Market Assessment for Frisbees in Bolivia

1. Market Assessment for Frisbees in Bolivia December 2002

2. PURPOSE To discuss current situation in Bolivia and come to agreement on entrance strategy for Transport products • Regulatory Conditions • Market Environment • Market Size • Reasons for Entry • Cost of Entry • Opportunity and Customer Potential • Next Steps

3. Form A Joint Venture Must be majority owned (60%) by Bolivians, enter into a JV with a Bolivian company to comply. Products Enabled: All Products Implications: Cost of setting up and running a JV REGULATORY SITUATION According to the regulations in Bolivia a “Frisbee provider” must be Bolivian owned and controlled to provide Frisbee services. There are 2 potential solutions that will meet this regulatory condition. • Resell of Services • Sell services from a sanctioned company • Product Enabled: • Any product the Reseller offers. • Implications: • Low Margin business There has been positive indications that the regulatory climate will change in Bolivia, but in the Reselling is the most cost effective way to proceed that enables the most products.

4. Competitor #2 Revenues ~ $4.6B Market Strength Western Boliva Products: Frisbees Bomerangs Tennis balls Competitor #1 Revenues ~ $13B Market Strength Central and Eastern Bolivia Products: Frisbees Bomerangs Tennis balls Training Services Bolivian Market Environment There are 5 major competitors that have had various degrees of success. Their total revenues were $21.3B in 2001. These will form the major competitors in the market. Similar to the rest of the world there are financial troubles that are effecting some of the suppliers. $21.3B Comp #11 Comp #10 Comp #9 $4,614 M Comp #8 (7$190M) Comp #7 ($379M) Comp #6 ($442M) Comp #5 ($695M) Comp #4 ($885M) Comp #3 ($980M) $12,956 M Comp #2 ($4.614M) Comp #1 ($12.956M)

5. Competitor #3 Revenues ~$950M Market Strength General distribution Products: Frisbees Tennis Balls Currently going through capital restructuring due to missing $52m in Bond payments in Sept Comp #9 is rumored to be interested in Comp #3 Competitor #8 Revenues. ~$590M Market Strength General distribution Products: Frisbees Comp #9 is rumored to be interested in the Comp #8 Canadian Market Environment Comp #9 is trying to become a consolidator of assets. They have recently put in an offer for Comp #8 which will strengthen their metro footprint and are rumored to be in discussions with Comp #7. • Competitor #9 • Recent Emergence from Chapter 11 • Strong penetration in the cities • Products: • Frisbees • Acquiring Comp #8 for $167M but currently have only $100M in cash on hand. • Rumored to be going to acquire Comp #8 and Comp #7

6. Market Size Frisbees in Bolivia When looking at this established market, we are considering ourselves as new entrants into a market that is currently contracting due to the highly competitive market environment and oversupply of capacity. The value of the market is expect to shrink 20% in 2003 and then return to a 3-5% CAGR. • TDS ~ 2002 Fisbee market size for services to be $110M annually Value of Fribees in Bolivia 200 0.6 180 0.5 160 140 0.4 120 Cash Revenues ($m) 100 0.3 Frisbee Price ($) 80 0.2 60 40 0.1 20 0 0 2000 2001 2002 2003 2004 2005 2006 Source: Taipei Data Security Company 2002

7. Supply and Demand The demand of frisbees is estimated to grow at 19% per annum through 2007. Combining the market size with the estimated demand leads to the conclusion that the price per firsbee will decline between 18-31% over the next 5 years. • TDS ~ 2002 frisbee demand will increase from 150 units to 500 units in the next 5 years. Source: Taipei Data Security Company 2002

8. Art of Control International Inc and Bolivia There are 4 major markets in Bolivia • Nempnet Throbwell: • This is the major market for services within Bolivia and can be served from the existing distribution channels that are in place. • La Paz • This is identified as the second major market in Bolivia and can be served from the existing distribution channels that are in place. • Huancha • This is the third major border crossing for traffic from the West Coast of the US. Currently, Art of Control, Inc has no existing facilities into this area. Art of Control, Inc will be able to extend our network from Seattle to this market using a reselling relationship • New Chicago • This is one of the main intra Canada markets and Art of Control, Inc will be able to serve this market from our base in Toronto, Montreal or Seattle on a reseller basis. 70%

9. Reasons for and Implications of Entry There is little to no capital outlay depending upon the market, therefore it is easy to recommend that we should enter in with our limited existing footprint and strategic interconnect agreements in place with the major Bolivia. This action will potentially have some impacts on the market and relationships Reasons for Entry Customer Response Competitive Response Increase in $$ for frisbess as new market potential is realized and Reciprocal business orders are placed by Bolivian Providers • “A of C is making a limited play and Comp #9 has already dropped prices in the market therefore A of C will have little impact” • “A of C is a competitive threat and we need to stop them immediately” • Service existing customer base • Develop reciprocal business with Low Capital Costs • Price Compression post entrance – Art of Control is going to have little impact on this aspect as Comp #9 is already compressing prices drastically. • Mild Competitive Response is expected • If Art of Control enters into Bolivia with a targeted focus on Nempnet Throbwell we will be perceived as only a limited threat. • Art of Control is addressing US and EU customers in Bolivia and not attacking the residential and imbedded Bolivian customer base.

10. Nempnet Throbwell Product Offering: Frisbee Bomerang Tennis Balls Current Capabilities: none Distribution: Take a success based approach La Paz Product Offering: Frisbee Current Capabilities: none Distribution: Take a success based approach Cost of Entry into Canada Considering each of our target markets we have a variety of costs associated with entrance and making these facilities Frisbee capable. The OPEX is fully dependent upon how successful we are in Bolivia. With the current projections there is no incremental OPEX. Adding an additional node into the systems requires minimal efforts Incremental Capital Cost ~ $200k Incremental Capital Cost ~ $500k

11. Opportunity Quantification There is ~ $200k in identified opportunities that we could potentially address. In addition $400k of opportunities that are partially qualified. Of our existing target customer base there is the potential for servicing the targeted segments more fully. Short Term Billy Bob Billy Joe Buffalo Chip Nittany Lion ~ $200k MRR Long Term Opportunity Bolivian Companies Juan Valdez Don Quixote Don Juan Don Corleone Lucretia Borgia US Companies Boston College Eagles Nebraska Corn Huskers Syracuse Orangemen Drew Rangers ~ $400k MRR ~ $??? MRR

12. Recommended Actions and Next Steps Develop a phased approach into entering the Bolivia Market with day one distribution in Nempnet Throbwell with reselling services on into the rest of Bolivia. • Pre-Launch Activities • Pricing analysis for all products for entrance into Bolivia – where do we want to price compared to the competition • Develop system support • Pricing analysis for all product Phase 1 – Feb 2002 • Negotiate the Definitive agreement with our consortium partners – TARGETED completion Jan 15th, 2003 • Launch in Art of Control in Nempnet Throbwell Market only • Resell services into the rest of Bolivia • Phase 2 -- SBC • Take a success-based approach to La Paz, if there is enough demand from Phase 1 activities deploy the capital needed in La Paz • Resell services into the rest of Bolivia