Helping producers save time and add their creative

brilliance to visual media

A new venture from an undergraduate team in the

Entrepreneurship and Emerging Enterprises Program

Whitman School of Management

Syracuse University

April 2007

Dream > Believe > Pursue

Table of ContentsTable of ContentsTable of ContentsTable of Contents Execut ive Summary and Introduct ionExecut ive Summary and Introduct ionExecut ive Summary and Introduct ionExecut ive Summary and Introduct ion Pages 1 through 5Pages 1 through 5Pages 1 through 5Pages 1 through 5 Concept and ServiceConcept and ServiceConcept and ServiceConcept and Service Pages 6 through 8Pages 6 through 8Pages 6 through 8Pages 6 through 8 The Concept Page 6 Serv ices Pages 6 - 7 Value-added Pages 7 - 8 The IndustryThe IndustryThe IndustryThe Industry Pages 8 through 10Pages 8 through 10Pages 8 through 10Pages 8 through 10 Postproduct ion Industry Structure Page 8 Industry Dynamics Page 9 Industry Trends Page 9 The Market and GrowthThe Market and GrowthThe Market and GrowthThe Market and Growth Pages 10 through 11Pages 10 through 11Pages 10 through 11Pages 10 through 11 Enter ing the Market Page 10 Market Segments Page 11 Market Share and Prof i tabi l i ty Page 11 EEEEconomics of the Businessconomics of the Businessconomics of the Businessconomics of the Business Pages 12 through 15Pages 12 through 15Pages 12 through 15Pages 12 through 15 Overview Page 12 Revenue Sources, Operat ing & Gross Margins Page 13 Var iable Costs Page 14 Break Even Page 14 Prof i t Potent ial and Durabi l i ty Pages 14 - 15 Market ing StrateMarket ing StrateMarket ing StrateMarket ing Strategygygygy Pages 15 through 17Pages 15 through 17Pages 15 through 17Pages 15 through 17 Pr ic ing Page 15 Adver t is ing Effor ts Pages 15 - 16 Sales Cycle Page 16 Cr i t ical Risks Page 17 Operat ions StrategyOperat ions StrategyOperat ions StrategyOperat ions Strategy Pages 18 through 19Pages 18 through 19Pages 18 through 19Pages 18 through 19 Operat ing Model Page 18 Legal Issues Page 19

The Management TeamThe Management TeamThe Management TeamThe Management Team Pages 19 through Pages 19 through Pages 19 through Pages 19 through 21212121 Founders Pages 19 - 20 Advisory Board Pages 20 - 21 F inancial PlanFinancial PlanFinancial PlanFinancial Plan Pages 21 through 22Pages 21 through 22Pages 21 through 22Pages 21 through 22 F inancial Overview Page 21 Income Statement Highl ights Pages 21 - 22 Balance Sheet Highl ights Page 22 Cash Flow Analysis Highl ights Page 22 The Offer ingThe Offer ingThe Offer ingThe Offer ing Pages 22 through 23Pages 22 through 23Pages 22 through 23Pages 22 through 23 Overview Pages 22 - 23 Valuat ion Page 23 Exi t Strategy Page 23 AppendicesAppendicesAppendicesAppendices Pages 24 through 33Pages 24 through 33Pages 24 through 33Pages 24 through 33 Appendix A – Producer Prof i le Page 24 Appendix B – Uni t Sales Page 25 Appendix C – Fixed and Var iable Costs Page 25 Appendix D – Break Even Page 26 Appendix E – Dai ly Product ion Duties Page 26 Appendix F – Operat ions Flowchar t Page 27 Appendix G – Overal l Schedule Page 28 Appendix H – Income Statements Pages 29 - 30 Appendix I – Balance Sheets Page 31 Appendix J – Cash Flow Statements Page 32

Appendix K – Financial Highl ights Page 33

Executive SummaryExecutive SummaryExecutive SummaryExecutive Summary

To produce a five-minute television segment it may require up to 15 hours of unedited video

footage. So consider that for an hour-long program — such as NBC’s Dateline — each episode

requires, on average, upwards of 35-hours of raw video footage. A critical step in preparing this raw

footage for the editing process requires that the production staff review all of the footage. The

producers create a time-coded ‘log’ so that they can easily navigate the hours of raw footage to find

the clips and shots they want to use in the final production. While video logging is low-tech and

tedious, logging is critical to the production process, and exceedingly expensive.

Our company, Logmedia, sees an opportunity to add substantial value throughout the

television production process by offering high quality, efficient, and cost-effective logging services

provided by an industry-experienced, well-trained logging staff. Andre Poulin, long time producer

for NBC’s Today Show, tells Logmedia that, “Producers don’t like logging. Partly because they

don’t like doing it and partly because they don’t have time.” In the television industry, time is money

– time spent by the production staff on logging footage translates to escalating production costs;

this relationship defines Logmedia’s opportunity. Logmedia takes the mundane and sometimes

overwhelming production task of logging raw footage from busy producers, allowing them to focus

their resources and creative talents on producing a quality program, and at the same time reducing

the exceedingly high cost of production.

Page 1

What We Do What We Do What We Do What We Do –––– TTTThe he he he LogmediaLogmediaLogmediaLogmedia Advantage Advantage Advantage Advantage

Initially based out of the New York Metropolitan area, an international communications hub,

Logmedia will provide producers with a simple, digital means to satisfy their video logging

requirements. Producers will digitally upload their footage to a Logmedia server, where

experienced, ‘Logmedia Certified’ loggers will log the footage according to producers’ specific

preferences. Producers and production staff will be able to access completed logs via a secure

server and download, in whole or in part, the completed product. Logmedia will subsequently act as

a log-data repository for its clients, maintaining completed logs and transcriptions on our secure-

server accessible to our clients, anytime, anywhere. We represent that Logmedia’s competitive

advantage is grounded in our ability to provide a value-added service to our clients, thus defining

an industry standard for quality and consistency where none currently exists. Further, we represent

that Logmedia is uniquely positioned to capitalize on this opportunity by leveraging our existing

industry relationships.

� A ValueA ValueA ValueA Value----Added ServiceAdded ServiceAdded ServiceAdded Service: Television pre and post-production activities represent a $62 billion-

dollar industry. Logmedia’s market research suggests that our service will reduce the cost of

post-production activities – given a typical, 30 minute news broadcast – between $140,000 to $140,000 to $140,000 to $140,000 to

$700,000$700,000$700,000$700,000 annually (depending upon factors such as broadcast genre, national vs. local

broadcast, etc). In New York City alone, our initial target geography, more than 300

independently produced news, entertainment, and documentary programs and companies that

require video logging services. In addition to the significant cost-savings, Logmedia’s service

will relieve the client’s production staff of the burden of logging, allowing them to focus their

time and creative talents on producing a quality production. Adam Wald, an associate producer

for Dateline, tells Logmedia that he could “spend 25 hours a week logging footage,” time that

would be better spent focused on developing new content or organizing for the show to come.

Jason Fisher, independent producer for “In the Zone” Productions, states that a company like

Logmedia would “save me hours of time—it’s a no-brainer!”

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� Defining the Industry Standard:Defining the Industry Standard:Defining the Industry Standard:Defining the Industry Standard: Logmedia’s portfolio of services include basic and advanced

logging, as well as transcription and ADtrac services. We have defined a standard for each

service in terms of the format content, ensuring a quality and consistent product. Further,

Logmedia will ‘Logmedia Certify’ all loggers through an extensive training program. Basic and

advanced logging requires a skill and industry know-how that will be taught and emphasized

during the logger certification process. This certification ensures the quality and consistency of

throughout the logging process, and differentiates us from in-house loggers who are mostly

production interns; these individuals are untrained and have an extremely high turnover rate.

� Established Industry Ties:Established Industry Ties:Established Industry Ties:Established Industry Ties: Logmedia’s established relationships and first-hand industry

experience has allowed the company to tailor the business around the customer’s needs.

Through our close association with the S.I. Newhouse School of Public Communications at

Syracuse University - the top-ranked communications school in the world - Logmedia’s

founders have established relationships within the television industry that will aid in gaining

clients, creating a buzz, and maintaining trust. Kevin Prince, CEO, is in constant contact with

producers, human resource representatives and executives at NBC; specifically

representatives at Today, Weekend Today, Late Night with Conan O’Brien and NBC Olympics.

Other founders have leveraged relationships at IMG Sports, Entertainment and Media and J&R

Music. These relationships will prove to be invaluable, as networking and word - of - mouth are

just as important in the television industry as the product or service one offers, and Logmedia

unquestionably has an advantage fostering relationships and buzz even before the business is

in operation. Dateline producer Adam Wald recently told our management team, “You’ve got a

great idea on your hands.”

Page 3

The IndustryThe IndustryThe IndustryThe Industry

Logmedia will compete in the Teleproduction and Other Postproduction Services industry,

NAICS 512191. Approximately 68% of the market is concentrated in only three states - New York,

California, and Illinois—and consists of small businesses, focusing on a particular geographic area

and segment of the television industry. As of the last economic census in 2002, there were 19,101

Teleproduction and Other Postproduction Services companies with annual revenues that exceed

$62 billion dollars.

The EconomicsThe EconomicsThe EconomicsThe Economics

Logmedia will price its logging and transcription services on a per page basis, and position

itself as a cost competitive player in the industry. That said, it is important to note that the majority

of video logging is currently performed ‘in-house’ by producers and production staff, whose salaries

are exceedingly high as compared to our costs for hiring full-time loggers at Logmedia. As such, we

can maintain a cost leadership position as compared to our existing competition (which we

perceive as the option to keep logging ‘in-house’), and yet still realize attractive margins on our

services. Because networks, cable stations, and independent production companies are always

looking for ways to reduce production costs, our low cost position is attractive. NBC Today’s Andre

Poulin suggested that, “producers are always looking for shortcuts” to reduce production costs.

Logmedia will generate its revenue from four service dimensions: basic and advanced

logging, transcription, and ADtrac services. Based on Logmedia’s projected revenue-mix, 75% of

the sales will be generated from logging services, 15% from ADtrac, and 10% from transcription

services. While in many respects a ‘virtual’ business, we will concentrate our marketing efforts,

during the first three years of operation, on the New York Metropolitan area. New York and the

surrounding communities are home to the largest concentration of news outlets in the U.S. As our

brand and reputation become established in the industry, we plan to expand fully to both Chicago

and Los Angeles within five years. Logmedia projects revenues of $1.5M in year one of operations,

growing at a CAGR of 36% over the next five years.

Page 4

Revenues at year three are projected to be $3.2M, and growing to $6.8M by year five. We

project that Logmedia will break even in the first quarter of our second year of operations.

The Management TeamThe Management TeamThe Management TeamThe Management Team

Logmedia’s five founders will be graduating with degrees in business and communications

from the Martin J. Whitman School of Management and the S.I. Newhouse School of Public

Communications at Syracuse University. Kevin Prince, CEO, is a dual major in Marketing and

Television, Radio and Film, and has extensive experience within the television industry. Interning at

MTV, NBC’s “Today,” “Late Night with Conan O’Brien,” and traveling to Torino, Italy with NBC as a

Production Associate for the 2006 Winter Olympic Games, Mr. Prince recognizes the importance of

Logmedia within the industry and is passionate about the industry it serves. Other relevant

experience among the founding members include summer analyst for Merrill Lynch, producer for

on-campus television show, broadcasting intern at IMG Sports, Entertainment and Media,

advertising intern at Princeton Partners and marketing analyst for J&R Music. Each founder

possesses an enthusiasm, drive, and motivation to take our concept from an idea to a viable

business opportunity.

Page 5

Section ISection ISection ISection I Logmedia’s Concept and Service

The The The The ConceptConceptConceptConcept

Through first hand industry experience and extensive market research, Logmedia’s

founders have identified meaningful opportunities for cost and quality improvement in the television

production process. In offering a cost competitive, high quality solution to overcome existing

inefficiencies in the production process, Logmedia will establish itself as a first mover position in the

industry. The company will offer basic and advanced logging, transcription, advertisement tracking,

and data storage services to its clients.

Logmedia, a C-corporation, will provide business-to-business services to the television

postproduction industry beginning in January 2008. Logmedia’s primary clientele will include

independent and network television producers (news, entertainment, sports and unscripted

programming). Located in the Metro-New York City area, Logmedia’s primary focus will be on

communication hubs including New York, Los Angeles and Chicago.

LogmediaLogmediaLogmediaLogmedia ServiceServiceServiceServicessss

Logmedia offers a comprehensive selection of services to aid the television production

process for networks, cable stations, and independent production companies. More specifically,

news-magazine segments, unscripted reality television, and documentary producers represent our

target clients.

Logmedia offers a traditional transcription service and two new service formats, basic and

advanced logging. Transcription services provide a time-coded, word-for-word written account of

events on a tape. Logging refers to the written record of time-coded footage used for video-editing.

Despite whether the footage makes it into the finished program, all raw footage must be logged by

the producer. Once logged, the producer can easily choose shots to be used for the segment.

Basic logging includes general time-coded information about the footage and is ideal for a producer

who wants a general summary of events on the tape.

Page 6

Advanced logging relies heavily on Logmedia’s custom ‘starring’ system to provide a more

detailed account summary of the footage on a tape. The aforementioned services apply to logging

interviews, background footage and archived materials, all of which are of great importance to a

producer. As an additional value added service, Logmedia will digitally store all logs on a secure

searchable server. This allows producers to locate and print past logs easily, and search for

specific content on any logged tape.

In addition to logging and transcription services, Logmedia offers an advertisement tracking

service called ADtrac. Product placement has become a significant source of revenue for television

programs. In order to satisfy contractual requirement, however, advertisers require verification that

their product received the proper amount of airtime. ADtrac provides written verification services to

production companies, creating a reliable account of product placement air-time.

ValueValueValueValue----AddedAddedAddedAdded

Logmedia will revolutionize the production industry by unveiling a new standard for logging.

Producers either want a basic understanding or an in-depth, intricate account of the footage on a

tape. The current market simply does not fulfill these needs. Logmedia recognizes this need and

has created a new concept of basic and advanced logging. The information of each log produced

will be stored in a digital database that can be searched by keyword, date added and logged, shot

specification, and other technicalities of production.

Logmedia’s logging service is backed by Logmedia Certified loggers and the development

of Logmedia Producer Profiles (see Appendix A). Andre Poulin stressed the necessity of employing

media savvy loggers that understand the importance of logging in the production process.

Therefore, Logmedia loggers will have 15 hours of customized training for each basic, advanced

and transcription log format. Each producer client will have a customized Logmedia Producer

Profile, which specifies the preferences of the producer and provide log consistency. Ultimately, the

profile will make the logger more efficient, which will correlate to a quicker log turnaround time and

higher productivity.

Page 7

The importance of fulfilling an advertising contract is imperative in the media industry.

ADtrac is valuable to any company or sponsor who buys and sells advertising space. Logmedia will

benefit from economies of scale because employees are familiar viewing large quantities of footage

while paying attention to details.

Section IISection IISection IISection II The Industry

Postproduction Industry StructurePostproduction Industry StructurePostproduction Industry StructurePostproduction Industry Structure

The Teleproduction and Other Postproduction Services Industry, NAICS 512191, is

comprised of, “establishments primarily engaged in providing specialized motion picture or video

postproduction services, such as editing, film/tape transfers, subtitling, credits, closed captioning,

and animation and special effects” (US Census Bureau NA). As of the last economic census in

2002, there were 19,101 Teleproduction and Other Postproduction Services companies with

annual revenue of $62,012,526,000 and annual payroll of $10,235,709,000 (US Census Bureau

NA). Further, television product placement spending in 2004 was $1.9 billion, up 46% over 2003.

Overall product placement spending from film, TV, and other media was $3.5 billion in 2004, up

30.5% versus 2003, according to industry publications.

In 2002, the total number of postproduction companies decreased from 1997, when there

were 19,269 established companies. However, the total revenue increased from 1997 when it was

$44,785,652,000. These numbers show approximately a 0.85% decrease in companies and

approximately a 38% increase in total revenue (US Census Bureau). As an overall trend, while the

industry size is decreasing it is growing substantially in revenue, indicating the industry is in an

early maturity stage.

Page 8

Industry DynamicsIndustry DynamicsIndustry DynamicsIndustry Dynamics

The Teleproduction and Other Postproduction Services industry is very concentrated, and

traditionally, suppliers of pre and post-production services have little bargaining power; producers

only engage outside production service if a pain point is exposed. If the producer is convinced that

the service will alleviate that pain, then the supplier is contracted. Approximately 68% of the

market is located in only three states - New York, California, and Illinois - and consists of small

businesses, focusing on a particular geographic area and segment of the television industry (US

Census Bureau). These three markets are the primary focus of Logmedia’s efforts.

Industry Trends Industry Trends Industry Trends Industry Trends

The postproduction industry is dynamic. In October 2006, NBC Universal announced

“sweeping cuts to its television division” shedding 700 jobs or 5% of the workforce (Ahrens). Other

networks and producers are under similar levels of competitive pressures; there are fewer

employees to handle the same workload. While a challenge for NBC, Logmedia plans to capitalize

on this opportunity. Further, due to increased competition in television programming and alternative

forms of entertainment, e.g. online, downloadable and on demand video/television, and gaming

devices, cost efficiency has become a key driver in all segments of the television and film

industries.

Most companies in the industry focus on offering one postproduction service. Logmedia

offers four complimentary services: logging, transcription, ADtrac and a searchable database of

logs. This offers production teams a one-stop-shop at the beginning of the production process.

Further, the Federal Trade Commission mandated all broadcasters to switch from analog to digital

broadcast services by 2008. All major broadcasters will have the capability to send footage digitally

to Logmedia, thus expediting the logging, transcription, and ADtrac processes.

Page 9

SSSSection IIIection IIIection IIIection III The Market and Growth

Entering the MarketEntering the MarketEntering the MarketEntering the Market

Logmedia will enter the market by capitalizing on existing relationships with independent

producers, as well as network producers at NBC, ABC, CBS, and ESPN. Initially targeting the

Metro-NYC area, and rapidly enter the Los Angeles and Chicago markets. The company will

primarily use targeted industry advertising, cold and warm referral calls, and trade shows to

penetrate the market. Over 40% of Logmedia’s total market is located in the Metro-NYC area.

Secondary targets include all digitally capable production facilities in Los Angeles and Chicago.

These two markets account for 25% of Logmedia’s market base. The company’s emphasis on the

newly developed advanced logging services will provide significant, value-added first mover

positioning. Logmedia’s founders estimated market potential of logging services by using the chain-

ratio analysis method. Specifically, the logic serving as a basis our projected market potential for

advanced, basic, and transcription services is as follows:

Step 1Step 1Step 1Step 1: The total number of finished, unique television programming hours per year (national,

regional, and local)

Step 2:Step 2:Step 2:Step 2: multiplied by the average number of raw hours of footage per finished hour

Step 3:Step 3:Step 3:Step 3: multiplied by the number of pages per hour of raw footage

Step 4:Step 4:Step 4:Step 4: multiplied by 5% market capture (based on known workforce reductions)

Step 5:Step 5:Step 5:Step 5: multiplied by weighted average of basic, advanced, and transcription services as a

percentage of total revenue.

Page 10

The estimates for product placement tracking (ADtrac) were based on modified market buildup

forecasts. Total industry estimates of annual product placement advertisements (mean average of

2005 and 2006)

Step 1:Step 1:Step 1:Step 1: Industry growth rate (percentage)

Step 2:Step 2:Step 2:Step 2: 5% market capture

= Basis for = Basis for = Basis for = Basis for ADtracADtracADtracADtrac market potentialmarket potentialmarket potentialmarket potential

Specific projections of market potential can be found in Appendix B....

Market SegmentsMarket SegmentsMarket SegmentsMarket Segments

In the first three years, Logmedia’s logging and transcription service will focus on

independent production companies that account for up to 60% of all television programming, along

with network producers, e.g. Dateline and Today, and cable stations such as MSNBC. . . . Logmedia

plans segmentation of potential ADtrac users including corporate clients and sport sponsors, both

of which buy and sell their advertising space.

Market Share and ProfitabilityMarket Share and ProfitabilityMarket Share and ProfitabilityMarket Share and Profitability

Using NBC’s recent 5% employee cutback as a guideline, including production personnel,

Logmedia believes it can obtain this percentage as an achievable market share. With independent

producers and network production staffs becoming leaner, Logmedia’s services are at the center of

client needs.

Page 11

Section IVSection IVSection IVSection IV Economics of the Business

OverviewOverviewOverviewOverview

The figure below serves to summarize the economic characteristics of our venture.

Logmedia’s revenue is generated from four distinct, but related value-added services that together

drive revenues: transcription, basic logging, advanced logging, and ADtrac services.

Operating Leverage

LowLow

Volume

HighHigh

Margins

MediumMedium

Product Mix

HighHigh

Operating Leverage

LowLow

Volume

HighHigh

Margins

MediumMedium

Product Mix

HighHigh

Our diverse (high) product mix reduces risk to the venture that may result from poor

performance of any one product line. Further, the economic model is based on realizing high

volumes associated with reasonable but attractive margins (as a weighted average, initially 20%

across four product lines). Finally, because our costs are predominately variable in nature, our

leverage position is such that we will breakeven (cover fixed costs) sooner, and realize profit gains

faster, than comparable businesses with higher leverage positions. A discussion of costs, margins,

and breakeven position follows is detailed in subsequent sections.

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Revenue Sources, Operating Margins and Gross MarginsRevenue Sources, Operating Margins and Gross MarginsRevenue Sources, Operating Margins and Gross MarginsRevenue Sources, Operating Margins and Gross Margins

Based on market research, we project the relationship between our product mix and

revenues will be such that 10% of our revenues will come from transcription services, 25% from

basic logging services, 50% from advanced logging, and 15% from ADtrac customers. Allocating

variable costs as a weighted average, the contribution of each revenue driver toward covering our

fixed costs is depicted in the table below.

Revenue DriverRevenue DriverRevenue DriverRevenue Driver

Percentage of Total Percentage of Total Percentage of Total Percentage of Total Revenue Revenue Revenue Revenue

Unit PriceUnit PriceUnit PriceUnit PriceWeighted Allocation of Weighted Allocation of Weighted Allocation of Weighted Allocation of

Variable CostsVariable CostsVariable CostsVariable CostsAverage Average Average Average

ContributionContributionContributionContribution

Transcription 10% $3.10 $55,400.00 $0.21

Basic Logging 25% $2.95 $138,500.00 $0.50

Advanced Logging 50% $3.05 $277,000.00 $1.05ADtrac® 15% $30.00 $83,100.00 $2.42

Weighted Average ContributionWeighted Average ContributionWeighted Average ContributionWeighted Average Contribution $1.05

Again allocating costs (both fixed and variable) as a weighted average across our four

revenue drivers, we were able to determine a weighted average margin – 19.2% - for each unit of

sale (defined per page for transcription and logging services, or per hour for ADtrac services).

Fixed CostsFixed CostsFixed CostsFixed Costs

Logmedia’s fixed costs total $487$487$487$487,650,650,650,650 (47% of total costs), and are detailed at Appendix C.

Primary contributors to our pool of fixed costs are full-time employees’ salaries, rent for the office in

Jersey City, NJ, and marketing and technology budgets.

• Logmedia’s full time employees consist of the five owners making $35,000 per year and one

IT network administrator making $50,000 per year. In addition, pay roll tax charges will total

$29,250 per year. Total Cost: $254,250/yrTotal Cost: $254,250/yrTotal Cost: $254,250/yrTotal Cost: $254,250/yr.

• Logmedia will be located in Jersey City, NJ where, on average, rent and utilities approach

$20/sq/ft for industrial space. Given our projected space requirements, on an annualized

basis we project rent and utilities to cost $75,000. Total Cost: $7Total Cost: $7Total Cost: $7Total Cost: $75,000/yr.5,000/yr.5,000/yr.5,000/yr.

• Logmedia allocates $20,000 a year for technology/equipment upgrades and/or replacement

requirements. Total Cost: $20,000/yrTotal Cost: $20,000/yrTotal Cost: $20,000/yrTotal Cost: $20,000/yr....

Other fixed costs include charges for insurance, equipment, marketing and utilities.

Variable CostsVariable CostsVariable CostsVariable Costs Page 13

The majority of Logmedia’s costs are variable, such that as our volume of sales increases,

costs will increase accordingly. Logmedia’s variable costs total $554,000$554,000$554,000$554,000 (53% of total costs) in our

initial year of operation. . . . Variable costs associated with per/unit increases in volume are primarily

the hourly wages of our logging staff. Based on estimated volumes in our initial year of operation,

we anticipate the costs associated with employee wages of $550,000.

Additional variable costs include the charges for server storage space (for completed logs,

and associated client products), and office supplies associated with printing and delivering

completed logs to clients. A complete accounting of variable costs can be found at Appendix C.

Break Even Break Even Break Even Break Even

Break even was determined as a function of the weighted average contribution margin of its

four distinct revenue drivers as it relates to total costs. As Logmedia maintains a low operating

leverage and projects high volumes, we anticipate covering fixed costs in first quarter of our second

year of operations. Specifically, break even will occur at 569,467 units of sale or equivalently at

$1,580,270 in revenue. Logmedia’s gross margins will exceed 49% in year one. A break even

analysis is depicted at Appendix D.

Profit Potential and DurabilityProfit Potential and DurabilityProfit Potential and DurabilityProfit Potential and Durability

We suggest Logmedia’s profit stream is sustainable because the media industry is based

on long lasting relationships. When clients begin working with Logmedia, in short order they will

recognize the monetary and time-saving benefits of satisfying their logging requirements using

Logmedia loggers. As demonstrated at Appendix E, conservatively Logmedia could reduce a

producer’s daily work load associated with logging by up to five hours per day. Instead of logging,

producers could use these hours to do other productive tasks such as seeking content for a new

show, collaborating on future endeavors or working with other employees. Accordingly, producer

salaries would be the most efficient way to analyze exactly how much money Logmedia could

potentially save any given show, network, or company. The average salary for producers is

between $70,000 and $113,000 per year.

Page 14

Logmedia’s team would be saving production companies about $54.00 a day per producer if

these five hours were returned to them totaling approximately $14,000 per producer per year.

Using NBC’s Today show as an example, the show has over 50 producers on-staff. This means

that Logmedia can save NBC’s Today show about $700,000 a year in logging duties. In the

television business, there is no price on time and any time saved is valuable.

Section VSection VSection VSection V Marketing Strategy

PricingPricingPricingPricing

Logmedia plans to price its logging service on a price per page basis. Specific prices per

page will depend on the logging format: basic, advanced or transcription. Transcript Associates Inc

uses a price per page basis and charges $3.25 per page for time-coded transcription. Logmedia’s

loggings services will be competitively priced based on these numbers. ADtrac will be priced on an

hourly basis by amount of real-time footage logged. Logmedia will charge $30.00 per hour of

ADtrac.

FormatFormatFormatFormat PricePricePricePrice Revenue Per Hour/Per LoggerRevenue Per Hour/Per LoggerRevenue Per Hour/Per LoggerRevenue Per Hour/Per Logger

Basic LoggingBasic LoggingBasic LoggingBasic Logging $ 2.95 / page $44.25Advanced LoggingAdvanced LoggingAdvanced LoggingAdvanced Logging $ 3.05 / page $45.75TranscriptionTranscriptionTranscriptionTranscription $ 3.10 / page $31.00ADtrac ® ADtrac ® ADtrac ® ADtrac ® $ 30.00 / hour $30.00

The table above breaks down Logmedia’s services and pricing. In addition, we have

estimated the amount of revenue each logger will bring in per hour of logging. It is estimated that a

Logmedia logger can log approximately 15 advanced logging pages per hour and transcribe ten

pages per hour.

Advertising EffortsAdvertising EffortsAdvertising EffortsAdvertising Efforts

Trade magazines focus on a limited number of targeted vehicles. The two television media

niche magazines Logmedia will advertise in are Broadcasting & Cable and Variety. Broadcasting &

Cable is a leading source of the television industry serving the broadcast, cable and syndication

communities with a circulation of 24,000. In Variety, Logmedia will advertise within the Daily

Gotham Edition, a regional New York edition with a circulation of 10,000 people.

Page 15

In conjunction with print advertising, Logmedia will place ads on Variety.com. This site

receives 1.5 million unique visitors; 68% are in top management positions and 39% are directly

involved in the television industry.

Logmedia will have an exhibition at the NAB POST+ trade show, sponsored by the National

Association for Broadcasters. This is the largest annual event for audio and content creation and

highlights production and post-production techniques. Last year, $50 billion in purchase plans were

attributed to the trade show and more than 105,000 industry professionals attended it.

Logmedia will focus advertising efforts during the stressful times before and during Sweeps

Week. Sweeps run four times a year (February, May, July, and November) and are a time when

producers aim to obtain the highest ratings by producing the best shows possible. It is a time filled

with scouring through footage, meeting deadlines, and dealing with pressure. Logmedia will work to

assist those clients participating in Sweeps Week by handling production tasks and monitoring

advertisements with its ADtrac service.

Sales CycleSales CycleSales CycleSales Cycle

Initially, Logmedia will rely heavily on industry contacts and referrals to personally

sell clients rather than heavily rely on costly, traditional advertising. Two of the founders with

significant television/sales presentation experience, Kevin Prince and Janet Levine, will be the

main sales agents for the business. Furthermore, these two have the the most direct contacts

within the target market.

Logmedia predicts the sales cycle will take, approximately, 4 weeks, from initial pitch to final

sale. This is an average cycle. The actual sales cycle may be shorter or longer depending on the

nature of the client and the level of need the client is presently experiencing. Where an

independent production company might immediately adopt Logmedia’s services, a network like

NBC, with more complicated chains of command, might take longer for approval.

Page 16

CritCritCritCritical Risksical Risksical Risksical Risks

Logmedia recognizes there are some critical risks associated with entering the post

production industry that must be addressed. Firstly, high turnover of loggers and employees is a

potential risk. Logmedia, however, will offer its loggers above average industry salaries, and

expects its loggers to move on to higher up positions within the industry, as logging is, primarily, an

entry-level job. Logmedia's loggers will move into production jobs. Keeping positive working

relationships and proving the value of Logmedia's services should help ensure continued success

as these former workers become decision-makers in using external logging services.

Secondly, attaining clients could be a potential risk facing Logmedia. Through its industry

contacts, Logmedia has secured significant interest from three of the major networks and one

independent production company. Contrary to popular belief, it is important to note that

independent production companies and cable stations will comprise a majority of Logmedia’s

revenues, not the networks.

Thirdly, technological security concerns will play a major role in the success of Logmedia.

Logmedia has spoken with IT experts who assured Logmedia that our T3 line will be secure and

password protected, similar to online banking systems.

Finally, a lack of funding could be detrimental to the beginning years of success of

Logmedia. Logmedia has already established funding prospects from an angel investor and has

been assured that Logmedia's financials, along with its collateral proposal will secure a commercial

loan from Wells Fargo Bank.

Page 17

Section VISection VISection VISection VI Operations Strategy

Operating ModelOperating ModelOperating ModelOperating Model

Logmedia will be headquartered in Jersey City, easily accessible to all major news outlets,

cable stations and hundreds of independent production companies. This accessibility is important

as not all customers will have the capability to transmit footage in a digital format to Logmedia. The

location, right outside Metro-NYC, allows Logmedia significant savings when compared to

Manhattan space costs. Logmedia will need approximately 1,400 square feet of space for initial

operations. This location outside of, but easily accessible to, New York City keeps overhead costs

lower.

Front stage operations visible to Logmedia’s clients include sales/marketing initiatives,

administrative knowledge, speed and ease of order processing and finished goods delivery. Back

stage operations, crucial to Logmedia’s success, include specialized training of employees, quality

insurance and billing.

Bottlenecks may appear due to the cyclical nature of the business. This applies most

directly to the news segment, which can spike without notice if and when news breaks. Logmedia’s

plan for measured growth allows flexibility and conservatism in its abilities to grow within the

confines of its projections. Physical expansion, factored in to the company’s financial growth model,

accounts for equipment, personnel, and space growth on a planned basis. Quality assurance

occurs during and after order processing in order to minimize customer problems. For a complete

operations flowchart see Appendix F.

Page 18

Operational Legal IssuesOperational Legal IssuesOperational Legal IssuesOperational Legal Issues

Confidentiality of customer’s footage is of utmost importance to Logmedia. Complying with

industry standards, Logmedia will require employees to sign confidentiality contracts regarding any

footage viewed and logged and Logmedia will be able to provide clients with copies of these

contracts upon request. Transcript Associates Inc. states, “We require all transcribers to sign

confidentiality contracts. Many times our customers want to see these contracts to ensure

confidentiality.”

Section VIISection VIISection VIISection VII The Management Team

Kevin Prince: Chief Executive Officer Kevin Prince: Chief Executive Officer Kevin Prince: Chief Executive Officer Kevin Prince: Chief Executive Officer

Mr. Prince brings a wealth of knowledge and experience to Logmedia. Some of Mr. Prince’s

experience includes working as a Production Associate with NBC in Torino for the Winter Olympic

Games, interning for NBC's Today, interning for Late Night with Conan O'Brien and working at

MTV. Mr. Prince has had first-hand logging experience at these networks, and has established

contacts and ties within the industry. Mr. Prince is a dual Marketing major in the Martin J. Whitman

School of Management and Television, Radio and Film major at the S.I. Newhouse School of

Public Communications. Newhouse is among the top communication schools in the nation and

Kevin has done extensive logging there as well.

Emily Wasco: Chief Operating Officer Emily Wasco: Chief Operating Officer Emily Wasco: Chief Operating Officer Emily Wasco: Chief Operating Officer

Ms. Wasco has a dynamic balance of business and communications experience that is

relevant to Logmedia. For the past two summers, Ms. Wasco has worked as a summer analyst at

Merrill Lynch. She also has logged footage in the television industry, serving as Entertainment

Director and Producer for Citrus TV. Ms. Wasco is a dual Marketing and Finance major in the

Martin J. Whitman School of Management at Syracuse University.

Page 19

Evan Olesh: Chief Financial OfficerEvan Olesh: Chief Financial OfficerEvan Olesh: Chief Financial OfficerEvan Olesh: Chief Financial Officer

Mr. Olesh has interned in the broadcasting division of IMG Sports, Entertainment, and

Media so he understands the workings of the television industry. Mr. Olesh brings a range of skills

as he is a dual Finance and Marketing major in the Martin J. Whitman School of Management and

a Public Communications minor in the S.I. Newhouse School of Public Communication. .

Janet Levine: Chief Communications OfficerJanet Levine: Chief Communications OfficerJanet Levine: Chief Communications OfficerJanet Levine: Chief Communications Officer

Ms. Levine interned in the Media Department at a full-service advertising agency, so she is

familiar with what it takes to create and execute an advertising campaign. Ms. Levine is a dual

Advertising major at the S.I. Newhouse School of Public Communications and Marketing major at

Martin J. Whitman School of Management.

Alison Pellingra: Human Resource DirectorAlison Pellingra: Human Resource DirectorAlison Pellingra: Human Resource DirectorAlison Pellingra: Human Resource Director

Ms. Pellingra, an extrovert who possesses strong interpersonal skills, will oversee all

employee relations, from hiring to training and payment. Bringing international experience to the

founding team, Ms. Pellingra helped create new distribution channels while aiding in the brand

management for an Italian jean company. Ms. Pellingra is a dual Marketing and Entrepreneurship

major in the Martin J. Whitman School of Management at Syracuse University.

Advisory BoardAdvisory BoardAdvisory BoardAdvisory Board

Logmedia has filled its advisory board with media savvy individuals. The advisory board will

consist of four members: Andre Poulin, John Hanington, Peter Feiner, Patricia Longstaff.

� AnAnAnAndre Poulindre Poulindre Poulindre Poulin is a long time producer for NBC’s Today. Mr. Poulin would provide invaluable

advice and expertise as he is Logmedia’s targeted customer.

� JohnJohnJohnJohn Hanington Hanington Hanington Hanington has worked in television sales for over 25 years with ABC. He is now a

sales executive and would be able to provide Logmedia with insightful recommendations

and marketing guidance.

� Peter FeinerPeter FeinerPeter FeinerPeter Feiner is a producer for the New York City evening news on CBS. His expertise in the

news field will aid Logmedia’s news initiatives.

� Patricia LongstaffPatricia LongstaffPatricia LongstaffPatricia Longstaff is a lawyer and communications law professor in the S.I. Newhouse

School of Public Communications at Syracuse University. A Research Associate for Page 20

Harvard’s Information Policy Center, Longstaff can provide Logmedia legal expertise

regarding television and media.

Section VIIISection VIIISection VIIISection VIII

Overall Schedule Beginning in September 2007, Logmedia will formally establish the corporate structure

while concurrently working to raise the capital required to commence operations. In the months

that follow, Logmedia will establish the necessary infrastructure to include leasing, renovating office

space, purchasing equipment and establishing the technological capabilities to digitally upload

footage from our clients. The next phase will be the start of the marketing initiative. Employees will

be hired and Logmedia certified to begin services for clients. By the years end, Logmedia will have

a client base established and will be planning on the expansion of the business. Appendix G

outlines the first three years of operation as well as future market expansion.

Section IXSection IXSection IXSection IX Financial Plan

Financial Financial Financial Financial OverviewOverviewOverviewOverview

Logmedia projects revenues to grow at 36%, as a CAGR, over our first five years of

operations. Margins conferred to Logmedia from our four revenue drivers grow at 6% as a CAGR

over out first five years. Margins at year one exceed 49%. Logmedia turns cash positive in year

one, and cash grows at 64% over five year. As revenue drivers, we project growth in transcription,

basic logging, advanced logging and ADtrac at 35%, 45%, 50%, and 30% respectively. Additional

financial highlights can be found at Appendix K.

Income StatementsIncome StatementsIncome StatementsIncome Statements

The Logmedia team has prepared proforma income statements for the first five years of

operations, and these statements are presented at Appendix H. Logmedia projects net profits of

$264,237.18 in year one, and profits of $2,467,402.14 by year 5. In addition, the gross margin

percentage increases significantly as operations continue.

Page 21

Balance SheetsBalance SheetsBalance SheetsBalance Sheets

As Logmedia is a privately owned company it has not issued any common stock. The

management team has decided to retain 100% of its earnings to re-invest back into the company

during the first five years of operations. Depreciation of plant and equipment was calculated based

on the straight line method at 10% each year. For the balance sheets, see Appendix I.

Cash Flow AnalysisCash Flow AnalysisCash Flow AnalysisCash Flow Analysis

A complete, pro forma cash flow analysis is presented at Appendix J. Based on our

projections, Logmedia will require an initial infusion of cash totaling $400,000. This funding will

ensure a positive cash flow and high liquidity throughout our first five years of the company’s

operations. The primary use of Logmedia’s cash will be for capital acquisitions—equipment, space,

and employees.

Section XSection XSection XSection X Offering

Logmedia requires an initial investment of $400,000 to commence operations. This

investment is required to fund Logmedia’s start-up costs, specifically investments in the technology

required to establish a digital interface with our clients. Our required funding will come from two

sources; Logmedia will obtain a bank loan of $160,000, and seek the remaining capital, $240,000,

from an angel investor.

For the angel investor, Logmedia has formulated an equity sharing agreement that

structured as a convertible note. As a negotiated agreement, at the end of year five, our angel(s)

can choose to convert the note into an equity share of Logmedia, or choose repayment of the note

plus interest commensurate with an investment of a similar risk profile as Logmedia.

While our financial projections suggest Logmedia would be in a position to repay the bank

loan in full within three years of operation, we have determined that profits are best reinvested in

the venture to sustain and accelerate growth. Thus our intention is to repay the bank loan over an

seven year period, and the costs of the associated interest have been incorporated into our

financial projections.

Page 22

ValuationValuationValuationValuation

Based on our accelerated growth strategy, we have determined the most appropriate

valuation technique is a discounted cash flow analysis (DCF). Free cash flow, discounted at an

appropriate cost of capital plus a risk premium (30% in total), suggests a firm valuation of $3.4M at

the end of year 5 of operations.

Exit StrategyExit StrategyExit StrategyExit Strategy

Each of Logmedia’s five founders will maintain an equal ownership stake in the venture.

Should one of the founders of Logmedia choose to leave the firm, he/she will sell their equity stake

in the firm to the remaining founders.

A reasonable exit or harvest strategy for Logmedia would be to be either purchased by an

existing competitor, or more likely to be acquired by one of our major customers.

Page 23

Appendix AAppendix AAppendix AAppendix A Producer ProfileProducer ProfileProducer ProfileProducer Profile

Poulin, Andre Network: NBC Division: NBC News Show: Today Title: Producer MANAGER USE ONLY Producer Preferences: Likes close-up shots with motion. Wide shots not acceptable unless establishing shots. Likes funny quotes from interviews, three star anything out of the ordinary. Do not star any shots with nothing going on. Likes to use rack focus to start out segments, three star those. Producer Dislikes: Any wide shot that is not an establishing shot. Shots that are out of focus are unacceptable, not necessary to include in logs. Deadlines: “George Clooney Interview” must be logged by 12/10/06, 5PM

LOGGER USE ONLY

Date Logger Project Comments 11/29/06 Brian Clooney Int. Andre liked the bytes with interesting

comments, plain bytes were not used. Log completed.

11/28/06 Brian Clooney Int. Started basic logging, got about half way through interview

10/30/06 Megan Mascot Seg Andre really liked close up shots of mascots, lots of color. He liked rack focus and used for beginning of seg—said he does that a lot. Log completed.

10/28/06 Megan Mascot Seg Started advanced logging, ¾ the way done.

Page 24

Appendix BAppendix BAppendix BAppendix B Unit SalesUnit SalesUnit SalesUnit Sales

Revenue/Product Mix Revenue/Product Mix Revenue/Product Mix Revenue/Product Mix –––– Unit of Sales Projections Unit of Sales Projections Unit of Sales Projections Unit of Sales Projections****

Revenue DriverRevenue DriverRevenue DriverRevenue Driver PercentagePercentagePercentagePercentage Unit/YearUnit/YearUnit/YearUnit/Year

Transcription 10% 5296Basic Logging 25% 132405

Advanced Logging 50% 264810ADtrac® 15% 6000

*Note: Units/Year for Transcription, Basic Logging and Advanced Logging are in pages while units/year for ADtrac is in hours of footage

Appendix Appendix Appendix Appendix CCCC Fixed and Variable CostsFixed and Variable CostsFixed and Variable CostsFixed and Variable Costs

Rent 75,000$ Part-time Employee Wages 550,000$ Insurance 3,400$ Office Supplies 4,000$ Equipment 20,000$ Full-time Employee Salaries 225,000$ Payroll Taxes 29,250$ Travel and Marketing 50,000$ Utilities 10,000$ Technology/Storage 75,000$

Total FixedTotal FixedTotal FixedTotal Fixed 487,650487,650487,650487,650$ $ $ $ Total VariableTotal VariableTotal VariableTotal Variable 554,000554,000554,000554,000$ $ $ $

Fixed CostsFixed CostsFixed CostsFixed Costs Variable CostsVariable CostsVariable CostsVariable Costs

Page 25

Appendix DAppendix DAppendix DAppendix D Break EvenBreak EvenBreak EvenBreak Even

Appendix EAppendix EAppendix EAppendix E Daily Production Duties (Based on a producer of NBC’s Daily Production Duties (Based on a producer of NBC’s Daily Production Duties (Based on a producer of NBC’s Daily Production Duties (Based on a producer of NBC’s Today Today Today Today show)show)show)show)

TimeTimeTimeTime Producer TaskProducer TaskProducer TaskProducer Task 7A7A7A7A Arrive on set for show, organize props for shoot 8A8A8A8A Greet guest at Green Room, go to control confirming footage 9A9A9A9A Read through all newspapers to search for stories for next day 10A10A10A10A Morning Pitch Meeting 11A11A11A11A Call clients, set up shoots, make sure elements are in place for segment

12P12P12P12P Log yesterday’s interviewLog yesterday’s interviewLog yesterday’s interviewLog yesterday’s interview 1P1P1P1P Lunch 2P2P2P2P Log BLog BLog BLog B----roll anroll anroll anroll and finish up interviewd finish up interviewd finish up interviewd finish up interview 3P3P3P3P Have intern take on BHave intern take on BHave intern take on BHave intern take on B----roll logging, go though shots for segmentroll logging, go though shots for segmentroll logging, go though shots for segmentroll logging, go though shots for segment 4P4P4P4P Organize travel and arrival of guests for tomorrow 5P5P5P5P Scroll through and log archived footageScroll through and log archived footageScroll through and log archived footageScroll through and log archived footage 6P6P6P6P Check in with intern, take and log any extra footageCheck in with intern, take and log any extra footageCheck in with intern, take and log any extra footageCheck in with intern, take and log any extra footage

XXXXXXXX Indicates where producers would use Logmedia’s service.

Sales Volume Sales Volume Sales Volume Sales Volume (100 thousands)(100 thousands)(100 thousands)(100 thousands)

Dollars Dollars Dollars Dollars ($100 thousands)($100 thousands)($100 thousands)($100 thousands)

Fixed CostFixed CostFixed CostFixed Cost

Total CostTotal CostTotal CostTotal Cost

RevenueRevenueRevenueRevenue

• 569,467 units of sale• $1,580,270.00 revenue• First Quarter of Year 2

Break EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak Even

Logmedia Breakeven Analysis

1010 8080 10010090903030 4040 5050 60602020 7070 140140 150150 160160 170170 180180 190190

500500

110110 130130120120

20002000

10001000

15001500

25002500

45004500

55005500

60006000

65006500

15001500

35003500

40004000

50005000

30003000

Sales Volume Sales Volume Sales Volume Sales Volume (100 thousands)(100 thousands)(100 thousands)(100 thousands)

Dollars Dollars Dollars Dollars ($100 thousands)($100 thousands)($100 thousands)($100 thousands)

Fixed CostFixed CostFixed CostFixed Cost

Total CostTotal CostTotal CostTotal Cost

RevenueRevenueRevenueRevenue

Fixed CostFixed CostFixed CostFixed Cost

Total CostTotal CostTotal CostTotal Cost

RevenueRevenueRevenueRevenue

Fixed CostFixed CostFixed CostFixed Cost

Total CostTotal CostTotal CostTotal Cost

RevenueRevenueRevenueRevenue

• 569,467 units of sale• $1,580,270.00 revenue• First Quarter of Year 2

Break EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak Even• 569,467 units of sale• $1,580,270.00 revenue• First Quarter of Year 2

Break EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak Even• 569,467 units of sale• $1,580,270.00 revenue• First Quarter of Year 2

• 569,467 units of sale• $1,580,270.00 revenue• First Quarter of Year 2

Break EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak EvenBreak Even

Logmedia Breakeven Analysis

1010 8080 10010090903030 4040 5050 60602020 7070 140140 150150 160160 170170 180180 190190

500500

110110 130130120120

20002000

10001000

15001500

25002500

45004500

55005500

60006000

65006500

15001500

35003500

40004000

50005000

30003000

Page 26

Appendix FAppendix FAppendix FAppendix F Operations FlowchartOperations FlowchartOperations FlowchartOperations Flowchart

Initial customer service request (inbound or outbound)

Sign privacy agreement

Terms of service agreement

Profile entered into database

Order entered into billing database

Assign purchase order number and unique password

Completion time estimated

Request for services complete

Manager routes to available specialist

Yes

Manager contacts client for additional information

No

Client satisfaction follow up

Services (Transcript, Basic, Advanced, ADtrac, Archive retrieval completed

Submitted to manager for QA

Reprocessed

Resubmitted to manager for QA

Video and data archived

Purchase order/billing completed

Manager approves

No

Yes

Manager approves

No Yes

Adjustments to profile database made, if applicable

Manager contacts client for resolution

Client notified of completion

Client satisfied

Purchase order closed – sales/marketing account management begins

No

Yes

Client satisfied

No

Yes

Operations

Page 27

Appendix GAppendix GAppendix GAppendix G Overall ScheduleOverall ScheduleOverall ScheduleOverall Schedule

Sept. Sept. Sept. Sept. 07070707

Oct. 07Oct. 07Oct. 07Oct. 07 Nov. Nov. Nov. Nov. 07070707

Dec. Dec. Dec. Dec. 07070707

Jan. 08Jan. 08Jan. 08Jan. 08 Feb. 08Feb. 08Feb. 08Feb. 08 Mar. 08Mar. 08Mar. 08Mar. 08 Apr. 08Apr. 08Apr. 08Apr. 08 May. May. May. May. 08080808

Jun. 08Jun. 08Jun. 08Jun. 08 Jul. 08Jul. 08Jul. 08Jul. 08 Aug. Aug. Aug. Aug. 08080808

Jan. 09Jan. 09Jan. 09Jan. 09 Jan. 10Jan. 10Jan. 10Jan. 10

Corporate structureCorporate structureCorporate structureCorporate structure

Initial capital raisedInitial capital raisedInitial capital raisedInitial capital raised

Fulfill legal/insuranceFulfill legal/insuranceFulfill legal/insuranceFulfill legal/insurance

Lease spaceLease spaceLease spaceLease space

Order equipmentOrder equipmentOrder equipmentOrder equipment

Begin marketing/salesBegin marketing/salesBegin marketing/salesBegin marketing/sales

Renovate spaceRenovate spaceRenovate spaceRenovate space

Begin logger hiringBegin logger hiringBegin logger hiringBegin logger hiring

Training of loggersTraining of loggersTraining of loggersTraining of loggers

Commence loggingCommence loggingCommence loggingCommence logging

Add staffing Add staffing Add staffing Add staffing

Establish client baseEstablish client baseEstablish client baseEstablish client base

Expansion into LAExpansion into LAExpansion into LAExpansion into LA

Expansion into Chicago Expansion into Chicago Expansion into Chicago Expansion into Chicago

Page 28

Appendix HAppendix HAppendix HAppendix H Income StatementsIncome StatementsIncome StatementsIncome Statements

2008200820082008 JanJanJanJan FebFebFebFeb MarMarMarMar AprAprAprApr MayMayMayMay JuneJuneJuneJune JulyJulyJulyJuly AugAugAugAug SeptSeptSeptSept OctOctOctOct NovNovNovNov DecDecDecDecRevenuesRevenuesRevenuesRevenues

Transcription 164,182.00 4,925.46 8,209.10 9,850.92 14,776.38 13,134.56 13,134.56 13,134.56 14,776.38 16,418.20 19,701.84 18,060.02 18,060.02 Basic Logging 390,594.00 11,717.82 19,529.70 23,435.64 35,153.46 31,247.52 31,247.52 31,247.52 35,153.46 39,059.40 46,871.28 42,965.34 42,965.34 Advanced Logging 807,670.00 24,230.10 40,383.50 48,460.20 72,690.30 64,613.60 64,613.60 64,613.60 72,690.30 80,767.00 96,920.40 88,843.70 88,843.70 ADtrac 180,000.00 5,400.00 9,000.00 10,800.00 16,200.00 14,400.00 14,400.00 14,400.00 16,200.00 18,000.00 21,600.00 19,800.00 19,800.00 Total SalesTotal SalesTotal SalesTotal Sales 1,542,446.001,542,446.001,542,446.001,542,446.00 46,273.3846,273.3846,273.3846,273.38 77,122.3077,122.3077,122.3077,122.30 92,546.7692,546.7692,546.7692,546.76 138,820.14138,820.14138,820.14138,820.14 123,395.68123,395.68123,395.68123,395.68 123,395.68123,395.68123,395.68123,395.68 123,395.68123,395.68123,395.68123,395.68 138,820.14138,820.14138,820.14138,820.14 154,244.60154,244.60154,244.60154,244.60 185,093.52185,093.52185,093.52185,093.52 169,669.06169,669.06169,669.06169,669.06 169,669.06169,669.06169,669.06169,669.06

Direct Cost of Sales 554,000.00 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 46,166.67 Management Payroll 225,000.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00 18,750.00

Total Cost of SalesTotal Cost of SalesTotal Cost of SalesTotal Cost of Sales 779,000.00779,000.00779,000.00779,000.00 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67 64,916.6764,916.6764,916.6764,916.67

Gross Margin Gross Margin Gross Margin Gross Margin 763,446.00 (18,643.29) 12,205.63 27,630.09 73,903.47 58,479.01 58,479.01 58,479.01 73,903.47 89,327.93 120,176.85 104,752.39 104,752.39 Gross Margin % Gross Margin % Gross Margin % Gross Margin % 49%49%49%49% -40%-40%-40%-40% 16%16%16%16% 30%30%30%30% 53%53%53%53% 47%47%47%47% 47%47%47%47% 47%47%47%47% 53%53%53%53% 58%58%58%58% 65%65%65%65% 62%62%62%62% 62%62%62%62%

ExpensesExpensesExpensesExpenses

Operating ExpensesOperating ExpensesOperating ExpensesOperating Expenses Rent & Utilities 85,000.00 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 7,083.33 Liability Insurance Premium 1,800.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 Fire/Theft Insurance 1,600.00 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 133.33 Payroll Tax Expense 33,750.00 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 2,812.50 Travel and Marketing 50,000.00 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 4,166.67 Depreciation Expense 19,500.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 Technology/Storage 75,000.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 6,250.00 Miscellaneous Expenses 40,073.00 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 3,339.42 Total Operations ExpenseTotal Operations ExpenseTotal Operations ExpenseTotal Operations Expense 306,723.00306,723.00306,723.00306,723.00 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25 25,560.2525,560.2525,560.2525,560.25

Operations % Operations % Operations % Operations % 0.20 0.55 0.33 0.28 0.18 0.21 0.21 0.21 0.18 0.17 0.14 0.15 0.15

Earnings Before Interest & TaxesEarnings Before Interest & TaxesEarnings Before Interest & TaxesEarnings Before Interest & Taxes 456,723.00456,723.00456,723.00456,723.00 (44,203.54)(44,203.54)(44,203.54)(44,203.54) (13,354.62)(13,354.62)(13,354.62)(13,354.62) 2,069.842,069.842,069.842,069.84 48,343.2248,343.2248,343.2248,343.22 32,918.7632,918.7632,918.7632,918.76 32,918.7632,918.7632,918.7632,918.76 32,918.7632,918.7632,918.7632,918.76 48,343.2248,343.2248,343.2248,343.22 63,767.6863,767.6863,767.6863,767.68 94,616.6094,616.6094,616.6094,616.60 79,192.1479,192.1479,192.1479,192.14 79,192.1479,192.1479,192.1479,192.14

EBIT 456,723.00 (44,203.54) (13,354.62) 2,069.84 48,343.22 32,918.76 32,918.76 32,918.76 48,343.22 63,767.68 94,616.60 79,192.14 79,192.14 Interest Expense 24,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00 Taxes 155,285.82 (15,029.20) (4,540.57) 703.75 16,436.70 11,192.38 11,192.38 11,192.38 16,436.70 21,681.01 32,169.65 26,925.33 26,925.33 Net ProfitNet ProfitNet ProfitNet Profit 277,437.18277,437.18277,437.18277,437.18 (31,174.33)(31,174.33)(31,174.33)(31,174.33) (10,814.05)(10,814.05)(10,814.05)(10,814.05) (633.90)(633.90)(633.90)(633.90) 29,906.5329,906.5329,906.5329,906.53 19,726.3819,726.3819,726.3819,726.38 19,726.3819,726.3819,726.3819,726.38 19,726.3819,726.3819,726.3819,726.38 29,906.5329,906.5329,906.5329,906.53 40,086.6740,086.6740,086.6740,086.67 60,446.9660,446.9660,446.9660,446.96 50,266.8150,266.8150,266.8150,266.81 50,266.8150,266.8150,266.8150,266.81

Net Profit/Sales 18% -67% -14% -1% 22% 16% 16% 16% 22% 26% 33% 30% 30%

The Monthly Comparative Income StatementThe Monthly Comparative Income StatementThe Monthly Comparative Income StatementThe Monthly Comparative Income Statement

Page 29

Appendix H (Continued)Appendix H (Continued)Appendix H (Continued)Appendix H (Continued)

2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012RevenuesRevenuesRevenuesRevenues

Transcription 164,182.00 221,645.70 299,221.70 403,949.29 545,331.54 Basic Logging 390,594.00 566,361.30 821,223.89 1,190,774.63 1,726,623.22 Advanced Logging 807,670.00 1,211,505.00 1,817,257.50 2,725,886.25 4,088,829.38 Adtrac 180,000.00 234,000.00 304,200.00 395,460.00 514,098.00 Total SalesTotal SalesTotal SalesTotal Sales 1,542,446.001,542,446.001,542,446.001,542,446.00 2,233,512.002,233,512.002,233,512.002,233,512.00 3,241,903.083,241,903.083,241,903.083,241,903.08 4,716,070.174,716,070.174,716,070.174,716,070.17 6,874,882.136,874,882.136,874,882.136,874,882.13

Direct Cost of Sales 554,000.00 775,600.00 1,085,840.00 1,465,884.00 1,978,943.40 Management Payroll 225,000.00 247,500.00 272,250.00 299,475.00 329,422.50

Total Cost of SalesTotal Cost of SalesTotal Cost of SalesTotal Cost of Sales 779,000.00779,000.00779,000.00779,000.00 1,023,100.001,023,100.001,023,100.001,023,100.00 1,358,090.001,358,090.001,358,090.001,358,090.00 1,765,359.001,765,359.001,765,359.001,765,359.00 2,308,365.902,308,365.902,308,365.902,308,365.90

Gross Margin Gross Margin Gross Margin Gross Margin 763,446.00 1,210,412.00 1,883,813.08 2,950,711.17 4,566,516.23 Gross Margin % Gross Margin % Gross Margin % Gross Margin % 49.50% 54.19% 58.11% 62.57% 66.42%

ExpensesExpensesExpensesExpenses

Operating ExpensesOperating ExpensesOperating ExpensesOperating Expenses Rent & Utilities 85,000.00 93,500.00 102,850.00 113,135.00 124,448.50 Liability Insurance Premium 1,800.00 1,980.00 2,178.00 2,395.80 2,635.38 Fire/Theft Insurance 1,600.00 1,680.00 1,764.00 1,852.20 1,944.81 Payroll Tax Expense 33,750.00 116,340.00 162,876.00 219,882.60 296,841.51 Travel and Marketing 50,000.00 52,500.00 55,125.00 57,881.25 60,775.31 Depreciation Expense 19,500.00 19,500.00 19,500.00 19,500.00 19,500.00 Technology/Storage 75,000.00 90,000.00 108,000.00 129,600.00 155,520.00 Miscellaneous Expenses 40,073.00 56,700.00 68,549.00 82,705.00 100,717.00 Total Operations ExpenseTotal Operations ExpenseTotal Operations ExpenseTotal Operations Expense 306,723.00306,723.00306,723.00306,723.00 432,200.00432,200.00432,200.00432,200.00 520,842.00520,842.00520,842.00520,842.00 626,951.85626,951.85626,951.85626,951.85 762,382.51762,382.51762,382.51762,382.51

Operations % Operations % Operations % Operations % 19.89% 19.35% 16.07% 13.29% 11.09%

Earnings Before Interest & TaxesEarnings Before Interest & TaxesEarnings Before Interest & TaxesEarnings Before Interest & Taxes 456,723.00456,723.00456,723.00456,723.00 778,212.00778,212.00778,212.00778,212.00 1,362,971.081,362,971.081,362,971.081,362,971.08 2,323,759.322,323,759.322,323,759.322,323,759.32 3,804,133.723,804,133.723,804,133.723,804,133.72

EBITDA 456,723.00 778,212.00 1,362,971.08 2,323,759.32 3,804,133.72 Interest Expense 24,000.00 24,000.00 24,000.00 24,000.00 24,000.00 Taxes 155,285.82 264,592.08 463,410.17 790,078.17 1,293,405.46 Net ProfitNet ProfitNet ProfitNet Profit 277,437.18277,437.18277,437.18277,437.18 489,619.92489,619.92489,619.92489,619.92 875,560.91875,560.91875,560.91875,560.91 1,509,681.151,509,681.151,509,681.151,509,681.15 2,486,728.262,486,728.262,486,728.262,486,728.26

Net Profit/Sales 17.99% 21.92% 27.01% 32.01% 36.17%

The Comparative Income StatementThe Comparative Income StatementThe Comparative Income StatementThe Comparative Income Statement

Page 30

Appendix IAppendix IAppendix IAppendix I Balance SheetsBalance SheetsBalance SheetsBalance Sheets

The Comparative The Comparative The Comparative The Comparative 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

AssetsAssetsAssetsAssets

Current Assets Current Assets Current Assets Current AssetsCash 501,937.18 1,009,057.10 1,901,918.01 3,428,679.16 5,932,245.42 Total Current Assets Total Current Assets Total Current Assets Total Current Assets 521,937.18 1,031,057.10 1,926,118.01 3,455,299.16 5,961,527.42 Long Term AssetsLong Term AssetsLong Term AssetsLong Term AssetsGross Property Plant and Equipment 175,000.00 175,000.00 175,000.00 175,000.00 175,000.00 Equipment Upgrades 20000.00 22000.00 24200.00 26620.00 29282.00 (Less Accumulated Depreciation) (19,500.00) (39,000.00) (58,500.00) (78,000.00) (97,500.00) Property Plant and Equipment (Net) 155,500.00 136,000.00 116,500.00 97,000.00 77,500.00 Total Long Term Assets Total Long Term Assets Total Long Term Assets Total Long Term Assets 155,500.00 136,000.00 116,500.00 97,000.00 77,500.00

Total Assets Total Assets Total Assets Total Assets 677,437.18677,437.18677,437.18677,437.18 1,167,057.101,167,057.101,167,057.101,167,057.10 2,042,618.012,042,618.012,042,618.012,042,618.01 3,552,299.163,552,299.163,552,299.163,552,299.16 6,039,027.426,039,027.426,039,027.426,039,027.42

LiabilitiesLiabilitiesLiabilitiesLiabilities

Current Liabilities Current Liabilities Current Liabilities Current LiabilitiesAccounts Payable - - - - - Accrued Liabilities - - - - - Total Current Liabilities Total Current Liabilities Total Current Liabilities Total Current Liabilities ---- ---- ---- ---- ---- Long Term Investor Debt 160,000.00 160,000.00 160,000.00 160,000.00 160,000.00 Other Liabilities - - - - - Total Liabilities Total Liabilities Total Liabilities Total Liabilities 160,000.00160,000.00160,000.00160,000.00 160,000.00160,000.00160,000.00160,000.00 160,000.00160,000.00160,000.00160,000.00 160,000.00160,000.00160,000.00160,000.00 160,000.00160,000.00160,000.00160,000.00

Stockholders' EquityStockholders' EquityStockholders' EquityStockholders' Equity

Retained Earnings 277,437.18 767,057.10 1,642,618.01 3,152,299.16 5,639,027.42 Paid In Capital 240,000.00 240,000.00 240,000.00 240,000.00 240,000.00 Common Stock - Total Stockholders' Equity Total Stockholders' Equity Total Stockholders' Equity Total Stockholders' Equity 517,437.18517,437.18517,437.18517,437.18 1,007,057.101,007,057.101,007,057.101,007,057.10 1,882,618.011,882,618.011,882,618.011,882,618.01 3,392,299.163,392,299.163,392,299.163,392,299.16 5,879,027.425,879,027.425,879,027.425,879,027.42

Total Liabilities and Equity Total Liabilities and Equity Total Liabilities and Equity Total Liabilities and Equity 677,437.18677,437.18677,437.18677,437.18 1,167,057.101,167,057.101,167,057.101,167,057.10 2,042,618.012,042,618.012,042,618.012,042,618.01 3,552,299.163,552,299.163,552,299.163,552,299.16 6,039,027.426,039,027.426,039,027.426,039,027.42

The Comparative Balance SheetThe Comparative Balance SheetThe Comparative Balance SheetThe Comparative Balance Sheet

Page 31

Appendix JAppendix JAppendix JAppendix J Cash Flow StatementsCash Flow StatementsCash Flow StatementsCash Flow Statements

2008200820082008 JanJanJanJan FebFebFebFeb MarMarMarMar AprAprAprApr MayMayMayMay JuneJuneJuneJune JulyJulyJulyJuly AugAugAugAug SeptSeptSeptSept Oct Oct Oct Oct NovNovNovNov DecDecDecDec

Cash Flows from Operating ActivitiesCash Flows from Operating ActivitiesCash Flows from Operating ActivitiesCash Flows from Operating Activities

Net IncomeNet IncomeNet IncomeNet Income 277,437.18 (31,174.33) (10,814.05) (633.90) 29,906.53 19,726.38 19,726.38 19,726.38 29,906.53 40,086.67 60,446.96 50,266.81 50,266.81

Adjustments to Net IncomeAdjustments to Net IncomeAdjustments to Net IncomeAdjustments to Net Income+ Depreciation 19,500.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 1,625.00 Change in Other Assets (20,000.00) (20,000.00) - - - - - - - - - - - Net cash inflows from operating Net cash inflows from operating Net cash inflows from operating Net cash inflows from operating 276,937.18 (49,549.33) (9,189.05) 991.10 31,531.53 21,351.38 21,351.38 21,351.38 31,531.53 41,711.67 62,071.96 51,891.81 51,891.81

Cash Flows from Investing ActivitiesCash Flows from Investing ActivitiesCash Flows from Investing ActivitiesCash Flows from Investing Activities

Purchase of Equipment/Technology (175,000.00) (175,000.00) - - - - - - - - - - - Net cash outflows from investing Net cash outflows from investing Net cash outflows from investing Net cash outflows from investing (175,000.00) (175,000.00) - - - - - - - - - - -

Cash Flows from Financing ActivitiesCash Flows from Financing ActivitiesCash Flows from Financing ActivitiesCash Flows from Financing Activities

Proceeds from Bank Loan 160,000.00 160,000.00 - - - - - - - - - - - Proceeds from Paid in Capital 240,000.00 240,000.00 - - - - - - - - - - - Net Cash Inflows from Financing Net Cash Inflows from Financing Net Cash Inflows from Financing Net Cash Inflows from Financing 400,000.00 400,000.00 - - - - - - - - - - - Net Increase in Cash 501,937.18 175,450.67 (9,189.05) 991.10 31,531.53 21,351.38 21,351.38 21,351.38 31,531.53 41,711.67 62,071.96 51,891.81 51,891.81 Cash and Equivalents, from prior period - - 175,450.67 166,261.62 167,252.72 198,784.24 220,135.63 241,487.01 262,838.39 294,369.92 336,081.59 398,153.55 450,045.37 Cash and Equivalents, this periodCash and Equivalents, this periodCash and Equivalents, this periodCash and Equivalents, this period 501,937.18501,937.18501,937.18501,937.18 175,450.67175,450.67175,450.67175,450.67 166,261.62166,261.62166,261.62166,261.62 167,252.72167,252.72167,252.72167,252.72 198,784.24198,784.24198,784.24198,784.24 220,135.63220,135.63220,135.63220,135.63 241,487.01241,487.01241,487.01241,487.01 262,838.39262,838.39262,838.39262,838.39 294,369.92294,369.92294,369.92294,369.92 336,081.59336,081.59336,081.59336,081.59 398,153.55398,153.55398,153.55398,153.55 450,045.37450,045.37450,045.37450,045.37 501,937.18501,937.18501,937.18501,937.18

The Monthly Comparative Cash Flow StatementThe Monthly Comparative Cash Flow StatementThe Monthly Comparative Cash Flow StatementThe Monthly Comparative Cash Flow Statement

2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

Cash Flows from Operating ActivitiesCash Flows from Operating ActivitiesCash Flows from Operating ActivitiesCash Flows from Operating Activities

Net IncomeNet IncomeNet IncomeNet Income 277,437.18 489,619.92 875,560.91 1,509,681.15 2,486,728.26

Adjustments to Net IncomeAdjustments to Net IncomeAdjustments to Net IncomeAdjustments to Net Income+ Depreciation 19,500.00 19,500.00 19,500.00 19,500.00 19,500.00 Net cash inflows from operating Net cash inflows from operating Net cash inflows from operating Net cash inflows from operating 296,937.18 509,119.92 895,060.91 1,529,181.15 2,506,228.26

Cash Flows from Investing ActivitiesCash Flows from Investing ActivitiesCash Flows from Investing ActivitiesCash Flows from Investing Activities

Purchase of Equipment/Technology (175,000.00) - - - - Equipment Upgrades (20,000.00) (2,000.00) (2,200.00) (2,420.00) (2,662.00) Net cash outflows from investing Net cash outflows from investing Net cash outflows from investing Net cash outflows from investing (195,000.00) (2,000.00) (2,200.00) (2,420.00) (2,662.00)

Cash Flows from Financing ActivitiesCash Flows from Financing ActivitiesCash Flows from Financing ActivitiesCash Flows from Financing Activities

Proceeds from Bank Loan 160,000.00 - - - - Proceeds from Paid in Capital 240,000.00 - - - - Net Cash Inflows from Financing Net Cash Inflows from Financing Net Cash Inflows from Financing Net Cash Inflows from Financing 400,000.00 - - - - Net Increase in Cash 501,937.18 507,119.92 892,860.91 1,526,761.15 2,503,566.26 Cash and Equivalents, Jan 1st - 501,937.18 1,009,057.10 1,901,918.01 3,428,679.16 Cash and Equivalents, Dec 31stCash and Equivalents, Dec 31stCash and Equivalents, Dec 31stCash and Equivalents, Dec 31st 501,937.18501,937.18501,937.18501,937.18 1,009,057.101,009,057.101,009,057.101,009,057.10 1,901,918.011,901,918.011,901,918.011,901,918.01 3,428,679.163,428,679.163,428,679.163,428,679.16 5,932,245.425,932,245.425,932,245.425,932,245.42

The Comparative Cash Flow StatementThe Comparative Cash Flow StatementThe Comparative Cash Flow StatementThe Comparative Cash Flow Statement

Page 32

Appendix KAppendix KAppendix KAppendix K Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

2008 2009 2010 2011 2012

Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights

Revenue

Gross Margin

Net Profit

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2008 2009 2010 2011 2012

Annual Prof itAnnual Prof itAnnual Prof itAnnual Prof it

Page 33