16 Mile Solutions Executive Summary Series B September 2008[2]

EDI 3.0 More Tools, Less Cost…

Executive Summary Minimum Investment: $25,000 $2,500,000 Series B Preferred Stock Financing Pre-Money Valuation: $6,000,000 16 Mile Solutions 712 North Motor Place, Suite 3 Seattle, WA 98103 www.16milesolutions.com Contact: Mark Pattison, Founder and CEO Direct: 206.675.1066 Cell: 206.650.8527 Email: [email protected]

“Supply chain visibility ranks as one of the top two application focus areas for companies as part of their supply chain technology investment plans.” — The Aberdeen Group, 2007

Overview 16 Mile Solutions is a revolutionary EDI web 3.0 company that has re-invented the way electronic purchase order information is delivered throughout the supply chain. Today, companies of all sizes communicate purchase order information electronically — from P.O. to final invoice via old legacy systems such as DI Central, SPS Commerce or Sterling which make conducting business very expensive to transact. Despite the millions of dollars in revenue involved, there is poor visibility into the status of orders for the buyers, suppliers, and other supply chain entities responsible for end-to-end order fulfillment. The competition charges for every transaction/message that is sent back and forth in addition to other required tasks such as UCC generation, Bill of Lading, Packing List, Advanced Ship Notices or Invoicing etc. 16 Mile Solutions has taken advantage of advances in technology to become the only hosted company to offer a SaaS model and charge by the seat in addition to offering bundled tools to process orders. In short, we can become a reoccurring cash stream over time the way Comcast or other phone companies have done. Once we onboard a customer , we will service the account making it very hard for them to leave.

Our inaugural product, 16 Mile OV™ (OV = order visibility), is a hosted solution that differs from its competitors in five important ways. •

New Pricing Model: Results in 50-100 percent lower EDI (electronic data interchange)1 costs, plus no charge for transactions sent to and from suppliers. EDI + Order Visibility: Unites EDI with the delivery of real-time, multidimensional order information across supply and demand networks. New Technology: Uses the latest database, application, and reporting technologies and integrates data from value added networks (VANs)2, Oracle, and other back-end systems to support end-to-end management of supply and demand networks. Built-in Tools: For no extra charge, includes built-in tools and reporting capabilities for vendor performance, event alerts, inventory tracking, response management, scanned-based trading, and more.

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Mobility Enabled: 16 Mile OV can “mobile enable” extra functionality to any Smartphone or PDA. This mobile functionality can be used for scan and pack within a

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Electronic data interchange (EDI) refers to the electronic communication of business transactions between organizations, such as purchase orders, confirmations, and invoices. Third parties provide EDI data translation and validation services that enable organizations with unlike systems to connect to each other. Although interactive access may be part of it, EDI implies direct computer-to-computer transactions into databases and ordering systems. (Adapted from PC Magazine encyclopedia: www.pcmag.com/encyclopedia_term/0,2542,t=EDI&i=42367,00.asp.) 2 A value added network (VAN) is a service company that receives and stores data temporarily in private mailboxes for retrieval by the sender’s trading partners.

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warehouse (retrofit the blackberry), check on inventory via RFID, price comparisons etc. and can go cross platform, cross carrier. 16 Mile Solutions is currently extending its order visibility platform and pricing model for our patent pending 16 Mile Warranty Claims™, which automates the product return and claimsresolution process for “reverse logistics” — the sequence of events used to manage product disputes following delivery. Our initial customer base for 16 Mile OV includes Robbins & Meyer, Olympia Sports, Carbon 5, Inmoda, Mello Sales, Staub USA, and The Pattison Group. Through these customers, we will be translating data to and from their buyers and suppliers, including retail giants Adidas, Columbia Sportswear, KB Toys, Nike, Reebok, Sam’s Club, Target, Dillards, Petsmart and Wal-Mart etc. We will be able to leverage our contacts into those companies by marketing our services to them. 16 Mile is very viral. Once we connect into those industry giants, we will be able to leverage our contacts into those companies by marketing our services to them. Series A was fully subscribed in May 2008 at 1.5 million consisting of angles. Moving forward,we have begun Series B fundraising efforts with the goal of raising another 2.5 million to scale the business. The funding will be applied to hiring a CTO, customer service and sales & marketing people with industry knowledge (already identified), a PR campaign and feature enhancements for 16 Mile OV. More information can be obtained at www.16MileSolutions.com..

Company Background 16 Miles Solutions was founded by Mark Pattison following years of buyer- and supplier-side experience through his two companies, The Pattison Group and Front Porch Classics (acquired in 2007). The Pattison Group is the leading manufacturer of Starbuck’s outdoor umbrellas and bases on three continents. The coffee table games created by Front Porch Classics are sold in 700 retail locations in seven countries, and two of its products have won the coveted Family Fun Toy of the Year. Like most companies dependent on supply chains, Front Porch and The Pattison Group could rarely access relevant order information at critical points, much less communicate potential problems with any degree of efficiency. Supply chain problems faced by the Pattison Group, in particular, inspired Mark to develop software that could deliver highly visible, end-to-end order status information, while lowering data exchange costs and motivating collaboration among supply chain entities. The result is 16 Mile OV, a web-based, hosted solution that unites electronic data interchange (EDI) with order visibility (from P.O. to final invoice) and built-in tools for reporting and analysis, process management, replenishment support, and EDI compliance. By delivering integrated order information across supply and demand networks, 16 Mile OV improves decision-making, encourages collaboration, pre-empts problems, and helps supply chain entities meet their service levels at a fraction of the cost of its competitors.

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Management Team In addition to founder and CEO Mark Pattison, the company is in the process of filling key executive positions with supply chain experts. These individuals have already been identified and are seasoned experts in EDI software with sales & marketing backgrounds. In addition, we have engineers that are deeply versed in mapping a clients 850, 977, 810, 856 etc (PO through Invoice) connection points between a company and its trading partner.

16 Mile Products 16 Mile OV helps integrate supply chains by delivering real-time, multidimensional, and always accessible order information across supply and demand networks. The strengths of its web-based technology platform, data integration capabilities, and built-in reporting and analytical tools combine to create a supply chain order visibility solution unmatched in the market for price, depth and range of visibility, and scope of analytics: Technology Platform 16 Mile OV’s web-based platform runs the latest SQL 2005 database, application, and reporting technologies to maximize processing speed, maintain reliable performance, and facilitate ongoing upgrades with the latest technology.

Illustration 1: Technology Platform

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Data Integration The product’s built-in Integration Manager reduces implementation costs by enabling IT professionals to pull data from Oracle and other back office systems with little effort. We accept data using three methods (tight, loose, and manual) in a broad range of formats to accommodate any back-office system. Our platform automatically translates and validates the formatting and syntax of the data and alerts IT to any problems. We also offer tight integration and formatting services for SAP, QuickBooks, Sage MAS 90 and MAS 200, Peachtree accounting systems, MYOB software, and many other back office applications Built-In Tools As part of the annual licensing fee, 16 Mile OV comes with built-in tools for: •

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Reporting and Analysis — including sales and spend analysis, vendor score carding and performance management, inventory reporting, and order tracking (track and trace) Business Process Management — including item management, event notification, response management, and EDI compliance Replenishment Strategy Support — including distribution center (DC) replenishment (such as cross dock systems and DC inventory), scan-based trading, vendor managed inventory (VMI), direct-to-store, and drop ship

In addition, 16 Mile OV can incorporate each customer’s unique EDI rules and policies to ensure EDI compliance by both domestic and off-shore suppliers. Our second product, 16 Mile Warranty Claims™, is completing its beta testing with Starbucks. The product picks up where 16 Mile OV leaves off — that is, at the point an order is delivered to the customer. Through a patent-pending technology process, 16 Mile Warranty Claims supports what is called “reverse logistics” by facilitating a claim against a product, its return to the vendor, and the claim resolution via debit, credit, product replacement, or other method.

The 16 Mile Pricing Difference Departing from the standard EDI pricing model, 16 Mile Solutions uses the software-as-a-service (SaaS) model to price its products. In addition to a one-time set-up cost, we charge an annual license fee based on the number of user seats, not on the volume of transaction data. For the following reasons, our pricing model results in 50-100 percent savings in EDI costs for companies doing business within supply chains. •

Unlike providers of hosted EDI solutions (our chief competition), we don’t charge transaction fees. In other words, there is no charge for the number of data kilobytes going through our system for electronic documents sent to and from suppliers (P.O., invoice,

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shipping notice, etc.), as long as the data doesn’t have to pass through a value-added network (VAN). If we have to charge for data passing through a VAN, we charge only for the kilobytes associated with each document sent to us via FTP, and at greatly reduced per-kilobyte rate. In contrast to EDI providers, we do not charge for: — The break up of data into higher-kilobyte components, such as documents broken by SDQ (store, item, quantity) (see illustration 2, below) (DI Central, SPS Commerce, Sterling as examples) — Data stored on our system — Electronic documents that have been drafted but not distributed Finally, we differ from EDI providers in the way we compute costs. EDI providers round the kilobyte fractions for each electronic document to the nearest kilobyte throughout the month, then total the number of these kilobytes at the end of the month, raising costs exponentially. In contrast, we add up fractions of kilobytes per document at the end of each month, then round that total to the nearest kilobyte.

How EDI Providers Handles Data

EDI Provider’s Legacy System

1. Retailer sends a purchase order (“850 PO”) as a 4 kilobyte EDI document to the value-added network (VAN). The PO includes SDQ data (for store, item, quantity) for replenishing 50 stores. 2. The VAN sends the PO on to the EDI provider's legacy system, where the data translator breaks it up by SDQ to facilitate data consolidation for the advanced shipping notice (ASN). 3. The PO is stored on the system in the supplier's account as 50 separate records, one for each store, expanding the original 4 kilobytes to at least 50 or more. 4. The supplier is charged for all 50 + kilobytes.

50 Purchase Orders

How 16 Mile Solutions Handles Data We also break up the 850 PO by SDQ, but we only charge for the 4 kilobytes we received from the VAN, not for the 50 separate records.

Illustration 2: The EDI Process

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The Market Improving supply chain processes not only offers a rich source of cost savings for businesses, it offers substantial market opportunities for 16 Mile Solutions. The software market for supply chain management (SCM, also called supplier relationship management, or SRM) is expected to grow at a compounded rate of 8.2%, from $1.56 billion in 2006 to $2.35 billion by 2011. Interest in SaaS is so high—it’s one of the most frequently searched terms on gartner.com—and demand for it so strong that Gartner predicts the SaaS market will have a compound annual growth rate more than double that of on-premises applications for the aggregate enterprise application software markets through 2012.

Worldwide Supplier Relationship Management Market (millions of dollars)

Source: ARC Advisory Group 2007

Illustration 3: Projected Market Growth

According to a 2007 report by the Aberdeen Group, supply chain executives view supply chain visibility as a critical initiative, because it enables them to respond quickly to change, a key factor in their companies’ success. Other business drivers that necessitate a focus on improving and extending supply chain visibility include: • • • • • • •

The rapid introduction of new products with short product lifecycles (less than a year) Volatile markets that cause a high degree of uncertainty around demand Shrinking margins due to price pressure Rising customer service expectations and diminishing brand loyalty Increasing global competition Business pressures to utilize expensive assets with maximum efficiency Global proliferation of value chain partners 16 Miles Solutions

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Almost two-thirds of the companies surveyed by Aberdeen use some type of supply chain visibility technology for basic “where is my order” information, but these solutions are limited and often department-based. A true visibility system must emphasis what Aberdeen calls “response management,” as characterized by: •

Speed: Response management analytics operate in real-time, allowing for rapid insight into the impact of a given change or proposed response to change. Transparency: Companies using visibility technology within the context of response management are three times as likely to have faster order-to-delivery cycles Risk management: The top-rated method of reducing supply chain risk has been to increase supply chain flexibility, allowing businesses to balance risk and opportunity.3

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Of the 309,000 companies based in the U.S. with annual revenues of more than $5 million, about 79,804 fall within 16 Mile Solutions’ targeted market: those with $30 million to $1 billion in annual revenue. Of those, we calculate that our customer base should grow to 2,200 companies, or less than 3 percent, to reach our five-year revenue goal. A

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Key: A = annual revenue B = number of U-S. based companies generating revenue

Competition Supply Chain Management (SCM) Companies: Competitors that offer SCM products typically offer generic solutions for implementation across different industries and enterprises. Such SCM solutions are expensive and require extensive, labor-intensive customization which only very large enterprises have the resources to handle. SAP, Oracle, Ariba, Manhattan Associates, and i2 dominate this category. Oracle also offers an online visibility portal, called iSupplier, but the product is expensive, and unlike the multidimensional 16 Mile OV, only provides visibility one-to-one, i.e. between two organizations at a time. EDI Providers: Two types of companies offer electronic data translation and validation services for retailers and suppliers: hosted value added networks (VANs) and hosted EDI solution

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“Beyond Supply Chain Visibility: Response Management Is the Key,” The Aberdeen Group, July 2007. 16 Miles Solutions

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providers. VANS are legacy systems that provide little or no added value beyond data interchange, while using a costly transactional pricing model (see above, “The 16 Mile Solutions Pricing Difference”). Companies that provide hosted EDI solutions, such as DIcentral, Inovis, Perfect Commerce, and Sterling Commerce subscribe to VAN services, then add value by providing their own translation and validation services, as well as some reporting and/or integration services, all at extra cost. They charge for all transactions/messages that are sent back and forth to complete an order. It gets very expensive to trade commerce between companies. 16 Mile Solutions: No company provides a hosted web-based solution that combines EDI translation/validation services, simple integration of real-time data from VANs and back-office systems, multi-dimensional visibility into the status of an order (from P.O. to final invoice), and built-in reporting and analytical tools — all while lowering EDI costs by as much as 50-100 percent. In the warranty claims space, no company offers a web-based automated process for managing warranty claims data, filings, and resolutions. Both products allow us to pursue companies in numerous vertical markets, regardless of the size of companies involved. In other words, we are ideally suited to sell our solution from one end of a global supply chain to the other.

Customers We have divided our sales effort into three fronts: 1) Signed agreements 2) 3rd party referral partnerships and 3) strategic partnerships. Signed Agreements: Robbins & Meyers (connecting to private label suppliers and clients); the Pattison Group (connecting to buyer Starbucks); Olympia Sports (connecting to suppliers Nike, Adidas, Columbia Sportswear, and more); Inmoda (connecting to buyers Wal-Mart and WalMart Canada); Carbon 5 (connecting to buyers Wal-Mart, Big 5, and Academy Sports), Mello Sale (connecting to PetSmart), Staub USA (connecting to Dillards and Federated Stores). Pending Proposals: We have proposals pending with 25 companies, including BDA, EvoGear,, Kassatex, Venture Products, Red Wing Shoes, Capacity, and K&M International. We’re also deep in discussions with Nordstrom and Starbucks and have begun talks with many other prominent retailers. Partnerships: In addition to direct sales, partnerships offer a rich source of potential customers. We have partnered with Capacity, Traxian, Faxscintating Solutions, OMS, Explore Consulting & Asia Inspectors all separate companies who will refer their clients to use our EDI portal in exchange for 16 Mile pushing their value proposition. Strategic Partnerships: 16 Mile is under a LOI with Atigeo. They have expressed interest in putting an investment into 16 Mile in exchange for being able to tap into our data and client base in the retail vertical. We have also partnered with a group in Australia that has created the ability to enable your mobile phone to receive 16 Mile data. We are in a EOI with Telstra Wireless for them to resell our solution under the name 16 Mile Mobile. Telstra’s SaaS strategy is similar to Sales Force app exchange. 16 Miles Solutions

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Exit Strategy Atigeo is a heavily backed company led by former Microsoft execs. Their strategy is company acquisition to scale their businesses faster. This is probably the lowest hanging fruit in that they will be financially vested in us. In addition, there is a tremendous amount of consolidation in the market today. In 2006 1,726 software technology companies were acquired, the most by sector since 2000. Examples in the supply chain arena include: • • •

Perfect Commerce, merged with Pantellos in 2004 i-2 software, acquired RiverOne in 2006 Manhattan Associates, acquired Logistics.com in 2002, StreamSoft in 2003, Return Central in 2004, Evant in 2005 • Oracle, acquired Siebel, PeopleSoft, Retek, ProfitLogic, 360 Commerce, and JD Edwards in the last several years • Illinois Tool Works, acquired Click Commerce in 2006 • Opsware, acquired I-Conclude in 2007 On average, software companies have been selling for a 3x multiple of sales. We feel that we will be positioned to sell the company within three to five years at an estimated 8.21x return on investment, based on the following example: We have $12 million in annual revenue, and we sell at 3x that, or $36 million. A $25,000 investment at .35/share returns $2.87/share, or $205,250 (not counting potential future dilution).

Management Team Mark Pattison, Founder and CEO Mark founded 16 Mile Solutions with 13 years of entrepreneurial and supply chain experience under his belt. In 1994, following his playing career in the National Football League (Oakland Raiders and New Orleans Saints), he founded the Pattison Group (www.thepattisongroup.com). The Pattison Group provides companies with brand-building merchandise and includes a Hong Kong-based import division for sourcing and quality control of products for Starbucks, Fox Sports, and others. Six years later, he co-founded Front Porch Classics, which designs and manufactures authentic wooden gifts, games, and toys (www.frontporchclassics.com). The company (acquired in 2006) has twice been awarded the prestigious Family Fun Toy of the Year™ — in 2002 for Old Century Baseball and in 2003 for Dread Pirate. Today, Front Porch Classics products are sold in more than 700 U.S. stores and distributed in seven countries.

Advisory Board Each board advisor has invested in 16 Mile Solutions: Dean Baker Founder of Asset Recovery Specialist Inc. (www.equipmentrecovery.com), which specializes in asset management for banks and leasing companies

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John Baughn Former partner of Accenture, where he served in business and IT architecture groups and managed over $100 million dollars Diane Dewbrey CEO and president of Foundation Bank Tim Dowling VP of Business Development McAfee Software. Former CEO of Pure Networks (Cisco) Terry Drayton Co-founder of Home Grocer, Count Me In, and Ramp Technology Group (www.RampGroup.com) Dan Nordstrom Former CEO of www.Nordstrom.com and currently CEO of Outdoor Research Company (www.outdoorresearch.com)

Reasons to Invest • • • • •

Founded by an entrepreneur with a track record of successful start-ups Working product and actual customers Seasoned sales team experienced in supply chain solutions Enormous market opportunity Potential 8x return on investment in three to five years

Summary Financial Data The following chart should be read in conjunction with information contained in the company’s complete Financial Projections and Assumptions. The projected data is based on various assumptions, most of which are difficult to predict and control. Accordingly, the projections are only estimates, and actual results may vary considerably.

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