Web hosting Custom Email SiteBuilder

America's Family Entertainment, Inc.     |   home

About Us | News and Events | Locations | Contact Us | Products and Services | Promotions | SkyTracker® News | SkyTracker® | Business Rules | Company Proforma | Advertising Documents | Customer/Dealer Work Order | Dish Installation Checklist | Claim Form Approval | AFEXpress - Satellite Internet | AFEXpress Approval Form | AFEXpress Waiver | AFEXpress Checklist | Internet Agreement | Dealer Agreements | Dealer Economics | Becoming a Dealer | Dealer Incentives | Co-op Advertising | Co-op Advertising Pre-Approval Form | Advertising Disclaimers | Stockholder News | FAQ| LP/GAS Magazine

Company Proforma

America's Family Entertainment, Inc.

 

Proprietary Notice

· Proprietary Letter of Confidentiality

I. The Company

· Introduction  

Executive Statement  

Executive Summary  

Employee Organization  

A. Organization Chart 

B. U.S. Account Executive Territorial Map

History of the Company  

Product Analysis  

AFE Products  

Market Analysis  

· Sales Strategy 

· Demographic Fact Sheet INC magazine

(FY 2000 Report on the Top 500 Privately Held US Growth Companies)

 

II. Target Market, Products and Services

Industry Orientation 

A. Natural Gas Liquids (“NGL”) 

B. Direct Broadcast Satellite (“DBS”) Dealers 

AFE’s SkyTracker® Prouducts

SkyTracker® diagram

DBS - Television Broadcasting 

* AFE Retail Dealer Economics

AFEXpress High-Speed Internet Connectivity 

* AFE Retail Dealer Economics

Website at www.AFEInc.com  

SkyTracker® News 

III. Return - Of - Investment

· Investor Return

A. DBS-TV Sales 

B. SkyTracker® Sales

C. AFEXpress Satellite Internet Connectivity

AFE Stock Investment Return Summary

Per Share Earnings/IPO Summary

Operating Cash Flow (EBITDA) Summary By Product

Common Stock Projected Return on Investment

IV. Corporate Organization

Corporate Structure

Participant Election 

 

America's Family Entertainment, Inc.

P.O. Box 1778 

Goodlettsville, TN 37070-1778 

Telephone (615) 859-9980

AFEIncorp@aol.com

TO: Potential Participant

DATE: January 1, 2002

RE: America’s Family Entertainment, Inc.

Confidential Letter on Proprietary Information

You have expressed interest in participating in a transaction (“Transaction) involving America’s Family Entertainment, Inc. (“AFE“ or “Company”). In this context you (“you“ or “Primary Holder”) have requested that we, and the Company, furnish you with certain non-public information relating to the Company, and make available certain of our officers to you to discuss such information and answer inquiries. As a condition to furnish you with such information, we, and the Company, request that you, the Primary Holder hereof, agree to treat confidentially and with proprietary respect, such information which the Company or any of the Company’s representatives or agents furnish you or to which you may be or have been afforded access to (collectively, the “Evaluation Material”). This provision includes any period prior to your execution of this document. You further agree to abstain from taking certain actions as set forth below.

As a Primary Holder, you agree that the Evaluation Material and all information derived, directly or indirectly, therefrom shall be considered the sole property of the Company. It is also understood and agreed that the Evaluation Material shall be held and treated by you and you’re agents and employees and persons retained and engaged by you (collectively, your “Agents”) in utmost and strictest confidence as provided for herein. Furthermore, you or your Agents shall not, without the prior written consent of the Company, or as otherwise provided for herein, disclose, in any manner whatsoever, in whole or in part, any of the Evaluation Material, nor use the Evaluation Material in any manner other than for you or your Agent’s evaluation of this Transaction or you or your Agent’s participation in this Transaction. This provision includes, but is not limited to, you or your Agent’s non-use of the Evaluation Material and/or it’s non-disclosure to any other party(ies) whatsoever, even under circumstances where the Company abandons the Transaction or in the event of corporate dissolution. You further agree that none of the information contained herein, or as otherwise may be furnished to you or your Agents subsequently, will be copied without the prior written consent of AFE. You also agree, that in addition to any right at law to damages, AFE shall be entitled to equitable relief, including injunction, in the event of any breach of the provisions of this Letter of Confidentiality.

You may disclose of the Evaluation Material (i) that which consists of information that has been filed with, and made public by any government agency, or which otherwise has been publicly disclosed; (ii) to regulatory authorities having jurisdiction to examine your books and records; (iii) pursuant to subpoena or other legal process; (iv) to your counsel and auditors in connection with matters concerning the Transaction, notwithstanding anything to the contrary therein.

America’s Family Entertainment, Inc.

Letter of Confidentiality

Page Two

You further agree that should you decline to participate in the Transaction or should the Transaction not be consummated for any reason whatsoever, you and your Agents will return to the Company all of the Evaluation Material, and all information derived therefrom, including, but not limited to, any notes, analysis or any other ancillary document(s) as held in your possession or in the possession or your Agents. Furthermore, you agree that you or your Agents will not retain any copy, summary thereof or extract of the Evaluation Material on any storage medium whatsoever.

Please acknowledge your understanding of this Letter of Confidentiality and your willingness to abide by its proprietary provisions by affixing your signature in the space as provided hereon.

With best regards, I remain,

Very Truly Yours,

R. L. Humphrey

Chairman of the Board &

Chief Executive Officer

RLH/rjc

Enclosures

Agreed to and acknowledged this _______ day of _______________, 2002, I (as “Primary Holder”) hereby accept assignment from America’s Family Entertainment, Inc. (“AFE“ or “Company”) the enclosed confidential and proprietary information (“Evaluation Material(s)”), as further identified as AFE Business Plan and Operating Proforma Document Number 2002 - 1__ __ __ , including any subsequent material(s) as provided my Agents or I by the Company. It is understood that this provision shall be expanded to included any prior knowledge of the Company and any information which my Agents or I derive from the Evaluation Material(s). Furthermore, I shall accept full responsibility for the Evaluation Material’s secrecy and safe-keeping, agreeing fully and completely that a facsimile copy of this document, bearing my signature, may be regarded as my original signature and to the terms, conditions and requirements of this proprietary Letter of Confidentiality and the Company‘s “Notice of Confidentiality“.

By: _______________________________________

Signature

Print: ______________________________________

Title: ______________________________________

I.

THE COMPANY

Introduction

The firm of America’s Family Entertainment, Inc. (“AFE”) is a wholesale enterprise of national and international scope. AFE is headquartered in Goodlettsville (“Nashville“), Tennessee. AFE offers residential and commercial Digital Broadcast Satellite ("DBS") television programming, co-branded high-speed Internet satellite connectivity, SkyTrackerâ liquid level gauges and other satellite communication products such as satellite radio, Sat-phone, Indavo data pack transmission devices, box-office movie transfer and other video-streaming of a commercial and residential nature.

AFE has negotiated direct television broadcast, Internet access and commercial satellite transponder contracts for internal use and resale by AFE and AFE’s Retail Dealers. AFE’s Retail Dealers will primarily be from the natural gas liquids ("NGL") or the Direct Broadcast Satellite (“DBS”) industries. This business concept holds the potential to place America’s Family Entertainment, Inc., and its Retail Dealer affiliates, firmly in the role of industry leaders; becoming the number one television programming and Internet access providers in North America.

AFE offers its Retail Dealers an opportunity to co-band their own high-speed Internet service. Using AFE’s broadband technology, AFE’s Retail Dealers can provide customers with 400K “push” IP multicast service. The Retail Dealer can also purchase time through AFE to communicate directly with their customers monthly. The residuals that AFE pays to its Retail Dealers are the highest in the industry.

The Company has also developed a device known as SkyTrackerÒ. SkyTracker® ’s primary application is in the propane, or NGL, and fuel oil industries. SkyTrackerÒ is an electronic sending unit designed to communicate with an ohms converter through a customer’s dish antenna and receiver. Individual customer propane or fuel oil tank readings can be collected by SkyTrackerÒ, sorted by delivery route(s) and sent, via satellite, to a propane marketer’s central dispatch office. The information to be communicated by satellite is the percentage of liquid fill in a consumer’s propane storage container. SkyTrackerÒ software will provide additional administrative support.

AFE is currently developing other new products for distribution through its nationwide Retail Dealer network. Indavo land-line enhancers, where Internet Protocol “IP” technology is applied, is one such product. Satellite radio, personal video streaming, box-office movie transfer and other satellite communication products are on the horizon.

Under AFE contracts, television programming providers will invest $637.6 million in activation spiffs and equipment/installation allowances in AFE, which will be further distributed to AFE’s Retail Dealers. Programming providers and satellite platform affiliates will realize $1.08 billion in annual revenues based on projections in this Proforma. Returns can be enhanced, with the addition of SkyTrackerÒliquid level gauges.

Today, AFE is based in two of the most solid and entrenched industries; natural gas energy and satellite communications. In the former, the Natural Gas Liquids (“NGL” or “Propane“) industry provides energy to 60 million Americans daily; 20 million rural households nationwide. According to recent studies as released by the US Department of Energy and independent researchers, such as Purvin & Gertz, the NGL industry has grown at an average rate of 5.64% in each of the last seven years. Furthermore, the US DOE projects a 45% growth in the consumption of natural gas by 2015.

According to an article in the New York Times, “Boom In Natural Gas Drilling Can’t Match Soaring Demand”, July 22, 2001, environmentally friendly natural gas is the “fuel of choice” for all power plants under construction today and all proposed plant construction for the remainder of this decade. With 96% of this nation’s natural gas reserves untapped, the natural gas industry is the most stable economic enterprise today; beating out such giants as GM, Microsoft, AT&T and even, the United States Government. Many of AFE’s Retail Dealers currently serve thousands of households and businesses with clean burning gas energy.

Satellite communication is AFE’s second “solid rock” industry. With over 1 billion subscribers to the World Wide Web - - - with subscriber contracts growing at a rate of 27 million subscribers per month - - - wired Internet connectivity has proven to be a waste of people’s money and business’ time. Speed and convenience is the desire of today’s Internet subscriber. AFE’s high-speed satellite Internet connectivity service, AFEXpress, stands alone in increased data file transmission, customer affordability and dealer compensation packages. In fact, the January, 2002, issue of PC World magazine endorses the satellite platform from which AFEXpress is derived. Internet Satellite Platform’s “iSAT” format, on which AFEXpress is carried, is the preferred Internet broadband connectivity service today. Furthermore, AFE’s long term and worldwide exclusive rights contracts to the NGL industry, through satellites owned by Loral (SatMex 5 & 6), TelStar (T-5, T-6 and T-12), EchoStar and the Hughes-Hubbard Broadcasting organizations, set AFEXpress apart from all competition.

In summary, AFE’s concept is to join satellite communication technologies of satellite television broadcasting, the high-speed Internet connectivity service of AFEXpress, Satellite radio, Indavo and AFE’s own SkyTrackerâ liquid level gauges to AFE’s Retail Dealer’s customer bases; forever changing the way an NGL or DBS marketer will conduct business.

Section III, Investor Returns, and Section V, Financial Targets FY 2002 - FY 2006, will provide you with projected revenues earnings and return-on-investment. In short, this Business Plan and Operating Proforma calls for cumulative five (5) year revenues of $2.465 billion; or average earnings of $237,071.46 per business hour. This makes AFE stock a bargain investment today.

EXECUTIVE STATEMENT

With over 14 million household subscribers on line with direct satellite television broadcast programming today, the industry is still in its infancy. Spurred by the addition of the must-carry local channels rule, and new services like high-speed Internet access and interactive TV, the Direct Broadcast Satellite audience in the United States will grow to 25 million subscribers by 2003, according to a new report from The Yankee Group.

According to a prior report in the Wall Street Journal, DBS-TV subscription forecasts are expected to rise to 75 million direct downlink satellite users by the year 2005; presenting a potential market of 61 million new subscribers to satellite television programming in the US. Annual revenues, in customer basic television service subscriptions, will be $40.56 billion.

Historically, DBS has been strongest in rural areas without access to cable television. But, with recent legislation permitting satellite delivery of local stations, DBS now competes more effectively and efficiently with cable land-lines in urban and suburban markets. In addition, the Yankee Group report also identifies several other factors that will sustain DBS subscriber growth; among them: 1) DBS will quickly emerge as a major player in high-speed Internet access. 2) Other data services will be available soon that will bring new incremental revenue streams to satellite providers. 3) Satellite receivers equipped with digital video recorders (DVR’s) will be introduced and 4) Interactive TV will become widespread.

“The DBS market is evolving as it adds new services,” notes Michael Goodman, senior analyst for the Yankee Group’s Media & Entertainment Strategies Planning Service. Goodman further states, “as DBS providers roll out local station packages in more markets … effective January 1, 2002 ... and begin to offer high-speed Internet access and interactive TV, DBS will expand its appeal to a wider range of consumers."

The report draws upon data gathered in surveys conducted with DBS and cable subscribers by The Yankee Group in conjunction with the Satellite Broadcast & Communications Association (“SBCA”). The Yankee Group is an internationally recognized leader in technology research and strategic consulting. The Company’s Media & Entertainment Strategies Department examines the tradeoffs that businesses and consumers must make as new products, services, and applications join traditional forms of media.

Anticipated growth will be further driven by Congress’s decision to force hard-line cable networks to convert to digital transmission. In order for companies to meet this regulatory burden, cost of cable network operations will rise. These costs will be passed on to cable subscribers in the form of programming increases and/or rental fees for converters or adapters.

Today, cable networks are already implementing heady cost increases that are not tied to federally mandated digital conversion; so the variance between hard-line cable fees to the consumer and direct satellite down-link service is widening. According to a report issued by the FCC in January 1998, cable TV rates have been rising nearly four times faster than inflation. In short, hard-line cable companies are implementing cost increases and cutting service to their customer base. AFE believes this gap will widen as cable networks cope with federally mandated digital format conversion.

The world-wide-web has grown from 25 million subscribers in 1998 to over 1 billion users today. Subscribers to the Internet spend over one quarter-trillion dollars per year. AFE has secured world-wide exclusive rights contracts for and to the NGL industries’ access to the Loral satellites and the TelStar Group. AFE’s AFEXpress Internet connectivity service is unique in that customer ownership is retained by AFE and AFE’s Retail Dealers. This co-ownership concept builds real business value for both AFE and its Retail Dealers and may be the DBS dealers only long-term business solution. AFE Retail Dealers may place their company’s tradename(s) and logo(s) on their customer’s dish antenna.

According to the most recent statistics as accumulated by the Federal Communications Commission (“FCC”), and as issued in a February 2002, report by the FCC, there are 7.8 million high-speed Internet subscribers today in the U.S., up 51.0% from 5.2 million subscribers as of January 2001. According to FCC Chairman, Michael K. Powell, “the seven percent (7.0%) of U.S. households which had high-speed Internet access on June 30, 2001, was three times the number of subscribers (1.6% of U.S. households) with high-speed Internet access as of August 2000”.

By comparison, the FCC report stated that three-fourths of high-speed Internet subscribers had incomes greater that $75,000.00. Furthermore, urban area access to a high-speed Internet service was double that of rural America. Due to this disparity between “have and have nots”, Congress is investigating ways to provide rural America and median income Americans with high-speed Internet access. AFE has informed U.S. Congressional leaders of the affordability and availability of AFEXpress, an AFE product which is a low cost high-speed Internet medium, versus DSL, T-1 or two-way Internet connectivity. AFEXpress delivers high-speed Internet content to rural America.

AFEXpress broadband technology provides:

* Always-on Internet access (down-loading)

* Fast-loading Web pages

* Satellite Internet access anywhere within the U.S.

* Local dial-up access anywhere within the U.S. (up-loading)

* Super-fast downloads

* State-of-the-art technical and customer support services

* High quality voice transmission

* Digital data transmission, graphics transfer and video streaming

* Digital conferencing

America's Family Entertainment, Inc. will warehouse and ship SkyTrackerÒDBS equipment and AFEXpress modems and dish antennae from warehouses in St. Louis, MO and Nashville, TN. Administrative offices for Retail Dealer support are located in Nashville, TN. Communication servers will be placed in-line with EchoStar's satellite up-link center in Cheyenne, WY, Internet Satellite Platform, Inc.’s up-link center in Orlando, FL, (SatMex 5, SatMex 6 and the TeleStar Group‘s T-5, T-6 and T-12 satellites) and at the Hughes-Hubbard Broadcasting Center in Eagle Rock, CO.

AFE is a Level Three Certified Dealer for commercial satellite programming. Commercial applications allow for the viewing of DBS in public, semi-public and Multiple-Dwelling Units (“MDU“), i.e.; hotels, hospitals, nursing homes, office buildings, sports bars, restaurants and apartment complexes. AFE’s Retail Dealers can earn significant commissions and residual payments through commercial DBS opportunities, AFEXpress high-speed Internet connectivity services and other communication products as AFE brings these products on-line, i.e., satellite radio, Indavo data pack and voice over transmission devices, video (movie) streaming, data filing, AFEXpress Meeting Plus and more. AFE is also a certified Hughes Aircraft Satellite Service Center.

Each new AFE natural gas liquids distributor and DBS dealer who signs with AFE will receive complete detailed instruction, which includes a Marketing, Technical Assistance and Business Rule manual, with periodic updates and technical training. AFE’s Operations and Technical Service Support Center will also provide each AFE Retail Dealer with an installation and troubleshooting manual. Corporate staff will be maintained to assist wholesale accounts with any questions or to monitor activity.

EXECUTIVE SUMMARY

R. L. (Rick) Humphrey: Serving in the capacity of Chairman of the Board and Chief Executive Officer of AFE, Humphrey conceived and engineered the concept of merging the propane and DBS industries with satellite utilities. Humphrey also conceived and spearheaded the development of SkyTrackerÒ; for application to the NGL industry. Also, he served as Chairman of the Board and Chief Executive Officer of Century Propane Company, Inc., a provider of energy services to 9,500 residences in 8 states.

Humphrey has also served in various association capacities including Chairman of the Board to the Missouri Propane Gas Association and as the late Governor Mel Carnahan's, Council Chairman to the Missouri Propane Education and Research Council ("MO-PERC"). As Governmental Affairs Committee Chairman, Humphrey authored proponent legislation for the industry, including the PERC bills, and coordinated opposition to detrimental regulations. Humphrey was Missouri State Director to the National Propane Gas Association’s Market Development and Governmental Affairs Committees.

Past responsibilities of Humphrey include: A) Director of National Advertising and Promotions for the Tulsa, OK based Williams Company's where Humphrey scripted, produced, and placed media buys with Grandpa Jones, Minnie Pearl and George “Goober” Lyndsey as Company Spokespersons. B) Director of National Accounts where Humphrey's department became energy consultants for General Electric's nuclear plants, GTE, Wendy's, Pizza Hut, K.O.A. Campgrounds, NASA and other national entities. C) Numerous assignments, both subordinate and senior, where Humphrey held full profit and loss responsibilities, the last which included assembly of an employee group, headed by 32 managers, who, collectively, increased EBITDA to $6.9 million by 1990, up from $754,000, in 1981.

 

L. Douglas Mullican: As President and founder of AFE, Mullican's career has been forged in the people business. Coaching, teaching and motivational leadership has been the cornerstone of Mr. Mullican's life.

 

After six years in the Marine Corps, with three purple hearts and a Presidential Citation, Mr. Mullican became a leader in the Nashville Public School System. In his twenty-five year tenure as Head Coach, Mr. Mullican's charges participated in several state championships and other playoff contests.

 

Mr. Mullican's skill in goal setting and motivation became a natural extension into the sales field. After retiring in 1996 from coaching, Mr. Mullican entered the direct broadcast industry, where his sales earned him the position of General Sales Manager for Audio Video Entertainment, Inc.

 

Diane Beckman: As Secretary/Treasure of the Corporation, Beckman provides the perspective of an educator to the organization. Beckman is a graduate of Memphis State University with a Masters Degree and attained an Education Specialist Degree from Middle Tennessee State University. Beckman was one of AFE’s first investors. She represents AFE’s originating stockholders on AFE’s Board.

 

 

Michael Eriksen: As Chairman/President of Wells Propane, Inc. of Wells and Elko, Nevada, Eriksen represents the propane industry on AFE's governing Board of Directors. Wells Propane is also a DBS dealer for AFE.

 

Eriksen is past president to the Nevada Propane Gas Association and participates on various committees to the National Propane Gas Association.

 

Eriksen holds other business interests including a bank affiliation with Great Basin Bank where he serves as Chairman of the Board.

Dwayne McKinney: As Vice-President; Wholesale Marketing, and a three year AFE Board Member, McKinney holds a Bachelor’s Degree in Business from the University of Tennessee at Martin. In his last position, McKinney was responsible for the launch of 110 Pegasus Satellite Television retail dealerships across Kentucky. He further negotiated Pegasus’ dealer commission programs, implemented market promotions to achieve budgeted sales targets and monitored all retail dealer activity within the Kentucky region for Pegasus.

 

Prior responsibilities of McKinney included management of a thirty-four (34) member sales team for Marion-Pepsi Cola Company. McKinney conducted weekly sales meetings and was accountable for all operating reports and profit targets. McKinney was further responsible for maintenance of quality relations with dealers and customers.

 

As AFE’s Vice-President; Wholesale Marketing, McKinney will be fully accountable for P&L activity of AFE. McKinney will be responsible for dealer establishment, dealer maintenance, dealer promotions and the monitoring of Account Executives’ activities.

EMPLOYEE ORGANIZATION

The accompanying Organization Chart identifies direct-line and staff roles of AFE employees. AFE’s wholesale organization’s objective is to support the Company’s Mission.

The Company’s front line force consists of eight (8) field-based Account Executives. This esteemed group will represent AFE to the NGL and DBS industries, through industry association affiliations and meeting the Company’s sales targets. An Account Executive territorial map follows. Filled Account Executive positions are identified in Section VI, FY 2002 Capital Budget.

This premier assembly will be led by AFE Board Member, Dwayne McKinney, who will serve as AFE’s Vice-President, Wholesale Marketing. McKinney was formerly associated with Pegasus Satellite Television in the capacity of Regional Sales Director.

While AFE’s Account Executives are the Company’s marketing arm, Account Executives will be backed:

1) Administratively, by four (4) Nashville based Account Coordinators, whose job will include AFE Retail Dealer Business Rule communication(s), handling of Dealer orders, Dealer commission reporting and other general administrative efforts.

2) Operationally, by four (4) field based Field Trainers, whose jobs shall include on-site Dealer installer training and systems orientation and Dealer technical support. Account Coordinators will report to the Vice-President, Wholesale Marketing. Field Trainers will be led by Steve Adair, a twenty year veteran of the DBS and C-band satellite programming industries. As AFE’s Vice-President of Operations and Technical Services, Adair will oversee the Company’s assimilation of new satellite communication products and coordinate, with AFE’s Vice-President, Wholesale Marketing, those products’ entrance into AFE’s market mix. Negotiations have been opened with Adair for AFE to acquire Adair’s retail DBS-TV dealership in Branson, Missouri.

Administrative tasks of AFE will be led by Rebecca Clark, who will serve as Director of Administration. Accounting functions of general ledger entry, asset, tax and inventory accounting, payroll, accounts payable and accounts receivable reporting will be carried out by this department. In addition, the Company’s Systems Director will report to the Director of Administration. The Systems Director will be responsible for development and maintenance of AFE’s expansive Website, at www.AFEINC.com, the monitoring of AFE Retail Dealer compliance to the Web-Posted Business Rules and calculation of AFE Retail Dealer commission and residual payment(s).

AFE senior management will be provided by those individuals as identified in the “Executive Summary” of this Section I.

HISTORY OF THE COMPANY

America’s Family Entertainment, Inc. (“AFE”) began as a direct broadcast retailer in early 1998. A year later, AFE was reinvented, becoming a wholesale satellite communications provider to the natural gas liquids (“NGL”) industry. AFE has added the nation’s DBS dealers to its wholesale roster.

In FY 1999, AFE concentrated on development of its Wholesale Marketing Business Plan and Operating Proforma. In addition, AFE negotiated and secured contracts for satellite transponder space on the Loral Satellites and with the TelStar Group and procured television program broadcast packages through industry giants such as EchoStar and the Hughes-Hubbard Broadcasting organizations. For FY 1999, remaining retail sales provided AFE with approximately $211,000.00 in revenue. Through the sale of AFE Common Stock, $66,000.00 was raised during FY 1999 to fund reinvention of the Company, its expansion into wholesale distribution and the further development of the SkyTrackerâ system.

During FY 2000, AFE continued its market research of the NGL industry, identifying AFE’s role as a national wholesale distributor. Robert V. Thamert & Associates of Minneapolis, MN was retained to conduct nationwide mail and telephone surveys. This activity produced over 4,000 contacts with NGL marketers. Almost three hundred responses, requesting both stock and Retail Dealer positions within AFE, were received. From this activity, AFE began developing its expansive dealer Website at www.AFEInc.com and other Retail Dealer programs. Over one dozen propane dealers, from West Virginia to Nevada, aligned themselves with AFE during FY 2000. Funding for FY 2000 operations was derived from a few retail sales, wholesale dealer revenue, service labor and the sale of $145,000.00 of AFE’s capital stock.

AFE, in 2001, continued its wholesale dealer development and AFE made its initial entry into the industry’s National Trade Shows. Beginning in June 2001, additional new Retail Dealers (propane marketers) were brought online with AFE. Wholesale merchandise sales from these dealers, through October 2001, totaled $102,358.26. Retail Dealer training revenue reached $9,850.00 and activation and residual income totaled $52,783.00. Other income totaled $2,872.00; bringing total revenue, through October 31, 2001, to $167,863.25. Approximately $271,140.00 in capital stock was sold to fund FY 2001 expansion programs.

A total of $475,140.00 has been raised through the sale of the Company’s capital stock since the Company’s date of incorporation, January 5, 1999. This capital and sales revenue, as outlined above, has sustained the company for three years. From this modest investment, AFE has developed its satellite transponder contracts, its Retail Dealer programs and generated sufficient response from the NGL and DBS industries for AFE to continue on the course as outlined in this Business Plan and Operating Proforma, supplying America with satellite communication products and producing returns for AFE Retail Dealers and AFE Stockholders.

Today, AFE is beyond start-up in its new role as a wholesale communications provider. It is now time to duplicate the efforts of the originators of the Company. To meet sale production targets as outlined in this Proforma, and to adequately serve customers, AFE will require field and corporate based marketing and operational staffs. Capital required for AFE communication services is $720,000.00. Acquisition capital, to merge AFE Retail Dealer’s NGL businesses into AFE and for their owners to be employed by AFE, is $780,000.00. For detail to AFE’s $11,500,000.00 FY 2002 Capital Budget, see Section VI of this Proforma.

PRODUCT ANALYSIS

Satellite technology is the new frontier. Until now, wireless cable communications have been limited to one-directional transmission services; used primarily to provide video programming. However, as the number of channels and variety of services offered by television production and satellite up-link companies continue to expand, a new regulatory paradigm for wireless communications will emerge. Today, new types of stations for the collection of upstream data are on the horizon. This includes cellular configurations. Satellite subscription services will also provide business and residential customers with video conferencing, data connectivity and data vaulting. (Data connectivity permits transmission of data files to other network users and data vaulting allows for the storage of information off-network.)

For the immediate future, though, the most promising new business opportunity is the provision of high-speed Internet access. In fact, satellite technology has already begun to revolutionize the delivery of Internet content, as we know it, much as it has revolutionized television since the 1970’s. Already, announcements from industry heavyweights such as Echo-Star and Loral may very well shift the entire balance of Internet power by enabling and controlling the gateway to a whole generation which is intent on gaining access to the information-rich dot-com technologies. AFE’s entrance into the delivery of high-speed Internet connectivity, through AFEXpress, holds promise that AFE will become North America’s rural Internet access leader; with potential expansion of AFEXpress into international markets.

While AFE is centered on family entertainment, it is these dawning technologies that will add real impetus to AFE’s Retail Dealer network. With its wholesale organization, AFE intends to be in position to take full and complete advantage of these trends, AFE's expansion being fueled by these emerging technologies.

Satellite digital receiver equipment, which AFE will distribute through its sales force to the Retail Dealer organization, may be provided through several manufacturers including Echosphere Communications, RCA, Hughes, Hitachi, Sony and others. As advances in technology occur, other product(s) and/or service(s) may become a part of AFE’s market mix. These include, for implementation in FY 2002: A) Indavo telepathic products which apply Internet Protocol (“IP”) technology to permit a single telephone line to be converted to multi-line uses in residential and business application(s). This technology uses “Data Pack(s)” to expand single telephone lines to handle up to six uses residentially and twelve functions commercially. For instance, two family members would be able to access the Internet simultaneously from two P/Cs, receive a facsimile, send a facsimile and conduct two “voice-over” conversations, all at the same time and all performed over one incoming line. (The business concept is similar.); B) An agreement with Hollywood Video, whereby AFE will provide movie streaming of 16,000 titles, via AFEXpress. (Further wholesale revenues will be derived from a set-top box for the customer’s use with their television.); C) Video conferencing for business and residential use. (Video streaming allows grandparents to share “firsthand” in special moments with family and friends across town or across the country.); D) A single toroidal dish antenna, which uses focal line technology, versus focal point. (This antenna will allow DBS-TV, AFEXpress, SkyTracker® , satellite radio and other satellite communication signals to be collected simultaneously from up to eight (8) orbital satellites on a single dish.) E) The development of a high-speed two-way satellite Internet connectivity service, which AFE can make available to Retail Dealers domestically and internationally.

The Digital Broadcast System transmits digital signals, which result in a crisp, clear picture with CD-quality audio. The DBS system uses M-PEG 2 Compression. M-PEG 2 improves picture quality by compressing nine frames of information/video into one frame. The analog signals, used in most cable systems, produce a poor or distorted picture quality, with ghost images and deficient audio. Furthermore, cable typically offers about five premium movie channels, but the DBS system has 34 premium movie channels, including movie channels that simply are not available on cable. Over 900 first run Pay-Per-View movies are available each month. In fact, 90% of all box office hits are shown every year on DBS.

AFE PRODUCTS

Equipment Monthly Monthly Date

Product or Services Sales Subscribers Residuals Available

MARKET ANALYSIS

The DBS system holds the advantage over cable networks. These advantages are charted as follows:

HARDWARE

*May require additional equipment and cost.

The average cable service costs about $35.00 per month plus other charges for additional cable boxes and remotes. According to DSS Insider magazine, from July 1, 1995, to July 1, 1997, there has been an average increase of 8.7% to 9.6% in yearly cable rates; an 8.5% hike in programming service cost and a 7.0% rise in cable equipment cost.

With the DBS system, premium movie packages start at $4.99 per month. Forty-One channels of programming from either DirectTV or Dish Network costs $19.99 per month. The fact is, a 1997 CEMA DBS ownership study showed that cable prices are a significant factor in a customer’s decision to buy a DBS system. Satellite dish ownership provides the consumer with a sense of controlling his/her own destiny and as a way to increase the value of their real estate investment.

SALES STRATEGY

The formula for success that AFE has incorporated in its design is:

1) Find a product that is in high demand. DBS-TV, high-speed Internet connectivity, SkyTracker® , satellite radio and all of their ancillary options, are such products.

2) Target the masses of people. Sixty-One million new subscribers will come on-line with a DBS-TV purchase within the next four years. High-speed satellite Internet connectivity will become available in these and other households, with forecasters predicting 2.5 billion Internet subscribers by FY 2005. (The propane industry has access to 20 million households, a 60 million customer base which can utilize commercial satellite technology through SkyTracker®, DBS-TV and AFEXpress Internet connectivity. The nation’s 17,000 DBS dealers have access to the nation’s 158,000,000 households.)

 

3) Create a residual income. AFE’s Retail Dealer’s customers will order television programming and will access the Internet, creating a cash stream from which AFE, and its Retail Dealers, can draw monthly residual dollars.

 

4) Have a program that is duplicable. Everyone watches some TV and everyone has some interest in viewer options. The Internet is fast becoming the primary personal communication information source and business “tool”, replacing, in part, conference travel and the United States Postal Service. These products are easily communicable, have customer root (utility) structures and reoccurring monthly revenue streams.

 

5) Have a system that one’s own success is based on helping others succeed. DBS-TV and the Internet are already successes. These are “cutting edge” in today’s marketplace and are the hottest consumer electronics items ever offered. AFE, through its continuing contracts with programming providers and satellite platform companies, can position its Retail Dealers in such a manner that they will be able to offer these and other competitive products to their customers.

 

DEMOGRAPHIC FACT SHEET

FY 2000 TOP 500 NATIONWIDE

PRIVATELY HELD

GROWTH COMPANIES

INC magazine tracks America’s fastest growing companies. A demographic summary of the Nation’s top 500 privately held growth companies for FY 2000 follows. America’s Family Entertainment, Inc. (“AFE”) fits the model for a top performance company. Shown in bold print below are demographics associated with AFE, its officers and its strategies.

Upon reaching the objectives as outlined in this Business Plan and Operating Proforma, whereby natural gas liquids (“NGL”) and Direct Broadcast Satellite (“DBS”) dealers provide Direct Broadcast Satellite (“DBS”) television subscription service and AFEXpress Internet connectivity to 7/10ths of 1.0% (.007%) of the nation‘s households, AFE’s growth rate over five years, would exceed 56,673.0%. FY 2000 INC 500 winner, the Parson Group, grew 27,992.0% between its inception year of 1995 and FY 2000. Second place was Keystone RV, with a growth rate of 17,117.0%. By FY 2006 AFE could clearly be an INC 500 company, perhaps the number one INC 500 company. According to INC, the demographics of the FY 2000 top 500 growth companies, and their CEO’s, are as follows:

1. The percentage of INC 500 companies that had initial Start-Up Capital of under $20,000.00 was 58%; under $10,000.00, 26%; under $1,000.00, 16%; over $50,000.00, 32.0%.

2. The percentage of this year’s INC 500 companies that received venture capital as seed money - - - - 4.0%.

(NOTE: Only 4,000 companies nationwide received any kind of venture capital in 1999.)

3. The median amount of additional financing raised, after Start-Up, by INC 500 listed companies was $1,500,000.00. The percentage of INC 500 CEO’s who plan to raise capital within the next year - - - 47.0%.

(NOTE: AFE was capitalized with $1,000.00 on January 5, 1999. After AFE was reinvented, in July 1999, Start-Up Capital was $66,000.00. Total capital raised to date is approximately $475,000.00. AFE’s Business Plan requires $1,195,000.00.)

4. Of this year’s INC 500 companies, the percentage of those companies, which started in the founder’s home  - -51.0%. The percentage of INC 500 CEO’s who started their companies with at least one co-founder - -55.0%.

5. The median age of those companies when they moved to their first location - -  months.

6. The percentage of INC 500 companies which had five or fewer full time employees at the time of move - -  64.0%.

7. The percentage of INC 500 CEO’s that hired a senior manager other than one of the founding partners - -76.0%.

8. The median number of employees in today’s INC 500 companies is 64.

9. The median sales of the INC 500 companies today is $10,604,000.00.

10. The percentage of this year’s INC 500 companies which offer Flex Time, 69.0%; Job Sharing, 22.0%;

Telecommuting, 59.0%.

11. The percentage of companies which offer Bonus Plan, 69.0%; Disability Insurance, 70.0%; Retirement Plan, 83.0%; Health Insurance, 97.0%.

12. The median annual starting salary for exempt (non-hourly) employees is $40,000.00.

13. The three most difficult employees to recruit, according to INC’s top 500 CEO’s, are Technical/IT, Sales and Senior Management.

14. The percentage of INC 500 CEO’s who started the companies with an exit strategy - - - 32.0%. Percentage of INC 500 CEO’s whose plan was to take their companies public, 42.0%; to acquire other companies, 68.0%.

15. Highest level of education completed by the CEO’s of this year’s INC 500 companies: 4 year college, 47.4%;

MBA, 18.2%; other advanced degrees, 17.6%; 2 year college, 8.4%; High School, 8.4%.

16. Economic background of INC 500 CEO’s: Middle Class, 58.4%; Working Class, 29.5%; Affluent, 8.6%.

17. Ethnicity: Caucasian, 85.0%; Asian, 10.9%; Hispanic, 1.9%; African American, 1.6%;

Native American, .05%.

18. Percentage of INC 500 CEO’s who changed their marital status while growing their businesses: got married, 59.2%; got divorced, 22.5%; got both divorced and remarried, 18.3%.

19. Median annual compensation of FY 2000 INC 500 company CEO’s - - - $200,000.00.

(NOTE: The number of CEO’s who took no compensation in their start-up year 22; or 4.4%. The number of CEO’s who earned over $1.0 million this year, 26; or 5.2%.)

20. INC 500 companies’ main source of business revenue (customers) is from Fortune 1000 business, 48.1%; small to mid-size business, 30.8%; consumers, 10.4%; government, 9.3%; and nonprofit, 1.4%.

(NOTE: 86.0% of this year’s INC 500 companies target other businesses as their customer base; not

consumers.)

21. The percentage of INC 500 companies that had Internet sales, 29.0%; companies reporting those sales as profitable, 95.0%; companies that think an aggressive e-commerce strategy is critical, 61.0%.

II.

Target Market, Products & Services

INDUSTRY ORIENTATION

The following is an option that may provide annual revenues of One Billion, Eighty-Four Million, Eight Hundred Thousand Dollars ($1,084,800,000.00) to broadcast providers and satellite platform affiliates (1,200,000 customers x $52.00 per month programming x 12 mos. = $748,800,000.00 plus 1,000,000 x $28.00 per month Internet fee x 12 mo. = $336,000,000.00). The vehicle, through which this revenue stream can be added, is through AFE’s joining of the propane industry with the direct broadcast infrastructure.

A) Natural Gas Liquids (“NGL”) Dealers:

The average U.S. propane marketer serves approximately 2,200 customers, selling over 880,000.0 gallons of propane each year to those customers. A synopsis of the propane industry would be as follows:

8,500 Independent marketers

 20,000,000 Rural residences use propane

  50,000 Employees in the industry

14,000,000,000 Gallons of propane sold annually

                25,000 Bulk delivery and transport trucks

Safety and technical standards training of the propane industry’s installers and service technicians are unequalled. The Consumer Products Safety Commission ("CPSC") has recently evaluated the propane industry and has pronounced it the “safest industry in the U.S.” In addition, CPSC gave the industry further commendation, stating that the industry was bestowed such recognition due to its “self-policing” policies. In short, the propane industries’ installers and service technicians are the best in the nation; having been certified and extensively trained at a significant cost to their companies.

Furthermore, a recent national survey conducted by the National Propane Gas Association, The Missouri Propane Education and Research Council ("MO-PERC"), The Alabama Propane Foundation, and The Texas Alternative Fuels Research, Education and Development Council (“AFRED”), concluded that Fifty-Two Percent (52.0%) of heads of households who have chosen propane as their energy source are college graduates with annual incomes in excess of $50,000.00.

Propane homeowners are perfect candidates for both Direct Broadcast Satellite (“DBS“) television programming and as Internet users. It is AFE's goal to provide DBS-TV service to 1.18 million NGL customers (5.87%) and AFEXpress Interrnet service to 1.07 million household (5.34%) of propane marketers who are AFE Retail Dealers. These energy customers could also have their propane tanks retrofitted to accept SkyTrackerâ ; a liguid level gauge accessed and read by satellite.

B) Direct Broadcast Satellite (“DBS”) Dealers:

The Nation’s 17,000 DBS dealers, while technology advanced, are today participating in a growth industry of historic proportions. What will happen to DBS dealerships once market saturation nears and the television broadcast providers enter into a mature market, is a DBS entrepreneur’s gravest concern. It is AFE’s management’s belief that today’s DBS dealers will be systematically eliminated by these same programming providers. Important signs of this process is evident today and are being demonstrated in the relationship(s) between DBS programming providers and their dealers. This provides an opportunity for AFE. In fact, DBS dealers may find fiscal refuge, and even rescue, in AFE’s AFEXpress Internet connectivity service. DBS dealers may co-brand and co-own their AFEXpress customers, providing the DBS dealer with a significant revenue stream, business resale value and longevity for their companies.

AFE’s SKYTRACKER® PRODUCTS

For SkyTrackerÒ access to the programming provider orbital satellites, a twenty cent ($ .20) per month assessment per customer would be billed to the propane marketer. This could cost the average marketer $240.00 per month.

A dealer could recapture part of the capital cost of retrofitting propane storage containers through tax liability savings. Depreciation deductions might be applicable. A CPA should be consulted.

SkyTrackerÒ's anticipated tank retrofit cost to propane marketers would be $135.00 per customer storage container. Satellite up-link, for SkyTrackerÒ, will be available during FY 2002.

How SkyTracker® Works

SkyTracker® is a liquid level gauge designed to operate through Direct Satellite Broadcast (“DBS”) or high speed Internet receivers, modems and dish antenna. Both wireless and landline systems will be available.

SkyTracker® consists of two basic components. An ohms sending unit replaces the normal junior or senior gauge on the multi-valve of a consumer’s propane storage tank. This eight (8) ohm device is attached, by wire to a transponder. The current liquid level reading of a propane storage tank is then converted into an information format for up-link to the appropriate orbital satellite. The SkyTracker® transponder is connected to a customer’s satellite television receiver or AFEXpress Internet modem and their respective dish antenna.

A propane dealer, installing SkyTracker® onto a customer’s propane storage container, can read the tank’s liquid level gauge from his or her office, saving the cost of sending a bobtail delivery truck and DOT trained and certified driver to each customer location. The industries’ Propane Education and Research Councils (“PERC”) have considered subsidizing the installation of this device for the nation’s NGL companies.

SkyTracker® is designed to allow a propane marketer to track customer field inventories along an entire delivery route. This allows the marketer to route his/her trucks in the most efficient manner possible. Furthermore, SkyTracker® software is being prepared to incorporate both Degree Day and Julian Day (elapsed week) scheduling.

A propane marketer may, from the office, enter a specific route code. Through SkyTracker® software, instructions will be sent to a satellite up-link center. This may either be accomplished by landline or, where applicable, by direct up-link from the propane marketer’s facility. By microwave, a message is transmitted from the up-link center to an orbital satellite. The satellite immediately relays the instruction to the customer‘s DBS-TV or AFEXpress dish antenna, activating SkyTracker® liquid level transponders at customer locations along a particular delivery route of the propane marketer. Through direct satellite up-link, the liquid level readings are relayed back to the up-link center, primarily by land-line, where AFE servers relay the reading to an orbital satellite. Through satellite downlink communication, all tank liquid level information along the propane marketer’s specified delivery route is sent to the propane marketer. Information to be assimilated by SkyTracker® is:

A) Customer names along a specified delivery route.

B) Customer storage tank serial numbers along a specified route.

C) Customer storage tank water capacities.

D) Current customer storage tank liquid levels.

E) Degree Day/Julian Day projected fill dates.

F) Current delivery gallon fill.

G) If price codes are entered, delivery ticket price extension.

H) If tax codes are entered, delivery ticket price extension.

SkyTracker® can also enable a propane marketer to utilize customer storage tanks as an extension of a propane marketer’s plant storage system, increasing propane inventory. This process can ease demand on the industries’ infrastructure and, possibly, permit the marketer to take advantage of off-season product pricing. By this means, SkyTracker® offers an excellent means for a propane marketer to enter the “meter-gas” business, without all the costs of transportation, meter readers or postage.

SkyTracker® Operations Diagram

SkyTracker® hardware cost can be recovered in three years, when allowing for recapture of tax liability through normal depreciation elections, improved delivery efficiencies and labor costs saved. An average marketer’s cost benefit (exclusive of tax liability reduction(s) through asset depreciation or otherwise or from government of PERC subsidized programs) from SkyTracker® implementation and tank retrofit would be as follows:

Of course, AFE’s SkyTracker® has more to offer the propane marketer than just improved delivery efficiencies and cost savings, though these aspects are cost justified in and of themselves. The AFE concept provides the propane marketer with a substantial revenue stream when the marketer includes AFE’s digital satellite television broadcasting and satellite Internet connectivity services in their market mix to their customers.

In this way, a propane marketer can enhance his or her income while providing intellectual growth and earnings to their certified installers. It is this aspect of AFE’s propane delivery plan that sets AFE apart from other tank monitoring systems. AFE’s plan does not imply, require or force a propane marketer to eliminate valued and trained personnel through work reduction(s). AFE’s plan is to build propane marketers and their staffs; not tear those staffs apart.

Through AFE’s program, propane marketer’s can pay for SkyTracker® immediately through margins generated at the time of signing a customer to AFE’s satellite communication products. Thereafter, the propane marketer can enjoy a long-term revenue stream and residual payment from each customer’s use of a Retail Dealer’s satellite communication products. (For Business Rules and product information, visit AFE’s Website at: www.AFEInc.com.).

AFE’s DIRECT BROADCAST TELEVISION PRODUCTS

A Retail Dealer enrolling in AFE’s digital satellite television service (“DBS-TV”) will provide the consumer a FREE or partially FREE satellite dish, receiver, remote control and perform a professional installation, depending upon the programming provider‘s promotion program or customer‘s choice of programming. An AFE Retail Dealer installing 20 DBS-TV systems per month will receive, beginning in their third month of enrollment and continuing thereafter according to the level of customer activations they perform, approximately $1.15 for every active DBS television subscriber. A dealer who maintains 1,000 monthly programming subscribers would receive approximately $1,115.00 per month for 60 months.

There will not be any restrictions for a dealer selling DBS-TV systems to homes connected to utility services other than propane, i.e., electric, fuel oil, natural gas, etc. Additional revenue will also be derived from services performed on a dealer’s own DBS-TV products and installations and those of other manufacturers or dealers.

AFE maintains a complete sales and service support group, both of which are field based and at AFE’s corporate office located in the Nashville, Tennessee metropolitan area. Shipping and warehousing facilities are also located in Nashville, TN. AFE’s “Level Three” certified installation and service department will provide the Retail Dealer with a forum for exclusive installer training and trouble shooting. Dealer activation, accounting and administrative assistance programs are also available.

DBS-TV RETAIL DEALER ECONOMICS

A modest goal which AFE has set for its DBS-TV Retail Dealer affiliates is as follows. This assumed level of sales participation would take the average NGL marketer nine (9) years to exhaust his or her existing customer base; exclusive of new customer(s), customers using other energies or any other growth opportunity such as acquisition(s).

 Total Revenue - - - - - - - - - - - - - - - - - - - - - - - - - - $184,448.88

Total COGS - - - - - - - - - - - - - - - - - - - - - - - - - - - -$104,160.00

Total Operating Expense - - - - - - - - - - - - - - - - - - - $20,356.61 (1)

V. Operating Cash Flow (EBIT-DA) - - - - - - - - - - - - - - - - - - - - - - -$59,932.27 (2)

==========

(1) If dealer uses existing employees, expenses may become incremental income(s).

(2) Business value would increase to $299,661.35 (5 x EBIT-DA of $59,932.27).

(*) RG-6 coax cable, F connectors, wire ties, grounding, hardware, splitters and etc. may be purchased through AFE.

 

(**) Revenue and COGS may vary depending upon special promotions.

Economics reflect current promotions at the time of this Proforma’s update.

AFEXPRESS HIGH-SPEED INTERNET CONNECTIVITY PRODUCTS

Your Companies’ Co-Branded Satellite Internet Service

Over the next 5 years, 1.2 Billion new subscribers will come on-line with Internet service. Through AFE, the NGL and DBS marketer has an opportunity to co-brand his/her own high speed Internet service. Using AFE broadband technology, the propane marketer or DBS dealer can provide customers with up to 400k “push” IP multicast Internet access speed.

America’s Family Entertainment, Inc. (“AFE”) offers two broadband Internet access solutions. Both products are readily available today for AFE Retail Dealers to co-brand with AFE. Through co-branding, AFE’s Retail Dealers can represent AFEXpress as their own “high-speed Satellite Internet service”. AFE’s Retail Dealers will retain ownership rights to their customer base and AFE can arrange for the Retail Dealer to place their logo on the customer’s dish antenna.

There are no commitments required, nor is there a minimum customer subscription service level required. Because AFE is a co-owned, co-branded arrangement by and between AFE and AFE Retail Dealers, there is no “stair-step” of residual payments and no “charge backs”. Furthermore, AFEXpress does not fix access fees for the Retail Dealer’s network connection to the Internet. Once enrolled as an AFEXpress Retail Dealer, access rights to the Internet and orbital satellites is established. By partnering with AFE, a Retail Dealer receives a monthly revenue of $9.00 per subscriber. Ownership rights to customers are held jointly. In that respect, a Retail Dealer has sufficient incentive to develop business without any quotas.

AFEXpress is a product designed for the home or business that wants to have broadband “High-Speed” Internet. Access speeds of up to 400k are available. AFEXpress requires .88 meter satellite antenna and modem card connected to a customer’s PC. Customer’s equipment cost is $388.99, for an internal PC card and modem and $488.99, for an external modem. Both include a $99.00 installation fee. Monthly cost for Internet access service, which includes local ISP, is $39.99. (Note: For AFE Retail Dealer cost, see “Dealer Economics” below or consult “Dealer Economics” on AFE’s Website.)

The AFEXpress solution has a low one-time set-up fee of $1,800.00. Included are:

* One (1) Demo/Show Unit (Internal Modem)

* Initial on-site training of a Retail Dealer’s installation staff

* Domain name registration and e-mail account set-up

* Online end-user modem provisioning

* A Retail Dealer’s dish logo

AFEXpress/CableXpress is designed for the private cable operator. It delivers 1-way or 2-way broadband service to apartments, condos, town homes, universities and businesses. CableXpress has a one-time set-up fee of $7,000.00. AFE Retail Dealers can earn activation commission(s) and residual payment(s) from local cable operator accounts which they sign on for AFE’s CableXpress Internet connectivity services. Included in the set-up fee is:

* All required headend hardware and receiver satellite dish

* Initial on-site training of a Retail Dealer’s installation staff

* Domain name registration and e-mail account set-up

* Online end-user modem provisioning

* A Retail Dealer’s dish logo

AFEXpress Meeting Plus: The marketer can also purchase time, through AFE, to communicate directly with their customers, outlying bulk plant(s) or office(s). AFEXpress Meeting Plus is high speed streaming of an audio or video event to remote receiver site PC’s. (Colleges or businesses that want to provide training to students or employees on a regular basis can benefit from AFE Meeting Plus.) This can be performed live or through traditional DSL and other providers.

AFEXpress File Delivery is high speed delivery of files to remote site PC hard drives; for retrieval and use by end-users that require daily updates of large files.

AFEXpress Box Office “Current Hit” Movies can be delivered to residential or business customers via AFE’s AFEXpress Internet connectivity service. AFEXpress Box Office can be connected to a television set through a set-top box and coax cable transmission line (Available Summer 2002).

AFEXPRESS RETAIL DEALER ECONOMICS

As with AFE’s DBS-TV program, an assumed modest sales goal can provide AFE Retail Dealers of AFEXpress Internet connectivity service with a substantial income stream. AFE’s assumption in this scenario would also take the average NGL dealer 9 years to exhaust their current customer base.

Total Revenue - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $170,677.60

Total COGS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ 58,920.00

Total Operating Expense - - - - - - - - - - - - - - - - - - - - - - - - - -$ 12,809.33 (1)

V. Operating Cash Flow (EBIT-DA) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ 98,948.27 (2)

==========

(1) If dealer uses existing employees, expenses may become incremental income(s).

(2) Business value would increase to $492,941.35 (5 x EBITDA of $98,948.27).

(*) RG-6 coax cable, F connectors, wire ties, hardware, splitters and etc. may be purchased through AFE.

(**) Revenue and COGS may vary depending upon special promotions. Economics reflect current promotions at the time

of this Proforma’s update.

 

WEBSITE @ www.AFEInc.com

The Company has developed, and today maintains, an expansive Website for Stockholder and Retail Dealer use. The Website contains numerous links which provide vital information to these groups and the general public. It is the communication tool for AFE Retail Dealers to obtain, on a 24/7 basis, the most current information on AFE’s “Products and Services”, “Business Rules”, “Commission Reports” (passcode protected), “Dealer Agreements” customer sign-up forms and “Coop Advertising” policies and claim forms. For stockholders, and the general public, the Company’s “Proforma” and “SkyTracker® News” publications are posted to the site and updated periodically.

SKYTRACKER® NEWS

SkyTracker® News is a quarterly produced internal publication of AFE. SkyTracker® News provides Stockholders and Retail Dealers with current activities of the Company, new products and services on the horizon and business concept(s). The prior three issues of SkyTracker® News are posted on AFE’s Website at www.AFEInc.com.

III.

RETURN-OF-INVESTMENT

INVESTOR RETURN

The common stock of AFE has primarily been transferred to stockholders in “units” comprised of Twenty (20.0) shares of the Corporation’s common stock. The following Investor Return Summaries, and subsequent exhibits, depict investor returns on both “unit” and “per share” basis.

The following Five (5) year cumulative Revenue through Operating Cash Flow (EBITDA) analysis, includes only AFE’s wholesale economics from sales to Retail Dealers for DBS products, SkyTracker® monitors and AFEXpress Internet access equipment and subscriber service. Ancillary products, such as Parts & Fittings, Retail Dealer origination fees and other order enhancement items i.e., SEA surround sound systems, surge protectors, DVD players and etc. are accounted for in the “Per Share Earnings/IPO Summary” and “Operating Cash Flow (EBITDA) Summary by Product” of this Section III. Stockholder returns for equity participants in AFE would be as follows:

A. Investor Return Summary From DBS-TV Equipment and Programming Sales:

(Five (5) Year Cumulative)

Total Revenue: - - - - - - - - - - - - - - - - - - - - - - $522,062,400.43

Total COGS: - - - - - - - - - - - - - - - - - - - - - - - ($ 454,132,800.43)

Total Gross Margin - - - - - - - - - - - - - - - - - - $ 67,939,600.00

B. Investor Return Summary From SkyTracker® Equipment and Programming Sales:

(Five (5) Year Cumulative)

Total Revenue: - - - - - - - - - - - - - - - - - - - - - $307,623,680.00

Total COGS: - - - - - - - - - - - - - - - - - - - - - - ($ 198,903,039.00)

Total Gross Margin - - - - - - - - - - - - - - - - - $108,720,641.00

=========

C. Investor Return Summary From AFEXpress Internet Connectivity Service:

(Five (5) Year Cumulative)

Total Revenue: - - - - - - - - - - - - - - - - - - - - - - - $3,093,873,333.00

Total COGS: - - - - - - - - - - - - - - - - - - - - - - - - ($2,850,312,773.00)

Total Gross Margin- - - - - - - - - - - - - - - - - - - - $243,560,560.00

=======

AFE STOCK INVESTMENT RETURN SUMMARY

Investor returns, upon achievement of this Proforma’s projections, are unprecedented. In addition, ROI can be enhanced with a sales performance greater than that portrayed in this Proforma.

Potential downside to an investor return is virtually non-existent. With only one half of one percent (0.5%) of this Proforma’s sales activity realized, investors may see the return of their principal plus an annualized rate of return of 10.2%. This allows for a 99.64% performance error in this Proforma’s projections for investors to realize a 100.0% recovery of their capital.

Equally exceptional to the returns available under this Proforma, is investor security. AFE has the potential to reward participants with a solid investment.

Investor returns as depicted in III-A, III-B and III-C of the proceeding pages may be outlined, collectively, as follows:

Table - 1

* Proforma Projection (5.87% of the propane industry's 20,000,000 existing rural customer base.)

** Stockholder Returns = Dividends Declared plus Retained Earnings plus Stockholder Equity/Appreciation.

 

 

 

PER SHARE STOCK VALUE PROJECTIONS; EARNINGS IPO SUMMARY

As stated throughout this Business Plan and Operating Proforma, the mission of America’s Family Entertainment, Inc. (“AFE”) is to provide Direct Broadcast Satellite (“DBS”) television service and AFEXpress high speed Internet connectivity service to 1,171,200 U.S. households (5.34%) as served by the natural gas liquids (“NGL”) industry. DBS dealers will add to this performance. In addition, AFE’s ancillary target is to provide NGL marketers with SkyTracker® liquid level gauges to monitor 2,049,600 customers (10.25%) of the NGL industry.

AFE’s Business Plan covers a five (5) year term. This summary is to depict what the value of AFE capital stock might be worth through an earnings approach or an IPO approach. Both are based on certain assumptions. These assumptions include:

1) That AFE can attain its target sales projections as depicted in this Proforma.

2) Target attainment is in accordance to time projections as depicted in this Proforma.

3) Projected margins can be obtained as outlined herein.

4) Operating expenses will be at or under projection(s) as contained in this Proforma.

5) An Income Valuation, using 15 as the multiple of EBITDA, is realistic in the marketplace at the time of an IPO. (This would compare to Ferrellgas at 10.88 X EBITDA recently or Cornerstone at 9.88 X EBITDA, both seasonal companies, Retail/Manufacturers whose stock has recently traded between 12 X to 18 X EBITDA and high tech entities whose stocks typically sell today for 22 X to 28 X EBITDA.)

PROJECTED STOCK APPRECIATION

============Today’s stock cost: $150.00

OPERATING CASH FLOW (EBITDA) SUMMARY BY PRODUCT

America’s Family Entertainment, Inc. Common Stock Projected Return on Investment

(For $150.00 Investment)

I. Earnings Approach:

======= =======

(A) To double an investment @ 12.0% per annum, 6 years is required.

(B) Projected AFE results @ 50.0% of Proforma

(C) Actual results of Bucilla Corporation’s 1996 IPO. (AFE stockholder, Jack Loynd and his

father received this return on their investment(s).)

IV.

CORPORATE ORGANIZATION

CORPORATE STRUCTURE

America’s Family Entertainment, Inc. is a Corporation organized under the laws of the State of Tennessee and licensed with authority to conduct business in the State of Tennessee. AFE, as required, will file all documents to establish itself as a foreign corporation in any state where it intends to conduct business. AFE is considered a closely held corporation whose stock is not traded publicly. Common Stock authorized for issue is 144,000.0 shares. AFE has elected to be governed and subject to a seven (7) member Board of Directors. Management of the Company is as presented earlier in this Proforma under Executive Summary.

Investors in the Company will consist of an undetermined number of individuals and/or legal entities. Two (2) investors, holding Twenty-One Percent (21.0%) and Nineteen Percent (19.0%) respectively, of the outstanding shares of the Corporation’s Common Stock, are the founders of the Company. Sixty Percent (60.0%) of the Corporation’s Stock has been designated as Treasury Stock and has or will be sold to outside investors.

A Stockholder Agreement exists and was executed by all initial sitting members of the Company’s Board of Directors as of January 5, 1999. An Ancillary Stockholder Agreement, recognizing the authority of the original Stockholder Agreement, the permanent Board, and the Company’s election(s) for an orderly transfer of its Common Stock, will be required to be executed by all other Stockholders, including Treasury or subsequent generation Stockholders. This “tie-in” document must be signed prior to the Corporation’s issuance and distribution of any of its shares of Common Stock to Stockholders. All Common Stock share certificates will contain an endorsement subjecting the issued shares of the Corporation’s Common Stock to the terms and conditions of the primary Stockholder Agreement.

The Stockholder Agreement will consist of articles and covenants, which shall serve to place guidelines upon and/or limit the activities of the Corporation, its Officers, Board of Directors and the individual Stockholders. Such covenants shall include:

1) The Company’s elected methods of valuing the Company’s Common Stock, i.e., market sales approach (last sold), through multiples of Operating Cash Flow (“EBITDA”) or, in the event of disagreement between any Stockholder, their heirs, assigns or estate and the Corporation, then the tangible and non-tangible asset approach using IRS Rules 34 and 68 with Revenue Ruling 65-193.

2) An election to not permit spousal or heir inheritance of Common Stock or heir ascension to the Company’s Board of Directors in the event of death or disability of any one of the Corporation's Officers so affected.

3) An organized means to transfer Common stock between existing Stockholders and/or new entry Stockholders.

4) Guidelines requiring Stockholder vote(s) and policies to establish corporate, employee and stockholder limits of authority.

 

5) Procedures whereby Stockholders may control or limit per share dilution should the Corporation elect to authorize the issuance of additional shares of Common Stock.

 

6) Creation of the Company’s Board of Directors. The Board of Directors of the corporation shall consist of:

 

A) The two (2) originators of the Company as presented in the Executive Summary of this Operating Proforma.

 

B) Five (5) periodically appointed or elected members from the investor group.

 

 

 

 

 

 

PARTICIPANT ELECTION

Should any reader of this Proforma make a decision to invest in AFE, then such participant shall be entitled to:

A) The Corporation’s issuance of a certificate in the appropriate denomination of the shares of common stock to which the participant is entitled. Such certificate shall be issued only upon the participant’s execution of an Ancillary Agreement to the Corporation’s Stockholder Agreement. In addition, such certificate shall bear an endorsement subjecting any shares owned by the participant to the terms, conditions and restrictions of the original Stockholder Agreement.

 

B) Vote, in direct proportion to the number of shares owned, on corporate issues as provided for in the Corporation’s Articles of Incorporation and/or Stockholder Agreement.

 

C) Dividends as declared by the Corporation’s Board of Directors.

D) Attend Stockholder meetings as elected or required.

There is no guarantee to any investor, or to any invested funds of a participant, so it is recommended that any interested participant not make an investment in AFE, unless that participant is associated with and comfortable with the inherent risk of business ventures of this type. It is to be equally understood and accepted by any participant that while the potential downside risks, as portrayed in this Proforma, are virtually nil, the prospect for partial or total loss of one’s investment in AFE does exist. Furthermore, the Officers and Management of AFE have not and do not make any representations whatsoever that the projections as outlined in this Proforma will actually materialize; notwithstanding that, AFE management has made every effort --- and will continue to make every effort --- to control business risks and monitor conditions to assure the success of this venture.