Financing Your Small Business

Business Plan

As part of your business strategy, planning, and feasibility analysis, you will commit your plan to paper. The document produced is typically called a business plan. The purpose of a business plan is to articulate the vision of your business and then set out the steps for implementing that vision. Chapter 2 gives you the suggested elements of a business plan.

Initially, start-up companies will write a business plan with the ultimate goal of raising capital. You may also wish to have an internal business plan to chart the actual course of the business. The latter will be constantly revised as circumstances change.

The business plan provided focuses on capital raising. It is an actual busi­ness plan from a company actively trying to raise capital to fund their busi­ness idea.

NOTE: The following business plan is used with permission from What’s In Your Neighborhood.

Business Plan

CONFIDENTIALITY & DISCLOSURE AGREEMENT

THE INFORMATION PRESENTED IN THIS BUSINESS PLAN IS PROPRI­ETARY AND CONFIDENTIAL. IT MAY NOT BE REPRODUCED OR COM­MUNICATED IN ANY MANNER, VERBALLY, ELECTRONICALLY, OR OTH­ERWISE, WITHOUT THE WRITTEN CONSENT OF WHAT’S IN YOUR NEIGHBORHOOD, INC. IF YOU HAVE AGREED TO RECEIVE THIS PLAN, YOU SHALL BE DEEMED TO BE IN AGREEMENT THAT THIS INFORMA­TION IS PROPRIETARY AND CONFIDENTIAL, AND FULLY UNDERSTAND AND AGREE TO REFRAIN FROM TRANSFERENCE OF SAME TO ANY OTHER INDIVIDUALS OR BUSINESS ENTITIES.

IF YOU DO NOT WISH TO BE BOUND BY THIS AGREEMENT, PLEASE RETURN THIS DOCUMENT TO WHAT’S IN YOUR NEIGHBORHOOD, INC. ADDITIONALLY, THE BUSINESS PLAN IS COVERED BY U. S. COPYRIGHT LAWS. THEREFORE, REPRODUCTION OR DISSEMINATION OF CON­TENTS MAY BE IN VIOLATION OF FEDERAL LAW.

THIS DOCUMENT HAS BEEN PREPARED BY WHAT’S IN YOUR NEIGHBORHOOD, INC., SOLELY FOR INFORMATIONAL AND PROJEC­TION PURPOSES ONLY. THIS IS NOT AN OFFER TO SELL STOCK OR SECURITIES. THIS BUSINESS PLAN WAS WRITTEN FOR INDIVIDUALS TO MAKE AN EVALUATION OF THE SUBJECT MATTER CONTAINED HEREIN AND TO ASSIST THEM IN DETERMINING THEIR DESIRE TO PROCEED IN PROVIDING SUPPORT TO THE PROJECT. WHILE THE INFORMATION CONTAINED HEREIN IS FROM SOURCES DEEMED RELIABLE, WHAT’S IN YOUR NEIGHBORHOOD, INC., HAS NOT INDE­PENDENTLY VERIFIED IT. WHAT’S IN YOUR NEIGHBORHOOD, INC., MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, THAT ACTUAL RESULTS OF THE PRODUCT(S) OR COMPANY WILL CONFORM TO RESULTS PROJECTED HEREIN. THIS DOCUMENT IS SUBJECT TO REVI­SION, WITHDRAWAL, OR MODIFICATION.

Executive Summary

What’s In Your Neighborhood, Inc. (WIYN, Inc.) is a start-up company, whose flag­ship software product, What’s In Your Neighborhood, (WIYN), will change the way neighborhood consumers and local businesses connect. The product is free to con­sumers and revenue is generated from business advertisers.

WIYN is a powerful, grass-roots desktop application that increases neighbor­hood awareness, stimulates the local economy, and provides valuable time & cost savings to residents regardless of computer ownership. WIYN addresses the prob­lem that neighborhood residents and local businesses have in using the Internet, the Yellow Pages, or other types of directories to link up with one another.

WIYN incorporates the best of proven business, delivery, and revenue models to present a convenient, easy-to-use electronic business directory that goes one step farther; it integrates pertinent neighborhood information, such as schools, parks, and recreation centers, to make WIYN the ideal neighborhood resource.

The computer and the Internet have become more prevalent and relevant in everyday life and as a result, Internet penetration in United States homes has reached nearly 75%'. Because of this trend, the potential market for WIYN is in excess of 125 million users. This technologically savvy market, when segmented by areas of defined shopping patterns, offers local businesses a targeted group of con­sumers, who by using WIYN have become qualified consumers searching for the business where they want to spend their money.

Businesses will spend $230 billion on advertising in general in the United States this year2. Yet, none of the common forms of advertising offers businesses the abil­ity to manage their advertising investment and modify their product and service mix based on quantified data pinpointing what the consumer in their community is looking for. The ability to gather its product’s usage at a local level makes WIYN extremely attractive to advertising businesses, because it allows the business to manage its advertising investment.

Businesses can choose among three different monthly packages that alter their level of prominence within the product. This allows businesses to select a package that suits their advertising and data collecting needs. Through the use of proven Internet technologies, WIYN permits local businesses to leverage the power of the Internet, without competing with every business on the Internet, to reach their local consumer and bring the competition for the local consumer’s dollar back to a truly local playing field.

The What’s In Your Neighborhood, Inc., team has over 30 years combined expe­rience in creating high-end, user-friendly, multimedia software applications with clients ranging from the United States Navy to the United States Hispanic Chamber of Commerce. Their skills and expertise combined with their growing team of experienced business executives, creates a company poised for success.

The Company has completed its pre-development phase of growth, and is well positioned to begin its remaining three phases:

• Development—Begins immediately upon funding

• Initial Area Launch—Begins immediately after development

• Expansion—Begins 12 months after initial area launch

Each area launched will be created as a separate Limited Liability Company (LLC), with the Company acting as its managing partner. The goal is to open ten areas within six years; this includes the twelve months required for development. Therefore, the potential for WIYN, Inc. and its underlying LLCs is substantial, with conservative projections showing over $105 million in gross revenues for ten areas in 72 months and a positive annual corporate cash flow of $23 million.

This opportunity requires an investment total of $900K, in exchange for an equity ownership position in the corporation. The investment reflects all monies needed to fully develop the product.

The Company

What’s In Your Neighborhood, Inc., the "Company”, is a California C corpora­tion registered in January of 2004, by the co-founders, Edward Cox, Ralph "Bud” Hartel, and Joseph Rios.

The Company is presently headquartered at 1345 Corte Bagalso, San Marcos, CA 92069, with a mailing address of P. O. Box 2679, San Marcos, CA 92079-2679.

The flagship product of the Company is called What’s In Your Neighborhood, (WIYN).

The Product

What’s In Your Neighborhood, Inc., is an information servicing company that brings neighborhood consumers together by finally providing them a comprehen­sive understanding of what their neighborhood businesses and community services has to offer, and thereby allowing them to maximize the local resources available.

The primary vehicle of this easy-to-use computer desktop application is an elec­tronic directory that connects neighborhood consumers to their local businesses.

WIYN provides users several familiar ways to find the businesses they are ready to spend money with either by category, keyword, or business name. Innovative and helpful ways to find businesses are also provided to allow searching for businesses that are offering coupons, offering neighborhood discounts, or simply have a mapped location to display.

Users can easily find all the business’ information they need from the basics: street address, phone numbers, and email addresses, to having one-click access to more in-depth information at the business’ website. Businesses can even enhance their information by providing quick-glance company descriptions or an engaging audio or video commercial. All of this information is kept up-to-date and fresh through automated Internet updates, similar to common virus protection software.

What sets WIYN apart from any other directory is the additional neighborhood and civic information incorporated into its system. Users can effortlessly find neigh­borhood information on schools, parks, recreation centers, golf courses, and impor­tant community numbers, etc.; making WIYN the 21st century neighborhood resource directory, and so much more.

The user’s experience is heightened through several visual innovations. WIYN is immersed in a well-designed, user-friendly multimedia interface to engage the senses through proven color schemes, animations, and sound effects.

Users are then provided a comprehensive view of their neighborhood through WIYN’s Map-Centric™ methodology that displays information overlaid and tied to a prominent on-screen map.

Through the integration of proven programs WIYN becomes an even more valuable resource for neighborhood consumers and businesses. For example:

• Coupon system—This allows advertising businesses to tap into the 242 mil­lion electronic coupons downloaded last year3 by providing users coupons they can print and redeem

• Discount card—This allows participating businesses to build brand awareness by offering neighborhood discounts to WIYN cardholders

• CouPoints™—This exclusive system mimics proven loyalty programs, such as frequent flyer miles, by rewarding users for regular and consistent use of the product with points that can be redeemed for special coupons from partici­pating local businesses

The combination of the software, the continuous local marketing, and these programs makes WIYN a powerful, grass-roots product that increases neighbor­hood awareness, stimulates the local economy, and provides valuable time & cost savings to residents regardless of computer ownership.

In addition, advertising businesses profit from the ability to track the usage of the product by reporting on keyword and category search trends, coupon usage, web linking traffic, and number of times found in a search. This allows businesses to manage their advertising investment, and serve their neighborhood consumers better by quickly adapting to their quantified wants and needs, thus creating a stronger and more rewarding relationship. This is what the Company likes to call a WIYN-WIYN relationship.

The Market

Every Metropolitan Statistical Area (MSA) in the United States with a popula­tion over 500,000 is a potential market for the product. Approximately 250 of the current 321 MSAs are potential target areas translating into over 125 million potential users in the United States. In the next six years, the goal is to expand into ten of these 250 areas, or 2.5% of the market potential.

An area is defined by a zip code grouping of communities tied together by shop­ping patterns, similar to Yellow Page directory boundaries. These are densely popu­lated areas with 500,000 to 1.5 million residents, where there is at least a 75% rate of computer penetration, meaning at least one computer in the home, and 15,000 or more potential advertisers. This grouping allows for three to eight neighbor­hoods to be serviced by one area office.

These neighborhoods are comprised of two to three communities that are defined by a shopping pattern, have 100,000 to 300,000 residents, and have 5,000 or more potential advertisers.

Internet connectivity is not a requirement to use the software. However, Internet users have now become accustomed to using their computer as a tool in everyday life. Therefore, the target residents within these neighborhoods are com­puter users and broadband Internet subscribers.

The Company’s advertising niche is the ten million small-to-medium sized enterprises (SMEs), the bulk of which have fewer than nine employees and con­duct the majority of their business within 50 miles of their locations. This indicates their understanding of the importance of reaching their local customers.

According to eMarketer, The Kelsey Group (the leading provider of strategic research and analysis, data and competitive metrics on Yellow Pages, electronic directories and local media since 1986) estimates that SMEs will spend $22 billion on advertising this year, with 46% going to Yellow Pages advertising ($10 billion)4. Their research also estimates that advertising dollars will be divided amongst other lead-generating tools, of which WIYN incorporates many of these same features: Yellow Pages 46% ($10.12 billion) Search engine keywords 3% ($660 million) Newspaper 13% ($2.86 billion) Print coupons 2% ($440 million)

Website 11% ($2.42 billion) Outdoor advertising 2% ($440 million)

Direct mail 6% ($1.32 billion) Web banners 1% ($220 million)

Magazines 6% ($1.32 billion) Email marketing 1% ($220 million)

Radio 4% ($880 million) Other 5% ($1.1 billion)

While large, these numbers only address the advertising dollars spent by SMEs. The advertising estimates across all businesses are significantly higher. The Kelsey Group reports that $230 billion will be spent on advertising in general in the United States this year, with advertising being split as follows5:

TV 28% ($64.4 billion) Yellow pages 6% ($13.8 billion)

Direct Mail 21% ($48.3 billion) Magazine 5% ($11.5 billion)

Newspaper 20% ($46 billion) Internet 2% ($4.6 billion)

Misc. 16% ($36.8 billion) Out of home 2% ($4.6 billion)

The Company is competing for these advertising dollars spent by local busi­nesses and has identified several direct competitors to the product. The most prominent of these are:

• Yellow Page directories, both print and Internet based

• Local business directories, both print and Internet based

• Coupon books and mailers

These industries have long competed for the advertising dollar of local busi­nesses, yet have built profitable and growing industries. For example, last year, the North American print Yellow Pages topped $15 billion in revenues6, and ValPak, the most recognized direct mail coupon company in the country, estimates that it will generate $400 million in revenue this year7.

These industries are succeeding, because businesses are compelled to advertise through any medium that could possibly work to get the local consumer into their business.

The lack of accountability from these advertising mediums, especially print, forces businesses to employ a "shotgun approach” to reach their customer. One example is a business placing ads in every directory in their area, because they do not know which directory is used by their customer. Businesses often do not know which medium is truly working for them, unless they spend their own money to survey their customers, which still does not give them accurate results. This is evi­dent in the recent discrepancies found in the A/C Nielsen ratings between written journal documentation and verified digital tracking. There was a 50%-100% mar­gin of error found in the journal surveys8.

These discrepancies need not exist as consumers continue to adopt digital tech­nology. Consumers are now using the Internet more and more to find what they want. According to the Nielsen//Net Ratings Enumeration Study released in March 2004, Internet penetration in the United States has reached nearly 75% 9.

The Kelsey Group’s editorial director, Greg Sterling wrote in a March 17, 2004 article10:

• C&R Research found 84% of United States mothers who use the Web would miss it more than any other single type of media if compelled to give up one

• Among consumers more and more people are using the Internet as a basic daily utility - and search is a key part of that experience

• Nielsen//NetRatings reported roughly 39% of Americans—114 million peo­ple—used at least one search engine during the month of January 2004, rep­resenting 76% of the active United States Internet users

Local search queries make up seven percent of all Internet searches in the United States, according to comScore, which found that in a single month nearly 36 million Internet users conducted more than 200 million searches that included local modifiers11.

Businesses are pouring money into this new medium for several reasons:

• They want to be where their customers can find them

• They know that customers actively searching for them are in essence qualified leads; they’re ready to spend money

• They want to be able to manage their advertising investment

According to the April 2004 PricewaterhouseCoopers, LLP "IAB Internet Advertising Revenue Report”, online advertising has increased dramatically.

Internet advertising revenue in the United States totaled nearly $2.2 billion in the fourth quarter of 2003, up more than 38% from the same time period in 2002. Internet advertising for all of 2003 totaled just under $7.3 billion, up nearly 21 per­cent from the 2002 total of $6.0 billion, and marked the first year-over-year annual increase since 2000. Revenues for the fourth-quarter of 2003 also experienced a healthy sequential increase of nearly 22% over the third quarter12.

The Kelsey Group projects that by 2008, as much as $5 billion in the North American market will be going to digital forms of local advertising—IYP (Internet Yellow Pages), search, and wireless13.

All the interest in local search is in direct response to a very real demand for local information online. People like to find and buy things in their neighborhood, and more consumers are turning to the Net rather than lift the 20-pound Yellow Pages. According to The Kelsey Group, the local search-based advertising market is expected to be worth $2.5 billion by 200814.

This phenomenon demonstrates that consumers are not only using the Internet to find what’s wrong with their toilet, but to find the local plumber to fix it. "When it comes to geo-targeted online search, more consumers clearly are using search to find local business information. A recent survey of 5500 online buyers showed that 25.1% of commercial searches (looking for a busi­ness, shopping, or doing research before buying) were local. The data also showed that 44% of respondents were performing more local commercial searches than one year ago. Furthermore, 64% of these respondents rated search engines as better than traditional offline sources of information, such as Yellow Pages, newspapers, magazines, and direct mail.15”

Greg Sterling, The Kelsey Group, Show Search the Money, March 17, 2004

According to Nate Elliott, an associate analyst at Jupiter Research, the two big growth drivers in Internet advertising are search (keywords) and rich media16.

Another occurrence on the rise is non-browser Internet use. Three out of four home and work Web users go online through non-browser-based Internet applica­tions, such as media players, instant messengers and file-sharing tools, according to Nielsen//NetRatings17. "Functionality has grown beyond the browser to become a fundamental piece of the overall desktop,” said Abha Bahagat, senior analyst at Nielsen//NetRatings, a part of Adweek parent VNU18. This shows that users will quickly embrace WIYN as a desktop gateway to their neighborhood.

All of these trends positively impact WIYN’s advertising revenues and product adoption. Where usage goes, so does the advertising dollar, and businesses have already started spending more on electronic mediums to reach their customers. WIYN is well poised to play a dominant role in this emerging local market.

The Team

The Company recognizes that its future success will be based on building an agile, experienced team of professionals that can manage the expected rapid growth of the Company. The Company’s management philosophy will support and encourage a smooth flow of ideas, and results-oriented implementation through development, customer service, sales and marketing. The initial team players are:

Edward Cox—Chief Executive Officer, Founder

Mr. Cox has four years of experience working as a project manager and software developer. Most recently he was the technical manager for Batiz. com, Vista, CA, where he managed a team of programmers and designers in the completion of sev­eral websites and CD-ROM projects. In addition, he created and developed new products and follow-on enhancements for the United States Hispanic Chamber of

Commerce’s official online career center website, Jobcentro. com. He also designed and developed back-end functionality for the award winning San Diego County Hispanic Chamber of Commerce website.

Mr. Cox is also credited with developing and maintaining an online chat mod­ule for the United States Navy used in conjunction with a multimedia CD-ROM that allowed potential recruits to connect with recruiters. Mr. Cox also developed user functionality for the first bilingual website of any branch of the United States armed services, ELNAVY. com. Prior to Batiz. com, he was with Mass Mutual, La Jolla, CA, where he was responsible for researching investments for client portfo­lios and managing agency investment materials. Mr. Cox holds a BS degree in Business Administration, with an emphasis in Information & Decision Systems, from San Diego State University.

Ralph “Bud" Hartel—Chief Operating Officer, Founder

Mr. Hartel has over 25 years of technical experience and proven team leader­ship. He was Chief Electronics Technician managing a technical team of eight on a Navy nuclear submarine electronics upgrade. Additionally he was the Chief Instructor supervising and scheduling seven instructors and maintaining the capital budget for the Spokane ITT Technical Institute electronics department. Mr. Hartel was also the operations manager for a cabinet manufacturing company responsible for revenue generation, sales force management and factory production. He also served as the CTO and Operations Officer for a software development company managing multiple Navy recruiting projects valued at over $2 million. Mr. Hartel has also managed his own consulting company utilizing his strong programming background to develop web-based data management tools. He holds multiple Microsoft certifications.

Joseph Rios—Chief Creative Officer, Founder

Mr. Rios’ creative background includes multimedia design at Batiz. com, Vista, CA, where he met and worked with the founders of What’s In Your Neighborhood, Inc. At Batiz. com, he was the lead interactive developer for all multimedia engage­ments. He also trained other interactive developers on the use of various software applications used in the building of these projects. While there, he spearheaded all of the concepts and designs, in addition to managing the creation of multimedia military recruitment marketing materials for the United States Navy, which demanded the highest level of cross-platform compatibility, system performance, and presentation techniques. He is also skilled at using all the leading website cre­ation tools. Prior to Batiz. com, Joseph was the Webmaster and Graphic Designer for LSI Sports, Vista, CA, where he was the website designer creating all artwork and navigation used on the site. He also designed all of the company’s marketing materials.

Board of Directors Bob Mangum

Prior to establishing his own consultancy in strategic planning, infrastructure for management, financial control, corporate finance, and other senior management and board level issues more than 20 years ago, Mr. Mangum worked with and man­aged numerous publicly listed companies. In addition to his consultancy practice, Bob has served as a director on numerous Boards including Arizona Small Business Association, Inc., Arizona Internet and E-Commerce Association, as well as, numer­ous other technology, service, manufacturing and product related corporations. Mr. Mangum brings years of fiduciary, corporate governance, and cost-control experi­ence to enhance the Company’s functionality, performance and efficiency.

Marie “Mimi" Zeller

Marie has over 15 years experience in franchising including eight years with Domino’s Pizza, Inc. and over three years with Mail Boxes Etc., where she recently served as senior vice president-operations, overseeing the franchise operations of 3,400 domestic locations. She also played a vital role in new product develop­ment and negotiated over 60 national agreements with companies such as Xerox, Konica and Pitney Bowes. Her assistance with small business owners has encom­passed areas of finance, marketing, training and operations. Marie has a bachelor’s degree in business administration, with a concentration in marketing, from the University of Kentucky. She completed a Harvard executive mini-MBA manage­ment course and has experience as a corporate keynote speaker at several large con­ventions.

Advisors & Professional Service Providers

The Company understands the importance of building a strong executive team. The founders are currently looking for an individual to add to the executive team with a history of directory experience and other individuals (including that of a Chief Financial Officer, and VP of Sales and Marketing) to meet the short-term and long-term goals of the company. The founders have also identified the following advisors and professional service providers to work with them on an as-needed basis.

Ken “Jake" Jakubowski—Emerald First LLC

Ken Jakubowski is currently Chief Financial Officer of Emerald First LLC, a startup financial services company headquartered in San Diego. He has over 20 years of progressive financial management experience with an emphasis on plan­ning, budgeting, financial analysis, treasury, M&A, international finance, and accounting. He is a strong corporate finance generalist and strategic thinker with excellent leadership, analytical and communications skills. Prior to joining Emerald First LLC, he was Vice President, Finance at GMAC Insurance, a $1.3 billion per­sonal lines insurance company based in Winston-Salem, NC. He has served as an adjunct professor in the evening MBA program at The Johns Hopkins University Lecturing in International Capital Markets and Corporate Finance, and has fre­quently presented at the Babcock Graduate School of Management, Wake Forest University. He holds an MBA from The University of Michigan and an undergrad­uate degree in Economics from Kalamazoo College.

Greg Writer—The Writer Group

Greg Writer currently serves as President and CEO of his firm, and is an exec­utive with more than 18 years of experience in corporate finance, capital formation, executive level management, mergers, acquisitions, and sales/marketing. He is an aggressive, venture-minded multi-tasker who has consistently converted risks to rewards and facilitated the formation and funding of many start-up companies. He consults in the areas of capital engineering, capital acquisition, creation of business plans, and development of business strategy. He speaks and trains on topics about growing your businesses through better marketing.

Tim Ristine—The Writer Group

Tim Ristine is currently serving as the COO of The Writer Group. He is an accomplished executive with over 20 years of marketing, business planning, prod­uct management, and sales experience with products and services sold to the retail, financial, telecommunications, healthcare, energy, computer, aerospace, and auto­motive industries through direct and reseller channels. He is experienced in turn­around and re-start companies as well as large enterprises. He holds an MBA from Northeastern University, a MSEE with a major in computer science and software from the University of New Mexico, and a BS degree in mathematics. He speaks regularly and trains on topics about growing your businesses through better mar­keting.

Vincent Molina—Vincent G. Molina & Associates

Vincent Molina provides consultation in business development, corporate struc­ture, and capital acquisition for product and service-driven companies from the start-up stage through seed capital, and also works closely with the client’s service providers. Mr. Molina has more than 20 years of experience in the corporate arena in the areas of training and management and currently participates on the U. S.A. Today’s Small Business Panel, which serves 20 million entrepreneurs. In addition, Mr. Molina is the president of the publishing company, Creative Alternatives, Inc., and creator of the Communicating With...™ book series.

Burk & Reedy Law—Corporate Legal Counsel

Jim Burk provides corporate legal counsel and has been in the private practice of law for over 30 years. He specializes in emerging companies in the initial stages of organization and growth. He has also been a senior partner in law firms located in New York and Washington, D. C. Mr. Burk’s law practice includes general busi­ness matters that pertain to corporations, contracts, venture capital finance, tax, asset protection, and securities law. Alan Reedy is a corporate and tax attorney and has been in the private practice of law for over 30 years. He is a Certified Public Accountant and Certified Financial Planner. Mr. Reedy assists companies in busi­ness contract and tax matters that include securities, intellectual property, and tax and asset protection.

Maria Crimi Speth—Jaburg & Wilk, P. C.

Maria Crimi Speth practices in the areas of intellectual property and commer­cial litigation, representing clients throughout the United States. She focuses her practice on assisting businesses in protecting their trademarks, copyrights, trade secrets, and other intellectual property through preventative measures to avoid dis­putes, and through aggressive measures when disputes arise. Ms. Speth has authored articles on the topics of litigation and intellectual property published in The Business Journal, the Arizona Journal of Real Estate & Business, and the Arizona Attorney.

Mike Starkweather—Kunzler & Associates

Mike Starkweather exclusively focuses his practice in the intellectual property law area. He started his practice as a Patent Examiner in Washington, D. C. After working in the Patent Office, he spent several years working as in-house counsel for several major corporations, including IBM, Xerox, and AT&T. In addition to prose­cuting hundreds of software, electrical, and mechanical inventions, Mr. Starkweather has been involved in performing major intellectual property audits, including audits for a 30-million and a 100-million dollar acquisition. Mr. Starkweather has recently been teaching at the University of Utah on IP Valuation and Strategies. He also teaches a seminar in Los Angeles to Emerging Enterprises about intellectual property. His philosophy is that "patents are a tool for the busi­nessman to achieve his objectives within a given budget.”

Howard Lim—How Studios Inc ®

Howard Lim supports his clients to realize the rewards of growth and earnings through Image MarketingTM—his uniquely integrated system of multiple graphic design disciplines, branding, and visualization. An award-winning creative director and graphic designer, he pioneered solutions that enabled ABC to broadcast on the first computerized off-line motion graphics on TV, allowed Zylan to launch one of the first graphically integrated effective websites, and reformatted an extended length interface design, MGM’s classic movie The Great Escape, onto DVD—a first for the studio. Today, Howard leads a team of professionals who successfully com­municate the powerful visions of America’s emerging and leading companies, including a select group on the Fortune 500. He continuously exceeds the expec­tations of clients like Apple Computers, UCLA, ABC networks, Disney, DreamWorks, Honda, Mitsubishi, Philips Media and Toshiba.

The Plan

The Company has completed its pre-development phase. The appropriate steps have been taken to now enter the development phase. They are:

• Filed and received provisional patent protection for the software’s interface functionality

• Filed for trademark protection of the product name, "What’s In Your Neighborhood”

• Completed a 56 page secondary market research study on the industry, prob­able users, competitors, and potential market gaps

• Developed a professionally narrated automated walkthrough demo of the product for investors

• Begun the team building process

• The next phases are development, launch, and expansion.

The development phase is budgeted for 12 months. Here the groundwork will be established to launch the first area by achieving the following milestones:

• Prototype development—Create the functional specifications of the software, and then outsource the programming of these modules to trusted technology companies in California and India. This strategy allows for rapid development of the product, while keeping overhead expenditures low in this development phase.

• Brand identity development—Create a strong, consistent image of the prod­uct and company through all mediums that lets everyone know that WIYN is a top-notch grassroots product whose company cares about its neighbors.

• Perform additional market research—The information that is gathered from consumers and businesses will supplement the Company’s current research in evaluating market acceptance and price points, this will allow it to sharpen its sales and marketing strategies to best serve these stakeholders.

• Develop sales tools and advertising materials—Based on the Company’s refined strategies, sales tools and advertising materials will be developed to support these strategies, such as a website, brochures, business sign-up web forms, sales videos, etc.

• Complete alpha, beta, and QA testing—WIYN will be tested and ready to go prior to the initial launch.

The next phase is where the proverbial "rubber meets the road”; the Company gears up for the launch of the initial sales area, and begins implementation of the revenue model.

The Company will create separate Limited Liability Companies (LLCs) for each sales area that it enters into. The purpose for this is the flexibility and bene­fits this structure offers to both investors and the Company. WIYN, Inc. will license out its technology, as well as provide all administrative, technical, accounting and ancillary support to each Area LLC. This enables each Area LLC to solely focus on sales within its predetermined geographic boundary. The Company will act as the managing partner for the Area LLC and will be paid a monthly management fee as well as additional fees for all services provided. These fees, in addition to yearly membership distributions, are where the Company’s revenue is generated. The Area LLC will derive its revenue through the implementation of the revenue model.

The revenue model is simple. Advertising space on the product is sold to busi­nesses within the product’s geographic boundary. Businesses are differentiated by the number of different ways a user can find them within the product. This dis­tinction is accomplished by offering businesses three monthly packages from $49.95, $89.95, and $149.95 per month. These prices are competitive in compari­son to print and internet-based Yellow Page and business directories, and reflective of the targeted consumers’ perceived value to the advertisers. Each package repre­sents differing features and levels of prominence available to the advertiser. This monthly subscription model alleviates the cost associated with actively seeking renewals, and allows more energy to be placed in constantly acquiring new adver­tisers.

In addition to these advertisers, up to nine local advertisers will have maximum exposure on the product, by being designated as a ‘Featured Business’. Featured businesses enjoy company logo placement on all WIYN advertising and product packaging for the year, including Cable TV commercials, Print Ads, and the CD - ROM package front or back cover. Featured businesses are highlighted within the product in the ‘Featured Business’ section, they are listed first in all applicable search results, their logo depicting their location is found on the map in all user searches, and these advertisers have access to more product usage reports, such as reporting across all business categories in the directory. This premium placement is similar to purchasing the back-cover in a Yellow pages directory, and is available for $15,000 per year per advertiser.

The milestones to achieve this phase are:

Corporate:

• Establish the corporate office—Establish the corporate office in San Diego County.

• Hire key personnel—Hire the Vice President of Sales & Marketing, as well as an Administrative Assistant, and begin working with outsourced professionals, such as a part-time Chief Financial Officer.

• Refine the Sales and Marketing strategies—The new VP of Sales & Marketing will be instrumental in refining the sales and marketing strategies developed by the board of directors.

• Hire Area Director and Administrative Assistant—The Area Director will be responsible for establishing the Area office, and the hiring and training of inside and outside Sales Representatives. (In Area One, the Vice President of Sales & Marketing will serve as the Area Director to reduce costs.)

• Begin PR campaign—Through the use of newspapers, magazines, and research company reports, the Company will begin to establish third party credibility for the product.

• Begin marketing campaign to potential advertisers—This campaign will have one clear message: businesses will see more customers, make more sales, and realize bigger dollars, as a result of participating in WIYN.

• Begin marketing campaign to Area consumers—The campaign will create product awareness in the neighborhood through the use of direct mail inserts and 30-second radio spots telling consumers of the benefits of WIYN and 30- second cable television commercials visually introducing the product to con­sumers. By associating the product with local and national neighborhood busi­nesses, and reinforcing this through product packaging, product credibility and familiarity are established, thereby decreasing the possibility that the product will be discarded as junk mail.

• Distribute software—All homes and businesses within the neighborhood will be direct mailed the product on CD-ROM. By using the United States Post Office, verification of actual distribution can be provided to advertisers. Because the product is transported on CD-ROM, it makes it very easy to dis­tribute through other channels. A limited number of CD-ROMs will be pro­vided to local realtors to hand out to clients new to the area; home develop­ers to insert in their welcome packages; and, Chambers of Commerce to insert in their relocation packages and to hand out to walk-in visitors. Once the soft­ware is installed, the CD-ROM is no longer needed, so users can even pass the CD-ROM on to friends and family. The primary distribution will occur on an annual basis, just like the Yellow Pages, to maintain product awareness.

Area LLC

• Establish Area office—The Area office will serve as office space for all Sales Representatives in the area. (In Area One, the Corporate office will serve as the Area LLC office to reduce costs.)

• Lease sales equipment—Sales equipment, such as laptops and cell phones will be leased to minimize the outlay of capital to purchase and to easily keep up with technology.

• Hire Sales Representatives—Area Director will be tasked to hire Sales Representatives. Sales Representatives will have two to three years sales expe­rience.

• Train Sales Representatives—Sales Representatives will be trained to be con­sultants and help businesses find the best value for their marketing dollar. Automated sales tools will make this process more efficient. A wireless inter­net-connected laptop to access the web-based sales system will allow Sales Representatives to sign-up new businesses on the spot, track their individual sales, and maintain their appointment schedule. The laptop also allows them to show businesses the compelling selling video to further highlight the ben­efits WIYN will provide them.

• Begin Sales—The Area LLC will initially target businesses that fall within the most referenced and fastest growing headings in the Yellow Pages. They are restaurants, physicians & surgeons, automobile parts and repair, pizza, attor-

Neys, cable television, carpet & rug cleaners, cellular telephone equipment & supplies, child care/day care centers, contractors, electric contractors, employ­ment agencies, hearing aids, motels, and mortgages19. When a sale is made a setup fee is collected and a simple credit card or bank authorization draft is setup to begin the business’ monthly payments.

As this area is refined, the next step is to replicate this cookie-cutter model in ten areas over the next five years. This ultimately generates a substantial positive cash flow that provides for self-funded continued growth.

The Potential

The potential of WIYN can be viewed from two different perspectives: the Corporation and the Area LLC. Since the initial launch area is the basis for future growth and does not begin until after the initial 12 months of development is com­plete, the Company is showing a five year forecast for the Area LLC and then a six year forecast for WIYN, Inc., which shows expansion into ten areas.

The Area LLC model shows at year five $12.0 million in revenues against $1.3 million in direct expenses. These revenues represent 12,019 advertising businesses across eight neighborhoods spending on average of $81.95 per month, in addition to 24 featured advertisers each spending $15K per year. The direct expenses include the cost for the replication and delivery of the CD-ROMs for each neighborhood, the mileage reimbursement for each Outside Sales Representative, Management and Inside Sales Representative bonuses, and Outside Sales Representative commissions. This translates into an 89% gross profit margin. The net profit margin at year five is 71%.

Area LLC—Five-Year Forecast

The Corporate model shows at year six $46.3 million in revenues against $3.7 million in direct expenses. These revenues represent the contributions made by ten Area LLCs to cor­porate that include member distributions, management fees, and servicing fees, based on $105,109,339 in gross revenues. The direct expenses include the cost of providing each Area LLC with administrative, technical, accounting, and ancillary support. This translates into a 92% gross profit margin. The net profit margin at year six is 50%.

The Liquid Strategy

The Company’s philosophy is to reward investors as soon as economically and legally possi­ble. Therefore, in year four, pending the existence of retained earnings, the Company may begin declaring dividends. At the six year mark, the Company will explore two possible liquidity strategies for investors:

• Optional company stock buy-back at a graduated rate

• Begin actively looking for a possible acquisition or merger

Either strategy will reward investors handsomely.

Funding

We have broken up our stages of funding into two logical raises. Our first and current raise will consist of seeking capital solely for the development of our software application and to posi­tion us for the initial area launch. Equity shares will be sold in WIYN, Inc. in order to raise the $900,000 needed for this development phase. This phase is budgeted for 12 months.

The second raise will be seeking $1.6M for the establishment of a solid scalable corporate framework and $3.0M for the launch of our first sales area. This round will be unique in that investors will be investing in WIYN, Inc., and WIYN—San Diego, LLC.

To provide investors the quickest cash return on their investment, we have decided to struc­ture each sales area as a Limited Liability Company (LLC). This allows investors to receive the benefits of pass-through losses in the area’s first year of operation, and then receive membership distributions as the area becomes profitable. These distributions may continue for the life of the

The investors in WIYN, Inc., not only benefit from the revenue the first Area LLC generates for the corporation, they also reap the rewards of each and every area that is open from then on.

Equity in WIYN, Inc. will be sold to raise the $1.6M. Membership units will simultaneously be sold in WIYN—San Diego, LLC to raise the $3.0M.

No further investment is anticipated for either entity.

Expansion will initially occur through the creation and funding of LLCs in each additional sales area.

The Company sees each Area LLC as a profitable investment vehicle that pro­vides investors an ongoing stream of revenue.

To get additional financial information, please contact Edward Cox at 760-443­3869.

Qtr 3. 2003 Qtr 1. 2004 Qtr 3. 2004 Qtr 1.2005 Qtr 3.2005 Qtr 1.2006 Qtr 3.2006 Qtr 1.2007 Qtr 3.2007 Jul Sep o, Jan Mar May.-ul Sep Nov Jar Mar May Jul Sep Mov Jan. Mar May Jul Sep Mov Jan Mar May Jul Sep No.

Market Research - Refine Sales/Marketing Model

Create Messaging/Positioning

Marketing Mix

Area Growth Process

Area(1)

Marketing

Sales

Manufacture Neighborhood CDs

Product Shipments

Task Split Progress

Project: Production cycleBP mpp Date: Wed 5/12/04

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1 Wall Street Journal, March 18, 2004.

2 Small Business Depends on Yellow Pages and Newspapers. Www. centerformediaresearch. com/cfmr_brief. cfm7fnt031117

3 More consumers are using online coupons as companies begin to offer them for a wider array of products. New York Times, March 17, 2003.

4 SMEs Tap Into Premium Search. Www. emarketer. com/news/article. php71002698

5 Small Business Depends on Yellow Pages and Newspapers. Www. centerformediaresearch. com/cfmr_brief. cfm? fnl=031117

6 Local Search: The Hybrid Future Http://searchenginewatch. com/searchday/article. php/3296721

7 ValPak website. Www. valpak. com/info/franchise/franchise_opps_content. jsp

8 Nielsen Reports More Diverse Television Viewing Patterns Among African American and Latino Audiences. Www. nielsenmedia. com

9 NetRatings: Internet Is 75% Full; comScore: They're Full Of It. Www. mediapost. com/dtls_dsp_news. cfm? newsId=242865

10 Show Search the Money. Http://www. imediaconnection. com/content/3043.asp

11 comScore Bows qSearch Local. Www. mediapost. com/dtls_dsp_news. cfm? newsID=240422&newsDate= 03/03/2004

12 Online Ad Spending Grows over 20% in 2003. Http://www. emarketer. com/news/article. php71002760

13 The Kelsey Group. Www. kelseygroup. com

14 Search Engines Going Loco for Local...But When Will Small Business Get Real? Www. searchenginejournal. com/index. php? p=484

15 Show Search the Money, Www. imediaconnection. com/content/3043.asp

16 Online advertising roars back. Http://money. cnn. com/2004/02/18/ technology/techinvestor/hellweg/index. htm

17 Non-browser Internet Use on the Rise. Www. mediainfo. com/eandp/news/article_display. jsp? vnu_content_id= 2060808

18 Ibid.

19 Study Finds Internet Yellow Pages References Hit 1.6 Billion in 2003. Www. mediapost. com/dtls_dsp_news. cfm? newsId=247028