Herrold, Beau From: Sent: To: Subject: lObmay2.ppt (3 MB) Jennifer Binder [jbinder@photofete.coml Monday, April 30, 2001 12:20 PM sherri sera; Beau Harrold; jep@wincrest.com; ,ab@wincrest.com; Jim woodhill; peter schaffer; Peter JMI-Iinc; charlie noel!; jmoores-jmi; MaeBeIIe; mwiIIis@comsys.com Board Presentation All, The board presentation as of 4/30/01 at 1:15pm is attached. Please let me know if you would like any of the attachments. Thanks, Jennifer Binder jennifer@photofete .com 713-942-7797 1 I GOVERNMENT EXHIBiT 24677 cii. !~4o H 04-0015 ~U .7. -~ :3 C: Schedule Intrnduu~tinn & Infrastructure by Jennifer Binder 10:15 to 10:45 10:45 to 11:15 am 11:15 to 11:45 am 11:45 to 12:15 urn 12:15 to 12:45 urn 12:45 to 1:15 Dm Sales & Marketing by Jennifer Binder & Jim Golden General Sales Strategy & primary focus Pipeline Notes from Carol Cox New Sales Teaser Financials by Jan Sutherlin & Jeffri Botkin P&L Statements, Balance Sheets Tax issues Gut Burn Rate / Longevity New Standard Procedures Technolo2y by Frank Soehn~e New Product features & schedule Time & cost to implement software Issues to be Addresses by .I~nnif~r Binder Pricing Structure Decision to sue or not sue Microdata Systems Cost of Closing /Thompson Knight Legal fees Employee Update Reuu~~* for Board Participation by all Board Members Q&A Financial, Technical, Introductions C1osin~ r~m~rks by Jennifer Binder Goals Milestones Conclusion 10:00 to 10:15am -, Introduction *Photofete officially closed $550k in new cash and converted $440 in debt/accrued interest April 9, 2001. The company originally did not budget closing costs which have cost us a month's worth of operation. We have 4-5 months to hit break even. *Our main focus at this time is to accelerate the sales cycle and lock down standard procedures. *We must generate a minimum of $50k a month to take us to break even. Our recurring revenue is @$25k, sales are down so our bum is up. After our April 30payroll: $272k in the bank $58k in accounts receivable $25k in recurring monthly revenue We expect BP's $ 100k to hit in June BP will increase our recurring revenue to $50k a month After dismissing King & Golden our cost of ops will be @ 85k *We have experienced a few set backs with our VP of Ops and VP of Sales even though their references checked out. Both employees were given goals but did not deliver immediate results a start up demands. Due to our cash flow situation, I do not recommend replacing the VP of Ops. Jim Golden will have another month to produce, please advise on whether he should be considered an employee or consultant. *Our sales cycle has slowed due to my focus on the due diligence process as well as a weaker economy and employee issues. I will need as much support for researching, calling, meeting and developing new clients. *l, along with our core team, are devoted to making this company work. *We will make up for lost time in sales THEN focus on recruiting a CEO and raising a Series B round of financing. The company can not afford a CEO at this time. If anyone can find someone who can produce results and will take stock, please let us know. Keep in mind we have $300k in cash, the only value add at this time is sales. ~pho4~te U - Photofete as of 4/01/01 E2 LII LZ~I Sales & Marketing Strategy Step Action 1 Define target industry and region. Identify companies $1 billion plus II Research core business, revenues Categorize as a b2b or b2c, level 1,11 or III client. Analyze advertising budget III Identify marketing,corporate communications, pr, graphic design, imaging and advertising contacts IV Identify appropriate department and contact. Establish contact V Send teaser. Set up Demo. VI Conduct demo. Identify problem. Analyze corporate media flow. Determine budget threshold. VII Follow up with presentation addressing the company's problem and offering a solution. VIII Follow up with letter of intent IX Conduct needs and cost analysis. Set implementation schedule. Sign contract. X Turn over schedule to account executive to implement, coordinate, monitor, deliver and maintain. U .1 ~.. GZ ~pho~te Pipeline * Setting *Setting a a Demo for the Houston Texans Demo for JMI * Salvaging a misconimunication with YPO *We need all the introductions you all can facilitate for companies with revenues over $1 billion Please see attached document B L pho4~te GE Selling Points 'The backend tracking mechanisms-how many times an image has been downloaded, this is valuable to designers so they do not over use an image 'The backend tracking of users and what the users are doing for security reasons *Expirations on user access, so an outside designer can use the system for the scope of their project then they are out *The digital rights management tools:all rights, internal only, etc 'Bulk loading of hundreds of images: dealing with 1000 images as easily as I image 'The simplicity of understanding the system if you are not a graphic designer 'The media interface 'Tiered security user access 'Our ability to scan quickly and affordably 'Our responsive service and attention to detail 'The process of publishing owned assets for re-use 'The quality of the downloads 'The amount of time it saves people to organize, search and retrieve media 'Being able to attach a note to an image for multiple purposes 'Storing the physical assets 'Custom scan requests 'Standards to follow 'Affordability 'Full service: digitizing, scanning, storage, software, hosting, deliveiy, support 'The categories, locations, file types and user types are data driven, meaning the client can make changes without reprogramming hard code Ongoing updates, clients love the idea of us adding video capabilities and document management creation as an update versus buying a new system C C CC CU L CU CC CC CC.J~X. L U LJLJ Notes From Carol Cox Current Targets MemorialHermann Anadarko Unocal Mattel Qualcom Sempra Energy Occidental Merisel Global Marine El Paso Energy Houston Livestock Show and Rodeo Transocean Sedco Forex, Inc. Burlington Resources Lexicon Future hit list includes: Phillips Petroleum Devon Oil & Gas Williams Companies Duke Energy Hill & Knowlton Accenture AIM Funds Our best selling points include: *Our current clients-- Enron, BP and Apache. These names have a lot of pull. *The flexibility to buy the software alone or to sign up for additional monthly services *User friendly---don't have to be tech person to use the software *Helps companies to need their photography/graphics needs---their staffs can then use their time to work on other projects *Simultaneous use worldwide of photographic images---staffs in different worldwide locations can use same photos at the same time *Does not require expensive hardware and other investments *The new lower price offering seems to be getting people's attention *The ability to add-on more features in the future *Meets the company's desire to organize their photography files in a smart, electronic format *The client still has control of their images----they are gaining control over their photography libraries, not losing control ph 1302 Waugh Drive, Suite 111 Houston, TX 77019 713-807-7799 877-891-8964 Info@photofete.com Photof&e... Is a media asset management company that organizes, digitizes, delivers and stores media for large corporations in net based software proprietary to Photofete. Our database supports various file types including but not excluded to jpg, tiff, giff, mpeg, ppt, eps and many more. These files are organized into searchable fields like locations, categories and keywords. The fields are data driven giving the client the flexibility to name the fields as they whish. Tiered levels of user access enables companies to control how a browser uses the system when searching, viewing or downloading. Most importantly, our software and services save delivery costs, replication expenditures and time. Your media is available 24/7. Who Benefits... Public relations, corporate communication, marketing departments, special event coordinators, media relations, advertising and design teams. SEARcIE .ve,a.uI,,. ~ ph.eq,eph.r ~ Cd j.he.e,. k.W.,a .,a~ *MM~ rn. MS '...~.IaMghasbd....j,,a~e *k, ng.., .'"-.nns..a Site Features... I * Significant cost and time savings * Digital Rights Management * Multiple viewing, output and delivery options U * Owner controlled access with tiered security U * Searchable libraries and archives * Scalable configurations U * Managed tracking, reporting and user analysis U * Traffic flow management system U * Shopping cart and internal billing support U Advanced text and keyword searching . Data driven categories, locations, drm and user types F~T~ ~ F delse F delsee Replace Replace FT FT I r r ~. r ~ r de4ete Replace a Replace - Re~.ce. Our Services... Proprietary Software and Digitizing Processes High quality scanning, downloading, compression and storage standards Multiple file type support Installation Hosting Archive images into a searchable database High res downloads 24/7 Training Back Ups LID Li D LII Liii ROTATE IMAGES na,. I af 7 t*~ ~ele¶e Replace FT r d*leIe Replace FT Eli pho4~te. DLI Advantages *Reduce time for searches *Decrease stock buys and re-shoots *Total service provider *Minimized internal IT support *Implementation time measured in days, not weeks, or months. *Media automatically backed up and archived *Supports various files types but not limited to jpg, ppt, gift, tiff, pdf, and many more Nuts and Bolts mAll the end user needs is a 3.X Browser or better. *Server - Housed w/ Photof~te *Built on Windows NT 115 4 *Microsoft SQL Server 7 database *Annual Software Updates mEault Tolerant Servers located in a secure environment *24 X 7 Access & Support Photof~te is lead by a team of professionals with diverse backgrounds in photography, technology, advertising, publishing, marketing, project management and business development. Companies like Enron, Apache, British Petroleum and Sunrise Company all recognize our expertise and deep industry knowledge regarding the needs of the marketing, communications, pr and imaging groups in organizations. Call or e-mail us today at: 713-807-7799 or 1-877-891-8964 info@photofete.com r delete I delete r delete E delete Rerdace. Reelace: Replace. EIII! ~ Financial Department Update Jan Sutherlin FYE 2000 Financial Statements EYE December 31, 2000 is closed, tax returns have been filed, the tax return as amended for capitalization of start-up costs will be filed shortly. Monthly Closing A company-wide Monthly Closing calendar has been developed to facilitate timely Financial Statement preparation and other financial reporting. New Accounting Software Peachtree Complete has been acquired and conversion is scheduled for the first two weeks of May. Mann, Frankfort, Stein & Lipp will be assisting with the conversion. This will allow more complete, flexible and functional financial reporting both for management and the Board of Directors. Peachtree complete will allow financial result reporting by department and comparison to established budgets. Human Resources and Payroll Photofete has retained Administaff for its HR and Payroll functions through a co-employment arrangement. This has provided benefits such as a 401 K Plan and health insurance for the employees, Workmen's Comp coverage for Photofete, and HR Management for Photofete. Through Administaff affinity programs, Photofete may also benefit from reduced pricing for services from Administaff partners. A customized Employee Handbook for Photofete is in production and should be delivered to each employee in May 2001. Insurance Coverage Insurance coverage has been bound for D&O, Property, General and Automobile Liability and Excess Liability coverages. Funding The Preferred Series A funding was completed in April 2001. D. it F U Lii ~ -~ - Monthly Closing Schedule Jan Sutherlin Please See attachment I II 71 Financial Statements Please find Attachments for the following: Balance Sheet Profit & Loss Financial Model and Projections: Revenue Expense Capex Staffing Summary All projections are subject to change. ~IiiIII PROPOSED MONTHLY CLOSE PROCEDURES Jeffri Botkin 1. Perform an overview "PBC review" of the balance sheet. This includes: * Tying cash general ledger accounts to cash reconciliation/bank statement * Tying accounts receivable aging to general ledger; scanning for old outstanding items and questioning Christy regarding possible bad debts. * Obtaining support for selected acquisitions, updating fixed asset depreciation schedules for acquisitions and booking current month depreciation expense. Ascertaining that general ledger accounts tie to the supporting detail. * Tying accounts payable aging to general ledger; discussing completeness of aging with Christy * Making expense accruals as necessary. * Tying sales tax liability (cash basis, per system) to amounts actually paid to taxing authorities on a quarterly basis. On a monthly basis, tying the general ledger to the sales tax report per the system. * Determining that any necessary payroll liabilities have been booked. * Agreeing support for activity in other asset and liability accounts. 2.Scan income statement activity for any large, unusual items; question Christy whether adjustments are needed for these items. 3.Using subsequent cash collections, determine that sales booked to accounts receivable are clearing the aging. 4. Obtain supporting documentation for selected expense item.s and ascertain that expense is properly coded. 5. Review expense reports for proper approval, support, business purpose, etc. MFSL previously performed item I above as the monthly procedures. In addition, on a go-forward basis, items 2 through 5 will be performed. El pho#4? JL~ Internal Control procedures Segregation of duties re: cash collection, preparation of bank deposits and posting to the accounting records. Approval process for expenses, fixed asset acquisitions over $XX, etc. *Back up signer for checks (for when Jennifer is out of town/unavailable *Dual signature for all checks over a predetermined limit (perhaps, over $7,500) *Petty cash procedures *Office organization - standardize filing procedures. 0 *Security of company assets in the new, shared space: company accounting records, payroll information, computers, etc. *General employment policies *Travel and expense policy (approval process, policy re: use of personal air miles) *Finance/accounting committee - oversee financial process, review/oversee decisions, etc. *A reporting mechanism of when and how this information will be distributed and to who D LZH Tax Issues Photofete, Inc. (Inc.) 2000 amended return simply moves the deduction for start up costs from Photofete, LLC (where the costs were incurred) to Inc. (who will ultimately pay for those expenses). Inc. gets the tax deduction for the start-up costs, not the LLC. This is a complex area, which is only made MORE difficult by the transactions with Photofete LLC and Photofete Inc. For more explanation, please contact Jeffri Botkin at Mann Frankfort. pho~cJ~te - . L... D pho~3i!~t2 Gut Burn Rates March 2001 April 2001 Projected May 2001 Projected June 2001 Projected July 2001 Projected August 2001 Projected September 2001 Projected October 2001 Projected November 2001 Projected December 2001 -$40k -$165k -$65k +$20k -$52k -$52k -$32k -$30k -$llk -$lk This takes us to cash flow positive by 12/01 it *collect $1 00k from BP *Add $1 5k a month of recurring revenue from BP *Continue to recur our existing $25k *Sign 2 $1 Ok set up clients a month starting in September *Sign 1 $30k set up client in November *Sign 1 $30k set up client and 1 $lOk set up client This does not Consider Taxes, this is a GUT Analysis. I believe we need to hit break even by October to maintain the existing staff do not add any new staff until October. I would like to increase Jan Sutherlin to 3 days so she can oversee more of the general administrative duties. The goal is to hit break even by October then raise more $. We will need a bridge loan in October to bring on a seasoned CEO in order for us to close Series B by February or March. Liz -I GD Technology Update Accomplishments from last month *Added User Comments to Jobs/Events/Photos *lmplemented Comment Changes to all Sites *Converted Enron site to match new Standard *Added Advanced Search Capabilities *Designed and Coded for new User Definable File Types *Created and Installed Central File Server *Moved all e-mail over to Exchange/Outlook *MOVEDi I SEARCH @03,1 eamo 'ala CMqwy plsalogeaphse Ct~ name -4- lw)wued U*Td, Lcooaeew~~J l~:E sf~i77J *Laa~saeoo phSsS. - P0 d..sbma.j.LgaiU±ml..uw. .tui. P4w .0.4 aTe p..h4e To 34MJ.~y. Infrastructure Goals * Train Everyone on Full Features of Outlook/Exchange * Implement Bug Tracking System for Site Issues Site Feature Goals * Rollout New File Type Support * Design, Code, Test and Implement Traffic Flow Management * Owner controlled access and tiered security * Searchable libraries and archives * Management reporting and analyses * Shopping cart and invoicing * Significant cost and time savings * Advanced text and keyword searching PHOTO INFO bask 54 Cinn54ft .Or,1 Enter th* quoutity fur r,ei' sic., Thor, odd lit your ~.rt dXilPmtu ~i ~X?PTTTT, *i EXIOPunIs SI Do,onoload media '~lutr,se Tonr,iriloo,. Thee odd ifs your cart. N.torw .rc. tO.~* X 10 ~. 72OPi ii) r OmrCTt, W3C'P~ ~ r (T~ ~ DPI ~ 10 r cc.em uSi I @eD.dOTawesGm,ooa I Demo TesYo,, cml wee ~fuomfee ileea~a ru row user, wu,,T cart job mllas aroo LII Technology Timeline Apr 1201 Apr 15201 Apr29201 May 13,'O1 May ID Task Name WS TM FT SWS T MF T SW~j~~Jj 1 Add User Comments I 2 Design Changes 3 Code Changes 4 Update Search 5 Update Job/Eve 6 Update Uploads 7 Update File Det 8 Test 9 Implement 10 Support for New File* 11 Design System 12 Database Modificat 13 Screen Modificatic 14 New Filetype M~ 15 New Filetype At 16 Update Uploads 17 Update Contact 18 Update Large V 19 Test 20 Software Licensing E: 21 Scope 22 Design 23 Impiementation 24 Testing 25 Traffic Management 26 Design 27 Code System 28 Test vy V i~p U V U y Lii GE Pricing Obj ectives: 1. Profit 2. Undercut Competitors 3. Analyze timing schedules & costs Set Up Fees: Level 1 Level II Level 111 $280k first year $55k first year $25k first year Licensing Fees: Mm I Upgrade Per year Negotiated $ 1k to $2k per month Ongoing Monthly Support: Training Phone Guides Assisting with Media Requests Searches, physical retrievals Physical Asset Storage Hosting Additional Fees: Training Seminars Instillation fees 20+ 35mm images scanned to pf std -20 35mm images scanned to pf std Custom 35mm scan 20+ 120 images scanned to pf std -20 images scanned to pf std Custom 120 scan 4x5 plus image scans ConsLilting Photo Shoots Renaming Loading Graphic Design Back Up CDs $100 an hour $100 an hour $100 an hour $100 an hour $500 abinder ayear Base quoted $30 a gig 1 gig = 250 images scanned to Photofete standard Quoted $100 an hour $5 per image $25 per image $30-$l00 $10 per image $25 per image $30-$l00 $30-$l00 $100 $l00-$500 an hour $100 an hour $100 $125-$200 an hour $10 I. pho4~t? LI pho4i~te U U t. Lull1 r.. 1W I- ..~- Issues with Microdata Systems *Microdata Systems developed eparty pix Photofete ' s first site *Their Programming did not function *Their budget was $1 Ok, they were paid around $20k *They slowed down development by 4 months *They illegally charged $1 3k on an American Express Card that had been reported stolen 'Collected funds after receiving a letter from our legal not to pursue collection of funds Please see attached documents Li LiZ pho#12 Thompson Knight Brown Parker & Leahy Legal Fees *Quoted $1 5k to handle closing *Has not provided Itemized Bills Upon PF's Request *Wants $25k in Cash & $13k in Series A preferred stock, as of 4-23-01 Please See Attached Invoices photqC~?te z~u Employee Issues Sales/Marketing Jennifer Binder, Jim Golden, Carol Cox & Amy Spangler Jim Golden has been given 1 month to show results, see attachment Carol & Amy will continue to research and call We are looking for $40k sales researcher and caller fulitime to cut out consultants This department needs to ramp up FAST! Technology Frank Soehnge and Eric Hickey Soehenge and Hickey continue to add functionality to the site at a rapid rate Soehenge negotiated our hosting costs to remain flat versus going up Great progress Ops Katy Anderson and Jeff Sanders Sheryl King resigned, please see attachment Katy Anderson and Jeff Sanders handle account management and the imaging department Anderson and Sanders have not reported any work overloads Financial Jan Sutherlin, Christy Williams and Mann Frankfort Stein and Lipp We plan to delegate more responsibilities to Sutherlin Christy is locking down standard accounting procedures Mann Frankfort is setting some of the standards and handling tax issues D ZEI2 phot4~tE? Board Discussion * Sales Suggestions *Brief Financial Analysis *Processes & Procedures *Product Recommendations *Microdata Resolution *Thompson Knight Resolution *Employee Discussion *Pricing Structure B phc~te Qi & Q2 Internal Goals *SELL *Technology Upgrade Schedule set for 2001 *Time Analysis of imaging Operations 'Standardize Ops, Imaging, Sales process & Technology *Imaging & Technology Cost Structure Analysis 'Revamp Financial Model *Sign 4 Contracts 'Create & Implement Traffic Flow System *Standardize Testing 'Create Process to Add Update Data to New Functionality 'Kill Paper City 'Enhance Site Content *Revamp Sales Pitch Lii Lii 2000 Milestones QI *Photofete founded as an S-Corp in March (was an LLC) Q2 'Development of Photofete Version I 'Collected $360k in seed investment 'Version 1 live for Beta Testing 'Started Online sales Q3 'Sign Enron as Beta Client 'Develop Photofete Version II 'Start Beta Testing Q4 'Start Marketing Houston Market, Fortune 500's 'Sign Second Client Apache 'Close 2Q00 with $318 in Revenues, exceeded expectations pho~te LIZ 2001 Suggested Milestones Qi *Signed 3 new clients: BP London, Sunrise Colony 'Existing Enron, Apache 'Photofete Version LII live, all databases running off same source code *Add eps Format *Target companies $1 billion plus in business over 10 years 'Enhance System Traffic Management Q2 'Sign new contracts: YPO, Padres, Houston Texans, Anadarko, El Paso, BP Houston *Add mpeg, ppt, gift, tiff *Add 25 new target companies 'Bring in ex Corbis business developer Jim Golden 'Prepare to move office Q3 'Sign 4 contracts *Move Office *Upgrade to SQS 2000 *Add pdf, qxd, ai Q4 *Sign 4 contracts 'Close the year with revenues of $600k 'Add 32 new clients to the pipeline photf~te Closing Remarks Standard procedures and processes are improving and will continue to do so. Employee benefits and the new office have increased everyone's level of professionalism. We are all disappointed that one of our employees did not work out. Since the growth has not exploded in the past 2 months, the company has not suffered operational loss. The company has suffered new client development. I believe with the cut in our payroll, we will have enough time to compensate for March and April. Software sales cycles have slowed with every company. We are moving to sell upfront installation and to create recurring revenue. Our philosophy is to understand the needs of the client and provide on going updates, don't re-invent the wheel. The concept of investing in software versus building it yourself is stress free and eliminates the need to rebuild a new system every year. The annual software upgrades are part on the recurring revenue, which builds a strong base for our cash flow. Photofete serves the 7~" largest company in the US and the largest company in the UK, we intend to grow an even stronger base. Our targets are corporate America versus image processing companies which gives us a price market but one with fewer competitors. There is no doubt in my mind that every corporation will want to own their own database to manage their media assets. The question is when and at what price does the corporation enter. It is a great opportunity that we can provide exceptional imaging services and software at a lower price than any of our competitors.