40,633 $42,664 Office Assistant $27,820 $29,211 $30,672 $32,205 $33,815 Total Payroll $638,820 $670,761 $704,299 $739,514 $776,490 PERSONNELFORECAST
  23. 23. __ CONFIDENTIAL – Do Not Distribute Without Permission 23 The Company intends to deploy its funding to maximize growth and profitability. In the Profit and Loss table below, gross margin equals revenue minus direct costs. The “bottom line” or profit (as measured before and after interest, taxes, depreciation, and amortization) equals gross margin minus operating expenses. Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $239,562,217 $266,341,987 $294,572,934 $324,472,733 $356,291,713 Total Cost of Revenue $17,083 $19,083 $21,383 $24,028 $27,070 Gross Margin $239,545,133 $266,322,904 $294,551,551 $324,448,705 $356,264,643 Gross Margin/Revenue 100% 100% 100% 100% 100% Expenses Marketing $35,930,000 $39,950,000 $44,190,000 $38,940,000 $42,760,000 Rent & Utilities $134,400 $144,700 $155,000 $165,300 $175,600 Travel & Entertainment $24,000 $25,200 $26,500 $27,800 $29,200 Ongoing Development $11,980,000 $13,320,000 $14,730,000 $16,220,000 $17,810,000 Insurance $5,400 $5,700 $6,000 $6,300 $6,600 Professional Services $20,000 $21,000 $22,100 $23,200 $24,400 Misc $2,400,000 $2,660,000 $2,950,000 $3,240,000 $3,560,000 Depreciation $135,480 $135,480 $135,480 $135,480 $135,480 Payroll Taxes & Benefits $95,823 $100,614 $105,645 $110,927 $116,473 Total Personnel $638,820 $670,761 $704,299 $739,514 $776,490 Total Op. Expenses $51,363,923 $57,033,455 $63,025,024 $59,608,521 $65,394,243 Profit Before Interest and Taxes $188,181,210 $209,289,449 $231,526,527 $264,840,184 $290,870,400 EBITDA $188,316,690 $209,424,929 $231,662,007 $264,975,664 $291,005,880 Interest Expense $0 $0 $0 $0 $0 Taxes Incurred $65,207,554 $73,251,307 $81,034,284 $92,694,064 $101,804,640 Net Profit $122,973,656 $136,038,142 $150,492,242 $172,146,120 $189,065,760 Net Profit/Revenue 51.3% 51.1% 51.1% 53.1% 53.1% PROFORMAPROFIT&LOSS
  24. 24. __ CONFIDENTIAL – Do Not Distribute Without Permission 24 The charts below demonstrate when the Company is expected to become profitable. Break-even occurs when revenue exceeds expenses. Revenue & Expenses Year 1 Monthly $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000 $200,000,000 Month1 Month2 Month3 Month4 Month5 Month6 Month7 Month8 Month9 Month10 Month11 Month12 Revenue Expenses Revenue & Expenses Years 1 to 5 $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 $300,000,000 $350,000,000 $400,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Expenses
  25. 25. __ CONFIDENTIAL – Do Not Distribute Without Permission 25 The following depictions of the Company’s projected cash flow show that the Company expects to maintain sufficient cash balances over the five years of this plan. The “pro forma cash flow” table differs from the “pro forma profit and loss” (P&L) table. Pro forma cash flow is intended to represent the actual flow of cash in and out of the Company. In comparison, the revenue and expense projections on the P&L table include “non-cash” items and exclude funding and investment illustrations. Cash Flow $0 $100,000,000 $200,000,000 $300,000,000 $400,000,000 $500,000,000 $600,000,000 $700,000,000 $800,000,000 $900,000,000 Year 1 Year 2 Year 3 Year 4 Year 5 Net Cash Flow Cash Balance Year 1 Year 2 Year 3 Year 4 Year 5 Cash Received Revenue $239,562,217 $266,341,987 $294,572,934 $324,472,733 $356,291,713 New Current Borrow ing $0 $0 $0 $0 $0 New Long-term Liabilities $0 $0 $0 $0 $0 Sale of Other Current Assets $0 $0 $0 $0 $0 Sale of Long-term Assets $0 $0 $0 $0 $0 New Investment Received $0 $0 $0 $0 $0 Subtotal Cash Received $239,562,217 $266,341,987 $294,572,934 $324,472,733 $356,291,713 Expenditures Expenditures from Operations Personnel Expenses $638,820 $670,761 $704,299 $739,514 $776,490 Bill Payments $51,608,643 $183,414,371 $142,148,979 $150,799,262 $165,133,138 Subtotal Spent on Operations $52,247,463 $184,085,132 $142,853,278 $151,538,776 $165,909,628 Additional Cash Spent Current Borrow ing Repay. $0 $0 $0 $0 $0 L-T Liabilities Principal Repay. $0 $0 $0 $0 $0 Purchase Other Current Assets $0 $0 $0 $0 $0 Purchase Long-term Assets $0 $0 $0 $0 $0 Dividends $0 $0 $0 $0 $0 Subtotal Cash Spent $52,247,463 $184,085,132 $142,853,278 $151,538,776 $165,909,628 Net Cash Flow $187,314,754 $82,256,855 $151,719,657 $172,933,957 $190,382,085 Cash Balance $190,313,754 $272,570,609 $424,290,266 $597,224,223 $787,606,308 CASHFLOW
  26. 26. __ CONFIDENTIAL – Do Not Distribute Without Permission 26 The balance sheet below highlights the Company’s projected assets, liabilities, and capital: Year 1 Year 2 Year 3 Year 4 Year 5 Assets Current Assets Cash $190,313,754 $272,570,609 $424,290,266 $597,224,223 $787,606,308 Other Current Assets $0 $0 $0 $0 $0 Total Current Assets $190,313,754 $272,570,609 $424,290,266 $597,224,223 $787,606,308 Long-term Assets Long-term Assets $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 Accumulated Depreciation $135,480 $270,960 $406,440 $541,920 $677,400 Total Long-term Assets $1,896,720 $1,761,240 $1,625,760 $1,490,280 $1,354,800 Total Assets $192,210,474 $274,331,849 $425,916,026 $598,714,503 $788,961,108 Liabilities and Capital Current Liabilities Accounts Payable $64,205,617 $10,288,851 $11,380,785 $12,033,142 $13,213,988 Current Borrow ing $0 $0 $0 $0 $0 Other Current Liabilities $0 $0 $0 $0 $0 Subtotal Current Liabilities $64,205,617 $10,288,851 $11,380,785 $12,033,142 $13,213,988 Long-term Liabilities $0 $0 $0 $0 $0 Total Liabilities $64,205,617 $10,288,851 $11,380,785 $12,033,142 $13,213,988 Paid-in Capital $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 Retained Earnings ($2,924,800) $120,048,856 $256,086,998 $406,579,241 $578,725,360 Earnings $122,973,656 $136,038,142 $150,492,242 $172,146,120 $189,065,760 Total Capital $128,004,856 $264,042,998 $414,535,241 $586,681,360 $775,747,120 Total Liabilities and Capital $192,210,474 $274,331,849 $425,916,026 $598,714,503 $788,961,108 BALANCESHEET
  27. 27. __ CONFIDENTIAL – Do Not Distribute Without Permission 27 The sensitivity analysis below assumes that revenues are 15% higher or lower than figures projected earlier in this business plan: Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $275,496,549 $306,293,285 $338,758,874 $373,143,643 $409,735,470 Cost of Goods $19,646 $21,946 $24,591 $27,633 $31,131 Gross Margin $275,476,903 $306,271,340 $338,734,283 $373,116,011 $409,704,340 Gross Margin/Revenue 100% 100% 100% 100% 100% Operating Expenses $51,363,923 $57,033,455 $63,025,024 $59,608,521 $65,394,243 Net Profit $145,673,437 $162,004,625 $179,211,019 $203,779,868 $223,801,563 Net Profit/Revenue 53% 53% 53% 55% 55% Cash Flow $212,003,426 $106,553,164 $180,472,257 $204,587,914 $225,154,467 Cash Balance $215,002,426 $321,555,590 $502,027,847 $706,615,761 $931,770,228 BESTCASESCENARIO REVENUE IS 15% GREATER THAN PROJECTED Year 1 Year 2 Year 3 Year 4 Year 5 Revenue $203,627,884 $226,390,689 $250,386,994 $275,801,823 $302,847,956 Cost of Goods $14,521 $16,221 $18,176 $20,424 $23,010 Gross Margin $203,613,363 $226,374,468 $250,368,818 $275,781,399 $302,824,947 Gross Margin/Revenue 100% 100% 100% 100% 100% Operating Expenses $51,363,923 $57,033,455 $63,025,024 $59,608,521 $65,394,243 Net Profit $98,131,223 $110,071,659 $121,773,466 $140,512,371 $154,329,957 Net Profit/Revenue 48% 49% 49% 51% 51% Cash Flow $162,470,436 $56,291,955 $123,000,848 $141,300,189 $155,646,248 Cash Balance $165,469,436 $221,761,391 $344,762,239 $486,062,428 $641,708,676 WORSTCASESCENARIO REVENUE IS 15% LESS THAN PROJECTED
  28. 28. __ CONFIDENTIAL – Do Not Distribute Without Permission 28 Appendix M onth 1 M onth 2 M onth 3 M onth 4 M onth 5 M onth 6 M onth 7 M onth 8 M onth 9 M onth 10 M onth 11 M onth 12 Revenue M CV Chips $211,093 $221,648 $232,730 $244,367 $256,585 $269,415 $282,885 $297,030 $311,881 $327,475 $343,849 $361,041 Software Plug-ins $184,288 $193,502 $203,177 $213,336 $224,003 $235,203 $246,963 $259,312 $272,277 $285,891 $300,186 $315,195 M CV Licensing Contract $3,298,334 $3,463,251 $3,636,413 $3,818,234 $4,009,146 $4,209,603 $4,420,083 $4,641,087 $4,873,142 $5,116,799 $5,372,639 $5,641,271 Technical Support $2,045 $2,147 $2,255 $2,367 $2,486 $2,610 $2,740 $2,877 $3,021 $3,172 $3,331 $3,498 M usic Room Software Down Payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $175,000,000 M usic Room Software Balance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $7,500 Facial Recognition Add-On $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $58,000 Digital Kiosk Push Fees $262 $275 $289 $303 $318 $334 $351 $368 $387 $406 $426 $448 Digital Kiosk M echanics Fees $356,011 $373,811 $392,502 $412,127 $432,733 $454,370 $477,088 $500,943 $525,990 $552,289 $579,904 $608,899 Total Revenue $4,052,033 $4,254,634 $4,467,366 $4,690,734 $4,925,271 $5,171,535 $5,430,111 $5,701,617 $5,986,698 $6,286,033 $6,600,334 $181,995,851 Direct Cost of Revenue M CV Chips $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Software Plug-ins $838 $880 $924 $970 $1,018 $1,069 $1,123 $1,179 $1,238 $1,300 $1,364 $1,433 M CV Licensing Contract $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Technical Support $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Down Payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Balance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,750 Facial Recognition Add-On $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Digital Kiosk Push Fees $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Digital Kiosk M echanics Fees $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cost of Revenue $838 $880 $924 $970 $1,018 $1,069 $1,123 $1,179 $1,238 $1,300 $1,364 $5,183 Other Direct Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Direct Costs $838 $880 $924 $970 $1,018 $1,069 $1,123 $1,179 $1,238 $1,300 $1,364 $5,183 Gross M argin $4,051,195 $4,253,755 $4,466,442 $4,689,765 $4,924,253 $5,170,465 $5,428,989 $5,700,438 $5,985,460 $6,284,733 $6,598,970 $181,990,668 Gross M argin % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% REVENUEFORECAST
  29. 29. __ CONFIDENTIAL – Do Not Distribute Without Permission 29 M onth 1 M onth 2 M onth 3 M onth 4 M onth 5 M onth 6 M onth 7 M onth 8 M onth 9 M onth 10 M onth 11 M onth 12 Units M CV Chips 527,733 554,120 581,826 610,917 641,463 673,536 707,213 742,574 779,703 818,688 859,622 902,603 Software Plug-ins 168 176 185 194 204 214 225 236 248 260 273 287 M CV Licensing Contract 1 1 1 2 2 2 2 2 2 2 2 2 Technical Support 13 14 15 15 16 17 18 19 19 20 21 23 M usic Room Software Down Payment 0 0 0 0 0 0 0 0 0 0 0 1 M usic Room Software Balance 0 0 0 0 0 0 0 0 0 0 0 0 M usic Room Software Training 0 0 0 0 0 0 0 0 0 0 0 1 Facial Recognition Add-On 0 0 0 0 0 0 0 0 0 0 0 1 Digital Kiosk Push Fees 524 550 577 606 636 668 702 737 774 812 853 895 Digital Kiosk M echanics Fees 3,560,107 3,738,112 3,925,017 4,121,268 4,327,332 4,543,698 4,770,883 5,009,427 5,259,899 5,522,894 5,799,038 6,088,990 Total Units 4,088,546 4,292,973 4,507,622 4,733,003 4,969,653 5,218,135 5,479,042 5,752,994 6,040,644 6,342,676 6,659,810 6,992,803 Unit Price M CV Chips $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 $0.4 Software Plug-ins $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 $1,100.0 M CV Licensing Contract $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 $2,500,000.0 Technical Support $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 $155.0 M usic Room Software Down Payment $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 $175,000,000.0 M usic Room Software Balance $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 M usic Room Software Training $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 $7,500.0 Facial Recognition Add-On $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 $58,000.0 Digital Kiosk Push Fees $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 $0.5 Digital Kiosk M echanics Fees $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 Direct Unit Cost M CV Chips $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Software Plug-ins $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 M CV Licensing Contract $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Technical Support $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Down Payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Balance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 M usic Room Software Training $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 $3,750 Facial Recognition Add-On $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Digital Kiosk Push Fees $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Digital Kiosk M echanics Fees $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 UNITASSUMPTIONS
  30. 30. __ CONFIDENTIAL – Do Not Distribute Without Permission 30 M onth 1 M onth 2 M onth 3 M onth 4 M onth 5 M onth 6 M onth 7 M onth 8 M onth 9 M onth 10 M onth 11 M onth 12 Personnel Count Chief Executive Officer 1 1 1 1 1 1 1 1 1 1 1 1 Chief Financial Officer 1 1 1 1 1 1 1 1 1 1 1 1 Chief Operations Officer 1 1 1 1 1 1 1 1 1 1 1 1 Chief Technology Officer 1 1 1 1 1 1 1 1 1 1 1 1 Senior VP of Sales & M arketing 1 1 1 1 1 1 1 1 1 1 1 1 Business Development 2 2 2 2 2 2 2 2 2 2 2 2 Investor Relations 1 1 1 1 1 1 1 1 1 1 1 1 Administrative Assistant 1 1 1 1 1 1 1 1 1 1 1 1 Accountant/Bookkeeper 1 1 1 1 1 1 1 1 1 1 1 1 Office Assistant 1 1 1 1 1 1 1 1 1 1 1 1 Secretary 1 1 1 1 1 1 1 1 1 1 1 1 Security Guard 1 1 1 1 1 1 1 1 1 1 1 1 Admin/Other 0 0 0 0 0 0 0 0 0 0 0 0 Total Personnel 13 13 13 13 13 13 13 13 13 13 13 13 Personnel Wage Chief Executive Officer $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 $10,833 Chief Financial Officer $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 Chief Operations Officer $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 $4,442 Chief Technology Officer $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 $5,850 Senior VP of Sales & M arketing $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 $5,417 Business Development $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 $4,225 Investor Relations $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 $3,467 Administrative Assistant $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 $4,117 Accountant/Bookkeeper $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 $2,925 Office Assistant $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 $2,318 Secretary $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 $2,383 Security Guard $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 $2,232 Admin/Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 PERSONNELFORECAST
  31. 31. __ CONFIDENTIAL – Do Not Distribute Without Permission 31 M onth 1 M onth 2 M onth 3 M onth 4 M onth 5 M onth 6 M onth 7 M onth 8 M onth 9 M onth 10 M onth 11 M onth 12 Revenue $4,052,033 $4,254,634 $4,467,366 $4,690,734 $4,925,271 $5,171,535 $5,430,111 $5,701,617 $5,986,698 $6,286,033 $6,600,334 $181,995,851 Total Cost of Revenue $838 $880 $924 $970 $1,018 $1,069 $1,123 $1,179 $1,238 $1,300 $1,364 $5,183 Gross M argin $4,051,195 $4,253,755 $4,466,442 $4,689,765 $4,924,253 $5,170,465 $5,428,989 $5,700,438 $5,985,460 $6,284,733 $6,598,970 $181,990,668 Gross M argin/Revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Expenses M arketing $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 $2,994,167 Rent & Utilities $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 $11,200 Travel & Entertainment $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 Ongoing Development $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 $998,333 Insurance $450 $450 $450 $450 $450 $450 $450 $450 $450 $450 $450 $450 Professional Services $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 M isc $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 Depreciation $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 $11,290 Payroll Taxes & Benefits $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 $7,985 Total Personnel $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 Total Op. Expenses $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 $4,280,327 Profit Before Int. and Tax ($229,132) ($26,572) $186,116 $409,438 $643,926 $890,139 $1,148,662 $1,420,111 $1,705,133 $2,004,406 $2,318,643 $177,710,341 EBITDA ($217,842) ($15,282) $197,406 $420,728 $655,216 $901,429 $1,159,952 $1,431,401 $1,716,423 $2,015,696 $2,329,933 $177,721,631 Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Taxes Incurred $0 $0 $0 $0 $0 $0 $402,032 $497,039 $596,797 $701,542 $811,525 $62,198,619 Net Profit ($229,132) ($26,572) $186,116 $409,438 $643,926 $890,139 $746,630 $923,072 $1,108,337 $1,302,864 $1,507,118 $115,511,722 Net Profit/Revenue -5.7% -0.6% 4.2% 8.7% 13.1% 17.2% 13.7% 16.2% 18.5% 20.7% 22.8% 63.5% PROFORMAPROFIT&LOSS
  32. 32. __ CONFIDENTIAL – Do Not Distribute Without Permission 32 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Cash Received Revenue $4,052,033 $4,254,634 $4,467,366 $4,690,734 $4,925,271 $5,171,535 $5,430,111 $5,701,617 $5,986,698 $6,286,033 $6,600,334 $181,995,851 NewCurrent Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewLong-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sale of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sale of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewInvestment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Received $4,052,033 $4,254,634 $4,467,366 $4,690,734 $4,925,271 $5,171,535 $5,430,111 $5,701,617 $5,986,698 $6,286,033 $6,600,334 $181,995,851 Expenditures Expenditures from Operations Personnel Expenses $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 $53,235 Bill Payments $0 $4,357,196 $4,216,683 $4,216,727 $4,216,773 $4,216,822 $4,230,274 $4,622,125 $4,717,347 $4,817,330 $4,922,312 $7,075,055 Subtotal Spent on Operations $53,235 $4,410,431 $4,269,918 $4,269,962 $4,270,008 $4,270,057 $4,283,509 $4,675,360 $4,770,582 $4,870,565 $4,975,547 $7,128,290 Additional Cash Spent Current Borrowing Repay. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 L-T Liabilities Principal Repay. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Spent $53,235 $4,410,431 $4,269,918 $4,269,962 $4,270,008 $4,270,057 $4,283,509 $4,675,360 $4,770,582 $4,870,565 $4,975,547 $7,128,290 Net Cash Flow $3,998,798 ($155,796) $197,448 $420,772 $655,263 $901,478 $1,146,602 $1,026,257 $1,216,116 $1,415,468 $1,624,787 $174,867,561 Cash Balance $6,997,798 $6,842,001 $7,039,449 $7,460,222 $8,115,485 $9,016,962 $10,163,565 $11,189,822 $12,405,938 $13,821,406 $15,446,193 $190,313,754 CASHFLOW
  33. 33. M onth 1 M onth 2 M onth 3 M onth 4 M onth 5 M onth 6 M onth 7 M onth 8 M onth 9 M onth 10 M onth 11 M onth 12 Current Assets Cash $6,997,798 $6,842,001 $7,039,449 $7,460,222 $8,115,485 $9,016,962 $10,163,565 $11,189,822 $12,405,938 $13,821,406 $15,446,193 $190,313,754 Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Current Assets $6,997,798 $6,842,001 $7,039,449 $7,460,222 $8,115,485 $9,016,962 $10,163,565 $11,189,822 $12,405,938 $13,821,406 $15,446,193 $190,313,754 Long-term Assets $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 $2,032,200 Accum. Depreciation $11,290 $22,580 $33,870 $45,160 $56,450 $67,740 $79,030 $90,320 $101,610 $112,900 $124,190 $135,480 Total Long-term Assets $2,020,910 $2,009,620 $1,998,330 $1,987,040 $1,975,750 $1,964,460 $1,953,170 $1,941,880 $1,930,590 $1,919,300 $1,908,010 $1,896,720 Total Assets $9,018,708 $8,851,621 $9,037,779 $9,447,262 $10,091,235 $10,981,422 $12,116,735 $13,131,702 $14,336,528 $15,740,706 $17,354,203 $192,210,474 Current Liabilities Accounts Payable $4,216,640 $4,076,125 $4,076,168 $4,076,213 $4,076,259 $4,076,309 $4,464,991 $4,556,886 $4,653,375 $4,754,689 $4,861,068 $64,205,617 Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Current Liabilities $4,216,640 $4,076,125 $4,076,168 $4,076,213 $4,076,259 $4,076,309 $4,464,991 $4,556,886 $4,653,375 $4,754,689 $4,861,068 $64,205,617 Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Liabilities $4,216,640 $4,076,125 $4,076,168 $4,076,213 $4,076,259 $4,076,309 $4,464,991 $4,556,886 $4,653,375 $4,754,689 $4,861,068 $64,205,617 Paid-in Capital $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 $7,956,000 Retained Earnings ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) ($2,924,800) Current Retained Earnings ($229,132) ($255,704) ($69,589) $339,849 $983,775 $1,873,914 $2,620,544 $3,543,616 $4,651,953 $5,954,817 $7,461,935 $122,973,656 Total Capital $4,802,068 $4,775,496 $4,961,611 $5,371,049 $6,014,975 $6,905,114 $7,651,744 $8,574,816 $9,683,153 $10,986,017 $12,493,135 $128,004,856 Total Liabilities and Capital $9,018,708 $8,851,621 $9,037,779 $9,447,262 $10,091,235 $10,981,422 $12,116,735 $13,131,702 $14,336,528 $15,740,706 $17,354,203 $192,210,474 BALANCESHEET

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