Pace Business Plan

Prepared For:______________________

Date:______________ No.__________

Q 1 2 0 0 2 -

PACE BUSINESS OVERVIEW !

All Content © 2002 PACE, LLC | Proprietary and Confidential ! 2

This document contains forward-looking statements based on PACE management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, service development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions.

PACE, LLC 1081 WESTWOOD BLVD., 1ST FLOOR LOS ANGELES, CA 90024 PHONE: (310) 209-0871 FAX: (310) 208-0284 www.paceamerica.net

PROPRIETARY AND CONFIDENTIAL

http://www.PaceAmerica.org

http://www.PaceAmerica.org


TABLE OF CONTENTS Table of Contents 3 ........................................................................................................

INNOVATION 4 ...........................................................................................................

COMPANY Overview 5 ................................................................................................

Value Proposition 5 ........................................................................................................

Market OPPORTUNITY 6 ...........................................................................................

REVENUE 8 ...................................................................................................................

Investment Highlights 9 ................................................................................................

Technology 10 .................................................................................................................

SUMMARY OF OPERATIONS 12 ..............................................................................

Sales STRATEGY 14 .....................................................................................................

MARKET STRATEGY 18 ............................................................................................

Competition 19 ..............................................................................................................

Management Team 21 ...................................................................................................

INVESTOR PROFILES 22 ..........................................................................................

Financial Highlights 23 .................................................................................................

Pace Risk Factors 23 .....................................................................................................

FINANCIALS 25...........................................................................................................



INNOVATION

September, 2002…

Tonight’s monthly PTA meeting at Valley Elementary is special. In addition to agenda items like the fall musical and the cafeteria menu, Principal Campbell will hold an open forum to discuss the new grading system. Campbell knows that he can ill-afford the normal half-empty turnout…

1:47PM – Valley Elementary School - Van Nuys, CA …From his office PC, Campbell securely logs on to www.PACEamerica.net and selects the "Parents" and “Teachers” icons. When prompted, Campbell picks up his office telephone and records a voice message explaining the special event. With a final click of his mouse, his message is instantly delivered to the 600 parents and faculty of the Valley Elementary Community.

1:49PM – The Ellis Residence - Van Nuys, CA The phone rings. Mrs. Ellis immediately hears the distinctive "PACE" tone. She knows it's an important message from her son’s school. It is Principal Campbell with a reminder that tonight’s meeting will feature an open forum on the school’s new grading system. Mrs. Ellis presses “1” on her telephone to confirm that she will attend the meeting. In the meantime, she better arrange for a babysitter. This message changes everything - from dinner plans to when the kids will need to be picked up.

1:49PM – Any Business Office - Santa Monica, CA Part-time math teacher Henry Stofko’s Palm Pilot beeps. It's a text message from Principal Campbell…They’re discussing the new grading system tonight. It’s a good thing since Mr. Stofko missed the faculty orientation meeting on this matter. This message prompts the Calendar function from his Outlook tool. Coach Stofko can clear his schedule from 7PM-9PM. Life wouldn't be the same without PACE.

In minutes, a community is contacted. Parents are involved. Time, effort and communication costs are saved.

A community is united…

!

PACE is the future of school-to-home communications!


http://www.PACEamerica.net


COMPANY OVERVIEW

The Partnership for Academic and Community Excellence ("PACE") is fast becoming the recognized leader in school-to-home communications. Designed exclusively for the K-12 education market, PACE provides the most effective, affordable and easy-to-use way for America’s K-12 schools to deliver their outbound voice and data messages. PACE revolutionizes school-to-home communications by delivering the power and reliability of a world-class communications network without changing the way schools currently operate. In just over five months of operations, PACE has penetrated more than 65 schools in Southern California, reaching over 45,000 families each month and has achieved “100% satisfied” ratings by its clients. This initial market penetration represents more than $200,000 in cash received from operations.

America’s schools need a voice. Existing modes of school-to-home communication such as phone chains or telephone trees, backpack newsletters, direct mailings and auto-dialer systems are inefficient, untimely and often go unnoticed. As such, schools have failed to establish a consistent, reliable or effective connection with their customers: parents.

PACE is unique because it enables schools to instantly communicate education-critical information directly via the telephone to thousands of targeted recipients with clarity, consistency and certainty – in minutes! PACE can be deployed instantly over the Internet - no hardware, no software and no formal training is needed. Subscriber schools simply access their secure PACE account via the Internet, record a voice message over the telephone, select their recipients, click their mouse and thousands of personalized messages are sent in an instant. Schools are currently using PACE to:

▪ Remind parents of important events, deadlines and holidays ▪ Rally support for school functions and fundraising initiatives ▪ Reinforce parental involvement through academic updates and feedback ▪ Raise turnout at parent-teacher conferences

VALUE PROPOSITION PACE gives schools a clear, consistent and reliable voice without shifting existing paradigms. Specifically, PACE uses the existing school hardware, wiring and software infrastructure to provide the basis for an easy-to-use, scalable, reliable and cost-effective communications environment that requires minimal training and administration. Maintaining contact, even on a limited basis, no longer requires staggering amounts of time, people and money. Information is no longer inaccurate or outdated without confirmation that contact was even made. With PACE, parents are proactively included in the school process, resulting in satisfied “customers.”

We believe the following factors will contribute to the continued rapid adoption of PACE by schools:

Schools Need to Communicate Effectively Despite varying socio-economic considerations all schools share a common need for timely, accurate and cost-effective outreach communication. Schools have identified parental involvement as the cornerstone of improved academic performance. Moreover, the need for fast and reliable communication beyond the classroom has also increased in importance due to a heightened focus on homeland security and school safety.

PACE Gives Schools an Unprecedented Communication Medium Currently, schools do not have a cost-effective means of school-to-home communication. Moreover, faculty and administration face tremendous time, financial and human resource constraints. PACE solves this problem by providing schools with an easy to use message distribution platform that can be applied to


“When something sounds too good to be true, we have been taught to be suspicious. Your system sounded too good to be true, but FAR EXCEEDED my expectations. It was both too good and too true!”

Mark P. Ryan, PhD Principal, St. Matthias High School

“PACE is the best customer service tool I have ever used! Often parents, like students, are nervous about coming to the principal to communicate. PACE has helped to make me more approachable. I love it!!"

Dr. Mark Jones Principal, Horace Mann Elementary School Beverly Hills Unified School District


virtually any school setting. And PACE dramatically increases parent and community involvement, which facilitates superior academic performance and better positions schools to procure additional state and federal funds, raise new funds through private sector sources, and ultimately expand K-12 service offerings.

PACE Delivers Immediate and Measurable Results We have had an instant impact on our clients throughout a variety of K-12 applications:

PACE is Easy to Use, Can be Deployed Instantly and Takes Little Time to Maintain PACE is a powerful new weapon in the K-12 communications arsenal whose time commitment pales in comparison to its benefits. There is no hardware, software or cumbersome installation processes. Participating schools need only a telephone and Internet access. Moreover, training requirements are negligible. Teachers and administrators become “experts” in less than ten minutes. PACE is completely intuitive by the look and feel of the graphical user interface (GUI). Even further, PACE provides on-line support with a detailed user guide, online help, glossary and Frequently Asked Questions (FAQs).

PACE is a Convenient Communication Medium PACE leverages the simplest and most ubiquitous device – the telephone. More than 97% of American households have telephones or easy access to telephones. By the same token, Internet access in US K-12 public schools exceeds 95% as of the fall of 1999. Thus, there is no learning curve with PACE for parents, teachers or administrators. Teachers need only speak into the telephone. Parents need only listen to their school’s communication. Additionally, the presence of telephones in almost all homes eliminates the potential for inequity based on economic status. Of course, PACE can also communicate to a variety of other devices including PDA, pager, fax and E-mail if desired.

PACE Features a Low Cost per Measure of Communication The PACE solution is more cost-effective, and exponentially more successful, than direct mail campaigns or the cost of maintaining auto-dialer equipment that some schools currently employ.

MARKET OPPORTUNITY In 2001, the total market for K-12 technology expenditures totaled more than $8 billion. According to the National Center for Education Statistics, there are more than 110,000 K-12 schools in the United States. This market consists of 66,731 public and private elementary schools and 14,889 middle and junior high

School District S c h o o l Application

Before PACE After PACE Reference

Horace Mann Elementary

Beverly Hills Unified

Ensure parents return student data cards

10%-15% response 75%-85% response Dr. Mark Jones, Principal

Conejo Valley Elementary

Conejo Valley Unified

Ensure parent contact information is current

54 incorrect phone numbers

All phone numbers are current

Larry Birdsell, Principal

West Angeles Academy

Private Prevent late tuition payments

20-30 late payments “[Parents] were at the door with checks first thing Monday morning.”

Debbie Armstrong, Principal

St. Anthony High School

Private Preempt rumors regarding Principal’s retirement

Worried about entrusting this important message to a “phone tree”

“With PACE, we were able to forestall gossip and communicate a clear message.”

Val Anderson, Business Manager



schools. In addition, the Early Childhood market consists of 99,877 daycare, Head Start, Montessori and preschool institutions. Schools receive funds to pay for PACE from a variety of key sources: 1 2

The United States Department of Education. President Bush recently signed into law the No Child Left Behind Act, the reauthorization of the Elementary and Secondary Education Act (ESEA). This Act represents a number of federal funding sources for PACE because it essentially loosens federal control of federal education dollars. Specifically, the Local District Transferability Program, Title I Basic Grants, Safe and Drug Free School funds and Title II Education Technology Block Grants represent excellent funding sources. Congress is expected to allocate $49.3 billion to the United States Department of Education for fiscal 2002. This is a 17% increase over 2001 and a 38% increase over 2000. ESEA marks a tremendous increase in discretionary spending authority at the local district level. ESEA funds are expected to become available to schools and school districts commencing Second Quarter 2002.

The Federal Communications Commission (FCC) via E-rate. The Federal Government has taken significant steps to address school communication needs through the E-rate program, an integral part of the 1996 Telecommunications Act. E-rate is funded up to $2.25 billion annually and offers discounts of 20% to 90% on telecommunications oriented services to all K-12 schools, public and private. These discounts are provided through direct subsidies to E-rate Service Providers like PACE.

E-rate funds cannot be used to support software or hardware products. Rather, E-rate focuses on establishing “universal service” for telephone and Internet connectivity. Since PACE can be deployed instantly with no formal training and relies on the public switched telephone network, we anticipate full-eligibility. To that end, a number of schools and school districts in Southern California have requested E-rate funds to cover PACE service for the coming school year. Private Sector – PACE Business Sponsorship. Schools need affordable and flexible payment options. They continue to face budget cuts that threaten core programs and technology initiatives. Fortunately, these diminishing budgets have fueled a trend toward accepting private sector sponsorship of certain school programs and initiatives. By the same token, Corporate America has been an eager benefactor. PACE is a revolutionary medium for corporate exposure that marries the school’s need to communicate education critical information in an affordable manner with the business community’s desire to generate goodwill, mind-share and positive recognition.

Specifically, PACE enables participating community-oriented businesses to sponsor and offset the entire cost of PACE for the school(s) of their choice. In exchange for their contribution, Business Sponsors are acknowledged by the school administrator in each outgoing message to parents. Thus, PACE Business Sponsors align themselves with the most trusted of local institutions and receive welcomed, non-intrusive exposure to a previously untapped, captive demographic: school families.

Currently, PACE schools are working with more than 35 Business Sponsors in Southern California. Many community-centric businesses, particularly within the residential real estate sector, are willing to pay top dollar for this unprecedented permission-based marketing opportunity. PACE has attracted nationally recognized realtors from Coldwell Banker, RE/MAX and Prudential John Aaroe to join as Charter Sponsors in the PACE Sponsor Program. These sponsors have paid between $4,000 and $12,000 (per school, per year) to exclusively sponsor schools within their marketing territories. A sponsor's message can be targeted demographically and geographically with pinpoint accuracy. Tracking and reporting capabilities indicate to both the schools and the sponsors if messages were successfully delivered. How Business Sponsorship Works

Quality Education Data, Annual Report, 2001-2002.1

Of course, private schools rely heavily on student tuition to pay for PACE. 2


"After partnering with PACE, I realized that good will is good business. Bus benches and other traditional advertising can't stand up to the welcomed, endorsed exposure I receive by sponsoring St. Anthony's communications to families and alumni. Nothing compares to PACE." Mary Anne Edwards RE/MAX College Park Realty


First, a K-12 school adopts our communications solution. Second, we “coach” K-12 schools to select and qualify an appropriate sponsor candidate. Partners tend to represent businesses that are interested in 3

targeting the "family demographic." Of paramount importance, all potential partners must share core educational values. In most instances, PACE can readily pre-qualify potential sponsor candidates for approval by the school to truncate the selection process.

Why Business Sponsorship Works The PACE Business Sponsorship program works because it enables PACE to penetrate the K-12 market more rapidly through a revolutionary, high-margin marketing medium without the “loss-leading” expenses associated with creating a new market. At the same time, Business Sponsorship creates a “win-win” scenario for both schools and community business partners. Schools receive a powerful, easy to use communications tool that allows them to maintain closer contact with their parents, faculty and Alumni. Plus, in many cases schools or districts currently create a profit center through PACE by generating revenue in excess of PACE subscription fees. Meanwhile, Business Sponsors receive cost-effective, targeted access to a vital demographic. This exposure is especially valuable to Business Sponsors, because: 4

▪ It is Endorsed by the schools, both implicitly and explicitly. ▪ It is Exclusive to that sponsor in that vertical market. ▪ It is Demographically Targeted to a desirable market, school parents. ▪ It is Personal because parents will tie a sponsor's identity to their school. ▪ It is Welcome because parents are enthusiastic about hearing from the school. ▪ It is Measurable because sponsors can quantify their marketing impact.

REVENUE

We derive revenue from two sources: 1) direct payment from client schools and districts and 2) indirect payment from Business Sponsorship.

Direct Payment Our pricing strategy balances market penetration objectives, the business responsibility of managing cash expenditures, and the reality of what the market is willing to pay. In particular, we must control the primary variable cost associated with our solution, long-distance telephone service. Specifically, PACE client schools and districts pay an annual subscription fee to utilize our communications platform. Thereafter, clients pay an affordable monthly subscription rate based on message delivery volume.

Business Sponsorship Business Sponsorship pricing is based on the quality of exposure to the school parent demographic. Residential Real Estate agents are our first vertical industry to sponsor Southern California K-12 schools. Our experience to date indicates that Real Estate Business Sponsors will pay upwards of $.50 per message to school parents. This is approximately twice the amount paid to PACE by schools under a direct pay scenario. The Residential Real Estate market is well documented, as there are abundant public domain and subscription-based resources that provide detailed information on public and private schools, average home cost breakdown by a variety of segments and other demographics.

To date, PACE has actively recruited local real estate sponsors for schools. As we continue to evolve our business model toward more direct 3

district and building sales, we anticipate that schools will continue to identify their own business sponsorship opportunities, making PACE a profit-center.

The Residential Real Estate market is well documented, as there are abundant public domain and subscription-based resources that provide 4

detailed information on public and private schools, average home cost breakdown by a variety of segments and other demographics. We believe

that potential new business generated by real estate agents through PACE is higher than other identified verticals because these agents, particularly in Profitable Early Adopter areas, maintain high levels of income such that they can easily afford the annual subscription price and, equally important, they rely on their relationship with the local community as the primary driver of income.


“Through your service, our families now receive information about all events, functions, and important school announcements…The message calls are unobtrusive and welcomed. The positive feedback from the parents has been overwhelming.”

Susan Isaacson Director, Beth Hillel Day School


INVESTMENT HIGHLIGHTS

Existing Clients with Strong and Growing Pipeline PACE has already achieved significant traction within the K-12 school sector in Southern California as well as the residential real estate vertical industry for community Business Sponsors. In particular, PACE has already signed more than 65 schools and more than 35 Business Sponsors. This is merely the beginning, as PACE has shifted from acquiring school buildings toward acquiring school districts. Thus, we have several hundred schools in our pipeline and will launch a targeted national sales campaign through qualified resellers in First Quarter, 2002.

Proven Technology The first iteration of the patent-pending PACE communications technology has been built and tested by seasoned technologists using open Internet standards to ensure reliability and scalability. Client schools that used PACE Version 1.0, all expressed satisfaction with the usability, security and quality of the system. Our recent release of Version 2.0 features dramatic improvements in functionality, capacity and stability. We have also developed a Version 1.0 of our sales automation technology to improve operational scale.

Unique Revenue Opportunity Through a Revolutionary Marketing Medium PACE gives participating Business Sponsors unprecedented exposure to their core market while offsetting the cost of PACE for client schools. This exposure is both effective for the Business Sponsor and non-intrusive to its target audience of school parents as proven by our success to date with a roster of more than 20 Business Sponsors.

Short Sales Cycle PACE is the first communications application for the K-12 education market that demonstrates immediate results by improving technology leverage while reducing IT and administrative costs. Because PACE is extremely affordable and does not require any on-site configuration, the sales cycle typically takes 1-4 months. Further, in many cases, PACE is offered to schools at no cost due to our revolutionary Business Sponsorship opportunity (see Market Opportunity section).

Significant Growth Opportunities PACE will be able to deliver a variety of services, upgrades and access to schools without purchasing hardware, application licenses or hiring consultants. In particular, we are currently exploring two product extensions focused on increasing the effectiveness of K-12 attendance and alumni fund-raising through the automated personalization and interactivity of the PACE platform.

Recurring Revenue Stream and Loyalty Management Once registered, K-12 schools will realize immediate results in the form of approval from parents, increased student attendance and overall community participation. We believe that both schools and Business Sponsors will be loathe to forfeit the PACE product especially as parents have become accustomed to PACE’s new and efficient mode of communication. As such, schools will budget accordingly for the annual PACE subscription license.

Strong and Proven Executive Leadership The PACE executive management team is entrepreneurial in spirit and brings a strong and diverse skill set that includes significant early-stage, educational, Fortune 500 and public sector experience in technology development, finance, operations, sales and marketing.

High Barriers to Entry through Grassroots Domain Expertise In addition to a commercially viable product with an existing client base, developing brand awareness, and proprietary feature set, the high fragmentation of schools across county lines requires a grassroots marketing effort founded on trust and reputation within the academic community. As such, it can be extremely difficult and financially challenging for new entrants, who might lack credibility on an intimate level, to target the K-12 school market. PACE has developed a proprietary sales automation application that will enable industry and regional insiders to resell our solution.


“Even with the most precise use of expertise in planning and scheduling, unexpected changes do occur and I cannot tell you how often the PACE system has allowed us to communicate these changes with grace and ease.”

Lussy Garboushian Exec. Secretary, Armenian Mesrobian


Recent Investment Activity PACE recently accepted an investment from an accredited investor, John Gamba, Sr. Prior to retiring from the Bell Atlantic Corporation in 1997, John reported directly to Bell Atlantic's Chairman and CEO as an executive member of the Office of the Chairman. He held this position for six years before retiring. PACE also accepted an investment commitment in cash and services from Avante Global, LLC. Avante Global is a diversified venture consulting firm with a track record for raising investment capital as well as stabilizing and growing early-stage, high-tech ventures. Avante Global has committed to provide cash and services that include human resource support, legal affairs, finance/accounting and technology integration.

Attractive Acquisition Candidate Because PACE is a communications medium that reaches thousands within the school community, we are an attractive acquisition target for companies seeking access to school districts, buildings and their constituents (the home demographic). In particular, our proprietary application and growing customer base combined with recurring monthly revenue makes us attractive across a variety of vertical markets including media, telecommunications and education.

TECHNOLOGY

Overview Our core technology is a Customer Relationship M a n a g e m e n t (CRM) application that delivers one-to-many voice and data communications. This proprietary software represents a new approach to using the public switched telephone network (PSTN) and Internet as an interactive message d i s t r i b u t i o n platform. This CRM application harnesses the p o w e r a n d sophistication of business-critical third-party o u t b o u n d messaging infrastructures without requiring any i n s t a l l a t i o n , configuration or training.

By accessing the secure PACE Web site, each member school can catalog a variety of event-specific messages for immediate or future delivery to their customized audience. The entire process is remarkably simple. First, PACE client schools record their message, often in the personal voice of the principal. Second, the school selects its message recipients. Third, the school schedules a time and date for delivery of the message. The school message is then delivered, with results (and feedback) instantly reported. Features PACE offers far more than phone message distribution. PACE is the outreach communications hub for all our K-12 schools. In particular, PACE gives schools:

World-class infrastructure. With access to more than 7,000 outbound phone lines through the power of industry leading partners including Envoy Worldwide and AT&T, PACE gives its clients access to an infrastructure they can depend on for timely and reliable message distribution and advanced functionality.

Ongoing maintenance, support and upgrades. Our technology team works hand-in-hand with our sales and marketing team to ensure our products meet the needs of all current and future schools. This means that we are always adding new features to the application which the schools can take immediate advantage of. Additionally, we have constant maintenance internally and with our partners on the existing application which ensures stability and reliability of the PACE solution.

Instant Deployment. PACE clients can import entire datasets, contact lists, and groups with minimal effort directly through our secure Web site. Further, a proprietary stand-alone Visual Basic Application can map any data to our import schema and upload it to the Web site at the click of an icon. This integration application currently works with the Aeries system from Eagle software (Eagle is one of the industry’s leading developers of school administration software). By building custom components to work with Eagle (and others in the near future, including BlackBaud, Sassi, etc.) we have removed the need for school officials to learn other programs or deal with the complexities of exporting data.


“Every month we find family phone numbers have changed, and the PACE system helps us to clean-up our database, so that we are always current and accurate. I'm excited every time I use it."

Val Anderson Business Manager, St. Anthony H.S.


Instant reporting. A proprietary custom reporting engine gathers results once communications have been completed and compiles them into the main database for future tracking and reporting. These reports are made available to the users through both E-mail and the PACE web site. The reports detail items such as: call status (live answer, answering machine, busy, etc.), duration of call, and retry attempts.

Interactive polling features. PACE Schools have the ability to prompt their constituents with various questions, and get actual responses from the touch of a button. Our schools can then track actual responses to items such as event attendance, notification receipt, or approval/disapproval of miscellaneous items. This feature is as easy as Press 1, Press 2, etc. and is compiled directly into our reporting application.

Universal messaging capabilities to any device (phone, fax, E-mail, pager). With minimal effort, PACE messages can be sent to additional communication devices. So, if customers want to send information through the phone, fax, and E-mail all at once, PACE can deliver this ability. In addition, through escalation rules, a customer could first be attempted to be reached at home, then cell phone, and lastly on their pager to make sure a message was received immediately.

Architecture PACE runs on multiple Microsoft Windows 2000 Servers utilizing Microsoft Internet Information Server 5.0 (ASP) and Microsoft SQL Server 2000. These servers communicate with our exclusive outbound infrastructure dialing partner, Envoy Worldwide, through a custom Java Server Application and the Envoy Application Programming Interface (API). Envoy is the market leader in Internet message distribution and currently provides PACE access to over 7,000 dedicated phone lines, and the ability to deliver messages through true Unified Messaging (phone, fax, E-mail, pager, and PDA). PACE is Envoy’s exclusive partner in the education vertical. The voice-recording portion of the application is developed and maintained on PACE owned and operated Computer Telephony Servers that use Dialogic Boards and a proprietary PACE Visual Basic application. There are two inbound Dialers, each with the capability to sustain 24 analog phone lines.

To better accommodate anticipated growth and security, PACE has recently moved into a managed hosting facility operated by AT&T. That facility provides unlimited bandwidth, redundant power feeds, multiple data connections, 24 x 7 security and monitoring, as well as other data center fail-safes (controlled temperature, raised flooring, state-of-the-art fireproofing, etc.).

Security In addition, PACE has created more stringent security policies and guidelines. Not only is the data secured behind a Cisco Pix firewall, the data is only accessible by proper permissions to the school representatives and selected PACE personnel. The hosting facility also provides other security fail-safes such as packet filtering, Virtual Private Networks, and security audits as need be. Industry standards like SSL are also used where appropriate.



! SUMMARY OF OPERATIONS

Our organization mitigates human resource and administrative costs through automated technologies. The cornerstone of our operational strategy is our proprietary web-enabled sales automation application called the “Tracker.” The Tracker centrally coordinates all aspects of our sales, reporting and customer relationship management initiatives to maximize internal communication and efficiency.

Success within the PACE organization requires continued scale and execution in four critical areas:

1) School Acquisition and Retention 2) Technology 3) Business Sponsor Acquisition and Retention 4) Financial and Organizational Controls

The PACE organizational structure addresses these core initiatives:

PACE ORGANIZATIONAL CHART

Internet

PACE MessageRecording Server

PACEDatabase

Envoy Worldwide

XML Messaging/Reporting

PDA

School Student,Parent, Alumni, etc.

Fax

• School selects messagerecipients through PACEWebsite

• School selects data and timeof message delivery throughPACE Website

PACE Web Server

SchoolTelephone PACE

School

XML Messaging/Reporting

• PACE Web Server hosts PACE Website.which is comprised of HTML and ASP

• PACE Web Server runs a custom JavaServer Application which communicates withEnvoy for Sending Messages and ReceivingReports

• PACE Database stores ALL PACE data,including School Information, SponsorInformation, Call Information, and ContactInformation

• PACE MessageRecording Serverhosts ALL digitalsound recording forOutbound Messages

• School recordsmessage on PACEMessage RecordingServer

• Envoy provides XML services for SendingMessages and Retrieving Reports,

• ALL Outbound phone calls are made fromEnvoy after information (message recipientand sound file) is passed from PACE toEnvoy

• Envoy reports Call Status and provides datafor Reports to PACE

Phone


Automatic E-mailMessage to Student,Parent, Alumni, etc.

Automatic E-MailReport to Sponsor

Automatic E-MailReport to School

Automated E-mail


PACE Architecture and Integration



!

Our sales cycle is relatively short and non-cyclical for the education market (1-4 months) because PACE is affordable and can be deployed instantly, at anytime during the school cycle, and without on-site visits or consultations. Moreover, all maintenance and upgrades can be performed remotely on our network, without any on-site client visits. In terms of support, we have developed a comprehensive and easy-to-use user guide, glossary and FAQ to support our clients. As such, contribution margins (revenue less variable costs on a per school/sponsor basis) are very attractive and continue to improve as we scale operations. Our primary variable cost exposure is long-distance telephone service and infrastructure maintenance costs for which we have procured a very favorable all-inclusive rate of $.07 per minute per message:

Proposed Pricing for District:

Marshall AbbottCEO

Focus on School Acquisition

John GambaStrategic Development

Special Initiatives

Patricia ThompsonSponsor Initiatives

Josh RothCTO

Craig GasparaMIS

Deanna EllisTech Support

Product Development

Engineer(s)Independent Contractors

As Needed

Ben SchwartzHR, Office Manager

Bookkeeping

Thomas MotterEVP Business and Corporate Development

School Acquisition and RetentionChannel Distribution

Evan ArguellesIndependent Contractor

Southern California

Frank CiraciIndependent Contractor

Southern California

James DumontIndependent Contractor

Sponsor Initiatives

David OffillIndependent Contractor

Southern California

Steven CliffordIndependent Contractor

Southern California

District Pricing Plans

Messaging Volume

Revenue Variable Costs per message

Operating

Margin

Messages per student per month

Revenue per student per year

Plan 1 Monthly Annual

Fixed Up-front

Monthly

Annual

Per Message

Delivery Sales

5,000 50,000 $2,595$1,29

5$15,5

45 $0.31 $0.07 $0.08 52% 2 $6.22

Plan 2

10,000 100,000 $2,595$2,49

5$27,5

45 $0.28 $0.07 $0.07 50% 2 $5.51

Plan 3

25,000 250,000 $2,595$5,99

5$62,5

45 $0.25 $0.07 $0.06 47% 2 $5.00

Plan 4

50,000 500,000 $2,595$9,99

5$102,

545 $0.21 $0.07 $0.05 41% 2 $4.10



Proposed Pricing for Building:

Note that the base rate for a message is one minute billed at six-second increments thereafter.

SALES STRATEGY

To date, we have employed a direct sales approach on both a district and individual school level to acquire client schools in the Southern California market. This strategy has been carefully tempered by an emphasis on fiscal and operational responsibility. To mitigate expenditures, we will focus primarily on schools and districts that pay directly for our platform or schools that can be paired immediately with qualified Business Sponsors (see Market Opportunity section). At the same time, we will continue to emphasize customer intimacy to insure satisfaction and cultivate market share. In particular, PACE School Representatives are trained and commit to a solutions-oriented sales approach with flexible and innovative payment options such as corporate sponsorship to establish a local market foothold. We have established an Early Adopter 5

precedent with 65 schools currently using PACE.

Pay as you go

Unlimited

Unlimited $3,995

Variable

Variable $0.31 $0.07 $0.08 52% Variable Variable

Building Pricing Plans

Messaging Volume

Revenue Variable Costs per

message

Operating

Margin

Messages per student per month

Revenue per student per year

Plan 1

Monthly Annual Fixed Up-front Monthly Annual Per Message

Delivery

Sales

500 5,000 $595 $195 $2,545 $0.51$0.0

7$0.13 61% 2

$10.18

Plan 2

1,000 10,000 $595 $375 $4,345 $0.43$0.0

7$0.11 59% 2

$8.69

Plan 3

2,000 20,000 $595 $695 $7,545 $0.38$0.0

7$0.09 56% 2

$7.55

Plan 4

4,000 40,000 $595 $1,195 $12,545 $0.31$0.0

7$0.08 53% 2

$6.27

Pay as you go

Unlimited Unlimited $995 Variable Variable $0.51

$0.07

$0.13 61%

Variable

Variable

Sponsor Pricing: Add 15% to respective building or district pricing when sponsor is secured by PACE representatives

PACE traditionally charges a competitive set-up and monthly licensing fee for service. As an alternative, some schools and school districts 5

enlist the support of a local business sponsor who, in return for paying the fees to procure PACE, earn exclusive recognition rights for their contributions to their adopted school(s).



Our sales strategy will be executed in two phases. First, we will continue to penetrate our local market of Southern California more rapidly in an effort to build our brand as the trusted leader in school-to-home communications. Second, we will expand our service offerings beyond Southern California beginning Spring 2002.

Local Market Penetration in Southern California A breakdown of the seven different counties in our local market of Southern California and numbers of schools within those counties is contained in the table below:

To date, PACE has acquired schools on a building-by-building basis with a sales force of two independent contractors. Accordingly, we have acquired between 7-20 schools per month during our first four months of operations. During the past two months, we have shifted our focus to approach school districts as opposed to school buildings. Districts are important because they represent a centralized decision-making body for tens, even hundreds, of school buildings. Therefore, in conjunction with the proliferation of PACE word-of-mouth marketing initiatives, we expect to rapidly increase penetration in the local market. In the second quarter of 2002 we will add two additional independent contractors in the southern California market to bring our sales force to four. Using independent contractors, our costs of sales is as follows:

Cost of direct sales – independent contractors:

Given approximate average annual revenue of $5,000 per school building, a local market penetration of 10% within the K-12 market segment alone translates to more than $2.75 million each year. Within our local market, our experience to date indicates that socio-economic factors are the primary drivers behind the market adoption of our solution. As such, we classify target schools as follows:

Immediate Early Adopters These schools can either pay directly or can easily be assigned a business sponsor willing to pay above and beyond the school quoted subscription price. Given the early focus on residential real estate agents as Business Sponsors, many of these schools are located in areas with higher property values. Most

County Public Schools Private Schools Total Schools

Los Angeles 1,762 1,328 3,090

Orange 563 326 889

San Bernardino 464 1 959

Kern 239 66 305

Ventura 1 99 294

Santa Barbara 112 49 161

San Luis Obispo 80 28 108

TOTALS 3,415 2,091 5,506

Type of Sale Commission Notes

Direct Pay 20.0 % For a new customer, paid as cash is received

Sponsor Pay 7.5 % For a new customer, paid as cash is received

Renewal 7.5% Existing customers, paid as cash is received, and only if the IC still under contract



Immediate Early Adopters are private schools, parochial schools and progressive public school districts. We estimate there are more than 2,000 Immediate Early Adopter prospects in Southern California alone.

Delayed Early Adopters These schools require federal or state assistance to pay for PACE. Programs such as E-rate (see Market Opportunity section) offer more than $2.25 billion to America’s schools for technologies like PACE. Currently, PACE is working with a number of large school districts in Orange County California to secure E-rate funding. To insure E-rate eligibility, PACE has been working with the leading education technology policy maker in Washington D.C. to formulate our federal policy, implement a powerful marketing outreach strategy and raise our profile through key strategic alliances.

Later Adopters These schools are unwilling to assume the “market leader” position. Typically, these schools are mired in bureaucratic process. We anticipate that many of these schools will adopt PACE once the trend is firmly established.

We will continue to focus our marketing efforts on Immediate and Delayed Early Adopter customers within Early Education, Elementary and Middle Schools in the Southern California region, using independent contractors for direct sales, because this segment has the flexibility and financial means to adopt PACE immediately. At the same time, we can mitigate our cash exposure, perfect our product, achieve operational scale and preserve customer intimacy. Upon achievement of these goals, we will launch widespread marketing to Later Adopter schools in the same region. 6

Expansion Beyond Southern California To date, we have employed a time-intensive and solutions-oriented direct sales approach primarily aimed at individual school buildings in the Southern California market. This direct sales approach has enabled us to perfect the service and satisfaction of our local market to protect our brand, enhance loyalty and build references that can be leveraged in expanded sales efforts. We leverage these success stories and references of existing PACE schools to generate the most trusted form of endorsement, references, testimonials, and word-of-mouth.

In 2002, we will aggressively recruit, certify and manage a network of sales representatives, agents and resellers with proven success in the education market. To this end, we have developed a variety of in-house technologies to decrease operational overhead, manage quality, increase profitability and establish scalability for national implementation. They include:

▪ Sales Automation – designed to insure coordination, efficiency and quality of PACE distribution; ▪ Remote Deployment – enables PACE to instantly deploy and upgrade our solution; and ▪ Online support – provides thorough guidance through a user guide, glossary, FAQs and E-mail. Most important, these tools will enable PACE to pursue channel distribution for our product in the form of area developers, resellers, independent sales representatives (ISR’s) and regional sales agents.

We have also raised our profile by developing relationships and alliances with key industry groups like the National School Board Association (NSBA), National Association of Elementary School Principals (NAESP), National Association of Secondary School Principals (NASSP), The United States Department of Education, the American Association of School Administrators (AASA), National Association of Independent Schools (NAIS) along with local and regional Parent Teach Associations (PTA). PACE has conducted preliminary meetings with each of the aforementioned organizations and has received a tremendous

Our current inventory of schools includes approximately fifteen Loss-Leader Early Adopters. We anticipate matching some or all of these 6

schools with more regional and “conscience” oriented sponsors like Wells Fargo Bank.


“I finally receive timely information about important school events and I don’t have to rely on my daughter to keep me informed. I think what the PACE system provides is wonderful for all the parents.”

Kelby Viole, Parent, Beth Hillel Day School


response to our product and mission. PACE has been featured in recent publications of both the NSBA 7

and NASSP. Additionally, we have received numerous client references from these organizations.

Using our own technology capabilities, we will also build a national direct-to-customer strategy. This will include enhancements to our web site that allow customers to purchase direct, either online or through inbound telemarketing. This will also involve our use of the PACE technology through state and national K-12 organizations and associations to build brand recognition and generate direct sale, inbound leads. This direct-to-customer approach allows PACE to serve and service both rural and metro markets, on a low cost basis, with or without direct or indirect sales force presence in any given area.

Channel Distribution PACE will provide sales and support through a network of select resellers and directly to education organizations. The PACE technology and value proposition are straightforward and can be conveyed by a remote sales force, especially when supported by our sales force automation application. PACE has identified a number of potential resellers with complementary, yet non-competitive offerings, and significant inroads into the education market. These resellers can be categorized as follows:

K-12 Technology Consultants and Integrators. Companies such as IBM, KPMG, SL Streaming, Dell and Futurekids (www.futurekids.com). Futurekids is an educational technology and curriculum development firm with more than 2000 franchisees and K-12 relationships worldwide. Our VP, Business and Corporate Development is the former VP of National Sales at Futurekids and is working to build a nationally focused partnership with this leading franchiser.

Regional Resellers. Phone system and PBX solutions providers within the education market. We will target partnership opportunities with these companies because PACE is best characterized as a “phone system upgrade/enhancement” in terms of the budget line item on a school district level. Therefore, we believe existing distributors of phone systems represent an excellent channel. By the same token, PACE is an ideal complement and value-add to their existing hardware/software offerings. Area Developers, Agents and ISRs. PACE will recruit highly regarded business associates, agents and independent sales representatives within the K-12 education community to resell our products throughout the United States. These individuals wield access to the leading decision makers in schools and school districts nation-wide. This influence can accelerate the acquisition process without burdening PACE with too much overhead.

In exchange, PACE partners, resellers, area developers, agents and ISRs would receive an industry-standard commission (20-40% gross) for each successful sale and based on the volume of sales they can deliver. For the most part, quality will be controlled through our sales automation tool, which insures maximum communication, coordination and brand message consistency. PACE resellers will be managed by a central account manager, our own experienced education market insider, the PACE VP, K-12 Acquisition and Retention.

We will be able to attract and retain highly qualified area developers and other resellers by offering them the opportunity to:

▪ Build a substantial book of business through marketing a unique and affordable service that delivers immediate results

▪ Benefit from attractive margins and an incredibly short sales cycle ▪ Benefit from amazing ease of customer start-up and servicing requirements with PACE ▪ Earn residual income from their book of PACE clients ▪ Resell PACE without upfront purchase or credit applications ▪ Make an impact by improving K-12 school community communications

We are currently in discussions regarding a variety of collaborative initiatives to advance our mutual interests including: large-scale cooperative 7

mailings, special “new product” feature articles on PACE in relevant industry publications, conference sponsorship opportunities for PACE and reseller/private label relationships.


http://www.futurekids.com


Cost of indirect sales:

Use Of Proceeds PACE intends to offer one million dollars ($1,000,000) of Class A Preferred Membership Interests solely to accredited investors. The net proceeds from the proposed offering will be used primarily for working capital, sales and marketing and general corporate purposes associated with expansion beyond our local market. We believe that the net proceeds from this offering, together with our existing funding commitments, current cash and future revenue, will be sufficient to meet anticipated cash needs for working capital and capital expenditures until we reach profitability. Specific areas of investment include:

▪ Web site enhancement to enable direct-to-customer sales ▪ Web site optimization ▪ Marketing collateral additions and enhancements ▪ Sales training development and implementation for IC, AD, ISR, and other channel partners ▪ Branding campaigns through National and State K-12 associations using PR and PACE ▪ Building inbound telemarketing capabilities

MARKET STRATEGY Market Segment PACE is the most powerful general purpose outreach tool available to schools. This value proposition, however, varies across the K-12 market landscape. To that end, we will target those schools with the greatest need for outreach communications.

Our experience to date along with Focus Group Research reveals that Elementary, Middle and Early Childhood Schools are more hands on with parents and place a premium on outreach communications. They tend to be more autonomous and less bureaucratic when it comes to technology decision making. Moreover, faculty and administration have more time to devote to “reaching-out.” Finally, there are significantly more Elementary, Middle and Early Childhood Schools than High Schools. The following matrix treats the outreach priorities of the various K-12 market segments:

Type of Distributor

New Sale Renewal Notes

Channel Partners 20 – 40 % 10 – 30% Rate structure will be based on several factors, including depth and breadth of the partner’s participation, market knowledge, capabilities and investment.

Regional Resellers 20 – 40% 10 – 30%

Area Developers 20 – 40% 10 – 30%

ISR’s 20 – 30% 10 – 15%

Emphasis on Increased Parental Involvement and Satisfaction

Emphasis on National Standards (API, ADA)

Fundraising

Elementary School X

Middle & Junior High School X

High School X

Private K-12 School X X

Early Childhood School X X

Religious Schools X



COMPETITION

Direct Competition Our value proposition to schools is unique. PACE is the only solution that can deliver thousands of messages in minutes rather than days. PACE is the only solution that does not require any equipment purchases or phone line installation. PACE is the only solution that can be deployed immediately. PACE is the only solution that can be subsidized entirely by a corporate sponsor, or in large part by E-rate. PACE is the only solution that does not require training or support.

The current state of the school-to-home communications market consists of a variety of multi-purpose software packages that convert desktop computers into "voice-mail box" and "auto-dialer" machines. Of course these packages are limited by the number of phone lines installed into each desktop computer. Consequently, "auto-dialers" can take months to install. Even then, a typical call to the entire parent-body can take days for an "auto-dialer" to deliver.

Because of this phone capacity limitation, "auto-dialer" technologies rely heavily on parents to call in to central voice-mail boxes for important information and updates. This perpetuates school-to-home information asymmetry. PACE removes the burden from parents by closing the loop through instant and confirmed delivery to thousands of recipients in minutes to a multitude of communications devices.

PACE has three competitors in the school-to-home messaging market: Parentlink (www.Parlant.com), PhoneMaster (www.Usnetcomcorp.com), and SchoolMessenger, (www.schoolmessenger.com). Each of these companies is an "auto-dialer" package and requires clients to purchase additional hardware, upgrade software and install dedicated phone lines to handle their call volume. This creates more personnel overhead for the school as well as creates a single point of failure for the schools messaging and communication needs.

Below is a matrix showing the requirements and fail-safes between PACE and these "auto-dialers": FEATURE PACE Auto-Dialers (AD)

Hassle-free Installation

Yes. PACE securely employs the Internet to interface and utilize all school computers.

No. AD requires a new stand-alone computer plus new dedicated phone lines.

Easy to Use Yes. Anyone can become an “expert’ in less than 10 minutes.

No. AD requires professional maintenance and modification.

Real-time Calling Yes. PACE will scale with the school’s need for more or faster communication.

No. AD is dependent on the number of new phone lines installed at the school.

Telecommunication Fees

No. Telecommunication Fees are included in the PACE subscription.

No. School must pay for each call made by AD according to school phone rates.

Power Safe Yes. PACE is hosted with a top-tier hosting provider who has redundant power feeds and on-site generators.

No. In the event of a power outage, rolling blackout, power surge, AD will not function.

Backup and Recovery Yes. PACE does daily incremental backups, weekly full backups, and stores tapes offsite for Disaster Recovery.

No. AD has no central server, and in a Disaster Event ALL data and voice messages will be lost.

Ongoing Maintenance Yes. PACE does ALL hardware/software maintenance on it’s own network. No external personnel required.

No. AD requires additional personnel on-site at the school to maintain both hardware/software and phone lines.

Parent/Student Directory integration

Yes. PACE will accept either Excel spreadsheets of the information or any delimited files.

Yes. But AD only accepts ASCII delimited files.


http://www.Parlant.com

http://www.Usnetcomcorp.com

http://www.schoolmessenger.com


Indirect Competition We recognize that certain other companies have developed similar one-to-many Internet to telephone broadcast, or "burst" technologies. Those companies, however, are infrastructure providers and focus on customized integrations and enterprise development of large-scale messaging, broadcast and notification services within more consolidated and competitive markets such as local exchange telecommunications, financial services, political campaigns and Fortune 500 corporate sectors. Whereas infrastructure companies provide a service, PACE offers a product.

PACE productizes the powerful technology of an infrastructure company, creating the first CRM for the education market. In other words, PACE “extends” the “broadcast” infrastructure into an easy-to-use application entirely responsive to the school’s needs. This makes PACE a software product as opposed to a messaging service. Schools use the PACE product to harness the power of a world-class communications infrastructure; to “manage” their outreach communication initiatives with parents, faculty and alumni. In that regard, the PACE takes on a look, feel and purpose in the mind of the school client. Thus, we are able to brand ourselves in a meaningful way each and every time a school “manages” an outreach communication to their parents, faculty or alumni.

Infrastructure providers do not have the K-12 domain expertise in terms of a proprietary front-end application and user experience. In order to achieve comparable functionality to PACE, these companies would need to develop their own Web application to interface with existing school databases, manage important school contact information including event and message distribution, recipient polling and customized reporting. Infrastructure companies are not designed to address the specific communication needs of K-12 academia. Instead, they ally with aggregators of messaging, like PACE, to develop custom applications that interface with their infrastructure and generate large volumes of outbound messaging. In fact, the leading universal messaging company, Envoy WorldWide, is PACE's exclusive partner in the K-12 education market. As such, all education market clients that endeavor to use Envoy WorldWide must be referred to PACE.

In light of our early success, we must anticipate competition. To protect our position we will capitalize on our first-mover advantage. Accordingly, we have developed a proprietary sales force automation application that will serve as the cornerstone of our aggressive reseller campaign. We appreciate that successful execution requires a deep understanding of community academic and business intricacies. We will continue to address and innovate our technology in response to the unique needs of our clients in this new niche market. Scale within this highly fragmented segment can only be achieved through serious commitment to grassroots sales, marketing and product development.

Redundancy Yes. PACE is architected for complete redundancy. No single points of failure.

No. One computer at a school. If that computer fails, the entire system fails.

Seamless Upgrades and Enhanced Functionality

Yes. PACE is a centralized server and services multiple schools. Therefore, there are constant improvements and upgrades to the system as each school benefits from the insight and experience from the other schools.

No. AD requires new software and upgrades to be installed and setup on the single computer by a professional or dedicated school employee.

FEATURE PACE Auto-Dialers (AD)

Hassle-free Installation

Yes. PACE securely employs the Internet to interface and utilize all school computers.

No. AD requires a new stand-alone computer plus new dedicated phone lines.

Easy to Use Yes. Anyone can become an “expert’ in less than 10 minutes.

No. AD requires professional maintenance and modification.

Real-time Calling Yes. PACE will scale with the school’s need for more or faster communication.

No. AD is dependent on the number of new phone lines installed at the school.

Telecommunication Fees

No. Telecommunication Fees are included in the PACE subscription.

No. School must pay for each call made by AD according to school phone rates.


“ We have accomplished all of our goals; we've had increased response to our requests, and sometimes double the attendance at events. This service is invaluable."

David-Paul Zuber Principal, Holy Innocents E.S.


MANAGEMENT TEAM

Marshall R. Abbott, Co-Founder and Chief Executive Officer Marshall brings strong experience in early-stage ventures, financial operations and the law. Abbott comes to PACE from Avante Global, a venture consulting firm, where he initially advised PACE as a client on matters ranging from corporate strategy to financial analysis.

Prior to Avante Global, Abbott founded Bigsafe Inc., a small business ASP based in San Francisco. As President of Bigsafe, Abbott guided Bigsafe from four employees to more than 25 employees while procuring two rounds of institutional financing. Abbott was also an original employee in the Special Projects Clearing arm of Bear, Stearns & Co. There he participated in large-scale trading system implementations for clients such as New York Life and the State of Ohio Pension Fund and served as a liaison between his department and client procurement officers.

Abbott holds a J.D., M.B.A. from Columbia University in New York City and a B.A. in International Relations from the University of Pennsylvania. While at Penn, Abbott served as President of Community Kids, an outreach program for underprivileged youth. At Columbia, Abbott continued his commitment to children by coaching a team of Harlem adolescents in the Legal Outreach Mock Trial Program.

Thomas L. Motter, Executive Vice President, Business and Corporate Development Prior to joining PACE, Tom served in several senior executive capacities with Futurekids, a $50 Million global educational technology services firm. As VP of Worldwide Franchise Operations, Motter directed the company’s strategic move from a consumer driven, retail oriented business into the K-12 education market. As VP of Global Product Operations, he spearheaded the move from a pure training and services organization to a balanced products and services portfolio, substantially improving the firm’s profitability potential. He was successful in building a national brand presence for Futurekids in the education market, winning more than $10 Million in school contracts during the first year of the new effort.

Prior to joining Futurekids, Motter served in several capacities with Century 21 Real Estate Corporation’s Pacific Division. During his ten-year tenure with the company, he held VP level positions in Franchise Development, Marketing, Operations and as Regional Director for Southern California operations. He contributed to significant advances for the company, opening new market segments in the commercial and investment real estate sector, creating and implementing programs and systems designed to support those segments, and improving company-wide operations.

Motter began his real estate career as a commercial broker with a Century 21 affiliated firm. Representing and negotiating property acquisition and disposition for national clients including McDonald's, US Steel, and Control Data, he propelled the local affiliate to leading commercial brokerage firm status in the Century 21 North Central States region.

John F. Gamba, Co-Founder and Chief Strategy Officer John brings ten years of experience in high-tech consulting, software development, systems integration and venture capital development. As a VP with Magnet Interactive Communications in 19, Gamba co-developed several “edutainment” software applications for National Geographic, Discovery Channel, Microsoft and 20th Century Fox.

As an Executive Vice President for US Interactive, Gamba helped grow operations from one office and $3million in revenue to 8 global offices and $50 million in revenue in less than 3 years. Gamba has extensive experience with high-tech ventures in the fields of software, E-learning and telecommunications. As Chairman and CEO of venture consulting firm Avante Global, Gamba has helped raise over $5 million in early-stage funds for new high-tech start-ups and generated over $2 million in cash-flow positive consulting revenue.

Gamba holds a B.A. in American History and Industrial Management from the University of Pennsylvania and Wharton School of Business.



Joshua Roth, Chief Technology Officer Josh was Senior Vice President and Chief Technology Officer at Viva Group, Inc. In his role at Viva, he led the strategic growth and development of the company's technical infrastructure, built a team of 25 engineers and interface experts to manage and develop the ongoing product efforts, and played a key role in making business decisions as a part of the executive team.

Prior to Viva, Roth was VP of Technology at Media Revolution where he guided the technical solutions team, oversaw various projects, aided in the creation of company-wide processes and provided strategic technical direction. Before Media Revolution, Roth was the Director of Technical Design for US Interactive, where he managed a department of more then 40 systems architects, software engineers and programmers. While managing this group, he oversaw the creation and implementation of innovative technical solutions for the company's clients, including Disney, Toyota, Dairy Farm and Microsoft.

Roth holds a B.S. in Computer Science and Engineering from the University of California at Los Angeles.

INVESTOR PROFILES

John Gamba, Sr. John is presently serving as the Chairman of the Board of SmartPros LLC. SmartPros is a leading provider of continuing education for professionals in the accounting, financial management and engineering, markets. Prior to this appointment he was Chief Executive Officer at Virtual Education Corporation (VEC). VEC was an E-Learning company focused on Engineers and general business customers and was merged with two other companies to form SmartPros.

John Gamba Sr. is the founder and President of JFG Associates, a leadership consulting and investment firm and brings a wealth of senior leadership experience to his current business endeavors. Prior to retiring from the Bell Atlantic Corporation in 1997, John reported directly to Bell Atlantic's Chairman and CEO as an executive member of the Office of the Chairman. He held this position for six years before retiring. John's senior leadership experience spans a variety of key assignments including: Group President-Network Technologies and Systems, President-Network Services, Inc., Vice President-Information Systems, Chief Financial Officer for a Bell Atlantic subsidiary and Senior Vice President-Corporate and Human Resources. As a senior executive, he championed re-engineering efforts that resulted in improved customer service and annual savings of over $200 million and led Bell Atlantic's culture and quality management transformation from 1993 through 1997. John's last assignment focused on the Bell Atlantic and Nynex merger. He worked with the Chairmen and CEOs of Bell Atlantic and Nynex on designing and deploying a new management system that would lead and unite the new corporation.

John served on the public school board of the West Chester Pennsylvania Area School District and the Southern Chester County Vocational Technical Board. He was also on the board of directors of Bellcore (now Telecordia), the Board of Trustees of Capitol College, the Board of the Washington Scholarship Fund and serves on the Committee for Undergraduate Financial Aid for the University of Pennsylvania. He was selected as a National Baldrige Quality Examiner in 19. John holds a B.S. Degree in Economics from the University of Pennsylvania's Wharton School and an MBA from Drexel University. John has written articles on the topic of executive leadership and corporate culture change and has spoken on this topic with corporate executive leadership teams, industry conferences and universities around the world. Bennett J. Liss, Founder Bennett has owned and operated Lenders Trust Mortgage; a full-service mortgage brokerage licensed by the State of California since 1992, and has brokered over $1 billion worth of residential real estate loans. Lenders Trust Mortgage counts as its clients 20th Century Fox FCU and related companies, which includes many of the top entertainment personalities in the world. Before entering the mortgage arena, Mr. Liss was a highly successful actor appearing on Broadway and on television. Bennett is a family man, married, with two small boys living in Los Angeles.

Frustrated by a direct mail miscommunication between his child’s school regarding a parent-teacher conference, Bennett sought to make a difference. Guided by the administration of his first school, he



commissioned several engineers to develop the PACE technology. Never again did Bennett miss a school communication.

FINANCIAL HIGHLIGHTS

Currently, PACE has more than 65 client schools with a pipeline of more than 900 potential clients in Southern California and immediate initiatives to implement a national distribution campaign. Total cash 8

investment to date of more than $650,000 plus more than $400,000 of in-kind services has yielded a completed Version 2.0 of our product as well as Version 1.0 of our proprietary sales automation tool. To date, we have derived a substantial portion of our revenue from corporate sponsors who subsidize the cost of our system in exchange for exclusive recognition rights from the school. We project our revenue from operations to grow substantially from an estimated $170,000 in Year 1 of operations to approximately $31 million in Year 4 of operations. Accordingly, we anticipate break-even on a cash-basis during our second year of operations. Based on projected average revenue per school and projected operating expenses, we 9

expect gross margins of approximately 52% by the Year 4 of operations. Detailed financials are 10

available upon request.

Financing History and Ownership PACE was recently re-capitalized by a sizable cash investment from Bennett Liss, John Gamba, Sr. and Avante Global, LLC. Additional detail in the form of a capitalization table is available upon request.

Use Of Proceeds PACE intends to offer one million dollars ($1,000,000) of Class A Preferred Membership Interests solely to accredited investors. The net proceeds from the proposed offering will be used primarily for working capital, sales and marketing and general corporate purposes associated with expansion beyond our local market. We believe that the net proceeds from this offering, together with our existing funding commitments, current cash and future revenue, will be sufficient to meet anticipated cash needs for working capital and capital expenditures until we reach profitability.

PACE RISK FACTORS

This business plan contains forward looking statements. These forward looking statements are solely the opinion of PACE management. While we believe strongly that our business model is unique and a superior value proposition, certain business risks and factors remain. As with any new enterprise, there are a number of associated risks that must be considered in order to reduce their probability of occurrence. PACE has studied the market and has identified and highlighted below the most likely factors that pose a risk to our technology and the sponsorship program. By no means is this list exhaustive:

▪ The time required to ramp up additional K-12 schools or community businesses to sponsor local schools may take longer than past results have indicated.

▪ Certain schools are reluctant to participate in the promotional or marketing aspects of the business sponsor program.

▪ Certain public schools sometimes take longer to budget for our product. Private schools, on the other hand, may be reluctant to sign up for branding or reputation reasons. To address this, we have done our best to maximize qualified Early Adopter candidates of which we believe there is an enormous market.

Of these 65 clients, approximately 35 are paying clients. The remaining 30 clients do not pay for one of two reasons: 1) The School represents 8

a strategic client aimed at accelerated market penetration 2) The school has subscribed to PACE as is in the process of being paired with a business sponsor. Currently, there are approximately 10 schools awaiting sponsors. As a general guideline, it takes approximately 2-3 weeks to pair a school with a business sponsor.

It should be noted that 64% of newly acquired PACE schools in October, 2002 are sponsored schools paying $5,000 cash up-front for services 9

to be rendered throughout the following year, creating a liability to perform services on an accrual basis.

These net cash margins are inclusive of capital expenditure of $927,520.10



▪ Privacy issues will also need to be addressed and will affect the extent that schools will provide outside access to their databases. The legal repercussions of unlawful access, particularly to information about minors, could act as a significant deterrent.

▪ We might face intense competition. ▪ A downturn in market or economic conditions may affect PACE as local Business Sponsors may not be

able to afford to participate in the sponsorship program. ▪ PACE's failure to adequately identify and erect market barriers may allow competitors to enter the

market.


PACE BUSINESS OVERVIEW

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FINANCIALS


PACE FINANCIAL SUMMARY

Pace Business Plan

Documents

Transcript of Pace Business Plan