HOAK BREEDLOVE INVESTMENT
WESNESKI BANKING
& CO.
LNNI.COM
UPDATE
Following is an update to certain items discussed in the Private Offering Memorandum (the "Memo") dated June 2000. This update replaces the referenced items in the Memo and should be read in conjunction with the Memo. Offering Amount (Preface, p. 1, p. 11, p. 12) The Company still intends to raise up to $30 million; however, the Offering will be conducted in stages, with $10 million raised immediately and the balance to be raised within the next 12 months. An updated capitalization table can be found attached hereto as Rider A. Summary Financial Information (p. 7) The Company has completed the preparation of its May financials and the Consolidated Statements of Operations Data table has been updated to reflect the updated numbers. It can be found attached hereto as Rider B. May revenues were very much in line with budget (in fact slightly better) while expenses were much lower than anticipated. Executive Officers, Directors and Senior Management (p. 33) Descriptions of management background and experience additional information, and a summary bio of the Company's It can be found attached hereto as Rider C. Projected Financial Information have been augmented where applicable with anticipated VP of Operations has been included.
(p. 8, p. 37-42, Appendix B) to reflect a staged offering with $10 million raised immediately months. The Company does not anticipate any changes to its originally required approximately $10 million during the next 12 statements are due to an adjustment to the timing and amount of income and other related accounts. The model has also been An update to the Selected Projected Financial Data table on page as Rider D. An updated model will be forwarded to you in hard-
Projected financial information has changed and $20 million raised within the next 12 planned national expansion since the rollout months. Changes to the projected financial capital raised, which effects cash, interest adjusted to reflect actual May 2000 results. 8 of the Memo can be found attached hereto copy format. Acquisitions • • • Update
On June 13, 2000, LNNi.com finalized the Reference Guides acquisition. On July 12, 2000, LNNi.com finalized the USBudget.com acquisition. LNNi.com has reached an agreement with New Mexico Information Services on the terms for the acquisition of its assets. LNNi.com expects to close this acquisition in the third quarter.
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13355 Noel Road Suite 1650 Dallas, Texas 75240
A member of NASD and SIPC.
Federal Client Additions Since May 1, 2000 Associations 1. 2. 3. 4. 5. 6. American Gastroenterological Association American Geological Institute American Iron & Steel Institute (AISI) Consumer Electronics Association National Association of Counties National Wildlife Federation
6. Railway Progress Institute (RPI) 7. The Composites Fabricators Association 8. The Leukemia & Lymphoma Society Government Agencies and Universities 9. Children's Defense Fund 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. City of Irving Texas Department of Housing and Urban Development - Office of the Chief Information Officer Georgia Institute of Technology, Office of Federal Relations Iowa Waste Reduction Center Lawrence Livermore Labs
Massachusetts Institute of Technology (MIT) Rutgers University State of New Hampshire - Department of Education The Centers for Disease Control and Prevention (CDC) The National Institutes of Health (N.I.H.), Legislative Division The United Way United States Department of Agriculture, Food Safety & Inspection Service (FSIS) United States Department of Agriculture, Las Cruces Agricultural Research Service United States Department of Health and Human Services, Substance Abuse & Mental Health Services Administration (SAMHSA) 24. United States Department of State - U.S. Information Agency (USIA) Corporations, Law Firms & Lobbyists 25. Capital Concepts 26. Covington & Buding 27. Hogan & Hartson LLP 28. Kirkland & Ellis 29. 30. 31. 32. O'Melveny & Myers LLP Preston Gates & Ellis Shaw Pittman White & Case - New York
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RIDER A Capitalization As of May 31, 2000 Pro Forma Actual Cash and cash equivalents 3 Note payable to TABACO 4 Notepayable related to party 5 Note payable to Triton Ventures 4 Other debt, including capital lease obligations Total debt and capital lease obligations Total shareholders' equity $1,025,023 1,000,000 536,771
500,000
Pro Forma I $1,002,523 1,000,000 536,771
500,000
As Adjusted 2 $9,565,752 --
170,356 2,207,127 (890,826)
170,356 2,207,127 (568,326)
170,356 170,356 9,996,674
RIDER B Consolidated Statements of Operations Data Five Months Fiscal Year Ended December 31, 1997 Totalrevenue Total operatingexpenses Income (loss) from operations Net income (loss) $ 331,390 488,366 (156,976) (162,154) 1998 Audited $ 352,316 751,585 514,543 (162,227) (177,526) 943,405 (191,820) (213,632) 844,225 (621,778) (665,405) 1999 $ Ended May 31_ 20006 Unaudited $ 222,447
To give effect to the anticipated acquisition of USBudget.com _Mand New Mexico Information Services, Inc. 2 As adjusted to reflect (i) net proceeds from this Offering of approximately $9.3 million, (ii) the repayment of the note to related party, and (iii) the conversion of the interim financing debt to preferred stock. 3Excludes $200,000 of restricted cash in the form of a 1-year certificate of deposit. 4 The indebtedness represented by these notes will convert into shares of Series A Preferred Stock in connection with the closing of this Offering. 5 Includes accrued interest in the amount of $36,771. eThe Company's revenues are currently seasonal in nature, with most revenues realized in the third and fourth quarters of the fiscal year.
Thursday, July 20, 2000 Page 3
RIDER C Executive Officers, Directors, and Senior Management The Company's management team combines substantial corporate management experience with expertise in marketing, legislative and political processes, and Internet design and development. The management team has a combined 80 years of management experience, 43 years of technical experience, and over 45 years of experience in the legislative and political arena. Management Name Walid R. Touma, PhD Haidar R. Khazen Terry W. Hamann D. Brent Golemon, JD Philip Battelstein Arnold Thomas Judi Merriman Benjamin W. Camp
Age 35 31 55 31 33 53 52 24
Title Chief Executive Officer and Co-Chairman Chief Technology Officer and Co-Chairman Chief Financial Officer and Director President and VP - Business Development VP - Administration and Controller VP - Sales and Customer Support Director of Federal Operations R&D Director
Walid R. Touma, PhD - Founder/Co-Chairman/CEO. Dr. Touma provides the Company with leadership and management expertise. His areas of focus are marketing, management, and technology. Since 1993, Dr. Touma has participated in launching and the strategic planning for companies in the areas of geographic, medical, and financial information services, and web-based enabling technologies. He was a fellow at the IC2 Institute, an Austin-based think tank that oversees the Austin Technology Incubator, among other organizations. Dr. Touma holds a BS in Electrical Engineering and an MS and PhD in Computer Engineering from The University of Texas at Austin. Haidar R. Khazen - Founder/Co-Chairman/Secretary/CTO. Mr. Khazen provides the Company with
leadership and management expertise in building the data collection and information management tools for its subscription services. His areas of focus are technical development and network design and management. Mr. Khazen served as President and CEO of GeoCel International, Inc. from 1994-1996. In that capacity, he coordinated product development, implemented technical support, and assisted with web site design and implementation. Previously, Mr. Khazen was with Ericsson Network Systems and E-Systems, Inc. Mr. Khazen was co-founder of Austin Computer Systems, served as Director of Research and Development and Manager of Engineering, participated in all areas of its operations, and assisted in building the company to $200 million in sales before it was ultimately sold. Mr. Khazen holds a BS in Electrical and Computer Engineering 1). Brent from The University of Texas at Austin. Golemon, JD - Founder/President/VP-Business Development. Mr. Golemon provides the
Company with leadership and legislative, operations, and sales expertise. His areas of focus are system conceptualization, operations management, and business development. Mr. Golemon has over eight years of legislative experience in Texas government and served as a legislative aide to members of the Texas legislature and as Chief of Staff to Texas State Representative Jim Horn. Additionally, Mr. Golemon has worked closely with representatives of the federal government through his work in the Governor of Texas' office in Washington, DC. Mr. Golemon graduated from Hampden-Sydney College in Virginia in 1991 with a BA in Political Science. In 1996, he received his JD from The University of Texas at Austin School of Law.
Thursday,20, 000 July 2 Page 4
Terry W. Hamann, CPA, PFS- Director/CFO. Mr. Hamann provides the Company with corporate finance, tax and strategic planning. He is currently the Managing Director of Hamann & Associates and Chairman and President of PGI, a financial consulting and investment advisory firm. Mr. Hamann was chief accountant for a regional security broker-dealer before commencing his career with Ernst & Young (formerly Ernst & Whinney; Ernst & Ernst) in 1969. He was a Partner in the Washington, DC office (1980--1991) with major concentrations and responsibilities in U.S. and international taxation and finance. Mr. Hamann graduated from Benjamin Franklin University in 1969 with a BCS degree in finance and accounting. Philip Battelstein - FounderTreasurerControllerliPAdministration. Mr. Battelstein is responsible for the Company's controllership, corporate administration and human resources. He served as CFO and VP of Marketing and Operations with GeoCel International, Inc. where he designed and implemented sales and marketing programs, recruited employees, and managed operations budgets. Previously, Mr. Battelstein worked as a Certified Public Accountant in Irvine, CA, providing audit, tax, and consulting services in the real estate, manufacturing, construction, and healthcare industries. He also served several years as a loan officer in the residential mortgage industry in Austin, TX. In 1988, Mr. Battelstein graduated from Trinity University in San Antonio, Texas with a BS in Finance and Accounting and received his CPA license in 1992. Arnold Thomas, liP - Sales and Customer Support. Mr. Thomas has been with the Company since December of 1999. He has over 14 years of sales expertise in the national legislative market and, prior to joining LNNi.com, was employed at Legi-Slate, Inc., a Washington Post company. He served Legi-Slate as Director of Customer Support, Director of Regional Sales, and Manager of the Law Division. He specialized in creating client retention and training programs and managing business development. Mr. Thomas was recognized by the Washington Post Company in the 1986 and 1994 Annual Reports for outstanding leadership and achievement. In 1999, the Washington Post and other industry trade publications acknowledged his support division as the "market leader" in customer support. Currently, Mr. Thomas is implementing both a national sales campaign and a customer service program for the Company's subscription services and will coordinate sales and marketing strategies for the national expansion. Mr. Thomas received a BS degree in Education and did his postgraduate study in the School of Human Development at the University of Maryland. Judith B. Merriman - Director of Federal Operations. Ms. Merriman has been with LNNi.com since September 1999 and provides the Company with leadership for its federal operations. She has Capitol Hill experience, having worked for three years as a legislative correspondent and then legislative assistant to an U.S. Congressman. Ms. Merriman also has over 12 years of federal legislative tracking experience and was employed by Legi-Slate, Inc., a subsidiary of the Washington Post, as a director of operations from 1987 to 1999. Ms. Merriman holds a BA degree in Sociology from George Washington University. Benjamin I4I. Camp - R&D Director. Mr. Camp serves as the R&D Director of LNNi.com, Inc, and provides the Company with system development and innovative technical problem solving expertise for all its subscription components. His areas of expertise are database and Intemet system design and development, network management, and Internet security. Prior to joining LNNi.com, Mr. Camp consulted and provided systems engineering expertise for both Entex Services and Intecom, Inc.
Thursday,20, 000 July 2 Page 5
,b
Executive
Recruitment
Recent Executive Management Hire: VP-Operations LNNi.com has received a signed offer letter for the position of VP of Operations, contingent upon a successful LNNi.com funding event. Following is a list of the anticipated VP of Operations' achievement highlights: • • Over twenty (20) years of progressive experience in the business and public records information industry. Over fourteen (14) years of operations management experience. As President of a leading legal information service provider, shared the P&L responsibility (with sales) for revenues of $157 million and managed an expense budget of $110 million. Immediate supervision of five Regional VP and five to seven VPs and Directors at headquarters, and was responsible for 845 employees. Responsible for the operations of 38 offices nationwide. In addition, was responsible for the opening/relocation for many of these offices. Launched a nationwide UCC Service Division designed and implemented plan that drove revenues from $775k to $15 million in five years. Instrumental in the rollout for a number of new products. Part of the design team for expert corporate document preparation and data retrieval system and data entry system. Strong background in all aspects of the acquisition of public data, conversions, data entry, quality control, etc.
• • • • •
RIDER D Projected Statements of Operations ($ in thousands) Projected Twelve Months Ending December 31_ 2001 2002 2003 2004 $ 8,759.4 6,617.1 2,142.3 9,385.2 (6,505.4) $ 29,575.1 18,071.2 11,503.9 15,148.2 (792.5) $ 80,164.6 25,732.5 54,432.1 18,177.7 39,034.2 $175,805.7 32,172.2 143,633.5 19,894.9 126,450.3
2000 Total revenue Total cost of sales Gross profit Operating expenses EBITDA Other Operating Statistics: Revenue growth Gross profit margin EBITDA margin Number ofU.S.markets penetrated Number of clients (end of year) Revenue per client
$1,373.9 1,663.8 (289.9) 3,019.8 (3,092.8)
83% NM NM 6 680 $2,020
538% 25% NM 23 2,424 $3,613
238% 39% NM 51 8,251 $3,584
171% 68% 49% 51 17,128 $4,680
119% 82% 72% 51 29,322 $5,996
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