MiniC

Solutions for mass computing and connectivity

PESO Team: LinSoC Victor Gruet, Management/Business member Rowel Atienza, Technology member Christine Manalansan, Management/Business member Prem Vilas Fortran Rara, Student member

EXECUTIVE SUMMARY Globally, personal computer (PC) production is on the rise. Last year, production peaked at 186 million, up 13.4% from 164 million in 20031. It is likewise forecasted to grow 10.3% this year, and the percentage growth in the near future is likely to remain at around this number. However, despite the growth in production, global PC penetration remains low. In 2004, worldwide installed base is estimated to be at 716 million, or only about 11.3%. On one hand, the developed regions have a fairly wide PC penetration, averaging at 55.7%. These regions include North America (77.2%), Western Europe (40.1%) and Japan (48.6%). In sharp contrast, regions with developing countries average at 4.5% PC penetration Asia/Pacific (3.8%), Latin America (8%), Eastern Europe (10.4%) and Middle East/Africa (2.2%). The Philippines is also lagging with a 2% PC penetration. 2 The ability to purchase PCs today unfortunately remains outside the realm of developing nations. Studies3 suggest that the low PC penetration in Third World countries is largely due to the PCs high selling price. In areas where a large portion of the population live on less than a dollar, such as Nigeria (70.2%) and Cambodia (34.1%)4, the PC ultimately becomes a prohibitive luxury. Beyond that, fifty-six per cent of the installed PC base are in office, education and enterprise environments. That is, PCs are still mostly used for simple office productivity applications, such as word processing, spreadsheet and database. The applications do not require much computing power, leaving the PCs idle. Typical PCs today include features we dont need but pay high prices for. There is good news. Progress in server-centric computing and open-source software now makes possible the development of efficient and low-cost computer terminals. These terminals allow the optimal use of computing resources for both hardware and software, and yet come at about 70%5 less than current prices, perfectly suitable for price sensitive markets. Our product, MiniC (pronounced minik) is a low cost computer terminal priced between $200 to $300. Our company, ThincSoC, will offer these terminals by integrating and building upon open-source modules and off-the-shelf components for its first generation products and subsequently on System-on-a-Chip (SoC), which will further lower the price of these terminals. These terminals will allow multi-user server-centric computing with support to different thinclient protocols. Solutions based on client-server and thin-client technology have large potential markets. High PC imports vis--vis PC penetrations in target areas indicate that there is real need for our products. For instance, the whole of Asia/Pacific region alone imports 33 million PCs. The
1 2

Gartner Dataquest 2004 Gartner Dataquest (December 1, 2004) 3 Understanding the Digital Divide (OECD, 2001); United Nations Human Development Report (2001); International Labour Organization report dated (January 2001) 4 World Bank, World Development Indicators (2005) 5 For enterprise level

ThincSoC Business Plan: Confidential

Philippines imports an estimated 400,000 to 500,000 PCs per year, and yet the country's PC penetration remains low. This reveals an untapped market for low priced computer terminals in the Philippines, as well as in the region. Thus, the initial target for our product will be costsensitive Asian markets, such as the Philippines, Indonesia, Thailand and Vietnam. Our competitive advantage lies in our cost-effective yet powerful thin-client solutions that are suitable for every type of user, from the firm to the home. For enterprises, we tailor our offerings with an eye towards improving their bottom line, while increasing resource productivity. On the other hand, academic institutions will benefit from our inexpensive MiniC for education package customized for their laboratories. For home users, our product is economical to bundle with Internet broadband and VoIP service, an untapped market in the Philippines and ASEAN region. The barriers to competition exist through ThincSoC's second-generation products, which will be based on embedded Linux on SoCs. The company is seeking $20,000 for its seed funding, which should be enough to finance the proof-of-concept product. Subsequent funding needed is about $700,000, which will be sought for the large-scale manufacturing and commercialization of our first generation products, as well as for the further development of the companys next generation offerings. Even with conservative estimates, MiniC is profitable, even on the first year. In a fast-growing industry, ThincSoC is poised as a first-mover in the Philippines. In later years, even as competitors enter the market, we project our market share to decline to no less than 60% overall. The key to ThincSoCs success is an expert and reputable team composed of people from the academe and industry. The team is mostly composed of engineers from a variety of discipline and expertise. Some of the members are already responsible for startup companies based on leading technologies. Our vision is to be the leading thin client maker and solutions provider in the ASEAN region, offering cost-effective products that ultimately raises productivity, increases profitability, and enhances the performance of resources across enterprises and institutions. Our strategy is one based on continuous and fearless innovation.

ThincSoC Business Plan: Confidential

THINSOC AND MINIC OVERVIEW Client-server architecture The advent of modern computers started with ENIAC, a very big computer driven by huge vacuum tubes, over 19,000 of them. It was eventually replaced by transistor-based computers in 1960s, which were relatively smaller, faster and cheaper. With the discovery of integrated circuit technology in 1970s, the computer became inexpensive enough for individuals to own, hence the term "personal computer" or PC. However, even with powerful PCs, government institutions and large companies favored using huge, expensive, room-sized processing machines called "mainframes" for mission-critical applications. Most mainframes are capable of supporting thousands of simultaneous users (called clients) through "dumb terminals," which is basically a computer screen and keyboard, but practically no processing ability. Large-scale users preferred mainframes, not so much for its internal engineering and reliability, but mostly for its technical support, security, and strict backward compatibility for software. These computers can run for years without hiccups, even with repairs and software updates. All data and processes reside in a secured mainframe, and all software are run in it, eliminating compatibility issues. Vendors also offer failover solutions; for instance, if a mainframe breaks down, a vendor can offer to run customer's applications on their own machines without any noticeable interruptions.

In later stages of microprocessor technology, companies found that servers based on microcomputer designs could be deployed at a fraction of the acquisition cost of a mainframe. PCs slowly began to replace "dumb terminals" used with mainframes. Today, the client-server architecture continues to dominate the corporate environment for the same reasons the mainframe was popular a few decades ago. In client-server architecture or server-based computing (SBC), the server is a powerful computer dedicated to running applications for the client. That is, the client sends requests to the server and

ThincSoC Business Plan: Confidential

waits for a reply, as the server processes the request then sends back a reply. Since most of the processing is done on the server, the client-side computer can be stripped down to the thinnest possible architecture thus the concept, thin client. Thin versus thinned client Today, there are two types of client: thick PC and thin-client PC. A thick PC typically consists of the cabinet, motherboard, CPU, main memory or RAM, hard drive, CD-ROM, disk drive, graphics card, sound card, and other expansion cards, plugs, and ports. In comparison, a thin-client PC is stripped of some components, such as the internal and external storage devices, CD-ROM drive, disk drive, sound card, and some ports, while still retaining the microprocessor or CPU and main memory. Existing thin clients are actually thinned PCs because they retain much of the PC chipsets and run on embedded software designed for PC architecture, thus degrading thin-client performance. ThincSoC is designing a system from hardware to the software level to develop a real thin client, which will cost lower but with additional feature sets. Voice over Internet Protocol (VoIP) VoIP is a technology that enables phone calls to be made over the Internet. Using analog-digitalanalog conversion, voice is converted into data packets from a VoIP provider's local server, sent through the network, and then converted back to analog voice in the other end by another server, located at another place. VoIP calls can be made using a regular telephone with a VoIP adapter or from a computer with a simple microphone and speaker.

VoIP is a cheaper alternative, which is beneficial to homes, small offices, and businesses that make regular international calls because it can bypass expensive toll fees of Public Switched Telephone Network (PSTN). VoIP is also a cost-effective communication system that can coexist with an existing IP network, taking the role of a traditional Private Branch Exchange (PBX). Our product MiniC integrates VoIP solutions for home, small offices, and large enterprises. A soft phone capable of communicating through Session Initiation Protocol (SIP) and H.323 protocol, two leading VoIP protocols, is bundled with MiniC.

ThincSoC Business Plan: Confidential

Embedded Linux and Open Source Compared to other operating systems, embedded Linux has several advantages. First, Linux is open source. Being open source in nature, Linux tends to be well supported. Linux also has a smaller footprint. Compared to Windows CE, which takes up about 21MB, Embedded Linux takes up only 2MB. Using Embedded Linux does not require the developer to pay royalty costs and, with over ten years of age and its wide use in a variety of devices, the Linux operating system has become more mature and stable. First generation of MiniC will run on embedded Linux and integrate open-source modules. THE PRODUCT: MiniC First generation ThincSoC's first generation of MiniC will be essentially a work station, with features that vary according to the segment. MiniC for Enterprise/Government feature set: VoIP connectivity Aside from being a workstation, it will support a SIP-enabled soft phone. A headset is bundled with the thin client. VoIP connectivity is not included by default but the customer can opt to package a server with a SIP-based router. Our VoIP solution includes traditional services of PBX switches plus some interactive applications such as SMS and instant messaging support. The implementation will be based on ser, an open-source SIPbased router. In terms of network infrastructure, it requires less equipment for managing both IT and phone system. VoIP via Bluetooth MiniC also supports a technology of using cellphones as VoIP phones via Bluetooth. There have been exploratory talks to partner with another PESO entry, Bluetalk, which is developed in the same lab as ours. Media streaming support As an add-on, it will support audio and video conferencing. By default, MiniC is bundled with software that supports media streaming such as online music video and web camera (web cam). Smaller footprint The product consumes little power and is designed to be less cluttered, very ideal for office use. MiniC for Education feature set: Educational tools The preferred setup based on our survey is 20-30 terminals per laboratory. Each package consists of 1 server and 25 MiniC terminal customized with educational and productivity tools. We will further customize the instructional package depending on the type of curriculum. The tools on the server will be based on an open-source instructional Linux distribution Edubuntu, which will save the school on licenses. Educational management applications With the client-server and MiniC setup, it would be easy for instructors to monitor student activity in each terminal. Student data resides on

ThincSoC Business Plan: Confidential

the server, unlike in a PC setup, the instructor need not visit each terminal to check student data. MiniC also supports broadcasting (instructor sends an instant message to students), session takeover (instructor takes over session of student), interactive messaging (students can ask instructor through the terminal), and streaming (instructional online media). MiniC for Home feature set: Plug and play with VoIP For home client, MiniC will be bundled with broadband services of telephone or cable companies and Internet Service Providers (ISP). The major differentiator of this customization is support for Internet browsing and online connectivity for productivity tools while having a VoIP phone. Think of your grandmother calling you abroad while browsing an online calendar. It is easy to use and does not require user configuration (no-touch configuration) other than plugging to an existing telephone or broadband line. Small form factor PC Most telephone companies and ISPs that offer Internet subscription bundle expensive and thick PCs. They usually cost from PhP20,0000 to Php30,000. MiniC for home is customized as low-cost, small form factor, minimalist, and small footprint PC but with thin-client capability. This is done by using our thin-client software that supports multiple protocols such as RDP and ICA. The hardware is designed to run common productivity tools locally such as document processing, spreadsheet, and email. Storage add-on MiniC for home is designed to support an external hard disk for storage of media such as MP3 music or video. Media support MiniC supports web cam, voice chat, and Internet messaging. Remote applications/gaming support If the user wants to run a full-blown application like a gaming application, MiniC supports running of remote applications from an ISPs terminal server. Based on our survey, MiniC for home can run popular games such as Ragnarok, Mu, and Warcraft. Native support for web services With today's web technologies moving to web services, MiniC for home supports a local browser with support to virtual machines and rendering technologies such as Java Virtual Machine (JVM) and Asynchronous JavaScript and XML (AJAX). Think of running a document editor in an Internet browser. Second generation One of the items in ThincSoCs roadmap is the second generation of MiniC, which will be based on embedded Linux on SoCs (MiniC-chip). We will be using the MiniC-chip in MiniC terminals or exporting to existing thin client makers in volume. The proprietary design will focus on the following aspects:

ThincSoC Business Plan: Confidential

 FPGA configurable Customization of chip based on type of customer (e.g. customized for banking, education, or enterprise), and MiniC-chip on Open Cores and ThincSoCdeveloped cores. Effective network management Enhance product by eliminating effects of packet loss and latency on software performance. Smaller footprint Less power, specialized RDP frame buffers, lesser gates, more optimized for thin client. We will strip down the Super I/O, RTC, IDE, and PCI for the SoC solutions. Data encryption and compression Video and audio compression to improve data transfer efficiency. Both ends will also encrypt data for protection against sniffing in the transfer layer. Multi-protocol support Supports multiple protocols such as RDP, LTSP, ICA and X. Support of these protocols allow the user to connect to different operating systems like Linux, Microsoft Windows 2000 or XP, Sun Solaris, etc. The major differentiator of this product against existing thin clients is the support for LTSP and unification of different operating systems in one desktop environment. Think of using Windows XP, Linux and Solaris simultaneously in one computer by launching separate windows for each. Wireless Broadband support With proliferation of wireless broadband services, MiniC will be improved to support not only wired broadband but also different wireless protocols like IEEE802.11b (Wi-fi), IEEE 802.16 (WiMax) and Bluetooth. Other Products To support ThincSoCs products and operations, we plan to sell monitors (CRT/LCD), server solutions with workstation management tools and educational tools directly to customers. We also plan to provide special packages with customization for specific customers. In our survey, there is huge potential market for SoC customization. For instance, another PESO entry, MEDS, Inc., needs a server unit in a hospital that can be deployed with MiniC terminals for each resident physician. Banks also expressed interest in MiniC terminals for Automated Teller Machines (ATM) and Point of Sale (POS) terminals.

TECHNOLOGY INNOVATION Our hardware and software technology gives power to the user by offering only what is needed. Today's personal computers are bloated, with consumers ending up paying for what they don't need and use. Yesterday, they do not have a choice; now, they do, with MiniC. Our software will follow the model of easy installation and configuration up to the hardware level. Imagine a machine with a brain smart enough to configure itself. Our target is to make it usable even for people who have no knowledge of a PC. Think of your grandmother sending letters through email and calling through VoIP. Also, with MiniC on SoC technology, we can add powerful features with same amount of money, at the same time miniaturizing the hardware. Our product answers the need of today's generation in terms of connectivity and computing. In short, they can have a computer to easy to use and with a phone besides!

ThincSoC Business Plan: Confidential

Our SoC technology will differentiate our products against existing thin clients that only use the concept of a "thinned" PC. Our hardware and software technology, which will focus on the embedded and protocol layer, creates an inimitable barrier against competing products. With our second generation MiniC-chip, we will be a major supplier of single chips to thin client makers and small computing solutions.

VALUE PROPOSITION Every computer user, from the home to the office, has encountered problems, from extensive data losses due to power failures, crashing hard drives, difficult configuration or security issues. ThincSoCs MiniC clients provide potent answers to the myriad of problems faced by today's customer. Exploratory talks with representatives from our target markets have revealed that there is an interest in our products. In contrast, commercial desktop PCs are the closest form factor to thin clients (these are thinned/stripped PCs commonly found in enterprises), and yet do not offer the same benefits as thin clients. ThincSoCs MiniC clients offer a range of inimitable benefits for users across industries and segments: Cost-effective In developing countries where PCs remain expensive, thin clients are obviously the better choice. MiniC terminals effectively cut costs across all levelsfrom purchase, upgrade, maintenance, power consumption, and technical support (see Appendix: Tables 1 and 2 for Total Cost of Ownership computations). For enterprise, aside from acquisition savings to as much as 50.00%, operation costs account to 55% savings. For education, acquisition and operation costs account to 26.67% and 40%, respectively. Thin clients also reduce the need for Uninterruptible Power Supply (UPS) units because of its server-based computing design. For instance, only a single UPS is needed for the server, as opposed to several UPS units for every few PCs. For home users, we intend to bundle it with broadband services. Studies6 confirm that broadband penetration in the past years has been low because of expensive rates and that home users still need to buy a PC. However, PCs bundled by broadband providers range from PhP20,000 to 30,000. Broadband penetration is poised to increase exponentially with the coming of cheap wireless broadband; MiniC for home is an affordable solution to bundle it these services. Aside from offering our products to those who have yet to own a computer in the home, we are also targeting those who may want to convert their present desktop PCs to thin clients. First generation of MiniC is innovative in that it is designed to cost lower than current market offerings. The motivating idea behind our product is that we are catering to an unserved market. After all, existing thin client players target the developed market and their prices are comparable to clone or even high-end PCs. Lesser power MiniC is designed to consume less power. Power consumption continues to be a major issue in IT industry, with systems becoming power hog. Thin clients, because they use less power, will
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Philippine IT Service Industry Update Report, Jetro Manila Center, Sept. 1, 2004

ThincSoC Business Plan: Confidential

ultimately reduce electricity bills for the user to as much as 79.17% (refer to Appendix: Tables 1 and 2 for TCO computations). Reliability Power failures, accidental unplugging or fan breakdown of your computer need not be catastrophic incidentsone's work is stored on the server, which has a UPS unit. The session, down to the last letter typed or the exact placement of the windows on the screen, can be easily restored without fuss. The system has no moving parts, such as hard disk and fan, which diminishes instances of equipment failure. Power outages will not affect the hard disk. The server is equipped with a technology that saves sessions safely before backup power is lost. In client-server architecture, it is easy to trace the point of failure because processes or data run on a "central" server; data is relayed via the network, and rendered to the client hardware. Business and IT managers have found thick clients or PCs, expensive to purchase, run, and maintain. One reason for this is that PCs can give end users too much freedom to tinker with the system that delicate configurations can be disrupted. The thin-client model provides little opportunity for users to reconfigure applications unless they have administrative status. In principle, centralized deployment of application and maintenance makes significant cost savings. Our product is ideal for banks looking to expand or convert their Automated Teller Machine (ATM) base into machines that are simpler to manage and do not require expensive ventilation equipment. ATM manufacturers, such as Wincor Nixdorf in Germany, have in fact begun to roll out thin clients in their products. Mr. Dado Banatao, a visionary, who founded several successful technology-based companies in Silicon Valley, proposed that Philippines should focus on three technology areas: server-based computing, wireless technology and thin clients. Two of these technologies (server-based computing and thin clients) are highlighted in our product, which can help produce more skilled workers for the same amount of capital and operational expenditures. Mr. Banatao cited two incidents that highlight the importance of server-based computing: Arthur Andersen took one year for one software upgrade, while Merrill Lynch during the 9/11 attack was able to recover their data because of a redundant server located in another place.7 Connectivity MiniC includes VoIP connectivity, which enable users from home to call their loved ones abroad with a soft phone specially configured to connect to a VoIP gateway. We aim to bundle the product with broadband services offered by telephone companies (telcos) and ISPs. We identified this potential technology from our current products due to demands from telephone companies for a terminal to serve as an Internet station and as a VoIP phone. This is in preparation of VoIP entry of telcos by customizing its own VoIP gateway. For government and enterprise, this would replace the expensive Private Branch Exchange (PBX) switch. Each thin client can be both a workstation and a VoIP phone.

http://www.itnetcentral.com/computerworld/article.asp?id=10164&leveli=0&info=Computerworld

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MARKET ENTRY AND GROWTH STRATEGY As computers continue to become an integral part of learning and business, there is now a high demand for cost-effective, efficient and easy-to-use products. Our thin client solutions take advantage of the most innovative and inexpensive technologies, perfect for this fast-growing market By partnering with Value Added Resellers (VARS), major distributors, retailers and suppliers of IT equipment to enterprises, we aim to put our products on the shelves of major stores within the first two months in the Philippines. In addition, we intend to set up alliances with offshore companies and call center organizations in setting up client-server environments within the firms. Finally, the company will work with strategic national bureaus, such as the Department of Trade and Industry (DTI) and Department of Education (DepEd), in providing low-cost computing solutions to public educational institutions and government offices. We intend to market our products to the overseas market, particularly ASEAN region after 3 to 3.5 years, after achieving a $6 million of sales. A combination of quality products, excellent customer service, and networking will ensure the success of our initial direct sales efforts. We shall sustain our position in the market with regular advertising campaigns to enhance brand awareness and differentiate our offerings from the competitors. We intend to establish reputable business for our thin-client solutions in the Philippines, through strategic partnerships with well-established enterprises:

Telecommunications companies such as Globe Telecom and PLDT for home users. Their VoIP and broadband offerings may be linked to our product. Leading media enterprises, such as Computerworld, Inq7.net, Media G8way and PC World Specific trade groups, such as Contact Center Association of the Philippines for offshore services and the Bankers Association of the Philippines State universities and colleges, such as the University of the Philippines Private academic institutions, especially those with IT-focused curriculum, such as AMA, STI, and Informatics Government agencies implementing computerization projects, such as DTI, DepEd, and CHED

Right Timing Today is the right time to introduce thin-client solutions. Enabling technologies and advances in computer applications are readily available. We have applications that cater to almost every need in the academe, government, and corporation. Furthermore, there is a greater demand now for security and reliability in these times when computer viruses and data theft are prevalent. The market pull in the 90s was not successful and brought the "dumb" terminals to a halt because the underlying technologies are not refined yet. The hype of that period of a "network PC" can be readily implemented because the barrier technologies are already solved now:

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powerful but affordable servers high-speed but affordable local area networks (LAN) and wide area networks (WAN) software with centralized database and application logic software and protocol standards such as TCP/IP, RDP, ICA, LTSP that handle client-server technology XML-based web services such as AJAX that enables remote-capable applications

Based on our consultations with representative segments, there is a great demand for clientserver workstation in enterprise, government, and education sectors.

MARKET RESEARCH AND ANALYSIS Market Definition Our first generation products target customers from the home, academe (schools and universities), government, and top enterprise segments, such as call centers, banks and manufacturing. These consumers prefer efficient, easy to use, and cost-effective computers, with functionalities that can be tailor-fit to their own specific needs. Our offerings for home users will be customized and bundled with available broadband services of telephone companies and ISPs. We are also exploring online gaming options for gamers, a strong market segment today. In addition, we will target government offices and enterprises needing telephony solutions. The Next Generation Our second generation products are based on embedded Linux on SoCs. We will target existing thin client makers by exporting the chips in volume. Our design will also appear in our thin client products. Competitors Some of the products in the market today include: Common desktop computersthese are the "fattest" PCs, with powerful processors and chips. Commercial desktopalso known as "thinned" PCs, most enterprises utilize this kind of PCs. This is roughly the closest form factor to thin clients. Commercial laptopstreated more as a mobile PC, customized for enterprise use. Thin Clients

The biggest thin client companies globally are Wyse Technology and Neoware Systems. Yet, while thin clients exist in the market today, these large companies cater only to rich Fortune 500 companies. The average prices of their products range from $300-$500. However, these computers are not really thin clients in the truest sense. They are still just "thinned" PCs, because they retain much of the PC chipsets and run on embedded software

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designed for PC architecture, thus degrading thin-client performance. This means they include the disadvantages that PC ownership entails.

MARKET SIZE The initial target market is the Philippines, primarily in four segments: education, government, enterprise, and home. The second stage of expansion will be full deployment in the ASEAN region in the near future. For the corresponding analysis, any hardware having the PC form factor will have an average selling price between $600 to $7008. The appeal of our products is that we offer them for as low as $220, depending on the components, and will have a longer product life, more than twice that of a PC. It must be emphasized that while we took a very conservative position in our market sizing analysis, the actual figures could be as much as 50% higher, based on industry reports. Conversion percentages from PC to thin clients were estimated to be as low as 0.4%. Education and Government In the Philippines, the Department of Trade and Industry (DTI) is pursuing a key project, the PCs for Public Schools Project (PCPS). It aims to "provide IT access" to students by distributing 20 computers to public high schools all over the country and by also providing teacher training. Using data from PCPS, for secondary schools alone, there is an estimated 142,650 empty laboratory seats as of 2005. Mirroring the educational effort, the national government is implementing similar moves across the bureaucracy, such as the Government Information Systems Plan (GISP). As of 2004, $54 million had been earmarked for these initiatives. We have also received positive feedback from officials regarding our products and how they complement national initiatives. Since government employees primarily use computers for productivity purposes, their thin client needs parallel that of the public high schools. In our consultations with officers in charge of national computerization programs, it was pointed out that the government could have computerized more schools laboratories if they used thin clients as opposed to fat PCs. Each PC is worth about 2 MiniC. Furthermore, our package bundles 25 MiniC terminals and one server with educational tools tailored for the curriculum. It was also discovered that computers equipped with licenses from old computerization programs have become idle because public schools cannot afford to renew them. Officials have since expressed a deep interest in our products and the idea that the PCPS can be a test bed of thin clients in the education sector. Central management software is important both for the academe and the government. Rarely do PC rollouts include any type of efficient technology management solutions. In the first two phases of PCPS, the IT personnel of the school, if any, has to maintain each PC individually. In
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IDC 2004-2006 market analysis

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comparison, our package has management and centralized productivity tools inherent with its client-server architecture. For state colleges and universities, the University of the Philippines is our initial test bed for the technology. In the State University, there is a great demand for public access terminals used by students for Computerized Registration System (CRS) and web mail. Our solution is elegant. We can provide them with more terminals, and open-source educational tools are already bundled with the server. If they choose proprietary operating systems over open-source modules, they have option to update just the server. In addition, thin client licensing scheme is cheaper when purchased in bulk. For Windows 2003 server, a 25-Client Access License (CAL) is cheaper by 40% compared to a 10 CAL. Since most of educational and government users utilize PCs for productivity purposes, our products are perfect for their needseasy to maintain, robust, and most importantly, inexpensive. Enterprise One enterprise segment that can benefit heavily from the use of our products is the call center industry. The call center industry is a sunrise industry in the Philippines, in that from 35,000 seats in 2005, it is expected to grow to 250,000 seats in 2009. Given the nature of the business, it is easy to assume that each seat will have one VoIP phone and one PC. Based on our survey, most of these PCs are commercial desktops in form factor. Our systems can support all common tasks in these enterprises, such as inbound and outbound call capability, email, fax, Internet, and secure data exchange. Most of the computers deployed in the enterprise are desk-based PCs, which is the closest form factor to thin client. Enterprise shipment is 51.49% of total PC shipment to the Philippines. We made conservative estimates by studying enterprise shipments from Gartner reports (Feb. 2005). Basing our potential market on 0.8% of enterprises converting from PCs to thin clients, and pegging a conservative share of market at 80% of that figure, revenues of $326,209 can be realized in the first year alone. In three years, we expect that even with the decline in market share due to competitors, but with the corresponding increases of PC conversion, sales of $1.9 million can be easily targeted. These sales are buoyed by the fact that we are the pioneer thin client solutions provider in the Philippines and our products are consumer-oriented computers and easier to manage. Home Studies9 confirm that broadband penetration in the past years has been low because of expensive rates and lack of PCs in the home. However, broadband penetration may potentially explode with the coming of cheap wireless broadband and our affordable MiniC. The end-user price
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Asia-Pacific ICT Sector Keeps climbing (ITU, 2004); Income and Broadband Penetration in US (Jupiter Research, 2002); Leichtman Research Group, Inc. agrees with Jupiter Research

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(EUP) of MiniC for home is $242. Aside from offering our products to those who no home computers, we are also targeting those who may want to convert their present desktop PCs to "thinner" designs. Our home offerings will be bundled with broadband services by telecommunications companies. Similarly, we made very conservative estimates based on broadband growth in homes. As on 2004, there were 1.8 million dial-up users and 125,000 broadband users. By 2006, 1.46% of dialup users are expected to shift to broadband. With broadband growth estimated at 67.7% by this year, we target a market share of 80%, which translates to sales of over $110,000. Total Philippine market Given the above possibilities at very conservative estimates, the Philippine market is very attractive. Below is a summary of the potential targeted revenues based on the assumptions outlined in the earlier sections. 2006 2,702 $ 703,173 2007 10,232 $ 2,665,294 2008 23,171 $ 5,882,789

Units Sold (Philippines) Revenue Potential

For more details, please see Appendix: Tables 3 to 6. With our aggressive marketing campaign, we aim to achieve and surpass a first-year overall unit sales volume of at least 2,702, which translates to market shares of 80% for enterprises and homes, 90% for education, and 60% for the government. With the onset of competition for the projected years, market shares may then decline, but we target a steady thin client market share of an average of 60%. We are confident that our superior products and service components, and excellent marketing skills, we will be the established market leader for thin client solutions in less than four years. ASEAN market Having reached key financial targets and operational goals in the Philippines, we will then expand to the ASEAN market. This market is potentially huge because our lower-priced products will attract buyers from this largely developing area. These countries include Indonesia, Malaysia, Thailand, China, Hong Kong, India, and Vietnam. Gartner (2005) estimates that total PC shipments amounted to around 27 million. Assuming that 0.25% moved to thin clients, potential shipments among to 242, 119. If ThincSoC can achieve a share of about 1% in the first year, potential revenues is about $286,587 in likelihood, this figure is undervalued and may actually be bigger once plans had been laid out. Marketing Strategy

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We shall position our products as the most efficient and logical solutions for the consumer and the enterprise. Essentially, the first generation design targets educational institutions, the government, and the enterprise market. Since our prices are significantly lower than current PC ASPs, this will drive adoption of our products, especially among cost-conscious consumers. An efficient distribution network and consistent marketing communications will furthermore increase awareness in the industry. We intend to start by forming partnerships with major enterprise segments, such as call centers and banks. We shall complement private sector penetration with local government initiatives to deploy thin clients in school laboratories and government desks. Finally, we intend to continue to study the market response to our products and determine new areas for future innovation.

FINANCIAL STATEMENTS For the first year of operations, we project revenues of $703,713, with gross margins of about 52%. From our projections about market potential, this translates to sales of about 2,702 units across target segments. Cost-volume-profit analysis shows that our breakeven point is just 640 units for the first year, leaving a large area for profitability. As we ramp up marketing and sales, and investments in the first year become more efficient, tight cost controls shall ensure than margins stay on target. As a ratio to revenues, all of our expenses are justifiably elevated, but as increases in sales reflect economies of scale, this proportion decreaseswe hope to target about 3.5% of sales to support research and development. One of the largest figures in our expenses is the budget allocated to research and development, as we move aggressively to develop next generation technologies. Third year research and development funds reflect the product development for these subsequent innovations. ThincSoc is profitable in the first year alone because the development time for our first generation products are well within rangewe estimate about three months for prototyping and testing, with a full roll-out ready by the second quarter of 2006. Furthermore, because the size and share of the market had been very conservatively estimated, it is quite likely that the bottom line is similarly undervalued. SUMMARY INCOME STATEMENT (in '000) Year 1 Year 2 Revenue $ 703 $ 2,665 Cost of Goods Sold $ 336 $ 1,285 Operating Expenses Research Development $ 211 $ 131 Marketing & Sales $ 63 $ 187 General & Administrative $ 92 $ 208 Total Operating Expenses $ 366 $ 526 Net Income Before Tax $ 1 $ 854

Year 3 $ 5,883 $ 2,838 $ 353 $ 294 $ 216 $ 864 $ 2,181

Year 4 $ 7,648 $ 3,690 $ 365 $ 303 $ 224 $ 1,123 $ 2,835

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SUMMARY STATEMENT OF CASH FLOWS (in '000) Year 1 Year 2 Cash Flow from Operating Activities $ (14) $ 814 Cash Flow from Investing Activities $ (26) $ (18) Cash Flow from Financing Activities $ 700 $ Change In Cash and Cash Equivalents Ending Balance $ 660 $ 660 $ 796 $ 1,456

Year 3 $ 2,114 $ (19) $ $ 2,096 $ 3,552

Year 4 $ 2,798 $ (19) $ $ 2,779 $ 6,332

SUMMARY BALANCE SHEET (in '000) Year 1 Assets Current Assets $ 703 Property Plant and Equipment $ 26 Total Assets $ 729 Liabilities Current Liabilities Long Term Liabilities Total Liabilities Stockholders' Equity Stock Retained earnings Total Equity Liabilities + Equity $ $ $ $ $ $ $ 28 28 700 1 701 729

Year 2 $ 1,619 $ 44 $ 1,663 $ $ $ 107 107

Year 3 $ 3,910 $ 63 $ 3,973 $ 237 $ $ 237 $ 700 $ 3,036 $ 3,736 $ 3,973

Year 4 $ 6,797 $ 82 $ 6,879 $ $ $ 307 307

$ 700 $ 856 $ 1,556 $ 1,663

$ 700 $ 5,871 $ 6,571 $ 6,879

OPERATIONS PLAN Implementation Schedule Major Milestones: 4Q/05 Start of staffing and financing Feb/2006 Product is finished, start of testing 2Q/2006 Launching of first generation products 2Q06-3Q06 Roadmap: Projected R & D for second generation technology 1Q/07 Roadmap: Projected launching of second generation products 3Q/08 Projected ASEAN market entry

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Milestones Financing

2006 2007 2008 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Development and prototyping First generation First generation launch Testing and first batch manufacturing Second generation Roadmap: launching R&D and prototyping Market entry Philippines: first generation Philippines: second generation

THE MANAGEMENT TEAM The key to ThincSoCs success is an expert and reputable team composed of people from the academe and industry. The team is mostly composed of engineers from a variety of discipline and expertise. Some of the members are already responsible of startup companies based on leading technologies. Founders (PESO LinSoC team) Rowel Atienza Rowels forte is embedded Linux. He is a professor at University of the Philippines Electrical and Electronics Engineering (UP-EEE) department while being a consultant in Linux development and embedded systems in electronic companies such as Eazix (a pioneer Philippine ODM). His research track includes computer vision, mainly vision-based human-machine interfaces; robotics; real-time embedded systems, and computer networks. Rowel is currently a PhD (Systems Engineering) candidate at The Australian National University. He will lead the engineering team and develop the first generation of MiniC. Victor Gruet Victor has an impressive career track in the electronics industry. He holds several executive and management positions in both private and government sector. Currently, he is the president of Symphony Consulting, ICT and Electronics, a consultation company focusing on startup operations for Application Specific Integrated Circuit (ASIC) and Field Programmable Gate Array (FPGA) integrated circuit design. He will lead our design of second generation MiniC, which is projected to use SoC technology on FPGAs. Victor has a wide experience in electronics industry, particularly management in product 18

ThincSoC Business Plan: Confidential

development, business and technology services. Currently, he is the president of Electronics Industry Association of the Philippines (EIAP). He will head ThincSoCs management team. Christine Manalansan Chrissie is currently pursuing her Master of Business Administration degree at the College of Business Administration in University of the Philippines in Diliman. Her work experience includes marketing and fund development for a San Francisco-based non-profit organization for children, public relations and editorial work in Singapore, and research for a construction management company. She holds a Journalism degree, also from UP Diliman, and has had additional study at Nanyang Technological University (Singapore) as a Singapore International Foundation Fellow. She spent most of her undergraduate years writing for Philippine Collegian; her last position was Associate Editor in 2001. Prem Vilas Fortran Rara Prem is an Electrical and Electronics Engineering undergraduate student at University of the Philippines (UP). He is one of the pioneers of the local Linux users group at UP. His work experience includes Linux technical support at UP Computer Center, Systems administration at UP Information Office, and Voice over IP expansion at Department of Science and Technology-Advanced Science and Technology Institutes project test bed, PREGINET. His primary interests are embedded Linux and Internet technologies, mainly dynamic web applications. Currently, he is a member of the Instrumentation and Control Laboratory of UP-EEE. He will work as an engineer on the project and will focus on remote applications run on web services.

Engineering Philip Mabanta, Jeric Francis Arguillo Lansang, and Mark Despi will comprise the rest of the engineering team. They are members of Computer Networks Laboratory (CNL) of UPEEE and former students of Professor Rowel Atienza.

Technical Advisers Peter Valdes Peter is famous in the global IT industry for Tivoli Management software, which he sold to IBM, and continues to generate billions of dollars annually in revenues worldwide. Lately, he launched a revolutionary product, which he calls Media Optimization and Administration Systems (MOAS), software that fully automates the entire media planning process from creation, editing, evaluation, and optimization of the plan up to the creation of broadcast orders and competitive reports. It will save the planner significant amount of time that can be spent on other tasks such as re-evaluation and other plan scenarios. In our initial planning sessions, he emphasized the value of making the product easy to use for any type of user. Using his experience in software development and Artificial Intelligence-based designing, MiniC will be the easiest computer to use. Peter holds a degree in industrial engineering from University of the Philippines. Asael Dror Asael has proven to be instrumental in evolving thin-client architectures. He comes from Ubixon, a company that designs ultra-thin wireless tablet. After leaving the company, he has been working with Dado Banatao (a partner of BGN Ventures, Inc.) on designing efficient computers. He also wrote Wingine, the first 32-bit, flat-rate memory display architecture for Windows, which became a basis for Windows 95 display system. He has a wide experience in global computing industry and worked on several computing technologies, some of which he has patents. His experience and expertise is valuable to ThincSoC MiniC software side.
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Dr. Paco Sandejas Paco is the managing director of BGN Ventures, Inc., which manages Narra Venture Capital (NarraVC), a Delaware fund sponsored by Dado Banatao with Philippine investors such as Ayala Corporation. He is responsible in formulation of several government IT policies in various government agencies. Paco founded Brain Gain Network, a worldwide network of technopreneurs for Philippine industry, a valuable source of excellent Filipino engineers. He will be instrumental in sales pitch of ThincSoCs products in the government and enterprise. Paco has a vast experience in RD&E, which started in Silicon Valley and being a board member of several companies including H& Q Asia Pacific. He is an inventor with 3 patents and the first summa cum laude graduate of Applied Physics from University of the Philippines. Earl Robles Earl joined NarraVC in December of 2002. He handled the due diligence of the biggest portfolio company investment to date of NarraVC. He worked with Silicon Valley engineers of Dado Banatao in crafting a business plan for a Silicon Valley-based computer company with planned Philippine operations. He also aided the due diligence process of a Philippine-based co-investor in a Silicon Valley-based photonics company. Earl also contributes data, research and analysis to IMI's due diligence team for the company's M&As. Prior to joining Narra, Earl was the core DSP Engineer for the Eurofix Project in Vicon Communications, a German engineering company. He was responsible for the RTOS engine, Signal Detection, Locking, Demodulation, Symbol Decoding, Position Extraction Modules of Vicon's Integrated Loran-C/Eurofix Receiverthe second demonstrated working prototype in the world, a project contract with Man Technologies, Germany. Earl holds a degree in Computer Engineering and did his thesis under the Instrumentation, Robotics and Controls Laboratory, University of the Philippines. Dr. Jay Sabido Jay is formerly the head of Philippines science and technology research arm, the Department of Science and Technology-Advanced Science and Technology Institute (DOST-ASTI). At ASTI, his research track includes embedded systems, low-cost computing platforms including thin clients. He is also the former director of Philippine National Computer Center, which drafts guidelines for ICT purchases. He has 10 years of Silicon Valley experience in RD&E. Jay graduated summa cum laude in Electrical Engineering from the University of the Philippines.

Industry Partners Bluetalk, a PESO contestant, whose product is a VoIP access point via Bluetooth. We have initial talks to integrate their system into our product. Meds, Inc., another PESO entry, which aims to outsource the workstation package, consisting of 1 server unit in a hospital that can be deployed with MiniC terminals for each resident physician. IMI, a manufacturing company (a partner of Narra Ventures), and a potential partner. DOST-ASTI, the Philippine government research arm which hopes to develop low-cost computing solutions Brain Gain network (BGN), a network of technopreneurs. Our partnership with BGN is a good source of Silicon Valley talent.

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APPENDICES Table 1: Total Cost of Ownership (TCO) for Large Enterprise Table 2: Total Cost of Ownership (TCO) for Education

Sales and Projected Revenue Table 3: Education Table 4: Enterprise Table 5: Government Table 6: Home

Pro Forma Financial Statements Table 7: Income Statement Table 8: Balance Sheet Table 9: Statement of Cash Flows Table 10: Startup costs and Projected Capital Expenditures

Confidentiality Statement

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Table 1: Total Cost of Ownership (TCO) for Large Enterprise

Thin Clients vs. PCs
TCO computation minus capital costs (for large enterprise) Assumptions and Dependencies Thin Client Financials Number of Employees Annual Revenue ($M) Annual Growth Rate Gross Margins Average Employee Salary ($) Employee G&A Costs ($) Revenue Per Employee ($) IT Staff Desktops Managed per IT person Total IT persons Operations Average IT worker's salary ($) Other G&A costs ($) Trips per year per IT person Expense per trip Total Savings on Operations PC End-user Operations Formal and Informal Training Costs Data Management Costs Self and Peer-to-Peer Support Costs Total Savings on End-User Operations Downtime Hardware failures Unsupported Software-induced problems Viruses Software updates User training User errors User personal games, messenger, browsing, e-mail Total Thin Client Downtime Total Downtime Savings Miscellaneous Daily Hours devices turned on Average Power consumption (Watt) Philippine average cost per kWh Total Miscellaneous Savings Thin Client PC

2,000 $1,000 15% 30% $50,000 $25,000 $500,000

$100 $0 $100 60.00%

$100 $200 $200

100 20

50 40

$70,000 $35,000 2 $1,000 53.48% 10

0.1% 0.1% 0.1% 0.2% 0.1% 0.1% 0.2% 0.9% 55.00%

0.2% 0.2% 0.2% 0.5% 0.2% 0.2% 0.5% 2.0%

8 50 $0.16 79.17%

8 240

Total Desktop-Related Costs ($k) Year One: Year Two: Year Three: Year Five: Year Ten:

Thin Client $3,487,410 $4,010,522 $4,612,100 $6,099,502 $12,268,278

PC % Savings $7,827,569 55% $9,001,704 55% $10,351,960 55% $13,690,467 55% $27,536,419 55%

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Table 2: Total Cost of Ownership (TCO) for Education

TCO Calculator: Thin Clients vs. PCs
TCO Computation minus capital costs (for education) Assumptions and Dependencies Thin Client IT Staff Desktops Managed per IT person Total IT persons Operations Average IT worker's salary ($) Other G&A costs ($) Trips per year per IT person Expense per trip Total Savings on Operations PC End-user operations Formal and Informal Training Costs Data Management Costs Self and Peer-to-Peer Support Costs Total Savings on End-User Operations Downtime Hardware failures Unsupported Software-induced problems Viruses Software updates User training User errors User personal games, messenger, browsing, e-mail Total Thin Client Downtime Miscellaneous Daily Hours devices turned on Average Power consumption (Watt) Philippine average cost per kWh Total Miscellaneous Savings Thin Client PC

25 1

25 1

$0 $0 $0 100.00%

$20 $0 $0

$3,600 $0 0 $0 0.00% 0

Total Desktop-Related Costs ($k) Year One: Year Two: Year Three: Year Five: Year Ten:

Thin Client $4,193 $4,193 $4,193 $4,193 $4,193

PC % Savings $6,945 40% $6,945 40% $6,945 40% $6,945 40% $6,945 40%

0.1% 0.1% 0.0% 0.0% 0.1% 0.1% 0.1% 0.5%

0.2% 0.2% 0.2% 0.5% 0.2% 0.2% 0.5% 2.0%

8 50 $0.16 79.17%

8 240

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Table 3: Sales and Projected Revenue for Education Target Launch Year 2005 2006 77,430 142,650 47,550 95,100 0.6% 285 90% 257 $ 401.50 $ 103,093.16

Secondary Terminals covered Empty seats % of empty seats converted to TC Thin clients deployed % SOM Units sold DP Target Revenues Tertiary Total number of terminals % of terminals converted/made TC Thin clients deployed % SOM Units sold DP Target Revenues Total Units Sold Total Target Revenues ($)

2007 47,550 47,550 2.0% 951 80% 761 $ 401.50 $ 305,461.20

2008 47,550 0 5.0% 2,378 70% 1,664 $ 401.50 $ 668,196.38

95,065

95,065 0.4% 380 90% 342 $ 401.50 $ 137,406.95 599 $ 240,500.11

95,065 2.0% 1,901 80% 1,521 $ 401.50 $ 610,697.56 2,282 $ 916,158.76

95,065 4.0% 3,803 70% 2,662 $ 401.50 $ 1,068,720.73 4,326 $ 1,736,917.11

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Table 4: Sales and Projected Revenue for Enterprise Target Launch Year 2005 2006 377,282 407,464 8% 8% 201,463 12% 201,463 100% 231,683 15% 231,683 100% 0.8% 1,853 $ 220.00 $ 407,761.84 80% 1,483 $ 326,209

Total PC shipment Growth Enterprise % Growth Desk-based PC % of Enterprise % moved to TC TC deployed DP Market size % SOM Units Sold Target Revenues

2004 349,335

2007 440,061 8% 289,604 25% 289,604 100% 2.0% 5,792 $ 220.00 $ 1,274,255.75 70% 4,054 $ 891,979

2008 475,266 8% 376,485 30% 376,485 100% 4.0% 15,059 $ 220.00 $ 3,313,064.96 60% 9,036 $ 1,987,839

179,878

179,878 100%

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Table 5: Sales and Projected Revenue for Government Target Launch Year 2005 2006 377,282 407,464 8% 8% 32,530 24% 32,530 100% 39,036 20% 39,036 100% 0.5% 195 $ 220.00 $ 42,939.81 60% 117 $ 25,764

Total PC shipment Growth Government % Growth Desk-based PC % of Government % moved to TC TC deployed DP Market size % SOM Units Sold Target Revenues

2004 349,335

2007 440,061 8% 45,672 17% 45,672 100% 3.0% 1,370 $ 220.00 $ 301,437.47 50% 685 $ 150,719

2008 475,266 8% 52,523 15% 52,523 100% 6.0% 3,151 $ 220.00 $ 693,306.19 40% 1,261 $ 277,322

26,234

26,234 100%

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Table 6: Sales and Projected Revenue for Home Target Launch Year 2005 2006 85

2004 Population (2005) (M) Growth (base 2005) Percentage of Internet users Number of Internet users (M) Note: approximate Internet home penetration % of dialup shifting to broadband Broadband growth Total Dial-up ('000) Total Broadband ('000) % of broadband bundled with our product Units bundled ('000) DP Market size ($ '000) % SOM Units Sold Target Revenues

2007

2008

69% 13.88% 11.798 20

1,850 125

0.5% 15% 1,841 153

1.00% 25% 1,822 210 0.3% 629 $ 220.00 $ 138,373.95 80% 503 $ 110,699

1.25% 35% 1,800 306 1.5% 4,587 $ 220.00 $ 1,009,195.79 70% 3,211 $ 706,437

1.75% 45% 1,768 475 3.0% 14,248 $ 220.00 $ 3,134,517.34 60% 8,549 $ 1,880,710

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Table 7: Income Statement Year 1 Revenue Education Government Enterprise (standalone) Home Total Revenue COGS Education Government Enterprise (standalone) Home Total COGS Gross Profit Gross Margin % Operating Expenses Research Development Marketing & Sales (inc Adv) General & Administrative Total Operating Expenses Working Capital (monthly) Operating Income Taxes Net Income Net Profit Margin $ $ $ $ $ $ $ $ $ $ $ 240,500 25,764 326,209 110,699 703,173 120,250 11,711 148,277 55,350 335,588 367,585 52.28% $ $ $ $ $ $ $ $ $ $ $ Year 2 916,159 150,719 891,979 706,437 2,665,294 458,079 68,509 405,445 353,219 1,285,251 1,380,042 51.78% $ $ $ $ $ $ $ $ $ $ $ Year 3 1,736,917 277,322 1,987,839 1,880,710 5,882,789 868,459 126,056 903,563 940,355 2,838,433 3,044,356 51.75% $ $ $ $ $ $ $ $ $ $ $ Year 4* 2,257,992 360,519 2,584,191 2,444,924 7,647,626 1,128,996 163,872 1,174,632 1,222,462 3,689,962 3,957,663 51.75%

$ $ $ $

210,692 63,286 92,256 366,233

$ $ $ $

130,688 186,571 208,426 525,685

$ $ $ $

352,967 294,139 216,487 863,593

$ $ $ $

365,321 302,964 224,453 1,122,671

$ 30,519.45 $ 1,352

$ $

43,807.08 854,357

$ $

71,966.12 2,180,763

$ $

93,555.95 2,834,992

1,352 0.19%

854,357 32.05%

2,180,763 37.07%

2,834,992 37.07%

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Table 8: Balance Sheet Year 1 Assets Current Assets Cash And Cash Equivalents Account Receivables Inventory Total Current Assets Property Plant and Equipment Total Assets Year 2 Year 3 Year 4

$ 660,296 $ 29,299 $ 13,523 $ 703,117 $ 26,200 $ 729,317

$ 1,456,304 $ 111,054 $ 51,256 $ 1,618,613 $ 44,200 $ 1,662,813

$ 3,552,061 $ 245,116 $ 113,131 $ 3,910,308 $ 62,700 $ 3,973,008

$ 6,331,540 $ 318,651 $ 147,070 $ 6,797,261 $ 81,700 $ 6,878,961

Liabilities Current Liabilities Accounts Payable $ 27,966 Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities $ 27,966 Long Term Debt Other Liabilities Total Liabilities $ 27,966 Stockholders' Equity Stock Retained earnings Total Equity Liabilities + Equity

107,104

$ 236,536

$ 307,497

107,104

$ 236,536

$ 307,497

107,104

$ 236,536

$ 307,497

$ 700,000 $ 1,352 $ 701,352 $ 729,317

$ 700,000 $ 855,709 $ 1,555,709 $ 1,662,813

$ 700,000 $ 3,036,472 $ 3,736,472 $ 3,973,008

$ 700,000 $ 5,871,464 $ 6,571,464 $ 6,878,961

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Table 9: Cash Flow Year 1 Net Income Cash Flow from Operating Activities Accounts Receivable Inventories Accounts Payable Other Activities Total Cash Flow From Operating Activities Cash Flow from Investing Activities Capital Expenditures Investments Other Activities Total Cash Flows From Investing Activities Cash Flow from Financing Activities Borrowings Other Activities Proceeds from Stock issuance/(Purchase) Total Cash Flows From Financing Activities Change In Cash and Cash Equivalents Beginning Balance Ending Balance $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,352 (29,299) (13,523) 27,966 (13,504) (26,200) (26,200) 700,000 700,000 660,296 660,296 $ $ $ $ $ $ $ Year 2 854,357 (81,755) (37,733) 79,139 814,008 (18,000) $ $ $ $ $ $ $ Year 3 2,180,763 (134,062) (61,875) 129,432 ,114,257 (18,500.00) $ $ $ $ $ $ $ Year 4 2,834,992 (73,535) (33,939) 70,961 2,798,479 (19,000.00)

$ $ $ $ $ $ $ $

(18,000) 796,008 660,296 1,456,304

$ $ $ $ $ $ $ $

(18,500) 2,095,757 1,456,304 3,552,061

$ $ $ $ $ $ $ $

(19,000) 2,779,479 3,552,061 6,331,540

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Table 10: Operating Costs Year 1 Startup costs Development & $20,000.00 Engineering Supplies Equipment & Prototype $ 960.00 Admin Supplies $21,200.00 Marketing & Sales Supplies and Equipment Advertising Tools Research $26,200.00 IT Facilities Tools and equipment (inc. repairs) Software & Website costs $10,000.00 Rent $ 3,920.00 Utilities $82,280.00 Total CAPEX Year 2 Year 3 Year 4

$ 6,300.00 $ 3,700.00 $ 960.00

$ 1,800.00 $ 4,400.00 $ 5,000.00 $ 1,200.00 $ 5,000.00 $3,000 $15,000 $3,500 $15,000 $4,000 $15,000

$ 6,200.00

$18,000

$18,500

$19,000

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CONFIDENTIALITY STATEMENT

This document is confidential and proprietary. It may not be circulated or disclosed in whole or part without the written permission of ThincSoC. By accepting this business plan, recipient agrees to treat all technical, business, financial, and other confidential or proprietary information of ThincSoC which is disclosed to the recipient. Recipient shall restrict disclosure of or access to this business plan (all of the foregoing content hereinafter collectively referred to as the Content) solely to persons with a need to know such Content who are under the duties of confidentiality and nondisclosure. Recipient shall, upon the request of ThincSoC, return all of the Content to ThincSoC and, at the direction of ThincSoC, return or destroy all copies of this business plan, in paper, electronics or other form, then in recipients possession or control.

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