USRF BUSINESS PLAN : Its lengthy, but well worth your investment dollar.........
> B. Edward Haun & Company
> CORPORATE UPDATE
> August 18, 1998
>
>
> INTERNET MEDIA CORP.
>
> OTC: USRF
> Shares out. : 7.00 mil.
> Float (est.): 1.10 mil.
> Price: 1 1/4
>
> Internet Media Corp. (OTC BB: USRF; pronounced you surf) has developed a
> wireless Internet technology for the residential and corporate markets
> which is completely non-reliant on a hard- wire or cellular telephone
> system, requires no FCC license, and provides constant access to the
> Internet from any computer--stationary or mobile--within the com-pany's
> transmission area. The technology is faster and more powerful than
> traditional "dial-up" methods of Internet access and, again, requires no
> telephone company involvement. The company has created the first 21st
> Century Internet Service Provider, one that is wireless, dependable and
> fast.
>
> BUSINESS STRATEGY
>
> USRF is devoting full time to the rapid implementation of a broad
> strategy to transform the company into a profitable Internet Service
> Provider (ISP) with annual revenues in the $3.7 million range in the
> near term. Given market multiples accorded publicly traded ISPs, this
> could value USRF at roughly $37 million, or $3-4 per share before any
> corporate revenue or subscriber growth, which supports the argument for
> a valuation in the $4-5 area. This valuation is expected to increase
> materially over the ensuing 12-18 months with the continuous execution
> USRF's business plan.
>
> The Opportunity
>
> Management has identified 20 ISPs with a combined 40,000 retail
> customers and $10 million in annual revenues (approximations) which are
> believed for sale, and which USRF has already, or intends to, enter into
> negotiations to acquire. The company recently agreed to purchase two
> ISPs located in Santa Fe, NM and St. George, Utah, and signed a letter
> of intent to acquire another in Salt Lake City.
>
>
> In virtually all cases, targeted ISPs service second and third tier
> markets. As such: there is minimal competition among other potential suitors which, unlike USRF, are still bound to the telephone line for Internet service (a second line in some areas is $20-25 a month); these "small town systems" are well behind the technology curve, and their customers long for high-speed Internet access, which is generally unavailable at any cost and could be years away, but which USRF can provide today;
>
>customers in these areas are ultimately reliant on the Baby Bells
> for "last mile" service (USRF completely removes local telcos from
> the equation); and
>
> these smaller markets offer inexpensive marketing channels relative
> to their larger counterparts (print, radio and cable tv
> advertising, computer store demos, etc.).
>
> Distinct Operating Advantages
>
> The acquisition of existing ISPs provides USRF with distinct advantages:
> instant revenues; a customer platform to rapidly upgrade to USRF's
> high-speed, wireless services; a pre-existing G&A base of operations
> through which to further expand the company's retail presence and enter
> the lucrative corporate market; and the ability to enhance profitability
> through the elimination and consolidation of redundant facilities,
> services and personnel.
>
> By focusing on tertiary markets, USRF is in effect "flying under the
> radar," and has yet to encounter competition from other ISP roll-up
> concerns. Moreover, in most instances targeted ISPs are eager to be
> acquired by USRF because they don't want to compete with the company's
> wireless service; there is no exit strategy for small local ISPs; and as
> part of USRF (some owners will join the company) they see an opportunity
> to dominate their local markets.
>
> Targets Strategically Selected
>
> Initial acquisition candidates were singled out based on their ability
> to provide access to nearby, and in certain areas larger, markets, with
> the
> intention of quickly and cost-effectively creating a large "footprint"
> within a geographic region. For example, the St. George acquisition is
> viewed as an entre to southern Utah/Nevada, including Las Vegas, while
> Santa Fe offers access to Albuquerque and several small towns throughout
> New Mexico. There are no ISDN lines in New Mexico at all.
>
>
> VALUATION SCENARIO
>
> The following basic scenario helps one begin to understand how USRF's
> business plan could create meaningful shareholder value:
>
> 1. An ISP with 2,000 subscribers, each paying $19.95 per month
> for service, is acquired and upgraded to high-speed wireless for
> $500,000, or basically the equivalent of one times annual
> revenue (realistic based on management's current
> negotiations). The wireless infrastructure takes about six
> weeks to construct.
>
> 2. 30% of existing customers upgrade to a service that is 4-10
> times faster than that offered by the previous ISP (a guaranteed
> minimum 64kbs), and pay $39.95; and 10% of avid users migrate
> to even faster service (a guaranteed minimum 128 kbs, or the
> equivalent of an ISDN line), and pay $69.95.
>
> 3. The average monthly income per subscriber then rises from
> $19.95 to $30.95, and total system revenue increases to an
> annualized $742,800 (not including the corporate market).
>
> Immediate Objective: 10,000 Subscribers
>
> USRF is in final negotiations to acquire an initial group of ISPs with
> more than 10,000 customers once sufficient funding exists. Applying
> this model to a total of 10,000 customers implies that USRF could
> conceivably grow revenues rather quickly to the $3.7 million level.
>
> Potential Value Near Term
>
> Public ISPs are commonly valued at a multiple of annualized revenue.
> MindSpring Enterprises and America Online trade at 12 and 10 times,
> respec-tively (7/26/98). Arbitrarily assigning a 10 times multiple to
> the above revenue figure would value USRF at $37 million. Assuming that the company issued 3 million shares to achieve this revenue
> level, then shares outstanding would rise to roughly 10 million,
> translating into a per-share value in the $3-4 area.
>
> Next: Add 10,000 Subscribers
>
> To reiterate, there is a longing to realize full-speed Internet access.
> This is particularly true in remote markets, where the Baby Bells have
> created a traffic jam along the so-called last mile; where alternatives
> such as cable television and fiber-optic access may be a years away; and
> where people can buy super-fast computers, but which are only as fast as
> the last mile will permit.
>
> Based on this pent up demand and its ability to obviate the need for a
> telephone line and provide mobile access, USRF believes it can add a net
> 10,000 customers across its network during year one of operation at the
> $30.95 monthly average.
>
> Potential Valuation
>
> This would gradually increase total revenues to $7.4 million annualized,
> which implies a stock price in the $7 range (once again assuming 10
> times revenues and 10 million shares outstanding).
>
> Importantly, while the projected number of sub-scribers of the original
> systems doubles under USRF ownership, total projected revenue triples.
> Also, systems are purchased for one times revenue, but under the
> Internet Media Corp. umbrella could be worth 10 times revenue, owing to
> public versus private market valuations and USRF's value as a publicly
> traded roll-up company.
>
> These calculations also do not assign any value to USRF's technology,
> and assume nil revenue contri-bution from the corporate sector.
> Moreover, many public ISP roll-ups are currently unprofitable. A
> profitable ISP with competitive advantages could command an
> above-industry multiple.
>
> Longer-Term: Secondary Offering; Purchase 30,000 More Subs
>
> A secondary offering of two million shares at or above $7 is believed
> sufficient to accomplish the following:
>
> 1. Acquire 30,000 more customers.
> 2. Construct wireless systems in 20 additional markets.
> 3. Exploit the corporate sector.
> 4. Qualify for Nasdaq listing.
>
> Potential Valuation
>
> Assume USRF acquires the 30,000 additional customers and the average
> monthly service fee increases to $30.95. This would translate into
> total annualized revenues of approximately $18.5 million for the entire
> 50,000-customer network, which at 10 times revenues would value USRF at
> around $15 a share, assuming 12 million shares outstanding (2 million
> added by the secondary).
>
> Going a step further, if the company were to double this 30,000 customer
> base as in the prior example, then the number subscribers could rise to
> 80,000 and annualized revenues to $29.7 million, implying a $24 stock
> based on the prior assumptions.
>
>
> CORPORATE
>
> To reiterate, corporate customers represent a high-margin, high-revenue
> source of income, and small, medium and large companies could ultimately
> com-prise USRF's largest revenue category. The company, which has
> already sold a high-speed data link to an Exxon Corp. facility in Baton
> Rouge, can provide this market high-grade, seamless and encrypted
> (scrambled) Internet and intranet networking capability, which can
> utilize a com-pany's existing network, and does not tax the existing
> telephone system or require any additional telephone lines or hard-wire
> lines of any kind. Intranets are in fact growing more rapidly than the
> Internet (source: Bear Stearns Research).
>
> USRF can, for example, install the popular T-1 line (as in the case of
> Exxon) at a roughly 40% discount to the prevailing market price for both
> installa-tion and monthly service. The company can also run up to six
> T-1 lines from one installed T-1, thereby increasing residual revenue by
> up to six-fold.
>
> Even in small and mid-size towns, this market is substantial. In
> addition to the obvious corporate environments, it includes office
> parks, schools (including colleges and universities), hospitals, hotels,
> adjoining building data links and so forth.
>
>
> NATIONAL PRESENCE, LOCAL FEEL
>
> USRF has the opportunity to create a national presence as a provider of
> superior Internet and intranet services to tertiary markets, yet retain
> the "local feel" important to smaller communities. The name of each
> system will include the town's name (e.g. USRF Santa Fe), and in some
> instances local managers will remain in place. Each system will also
> have its own web page containing local information, but which will also
> be hyperlinked to USRF's main corporate website.
>
>
> CONCLUSION
>
> Speed, seamless transmission, sidestepping the local telephone company,
> the ability to upgrade existing clients and add new subscribers, and
> when necessary to "pay up" for ISPs due to the ability to rapidly and
> materially increase system revenues, clearly gives USRF a formidable
> advantage over the competition.
>
> The investment potential summarized herein is based merely on an initial
> 20 systems in seven states. There are several more acquisitions already
> identified, including ISPs in much larger cities in the vicinity of
> acquisition targets. In pursuing the initial group of candidates, it
> has become apparent to management that there are numerous small and
> medium-size ISPs willing to be purchased to avoid competing with USRF,
> and as a part of Internet Media Corp. to gain the opportunity to
> dominate their respective markets. Furthermore, many have seen their
> colleagues reap huge rewards by being acquired for the stock of public
> ISPs.
>
>
> FOR FURTHER INFORMATION CONTACT:
>
> Thomas Lobaugh
> 303/773-8185
>
> James Kaufman
> 805/493-9273
>
>
>
> The foregoing contains forward-looking statements which are subject to
> contingencies and uncertainties. Such forward-looking statements are
> not guarantees of future performance, and are based on numerous
> assumptions about future conditions
>
>
> that could prove to be inaccurate. Actual events, transac-tions and
> results may differ materially from anticipated events, transactions or
> results described in such statements. Material uncertainties about the
> future of Internet Media Corp. (the"Company") exist, and there can be no
> assurances that the market for its services will be assumed.
>
> The information contained herein has been furnished by the Company to
> which it relates, and for which B. Edward Haun & Company serves as
> financial relations counsel and from which it receives compensation.
>
> This report has been prepared using information supplied by the Company
> and is otherwise available in the marketplace. It is believed to be
> accurate, but absolutely no assurance is given to that effect. The
> Company does not publish financial forecasts, and the only such
> forecasts available are those prepared by independent consultants.
> Since any such forecast, regardless of who prepares it, is subject to
> changes outside the preparer, no analyst involved herein, nor the
> Company, warrant the accurateness of the financial forecast, and should
> not be relied upon in making the investment decision.
>
> This document is not, and should not be construed as, an offer to sell
> or solicitation of an offer to buy any securities. The information and
> opinions contained in this document have been compiled or arrived at
> from sources believed to be re-liable and in good faith, but no
> representation or warranty, expressed or implied, is made as to their
> accuracy, complete- ness or correctness. All opinions and estimates
> contained in this document constitute judgements as of the date of this
> document and are subject to change without notice. The information
> contained in this document is published for the assistance of
> recipients, but is not to be relied upon as authoritative or taken in
> substitution for the judgement for the exercise of judgement by any
> recipient. B. Edward Haun & Company accepts no liability whatsoever for
> any direct or consequential loss arising from any use of this document
> or its contents. The principals of B. Edward Haun & Company may have
> long or short positions in the securities mentioned in this document; or
> in options, futures and other derivative instruments base on these
> securities.
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