| Summary: | Location: University of Michigan League Ann Arbor, Michigan Companies: Accumed Systems, Inc. AccuPhotonics, Inc. COMPANY PROFILES Advanced Modular Power Systems, Inc. Balance Dynamics Corporation Haushahn Systems & Engineers, Inc. Immersive Edutainment Company Knowledge Discovery One Lifeserv Corporation Little Professor, Inc. Origen, Inc. Soil Magnetics, Inc. South Wind Design, Inc. Stardock Systems, Inc. Systems Engineering Consultants, Inc. InterFax Imaging Systems, Inc. Speakers: Distinguished Speaker: Mr. D. Theodore Berghorst Founder and CEO, Vector Securities International, Inc., Deerfield, IL, Dr. David J. Brophy Accu.med Systems, Inc. 2504 Geddes Avenue, Ann Arbor, :MI 48104 (313) 930-9741 (313) 662-0521 mickey@bizserve.com N/A Ms. Mickey Katz-Peck Executive Summary Accumed Systems Inc. is a Michigan corporation formed in February, 1990. The principal business is to develop, produce and sell medical accessory devices in the interventional cardiovascular market. Initially, the Company concentrated on the development of accessory devices to be used by interventional cardiologists performing angioplasty and angiographic procedures. The Company is planning growth to achieve $28 million in revenue by the end of the Year 2001. Accumed will accomplish this objective by licensing, joint research and development, and commercialization ventures in all areas of interventional cardiology. The first accessory device to be successfully developed by Accumed is a percutaneous transluminal coronary angioplasty (PTCA) high pressure a balloon inflation device. Angioplasty is the reconstruction of a blood vessel, involving the insertion of balloon tipped catheter into a partially obstructed atherosclerotic lesion with inflation of the balloon to dilate the obstruction. This device has been awarded a US patent and has received 5 lO(k) exemption from the US FDA. The rights to the PTCA inflation device were sold on a cash plus royalty basis to Medtronics Interventional Cardiovascular, Inc. Launched in May, 1996, 44,000 units have been sold. Sales have increased an average of 36%/month through January, 1997. A second device, a high pressure syringe for use in angioplasty and angiography, has also received 5 lO(k) exemption. Angiography is the visualization through radiography of vessels after the injection of a radiopaque material. In addition to the two devices it has developed, Accumed is currently actively pursuing the development of several additional accessory devices for angioplasty, angiography, coronary artery bypass, and other open heart surgery procedures. The development of one 5 of these devices has been partially funded by a grant from the Michigan State Research Fund. An initial prototype has been developed. Additionally, Accumed is pursuing the development of three angioplasty devices that are designed to be invasive, or used inside the human body. Accumed has an option to license certain patented technology from the University relevant to the development of a CMOS pressure sensor for multiplexed catheters. This will be accomplished in partnership with BioCompatibles, Inc., a publicly traded company on the London Stock exchange and with the University of Michigan School of Engineering. The principals of Accumed are uniquely qualified to accomplish this mission. They have long-term relationships with respected scientists, physicians, and technology transfer offices at the University of Michigan, Wayne State University, Beaumont Hospital and others in Michigan. Market In 1993, over 4.4 million operations were performed on the cardiovascular system. Approximately 500,000 angioplasty procedures were completed in the US, with approximately 1 million procedures performed worldwide. Another 1 million cardiopulmonary bypasses were also performed in the US, Japan, and Western Europe. These numbers are anticipated to grow steadily, since the population is aging rapidly and more women are being treated for cardiovascular disease. The US market for products utilized in coronary procedures reached almost $1.2 billion in 1993. The market segment for angioplasty was $790 million in 1993 and has been expected to grow at an estimated 15-18% per year through 1998. The US angiography market ($408 million) and the US accessory market are expected to grow 10% per year during the same period. Accumed will initially focus on the accessory market. Customers can be identified as follows: corporate partners licensing our technology; corporate partners selling our products; kit manufacturers including our products in kits requested by the physician/surgeon on their preference cards; hospital buying groups; catheterization and radiography laboratory managers and physicians. While we do not intend to initially develop a direct sales force, we do intend to reach our potential customers and partners through various routes including direct contact, trade shows, advertising in scientific and trade journals and direct mail. Management Team Marilyn (Mickey) Katz-Pek, President and Co-founder. Past president, BioQuant, Inc.; Medical Cybernetic Systems; and Biotechnology Business Consultants. Extensive business experience in biomedical technology development, licensing and technology transfer. Experience with Venture Capital. Director, Ann Arbor Commerce Bank. 6 Lisa Kurek, Vice President of Marketing and Sales. MS in Bioengineering and has extensive international sales and marketing experience as VP for Marketing and Sales of a spin-out of a publicly held biomedical instrument company. Until early January, 1996, Accumed conducted business with officers who worked on behalf of the company only on a part-time basis. A principal purpose for seeking additional funding is to bring together a product development team to carry out this business plan in an aggressive manner. The current Board of Directors provides expertise in understanding the state-of-the-art of the interventional cardiovascular market, business development and management. We intend to enhance our Board of Directors with financial expertise, medical market knowledge, and an individual(s) who have experienced a medical company's growth through acquisition or public offering. Our full time management team will initially include four professionals whose backgrounds will consist of extensive experience in corporate development, marketing, engineering and design, intellectual property management, and administration in the health care industry. The finance, FDA process, clinical trial management, prototyping, legal (corporate and patent) and contract manufacturing needs will be under contract as required. In addition, a well qualified senior level research scientist has expressed an interest in joining the company upon funding. This individual has a Ph.D. in Cardiovascular Physiology and most recently was employed as a Senior Research Scientist with a publicly held company that is a potential partner for Accumed. He has worked closely with FDA inspectors and is experienced in GMP issues. An outside Medical and Scientific Advisory Board will assist the management team by evaluating new technologies either developed internally or brought to the company from the outside. These advisors are internationally respected in their varied fields of medicine, basic science and engineering. Financials Accumed Systems inc. is currently authorized to issue 10,000,000 shares of capital stock. A list of the current shareholders and the number of shares each one holds is detailed in the due diligence package that will be provided upon request. Also contained in the due diligence package are copies of the Company's financial statements for each year of operations as well as its tax returns for those years. The company is seeking to raise $2.0 million in capital to pursue its business plan through 1998 and to profitability. The net proceeds from the sale of common stock will be used for the following purposes: • Implement proprietary technology protection program. • Establish research and development and assembly facilities. 7 • Seek and hire the best people to implement company vision. • Purchase molds and other tooling for contract manufacturing and inventory. • Maximize sales through partnerships. • Implement customer support services. • Implement clinical trial and FDA review and approval process. 8 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEBSITE: CONTACT: Executive Summary AccuPhotonics, Inc. 2901 Hubbard Road, Ann Arbor, MI 48105 (313) 741-1586 (313) 769-8810 mickel@seatlower.com NIA Steve Mickel (President) AccuPhotonics, Inc. markets high efficiency fiber-optic probes for Near-field Canning Optical Microscopy (NSOM). NSOM is a breakthrough technology that allows visualization of biological samples in detail not possible with any other method. AccuPhotonics has patented design and production technology that provides a thousand fold increase in light transmission compared to any other marketed probes. The Company's expertise in stretching and creating fiber optic tips also opens up opportunities in the emerging field of micro-chemosensors. In addition to two issued patents on the probe, the Company has a patent pending for a complete NSOM unit that will offer dramatic improvements in speed, cost, and reliability over current designs. The US military is very interested in the AccuPhotonics system for the detection of biological warfare agents; the Company is pursuing opportunities to accelerate development of its system in partnership with these government sources of funding. The Company began operations in 1994. It is based in a high-technology incubator at Ann Arbor's Industrial Technology Institute. It employs two full-time research scientists and a President, drawing on consultants on a project basis for assistance with specific needs. The primary angel investor is Dwight Carlson, a local entrepreneur whose successful start-ups include Perceptron, a publicly traded company. In January, 1997, the Seaflower Health & Technology Fund made a seed round investment in the Company. Product The Company currently markets one product line, high-performance NSOM probes. These are available in two basic formats, for use either with visible red or visible green laser light, and sell for $120 apiece. As volumes increase, gross margins on the probes 9 will exceed 70%. A typical NSOM customer uses over 100 probes per year, with usage increasing as additional applications of the technology are developed. The AccuPhotonics tips have been tested at several sites, where the response has uniformly been that the efficiency of light transmission is the highest observed anywhere. The Company has recently begun selling the probes and is scaling up its manufacturing capacity. Market The NSOM probe market is currently a cottage industry, with individual labs producing small numbers of probes for their own use, resulting in problems with yield, cost and quality. No other viable manufacturer exists. AccuPhotonics will therefore standardize the industry, capturing a dominant share of the market for NSOM probes, expected to grow to $20 million over the next five years. AccuPhotonics is also targeting the greater market opportunity for entire NSOM systems. Most NSOM systems are individually built by the end user. One commercially available system marketed by a California company, Topometrix, has not performed up to most customers' expectations and consequently has made little headway in the market. This system is priced at $110,000. The AccuPhotonics system is expected to deliver significantly greater performance, be more robust and compact, and therefore will be priced at a premium to the Topometrix unit. Management Team Mohammed N. Islam is the inventor of the fiber-optic probe and founder of AccuPhotonics. Dr. Islam, a professor of Electrical Engineering at the University of Michigan, serves as the Company's Chief Technical Officer. He earned his Sc.D. degree in Electrical Engineering at the Massachusetts Institute of Technology. Dr. Islam's work in fiber-optics, lasers, and nonlinear optics has received wide recognition including the Optical Society of America's Adolph Lomb Award. He has 9 patents and over 70 papers and books. Stephen S. Mickel became the Company's President at the beginning of 1997. As General Manager in the venture capital firm Seaflower Associates, he is experienced in building and financing high-technology start-up enterprises. He has served in marketing, sales and product development positions for divisions of Becton Dickinson and Mallinckrodt Medical. He holds an BS in Chemical Engineering from the Massachusetts Institute of Technology and an MBA from Harvard Business School. Ali A. Said joined AccuPhotonics in 1996 as a Research Scientist. His experience includes four years at the Center for Research and Education in Optics and Lasers (CREOL) at the University of Central Florida. He earned his Ph.D. from the University of North Texas. As a graduate student, Dr. Said co-invented the Z-scan technique for measurement of non-linear absorption and refraction in materials. He has published over 15 papers in reference journals. 10 Xiao-Kang Zhao joined AccuPhotonics in 1994 as a Research Scientist. Ms. Zhao has over 15 years of experience in NSOM-related fields, including four years at J&D Scientific, where she designed and tested components of scanning tunneling and atomic force microscopes. Her expertise in scanning probe microscopy and the manufacturing of metallic tips is invaluable to AccuPhotonics. She was a research scientist at Montreal University, a senior postdoctoral fellow at Syracuse University, and an Assistant Professor in the People's Republic of China. Zhao has published over 30 scientific papers. Dwight Carlson, the Company's co-founder and primary angel investor, has served as Chairman since inception. He brings to the Company a wealth of entrepreneurial experience, including: founder, President and CEO of XYCOM from 1968 to 1981 and founder, President and CEO of Perceptron from 1981 to 1996. He currently serves as Vice Chairman of Perceptron, a global leader in three-dimensional machine vision systems. XYCOM is a leader in industrial microcomputer applications. Mr. Carlson also serves as Chairman of several other organizations, including Michigan Future, Inc., the Auto Body Consortium, and Onset BIDCO, a provider of capital and assistance to emerging growth companies. 11 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEBSITE: CONTACT: Executive Summary Advanced Modular Power Systems, Inc. (AMPS) 4667 Freedom Drive, Ann Arbor, MI 48108 (313) 677-4620 (xlll) (313) 677-0704 glevy@ampsys.com www.amps.com George C. Levy, President AMPS is the world-leading developer of AMTEC technology. AMTEC (Alkali Metal Thermal to Electric Conversion) systems efficiently convert heat into electric power in small sized, light-weight modular units. AMTEC power converters have no moving parts, operate silently, and as self contained sealed units, they operate for extended periods without need for maintenance. The immediate market for the company's AMTEC power converters is for space applications. AMTEC technology has been selected by the US Department of Energy and NASA for missions th�t are planned following the year 2000, including Europa (the moon of Jupiter), the planet Pluto, and a mission launched toward the sun. The Company continues to enhance performance of its AMTEC systems, and additionally, manufacturing techniques are being investigated to allow AMTEC cells to be produced in quantity and at low-cost, for future commercial markets including micro cogeneration and portable and remote power systems, where AMTEC's silent and maintenance-free operation are needed, or where the high efficiency of AMTEC power conversion is important. AMPS was founded at the end of 1990 and since 1995 the company has doubled each year to an anticipated revenue in excess of $SM in 1997. The company's growth has been accomplished without deficit spending through an extensive array of federal government contract and grant support, now being supplemented by industrial contracts aiming toward commercial markets. Commercial product prototypes are being developed in contracts with Teledyne Brown, AD Little, Lockheed Martin and Gastec, a Netherlands corporation. The company requires equity capital to develop production technology and facilities to lower manufacturing costs for commercial mass market entry. $I.SM in equity is sought 12 during the next year, with an additional investment of $1.5 to $2.5M over a period 1998- 99 through acquisition of strategic commercial partners. Product AMTEC power converters are fully modular stainless steel devices that range in size from near that of a standard D-cell battery (this AMTEC device produces approximately 10 watts of DC power at 3.5 volts) to the next-generation type AMTEC module which will fit in a 10" x 10" x 1.5" footprint, and which should produce between 100 and 150 watts of power at 8-9 volts. The type device can be stacked to produce higher voltages and more power; thus a kilowatt of power would fit in a 10" cube and weigh approximately 5 to 7 kilograms. Type AMTEC cells are scheduled for delivery for initial government and commercial customers as prototype systems in late 1998. At the same time period, a series of 10 watt AMTEC power units will be provided to NASA as quality assurance cells for planned 2001-02 space missions. Market The current design AMTEC system cells are made from mostly low-cost commercial industrial materials with some sub assemblies having high-cost components and complex fabrication and assembly processes. These cells have excellent markets in high value added products for space vehicles and specialized earth-orbit satellites, plus remote arctic site gas-propane-fired telemetry stations and other specialized markets. These markets together total $1OM-$20M/year. The much larger markets for consumer and industrial AMTEC products require simplification of fabrication and replacement of a few material components in current design AMTEC cells. It is envisioned that these low-cost AMTEC systems could be produced by the year 2000, with high volume markets following within 1 to 2 years. If high-volume low-cost production is achieved for AMTEC, then markets as large as several hundred million dollars become accessible: $10M-$50M markets in micro cogeneration (e.g. self-powered home furnaces and hot water heaters), portable power systems such as light weight portable battery chargers, electric power sub-systems for gas-powered portable and transportable utilities (such as combined air-conditioning and heating systems burner-based technology, planned for long-haul trucks.) Other applications include high current, low voltage plant power systems, and co-generation systems for fuel cells and other heat producing electric power generation systems. Projections The Company and its affiliates (AMPTAL, a joint venture for low-cost production of the ceramic material which forms the heart of AMTEC devices, and the anticipated joint venture for production of AMTEC cell components) expect significant growth in revenues in 1998 (~$SM) and 1999 (~$1OM) while preparing for commercial non-space AMTEC production beginning in 2000. Commercial market sales are not expected to reach high volume production until 2001-02. AMPS anticipates being able to operate at break-even through the year 2000, based on contract funding and AMTEC production for 13 NASA and other government customers. Commercial revenues should become significant starting in 2000-01. Financial projections are available from the Company. · Management The Company is led by a management team having both technical and business development talents. George C. Levy, President and Chief Operating Officer. (Ph.D., Chemistry, UCLA, 1968). Mr. Levy has over 30 years of experience in research, technology, and entrepreneurship. In the early 1980s he founded his own Company and grew it to listing in the 1989 Inc. 500 as the 140th fastest growing private US company. Thomas K. Hunt, Founder, Chairman, and Chief Scientist. Earned his Ph.D. in Physics at California Institute of Technology. Dr. Hunt continues to develop innovations to AMTEC technology and is the Company's Board Chairman and Chief Scientist. Robert Sievers, co-Founder and Vice President of the Power Systems Division. Mr. Sievers has over 15 years of AMTEC and related experience beyond his M.S. in Engineering earned at the University of Pittsburgh. Michael Dobbs, Vice President of the Space Division. Mr. Dobbs earned his B.S. in Electrical Engineering at The University of Michigan. He has over 20 years of design and experiment flight experience, including recent, complex in-space automated materials handling processing systems and remote sensing. The Board of Directors of AMPS has five outside directors, along with Hunt, Sievers and Levy. 14 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEB SITE: CONTACT: The Company Balance Dynamics Corporation 3915 Research Park Drive, Suite A-10 Ann Arbor, MI 48108 (313) 996-5750 (313) 994-3690 NIA NIA Thomas P. Nielson, CEO Balance Dynamics Corporation, based in Ann Arbor, Michigan, develops, manufactures, markets and services in-process balancers and is the global leader in this evolving technology. From its incorporation in 1981, the company has had a successful history of developing new technology and bringing that technology to market. The company currently holds seven U.S. patents and several corresponding foreign patents. The company's engineers work closely with engineers from such major corporations as Lucent Technologies, Pratt & Whitney and Westinghouse, as well as engineers from automobile companies, chemical companies, petroleum companies and domestic and international machine tool manufacturers to customize balancing solutions in each of these industries. Management Team The management team is centered around the company's four principal shareholders, all of whom have been with the company for at least eleven years. Thomas P. Nielson, President and CEO. Dr. Nielson, 60, is an original founder and 27% shareholder. He has extensive administrative experience, serving as president of organizations domestically and abroad, and is driven by a strong sense of vision for the company. He holds a Ph.D. from the University of Washington. Wayne L. Winzenz, Executive Vice President. Mr. Winzenz, 50, a 15% shareholder, joined the company in 1985. At that time he was the Manager of Manufacturing Engineering at a 30 million dollar subsidiary of Wyman Gordon Company, a Fortune 700 Company, and before that the Chief Industrial Engineer at Hoover NSK. He has an 15 impressive history of bringing cutting edge technology to the market. He is a graduate of Michigan State University. Thomas E. Schulte, Vice President of Sales. Mr. Schulte, 49, a 27% shareholder, was a design engineer at Ford Motor Company when he helped found Balance Dynamics in 1981. He negotiated the inclusion of the company's balancing systems as standard options on the machines of many major grinding machine manufacturers and his global vision resulted in securing the company's European and Asian distributors. He holds a Master's Degree in Engineering from the University of Detroit. Brian K. Hackett, Vice President of Research and Development. Mr. Hackett, 48, a 15% shareholder in the company, left Interactive Systems/3M to join the company in 1986. He was responsible for resource and financial management of all technical areas of this $20 million business group. He has received several patents for his innovative technology. He holds a B.S. degree in Electrical Engineering from Montana State University. Products Fluid Balancer. In 1981, the company first offered its patented fluid balancer on grinding machines. In addition to its on-going sales of this product, the company recently expanded this application to include precision slicing and dicing machines used by the computer industry to manufacture hard-drives and has a $1.2 million order from one OEM in this industry. This product sells from $7,000 - $13,000 per system, and there are competitors. In 1993, the company up-sized its fluid balancer 100-fold and pioneered the introduction of in-process balancing to industrial fans in the steel, cement, chemical, fiber-glass and waste treatment industries. This product sells from $15,000 to $80,000 per system, and there are no competitors. In 1996, the company applied the fluid balancer to nuclear reactor coolant pumps and has an agreement with Westinghouse Electric Corporation wherein the Westinghouse Electro Mechanical Division markets and installs the balancer as a value-added product. This product sells to Westinghouse for $68,000 per system and there are no competitors. Balance Monitor. Seeing the need for a low cost vibration monitoring instrument, the company redesigned and repackaged its microprocessor controller. In addition to being priced below other vibration monitoring instruments, this portable balance monitor has a unique menu which guides the user through the manual balancing procedure. It also features unique analysis software that is Windows™ compatible. This product sells for $2,995 and there are competitors. New Technology: Real-Time High-Speed In-Process Balancing. In response to the market, the company began developing real-time high-speed in-process balancing technology in 1994, for which it subsequently applied for patents in the US and several 16 foreign countries. This new technology is now being introduced to industries using high speed turbo-machinery, high-speed machining and turning centers, and jet aircraft engines. High-Speed Turbo-Machinery Balancer. The company completed negotiations with a niche end-user of turbo-machinery that will bring in revenue of $2 million over the next two years. This agreement will serve as the spring board to the huge rotating machinery market. It will also give the Company a high-profile end-user site to showcase the new application of the technology. The first two installations will occur during the third quarter of 1997. This product sells for $180,000 - $250,000 per system, and there are no competitors. High-Speed Machining and Turning Center Balancer. High-speed in-process balancing is an enabling technology for the implementation of high-speed machining. "Unbalance, not the machining center's capability, will define the maximum usable spindle speed" (Manufacturing Engineering, October 1992). High-speed machining dramatically increases productivity and reduces the time required to bring products in the aerospace and automotive industry from concept to production. In the aerospace industry one case study showed parts decreased from 687 to 75 and fasteners from 2450 to 400 resulting in a savings of $4 million per airplane, weight reduction resulting in fuel savings of $150 million over the life of the airplane, and unnamed savings from installation time being reduced from 230 hours to 75 hours. Balance Dynamics Corporation's strategy is to have the high-speed in-process balancer a standard part of all high-speed machining and turning centers sold to the aerospace industry, the automotive industry, as well as other industries which use this equipment. In order to accomplish this objective, the company successfully tested a prototype balancer in Switzerland installed on a Fischer high-speed spindle. The company will soon do a production test of that prototype balancer on a machining center at Boeing. An executive at a major machining center manufacturer wrote the following: "Such a system would be used by all aircraft makers and their second and third tier subcontractors. [We] and other machinery suppliers to the industry would be required to incorporate the new technology into our products." The first installations of this product will occur at the end of the second quarter, 1997. This product will eventually sell for $10,000 per system and there are no competitors. Jet Engine Balancer. As part of an initiative funded by the Defense Advanced Research Projects Agency (DARPA) and the U.S. Air Force, Lucent Technologies conducted a nationwide search for in-process balancing technology to be applied to jet aircraft engines. They clearly identified Balance Dynamics Corporation as the leader in this technology and the company was subsequently contracted by Pratt & Whitney to develop 17 an in-process balancing device to be tested on jet aircraft engines. The company performed successfully during this $1 million, two year contract and will test a prototype device at Pratt & Whitney laboratories in the third quarter of 1997. With engines that are balanced in-process, unscheduled shutdowns due to fatigue failure of externally mounted hardware will be dramatically reduced. Pratt & Whitney engineers project: ''The industry will save $125 million per year as a direct result of the active balancing system reducing engine external component failure." In addition, revenue will not be lost from canceled or delayed flights and there will be unknown cost benefits from reduction of cabin noise and improved aircraft performance. This product will go through two or more phases of development and is estimated to be marketed by the year 2000. There are no competitors. Primary Markets The Company has identified three primary markets which offer the greatest potential for its balancing technology: Turbo-Machinery, Machine Tools, and Aerospace. Financial Overview The Company's 1997 revenues will be approximately $2.5 million, operating at a break even level. The Company plans to reach $20 million in revenue in 2000, based on the introduction and expansion of the several product lines described above. Strategic Intent The Company will continue to commercialize its proprietary technologies, while expanding its intellectual property base. The Company plans to either go public or sell to a large technology company in the three to five year range. Financing Objective The Company is seeking $1.0 million in equity capital to continue the commercialization and marketing of its products and technology in the three primary markets described above. The Company anticipates the need for future rounds of financing totaling an additional $2.0 million over the next two years. 18 1997GROWTH CAPITAL SYI\'.IPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEBSITE: CONTACT: Haushahn Systems & Engineers, Inc. 5730 Eagle Drive SE,Grand Rapids, Michigan 49512 (616) 285-3311 (616) 285-3312 hse@haushahn.com www.haushahn.com Ken Lewis, President & CEO Executive Summary: Haushahn Systems & Engineers (Haushahn) has developed the VIAWARE™ Warehouse Management System. VIAWARE™ is a complete modular software system designed for managing a variety of types of distribution, and warehousing environments. Haushahn is the United States subsidiary of C. Haushahn GmbH, with Ken Lewis owning a significant majority interest, Haushahn has been in the US market since 1983 through an exclusive North American OEM contract for the sale of its automated storage and retrieval systems. Haushahn has installed in excess of 75 automated material handling and VIAWARETM Warehouse Management Systems in the United States, and over 1500 automated material handling systems worldwide. Haushahn's focus is on quality baseline development utilizing leading development software tools while employing proven project methodologies. Products and Services: VIAWARE™ is a powerful "execution system" for the warehouse. Rather than replacing order entry, material requirements planning (MRPJMRPm, distribution requirements planning (DRP) or other corporate systems, VIAWARE™ helps the user in the warehouse to fulfill the requirements of these systems quickly and efficiently. VIAWARE™ works in real time, eliminating batch processing and the update delays typically associated with corporate inventory systems. VIAWARE™ converts information passed from corporate systems into an optimized execution plan for the warehouse. In the "paper-less" warehouse, VIAWARE™ issues instructions to material 19 handlers via their radio frequency terminals. These instructions are issued based on user configured rules and priorities. A bar code scan or a keyed entry confirms the completion of each instruction. This means that the condition and location of inventory is always accurate and up to date. Exceptions are handled on the spot. This eliminates wasted steps and means more useful work per shift. Of course, in areas where a paper document is the most efficient dispatching method, VIAWARE™ produces sorted storage lists, replenishment lists, pick lists and cycle count lists for each operator. Users confirm the completion of each list via keyed entry or bar code scans. VIAWARE™ also helps to organize storage by zoning the warehouse(s) for efficient use of space and personnel. Progressive cycle counting is used to reduce or eliminate shut downs for physical inventory. VIAWARE™ interfaces with automated material handling systems and other control systems. Traditionally, Haushahn has operated as an integrated systems provider using VIAWARE™ and its Value Added Reseller (VAR) agreements. Licensing of VIAWARE™ to end-users and integrators has resulted in opportunities for increased license fees and higher margin for professional services, with such services projected to grow from $24,000 to over $600,000 in fiscal 1997. There are a number of success stories printed in industry publications including The Torrington Company receiving the Seventh Annual Productivity Award for Warehousing Excellence sponsored by Modem Materials Handling. a Cahners publication. Torrington increased productivity by 20% and improved order accuracy to 99.5%. Market: The Warehouse Management market is growing rapidly and represents a $800M industry. This industry is projected to grow at an annual rate of 30% due to the increasing demand for warehouse management systems. Haushahn's philosophy on sales is to pre-qualify opportunities that fit our solution and provide a highly technical consultative selling process providing Haushahn and the perspective customer the opportunity to thoroughly understand the requirements and Haushahn's proposed solution. A statement by one of our integrators sums it up; "Haushahn is by far the leader in my mind as it pertains to being a quality company with an honest and ethical approach to the business; a refreshing attribute!" The Company will continue to serve a number of different vertical markets (e. g. automotive, publishing, chemicals and allied products, electronics, food, furniture, consumer goods, and third party logistics providers while increasing its market share through collaborative efforts with consultants and integrators and establishing a larger presence in other countries (initially Latin America). Haushahn is expanding its sales and marketing department in 1997/1998. New hires will include a Sr. Account Manager, Application Engineer, and Third-Party Hardware Manager. Marketing and sales activities will focus on trade show follow-up, expanded 20 marketing materials, and the pursuit of strategic alliances with integrators, consultants, and other software providers. Management Team: Kenneth W. Lewis, President and CEO, was formerly National Sales Manager for Logisticon of Santa Clara, California, and AS/RS Product Manager for Clark Equipment Company. He received his B.S. degree in Electrical Engineering from Western Michigan University. Joseph A. Stojak, Vice President and CFO, was formerly a partner with Deloitte & Touche, a member of the international firm of Deloitte & Touche Tohmatsu. He holds a B.S. in Accounting from the University of Illinois. John W. Pulling, Vice President and COO, was previously Director of Advanced Product Development for Logisticon, of Santa Clara, California. In that position, he was responsible for all product development activities. He received his B.S. in Mechanical Engineering at the University of Waterloo. Jeff W. Baum, Vice President ofSales & Marketing, has extensive warehouse management systems sales experience, including, six years with Hewlett Packard (HP). He received his B.S. in Industrial Engineering from the University of Illinois. Rod G. Wyles, Director Systems Integration, came to Haushahn from Versyss, a company specializing in vertical software applications, including construction management, building materials, credit unions and medical billing. He received a B.S. in Computer Science from the University of Michigan in 1982. Norbert Froehlich, Director Product Development, received a degree in Electrical Engineering in 1983 from the University of Stuttgart, Germany. James D. Jo, Professional Services Manager, was previously Manager of Information Systems for Elston-Richards, a public and contract warehousing company. He holds a B.A. degree in Computer Science from Calvin College. Adam E. Shier, Customer Service Manager, previously held the position of R&D Database Systems Analyst at the Goodyear Tire and Rubber Co., Akron, Ohio. He received his Bachelor of Science degree in Computer Science from Michigan State University. 21 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEBSITE: CONTACT: Executive Summary lmmersive Edutainment Company 300 Enterprise Court, Suite 300 Bloomfield Hills, MI 48302 (248) 253-0700, ext. 25 (248) 253-0846 NIA NIA Dan Dembicki hnmersive Edutainment Company (IEC) is a major player in a new segment of the Location-Based Entertainment known as Family Entertainment Centers. Walt Disney, Warner Brothers, Universal Studios, Iwerks, Sega, Dreamworks-SKG and others are all entering this market. According to the· latest survey by the International Association of Family Entertainment Centers, there are now between 4000 and 5000 such establishments; up dramatically from the 1990 figure of 250. Amid this high-dollar frenzy of activity there exists a niche that can generate significant revenue and growth. Our mission is to establish IEC as a major player in a new segment of Family Entertainment Centers by rolling out a chain of centers featuring break through ideas and technological innovation in entertainment supported by food and merchandise revenues. The process of developing and deploying the concept is based on real-world experience and technical expertise ranging from large-scale museum installations to Disney's EPCOT Center. However, unlike many such concepts offered to investors, IEC is a different kind of start-up company - it is a spin-off of Dawber & Company, Inc, a 20-year veteran of special venue productions. Dawber is an established supplier of creative and production services for museums, theme parks, and Fortune 500 corporations, with installations ranging from kiosks to interactive multimedia theaters. Its clients include GM, Ford, AT&T, Xerox, IBM, ITT, Michelin, Hughes, Delco Electronics, and others. For special venue projects, Dawber has developed its own patented, interactive theater software. They also hold exclusive licenses and/or VAR agreements for national laboratory and defense contractor technology. These re-purposed tools enable Dawber to bring products to market faster than any other creative competitor. Further, Dawber has been working for 13 years under contract to GM to research and develop new 22 presentation technologies and implement them for corporate image programs. It's an arrangement that allows Dawber free access to labs, technology centers and R&D facilities across the country. The resulting relationships greatly enhance Dawber's capability to source and integrate new technology for communicating messages and entertaining audiences. The company seeks $7 million to develop and build it's first store in a new development at a major metropolitan city center and to establish credibility and acceptance within its target market. IEC intends to license a well-recognized brand name. Currently, JEC is negotiating with National Geographic, Scientific American and the Albert Einstein estate. This will lead to a second more substantial round of financing to build additional stores and possibly develop a franchise model. Product Dawber has developed a world class family entertainment center concept that takes advantage of their experience and technology. To avoid de-focusing from their primary services, they have formed lmmersive Edutainment Company ()EC), a spin-off organization. It's function is to build and operate centers whose attractions combine video game and amusement park ride experiences featuring 3-D "holographic" projections. Individuals or groups see and interact with images floating in thin air. A per use fee would be charged for these state-of-the-art "synthetic" attractions, which means the image and entire content can be changed at the flick of a switch. The benefit of a "synthetic environment" is that the centers have total flexibility for special events, sponsorships and changing themes. No other company is know to have products with these features and benefits. For additional revenues, JEC also has plans to sell high quality merchandise, upscale beverages and snack service. This concept's uniqueness affords major promotional and public relations opportunities for us and corporate sponsors. The JEC experience can't be replicated on a PC or viewed via the Internet. It will require a first-hand visit. And, because of its interactive nature, the show experience will change every time. Besides revenue from the store attractions, food and merchandise, there are larger opportunities from the content development standpoint. Dawber can provide a continuous conduit of new development and content for the centers, and that is part of their ongoing expansion plans. Market The location-based entertainment (LBE) industry continues to enjoy robust growth. Theme parks generate $14 billion in yearly gate and food receipts. Even video arcades have gross annual revenues of $8 billion, rivaling Hollywood's annual box office figures. There are several distinctive categories of entertainment centers ranging from theme restaurants (Hard Rock Cafe, Planet Hollywood, etc.) to theme retail (Nike, Sony, etc.) and new media supercenters (Dave & Busters). These venues utilize larger versions of existing entertainment technology in huge spaces coupled with full food service. 23 IEC's secondary market is to reconfigure and sell its products into these venues. Since IEC has valuable trade secrets and know-how, it can license its approaches to others to many markets where they bring value, but where IEC does not have the resources to enter (i.e. location-based branding). The royalty stream from these potential licensing deals can produce an investor payoff. Management Team Andrew Dahl, Co-founder, Chief Technology Officer. Mr. Dahl, 42, has over 17 years experience as an award-winning writer, producer and director of special-venue films, corporate exhibits, business theater and multimedia presentations. He has an ongoing blanket order for special venue creative services with Gen�ral Motors Corporation. Other Fortune 500 clients include Ford Motor Company, Xerox Corporation, AT&T, Michelin Tire Corp., Frigidaire Company, and fIT Automotive. His special venue productions have appeared in the Smithsonian Institute, the Chicago Museum of Science & Industry, EPCOT, and the new Kalamazoo Valley Museum. He has won top industry awards including nine CINE Golden Eagle awards, two Telly awards, the IABC's Renaissance award, the Houston International Film Festival's Bronze and Gold awards, and a Presidential Citation for Creative Merit for his work. Mr. Dahl has served as President and Creative Director of Dawber & Company, Inc. since acquiring majority interest in 1989. As such, he has designed and supervised over 150 productions. He joined the firm in 1980, re-focusing and refining its services to focus on films, shows and interactive multimedia for special venues (i.e. commercial expositions, theme parks, museums). Mr. Dahl previously worked for Wiling, Inc. as a writer/producer of introduction shows, films, special promotions, and business meetings. At Campbell, Henry & Calvin, Dahl was a writer/designer on Rose, Boy Scouts, and J.B. Webb accounts. Mr. Dahl Studied journalism at Wayne State University, advertising design at the Center for Creative Studies, and fine arts at the University of Detroit. Dan Dembicki, President and ChiefExecutive Officer. Mr. Dembicki, 41, has extensive experience in start-up business and executive-level marketing, and the development of high technology products and computer software. Mr. Dembicki served as Vice President of Sales and Marketing for Alternate Realities Co., a high-tech start-up company based in Research Triangle Park, North Carolina. He created an international marketing campaign, identified and penetrated target markets, product commercialization and raised capital. The company received two "Best New Product" awards in vertical market applications, and a national television news feature which paved the way for a new business contract worth ten million dollars. 24 Mr. Dembicki served as co-founder and Vice President of Sales & Marketing for AirWorks Media, of Alberta, Canada, which conducted an IPO. He was president of Dan Dembicki & Associates, Inc., a sales and management company and reseller or tum-key, lead automation software and systems. His clients included four out of the largest six computer tradeshow producers in the world, three of which have been sold to larger firms. Mr. Dembicki began his career at the Society of Manufacturing Engineers (SME), one of the nation's largest producers of expositions and conferences. Mr. Dembicki holds both an M.S. and B.S. in Music and Communications from Central Michigan University. 25 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEBSITE: CONTACT: Executive Summary Knowledge Discovery One 127 South Main Street, Plymouth, Ml 48170 (313) 451-2440 (313) 451-2445 dalton@kdl.com NIA Joe Dalton KDl is in business to develop and apply advanced decision support, knowledge and data mining applications to specific industry problems and challenges. The company offers consulting services, off-site computer services, and· whole software application products developed and targeted for specific industries on a variety of platforms. KD1's objective is to become a leading supplier of advanced decision support application software by developing and leveraging advancements in Data Mining/Knowledge Discovery software as well as Internet/Intranet browser application development and delivery technologies. The company has been operational since January, 1996 in its current form, and is underway with product development and initial customers engagements. In addition, strategic partnerships have been developed with Torrent Systems for product development, and NCR for data center hardware and joint marketing activities. The company seeks investment capital to fund its development and staffing plans, as well as assistance in recruiting key management team individuals to lead the company through its early stages of growth and beyond. The company has raised its first round funding to finance activities through the 2nd quarter of 1998, with a 2nd round of funding to be sized at that time. Market Corporate spending for decision support capability is rapidly picking up steam. In July, 1995, Price Waterhouse estimated that 90% of large companies were either building or planning to build data warehouses and that the total market would likely top $20 billion by 2000. The Gartner Group in 1994 estimated a $16 billion market by 2000 and a 1993 IDC study pegs it at $12 billion. These estimates, along with others from the Meta Group, Forrester Research, and the Smaby Group, point to a growth market in decision support systems (DSS) reminiscent of the explosive growth in personal computing and 26 client/server computing. Indications are that at least a quarter of the revenues spent in this market will go to software product suppliers. Products and Services KD 1 markets its products and services in a concentrated set of application areas within a few commercial industries. These are: Retail, Telecom, Insurance, and Financial, with a primary initial focus on the Retail and Consumer Packaged Goods industries. The characteristics of an industry or company that make it a potential for KD 1 products are: 1. Data intensive - the ability and desire to retain a high volume of data surrounding historical events or transactions. Examples are retail POS transaction data or insurance claim detail information. 2. Changing competitive forces - a dynamic environment for both direct and indirect competitors, with multiple new entrants and non-traditional competitive threat. An example is the changing nature of retail banking, with non traditional competitors vying for high margin loan and credit business. 3. High value in understanding consumer behavior. An example is determining the certainty of response to advertising by consumer profile. 4. Willingness to use technology as a competitive tool - industry leaders are early adopters of competitive technologies, such as large scale data warehousing, marketing database tools, etc. KD 1's initial focus is large, high data volume customers within these industry segments, or roughly the top 15% in each industry. Once a reference base within this segment is established, a more "shrink-wrapped" application approach to the industry will be taken to realize the volume potential for KD 1 products. This approach will be comprised of relatively low cost template applications on a variety of common computing platforms. The application focus within these industries are: Retail: Market Basket Analysis, Promotional Forecasting, Customer Profiling, Efficient Assortment Telecom: Customer Profiling, Cross Selling Analysis Insurance: Risk Modeling, Target Markets, Profitability Analysis Financial: Customer Profiling, Cross Selling Analysis, Customer Life Cycle The company will derive revenue from three main sources: 1. Application sales 2. Computation Services (Data Center) 3. Consulting Services The majority of revenue contribution will be derived from application sales, with data center and consulting services efforts used in support of that goal and as initial revenue generation activities while applications are under development. Competitive Advantage KDl will build its competitive advantage by continually defining and refining the whole application of KD or DM within its industry sets, and by building an experience set of high volume solutions through input from our customer engagements. It is our intent to 27 establish KO1 as the premier supplier of these tools and applications. By building both high end SMP/MPP based products as well as low end UNIX/NT/AS400 products, KOl will have the customer experience and the platform installed base to build a template based high volume business. KOl's early hiring philosophy is to attract experienced, respected people during the first two rounds of hiring (first 20 associates). Competitive salaries, bonuses, and equity positions will be offered to the first 10 associates, and this group will form the core decision making group for all subsequent hires. It is important that a certain template of KO 1 associate characteristics be followed when making hiring decisions. These are: strong academic background, demonstrated direct achievement in relevant field, strong team play mentality, and demonstrated leadership characteristics. Management Team Joe Dalton, President, Sales/Marketing. Over 12 years experience in large systems/DSS sales and marketing. Oracle, Teradata, and Convex experience in market development and program execution prior to founding KOL Joe holds a B.S. in Electrical Engineering and an MBA from the University of Michigan. Coyne Gibson, Chief Technologist/KD Consultant. Coyne is a co-founder of KOl with over 15 years experience in large hardware and software architecture design and application. Coyne spent the majority of his career at Convex where he was responsible for database and data mining software strategy and implementation. Coyne holds a M.S. and Ph.D. in Computer Science. Frank Triolo, Chairman. Mr. Triolo is a former Sr. VP of AT&T and was VP Worldwide Sales & Marketing for Teradata Corporation. Mr. Triolo was also Chairman of Data Cache prior to joining KO 1 as Chairman. Lynn Keeling, Data Center Manager. Lynn has over 8 years experience as a database administrator and UNIX development manager, and was most recently Director of Database Computing for Convex. Fran Frazer, KD Consultant. Fran brings over 15 years experience to KOl from Teradata's Industry Consulting Group and Coopers & Lybrand Retail consulting practice. Fran's experience in applying DSS strategies to industry problems is very extensive, especially within the Retail industry. Karen Heath, KD Consultant. Karen is one of the most experienced and sought after DSS consultants in the country. With over 20 years experience on well over 50 major accounts, Karen's knowledge base in decision support, database systems, SQL, and industry applications is extensive. Also part of Teradata's Industry Consulting Group and most recently from Coopers & Lybrand Retail consulting practice, Karen brings immediate application experience to KOl. Karen holds an M.S. in Mathematics. 28 Financials Projected income 1997-2001 (OOO's): Revenue NIBT 1997 1998 $10,240 $2,913 1999 $23,345 $13,431 29 2000 $38,790 $24,749 2001 $64,285 $44,363 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-M AIL: WEBSITE: CONTACT: LifeServ Corporation 10354 LongleafDrive, Suite 200, Parker, CO 80134 (303) 840-6420 (303) 840-6422 NIA NIA Jeff Bull, CEO· (303) 840-6420 Rob Reynolds, President - (312) 943-6240 Executive Summary LifeServ Corporation is a technology facilitated life-event marketing company. LifeServ will create direct, technology-enabled interfaces with consumers around key life events. Through these interfaces, the company will develop a trusted relationship with individual consumers thereby building a valuable channel for marketing goods and services throughout their lives. After building this relationship, LifeServ will act as the intermediary between producers and consumers, allowing producers to market and promote their goods and services to consumers on a one-to-one basis. The initial life event for LifeServ, and the focus of this summary, is the wedding. WedServ Technologies, Inc. has been formed to become the crucial link among wedding market participants: engaged couples, wedding guests and service providers. WedServ's success in establishing a relationship with consumers around this life event will set the foundation for other life-event marketing opportunities such as having children, buying and furnishing a home, etc. WedServ has been actively developing the infrastructure to serve this market and now seeks $1 million to capitalize on the market foundation which it has built. This will include hiring key sales and technical personnel. 30 The Company Strategy: Creating a connection with engaged couples is the key to positioning WedServ as the crucial link in the wedding market. As a result, WedServ will undertake an aggressive penetration strategy to ensure this position. • The company will distribute a free wedding planning software application, WedLink, to engaged couples. • With awareness primarily driven outside the Internet and early in the planning process • Primarily delivered through the Internet, but also on diskette/CD • Customized for each couple based on wedding location and requested service provider information • This desktop application software will be used as a medium through which WedServ can: • Embed service provider information • Obtain information on the couples and their guests and package customized services to them • Create a link back to the Internet by giving the couple the capability to create a personal wedding community (their own wedding homepage) directly from WedLink for free, thus allowing them to: • Inform the guests of specific wedding events, service providers, and other information; and • Endorse service providers. Products: WedServ will generate revenues from the sale of goods and services to both service providers and engaged couples. These goods and services include: • A marketing program for service providers that: • Allows each service provider to embed up to seven pages of promotional messages in the application software that is given to couples • Provides each service provider with the name, address, and wedding information of each couple that receives the software • The delivery of real-time advertisements to couples throughout their engagement period, whether preprogrammed into the software to appear at a designated time in the well defined "buying cycle", or sent to the couple via their personalized homepage interface or e-mail • Wedding accessories such as wedding cameras, candles, bubbles, wedding time capsules, toasting glasses, etc., that can be sold directly to the couples • Advertising and promotional material that can be delivered directly to guests via the personalized homepages of each couple, e-mail, or regular mail • Wedding services such as accommodations, car rentals and airline travel that can be sold directly to wedding guests • Market research material that is accumulated from both couples and guests to be sold to providers 31 Strategic Relationships: WedServ has formed, and will continue to form, relationships to generate awareness among engaged coupled, provide content to couples and guests and sell WedServ's products and services to providers. The table below described some significant relationships that have been formed. Type Company Scope Reach Agreement Name Status Couple Elegant Bride National, US 400,000 Finalized Awareness Magazine couples National Bride National, US 500,000 Agreement in Service couples principal Classic National, US 750,000 Agreement in Calligraphers couples principal Bridal Expos Regional 150,000 In discussions couples Wedding Bells National, 100,000 In discussions Magazine Canada couples Various National 250,000 In discussions Wedding couples Planners and Publishers Bookstore National 500,000 In discussions Chain couples Value/Content Suzanne National Agreement in Kresse-''The principle Wedding Lady" Fourll National Agreement in principle Concentric National Agreement in Network principle Mapping National In discussions Service Provider Elegant Bride National/Local, Advertising Finalized Awareness Magazine base National Bridal Local, 1100 stores Agreement in Service principle Vows National/Local, 40,000 stores NIA Magazine Suzanne National Agreement in Kresse-''The principle Wedding Lady" The Market The wedding market in the United States generates over $32 billion in direct sales annually, impacts millions of providers in a tremendous range of industries, including 32 financial, floral and travel services, and affects nearly half of the population of the United States each year either as participants or guests. Each year 2.4 million couples get married, spending on average $10,000 to $15,000 for their wedding. These couples proceed through a well-defined buying cycle from the time of engagement until six months after the wedding. Providers want to reach these couples at this critical household formation stage, as product decisions made at this time typically result in long term product affiliations. Millions of guests attend these weddings spending billions of dollars on gifts, lodging and transportation, with the purchase of these products and services driven, in many cases, by decisions made by the couple, e.g. the couple's decisions as to where to register and as to the location of the wedding. The 200 guests that attend the average wedding are, therefore, reliant on the couples to inform them ·of gift registry, travel, lodging and other wedding event information. WedServ is in a position to serve as the central clearing point between these couples, providers and guests. Management Team The key management and development personnel for LifeServ are as follows. Jeff Bull: Mr. Bull is the Chief Executive Officer of the LifeServ. He has worked in the field of systems consulting and, most recently, was responsible for the regional sales of a venture backed communications company. Mr. Bull holds a BS in both Finance and Economics from Arizona State University and an MBA from the University of Michigan. Rob Reynolds: Mr. Reynolds is President of the LifeServ. He has worked in the field of merchant banking and has spent the last five years as a management consultant. Mr. Reynolds holds a Bachelor of Commerce from the University of Calgary and an MBA from the University of Michigan. Andrey Dolgachev: Mr. Dolgachev is head of application programming for LifeServ. Since obtaining his degree, Mr. Dolgachev has worked with a major software and computer manufacturer as a software development engineer. He holds a Bachelor of Science, Engineering degree in Computer Engineering and a Bachelor of Science in Honors Mathematics from the University of Michigan. 33 1997GROWTH CAPITAL SYMPOSIUM NAME: ADDRESS: TELEPHONE: FAX: E-MAIL: WEB SITE: CONTACT: Executive Summary Little Professor Book Centers, Inc. 130 First Street, Ann Arbor, MI 48104 (313) 994-1212 (313) 994-9009 NIA members.aol.com/lpbchome/website John Glazer, President Little Professor Book Centers, Inc. is a business format franchisor of full service, full-line community bookstores. Little Professor has franchised and operated bookstores since 1969. Our core business is selling and servicing franchises for general community bookstores that do business under the trade names "Little Professor," "Little Professor Book Center," and "Little Professor Book Company." The company has been hindered in pursu�g growth opportunities through historical undercapitalization and current ownership structure. The company intends to accomplish a management buyout and seeks capital to increase franchise sales, re-establish a corporate flagship store, provide working capital, and aggressively pursue its initiative to expand as an infrastructure service provider to independent bookstores. Franchising Little Professor Book Centers, Inc. currently has 91 franchised locations. Little Professor offers two franchise opportunities. Little Professor Book Centers have historically ranged in size from 2,000 to 6,000 square feet, depending on market size. Little Professor Book Company stores are book "superstores" ranging in size from 7,000 to 18,000 square feet. Although Little Professor competes with other business opportunities at similar investment levels, most franchise candidates interested in Little Professor are not comparatively shopping other franchise opportunities. In addition to economic return, purchase motivation centers on the specific interest and lifestyle associated with owning and operating a bookstore. Little Professor is the only national franchisor of full service general community bookstores. Little Professor is an award-winning franchise, with a proven concept and long standing reputation for excellence. 34 Areas of support for franchised locations include systems, services, and programs related to inventory management, merchandising, marketing, computer support, training, personnel, bookselling and financial management. Market U.S. consumer spending on books is a $25.5 billion market. $10.2B of this market represents product sold through bookstores in 1995. U.S. bookstore sales grew 2.4% in 1996 to $10.SB, and industry projections are for a compound annual growth rate of 5% through the year 2000. Little Professor Book Centers, Inc. had systemwide retail sales of over $56M in 1996. Little Professor stores are generally located in wen· anchored strip centers in tertiary markets with immediate populations of SOK or more and a wider trading area. These tend to be smaller markets than those targeted by chain competitors. Little Professor is concentrated in midwestem markets around the Great Lakes, but has locations in 28 states. Little Professor is the largest organization of independent bookstores in the country with total market share of 0.5% of U.S. bookstore sales. The key competitive factor in retail bookselling has been the rapid development in recent years of chain-based "superstores." Despite rapid growth, the two industry leaders, Barnes & Noble and Borders, represent only 23.0% and 17.6% of the market, respectively. Independent bookstores hold a 52.2% market share and other retail bookstores (small regional chains) account for the remaining 6.7%. Little Professor competes by capitalizing on the same strengths as other independents, including: local ownership, flexible market adaptation, and community involvement. In addition, Little Professor shares many strengths of chain operations, including: inventory management systems, economies of scale, uniform systems, centralized support services, information systems, market research, and collective clout. Further, prop
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