Winston D. Johnson - Welcome to Winsonic Digital Media ...winsonic.net/pdf/chairman.pdf · Winston...

WINSONIC DIGITAL MEDIA GROUP

2500 Anthem Village Drive Suite 200 Henderson, NV 89052 Office: 404-223-2301 Fax: 404.223.2313

Winston D. Johnson Founder and Chairman WinSonic Digital Media Group, Ltd. WinSonic Digital Cable Systems Network, Ltd. Chairman’s Review Dear Valued Investor: Mine is a blessed existence. More than thirty years after building WinSonic Digital Media Group, my days remain an exercise in learning, absorbing and growing. In all of these lessons, I’ve found that our shareholders and partners have proven to be a major ingredient in our recipe for success. WinSonic Digital Media Group is not a conventional company. We do not intend to become one. Success in this industry relies a great deal on envisioning and delivering the services needed to support a society with an appetite for greater convenience, better quality and lower cost communications. Not only is our company well positioned to be a leading provider of digital distribution services in this country, but also our offerings have gained a new level of recognition and status in our industry. At WinSonic Digital Media Group our belief is that the future is digital and, over the next few years, we will continue to see its rapid adoption in our country, particularly as analog licenses are surrendered and the incumbent carriers increasingly seek to migrate their platforms to digital networks. Our focus, therefore, is on leading the way in innovative new services while offering highly competitive rates combined with excellent customer service. Our corporate policies and practices are designed to ensure that this focus is continuously upheld at all levels of our company. With an objective of listing on a major exchange as soon as reasonably possible, we have made a point of adopting industry best practices in our public company corporate governance and board oversight, and will continue to identify ways to enhance and strengthen our corporate stewardship as WinSonic Digital Media Group evolves and prospers. I'd like to formally welcome you to join those who have stood by us with unwavering support and confidence and invite you as a prospective investor to pay very close attention to our actions. We believe you will come to find that we are indeed a company on the move and one that is destined for greatness. We are Winsonic Digital Media Group. Chairman Founder, Winston D. Johnson



WinSonic Digital Cable Systems Completes Bridge Financing Line of Credit WinSonic Digital Cable Systems Network Commences Restructuring Efforts; The Effort to Restructure WinSonic Digital Media Group, Ltd., by Debt Reduction and Maximizing the Value of Corporate Assets Is Aggressively Pursued

ATLANTA, GA-- (Market wire - 06/21/10) - WinSonic Digital Media Group, Ltd. (Pinksheets:WDMG - News) (www.winsonic.net) and WinSonic Digital Cable Systems Network, Ltd. (WDCSN), a facilities-based digital media company, announced the completion of an agreement providing bridge financing dedicated to the launch of WinSonic Digital Cable Systems Network, Broadcast Center, Super Computer Lab, and Customer Care Support Services. Terms of the loan facility call for the investment group to become majority shareholders in WDCSN. Included with their acquisition of a controlling interest is the right to appoint two directors to the board of WDCSN. The investment group has commenced assisting WinSonic Digital Cable Systems Network in recruiting and appointing key management and technical positions as well. WinSonic Digital Media Group (WDMG) is in the process of making material event filings designed to expedite the accomplishment of these objectives. WinSonic Digital Cable Systems Network (WDCSN) is a privately held spin off from the parent company, domiciled in the state of Maryland. By establishing WDCSN as a separate entity, significant cost savings were achieved as well as enhancing the opportunity to attract direct investment into the new corporation. Additional actions were taken by WDMG to provide maximum flexibility in using the capital structure of the treasury to restructure or eliminate debt. Also, proceeds from the line of credit will provide an additional investment in equipment and expertise to build and manage WinSonic Digital Cable System Networks.WinSonic Digital Cable Systems Network will activate on-demand services for all major formats including real time broadcast, HDTV, 3D, Adobe Flash, MAP audio, QuickTime, Real Networks Real Player, Windows Media and iPod compatible. WinSonic strategic initiative now establishes WinSonic services available to local, global, and wireless networks, i.e. Verizon, Cogent, Sprint, AT&T, Tulix, Time Warner, and Comcast; thereby, capability is created to cross all new platform standards for delivery of digital media.

"This funding plays a critical role in facilitating WDCSN's transition from a development stage company to a full operating company. We anticipate revenue from the launch of these projects in the fourth quarter of 2010. Throughout this transition, WinSonic will maintain its heritage of innovation, service, quality, reliability and integrity. We shall continue to provide the level of services our customers and the market have come to demand," said Winston Johnson, Chairman & CEO of WinSonic. As facilities based network, WDCSN is now uniquely positioned to offer products and services to corporations, government agencies and private individuals interested in capitalizing on efficiencies and benefits derived from this emerging market for advanced super computing services. WinSonic Digital Cable Systems Network (WDCSN) will now launch its national, digital TV transport network schedule in the third Quarter of 2010. WDCSN will offer an extensive content library with transport rights from top national programmers, cable networks, linear programming, established music libraries, and Video on Demand (V.O.D.) rights from major Hollywood movie studios. "Working with our partners, WDCSN will offer solutions completely dedicated to the highest quality digital delivery of television, video and music content to our client subscriber base," said Winston Johnson, CEO of WinSonic Digital Media Group, Ltd. "Our network has been focused solely on digital video, digital music and digital television services. We have structured our product offerings in a manner that optimizes the experience for both network and customer subscribers." WinSonic Digital Cable Systems Network has secured contracts for digital video, digital music, and digital television distribution services. In addition to previous announcements, WinSonic Digital Cable Systems Network and VIPMEDRX have teamed up to deploy a chronic disease management system on the WinSonic Digital Cable Systems Network. VIPMEDRX offers a chronic disease management system that coordinates care of patients with diabetes, hypertension, asthma and other chronic diseases with their physicians. WinSonic Digital Cable Systems Network & VIPMEDRX product is the initial product offering providing online tools for self management, education and social networking enabling doctors to coordinate care with patients in their homes or community based kiosks.



WinSonic Digital Media Group, Ltd. Releases Business Update to Shareholders

WinSonic Digital Cable Systems Network Commences Restructuring Efforts; The Effort to Restructure WinSonic Digital Media Group, Ltd., by Reducing Debt and Maximizing Value of Corporate Assets, Is Aggressively Pursued Companies

ATLANTA, GA--(Marketwire - 04/16/10) - WinSonic Digital Media Group, Ltd. (Pinksheets:WDMG - News) (www.winsonic.net) and WinSonic Digital Cable Systems Network, a facilities-based digital media company, release the following business update to shareholders. The Company continues to focus their efforts on growing existing markets, identifying additional market opportunities, product development and reducing expenses. Management believes that in spite of difficulties in the current economic environment there are ample opportunities for future economic growth and corporate prospects remain excellent. At this time prospects for capital formation are best served by continued emphasis on growing the business and strengthening the balance sheet. In response to this statement, WinSonic Digital Media Group (WDMG) has filed material events designed to expedite the accomplishment of these objectives. WinSonic Digital Cable Systems Network (WDCSN) spin off from the parent company (WDMG) as a separate, privately held corporation domiciled in the state of Maryland was the first material event. By establishing WDCSN as a separate entity, significant cost savings were achieved as well as enhancing the opportunity to attract direct investment into the new corporation. Additional actions were taken by WDMG to provide maximum flexibility in using the capital structure of the treasury to restructure or eliminate debt. WDMG has entered into a agreement with a new organization noted as the WinSonic Group, LLC. The WinSonic Group is a separate entity headed by Winston Johnson that intends to retire or refinance the debt of WDMG as well as develop a new WinSonic Campus where network facilities for WDCSN will be domiciled including:

A 4 Acre complex including WinSonic Digital Cable Systems Network, Ltd. Broadcast Center, Super Computer Lab, Customer Care Support Service, WinSonic Home Entertainment, WinSonic International, WinSonic Electronics, WinSonic Studios, WinSonic Institute, WinSonic TV, WinSonic Music, WinSonic Publishing, and WinSonic Process Digital. In addition to facilities development, the WinSonic Group will provide financial, advisory, and management services on all phases of the senior debt financing process as well as working with an Atlanta based CPA firm to complete the 10K 2008 Audit and 2009 first, second, and third quarter 10Q's. Included in the services will be preparation and presentation of a comprehensive private placement memorandum, solicitation of lenders and coordination with other financial advisors to complete the transaction. The WinSonic Group will oversee a debt capacity analysis and advisory services on establishing optimal capital structure parameters in connection with this transaction. In a coordinated effort, the WinSonic Group will work with WinSonic Digital Media Group, Ltd. on a share repurchase and stock buy back program. By repurchasing its own shares, the company intends to broaden opportunities for capitalizing strategic acquisitions that may become available.

As negotiations with creditors of WinSonic Digital Media Group conclude, shares of WDMG common stock will be placed in the WinSonic Group escrow as the WinSonic Group reduces and retires debt. In exchange for investment capital, the WinSonic Group will receive restricted shares of common stock assigned to designated investors from the balance held in escrow. On April 13, 2010 an 8k filing stated a significant milestone in announcing the appointment of an interim Director of a three man Board of Directors to be nominated and voted upon at the next annual meeting of WinSonic Digital Cable Systems Network. Mr. John Bellamy has agreed to act as interim director until a full board is appointed. In addition to Mr. Bellamy's appointment, the 8k announced the WDCSN development and launch of a super computer cloud central office Lab with nationwide fiber optic network application development environments that exist in most carrier labs. WinSonic launched a pair of services targeted at building cloud applications and services."Cloud" computing is an emerging market opportunity that may be unfamiliar to many shareholders.



The online dictionary "Wikipedia" defines cloud computing as: "Internet-based computing whereby shared resources, software and information are provided to computers and other devices on-demand, like a public utility."

As a facilities based network, WDCSN (with the new campus) is uniquely positioned to offer products and services to corporations, government agencies and private individuals interested in capitalizing on efficiencies and benefits derived from this emerging market for advanced super computing services. WinSonic Digital Cable Systems Network (WDCSN) was approved to launch its national, digital TV transport network schedule in the first Quarter of 2010. WDCSN will offer an extensive content library with transport rights from top national programmers, cable networks, linear programming, established music libraries, and Video on Demand (V.O.D.) rights from major Hollywood movie studios. "Working with our partners, WDCSN will offer solutions completely dedicated to the highest quality digital delivery of television, video and music content to our client subscriber base," said Winston Johnson, CEO of WinSonic Digital Media Group, Ltd. "Our network has been focused solely on digital video, digital music and digital television services. We have structured our product offerings in a manner that optimizes the experience for both network and customer subscribers." WinSonic Digital Cable Systems Network has secured contracts for digital video, digital music, and digital television distribution services.

In addition to previous announcements, WinSonic Digital Cable Systems Network and VIPMEDRX have teamed up to deploy a chronic disease management system on the WinSonic Digital Cable Systems Network. VIPMEDRX offers a chronic disease management system that coordinates care of patients with diabetes, hypertension, asthma and other chronic diseases with their physicians. WinSonic Digital Cable Systems Network & VIPMEDRX product is the initial product offering providing online tools for self management, education and social networking enabling doctors to coordinate care with patients in their homes or community based kiosks.

Our clients are healthcare providers, payers and/or patients who seek to lower healthcare costs without compromising quality. This is accomplished through efficient management of chronic disease treatment by increasing the accessibility of medical information and treatment online. The online chronic disease management market is growing rapidly and is currently projected to exceed $25 billion annually. The market is virtually untapped with less than 5% of the needs of chronic illness patients addressed. The United States represents approximately 60 - 70 % of this market. General Electric, Phillips, Microsoft, SUN, Intel, Cerner, McKesson and other fortune 500 companies are currently seeking to penetrate this market; however there is no dominant, full service health information technology company offering a comprehensive chronic disease management product. The federal government has set the bar for physicians and healthcare payers to manage patients more closely, particularly those with chronic diseases. One way this is accomplished is by linking reimbursement directly to their ability to coordinate and provide care outside of the physician's office.

"WinSonic Digital Media Group is aggressively pursuing actions that should offer encouragement to shareholders and the investment community," said Winston Johnson, Chairman and CEO of WinSonic Digital Media Group, Ltd. The WinSonic Digital Media Group has implemented steps that reduce in percent ownership the interest of WDMG in WinSonic Digital Cable Systems Network. "Restructuring is believed to increase the value of WDCSN sufficient to offset dilution from the transaction. As a consequence of these efforts we believe the two companies will allow the market to more accurately assess the value of our assets and market opportunities. We continue to work aggressively toward that end," said Mr. Johnson. On behalf of WinSonic Digital Media Group, Ltd. (“WDMG”), “WinSonic”, the “Company”), I sincerely thank you for your continued interest, patience and support for WDMG. Let me first review with you our plans to transition WDMG from a development stage company to an operating company during 2010. I will close with a high level overview of the 2006, 2007, 2008, and 2009 Financial Statements.



The Company’s 2010 Operating & Business Strategy In 2010, our primary focus is to accomplish the following operational goals:

• Administrative infrastructure (EVP, CFO, CIO) business, accounting, legal systems, and maintenance for business and technical development;

• Identifying qualified individuals to become board members, in determining the composition of the board of directors and its committees, in monitoring a process to assess board effectiveness and in developing and implementing the company’s corporate governance guidelines;

• Board’s fulfillment of its oversight responsibilities relating to (1) the integrity of

WinSonic Digital Media Group’s financial statements, (2) WinSonic Digital Media Group’s compliance with legal and regulatory requirements, (3) the qualifications, independence and performance of WinSonic Digital Media Group’s external auditors, (4) monitoring the performance of WinSonic Digital Media Group’s internal audit function, and (5) the business practices and ethical standards of the company;

• Complete the development of a chronic disease management system on the WinSonic

Digital Cable Systems Network. A chronic disease management system that coordinates care of patients with diabetes, hypertension, asthma and other chronic diseases with their physicians. WinSonic Digital Cable Systems Network VIPMEDRX product is the initial product offering providing online tools for self management, education and social networking enabling doctors to coordinate care with patients in their homes or comm. Support this development by securing agreements with actors, artists, retailers, and celebrities in the film, entertainment, edutainment, and sports industry, as well as other social networks, affiliation agreements with retail businesses for advertising, on-line shopping and subscription revenues;

• Partner with several media companies to distribute and sell music, film, video, and e-

magazine content to customers;

• Focus additional resources on near term revenue opportunities that include providing digital telecommunication services and professional services to enterprise customers;

• Implement certain content distribution network elements to coincide with the Company’s

digital media and content commercial launch to control delivery costs and improve margins; and

• Implement Equipment & Network: – Computers, servers and network equipment and

installation.



• Implement Sales & Marketing plans to recruit and maintain a sales staff to cover targeted

high-yield markets and support their efforts.

• Implement Technical Development and Customization of on going optimization of the

Solink, Aspera, TV, portal and other network applications, as well as integration of best of breed technology onto the platform.

• Implement Customer Support center to recruit and maintain an adoption team of clinical

and technical personnel to maintain early (adopters) customers, as well as an ongoing team to provide 24/7 telephone and on-line support and 24 hour response on-site support to technology and marketing partners.

• Implement Partnership development to obtain $3M investment funding by end of 3rd

quarter 2010 through Private Placement Memorandum to support the operational growth and strategic initiatives. Included in this initiative a second offering associated with a Series B Preferred stock-funding plan.

To better align the core competencies with the market opportunities, drive product development, focus marketing and sales efforts, and execute its business plan, the Company is reorganizing its operations into four major business units / segments plus the Corporate management group. Brief descriptions of each business unit segment and Company affiliations, including products and services, revenue models and target customers follow. The interaction of our planned introduction of the Company’s Content & Technology, our Digital Media Group, Digital Distribution Group and Integrated Services Group as they all interface with our existing supply side affiliations to provide solutions and managed services to our target customer base. 2010 and Beyond Financial Focus We have completed our budgeting and planning session for our financial plan for calendar 2010 and the ensuing three years through calendar 2013. From a procedural standpoint, we will test this plan on a quarterly basis against actual results and modify, when necessary, based on management achievements and then market conditions. While this is subject to further review and adjustment, the table below depicts that which our management believes reasonable over the next four years. As in any financial plan, we assume certain future events and risk factors, which may or may not be under our control.



WinSonic Digital Media Group, Ltd. Five (5) Year Consolidated Income Statement Summary

($ in Millions) 2009 2010 2011 2012 2013

Forecast

1 Forecast

2 Forecast

3 Forecast

4

REVENUE 1,525 8,447 27,484 34,325 52,008 COS 2,108 5,637 17,523 21,093 30,137 GROSS MARGIN (583) 2,810 9,961 13,232 21,871 S, G &A * 6,069 6,013 7,849 8,162 8,566 R&D 485 350 457 480 504 Modified EBITDA ** (7,157) (3,553) 1,655 4,590 12,802 NET INCOME (20,135) (7,380) 655 3,589 11,801

* Excludes the following non-cash SG&A accruals: Stock Compensation, Severance Accrual, Consulting paid with Stock ** Excludes the following Other Income/Expense items:

Legal Settlement costs, Unrealized Gain/(Loss) on Derivatives, Impairment of Goodwill

Potential revenue increase to $35M + resulting from Merger & Acquisition and/or Joint Venture activity with strategic partner(s) commencing mid year 2011; Market Cap projected to $100M+ by end of 1st Quarter 2014. Potential revenues for 2011 – 2014 up to $45M and $70M respectively from M&A activity in 2012 and 2013.

Some considerations supporting our WDMG management’s opinion and forecast in the development of our four year financial plan, include:



Financial Overview This overview for the 2007-2010 financials will provide summary highlights of final results. The Company’s revenue, while increasing to approximately $1.5 million in 2007 and 100% over the prior year, the 2007 quarterly performance through the year resulted in a decrease due to several factors. The primary factor was the halting of construction on three projects by Tytess Design and Development (“Tytess”) in the 3rd quarter. Construction was halted due to projected cost over-runs and the completion time frames to perform the contracts. In addition, Automated Interiors (“AI”) experienced a slowdown in revenue due to cash flow and staffing challenges in the last half of the year. Consequently Tytess was unable to complete jobs due to delayed installation schedules, which prevented timely revenue recognition. The cost of goods sold remained relatively constant each quarter except for the increase in the third quarter related to the accrual for cost over-runs construction projects. The Company had an overall negative gross profit due to adjustments, overages, certain fixed salary costs and other costs associated with Automated Interiors. Operating Expenses In 2008-2009, the Corporate operating expenses totaled approximately $10.9 million and were comprised of many non-cash items and some unique one-time items, which are detailed as follows:

Exceptional Growth Industry Digital media delivery and ecommerce provide exceptional opportunities for sustainable growth in revenues and market share.

Entertainment & Communication Industry Relationships

Management has relationships that enhance ability to acquire and develop content as well as efficiently distribute digital media and communications.

3D Social Networking Applications

The Company’s 3D virtual world browser applications and entertainment distribution platforms are unique and leverage the viral growth of social networking.

Distribution Networking Advantages

Our facilities-based carrier designation affords the Company network rights and privileges, which can be leveraged for competitive advantage.

Diversity Program Opportunities

Our affiliation with WinSonic Diversity offers the Company a unique “go-to-market” channel to access this multi-billion dollar MBE market.



Selling, general and administrative expense. This averaged approximately $186,000 per month and was comprised of the following items:

• Legal expense of approximately $32,000; • Auditing and other public reporting expenses (filing costs/ auditors and D&O insurance)

of $19,500; • Rent, WinSonic network, and utilities of approximately $73,000; • Accounting temporary assistance and recruiting fees of approximately $10,500; • WDCSN consulting expenses for network and programming costs of $10,000; and • Various office and miscellaneous expenses accounted for the balance of approximately

$41,000. These expenses decreased by the 4th quarter of 2009 to approximately $80,000 per month, including an increase in legal fees to approximately $16,000, related to acquisition and private placement work performed by outside counsel after the departure of Janice Alford, and Yari Lawson the company’s internal legal and business affairs person. Bad debt expense. This was a non-cash expense related to the recognition of uncollectible accounts receivable related to AI and Bill Mann. Payroll expense. Monthly payroll expense averaged $328,000 for the year-ended December 31, 2007 with a decrease for the last two years of the year to an average of approximately $55,000 per month. Due to the elimination of personnel and the deferral accrual, the monthly payroll and payroll related expense number decreased and has remained at the $35,000 level. Payroll tax penalties. The payroll tax penalties accrued in 2007 totaled $236,000 for back payroll taxes that are due. The amount is included in the approximate $920 thousand that is currently payable related to payroll taxes from AI, Tytess, WDMG, and other related deals. The Company is currently in the process of negotiating payments with tax authorities and is making payments. Severance accrual. Severance totaling $1.8 million was accrued during 2007 and relates to employees terminated with severance provisions in their original offer letters. This provision relates to all employees hired prior to 1st quarter 2007. While the Company believes the ultimate settlement with each employee may not require payment of severance benefits, this potential expense is recorded on the books. No current employees have severance provision in their offer letters, which were reissued January 2008 to 2010 at the time of the salary adjustments. Stock based compensation. Approximately $2.0 million in non-cash expense was incurred for 2007 to 2009 related to the vesting of stock options that were granted to employees at the time they were hired. These expenses are recognized at the fair value of the options granted over the vesting period as additional payroll expense. The benefit of the options being vested for the employees is the possibility they will exercise these options by writing a check to the Company



to purchase WDMG stock directly from the company. Consulting services-related party. This is a non-cash expense that relates to the fair value of shares of stock issued to stockholders for consulting services related to monies raised during the year. Depreciation and amortization. The depreciation and amortization expense was $124,000, a non-cash item related to historical capital asset purchases. There was a slight decrease to the prior year due to fully depreciated items. In summary, of the $10.9 million in operating expenses 2007-2009, there was approximately $4,800,000 in non-cash and one-time items (bad debt expense, payroll tax penalties, severance accrual, stock-based compensation, consulting and depreciation). With the termination of personnel, adjustment of salaries on a forward looking basis and the elimination of certain non-essential expenses, the on-going burn rate for operating expense is estimated to approximate $25,000 a month prior to legal and audit fees. Other Income/(Expense) Other income and expense was approximately $8.6 million and was comprised of primarily non-cash items. Interest expense. This totaled approximated $7.3 million and is primarily non-cash interest. The interest expense relates to required accounting treatment for discounted convertible debt with detachable warrants and shares or additional warrants issued in connection with financing transactions. Impairment of goodwill. The non-cash expense of $720,000 related to impairment of goodwill is associated with the acquisition of AI, and Tytess. Based on the required annual assessment, goodwill for 2007 it was determined that goodwill recorded at the time of the Tytess purchase had been impaired and the appropriate write-off was recorded. Unrealized gain (loss) on derivatives and warrant liabilities. This non-cash item related to the mark-to-market adjustment related to the 2004 convertible notes and warrants was a favorable $575,000 impact resulting from the variable nature of the conversion price of these items. There is currently one note that remains outstanding with this issue. Legal settlement costs. The net legal settlement amount of approximately $1,764,000 represents the expense related to certain lawsuits that were primarily settled for stock during the years 2007, 2008, 2009, and 2010.



The Company WinSonic Digital Media Group, Ltd., a Nevada corporation and headquartered in Atlanta, Georgia (“WinSonic”, “WDMG” or the “Company”), is a digital media distribution company that owns, develops, manages, and digitally distributes content. The Company has communication licenses, rights and agreements that allow it to cost effectively and reliably deliver its products and services. WinSonic’s library of digitally formatted music, video, print and other media is made available to its customers through innovative web based browsers and distribution platforms. In addition, the Company provides high-end consulting in the areas of digital media production and content distribution, plus related network implementation, integration and communications services. Our History. WinSonic’s lineage can be traced back to the early 1980’s when our CEO, Winston Johnson founded WinSonic Enterprises and several affiliated companies (“WE”) to provide contract production services to the music, film and recording industry. Prominent artists and corporate clients included Michael Jackson, Barbra Streisand, Kenny Rogers, Stevie Wonder, Motown, Sony, MCA, Warner Brothers, A&M and many more. As a result of these entertainment industry relationships, WinSonic owns the digital rights to a library of content including over 200 original “Master” recordings of major artist’s songs, sound effects, and other content. WE pioneered remote film production and editing collaboration solutions for the entertainment industry. Innovations included the “WinSonic Process”, a sophisticated digital file compression technique that provides superior audio mixes, which emulates surround sound and was used for efficiently packaging and transporting video over an advanced Pacific Telesis ATM broadband network. With the advent of these innovations, Mr. Johnson and WE integrated the entertainment industry with broadband telecom, creating one of the first digital content distribution networks in the world. Business Strategy WinSonic is a holding company with several “development stage” subsidiaries that possess or are developing intellectual property, digital rights, software applications, communication licenses and agreements, plus integration expertise. WinSonic, together with its affiliates, is well positioned to participate in the burgeoning IP-based digital media, distribution, and communications industries. The Company will utilize its relationships in the entertainment and communication industries to own and control the digital rights and distribution of as much music and video content as possible. In addition, WinSonic will leverage its preferential communication licenses, interconnection, co-location, and wholesale pricing agreements with global service providers to reliably and cost effectively distribute its digitally formatted voice, video and data products and services. Furthermore, the Company has intellectual property and Internet–based browser applications that it owns and is developing, which will capitalize on the rapidly expanding social networking, virtual world and ecommerce markets. Value Proposition The convergence of media, content, web-based applications, and e-commerce delivered over digital networks optimized for these products and services offers a compelling business opportunity for the Company. Our value proposition follows.



Industry relationships. Mr. Johnson and senior management have long-standing relationships in the entertainment, music and communications industries. Access to content. WinSonic is licensing the digital rights to music and will begin distributing music, video and print media from companies and artists that will significantly expand its portfolio and substantially increase revenues. WinSonic Digital Cable Systems Network (WDCSN) was approved to launch its national, digital TV transport network schedule in the fourth Quarter of 2010. WDCSN will offer an extensive content library with transport rights from top national programmers, cable networks, linear programming, established music libraries, and Video on Demand (V.O.D.) rights from major Hollywood movie studios. "Working with our partners, for the North and South American territory for all contracts and business relationships for digital distribution stores, content aggregation, IP-web hosting and maintenance and consulting services. Applications and development capabilities. The Company has intellectual property, development and digital processing expertise in three dimensional web browser, social networking, and e-commerce applications, plus rights to audio and video compression technologies. Digital distribution networking advantages. WinSonic has licenses, interconnection, co-location and wholesale agreements with global communication companies that permit the Company to control distribution cost and reliably deliver its products and services Minority Business Enterprise (MBE) affiliations. Our affiliate relationship with WinSonic Diversity, LLC, a certified MBE, provides a unique and profitable channel to customers striving to meet corporate diversity goals, objectives, and minority business content. The Industry WinSonic participates in the rapidly growing IP-based, digital media and content distribution industry. Key market trends and other companies that participate in these segments follow. E-Commerce Digital Download Momentum. For more than a decade, the Internet has been the fastest growing retail sales channel in the U.S. According to Shop.org and Forrester Research (www.forrester.com), on-line retail sales, excluding travel, has experienced a 25% CAGR and represented 6% ($147B) of the total U.S. retail sales in 2006. Additionally, eMarketer (www.emarketer.com) is projecting digital entertainment content sales (digital music, on-line TV and movies) to grow from $2.4 billion in 2006 to $7.8 billion in 2010. As the statistics above indicate, broadband access, the rapid adoption of e-commerce and the digitization of entertainment content (music, video, etc.) is significantly changing the traditional media distribution models, which until recent years, were dominated by the sale of physical media (records, CDs, DVDs). In April 2007, Apple announced that it had sold more than 100 million iPods and downloaded over 2.5 billion iTunes tracks since its 2001 market introduction. Digital downloads have become the preferred method of obtaining music. Video is anticipated to rapidly follow this growth trend. Examples of companies that are focused on e-commerce and/or bypassing traditional retail channels with Internet download include Amazon, Apple, Napster, and DMGI, On-stream, eBay, Audible and others. Internet Social Media Network and Virtual Worlds. Hit Wise (www.hitwise.com) reported that over



15% of all U.S. Internet visits were to social networking sites representing a growth rate of 416% within two years. Today there are over 200 social networking sites on the Internet (Infojuice.org January 2008). Because social networks connect people with similar demographics and interests at a low cost, these networks grow virally becoming excellent mediums for communicating brands, distributing content and conducting commerce. As social networks continue to mature, the introduction of 3D graphics, virtual reality, and on-line societies are being created representing new advertising and product distribution channels. Venture capital, technology and media companies recognize this major opportunity too. From October 2006 to December 2010, over $3.4B has been invested into (49) social networking firms that have or are planning on releasing virtual world or “metaverse” special effects. Examples of companies that are focused on social networking and virtual world graphics include Second Life, Whyville, Club Penguin, Kaneva, Gaia Online, There.com, and others. Content Distribution Networks (CDN). According to a January 2008 report published by “Research and Markets”, global sales for all CDN providers in 2006 was $2B and grew an additional 33% in 2007. Content distribution networks augment the end-to-end transport networks and employ a system of computers networked across the Internet to transparently deliver content to end users utilizing optimization techniques including web caching, server-load balancing, and request routing. This industry will continue to grow as streaming video, Internet gaming, and other forms of media and content become “mainstream”. The ability to cost effectively provide low cost bandwidth and distribute network intelligence to the network end-points will be important. There are approximately (30) CDN companies globally with over 80% of the current market share controlled by Akamai, Limelight, and CDNetworks. In 2007, Level 3, AOL and AT&T announced plans to expand their operations into the CDN market too. Product & Service Solutions To better align its core competencies with the market opportunities, drive product development, focus its marketing and sales efforts, and execute its business plan, the Company is reorganizing its operations into four business units/segments. Brief descriptions of each business unit/segment and Company affiliations, including products and services, revenue models and target customers follow. Integrated Services Group (“ISG”) provides communications and integration services including network design, installation of structured wiring, and audio/video systems, plus security and surveillance systems to enterprise and residential customers. In addition, ISG is a value-added reseller of product lines that complement its services business. In 2007,2008, and 2009 ISG generated over $2.4 million of revenue, which was primarily achieved by providing professional services on a project-by-project basis. The Company believes that significant growth can be achieved by extending ISG’s capabilities and portfolio of products and services to include structured wire line, wireless broadband, IP-based connectivity and managed services. To accomplish this, management is pursuing acquisitions and leveraging WinSonic’s existing wholesale purchasing rights with global communication companies, including AT&T, Verizon, Comcast and others, to offer enterprise customers bundled voice, video and data solutions. Management is targeting primarily small to medium size enterprise customers in the medical, multi-tenant unit (“MTU”), multi-dwelling unit (“MDU”), educational and government sectors. WinSonic Digital Cable Systems Network, Ltd. (“WDCSN”) WDCSN and internally referred to as the “Digital Distribution Network Group”. WDCSN is responsible for the engineering, operations and



maintenance of network resources for its own facilities, plus the procurement and management of connectivity from other content delivery network providers. Beyond the ability to cost effectively, aggregate and distribute the Company’s digital media, content and communication services globally, WinSonic and its affiliates can benefit from WDCSN’s certifications, licenses, agreements and wholesale pricing arrangements with some of the largest communications companies in the world. As a Competitive Local Exchange Carrier (“CLEC”) and Interexchange Carrier (“IXC”) with interconnection and co-location rights in AT&T central offices, the Company has access to unbundled network elements and wholesale pricing advantages. In addition, WDCSN has the right to negotiate bulk feed agreements with Comcast and Direct TV that permit the Company to resell cable and satellite TV service on a nationwide basis to its customers and receive a substantial discount with co-branding rights. Management believes this represents a near term revenue opportunity. The Company will sell bandwidth, telephony and IP-based services under the terms of its wholesale agreement with AT&T, resell other communication provider’s products and services, plus offer cable and satellite TV through the Integrated Service Group to enterprise customers at a price that is competitive in the market. As WinSonic’s digital content distribution and communications business grows, bandwidth usage, and controlling end-to-end quality of service will be significant differentiators. By exercising its rights for interconnection and co-location in AT&T’s network, WinSonic can build and operate its own network facilities to control and reduce costs and improve operating margins. Digital Media Group (“DMG”) owns, creates and licenses digital content from artists and media companies to cost efficiently and reliably deliver voice, video, and data products and services to its customers on a global basis. DMG will be responsible for identifying product, service and web based applications, defining the solution, product development and management, sales, marketing, channel management, network security, database management, hosting, and other integration and customer support operations. DMG’s intellectual property includes, but is not limited to, three dimensional web browser applications and interactive media distribution platforms that leverage the viral growth characteristics of social networking and virtual reality. WinSonic intends to commercially launch a 3D virtual city (the “WinSonic City”), which includes retail, commercial and residential buildings, roads, airports, sports arenas, and other environmental and geographic elements in 2008. The Company couples this unique and compelling user environment with on-line shopping for consumer goods and services, digital downloading of music and video, plus other IP-based communications services and office productivity tools. The WinSonic metaverse and on-line shopping application utilizes simple user interfaces and point and click controls. WinSonic will derive its revenue from advertising, e-commerce, subscription services and content distribution partnerships. The Company will focus initial business development efforts on securing affiliation agreements with national retail businesses, media companies, sports associations, alumni organizations, existing social networks, plus music artists, film and sports celebrities. The objective is to fill the WinSonic City buildings with tenants, who execute agreements for advertising, revenue-sharing, and possibly, subscription fees. The revenue model would be similar to existing web browser sites like Google, Yahoo and others, whereby retail businesses offer WinSonic revenue-sharing for on-line purchases, plus commercial and retail tenants purchase banner ads, which in the WinSonic virtual world equate to corporate logos and/or billboards on buildings. Celebrity anchor tenants, initially from urban Entertainment and sports industries, will be contracted to become residents of the WinSonic City to stimulate awareness, promote the social networking aspects of the website, and generate subscription revenue from their members. The Company believes the social networking aspects coupled with easy-to-use, three dimensional web browser experiences that appear like a virtual city will be very popular across all market and demographic



segments. Customers will “go to the city” to socialize with their friends, shop, listen to music and watch videos. Affiliations The WInsonic Group, LLC. Holding Company. WInSonic International, LTD. Holding Company. WinSonic Diversity, LLC. The Company has a 49% ownership position in WinSonic Diversity, LLC, (“WD”), a certified Minority Business Enterprise. The remaining 51% is owned by Mr. Johnson. WD leverages the capabilities of WinSonic and utilizes its corporate resources on a sub-contracted basis, to secure service contracts with enterprises such as Bank of America, AT&T, Verizon and other major corporations striving to meet corporate diversity goals, objectives and minority business content. WinSonic Process Digital, LLC, (WPD”) provides high-end consulting services that include sound and video editing, mixing and engineering for the entertainment industry, plus applications related to communications and digital distribution. WPD’s trade secrets include, but are not limited to, a digital process which emulates surround sound, proprietary compression techniques and a library of master recordings of major recording artists, sound effects, and other content. Pursuant to a licensing agreement, the Company utilizes WPD as a corporate resource to address the technology needs of WinSonic’s divisions and subsidiaries. WPD is internally referred to as the “Content and Technology” lab. WinSonic Music and Publishing (“WMP”) is within the Corporate area of WDMG, and is a content owner and global leader in the digital distribution of independently owned music and video content, including music recordings and music, television, film and other video content. We acquire or license the digital rights to music and video content from record labels, artists, television and film production companies, and other content owners. WMP digitally encodes the content into multiple formats for distribution to digital entertainment services operating over the Internet and wireless, cable and mobile networks. Consumers can then listen, view and/or purchase the content for use on their personal computers, digital music and video players, and music and video-enabled mobile phones. In March, 2008, an agreement was signed with Blue Pie Productions for an exclusive North American rights deal for over 5 Million music files, over 5000 digital video files, 10,000 mobile games, social networking products, data mining systems & tools as well as a source code library of proprietary software available for license and sale through digital distribution, digital music retailers, and digital stores. Our digital entertainment service partners make our content available to consumers through two primary business models - permanent copies of entire albums, individual recordings or ringtones on a pay-per-download basis, or broad access to a substantial quantity of content on a subscription basis. We are planning to receive revenue from the digital entertainment services based on the number of times our content is downloaded or streamed by consumers. Beginning in 3rd quarter 2010, we will deliver certain of our video content to advertising-supported Internet sites where it will be available to consumers, and we will share in a percentage of the advertising revenue based on the number of times our video content is viewed by consumers. Our digital entertainment service partners include: Apple iTunes, Napster, Real Networks, eMusic, Wal-Mart Music, MusicNet, Verizon, Sprint, Moderati, Zingy, 9 Squared, and many others. We



expect to make our video content available during 2010 through Apple iTunes, Google Video, YouTube, AOL/In2TV, Movie link, and other digital entertainment services. Operating Strategy To better align its core competencies with the market opportunities, drive revenue, focus on marketing and sales efforts, and execute its business plan. The Company will operate three business units. Integrated Services. Near term revenue growth will be derived from Integrated Services by leveraging existing business relationships and its affiliation with WinSonic Diversity and operationally improving project execution and cash flow processes. The Company will leverage its interconnection, co-location and wholesale purchasing agreements with AT&T, Verizon, Comcast and Direct TV to resell bandwidth, cable/satellite TV and related managed services to enterprises. WinSonic will grow its value added reseller (“VAR”) business by expanding its portfolio to include wireless and IP-based CPE products and services. In addition to organic growth, the Company is considering strategic acquisitions of communications businesses that can leverage our competencies and deliver new sources of profitable revenue. Digital Distribution Network. WinSonic Digital Cable Systems Network (WDCSN) was approved to launch its national, digital TV transport network schedule in the third Quarter of 2010. WDCSN will offer an extensive content library with transport rights from top national programmers, cable networks, linear programming, established music libraries, and Video on Demand (V.O.D.) rights from major Hollywood movie studios. "Working with our partners, WDCSN will offer solutions completely dedicated to the highest quality digital delivery of television, video and music content to our client subscriber base," said Winston Johnson, CEO of WinSonic Digital Media Group, Ltd. WinSonic Digital Cable Systems Network has secured contracts for digital video, digital music, and digital television distribution services. WDMG has signed Master Services Agreements (MSA's) with various companies in the range of 5 million dollars. WDCSN (a subsidiary of WDMG) signed distribution agreements that will bring our network reach up to 10 million subscribers and 1.8 million households via fiber-to-the-home. In addition, WDCSN estimates its digital services will reach 1 million broadband subscribers via the Internet in 2010. We are currently in negotiations for several multi-year contracts with other major broadband, cable and IPTV service providers.

Digital Media and Applications. This business segment/group is considered an internal resource that supports the sales, engineering and technical support requirements for both the Integrated Services and Digital Media groups. The Company, will utilize WDCSN’s network facilities, licenses, interconnection and co-location rights, plus wholesale purchasing agreements to reliably and cost effectively deliver media, content and communications products and services to customers. As WinSonic introduces additional communications services, content and commercially launches its web portal and other interactive applications/platforms, Internet traffic will substantially increase. This business segment will determine the Company’s initial networking requirements, measure performance and develop a phased capital expansion plan to expand and/or lease sufficient network facilities to meet WinSonic’s business demands, lower distribution costs and improve margins.



Investment Considerations

Exceptional Growth Industry The delivery of digital media and content, plus ecommerce represent exceptional and sustainable market growth.

Entertainment & Communication Industry Relationships

Management team has relationships that enhance ability to acquire and develop content as well as efficiently distribute digital media and communications.

Health Care Applications Complete the development of a chronic disease management system on the WinSonic Digital Cable Systems Network. A chronic disease management system that coordinates care of patients with diabetes, hypertension, asthma and other chronic diseases with their physicians.

Distribution Networking Advantages

Our facilities-based carrier designation affords the Company network privileges and rights which can be leveraged as a competitive advantage.

Diversity Program Opportunities

Our affiliation with WinSonic Diversity offers the Company a unique “go-to-market” channel to access this multi-billion dollar MBE market.

Winston D. Johnson - Welcome to Winsonic Digital Media ...winsonic.net/pdf/chairman.pdf · Winston...

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Transcript of Winston D. Johnson - Welcome to Winsonic Digital Media ...winsonic.net/pdf/chairman.pdf · Winston...