Sample Business Plan MoreLogic

DISCUSSION ONLY 30 August 2001 TM MORELOGIC™INC. This Memorandum has been prepared by MoreLogic™ Inc. ("MoreLogic™" or "Company"). The sole purpose of the Memorandum is to assist the recipient in deciding whether to proceed with an in-depth negotiation with the Company. While the information herein is believed to be accurate, the Company expressly disclaim any and all liability for representations or warranties with respect to the accuracy or completeness of the information contained herein. Upon request, the recipient will return all material received from the Company without retaining any copies. All inquiries relating to this Memorandum or to a possible transaction should be directed to Bernard Tan from MoreLogic Inc. MoreLogic Inc. 90 William Street Suite 505, New York NY 10038 Phone (646) 387-8506 Fax (212) 3242291 email: bernard@morelogic.com MORELOGIC™, INC. Information Memorandum Table of Contents Executive Summary Investment Consideration Capitalization and Use of Proceeds Financial Plan 4 7 8 9 Business Product Target Market and Customers Business Strategy Marketing and Sales Strategy Earnings Model Competition Management, Directors and Key Employees 10 12 15 15 16 17 18 Exhibit Worldwide Connectivity Market 1995E-2000E Tab 1 MoreLogic Digital Desktop Size of the Market and Opportunities Projected Online Shopping in 2002 - source Jupiter Communications - 11/00 - $6.4 billion PC Hardware -$2.4 billion PC Software - $3.5 billion Grocery -$3.7 billion Books -$1.8 billion Tickets Health & Beauty - $1.2 billion Toys - $0.6 billion Total - $38.5 billion Travel Gifts Music Clothing Videos Electronic -$11.7 billion -$1.4 billion -$1.6 billion - $2.8 billion - $0.6 billion - $0.8 billion Online advertising spending will surge from $5.3 billion worldwide this year to $45.5 billion by 2005. Advertisers in the US will spend more to tout their products and services on the Internet than they do on TV, according to Myer Group. The US accounts for $4.3 billion or 82% of global online ad spending in 2000. By 2005, US spending will rise to $32.5 billion, accounting for 71% of the worldwide total. EXECUTIVE SUMMARY MORELOGIC™, INC. MoreLogic™, Inc.'s vision is to empower the Internet user with faster, easier and organized access to the Internet. Our mission is to set the standard for future desktop applications and establish our interface as the desktop of choice for the 120 million personal computers sold annually, 250 million Internet users, and 250 million e-mail users worldwide. We enrich the user's experience by offering highly functional and powerful tools to quickly retrieve web destination and execute e-commerce transactions on the web. The product, "MoreLogic desktop", is in the form of a desktop on the PC. While our product has the characteristics of a portal, search engine and browser, we will focus on the applications for e-commerce transactions. The desktop allows users to organize, prioritize, and efficiently navigate between the web and the personal computer. Users can customize the desktop with personalized photo and install favorite sites "off the web". These sites are accessed with one click, without typing, remembering or knowing the URL. The desktop incorporates the best and most important features and revenue models of Microsoft's application (the gateway to the computer), AOL's proprietary network (tollgate to the Internet), Yahoo's strength as a content aggregator, Google's relevant search result and Portal's homepage. Product The MoreLogic desktop appears as a digital "desktop" and consists of: Desktop: Consists of a personalized directory and control panel that allows instant access to pre-selected and popular sites on the Internet. The desktop controls the functions of the Internet and the computer and replaces the need for bookmarks and laborious typing of hard-to-remember and easy-to-misspell URLs.. It's intuitively and logically well-organized "directory" will set the standard for faster, cheaper and easier access to the Online world, independent of any ISP. It has 40 main categories and 370 sub-categories to cater to most online users. A remote control version is also available. Mini Browser: The desktop has a built-in mini browser that allows user to view announcement, promotions, advertisement and video clip. This mini browser provides opportunity for sponsors and advertisers to display their products and services to the users. Webshow. a unique, revolutionary and innovative built-in application that precollects, aggregates, collates and organizes a series of relevant and popular websites with specific products and services in response to a user's inquiry. This application brings the shop and service at the user's request, thus saving time in clicking through a maze of web pages in order to get to his destination. It revolutionizes the shopping process from consideration to purchase. Value Prosposition An opportunity to create a new market and establish market leadership. The digital desktop is easy-to-use, features pre-sorted favorite sites with "off-the-web" selection and one-click convenience. Novice and advanced web surfers will find our tools take the drudgery out of "stick-shift" surfing and replace it with "automatic" power web surfing. To the consumers, the application will increase the usage of Internet users and the productive time users spend on the Internet. To the merchants and retailers, it will direct their presence and visibility to the users without any search. The desktop incorporates the best and most important features of Microsoft, AOL, Yahoo, Google and the Portal's homepage combined and yet able to control Internet traffic flow and database. We also believe our novel and first mover advantage will result in significant lead in the market place. Target Market and Customers Technically, we operate in a $6 billion market sub-segment of the $79 billion Internet market that Morgan Stanley Internet analyst Mary Meeker calls "Organization and Aggregation" and in the $2.5 billion application software sub-segment of the $5 billion Software and Services market. However, our vision is to be the tollgate keeper and dominant player in the $40 billion online shopping market projected by Jupiter Communications in 2002, (see Exhibit I). Our Digital desktop will give the user instant access to a wide spectrum of large vertical markets across many industries. Our versatile products will initially target the B2B market, and then expand to the B2C market. Businesses, large and small, will use MoreLogic™'s home page as a platform for communicating with and doing business with customers, suppliers, employees, and shareholders. We will target vertical markets such as health care, financial institutions and the auto-makers, including E-marketers, advertisers, manufacturers, retailers, and corporations. Businesses will find our platform reduces costs, increases revenue and improves customer service. Local, state, and Federal governments will use the MoreLogic™'s interface to communicate with their constituents, employees and vendors. Consumers will use our products for shopping, personal finance, sports, and hobbies, etc. We believe that our "desktop" will be the desktop interface of choice for the 120 million PCs sold annually worldwide and the 150 millions net/web surfers. We will target AOL (28 million subscribers), Microsoft MSN (6.5 million subscribers) and other corporations as licensees of our product. A major multinational financial institution and a major PC manufacturer are evaluating our product under a non-disclosure agreement. Business Strategy We will serve the B2B market by forging strategic relationships and licensing arrangements with major corporations, financial institutions, web portals, PC manufacturers, and software vendors. For example, an alliance with Microsoft to embed our software in their operating system would give us access to a large installed base Windows users and offer Microsoft a more functional access to launch their suite of products. An alliance with General Motors would allow GM to present color photos, with descriptions of their cars to dealers and end-users, or alternatively having the "desktop" OEM into the computers of PC manufacturers will transform their one-time revenue model into multiple and recurring one. We will target the ecommerce segment of the Internet industry and leave the traditional search and information segment to major portals. We want to participate in the referral, click-through, and transaction business flow. We will address the B2C market by establishing alliances with Applications and Internet Service Providers at a later stage. Competition and Intellectual Property To the best of our knowledge, we have not come across any "off-the-web" software technology that is similar or close to our product. Our largest potential competitors are the portals and search engines. Our strategy will be to work with them, rather than compete with them. We have also identified and recognized others like alladvantage.com, iwon, ebrick.com, hotbar, octupus.com, vivisimo.com, backflip.com and icq.com as indirect competitors. We believe that these companies lack content and the technology is limited to "on-the-web". MoreLogic™ has filed an application a U.S. patent covering its invention of retrieving and displaying the information. We have also been approved of the trademark "Morelogic" for our business. Financial Plan Our business model embodies multiple and recurring sources of revenue: license fees from portals and major corporations, listing revenue from merchants and services, and fees from sponsors, referrals, customization and transactions. ($000) Revenue Operating expenses Pre-tax income Yearl 1,515 900 615 Year2 3,150 1,300 1,850 Year3 5,800 1,550 4,250 Year4 8,750 1,665 7,085 YearS 12,900 1,765 11,135 Management Team Bernard Tan, founded the Company in May 1999. Mr. Tan is the developer of the Company's Internet navigation products. Prior to MoreLogic™, Mr. Tan co-founded HotelNet, an Internet-based hotel reservation system in 1998. Bernard's interest in computer and software started 7 years ago, when he was responsible for integrating and delivering financial data via computer as an investment banker for Salomon Brothers in Singapore. Lieng-Seng Wee, C.E.O. Lieng Seng joined MoreLogic in Sept.2,000 after several years as Partner at The Capital Markets Company, Inc., Capital Market Risk Advisors, Inc., Managing Director, Bankers Trust, Senior Associate, Booz Allen and Hamilton, Banker at Paribas. Lieng Seng graduated with MBA from Wharton; BA, National University of Singapore Opportunity To capitalize on our growth opportunities, we are seeking up to $2,000,000 in equity financing to hire software engineers, recruit marketing people, acquire office space, buy equipment, and for working capital. Bernard Tan, the directors, management and employees provided the initial capital and currently own all the shares. We are located in New York City. INVESTMENT CONSIDERATIONS Investors contemplating an investment in MoreLogic ™ should consider: 1. Our Innovative Product • Our product combines the functions of an automated homepage browser and the PC control panel. It revolutionizes the way the Internet, products, services and information are accessed. • Our product is an enabler that helps e-commerce player generates high conversion rates— "the One Internet Metric that Really Matters", (article by Benchmark Capital's Bill Gurley in March 6, 2000 issue of Fortune). Successful e-marketers have the following characteristics: • User interface (easy-to-use), Performance (quick) • Convenience (one click service), • Effective advertising (inspiration to act, not distract) • Word-of-mouth advertising and quick adoption. Target Market • Our vision is to be the toll keeper of the $40 billion online market described by Jupiter Communications (Exhibit I). • The number of Internet users are doubling annually, or a rate of 0.19% daily (Mary Meeker's "Internet Report", 1996, page 1-7). • Worldwide Internet Users. Another source, Computer Industry Almanac estimates that the 349 million Internet users worldwide in 2000 will increase to 766 million by 2005. 2. 3. Our Growth Potential • Our easy-to-use product will expand the universe of Internet users, both novice and advanced, in the U.S. and globally. • We expect to grow at CAGR of 65%, twice our sector growth rate. Our First Mover Advantage and Competitive Edge • We estimate that we have about 6-12 month lead-time-to-market. • We expect quick penetration of the B2B market. Businesses will assist us in distributing our product because it acts as an acquisition, retention, branding and marketing tool while increasing their revenue, reduces costs and improves customer service. Management • The present team has done a good job in product development and strategically positioning the company for growth. • To take the company to its full potential, we have recently hired a CEO and a E.V.P for marketing and business development. Creating New Market and Market Opportunity • The MoreLogic desktop creates a brand new market and a new way to connect PC user to the Internet. As first mover we are able to position ourselves to bypass the competition. 4. 5. 6. CAPITALIZATION and USE OF PROCEEDS MoreLogic™ was incorporated in Delaware as a C-corporation in May 1999. It has authorized 100,000 shares of Common Stock, par value $0.01, and 50,500 shares are outstanding. The Company's co-founders, Messrs. Bernard Tan and Ian Ang, the directors, key employees and friends own all the Common Stock. The Company is seeking up to $2,000,000 in capital. The proceeds will be used to: People hires: CEO, CTO and CFO Marketing and sales (5) software engineers (3) Marketing and branding Office space & equipment Working capital $ 500,000 150,000 150,000 100,000 1,100,000 $ 2,000,000 MoreLogic - Financial Plan Our business model embodies multiple and recurring sources of revenue: listing fees, licensing fees from portals and major corporations, advertising revenue from advertisers, and fees from sponsors, referrals, customization and transactions. 5 Year Cashflow Projections yearl year 2 year 3 year 4 yearS Distribution of Software 100,000 1,000,000 3,000,000 6,000,000 10,000,000 Total us$ us$ us$ US$ 500 us$ Income Number of Listings/affiliations Number of download/Registration Licensing fee@10cent* Listing/Affiliation Revenue Sponsorship Fee Click through -Referral Fee Transaction Fee Total Income Expenses Salary 5-15 personnel Computer & software Office Rental & Utilities Travel Research & Development Marketing Total Expenses Income Before Taxes Taxes @ 35% Net Income After Taxes 100 300 100,000 500,000 1,000,000 1,500,000 1,000,000 20000 ,0,0 $200,000 $900,000 $2,000,000 $250,000 $ 0 , 0 $1,000,000 5000 $15,000 $100,000 $300,000 $ 0 0 0 $150,000 5,0 $0,0 5000 750 1,000 1,500,000 2,500,000 2 5 0 0 0 3,000,000 $10,000,000 ,0,0 $ , 0 , 0 $5,000,000 $11,100,000 30000 $,0,0 $,0,0 $,5,0 20000 30000 67000 $0,0 5000 $900,000 $1,815,000 $ 5 , 0 $1,000,000 $ , 5 , 0 7000 24000 $1,515,000 $3,150,000 $ , 0 , 0 $ , 5 , 0 $12,900,000 $32,115,000 58000 87000 $400,000 $750,000 $1,000,000 $1,100,000 $1,200,000 $4,150,000 $000 5,0 $50,000 $25,000 $000 2,0 $15,000 $160,000 $7,0 4000 $50,000 $75,000 $100,000 $120,000 $125,000 $100,000 $125,000 $125,000 $125,000 $125,000 $600,000 $500,000 $100,000 $100,000 $100,000 $100,000 $100,000 $200,000 $ 0 , 0 2000 $200,000 $200,000 $200,000 $1,000,000 $ 0 , 0 $1,300,000 $1,550,000 $1,665,000 $1,765,000 $ , 8 , 0 9000 68000 $615,000 $1,850,000 $215,250 $647,500 $399,750 $1,202,500 $4,250,000 $1,487,500 $7,085,000 $11,135,000 $25,235,000 $2,514,750 $3,967,250 $8,832,250 $7,367,750 $16,402,750 $2,762,500 $4,670,250 Assumptions * Licensing fee -10 cts/subscriber 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 100 300 500 750 1,000 Listing-$1200-$10k per listing p.a Sponsorship fees ($20k-50k/ea) 8 16 35 50 70 $1,000,000 $3,000,000 $10,000,000 $15,000,000 $ 0 0 0 0 0 2,0,0 Transaction Vol. @ (1-10%) Referral fee (2 cts) per day 2,000 15,000 40,000 75,000 125,000 BUSINESS MoreLogic™, Inc.'s vision is to empower the Internet user with a faster and easier access to the Internet. Our mission is to set the standard for future desktop applications and establish our interface as the desktop of choice for the 120 million PCs sold annually worldwide, 150 million Internet users, and 200 million e-mail users worldwide. We enrich the user's experience on the Internet by offering highly functional and powerful tools to quickly retrieve information and execute e-commerce transactions on the web. While our product has characteristics of a portal, search engine and browser, we will focus on the applications on executing e-commerce transactions. Our desktop desktop organizes, prioritizes, and facilitates the navigation between the web and the personal computer. Users can custom-build a homepage with personalized photo and install favorite sites "off the web". The desktop incorporates the best and most important features and revenue models of Microsoft's application (the gateway to the computer), AOL's proprietary network (tollgate to the Internet), Yahoo's strength as a content aggregator, Google's relevant search result and Portal's homepage. PRODUCT Our Universal Web Navigator appears as a digital "desktop" and consists of: Digital desktop: A personalized directory and control panel that allows instant access to more than 25,000 popular and selected websites on the Internet. The desktop is independent of any ISP and is compatible with a low-cost PC. Mini Browser: The desktop has a built-in mini browser that allows user to view announcement, promotions, advertisement and video viewing. This mini browser provides opportunity for sponsors and advertisers to display their products and services to the users. Webshow: The automated browser collates, sorts and organizes a series of websites with specific products and services to facilitate e-commerce transactions. This saves the user time in clicking through a maze of web pages in order to get to his destination. The destinations "come" to the viewer with one click. MoreLogic™ Inc. develops and markets innovative multimedia e- commerce-based applications for businesses, governments, and consumers. Our objective is to create a seamless Internet superhighway for business, governments and consumers to reach their destination on the Internet in the fastest and easiest method available. The user achieves this through our unique software that serves as gateway to the computer operating system and the Internet. 10 MoreLogic desktop -integrating the PC desktop, the internet and the homepage. Our Product — Innovative Applications 1. software that acts both as the default desktop and homepage on the computer. 2. creates a web show, assembling a series of websites with specific product and service for the users, thus making e-commerce transaction easy and fast. 3. creates and display more than 20,000 urls without any Internet search. 4. Application has full control of the traffic and database to track user behavior. Product Description - "Desktop" - the gateway to the computer and the Internet Our product is attractive, well organized and functional. It controls the major functions of the computer (Windows Explorer, control panel, CD, player, scandisk, notepad, mediaplayer, calculator, program manager, print manager and others). It has a personalized do-it-yourself picture frame, allowing the user to insert and change the photographs as regularly as he wishes to. The desktop has 40 major categories of subjects and 370 sub-categories of products and services, organized and ranged from, newspapers, magazines, sports, entertainment and financial news, maps, games, email, online banking, online investing, and shopping sites, etc. The MoreLogic multi-purpose digital desktop will complement the Microsoft desktop, which is installed in 90% of the world's personal computers. MoreLogic™ Desktop and Homepage Our well-organized desktop and custom-designed home page also acts as a gateway to the Internet that can replace the portal's coveted homepage. The desktop allows users direct, easy and fast access to all the important and regularly used information available on the Internet, ranging from reading the newspaper, magazine, sports, news, online banking, online investing, ticket purchases and keeping track of weekly events. Equally important is the ability to access e-shopping sites easily and quickly through its comprehensive shop by product category. To cater to diverse interest groups, our desktops are designed with several templates for men, women, and teens, covering many different themes. Each template can be used separately and independently of one another. There is an advanced remote control version for advanced user. The desktop is the first and only application that can replace the portal's homepage before connecting to the Internet. MoreLogic™ Webshow MoreLogic's™ proprietary software pre-collects, filters, sorts, organizes and displays the information from the web the way a user wants it. The application has the unique ability to assemble the most comprehensive and relevant information from a variety of web sites with one"request" and do so in the quickest possible time. Unlike traditional search engines, which lead users to countless home pages, MoreLogic™ pre-sorts the results of 11 those searches, selecting and arranging specific pages of the selected web sites containing the relevant pages in a logical fashion. With MoreLogic™ webshow, users do not have to open numerous web sites and "dig" for information. Instead, information will flow to the user at the click of a button. An example of this would be an item called "news". With one click on the "daily newspaper" icon located under the Scrolling News button, selected newspapers will be displayed to the user, one at a time. The user can pause the automation, continue to see more shops or fast forward to new pages and leave the program. The web show is the first and only application that automatically brings the information and e-commerce to the user, with a click of a button. Automated Information Caching The automated web show collects specific information or news and allows the user to access all the relevant information with one click and cache them to be read later. For example, a financial analyst could collect certain information then review the data while commuting. This automated news collection function saves the user time and allows the user to organize his work more efficiently. Internet Traffic and Database The desktop application has full control of the Internet traffic and database. Such information was privy only to the ISP and individual website server. MoreLogic's unique application can track user traffic destination regardless of any ISP, thus capable of harnessing a wider, larger and diversified database. TARGET MARKET and CUSTOMERS We view the Internet market as being divided into two segments: the traditional search and the E-commerce. We will leave the search segment to the major portals and will focus on being a leader in the E-Commerce applications. We are targeting the following market segments. A MoreLogic™ Solution is presented as a Value Proposition in response to each challenge. 12 MoreLogic's Value Proposition Challenges in the Internet and Information Market and the MoreLogic™ Solution (1) Business and Corporate Sector: Keeping Informed and Saving Time • The Challenge. Companies want to keep their employees abreast of news and information but they don't want them wasting them searching and surfing the web. Externally, companies want to keep their customers and shareholders informed of their products, shareholder issues, weekly promotions and specials, but find it expensive and labor intensive to do it. MoreLogic™ Solution. Using proprietary cross-indexing and automated browsing capabilities, MoreLogic™ will create re-order "newspaper" or "magazines", drawing on general and special interest news and information sources on the web. It has the ability to pull out pages from different web sources and will automatically update the information as frequently as the sources are refreshed. Using MoreLogic™ webshow, a customized corporate icon displaying the company products and services can be created for users to browse through. MoreLogic default desktop can also be customized to display the most important and frequently used information on the main desktop, saving unnecessary bookmarks and search. • (2) E-Commerce Segment: Consumer Confusion and Loyalty. • The Challenge. With the proliferation of web sites, E-marketers need more efficient ways to direct consumers to the goods and services they want consumers to buy. There are too many banners, products and services that bombard the consumer, causing diversions and confusion. The web makes it easier than ever for consumers to make price comparisons. E-marketers need more effective ways to ensure consumer loyalty. MoreLogic™ Solution. We create customized electronic catalogues, by product category to maximize user-friendliness and make purchasing goods and services on the web fast and easy. Our software can take consumers on a pre-defined path through a catalogue to ensure they find what they are looking for quickly and easily. MoreLogic™ will furnish consumers with branded desktop icons or proprietary cdrom to solidify loyalty. Merchants will use electronic ad web sites to promote sales and special offers through our mini browser. 13 (3) Advertiser Segment: Internet Clutter • The Challenge. As web sites proliferate and the web becomes increasingly cluttered with advertising diversions, advertisers need more efficient ways to insure they are reaching their highest potential customers directly. Banners and impressions do not always reach the right consumers. MoreLogic™ Solution We offer advertisers a pre-qualified audience, that results in maximum exposure and cost efficiency. We deliver the "advertisement" to the user. Our proprietary automated browsing system offers a variety of advertising messages, from banners to full screen (still and animated) messages, to be aired with impact, to a selected audience. The builtin mini browser serves as a major avenue for merchants to display and promote their goods and services on a daily basis. • (4) Consumers: Time and Computer Competence • The Challenge. Using the web is very time consuming: searching for sites, waiting for each page to download, making bookmarks, back paging, running into blind alleys and dead ends. After a search is done, the results are not sorted and organized in a meaningful and informative manner for the consumers. Most Internet users are not skilled computer users and therefore lack confidence that they are using the web properly. MoreLogic™ Solution. We access, collect, filter, sort, organize and display information from the web in a way that is intuitive to the user. Our proprietary software has the unique ability to assemble information from a variety of web sites with one "request", providing the most comprehensive information available in the quickest possible time. Unlike traditional search engines, which lead users to the home pages of web sites, we pre-sort the results of those searches, select and arrange specific pages of the web sites containing the relevant pages the way user wants them.Users do not have to open numerous web sites and "dig" for information. More than 10,000 relevant and popular websites are organized intuitively and easily for users to access readily. • (5) Shopping Experience: Too Long to Find the Right Product • The Challenge. "Shopping" on the Internet is like going through a maze of shopping centers and malls, compounded by driving, parking and traffic congestion. It is tedious to search with many distractions and diversions to unrelated sites. It involves too many clicks before finding the right information, price comparison, product review and stores. MoreLogic™ Solution. With our unique software, instead of "going" to the stores to find the things you want to buy, the various shops "come" to you. • 14 Morelogic™ channels the web shopper to a virtual "shopping districf'or "fashion avenue" with a very focused product or service. We provide a total solution to the shopping process by integrating the shopping decision process of price comparison and product review into the shopping process. (6) The Portals : Stickiness and Default Homepage • The Challenge. Portals in general depend greatly on the adoption of the homepage as a key element of their business and revenue models since the homepage acts as a tollgate to the Internet and makes the web-site sticky. Unfortunately the portals have no control over this as user can change the default homepage easily and freely. Likewise corporations and eMerchants aspiring to have their websites be the default page competing for visibility and eyeball with the portals find the effort very expensive and daunting. MoreLogic™ Solution. Because Morelogic's desktop acts as a desktop as well as a homepage, it is sticky regardless of which Internet browser is being used, since the desktop will always appear on the background. The desktop will always put the main sponsor in front of the PC desktop and the Internet homepage, thus avoiding the competition from portals. The contents in the desktop are embedded with the encoded urls to ensure that the traffic is consistently and regularly directed through MoreLogic or the sponsor. • (7) Computer Manufacturer - low margin and one time revenue • The Challenge. Computer manufacturers experience decreasing margin and one time revenue model from the sale of the hardware to consumers, while at the same time unable to leverage the hardware to participate in future revenue and ecommerce. MoreLogic™ Solution. With MoreLogic desktop, computer manufacturers can OEM private label software into the hardware to help users navigate the PC and the Internet. The software also provides the PC manufacturers the opportunity to participate in ecommerce activities of the users, thus transforming the one time revenue model into multiple and recurring models. • BUSINESS STRATEGY: B2B FIRST. THENB2C We will initially target the B2B market, serving businesses and governments, to facilitate their e-commerce transactions. This will achieved by developing strategic partnerships and licensing agreements with major portals, systems integrators, hardware manufacturers, software vendors, Application Service Providers, and Internet Service Providers. Large corporations, financial institutions, advertisers, e-marketers will find our combined desktop, homepage browser and Web show a robust platform to execute Ecommerce transactions. 15 Our versatile software allows us to position ourselves initially as a B2B, then into B2C business model. As an example, our software is able to create an application for General Motors to sell cars on the Internet through a private label Digicard to the end-users or downloaded through the Internet. We will license the software to GM and negotiate revenue sharing for all transactions that goes through the application. To transform ourselves into the B2C business, we simply modify the software to create an application for the entire car industry, listing all major car models in the application. In this business model, auto manufacturers, car dealers, auto parts maintenance and repair shops will sponsor the application and offer a share of the revenue. MARKETING AND DISTRIBUTION STRATEGY We have a 10 point marketing and distribution strategy in the U.S. and overseas to secure rapid acceptance of the MoreLogic's Desktop 1. 2. 3. 4. 5. 6. 7. 8. 9. Financial and credit card sponsor - Citibank, Chase, Visa, Mastercard Major corporations and government agencies Affinity groups - AARP, Sports Teams, colleges, school, churches, etc ISP and Portals - AOL, Yahoo, Excite, Lycos, MSN, etc Computer manufacturers - HP,Compaq, IBM, Dell, Gateway Telecommunication companies - Bell Atlantic, ATT, MCI, Comcast, etc. Downloading through Internet Sales of CDROMs. Microsoft - embedding the software into Windows operating system. Distribution Channel comparison against portals and search engines Portal/Search Engine E-tailers Harddrive Web-based Download Cdrom No Yes Yes Yes No Yes Yes No MoreLogic Yes Yes Yes Yes EARNINGS MODEL We intend to generate multiple and recurring revenue sources: 1. Listing Revenue. Our unique product and focused search process gives advertisers better value proposition by targeting specific users. We intend to charge between $1,000-$ 10,000 annually per category. We believe our system will also replace flyers and coupon distribution in the future. While advertising spending will surge from $5.3 billion worldwide this year to $45.5 billion by 2005, corporations in the US will spend more to tout their products and services on the Internet than they do on TV, according to Myer group. The US accounts for $4.3 billion or 825 of global online ad spending in 2000. By 2005, US spending will rise to $32.5 billion, accounting for 71% of the worldwide total. 16 2. Selling the Default Page. MoreLogic™ Internet desktop is prime "real estate" and high-value "space", which could be auctioned to the highest bidder. For example, the Internet button could be sold to a major portal for an annual fee. Ticket booking button can be sold to either TicketMaster or Ticket.com to be the default portal. Likewise there are several buttons on the Women's homepage that can be sold to iVillage or Women.com Licensing Fee from portals and major companies. We intend to charge licensing fee annually to portals and corporations. The major portals have a combined readership of more than 150 million and combined subscribers of more than 50 million. We are conservatively anticipating 5 million users of our software by the end of the second year. Sponsorship of the Digital Wallet. We will select a financial institution or credit card sponsor to launch a Digital Wallet. Transaction Fee/Commission. As an E-Commerce portal, we will work with various business sites for a transaction fee or commission ranging from 2% to 10%. Customization Fee from users - $19.95. We anticipate this to pick up significantly over time as this will prove popular with the consumers. We expect customization to reach 50,000 by the end of the 3rd year. Customization is labor intensive but allows us to gain valuable information about user taste and preference. The data collected can be used for marketing and advertisers. We also believe companies will use our software to target specific customer groups. Referral and Affiliation Fee. Our ability to link all the pages through our desktop will give us the opportunity to receive referral revenue as a result of directing traffic to the various homepages. There are at least 5,000 websites that use referral fee programs. Subscription/Membership Fees. Free distribution, but charge $3.95 for shipping and handling of the CDROM. Sale of Software through CD ROM. Price: $19.95 per disc. We may consider selling the CDROM at substantial discounted price to various financial sponsors for their customers, affinity groups for their members, government organizations for their constituents, computer companies for their clients, and portals for their customers. This will also help to create a distribution channel for the product. We may also consider selling the software priced at $19.95 each on our own, however we don't intend to use this option currently. 3. 3. 4. 5. 6. 7. 8. 17 COMPETITION and INTELLECTUAL PROPERTY To the best of our knowledge, no one else has developed the "off-the-web" technology desktop browser. Our major potential competitors are the portals and search engines. Our strategy will be to work with them, rather than compete with them. Other indirect competitors include hotbar.com, octupus.com, desktop.com, and alladvantage.com. We believe these companies lack contents and the technology is limited to "on-the-web". MoreLogic™ has filed a U.S. patent covering its invention of retrieving pre-selected information from several pre-selected destinations and displaying the information through the desktop. MANAGEMENT, DIRECTORS, and KEY EMPLOYEES Bernard Tan, Founder Bernard co-founded MoreLogic™ in May 1999, after spending a year searching for tools that can navigate faster and easier than the current search engines. He pioneers an application that can intuitively collect, filter, sort, organize and present the results automatically. He also developed a user-friendly interface that can control the operating system and navigate the Internet. Bernard co-founded HotelNet, a hotel city guide software in 1998. As President of HotelNet he was responsible for building the business from scratch by developing relationship with one hotel in Manila and one in Manhattan. Prior to HotelNet, Bernard worked 12 years with Salomon Brothers as Director and Chief Representative with responsibility for managing Salomon Brothers' fixed-income, foreign exchange, equity sales and research in Singapore and the S.E Asia Region. Bernard's interest in computer and software started 7 years ago in Salomon and was responsible for integrating and delivering financial data, news and research through the computer. Bernard also worked at CSFB as Vice President, Morgan Guaranty as Senior Manager Investment, and Singapore's Board of Commissioners of Currency as Head of its Investment Division. Bernard earned a BBA from University of Singapore in 1997. Ian Ang, Co-founder and Multimedia Applications Director Ian Ang's special skill is in the area of multimedia programming and applications. He also has varied experience in supporting and maintaining hardware and software applications. Ian has been an instructor at colleges and Singapore Polytechnic in the field of multimedia applications and served as consultant to several companies in Singapore. Ian graduated in 1994 from the University of Singapore, majoring in Computer Sciences and Information Systems. 18 Management Team C.E.O Lieng-Seng Wee, C.E.O. Lieng Seng joined MoreLogic in Sept.2,000 after several years as Partner at The Capital Markets Company, Inc.,Capital Market Risk Advisors, Inc., Managing Director, Bankers Trust, Senior Associate, Booz Allen and Hamilton , Banker at Paribas. Lieng Seng graduated with MBA from Wharton; BA, National University of Singapore E.V.P - Marketing & Business Development Judy Lee, EVP- Marketing and Business Development joined MoreLogic in Sept. 2000 after serving as Partner, The Capital Markets Company, Inc., Partner, Capital Market Risk Advisors, Inc., Principal, Bankers Trust. Judy graduated with an MBA from Wharton; BS, and New York University, Stern School Board of Directors The Company's Board of Directors includes Bernard Tan, Michael Cheah, John Wambold and Nick Giannuzzi, (an attorney with Nick & Giannuzzi). John Wambold's has 16 years experience in fixed income trading and on-line systems. John has served as Head Trader of Salomon Brothers Governments OTC option desk and as Citicorp's Managing Director and the Head Trader of its Government bond department. John received his B.S. from Drexel University in 1983. Tim Pollak spent 30 years in the advertising industry, including 20 years with the leading global agency, Young & Rubicam Inc. At Y&R, Tim was Vice Chairman, Worldwide Director of Client Services and a member of the corporate executive committee, and served as CEO of both the flagship New York office and the global joint venture, HDM Worldwide. Tim was responsible for developing and managing the global relationships with key clients Colgate-Palmolive, Citibank, Sony and Monsanto. 19 Tabl WORLDWIDE CONNECTIVITY MARKET 1995E-2000E Tab 3 World Wide Connectivity Market 1995E-2000E (Millions) 1995 1996 1997 1998 1999 2000 Users of: PCs E-mail Net/Web Online/Hybrid 144 167 184 203 130 217 180 122 225 200 152 35 9 8 60 23 13 80 46 18 81 23 27 30 Source: Morgan Stanley Research Estimates From "The Internet Report" by Mary Meeker and Chris DePuy (New York: Harper Collins, 1996), page 3-1, Table 3.1 20