SYMIC INC

John Roberts

Starting and funding a high tech company in the current economic

climate

Feb 02

1.The Recession - VC Activity- Layoffs- S&P 500 Profits- Nasdaq Vs 1929

2. Venture Now?3. New Rules4. The Steps5. Competitive Advantage6. Pricing and Placing the Shares of a Startup7. A Current Example. – SYMIC Inc.8. Realities – What actually happens

12 Companies / 19 years9. Some useful references

VC ActivityQ1’99 to Q3 2001

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

US VC's

CDN VC's

Data indexed to 4Q99. Source: Macdonald & Associates, Thomson Financial/Venture Economics

Every time the Bureau of Labor (US) statistics show a sharp increase in layoffs - a recession is sure to follow

S&P 500 (a broad market index) when profits fall rapidly and more than 20% from the peak – a recession is likely.

Angel investors hurt by sucker rallies and the deep plunge of the major tech index

Two Views – Launching a New Venture now

George GendronEditor - Inc. Magazine

Michael Dell

“In the past, I’ve written that an economic downturn can be a terrific time to launch a new venture Many well-known entrepreneurial successes, Dell Computer included, trace their roots back to a recession. But at the risk of sounding treasonous, I think there are reasons to believe that the current environment isn’t as propitious for start-ups as the latter stages of business downturns have traditionally been. Right now what people in companies large and small are feeling is nervous – very nervous. That’s what happens when you eliminate a couple million jobs. People start to wonder whether they’re next, and their paranoia makes them highly risk averse, which means they aren’t inclined to try new things, even when those new things might be good for the business.”

“I’m not a market timer, I think you start when you feel its time” Michael Dell started with $1,000 in the midst of a recession on the eve of the worst year ever for the PC industry.

Source Inc. Magazine March 2002

New Rules for Money Raising (Ontario)

• Private Placement exemption for “closely-held issuers” Section 1.1 of the Ontario Securities Commission Rule 45-501

• 35 outside (Friends, Family and others) investors Maximum

• Reach 35 and the investors must be “sophisticated investors”– Liquidity $1.0M plus– Income $200K annually

THE STEPS

Create A consensual Hallucination

Begin with a story

Investors give them something to wrap their minds around – chance to be a hero – where the imagination goes the

dollars follow

Brands Not just an idea or product - create a brand – much rarer

Cachet Create an aura – a following; converge marketing and technology

In Summary ‘If you give people a why, they will endure and accept any how’ – Nietzche

Source Ellie Rubin ‘Bulldog: Spirit of the New Entrepreneur’ Harper Collins 99

Competitive AdvantageInnovating the smart way.

Provable: The product can be demonstrated on a pilot basis. Customers can try it out on a smaller scale.

Divisible: It can be adopted in segments or phases. Customers can ease into it.

Reversible: It it doesn’t work, it’s possible to return to life without it.

Tangible: It offers results that can be seen to make a difference in something that the customer needs and values.

Fits prior investments: It is in an area where there have already been actions or investments, and it builds on them.

Familiar: It feels like things that customers already understand, so it is not jarring to use.

Congruent with future directions: It is in line with where the customer is heading anyway.

Publicity value: It will make the customer look better to itself and others.

There’s still plenty of room to sneak in revolutionary ideas under cover of evolutionary change. The path to success involves staying a little ahead of the competition but close enough that customers can still understand your product and incorporate it into their lives and business.

Source Rosabeth Moss Kanter Business 2.0 February 2002

PRICING AND PLACING THE SHARES – NEWCO

1. Jan 1, 2002 NEWCO "INC" formed - Share Price 0.01c 1M shares founder 1 1M shares founder 2 50K shares Assistant

2. Feb 28, 2002 NEWCO INC "Bus Plan" Share Price 25c 100K share 25c each $25,000 4 seed investors / total $100,000 3. April 2002 NEWCO INC "DEAL" - Share Price 50c 50K shares 50c each - $25,000 10 seed investors / total $250,000 2 key employees 100,000 options each 4. Dec 2002 NEWCO INC "PRODUCT" - Share Price 75c 500K shares $1.0 each - $500,000 - VC Money 3 employees 33,000 options each 5. June 2003 NEWCO INC "SALES" - Share Price $1.50 1M shares $1.50 - $1.5M - VC Money 5 employees 20,000 options each 6. Jan 2004 NEWCO INC "PRODUCTS" Share Price $2.00 1M shares $2.00 - $2.0M - Pension Fund 5 employees 20,000 options each 7. June 2004 NEWCO INC "PROFITS" Share Price $5.00 2M Shares $5.00 - $10.0M - Private Placement 8. June 2005 NEWCO INC "IPO" Share Price $10.00 5M Shares $10.00 - $50M Public

SYMIC INCSymbol Magic TM

The first integration of Bluetooth TM RFID and Symbol Reader

Technology in an integrated .Net Logistics System

Company Overview

BACKGROUND

• Focus - Logistics IT solution provider

• Founder - John Roberts (Jan 2002)

• Stage - Start-up

• Expertise - Licences - SiGEM - Telematics- Symagery - Barcode

- Proven Team

Company Overview

• New Approach that unifies Bluetooth as the technology of choice in RFID/Symbol/.Net logistic applications

• Every element of the logistics problem is addressed through a confluence of new technologies

• The company sees the low cost easy to use .Net software as the key to introducing realtime web based logistics solutions

• SYMIC intends to provide an end to end real time solution including Telematics, RFID, Symbol Readers, .Net software elements.

Logistics Market• Logistic expenditures constitute 10% - 15% of the cost of

every physical product you buy.• For UPS logistics will shortly constitute $130 Billion part

of its business – twice the size of its current parcel delivery business – note that UPS has only 1.4% of the worlds logistic business.

• By 2006 MS .Net software competing with JAVA will gain 60% of the $15Billion logistic worldwide software market.

• Real-time monitoring and extreme granularity is the aim of all logistics providers.

Logistics IT Market

• Telematics (Mobile Assets)

• Storage/Warehouse (Fixed Assets)

• Storage/Warehousing (RFID/Barecode Readers)

Source: Forrester Research (Telematics /RFID)

Addressable Market

• Move to real time and extreme granularity puts pressure on the need to provide RFID, Bar Code and Wireless Solutions – These elements are expected to grow faster than the overall logistics markets. Associated software and the new hardware will gain a CAGR of 25% to 2006.

Technology ChallengeThe Reader- Must be 802.11a/b compatible- Must have Bluetooth- Touch screen keyboard- Full Barcode compatibility- Totally portable- Programs/Reads RFID TagsThe RFID- Uses Blue tooth- Ultra low power- Ultra low costThe Software- Move to MS.Net- Integration/Real-time answers

The Benefits of the SYMIC Solution

Symic will provide the only real time end to end solution.

The Warehouse - Barcode Reader - RFID- Wireless interconnect- Software

The Transport - Telematics- RFID- Software

The Customer- Barcode reader- Software

NET POSITIVEAnalysts remain Optimistic about future proceeds from Web services.

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$5

$10

$15

$20

$25

2000 2003 2006

ServicesSoftware

$Billion

SOURCE: Gartner Research

TelematicsAlthough hardware will initially spark growth, airtime will be a greater

source of long-term revenue for telematics providers in the United States.

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$5

$10

$15

$20

$25

2001 2002 2003 2004 2005 2006

HardwareServicesAirtime

$Billions

SOURCE: Forrester Research

Financial – Revenue ModelProjected Revenue SYMIC Inc. $000

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2003E 2004E 2005E 2006E 2007E

.Net SoftwareRFID TagsReader

Copyright 2002 SYMIC. All rights reserved. SYMIC Proprietary

Financial Income Statement Information

US$ 000s 2003 2004 2005

Revenue 1,000 6,896 25,960

Cost of Goods SoldComponents 270 2,737 11,293 Manufacturing 307 449 654 Total COGS 577 3,186 11,947

Gross Profit 423 3,710 14,013

Gross Margin 42.3% 54.0% 54.0%

Operating ExpensesSG&A 306 391 391 Marketing 243 486 509 Research & Development 881 1,731 2,156 Total Operating Expenses 1,430 2,608 3,056

Operating Profit (1,008) 1,102 10,957 Operating Margin -101% 16% 42%

Calendar Year

Financials – Revenue Inputs

2003E 2004E 2005E 2006E 2007EVolume (Units, 000s)

Reader/Camera 0.57 3.33 11.07 18.52 30.88 RFID Tags 11 179 940 1,600 2,485

Pricing (US$ / Unit)

Reader/Camera 1,400 1,200 1,080 972 875 RFID Tags 18.00 16.20 14.50 13.12 12.46 Software - 0.1 0.3 3.0 8.0

Calendar Year

Copyright 2002 SYMIC. All rights reserved. SYMIC Proprietary

Terms of the Offering

• Issurer SYMIC Inc.• Issue Common Shares• Share Price $US 0.10• Size $US 0.5 Million• Current Shares Outstanding 5 Million• Close April 30, 2002• Agents None

How to Gain Market Share

• To win market share the SYMIC base unit (Camera/Reader) needs to dramatically advance the functionality of barcode readers.

• Users need real time monitoring and extreme granularity

- 2D BarCode/Bluetooth- RFID Proramability- 802.11 Wireless- Easy to use touchscreen

• MS.Net Software is the glue needed to make the system operate Time

Cost ($ ) / Handset Functionality (e.g. Multi-mode)

What Actually Happens (1983-2002)

• 1983 CALMOS (Semiconductor) $25,000 ($1.5M) Newbridge Microsystems (Calmos sold to Newbridge for $5.0M)

• Now Tundra TSE Market Cap mid 2000 circa $500M

• 1985 CALNET (Modules) $30,000 ($300,000) Current private breakup value circa $300,000

Mid Term

• 1992 Quadrillion (Software) $10,000 ($300,000)

Current private sale value, circa $500,000• 1992 PMC (Semiconductors) $1.5M (Gov’t.)

PMC Sierra

PMC

NASDAQ Market cap mid 2000 circa $1.5B• 1992 Genesis (Semiconductor) $1.0M (Gov’t)

NASDAQ Market cap mid 2000 circa $500M

Mid Term - Continued

• 1995 SiGE Microsystems ($0) ($500,000)

SiGE Semiconductor

Raised $35M mid 00 / Raised $20M late 01• 1995 Skystone ($0) ($300,000)

Sold to Cisco for $94M ($600M)• 1997 SiGEM (Module) ($0) ($300,000)

Raised $25M early 00

Recent 98 - 01

• 98 ATMOS (Semiconductor) ($0) ($600,000)

Recently raised $15.2M

• 00 CS Live (Software) $25,000 ($2,000,000)

Buyout $3.3M

• 00 HR Dept (Human Resource) $30,000 ($200,000)

• 00 e-djuster (Insurance Software) $30,000 ($2.1M)

• 00 VideoSpheres (Video Server) $650,000 ($3.3M)

References1. Financing Your Business with Venture Capital –

Strategies to grow your enterprise with outside investors – Frederick D. Lipman, Prima Publishing

2. Winning Angels – the 7 fundamentals of early stage investing – David Amis, Howard Stevenson, Prentice Hall

3. Going Places – Everything you need to know to turn a private enterprise into a publicly traded company – Frederick D. Lipman, Prima Publishing