Glenbriar Business Plan - Sept 2002

Glenbriar Business Plan Glenbriar Technologies Inc. 320, 505 3 St SW Calgary, Alberta T2P 3E6 Phone: (403) 233-7300 Fax: (403) 234-7310 Email: info@glenbriar.com Confidentiality Agreement The undersigned reader acknowledges that the information provided by Glenbriar Technologies Inc. in this business plan is confidential; therefore, reader agrees not to disclose it without the express written permission of Glenbriar Technologies Inc. It is acknowledged by reader that information to be furnished in this business plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to Glenbriar Technologies Inc. Upon request, this document is to be immediately returned to Glenbriar Technologies Inc. ___________________ Signature _________________________________ Name (typed or printed) _________________________________ Date This is a business plan. It does not imply an offering of securities. Table of Contents 1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Company Ownership & Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Company History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Sales Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Future Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.2 Marketing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.3 Investor Relations Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2 Sales Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Strategic Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 2 2 2 3 5 6 7 7 7 7 8 10 10 11 11 12 13 14 14 15 15 16 17 17 18 19 2.0 3.0 4.0 5.0 6.0 Web Plan Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 6.1 Website Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 6.2 Development Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 7.1 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 7.2 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 22 23 24 26 26 7.0 8.0 Glenbriar Business Plan 1.0 Executive Summary Glenbriar will focus on its strengths in each of its markets, and expand those strengths among its existing and new locations. Glenbriar projects that sales withh increase to close to $10 million in 3 years, based on small improvements in gross margin on sales, cash management and working capital. While Glenbriar management believes that annual sales could double with a carefully executed investment of approximately $1 million per year over the next 3 years, this plan deals only with the internally generated growth scenario. Projections of the effect of the contemplated investment are available in a separate 4 page executive summary. 1.1 Definitions The following abbreviations are used throughout the plan: ASP - Application service provider, refers to the model of providing users from a number of different enterprises with access to software and Internet services through the Internet or a WAN, rather than on a client-server basis. ERP - Enterprise resource planning, refers to a software suite which provides modules which serve all levels of an enterprise, such as financial and cost accounting, inventory tracking and control, payroll, electronic payments, electronic data interchange, project management, time and billing, etc. GUI - Graphical user interface, refers to a graphical, rather than text-based, user interface for a software product. ICT - Information and communications technology, refers to a specific sector of the Canadian economy identified by Statistics Canada, which is made up of the following industries: i) Computer Equipment; ii) Communications Equipment; iii) Electronic Components; iv) Telecommunications Services; and v) Software and Computer Services. IP - Internet protocol, refers to the protocol used to transmit data packets over the Internet. IT - Information technology. SMB - Small and medium businesses, generally identified as companies or organizations made up of one or more sites, with from 5 to 1000 connections. 1.2 Objectives The main objectives for the next two years are as follows: 1. To increase gross revenue to $9.8 million in 2005. 2. To achieve an after tax profit of $555,000 in 2005. 3. To introduce IT services and IP telephony into each branch. 4. To open an Edmonton and Toronto offices by 2005. 5. To add a GUI to the ERP suite of software products. 6. Develop versions of the ERP suite tailored to specific industries. Page 1 Glenbriar Business Plan 1.3 Mission Glenbriar's mission is to provide effective business technology solutions within the scope of the software and computer services industry in Canada. Glenbriar focuses on improving workflow and functionality using proven information technologies and solutions geared toward small and medium businesses (SMB). Glenbriar seeks to deliver these solutions in a merit based and profit driven environment. Highlights (Planned) $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2003 2004 2005 Sales Gross Margin Net Profit 2.0 Company Summary Glenbriar Technologies Inc. is an IT company providing business workflow improvement through IT design, implementation and support. Glenbriar provides IT outsourcing and consulting services, including IP telephony and call centre solutions. Glenbriar also develops, markets and supports a proprietary ERP software suite for manufacturers and distributors and specific SMB segments through its subsidiary Peartree Software Inc. in Kitchener-Waterloo. 2.1 Company Ownership & Governance Glenbriar is an Alberta corporation which trades on the TSX Venture Exchange (TSX-V) under the symbol GTI. Glenbriar is a public company listed as a Tier 1 issuer on TSX-V. Glenbriar would seek to graduate to the senior TSX exchange when it meets the listing criteria. Glenbriar would consider filing a Form 20-F with the Securities and Exchange Commission to become the equivalent of a reporting issuer in the US if future circumstances so warrant. That action could be combined with a Nasdaq OTC listing. Glenbriar's board of directors is made up of 7 members. The 3 inside directors are based in Calgary and Vancouver, and are the founders of Glenbriar and its principal officers, who collectively hold 47% of the voting shares. Three of the independent directors are based in Toronto and the Niagara Region, and collectively hold less than 4% of the voting shares, and are all former directors of Peartree Software Inc., which Glenbriar acquired in December 2000. An additional independent director from Vancouver was added at the Glenbriar annual meeting in April 2002. Glenbriar management seeks to reduce the size of the board of directors to 5 members over the next 2 years. The following persons own or control, directly or indirectly, more than 10% of the 25,267,428 Common Shares issued and outstanding: Page 2 Glenbriar Business Plan Name and address Robert Matheson Calgary, Alberta Glenn Matheson Calgary, Alberta Brian Tijman Richmond, B.C. Ownership direct direct direct Number of shares 4,680,420 4,432,600 3,242,150 12,355,170 % of Common Shares owned or controlled 18.5% 17.5% 12.8% 48.9% 2.2 Company History Glenbriar Technologies Inc. was incorporated under the Business Corporations Act (Alberta) on July 15, 1994 as Glenbriar Developments Ltd., and changed to its current name on March 26, 2001. "Glenbriar" is a combination of the first names of the founders, Glenn, Brian and Robert, who are still the three largest shareholders. In March 1995, Glenbriar was listed on the Alberta Stock Exchange (now TSX-V) as a junior capital pool company. Effective September 1, 1996, Glenbriar completed its major transaction, and became listed as an oil and gas issuer. From September 1996 to December 1999, Glenbriar was engaged in oil and gas exploration, development and production. In December 1999, Glenbriar ceased oil and gas exploration and development activities, but retained its producing properties. In March 2002, Glenbriar sold its oil properties, leaving it with a 55% interest in a producing gas well and a 50% interest in a shutin gas well. Effective May 1, 2000, Glenbriar changed its principal business from oil and gas to information technology (IT) by acquiring IS Department Ltd. (IS Dept) of Calgary, a private IT outsourcing and support company founded in July 1997 and owned by the founders of Glenbriar. On December 1, 2000, Glenbriar acquired Peartree Software Inc. (Peartree), an enterprise resource planning (ERP) software vendor and support company, and Moser Computer Services Inc. (Moser), an IT support company and SMB software segment provider, both based in Kitchener-Waterloo, Ontario. Effective April 1, 2001, Glenbriar acquired Tel2000 Services Ltd. and Nat Communications Ltd. (Nat) of Vancouver, B.C., which specialized in Internet protocol (IP) telephony and call centre solutions. Effective September 30, 2001, IS Dept., Moser, Tel 2000 and Nat were amalgamated with Glenbriar. On October 1, 2001, Glenbriar acquired Platinum Systems Ltd. (PSL), an IT support and ASP company in Calgary. Page 3 Glenbriar Business Plan Table: Past Performance Past Performance Sales Gross Margin Gross Margin % Operating Expenses Collection Period (Days) Inventory Turnover Balance Sheet Short-term Assets Cash Accounts Receivable Inventory Other Short-term Assets Total Short-term Assets Long-term Assets Capital Assets Accumulated Depreciation Total Long-term Assets Total Assets Capital and Liabilities Accounts Payable Current Borrowing Other Short-term Liabilities Subtotal Short-term Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Capital and Liabilities Other Inputs Payment Days Sales on Credit Receivables Turnover 2000 2001 2002 $198,423 $975,509 $1,036,265 $69,051 $0 $152,167 $49,300 $273,160 $256,385 $316,774 $1,248,669 $1,444,817 $53,432 $370,206 $2,123,771 $294,132 $0 $2,417,903 $2,788,109 2000 183 $526,038 1.00 $11,432 $1,260,101 $2,787,650 ($37,727) $0 $2,749,923 $4,010,024 $12,432 $1,457,249 $2,979,474 ($37,727) $222,961 $3,164,708 $4,621,957 2000 2001 2002 $1,051,336 $4,511,055 $7,016,836 $576,678 $1,372,241 $2,022,656 54.85% 30.42% 28.83% $159,845 $1,105,297 $1,479,705 365 295 294 5.69 19.81 14.05 2000 2001 2002 $616,136 $462,992 $118,128 $526,038 $857,030 $1,408,437 $83,462 $233,371 $477,659 $1,376 $2,430 $3,676 $1,227,012 $1,555,823 $2,007,900 $1,596,097 $2,706,202 $3,148,747 $35,000 $252,001 $534,690 $1,561,097 $2,454,201 $2,614,057 $2,788,109 $4,010,024 $4,621,957 2001 2002 69 73 $857,030 $1,408,437 1.00 1.00 Page 4 Glenbriar Business Plan Past Performance $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2000 2001 2002 Sales Gross Net 2.3 Company Locations and Facilities Glenbriar's head office is located in Calgary, with branch locations in Vancouver and Kitchener. In May 2001, Glenbriar's Kitchener office relocated to new premises in the same building at 50 Queen Street North, Suite 700, Kitchener, Ontario. The new location is comprised of 7,000 square feet, which was renovated to Glenbriar's specifications at the landlord’s expense. Rent is $7 per square foot plus occupancy costs, with a cap on gross rent of $12 per square foot. This site also hosts secure servers accessed by Peartree's clients for support, upgrades and customer extranet. There are 18 employees working out of the new location, made up of 3 IT support and 15 ERP and SMB software development and support employees. In November 2001, Glenbriar relocated its Calgary operations to 320, 505 3 St SW, Calgary. The new location is comprised of 2000 square feet of offices in the centre of downtown Calgary, at a gross rent of $8 per square foot plus occupancy costs until February 2004. Glenbriar allowed the lease to expire on its previous location at the end of December 2001. The new location was renovated to accommodate both Glenbriar’s and Platinum’s existing lines of business. Glenbriar now provides Web hosting and application service provider (ASP) solutions to businesses in downtown Calgary. Glenbriar has 23 employees working out of the new location. The Calgary location houses a central Windows 2000 ISA/Exchange Server and Windows 2000 Terminal Server, which are used for administration, accounting and client support. These servers are connected to the Internet by a full duplex 10 mbps optic fibre. Employees access the servers from 13 workstations located on site or remotely through Remote Desktop Protocol Clients over the Internet. The downtown location includes a test bench and inventory for the assembly, installation, configuration, repair and dispatch of computer hardware and software for Glenbriar clients. Glenbriar consultants work mainly at client sites. In addition to internal servers, the Calgary site hosts 5 servers used by Glenbriar clients to remotely access hosted e-mail, Internet and applications using an ASP model. This function currently generates over $100,000 in annual revenue, and is being redesigned to handle additional clients and services. In November 2001, Glenbriar purchased a new office location at 103 – 1500 Hartley Avenue in Coquitlam, B.C., which is centrally located within the Lower Mainland. The location consists of one bay of a 4 year old building in a condominium Page 5 Glenbriar Business Plan warehouse, and includes 3100 square feet of finished office space on two floors plus 300 square feet of warehouse space. The location includes 3 parking stalls, and on street parking is also readily available. The purchase price of $225,000 was paid by a 30% cash down payment, with the balance by way of commercial mortgage. Glenbriar believes that the purchase price is below replacement cost. Glenbriar currently has 10 employees working out of the new location. 3.0 Products and Services Glenbriar delivers complete IT management and support that makes business processes and workflow accurate and efficient and keeps them reliable and stable. Glenbriar's target market is businesses with 1 to 1000 active network nodes. Glenbriar provides a high degree of specialization in integrating diverse hardware platforms and software solutions which is beyond the scope of the internal resources of most small and intermediate sized companies. Glenbriar provides a single point of contact solution for business technology solutions at a higher level of service and reliability at lower cost than can be achieved using in-house personnel. Clients obtain access to IT specialists just for the time and purpose that fits their needs. By specifically targetting those requirements, Glenbriar reduces the overall cost to its clients while delivering higher quality solutions. Glenbriar provides a number of key products: 1. IT Services -- Glenbriar provides the following IT services: • IT Outsourcing and Consulting - Glenbriar helps clients develop and manage strategic direction, business practices and computer applications for specific business disciplines. Information technology is applied to customers' existing resources to optimize business workflow. Glenbriar provides a complete suite of IT services on a project, partial or full outsourcing basis. Infrastructure support includes PCs, servers, peripherals and connectivity on a variety of operating systems, including Windows 95/98/NT/2000/XP, Citrix, Unix, and AS/400, as well as database servers running Oracle or SQL server, and many other specialized industry applications. Networking and internetworking expertise includes LAN, WAN, Ethernet, wireless, fibre, ATM, and frame relay. Pricing is available at an hourly rate, at a daily rate, on a project-byproject basis, on a monthly price per consultant engaged or on a monthly fee per employee/user. vendor for Microsoft, HP, Compaq, Cisco, 3Com and various other manufacturers. Hardware and software are custom configured and delivered to the client's site. Glenbriar assembles its own line of custom PCs and servers for its small business customers who cannot afford or are not prepared to pay the premium for Tier 1 equipment. Glenbriar offers onsite pickup, repair and return of hardware components for its IT customers. specializing in the 3Com line of IP telephony solutions. • Procurement -- Glenbriar provides procurement of all IT requirements for its clients, and is an approved • IP telephony solutions -- Glenbriar designs, sells, installs and supports IP telephony and call centre products, 2. Software Services -- Glenbriar provides 2 levels of software services: • ERP - Through Peartree, Glenbriar develops, sells and supports a line of ERP software modules geared for the manufacturing and distribution sectors. There are 26 modules in total. These modules are certified and validated by General Motors, Ford, Daimler Chrysler and Honda for use within the automotive industry. SMB Segment - Through Peartree, Glenbriar develops, sells and supports software for specific SMB market segments, such as recreation vehicle dealerships, veterinary clinics and dental offices. • Page 6 Glenbriar Business Plan 3.1 Competitive Comparison Glenbriar is differentiated from its competitors by directing its primary focus on business workflow rather than on IT. Glenbriar discourages its clients from investing heavily in IT solutions which do not provide meaningful and lasting benefits. Glenbriar targets companies with less than 1000 workstations. Glenbriar has found this market niche to be underserved in the IT field. Companies in this range cannot find or afford to retain the breadth and depth of IT support that they need to compete with their larger competitors. By providing competent support onsite at aggressive rates, carefully watching its overhead, and grooming its support staff to focus on its clients' best interests, Glenbriar has identified a market niche. Over time, Glenbriar seeks to expand its market geographically, believing that this concept can serve equally well in smaller centres. Glenbriar is uniquely positioned to deliver on all of these requirements. Glenbriar is more flexible, more focused and less expensive than its larger competitors, while providing superior depth and reliability to the services offered by its peer group. Glenbriar's ERP and SMB software solutions are completely interactive and multitasking, providing the latest management information, with more functionality than competing systems, at a fraction of the cost. 3.2 Sales Literature Glenbriar has not invested heavily in sales literature. In the first quarter of fiscal 2002, Glenbriar participated in the Calgary Technology Showcase and Vancouver Technology Showcase trade shows in order to make an initial introduction of both the Glenbriar brand and IP telephony offerings in both markets. The branding effort was timely due to the amalgamation of five companies on September 30, 2001, which effectively launched the Glenbriar brand name in the IT field. The Glenbriar brand is protected by trade mark registration in Canada, which provides effective protection within the United States as well. 3.3 Fulfillment Glenbriar provides IT and IP telephony support and maintenance onsite at client locations. Hardware and software procurement are done directly by Glenbriar on behalf of clients. Glenbriar provides procurement as a service to its IT customers, who do not wish to be involved in such activities. Gross margins typically range from 10 to 20% for computer hardware and software, and from 20 to 35% on telephony equipment, depending on the size of the order. For clients that require and are able to afford tier one equipment, Glenbriar sources Compaq or HP servers and workstations. For clients that are on a restricted budget, Glenbriar assembles computers under its own brand name. Glenbriar has trade accounts with over 35 industry suppliers, including Synnex, Ingram Micro, Graybar and Tech Data. Glenbriar is an authorized reseller for Microsoft, HP, Compaq, 3Com, and several other manufacturers. Glenbriar's ERP and SMB software is proprietary and is licensed to clients on an annual basis. The software runs on the Unidata multi-value database, which was purchased by IBM in 2001. Glenbriar resells licensing for the database to its clients as an IBM Business Partner. 3.4 Future Products and Services Glenbriar's product suite has recently expanded to include Website design and maintenance, e-commerce, Internet security, ASP, IP telephony and Intranet business workflow products and strategies. Glenbriar is currently implementing a project to put a GUI on its ERP and SMB software solutions using Microsoft's Visual Studio.NET. Glenbriar plans to extend the scope of its ASP offerings to potentially include business productivity applications, software rental and telephony solutions. It is possible the the ERP and SMB segment software may be able to work into an ASP model as well. Glenbriar may also wish to consider packaging its various support lines into combined business technology solutions in the future. Page 7 Glenbriar Business Plan 4.0 Market Analysis Summary Glenbriar falls into the industry sector classified by Statistics Canada the Information and Communications Technologies (ICT) sector, which is further broken down into subsectors. The following charts show the share of GDP and GDP growth from 1997 to 2000 for the sector, and breakdown of GDP by subsectors in 2000: Statistics Canada defines the “software and computer services industry” to include companies whose primary business is: (a) in the development and sale of software products; (b) in services like consulting, custom software development, facilities management, and processing services; and (c) in the sale, lease and maintenance of computer hardware. Glenbriar fits well within this definition if the words “IP telephony” are added before “hardware” in the last category. Glenbriar management believes that IP telephony will become integrated into the computer services category in the coming decade due to the convergence of telephony and computer technologies over that period. The share of total employment for the ICT sector and software and computer services is as follows: Page 8 Glenbriar Business Plan Research and development expenditures for the ICT sector were $5.3 billion in 2001, of which a little under 50% was spent on telecom equipment, with only 13.6% being spent in the software and computer services subsector: While the software and computer services industry attracts its proportionate share of ICT research and development expenditures based upon revenue, the subsector includes 37% of all ICT employees. In addition to the higher proportion of employment, the software and computer services industry also demands and attracts the top performers in the ICT sector, as shown by the education and income levels for that subsector: Page 9 Glenbriar Business Plan 4.1 Market Segmentation Industry Canada identifies three principal technology triangles in Canada, with the following characteristics: 1. Vancouver/Calgary/Edmonton Triangle • over 100,000 ICT professionals • combined population close to 4 million • strong academic and R&D infrastructure • 3 of the top 20 electrical engineering programs in North America • North America’s major air/shipping gateway to Asia • rapid air shuttles • increasingly integrated into US West Coast complex 2. Toronto/Ottawa/Montreal Triangle (includes Kitchener-Waterloo) • • • • • • • over 300,000 ICT professionals combined population close to 10 million advanced ICT infrastructure numerous research institutes and centres of excellence 5 of the top 20 computer and electrical engineering programs in North America rapid air shuttles and fast rail integrated into US Great Lakes/Northeast region 3. Atlantic Triangle (not currently relevant to Glenbriar) It should be noted that the Toronto area makes up about 50% of the second group, making it of similar size to the Vancouver/Calgary/Edmonton triangle. The Atlantic Triangle is significantly smaller than either of the other triangles, and is not expected to be of an area for expansion in the foreseeable future. Glenbriar management places its next geographic priorities on Edmonton and Toronto, based upon market need and the perceived ability to find and manage an appropriate acquisition in each location. Operations in each location are currently focused on specific lines of business, with Calgary driving IT services, Vancouver driving IP telephony, and Kitchener-Waterloo driving software services. All locations are currently being converted to a common accounting and management information system, which is based upon the system developed internally and currently in use in the IP telephony has been introduced into the Calgary market with Vancouver’s assistance, and IT services are being introduced into the Vancouver market with Calgary’s assistance. It is planned that both of these areas will be expanded into the Kitchener-Waterloo area in the coming months, and that software services for specific SMB market segments can be introduced into all locations once those products are updated in accordance with the Kitchener office’s plans. 4.2 Target Market Segment Strategy Glenbriar's typical new customer would meet some of the following criteria: 1. 2. 3. 4. 5 to 1000 network connections. Local decision making. One or more branch offices. LAN or WAN. Page 10 Glenbriar Business Plan 5. 6. 7. 8. Aging LAN, PBX or Centrex customer. Grown rapidly or made major acquisitions. Relocating premises. Cannot justify or get value from full time IT staff. 4.2.1 Market Trends During the recent economic downturn, there has been a marked decrease in the telecom and computer equipment manufacturing sector, while the software and computer services industry has continued to hold its own. Glenbriar management expects that the largest areas of growth for newer business IT solutions in the coming years in the software and computer services industry will be related to: a. Web enabling of applications and processes; b. expansion of ASP opportunities for smaller businesses due to widespread availability of broadband access, including IP telephony applications; c. d. movement of traditional software applications to a .NET environment; and growth in wireless connectivity solutions, including GSM capabilities. It should be noted that all of the above trends relate to the growing connectivity of vendors, suppliers, customers, the public and government agencies through the Internet or Internet-based technologies. 4.2.2 Market Growth As illustrated by the following charts, the ICT sector and software and computer services subsector have grown substantially faster than overall GDP since 1997. In addition, the downturn in ICT manufacturing sector and reduced employment in ICT manufacturing and services since the second quarter of 2000 has been virtually bypassed by the software and computer services subsector, which has continued to show consistent growth. Page 11 Glenbriar Business Plan Despite the strong growth in the ICT sector, and software and computer services subsector in particular, the overall trade deficit in the ICT sector in Canada has grown substantially in the last decade. 4.3 Service Business Analysis In 1999, Statistics Canada estimates that there were 19,000 software and computer services firms employing 190,000 employees, of which 65,000 were self-employed. This represents 37% of the ICT sector’s workforce, but only 13% of ICT revenues and 26.8% of ICT’s share of GDP. These figures can be further broken down as follows: 1. Software: 1745 companies specialized in packaged software with revenues of $4.2 billion in 1998. Most of these companies, and most revenues were concentrated in Ontario, Quebec, British Columbia and the Prairies. According to the Branham Group, total revenues of the Top 100 independent Canadian software firms reached $4.5 billion in 2000. Over 73 percent of their total revenue came from foreign sources in 2000. The top ten firms had 95% of their revenues coming form foreign sales. 2. Computer Services: 16,000 computer services firms (excluding online services) in Canada and their revenues reached $13 billion in 1998 and were mostly concentrated in Ontario, Quebec and the Prairies. The Branham Group reports that the Top 50 Page 12 Glenbriar Business Plan Canadian professional services companies had revenues of $5.1. billion in 2000. The revenues of the Top 5 Canadian professional services firms amounted to $2.9 billion that same year. In 2000, 20% of revenues of the Top 50 Canadian IT professional services firms came from foreign sources. Some of the leaders in are IBM Canada, EDS Canada, the CGI Group, GEAC, Deloitte and Touche, ISM Information Systems, Accenture, Cognicase, X-wave and DMR Consulting. As noted above, the software-oriented firms in Canada are made up of fewer players generating mainly US sales, while computer services-oriented firms make up a much more diverse set of companies generating mostly local sales. Primary competitors include participants from a wide variety of market segments, including major accounting firms, systems consulting and implementation firms, service groups of computer equipment companies, facilities management companies, general management consulting firms, programming companies and commercial systems integrators. Glenbriar’s most direct competition in IT services are companies such as Charon Systems (formerly FutureLink’s Canadian operations), Voyus Ltd., and a number of smaller companies. A certain number of industry software suppliers try to bundle IT outsourcing services with their software offerings, such as Qbyte and Applied Terravision with their oil and gas accounting software, and FinTech with its SAP franchise for Western Canada Glenbriar typically finds that these software suppliers are expensive, inexperienced at systems integration, and are not well schooled beyond their own applications. However, Glenbriar works closely with such companies at its clients' sites to ensure that their applications are running smoothly. It should be noted that Applied Terravisions was recently acquired by Cognicase, a large supplier of IT services based in Montreal Glenbriar believes it should offer a similar model of combining its ERP software with IT services once it has established a greater presence in the Kitchener-Waterloo market, and once the software offerings are expanded to make them saleable in other markets Glenbriar serves. Peartree's ERP software competes directly with much larger providers such as SAP, Baan, JD Edwards and Great Plains. Peartree's SMB segment products serve specific segments which usually have a limited number of small competitors. Peartree has not made any significant efforts to market its products outside its own locale. Peartree will undergo a development project to determine the most simple and effective solution for implementing a GUI interface for its products before undertaking any major new marketing efforts. Glenbriar does not generally compete directly with large-scale providers such as IBM Global Services, EDS, Systemhouse, CGI and GE Capital Technology Services. These commercial providers are significantly more expensive, less responsive to customer needs, and more geared toward large-scale sites than Glenbriar. 5.0 Strategy and Implementation Summary 1. Focus on business technology solutions. Glenbriar delivers business technology solutions, whether those solutions are IT outsourcing, IP telephony or ERP software services. The provision of hardware and support is a necessary part of those solutions, not the driving force. Glenbriar differentiates itself from its competitors by offering complete leading edge IT solutions to the SMB market, including support and business workflow solutions. 2. Build a relationship-oriented business. Glenbriar builds long-term relationships with its clients, particularly in the areas of IT outsourcing and ERP software services. While an IP telephony solution tends to involve a high initial expenditure with lower monthly maintenance charges, IP telephony clients should be viewed as potential IT outsourcing clients, even if establishing the trust relationship takes months or even years to develop. Glenbriar seeks to become its clients' business technology solutions provider, not just another vendor. It is critical to establish the level of trust that makes them understand the value of the relationship. 3. Focus on target markets. Glenbriar need to focus its offerings on the SMB market segment, representing the 5 to 1000 network nodes. Glenbriar provides Tier 1 support to companies in this segment at a cost structure which does not compete with the large providers. 4. Corporate recognition and brand consciousness. Glenbriar needs to increase its public recognition both to attract new business, retain customers, and to develop a greater following with the investing public in order to maximize its return to shareholders. A promotion strategy to achieve these goals is set forth in section 5.3.4 of this plan. Page 13 Glenbriar Business Plan 5.1 Competitive Edge Glenbriar is more flexible, more focused and less expensive than its larger competitors, while providing superior depth and reliability to the services offered by its peer group and smaller competitors. Glenbriar's SMB clients are able to obtain all of the functionality and robustness in their business technology solutions as their significantly larger competitors. Glenbriar has provided high levels of uptime, unique solutions, rapid deployment, and consistently better troubleshooting skills than its smaller and larger competitors. These results reflect taking ownership of problems and delivering the required solutions. Glenbriar's IP telephony solutions are particularly effective with customers that are moving, have an unstable PBX, multiple branch offices, or are using a Centrex solution. Glenbriar's ERP and SMB segment software solutions have the advantage of being competitively prices, as well as being tailored to the particular company and industry for each install. The ERP modules are EDI certified and verified for GM, Ford, DaimlerChrysler and Honda. The SMB segment software has been customized for RV dealerships, veterinary clinics, and dental clinics. All of Glenbriar's business lines are highly competitive, with many new players entering the market and many old players leaving the market due to mergers, business failure, obsolescence or various other factors. Glenbriar's competitive edge in this regard has been a relatively long history of customer-oriented service. 5.2 Marketing Strategy Glenbriar seeks to become a premier provider of business technology solutions for the SMB market segment across Canada. 1. IT outsourcing and support. These services are provided directly within each local market. IT consultants visit client sites directly. Glenbriar wishes to expand its IT outsourcing services across major Canadian urban areas in order to eventually be in a position to better service national accounts. 2. IP telephony. IP telephony solutions can be sold over a much wider geographic area than just the local market. Glenbriar has focussed on the 3Com NBX IP telephony system due to it being the most pure IP solution, length of time in the marketplace, flexibility and reliability. Market penetration for IP telephony solutions is considerably higher in the US than Canada, reflecting earlier adoption of new technologies in the U.S. 3. ERP Software. Peartree's ERP software can be sold anywhere in North America. Support can be provided online, with minimal need for visits to client sites. Peartree intends to do development work during fiscal 2002 to determine the most effective means of putting a GUI on the product. If done properly, this may open the door for marketing the ERP suite as a new, updated product. 4. SMB Segment Software. Peartree's SMB software offerings focus on specific end users, such as recreational vehicle dealerships and veterinary clinics. Like the Peartree ERP software, these products are based upon a variation of the Pick multivalue database, and are currently text driven. A Windows interface is obtained using a product called Wintegrate. By placing a GUI front end on these product offerings, Glenbriar believes they will become more marketable. This software can be sold anywhere in Canada, with little change required to address US markets. Glenbriar believes that the software offerings have never been properly marketed, and that they need to be spiffed up with a friendlier GUI in order to make them easier to sell. They are cost-effective products that provide excellent reliability and functionality in a multiuser environment which is specially tailored to that SMB or ERP's industry. Page 14 Glenbriar Business Plan 5.2.1 Pricing Strategy Glenbriar delivers onsite services at approximately the same rates as are typically charged by storefront operations for service in their shops. However, Glenbriar employs highly skilled IT professionals who have proven their mettle on site under a vast array of circumstances. In addition to hardware and software firefighting, Glenbriar provides a full suite of outsourcing solutions, with substantial depth and experience which would typically only be available from much larger systems integrators. By keeping no storefront and having its consultants work onsite, overhead is minimized. Customers obtain top level IT support and management at storefront rates. Large systems integrators and manufacturers charge rates which can be two to three times as high as those charged by Glenbriar, with less flexibility and no discernible difference in quality of service. As in any industry, the premium paid in IT for brand name recognition is substantial. Glenbriar has run into many cases of large systems integrators hiring inexperienced IT staff on a contract basis to work on a project, and charging them out at high rates. Customers often do not understand IT issues or services, and are prone to choosing a known entity. As time progresses, Glenbriar hopes to build up its name recognition and take on larger clients as it builds a reputation for solid, reliable and innovative IT solutions. Peartree's software offerings are priced relatively inexpensively compared to the competition. In part, this is due to a prior history of corporate instability relating back to the 1996 corporate restructuring, which led to concern on the part of potential customers about Peartree's long term viability. With that issue now behind it, Peartree can hold itself out as a survivor, and hopefully with a new GUI, an innovator. This will give Peartree the ability to compete on product virtues and functionality rather than on price. 5.2.2 Marketing Programs 1. Personal selling. Most of Glenbriar's sales are conducted through personal selling by staff members. For IT outsourcing and support and ERP and SMB segment software, this is usually through word of mouth and referrals. For IP telephony, it involves cold calls, telemarketing and referrals. 2. Telemarketing. Telemarketing efforts have been limited to qualifying leads in the Vancouver and Calgary markets for IP telephony sales. These leads are then passed along to account executives, who contact the leads personally. Glenbriar believes that fax and e-mail campaigns are treated by most business persons as intrusions, and do not generate a positive response. 3. Seminars. Glenbriar participates in seminars from time to time, usually in conjunction with a vendor or supplier. The March 2002 conference with 3Com in Vancouver and April 2002 one in Calgary are good examples of this. Glenbriar believes this is a relatively inexpensive and well targeted method of reaching existing and potential future customers. Holding it in concert with a major vendor, such as 3Com or Compaq, lends credibility to Glenbriar, raises Glenbriar's profile, and increases attendance. 4. Sales brochures and newsletters. Glenbriar has created sales brochures from time to time for specific events, such as seminars, Y2K and trade shows. Peartree has a much more coordinated and developed approach, using frequent e-nouncements, mailouts and brochures. 5. Customer conferences. Peartree holds an annual customer conference at its offices in Kitchener. This event is well organized and attended. The conference builds client loyalty, teaches customers about the software, and guides users through new updates and directions. The conference is good for both obtaining feeback and generating additional interest in Peartree's products. Glenbriar participates in the conference in order to introduce IP telephony concepts and IT services into the Kitchener market. Glenbriar management believes that the SMB product segment could play an expanded role in the conference in the future as well. 6. Trade shows. Glenbriar participated in the Calgary and Vancouver Technology Showcases in the fall of 2001 in order to launch its brand name and introduce IP telephony into Calgary and IT services into Vancouver. Although attendance was good at both events, and the Glenbriar booth generated significant interest, it is not determined whether to attend this event in the future. Glenbriar management is leaning toward changing venues or participating less regularly. Page 15 Glenbriar Business Plan 7. Corporate and brand recognition. Glenbriar has registered the Glenbriar brand name as a trade mark in Canada for the lines of business it is currently engaged in. The Glenbriar name was initially associated with IT in February 2000 when Glenbriar announced its intention to shift from energy to IT, but was not launched in the marketplace until September 30, 2001, when Glenbriar amalagmated with 4 of its subsidiaries. In October 2001, the Glenbriar name was further promoted by the acquisition of Platinum Systems Ltd. in the Calgary marketplace, which was absorbed under the Glenbriar banner. Following these actions, Glenbriar participated in trade shows in Calgary and Vancouver in the fall of 2001 to give further impetus to building brand recognition in the IT field. 8. Media. Glenbriar's principal access to the media has been through press releases relating to its public company disclosure requirements. In December 2001, 3Com made a press release which was also released by Glenbriar outlining Asset Recovery Corporations's IP telephony solution, which gave Glenbriar extensive exposure. Opportunities for this type of promotion will grow as and in proportion to Glenbriar's ability to make new sales and maintain excellent supplier relations. Glenbriar also benefitted from having been chosen by Alberta Venture magazine as the 10th fastest growing company in Alberta. This type of coverage should be leveraged in order to maximize exposure of Glenbriar for both investor relations and in its marketing efforts. Glenbriar has also made some inroads by gaining mention in such industry publications. Glenbriar management believes efforts to elicit media coverage should be part of a corporate recognition program. 9. Web sites. Glenbriar's web strategy is dealt with under section 6 of this Plan. 5.2.3 Investor Relations Plan Glenbriar has never conducted an active investor relations program. The initial offering to float Glenbriar was the Junior Capital Pool financing in 1995, which raised $200,000 from the public, and $210,000 from the three founders. When Glenbriar announced the move into IT in February 2000, a private placement for $750,000 was completed. A single broker was used for both financings, resulting in limited market exposure. Glenbriar added a director with investor relations experience at its April 2002 annual meeting. Glenbriar management will consider pursuing an investor relations program in accordance with TSX-V policies when justified by market conditions to achieve the following objectives: 1. Raise Glenbriar's profile in capital markets so that Glenbriar shares properly reflect a market value in line with its peers. 2. Use the higher corporate profile to help build brand awareness and profile, thereby assisting with sales. 3. Open up the opportunity for Glenbriar to have access to capital markets at reasonable rates, so that dilution to exisiting shareholders is in line with a proper valuation model. 4. Raise additional financing at reasonable rates so that Glenbriar can take full advantage of its business opportunities. 5. Increase Glenbriar's size and annual revenue to a point where Glenbriar can list on the TSX senior exchange and possibly also in the US, in order to increase liquidity for shareholders, and give Glenbriar access to new capital markets, including pension and mutual funds. 6. Increase the value of Glenbriar's stock as currency in pursuing acquisitions. Page 16 Glenbriar Business Plan 5.3 Sales Strategy Glenbriar's business technology services are delivered on site to our customers. In the case of ERP software, support is often delivered through the Web or by phone. As shown by the Statistics Canada data, ERP software sales are unusually concentrated within a 2 hour drive of Kitchener-Waterloo, compared to 95% of total Canadian software sales being exported to the US. This suggests that efforts should be undertaken to expand the ERP software's geographic presence once a new GUI is developed. IP telephony sales are much more supportable remotely than traditional PBXes due to the Web administration of accounts, ability to remotely access the NBX, and reliability of the equipment. IT services must generally be delivered personally, although it could be very helpful to develop a helpdesk model for dealing with IT support issues to the extent that becomes efficient, thereby centralizing costs and decreasing the need for site visits. Glenbriar needs to sell business technology solutions, service and support, not hardware, software and phone systems. This applies equally to IT services, ERP software and IP telephony solutions. Glenbriar's overall strategy is to roll out all of its business techology offerings in each area in which it has a presence, while additionally expanding that presence into Edmonton and Toronto. This strategy also involves cross-selling various services to existing customers within each geographic area. It should also involve formulating packaged business technology solutions for specific industry segments which promote the entire business technology solution. The Yearly Total Sales chart summarizes our ambitious sales forecast. Sales are projected to to increase from $4.5 million in 2001 to close to $10 million in 2005. In the future, Glenbriar should focus on increasing its Web presence as a sales and marketing tool, offering more demos, interactive displays and other tools for demonstration to potential customers. This may include the establishment of a distribution system for any products or services offered on the Web. 5.3.1 Sales Forecast The sales forecast is divided into two segments, IT services and Equipment sales. Based on historical data, the segments are divided 60% for IT services and 40% for Equipment/software sales. Both segments are forecast to increase 3% per month in 2003, and 25% annually in 2004 and 2005. These figures are conservative as Glenbriar's historical increases have exceeded these projected increases. The sales forcast does not take into account new financing rounds or the potential large contract IP Telephony sales which may occur as a consequence of the strategic partnering efforts that are currently underway between 3Com and Glenbriar. Also, the sales forecast fails to recognize the increased marketing and sales effort that Glenbriar has planned. Page 17 Glenbriar Business Plan Table: Sales Forecast (Planned) Sales Forecast Sales IT services Equipment sales Other Total Sales Direct Cost of Sales IT services Equipment sales Other Subtotal Direct Cost of Sales 2003 2004 2005 $4,300,000 $4,700,000 $5,200,000 $3,450,000 $4,000,000 $4,600,000 $125,000 $30,000 $30,000 $7,875,000 8,730,000 9,830,000 2003 2004 2005 $0 $2,750,000 $3,200,000 $3,650,000 $0 $2,750,000 $3,200,000 $3,650,000 Sales by Year (Planned) $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2003 2004 2005 IT services Equipment sales Other 5.3.2 Sales Programs 1. 2. Direct mail: not generally used due to low response rates and inundation of customers with direct mail campaigns. However, invitations are sent out for seminars or other times when a personal call or introduction has previously been made. Seminars: Glenbriar plans to quarterly seminars in conjunction with 3Com to promote NBX and wireless solutions, with the first being held in Vancouver in March 2002 and Calgary in April 2002. They are expected to draw 25 to 30 selected prospects in Vancouver and Calgary, but should be expanded to the Kitchener-Waterloo market once they have some experience with the NBX system. Glenbriar may also wish to consider using some of the approaches which have been adopted by Peartree Software in the IT services and IP telephony areas, such as customer conferences, user groups and newsletters. Personal selling: has always been the primary source of new business for IT services and the SMB product segment. IT consultants should be encouraged to soft sell existing and potential new clients, and be given the tools to encourage their participation. It may also be worth considering whether any additional compensation should be delivered to the consultants for new business. Sales force: Glenbriar has maintained an IP telephony sales force in Vancouver in keeping with the old Tel 2000 Services marketing model. This model has to be thoroughly reviewed for effectiveness and expansion into offering IT services. In addition, techniques should be standardized with Calgary and Kitchener in offering a complete suite of products, such as SMB segment software, ERP solutions, IP telephony and IT services. The effectiveness of lead Page 18 3. 4. Glenbriar Business Plan 5. 6. generation using sanitized lists from telemarketing campaigns must also be addressed. Speaking engagements: These have not been pursued, but can be a very effective means of promoting both Glenbriar and its products and services. See 5.2.2. Media. See 5.2.2. 5.4 Strategic Alliances Glenbriar is seeking to strengthen its strategic alliances with AT&T and 3Com in the IP telephony area. Additional alliances should be developed in the IT services and ERP and SMB segment software areas. Alliances in the IT services field should be worked out with such IT industry participants as Ethier Associates or some of the larger concerns who do not wish to mingle in Glenbriar's market space. Glenbriar has not previously sought out such alliances, and needs to implement a specific and orderly campaign to achieve the necessary connections and networking to support appropriate alliances. Glenbriar entered into a Memorandum of Understanding in August 2002 with The Calgary Centre for Non-Profit Management. The Centre has recognized Glenbriar's strong contributions to the non-profit sector, which includes IT outsourcing and IP telephony support for the United Way of Calgary, and IT services to Scouts Canada, PREP Program, and the Salvation Army. The purpose of the Memorandum is to combine Glenbriar's SMB IT expertise with the Centre's non-profit support to deliver more cost effective IT solutions to the non-profit sector. 6.0 Web Plan Summary Glenbriar has not dedicated a significant amount of effort to its Web site. As part of its strategy, Glenbriar sees the need to use its Web site as a bit of a showcase to demonstrate its Internet business promotion. Glenbriar intends to increase its Web presence as part of its overall corporate presence. Through a mild promotion of its Web site in the fall of 1999, Glenbriar was able to increase its Web traffic to over 400 hits per day. Through redesign and expansion of the site in March 2000, traffic tripled to 1200 hits per day. With the launching of the Glenbriar brand and acquisition of Platinum Systems, volume jumped again in October 2001 to over 1000 hits per day. The recent revamping of the look of the site has resulted in another rise in visits. It is expected that this traffic will continue to grow as Glenbriar pursues an investor relations campaign in the coming months aimed at increasing its public profile. The following chart shows the monthly web traffic for glenbriar.com over the last year. Please note that the March 2002 figures are only to March 23, 2002. Meaningful figures are not available for the period of April through August 2002 due to changes in locations and hosting. Page 19 Glenbriar Business Plan 6.1 Website Marketing Strategy Glenbriar wishes its Web site to serve several purposes: 1. 2. As a resource site to deliver investor relations information, including press releases, financial statements, etc. As a corporate presence site to provide an overview of Glenbriar, its offerings, its culture and its values for potential investors, customers, vendors and employees. As a sales site to provide information about product lines and business technology solutions. As a corporate image site to develop brand awareness and image. As a support site to allow customers to obtain support for Glenbriar's products and offerings. To obtain customer, investor and other third party inquiries and feedback. As a customer extranet, by permitting password protected subwebs for customers and potential clients, which give them access to confidential or proprietary information about their particular projects or circumstances. To provide marketing of and access to ASP services. 3. 4. 5. 6. 7. 8. 6.2 Development Requirements The March revisions to the Glenbriar site were done in house in February 2002 as part of Glenbriar's Web development rollout. In concert with the move into Web development, Glenbriar's Calgary office hired a full time programmer in February 2002. The combination of the Web developer and programmer add a new dimension to the solutions that are being provided to Glenbriar's business technology customers, and are expected to become a growth area in the coming periods. This is reflected in Microsoft's move into .NET servers and architecture, which will integrate business functions, including EDI, catalogues, online ordering, and accounts receivable and payable into the Internet. These moves all involve a degree of programming and Web development, which Glenbriar believes will grow substantially in the coming years. In keeping with these moves, all future Web development and Web presence matters will be handled internally. 7.0 Management Summary Glenbriar has 23 employees in Calgary, 17 in Kitchener-Waterloo, and 10 in Vancouver. Glenbriar's management requires its employees to operate based on responsibility, personal initiative and mutual respect. Glenbriar seeks to provide an environment that encourages creativity and achievement, but places a strong emphasis on being a team player and taking ownership of both successes and mistakes. While most new hires thrive in this environment, Glenbriar tries to keep up both the quality and effectiveness of its team by ensuring that all staff members are "producers". The result is that while employee turnover is very low from the employee side, there will be from time to time employer-initiated staffing adjustments. Glenbriar has been fortunate to obtain a good supply of job applicants without advertising for positions. Applicants apply through the Web site, or discover an opening through word of mouth. Glenbriar typically finds that successful IT candidates have to be judged by their on the job performance rather than by their academic qualifications or vendor certifications. As business grows, it is expected that the task of finding employees who meet Glenbriar's standards of performance will become more difficult. Page 20 Glenbriar Business Plan Being public, Glenbriar believes it can better recruit and retain staff through stock options and share ownership. 7.1 Management Team Robert D. Matheson, B.Com., LL.B., Chairman -- President & CEO. Robert combines 3 years as a corporate and commercial lawyer with McLaws & Company in Calgary with 13 years of experience as Vice-President & General Counsel of Transwest Energy Inc. an intermediate-sized public oil and gas company in Calgary, with duties that included full responsibility for land, legal, financial and information systems. Glenn F. H. Matheson, B.Sc. (Civil Engineering), Executive Vice-President & COO since July 1997. Glenn spent 10 years as Vice-President of a private construction and development company before moving into information technology. Glenn has over 14 years of experience as a project manager, systems analyst and network support specialist in the information systems business, with 9 years at Edge Consulting in Vancouver and 4 years with Glenbriar in Calgary. Glenn specializes in clients with 25 to 500 network nodes, and has richly earned his reputation as a pragmatic and effective problem solver. Brian Tijman, P.Eng. (Civil Engineering), Controller & CFO -- Brian brings 16 years of experience as a senior officer in companies in Vancouver engaged in developing and marketing software applications used in structural engineering. David Moser, B.Com. Vice-President, Ontario Region since December 2000. David has also been President of Peartree Software Inc., a Glenbriar subsidiary, since June 2001. In December 2000, David sold his IT support company and SMB segment software development company to Glenbriar. David has over 22 years of direct experience in IT support and software development. Jamie Skawski, CET, Project Manager -- Vice-President, Consulting since June 2000. Jamie has a Certified Electronic Technologist diploma and combines his 12 years of hands-on hardware and network experience with solid judgement to deliver top level support to our client sites, including AS/400 support. Jamie specializes in network solutions for companies with 25 to 500 network nodes. 7.2 Personnel Plan The Personnel Plan reflects the need to bolster our capabilities to match our positioning. Our total employment should increase to 75 by 2005. Detailed monthly projections are included in the appendices. Glenbriar management recognizes the need to add additional skills and resources to its core management team. If a financing is pursued, Glenbriar will seek to add 2 executive level positions, one for sales and marketing and one for finance. If no financing is pursued, Glenbriar will seek to add those 2 positions over time, possibly as a result of acquisitions. Page 21 Glenbriar Business Plan Table: Personnel (Planned) Personnel Plan Production Personnel People Average per Person Subtotal Sales and Marketing Personnel People Average per Person Subtotal General and Administrative Personnel People Average per Person Subtotal Other Personnel People Average per Person Subtotal Total People Total Payroll Payroll Burden Total Payroll Expenditures 2003 2004 2005 42 44 48 $64,996 $65,083 $65,341 $2,729,826 $2,863,636 $3,136,364 5 $40,500 $202,500 10 $39,550 $395,500 2 $108,000 $216,000 6 $44,246 $265,476 10 $44,167 $441,670 2 $110,000 $220,000 6 $44,167 $265,000 11 $44,167 $485,837 2 $120,000 $240,000 59 62 67 $3,543,826 $3,790,782 $4,127,201 $177,191 $189,539 $206,360 $3,721,018 $3,980,321 $4,333,561 8.0 Financial Plan The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow: 1. Glenbriar must stop the slide in inventory turnover and develop better inventory management to bring the turnover back up to twelve turns by 2005. This should be a function of the shift in focus toward service revenues from hardware revenues. 2. 3. Glenbriar must also bring the gross margin up to 30%. This, too, is related to improving the mix between hardware and service revenues, because the service revenues offer much better margins. If Glenbriar does not pursue an equity financing, it should plan to borrow $500,000 in working capital in early fiscal 2003. The amount seems in line with the balance sheet capabilities. 8.1 Important Assumptions The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are: • A slow-growth economy, without major recession. • No unforeseen changes in technology to make products immediately obsolete. • Access to equity capital and financing sufficient to maintain our financial plan as shown in the tables. • • • Sales forcasts are based on historical financial data. Projected financial statements do not include any allowance for additional financings or acquisitions. Improvements are assumed in gross margin, collection days, and inventory turnover. Page 22 Glenbriar Business Plan Table: General Assumptions General Assumptions Short-term Interest Rate % Long-term Interest Rate % Tax Rate % Expenses in Cash % Sales on Credit % Personnel Burden % 2003 10.00% 10.00% 25.00% 0.00% 100.00 % 5.00% 2004 10.00% 10.00% 25.00% 0.00% 100.00 % 5.00% 2005 10.00% 10.00% 25.00% 0.00% 100.00 % 5.00% 8.2 Break-even Analysis This break-even analysis assumes running costs of approximately $80,000 per month, which includes office management and staff, rent, utilities, and other running costs. Payroll accounts for about one-half of the total running costs. Margins are harder to assume. The overall average of 23% is based on past sales. This margin must improve in the future. The chart shows breakeven is about $350,000 per month. This is about half of projected 2002 sales, so it should be achievable. Table: Break-even Analysis Break-even Analysis: Monthly Units Break-even Monthly Sales Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost 347,826 $347,826 $1.00 $0.77 $80,000 Break-even Analysis $80,000 $60,000 $40,000 $20,000 $0 ($20,000) ($40,000) ($60,000) ($80,000) $0 $120,000 $240,000 $360,000 $480,000 $600,000 Monthly break-even point Break-even point = where line intersects with 0 Page 23 Glenbriar Business Plan 8.3 Projected Profit and Loss The most important assumption in the Projected Profit and Loss statement is the gross margin, which is projected to increase to 30% in 2003, 31% in 2004 and 32% in 2005. This is up from about 24% in the last year. The increase in gross margin is based on changing our business consulting model, and it is critical. No allowance has been made in the projected profit and loss for the increase in margins applied to equipment sales, especially for IP Telephony sales. Month-by-month assumptions for profit and loss are included in the appendices. Table: Profit and Loss (Planned) Pro Forma Profit and Loss Sales Direct Cost of Sales Production Payroll Other Production Expenses Total Cost of Sales Gross Margin Gross Margin % Operating Expenses: Sales and Marketing Expenses: Sales and Marketing Payroll Advertising/Promotion Travel Miscellaneous Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses: General and Administrative Payroll Payroll Burden Depreciation Leased Equipment Office expenses Travel, professional development Rent, utilities, insurance Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll Contract/Consultants Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Short-term Interest Expense Long-term Taxes Incurred Extraordinary Items Net Profit Net Profit/Sales 2003 $7,875,000 $2,750,000 $2,729,826 $337,983 -----------$5,817,809 $2,057,191 26.12% $202,500 $72,000 $48,000 $0 -----------$322,500 4.10% 2004 $8,730,000 $3,200,000 $2,863,636 $286,364 -----------$6,350,000 $2,380,000 27.26% $265,476 $75,000 $60,000 $0 -----------$400,476 4.59% 2005 $9,830,000 $3,650,000 $3,136,364 $313,636 -----------$7,100,000 $2,730,000 27.77% $265,000 $100,000 $75,000 $0 -----------$440,000 4.48% $395,500 $441,670 $485,837 $177,191 $189,539 $206,360 $150,000 $125,000 $100,000 $0 $0 $0 $60,000 $72,000 $84,000 $24,000 $30,000 $36,000 $252,000 $272,000 $300,000 ---------------------------------$1,058,691 $1,130,209 $1,212,197 13.44% 12.95% 12.33% $216,000 $220,000 $240,000 $0 $24,315 $7,803 ---------------------------------$216,000 $244,315 $247,803 2.74% 2.80% 2.52% ---------------------------------$1,597,191 $1,775,000 $1,900,000 $460,000 $605,000 $830,000 $33,757 $23,757 $23,757 $1,243 $1,243 $1,243 $100,000 $150,000 $250,000 $0 $0 $0 $325,000 $430,000 $555,000 4.13% 4.93% 5.65% Page 24 Glenbriar Business Plan Profit Yearly (Planned) $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2003 2004 2005 Gross Margin Yearly (Planned) $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2003 2004 2005 Page 25 Income & Retained Earnings Revenue IT services Equipment & software Oil & gas Other Expenses IT services Cost of goods sold General & administrative Oil & gas production EBITDA Depn & amortization (*) Interest and bank charges Income taxes Net earnings Retained earnings, start Retained earnings, end Net earnings per share Balance Sheets Assets Cash Accounts receivable Prepaid expenses Inventory Total current assets Capital assets Intangible assets Goodwill Future income taxes Liabilities Accounts payable Deferred revenue Total current liabilities Loans payable Future income taxes Site restoration Shareholders' Equity Share capital Retained earnings 2003 4,300,000 3,450,000 95,000 30,000 7,875,000 2,950,000 2,750,000 1,500,000 65,000 610,000 150,000 35,000 100,000 325,000 185,234 510,234 0.013 2003 674,250 1,500,000 10,000 600,000 2,784,250 441,566 136,930 1,040,639 869,922 5,273,307 1,275,000 250,000 1,525,000 146,167 12,432 1,683,599 3,079,474 510,234 3,589,708 5,273,307 2003 475,000 12,122 487,122 100,000 (6,000) 94,000 (25,000) (25,000) 556,122 118,128 674,250 2004 4,700,000 4,000,000 30,000 8,730,000 3,150,000 3,200,000 1,650,000 730,000 125,000 25,000 150,000 430,000 510,234 940,234 0.016 2004 1,048,250 1,700,000 10,000 700,000 3,458,250 491,566 61,930 1,040,639 869,922 5,922,307 1,400,000 250,000 1,650,000 140,167 12,432 1,802,599 3,179,474 940,234 4,119,708 5,922,307 2004 555,000 (175,000) 380,000 100,000 (6,000) 94,000 (100,000) (100,000) 374,000 674,250 1,048,250 2005 5,200,000 4,600,000 30,000 9,830,000 3,450,000 3,650,000 1,800,000 930,000 100,000 25,000 250,000 555,000 940,234 1,495,234 0.021 2005 1,497,250 1,900,000 10,000 800,000 4,207,250 541,566 11,930 1,040,639 869,922 6,671,307 1,500,000 250,000 1,750,000 134,167 12,432 1,896,599 3,279,474 1,495,234 4,774,708 6,671,307 2005 655,000 (200,000) 455,000 100,000 (6,000) 94,000 (100,000) (100,000) 449,000 1,048,250 1,497,250 Statements of Cash Flow Cash flow from operations Non-cash working capital Shares Loans Capital assets Cash on acquisitions Net change in cash Cash, beginning Cash, end Appendix Appendix Table: Sales Forecast (Planned) Sales Forecast Sales IT services Equipment sales Other Total Sales Direct Cost of Sales IT services Equipment sales Other Subtotal Direct Cost of Sales Oct $336,699 $257,250 $10,417 $604,366 Oct $0 $205,054 $0 $205,054 Nov $340,487 $262,395 $10,417 $613,299 Nov $0 $209,155 $0 $209,155 Dec $344,317 $267,643 $10,417 $622,377 Dec $0 $213,338 $0 $213,338 Jan $348,191 $272,996 $10,417 $631,604 Jan $0 $217,605 $0 $217,605 Feb $352,108 $278,456 $10,417 $640,981 Feb $0 $221,957 $0 $221,957 Mar $356,069 $284,025 $10,417 $650,511 Mar $0 $226,396 $0 $226,396 Apr $360,075 $289,705 $10,417 $660,197 Apr $0 $230,924 $0 $230,924 May $364,126 $295,499 $10,417 $670,042 May $0 $235,543 $0 $235,543 Jun $368,222 $301,409 $10,417 $680,049 Jun $0 $240,254 $0 $240,254 Jul $372,365 $307,438 $10,417 $690,219 Jul $0 $245,059 $0 $245,059 Aug $376,554 $313,586 $10,417 $700,557 Aug $0 $249,960 $0 $249,960 Sep $380,786 $319,598 $10,413 $710,797 Sep $0 $254,753 $0 $254,753 1.13% 2.00% 0.00% 68.60% 79.71% 0.00% Page 1 Appendix Appendix Table: Personnel (Planned) Personnel Plan Production Personnel People Average per Person Subtotal Sales and Marketing Personnel People Average per Person Subtotal General and Administrative Personnel People Average per Person Subtotal Other Personnel People Average per Person Subtotal Total People Total Payroll Payroll Burden Total Payroll Expenditures Oct 35 $5,872 $205,520 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 50 $270,020 $13,501 $283,521 Nov 36 $5,872 $211,392 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 51 $275,892 $13,795 $289,687 Dec 37 $5,872 $217,264 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 52 $281,764 $14,088 $295,852 Jan 37 $5,872 $217,264 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 52 $281,764 $14,088 $295,852 Feb 38 $5,872 $223,136 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 53 $287,636 $14,382 $302,018 Mar 39 $5,872 $229,008 4 $3,750 $15,000 9 $3,500 $31,500 2 $9,000 $18,000 54 $293,508 $14,675 $308,183 Apr 39 $5,872 $229,008 5 $3,750 $18,750 9 $3,500 $31,500 2 $9,000 $18,000 55 $297,258 $14,863 $312,121 May 40 $5,872 $234,880 5 $3,750 $18,750 10 $3,500 $35,000 2 $9,000 $18,000 57 $306,630 $15,332 $321,962 Jun 40 $5,872 $234,880 5 $3,750 $18,750 10 $3,500 $35,000 2 $9,000 $18,000 57 $306,630 $15,332 $321,962 Jul 41 $5,872 $240,752 5 $3,750 $18,750 10 $3,500 $35,000 2 $9,000 $18,000 58 $312,502 $15,625 $328,127 Aug 41 $5,872 $240,752 5 $3,750 $18,750 10 $3,500 $35,000 2 $9,000 $18,000 58 $312,502 $15,625 $328,127 Sep 42 $5,872 $245,970 5 $3,750 $18,750 10 $3,500 $35,000 2 $9,000 $18,000 59 $317,720 $15,886 $333,606 Page 2 Appendix Appendix Table: General Assumptions General Assumptions Short-term Interest Rate % Long-term Interest Rate % Tax Rate % Expenses in Cash % Sales on Credit % Personnel Burden % Oct 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Nov 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Dec 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Jan 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Feb 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Mar 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Apr 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% May 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Jun 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Jul 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Aug 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Sep 10.00% 10.00% 25.00% 0.00% 100.00% 5.00% Page 3 Appendix Appendix Table: Profit and Loss (Planned) Pro Forma Profit and Loss Sales Direct Cost of Sales Production Payroll Other Production Expenses Total Cost of Sales Gross Margin Gross Margin % Operating Expenses: Sales and Marketing Expenses: Sales and Marketing Payroll Advertising/Promotion Travel Miscellaneous Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses: General and Administrative Payroll Payroll Burden Depreciation Leased Equipment Office expenses Travel, professional development Rent, utilities, insurance Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll Contract/Consultants Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Short-term Interest Expense Long-term Taxes Incurred Extraordinary Items Net Profit Net Profit/Sales Oct $604,366 $205,054 $205,520 $25,969 -----------$436,543 $167,823 27.77% $15,000 $6,000 $4,000 $0 -----------$25,000 4.14% $31,500 $13,501 $12,500 $0 $5,000 $2,000 $21,000 -----------$85,501 14.15% $18,000 -----------$18,000 2.98% -----------$128,501 $39,322 $2,813 $104 $8,333 $0 $28,072 4.64% Nov $613,299 $209,155 $211,392 $26,556 -----------$447,103 $166,196 27.10% $15,000 $6,000 $4,000 $0 -----------$25,000 4.08% $31,500 $13,795 $12,500 $0 $5,000 $2,000 $21,000 -----------$85,795 13.99% $18,000 -----------$18,000 2.93% -----------$128,795 $37,401 $2,813 $104 $8,333 $0 $26,151 4.26% Dec $622,377 $213,338 $217,264 $27,143 -----------$457,745 $164,632 26.45% $15,000 $6,000 $4,000 $0 -----------$25,000 4.02% $31,500 $14,088 $12,500 $0 $5,000 $2,000 $21,000 -----------$86,088 13.83% $18,000 -----------$18,000 2.89% -----------$129,088 $35,544 $2,813 $104 $8,333 $0 $24,294 3.90% Jan $631,604 $217,605 $217,264 $27,143 -----------$462,012 $169,591 26.85% $15,000 $6,000 $4,000 $0 -----------$25,000 3.96% $31,500 $14,088 $12,500 $0 $5,000 $2,000 $21,000 -----------$86,088 13.63% $18,000 -----------$18,000 2.85% -----------$129,088 $40,503 $2,813 $104 $8,333 $0 $29,253 4.63% Feb $640,981 $221,957 $223,136 $27,730 -----------$472,824 $168,157 26.23% $15,000 $6,000 $4,000 $0 -----------$25,000 3.90% $31,500 $14,382 $12,500 $0 $5,000 $2,000 $21,000 -----------$86,382 13.48% $18,000 -----------$18,000 2.81% -----------$129,382 $38,775 $2,813 $104 $8,333 $0 $27,525 4.29% Mar $650,511 $226,396 $229,008 $28,317 -----------$483,722 $166,789 25.64% $15,000 $6,000 $4,000 $0 -----------$25,000 3.84% $31,500 $14,675 $12,500 $0 $5,000 $2,000 $21,000 -----------$86,675 13.32% $18,000 -----------$18,000 2.77% -----------$129,675 $37,114 $2,813 $104 $8,333 $0 $25,864 3.98% Apr $660,197 $230,924 $229,008 $28,317 -----------$488,250 $171,947 26.04% $18,750 $6,000 $4,000 $0 -----------$28,750 4.35% $31,500 $14,863 $12,500 $0 $5,000 $2,000 $21,000 -----------$86,863 13.16% $18,000 -----------$18,000 2.73% -----------$133,613 $38,335 $2,813 $104 $8,333 $0 $27,085 4.10% May $670,042 $235,543 $234,880 $28,905 -----------$499,328 $170,715 25.48% $18,750 $6,000 $4,000 $0 -----------$28,750 4.29% $35,000 $15,332 $12,500 $0 $5,000 $2,000 $21,000 -----------$90,832 13.56% $18,000 -----------$18,000 2.69% -----------$137,582 $33,133 $2,813 $104 $8,333 $0 $21,883 3.27% Jun $680,049 $240,254 $234,880 $28,905 -----------$504,038 $176,010 25.88% $18,750 $6,000 $4,000 $0 -----------$28,750 4.23% $35,000 $15,332 $12,500 $0 $5,000 $2,000 $21,000 -----------$90,832 13.36% $18,000 -----------$18,000 2.65% -----------$137,582 $38,429 $2,813 $104 $8,333 $0 $27,179 4.00% Jul $690,219 $245,059 $240,752 $29,492 -----------$515,303 $174,917 25.34% $18,750 $6,000 $4,000 $0 -----------$28,750 4.17% $35,000 $15,625 $12,500 $0 $5,000 $2,000 $21,000 -----------$91,125 13.20% $18,000 -----------$18,000 2.61% -----------$137,875 $37,042 $2,813 $104 $8,333 $0 $25,792 3.74% Aug $700,557 $249,960 $240,752 $29,492 -----------$520,204 $180,353 25.74% $18,750 $6,000 $4,000 $0 -----------$28,750 4.10% $35,000 $15,625 $12,500 $0 $5,000 $2,000 $21,000 -----------$91,125 13.01% $18,000 -----------$18,000 2.57% -----------$137,875 $42,478 $2,813 $104 $8,333 $0 $31,228 4.46% Sep $710,797 $254,753 $245,970 $30,014 -----------$530,737 $180,060 25.33% $18,750 $6,000 $4,000 $0 -----------$28,750 4.04% $35,000 $15,886 $12,500 $0 $5,000 $2,000 $21,000 -----------$91,386 12.86% $18,000 -----------$18,000 2.53% -----------$138,136 $41,924 $2,813 $104 $8,333 $0 $30,674 4.32% Page 4