American saddle tree company plan 2005 by Robert Ferrand

Reorganization & Modernization

business plan 6 / 3 / 2005

Prepared for

Pathfinder Leathers By

Robert Ferrand Inventor / CEO

TABLE OF CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

HOME RUN HIT.........................................……………………………………. EXECUTIVE SUMMARY.........................................…………………………….. LEVERAGING THE “INTELLECTUAL PROPERTY” FOR THE FUTURE …………… SADDLE INDUSTRY OVERVIEW………………………………………………….. SADDLE INDUSTRY STATISTICS ………………………………………………… THE MARKET OPPORTUNITY …………………………………………………… THE BACK OF THE NAPKIN ANALYSIS………………………………………….. HOW TO INCREASE THE PROFIT WITHOUT INCREASING COGS ……………… THE TWO COMPANIES HISTORY……………………………………………….. THE COMPANY & TECHNOLOGY……..………………………………………… STRATEGIC ADVANTAGE .........................................…………………………. THE SADDLE INDUSTRY’S ACHILLES’ HEAL ………………………………….. FEDERAL REGULATIONS & CONSUMER PROTECTION LAW ..........………….. PRODUCT LINE.........................................…………………………………… ACCURACY ADDS VALUE……………………………………………………….. THE ORTHOTIC SOLUTION – AN UP-SIDE OPPORTUNITY ……………………. THE MANUFACTURING CHALLENGE……………................…….. ………….. PRODUCTION TIME COMPARISON (GANTT CHART)………………………….. THE “OBVIOUS” SOLUTION IS A TRAP ..............................………………… THE SADDLETECH SOLUTION.......................................…………………….. THE SADDLETECH CAD-CAM SOFTWARE ………………………………….. SADDLETECH PARAMETRIC DATA SET – PROOF OF CONCEPT……………… PRELIMINARY ROLL OUT SCHEDULE...(GAANT CHART)...................……… SALES PLAN .........................................…………………………………… MARKETING PLAN .........................................……………………………… PROPRIETARY POSITION .........................................………………………. TRADE SECRETS AND GOOD WILL .........................................……………. POTENTIAL COMPETITION – NATIONALLY & INTERNATIONALLY ................... INFORMATION TECHNOLOGY ......................................…………………….. PRO FORMA ANALYSIS ASSUMPTIONS………………………………………. PRO FORMA INCOME SUMMARY ...............................…………………….. ENLIGHTENED “ANGEL” INVESTMENT FINANCING REQUIRED..................... THE USE OF PROCEEDS...............................………………………………. INTELLECTUAL PROPERTY – BRAIN “REAL ESTATE” ………………………. THE VALUATION OF THE INTELLECTUAL PROPERTY………………………… THE VALUATION OF THE TRADE SECRETS & GOODWILL ……………………… CONSULTANTS / INTERIM MANAGEMENT ................................……………. ROBERT FERRAND - BIOGRAPHY……….......................……………………. U.S. PATENT # 6,334,262 - THE INTELLECTUAL PROPERTY…. …………… U.S. PATENT # 6,344,262 LICENSING AGREEMENT ………………………..

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THIS IS A HOME RUN HIT ! 1.$35,000,000+ Niche U.S. Saddle Tree Market $ 35,000,000+ International Saddle Market 2. No Significant Saddle Tree Competitors 3. Competitors are using Antiquated technology 4. Competitors have a significant Legal Legacy Liability 5. We have Technological Superiority 6. Patented Proprietary Position 7. No Significant “Technological” hurdles 8. Relatively Low $ Capitalization Required 9. Return on Investment 10X – 20X or better 11. We are Creating a Tipping Point Phenomenon.

Executive Summary The “saddle tree” is the frame upon which all saddles are built to fit on horses’ backs, and the frame upon which on the leather that constitutes the saddle, is attached. As amazing as it may be, in the United States more than 350,000 western saddle trees are sold every year, in a market of 7,000,000 horses. Equally amazing is that all the saddle tree manufacturing companies, including Superior Saddle Tree Company & Hercules Tree Company have built these saddle trees with technology that is straight out of a Dickens novel, set in the 1800’s, which significantly limits production. There is a significant market opportunity to apply modern manufacturing methods to this saddle tree market and dominate saddle tree manufacturing worldwide. By integrating, “PATENTED” horse and saddle measurement technology with computer-numerical controlled (CNC) routers, a significant increase in accuracy and productivity is easily achieved. Employing “PROPRIETARY MEASUREMENT TECHNOLOGY” also permits “MARKET DIFFERENTIATION” by being able to actually validate the saddle “FIT” with computer interface pressure measurement. By adding software to control CNC leather cutting machinery, the corresponding leather parts that constitute the saddle, itself, can be provided as a “Saddle Making Kit” for a complete saddle making solution. The “Saddle Maker’s Virtual Apprentice” does all the dirty work, the saddle maker just adds “craftsmanship”, which is all what they really want to do, anyway. By an amazing series of unfortunate events, the two highest quality saddle tree companies in the United States, the Superior Saddle Tree Company & Hercules Tree Company are in position for asset acquisition, at a significant discount. Just as a previous version, of this business plan was being written and authorized by the then President of the Superior Saddle Tree Company, Frank Bellavia, he suffered a serious stroke and it is unlikely to ever return to work. In 2004, Superior received investment from the Piute Indian Economic Development Corporation, in Benton California and was moved on to the reservation. Due to its remote location and lack of skilled labor, Superior was in serious trouble before Frank’s stroke. With no knowledgeable management in the front office or skilled labor in the shop, the company is in dire straights. Since the tribal members never wanted to purchase the company, in the first place, it is only a matter of time before the Tribe will be forced sell assets. Superior’s sister company, Hercules Tree Company’s assets are currently in probate due to a tragic traffic accident, that killed the entire family. By purchasing these assets: the historic saddle tree patterns and “TRADE SECRET” manufacturing methods as well as client lists and “GOODWILL” and adding modern manufacturing methods in a semi-skilled labor market - a MARKET TAKE OVER STRATEGY can be effectively implemented. This market opportunity permits market domination with a few rather simple changes in the manufacturing process, because competitors are using such antiquated manufacturing equipment. By using computer technology to do the complicated tasks, the input for the saddle tree specifications can actually be performed by the saddle makers, themselves, by using an Oracle database, accessible worldwide through the Internet. This manufacturing strategy also permits the assembly of the saddle tree to be preformed by relatively “unskilled” labor, significantly reducing costs. All this can be accomplished by building, computer numerical controlled “Modular CAD-CAM Work Cells” that can be added, and financed, incrementally as market share increases. This “production driven”, American Pro Forma Financial Model NET INCOME BEFORE TAXES details how a $1,000,000 Private “Angel” Investment Loan, (repaid from 24,000,000 cash flow) plus an initial $500,000 Lease Line of Credit, over five years, 19,000,000 for the acquisition of the 3-Axis CNC Routers, and CNC leather cutting 14,000,000 machines can yield: cash positive in one year, a NET income of 9,000,000 $1,000,000, within 2 years, with a 15% market share. Even better, this 4,000,000 plan also permits over $20,000,000 in cumulative NET income before -1,000,000 taxes, with a 25%+ market share, within the first five years of operation. This Business Plan provides a 20 times Return on Investment (R.O.I.) (Analysis is on the CD American Pro Forma) Loan over 5 years, if all occurs as planned. Even more amazing, is that there is an up-side potential of 2X-3X times the above net income, if existing Federal Consumer Protection Laws are enforced. 1

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These extraordinary returns are only possible because this is not exactly a “Start-up”. This is a Strategic Reorganization and Modernization of Two (2) 40 year-old businesses. Superior has been back ordered 2 to 3 months for years on end and has consistently turned down large volume order of 1,000’s of saddles. By hiring Superior’s Production Manager, Lorenzo Javalara, these orders can be reclaimed and fulfilled, bringing the company into cash flow at a significantly faster pace than attempting to do it for a ground zero “start up” position. By building on the history of these two 40 years companies and coupling modern CAD-CAM production equipment with significantly greater measurement accuracy provided by Saddletech Technology, and hiring experienced staff, will permit the American Saddle Tree Company to exploit this significant market opportunity and create a “Tipping Point Phenomenon” in the saddle tree manufacturing industry.

Leveraging the “262 ” Intellectual Property for the future By licensing the Proprietary Technology as detailed in this Business Plan, there is a significant market opportunity for Pathfinder Leathers to “Leverage the “262 License” Intellectual Property” to build a network of companies that can provide employment as well as a significant revenue stream over the years. By building on this “262 License” a “Value Added” Saddle Making Franchise Opportunity can be created. This “CAD-CAM Work Cell Manufacturing System” itself, can be licensed to other Tribes or companies throughout the United States or the world, just as this “262 License” itself being licensed to the Pathfinder Leathers. Alternatively, the “Cash Cow” revenue stream could be used by Pathfinder Leathers to finance the saddle company, the boot company, a saddle pad company, and in time, maybe even a leather tannery, as well as the parent company the American Indian Prevention Coalition, itself. All these companies would provide career paths and more than $10,000,000 in gainful employment for over 100 individuals, all without the aid of any government grants or an initial public offering. This is a Real Market Opportunity. BUREAU OF INDIAN AFFAIRS EMPLOYMENT PROGRAMS

BUREAU OF INDIAN AFFAIRS HIGH SCHOOLS

NATIONAL HIGH SCHOOLS

PRIVATE SECTOR

SADDLE INDUSTRY

NATIVE AMERICAN UNIVERS ITY

SA DDLE TE CH

CALIBRATED SADDLE FITTING

SADDLE TREE MAKING

WESTERN SADDLE MAKING MAKING

SA DDLE TE CH

AMERICAN SADDLE TREE COMPANY

SADDLETECH ORTHOTICS TO CORRECT FOR POOR FIT

SA DDLE TE CH

TRIBAL SADDLE FITTERS

TRIBAL DIRECT SADDLE SALES

HIGH QUALITY SADDLES FOR NATIONAL DISTRIBUTION

3 patherfinder leathers BOOT COMPANY

HIGH QUALITY LEATHER FOR SHOES, BOOTS HANDBAGS

HIGH QUALITY SADDLE LEATHER FOR SADDLES AND BRIDALS

SA DDLE TE CH

TRADITIONAL SADDLE MAKERS

TRIBAL SADDLE MAKERS

INTERNET SADDLE SALES

LEATHER TRADE BOOTS AND HANDBAGS

ENGLISH SADDLE MAKING

SA DDLE TE CH

pathfinder leathers SADDLE COMPANY

SADDLE TREES FOR TRADITIONAL SADDLE MAKERS

SA DDLE TE CH

NATIONAL SADDLE SALES

LOCAL TACK SHOPS

GOVERNMENT CONTRACTS

THE UNITED STATES EQUESTRIAN SADDLE MARKET 5,000,000 HORSES IN THE UNITED STATES $500,000,000 ANNUAL SADDLE SALES 500,000 SADDLES PER YEAR

“more bang for the buck”

Proprietary technology provides the American Indian Prevention Coalition with

EDUCATION / INDUSTRY / PRODUCTS / EMPLOYMENT / TRADITION / REVENUE THIS OPPORTUNITY SHOULD PERMIT THE AMERICAN INDIAN PREVENTION COALITION, ITSELF TO WEAN FROM DEPENDENCE ON GOVERNMENT GRANTS

Saddle Industry Overview The equine industry is one of the America’s largest hidden markets. To understand the truly amazing size of the equine market a recent audit, produced for the American Horse Council, determined that "horse based economic activity totals $25,300,000,000 annually and ultimately has a $112,100,000,000 impact on the U.S. Economy". This same study determined that there are about 7,000,000 horses currently in the U.S. If you subtract the younger and older horses, there are at least 5,000,000 horses that require saddles. Just like humans, horse's backs curve as they age. Therefore it would be unusual for a saddle to fit for more than a few years. So a very conservative estimate would place a ten-year life on a saddle, which would mean that at least 500,000 saddles are sold each year in the U.S. This estimate was also confirmed by Western Horseman magazine in the May 1999 issue. 7,000,000 horses in the United States. Less 1,000,000 “young” horses Less 1,000,000 “old/retired” horses 5,000,000 horses “under saddle” in the U.S. A Saddle’s “working life” is less than 10 years. Approx 500,000 saddles sold in the U.S. annually 70% are Western Saddles 20% are English Saddles 10% are other Saddle designs An estimated 350,000 Western Saddles are sold annually in the U.S. Saddles sell between $500 and $5,000. Some are even sold for more than $10,000. Using the lower price between $500 and $1000 per saddle, it can be estimated that between $250,000,000 and $500,000,000 dollars worth of saddles are sold every year in the United States. Each of these saddles is built upon a saddle tree. In the United States, saddle trees represent 10% to 15% of the cost of the saddle, creating annual revenue for the saddle tree industry of approximately $35 million dollars per year. Superior Saddle Tree Company has had annual sales averaging around $350,000 per year, which represents less than 1% of the market. This provides a substantial potential growth opportunity. Saddle tree making has changed little over the past century. While many other industries have established standards of measurement, employed automation and recently employed computer numerical control, the saddle tree makers have resisted any modernization. This presents a significant market opportunity to take over the market.

Current Technology

State-of-the-Art CNC Technology

By employing standards of measurement, automation and proprietary technology, the American Saddle Tree Company is in position to become THE dominant saddle tree manufacturer in the world. Modern technology permits significantly improved efficiency and thereby significantly increase profit margins. This technology will also permit a significant increase in production as well as shorten lead times, making it increasingly difficult for other companies to compete with American Saddle Tree Company’s quality, speed, price, or accuracy.

Saddle Industry Statistics For years, horsemen and women have known that the American horse industry is a serious, economically diverse and productive business that deserves the attention and appreciation of government, media and the public. But they had no written documentation to support their claims. Following are some industry statistics from The Economic Impact of the Horse Industry in the United States, conducted by the Barents Group of Washington, DC. What is the Economic Impact of the Horse Industry? The horse industry has a total impact of $112.1 billion on U.S. Gross Domestic Product (GDP). * The horse industry provides 1.4 million full time jobs. * The horse industry pay $1.9 billion in taxes. * Racing, showing and recreation each contribute more than 25% to the total value of goods and services produced by the industry. * The horse industry's contribution to the U.S. GDP is greater than the motion picture services, railroad transportation, furniture and fixtures manufacturing and tobacco product manufacturing industries. It is only slightly smaller than the apparel and other textile products manufacturing industry. * In terms of employment, the industry directly employs more people than railroads, radio and television broadcasting, petroleum and coal products manufacturing and tobacco product manufacturing. How Many People are Involved in the Horse Industry? There are 7.1 million Americans are involved in the industry as horse owners, service providers, employees. * * * * * 路 * * * *

4.3 million individuals participate in recreation activities 3.6 million individuals participate in showing With some overlap in cases of people who participate in both showing and recreation. 1.9 million people own horses 941,000 people participated in racing in either a professional or volunteer capacity In addition to the people actually involved in the industry, tens of millions more Americans participate as spectators. The median income for horse owning households is $60,000 14% of horse-owning households have incomes under $25,000 38% of horse-owning households have incomes under $50,000 64% of horse-owning households have incomes under $75,000

How Many Horses are there? There are 6.9 million horses in the U.S., including both commercial and recreational horses. * * * *

2,970,000 and recreation 1,974,000 are used in showing 1,262,800 are used in other activities, such as farm and ranch work, rodeo, police work, etc. 725,000 of those horses are involved in racing and race horse breeding

Contact the American Horse Council for a copy of this report http://www.horsecouncil.org/statistics.htm

The Market Opportunity Is to build a modular saddle tree manufacturing “CAD-CAM Work Cell” employing computer numerically controlled (CNC) routers that can create a “Tipping Point Phenomenon” in the saddle tree manufacturing industry. By significantly increasing the accuracy of the saddle fit while also significantly shortening delivery times, would create a significant “value added” to the product while also reducing cost of goods. By incrementally adding “CAD-CAM Work Cells”, as market share increases, a significant Return On Investment (ROI) is possible. PRODUCTION MANAGER COMPUTER ROUTER PROGRAMMER MAKING

CAD / CAM WORK CELL #1

CAD / CAM WORK CELL #2

CAD / CAM WORK CELL #3

CAD / CAM WORK CELL #4

CAD / CAM WORK CELL #5

SAD D LETEC H 3- AXIS ROUTER

LOADER UNLOADER

SADDLE TREE ASSEMBLER

SANDER FINISHER

ULTRA-HIDE SPRAYER QUALITY C ONTROL

SHIPPING RECIEVING

The Back of the Napkin Analysis 24 PASSES

250

6,000 12

PASSES

250

3,000 12

PASSES

EFFICIENCY

MARKET MARKET

250

INCHES OF TOOL PATH TO CUT SADDLE TREE BAR LENGTH OF FORK IN INCHES INCHES OF TOOL PATH TO CUT SADDLE TREE BAR LENGTH OF CANTLE IN INCHES

3,000

INCHES OF TOOL PATH TO CUT SADDLE TREE BAR

12,000

TOTAL INCHES OF TOOL PATH TO CUT ONE SADDLE TREE

800

ROUTER CUTTING SPEED - INCHES PER MINUTE

MINUTES TO CUT ONE SADDLE TREE

UNITS PER HOUR

UNITS PER WORK CELL PER SHFT

75.00%

ACTUAL WORK CELL UNITS PER SHIFT

105

UNITS PER WORK CELL PER WEEK PER SHIFT

420

UNITS PER WORK CELL PER MONTH PER SHIFT

5,040

TOTAL UNITS PER WORK CELL PER YEAR PER SHIFT

300000

1.7%

MARKET SHARE PER WORK CELL PER YEAR

15,120 5.0%

300000

UNITS PER WORK CELL PER YEAR - 3 SHFTS MARKET SHARE PER WORK CELL PER YEAR - 3 SHIFTS

$175

SELLING PRICE PER SADDLE TREE

$50

COST OF MATERIAL

$25

COST OF LABOR

$100

GROSS PROFIT PER SADDLE TREE

$1,512,000

MARKET

LENGTH OF SADDLE TREE BAR IN INCHES

75,600

300000

$7,560,000 25%

GROSS PROFIT PER WORK CELL PER YEAR UNITS PER DIVISION WITH 5 WORK CELLS

GROSS PROFIT PER YEAR PER DIVISION MARKET SHARE PER DIVISION PER YEAR

How to Increase Profits without Increasing Cost of Goods There are four distinct market opportunities for Saddletree product positioning:

PRICE, SPEED, ACCURACY & ADJUSTABILITY. 1. PRICE - SEGMENT BUSTER. Paradoxically, today, the saddle tree industry is basically competing on price, despite the fact that demand has consistently out paced production, contrary to the supply and demand theory. Without a standard of measurement the quality of the tree, or the quality of the “FIT” is secondary or not important, so price is the critical factor. Using TM automation and Superior Saddle Tree Company’s proprietary UltraHide there is an opportunity to build a high quality tree with reduced labor costs. This permits the American Saddle Tree Company to offer a “segment buster” which is basically a high quality tree at a low price. This product does require high volumes of exactly the same shape. This saddle tree would be sold for $125 or less in quantity, this product is intended to break the back of all competitors. A significant “market differentiation” of this saddle tree has over competing saddle trees is that it is made to a “calibrated” measurement. Therefore, the saddle consumer can measure the horse, if the saddle fits – that is wonderful, however, if the saddle does NOT fit, the customer determines that prior to purchase, permitting the opportunity to Up-sell to a American Saddletech Custom Tree, as well as compliance with Federal Regulations. 2. SPEED - JUST IN TIME Most saddle tree companies have lead times of eight to ten weeks and in some cases many many months. By using automation these delays can be reduced to days or weeks, by just bumping the sequence of the order up in the production cycle. This permits the small saddle maker to respond to customer in a more timely fashion and it allows the large production saddle makers to improve through-put, providing an additional income per saddle tree, with no additional cost of goods. This is a “value added” product worth at least a $100+ additional charge. 3. ACCURACY - AMERICAN / SADDLETECH CUSTOM TREES – Most saddle tree companies have a few patterns and the customer takes it or leaves it. In some case a custom saddle tree can be made, but due to the lack of any measurement relating the saddle to the horse, it becomes confusing for the saddle tree maker to understand what the customer really wants or needs. Using a standard of measurement, communication is improved and the accuracy of the shape of the saddle improves. This allows the saddlemaker to “reposition” the quality of their saddle with respect to production saddles and adjust the price accordingly. “Accuracy adds ValueSM” – By improving accuracy the profit margin for the saddle tree can be significantly increased with correspondingly little increase in cost of goods or labor. The U.S. Patent # 6,344,262 provides the technology to secure this market. This is a significantly “value added” product worth at least a $250 additional charge. This segment would more than triple profits.

4. ADJUSTABILITY – AMERICAN / SADDLETECH CUSTOM TREES WITH INTERCHANGEABLE ORTHOTICS – So great, you can make the saddle fit the horse, BUT what happens when the horse’s back changes or the customer changes horses, or you ride a number of horses with the same saddle. Which is the real world. Then what? The challenge to any effort to fit a horse with a saddle, over a number of years, is that the shape of the horse’s back is changing, so any attempt to view saddle fit as a static occurrence is prone to failure. The American Saddle Tree Company will offer two solutions: The first is a “High Performance” Model saddle tree that provides interchangeable bars sets, so that high level competitors change “fine tune” the saddle on the spot. The second product is the Saddletech “ORTHOTIC” (U.S. Patent # 60/385,526) that has been designed from the beginning to be adjustable and replaceable, so that the ORTHOTIC can easily be “refit” to the shape of the horse, over time. By making the Orthotic for the horse and then building the saddle tree to accommodate the Orthotic, Superior can double; triple or more than quadruple the profit on the saddle tree. Even if Superior charges $175 for the saddletree, then an additional up charge of $150 – $250 per orthotic could be added to significantly increase profits, with little increase in cost of goods or labor. Over the life of the saddle, multiple Orthotics would be required, generating $1,000s of dollars per saddle instead of $75 (seventy-five) dollars, per saddle. (This is a follow on product, to be developed after the CAD-CAM Router system is operational. This U.S. Patent Application # 60/385,526 has just received ‘Notice of Allowance,” however the patent, itself, has not been issued and therefore is not part of this current agreement, but is an additional market opportunity to significantly increase profits, with a new product line

The Two Sister Companyâ&#x20AC;&#x2122;s History

In 1965 The Standard Saddle Tree Company Was founded in Vernal, Utah. In 1980 The Standard Saddle Tree Company Merged with The Hercules Tree Company in Moab, Utah. In 1984 The Hercules Tree Company in Moab, Utah. Was sold to the Navaho Tribe in Phoenix, Arizona In 1986 The Hercules Tree Company was repurchased by Jim Parry, and moved back to Moab, Utah. In 1986 The Standard Saddle Tree Company side Moved to Grand Junction Colorado And Sonny Felkins changed the name to the Superior Saddle Tree Company In 1993 Frank & Grace Bellavia Purchased the Superior Saddle Tree Company In 2004 The Superior Saddle Tree Company was purchased by the Piute Economic Development Corporation and Moved to the Reservation in Benton, California

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The Company & Technology The Superior Saddle Tree Company is a manufacturer of saddle trees. Saddle trees are the foundation of all western saddles. The saddle tree is, traditionally, made of wood and traditionally covered with rawhide for strength. Saddle trees are used by custom saddle makers as well large companies that build mass-production saddles. Superior’s saddle trees are sent all over the United States and, in fact, all over the World. In 1993, the Superior was grossing about $125.000.a year, within 3 years, the new gross sales were almost TM $300,000. The combination of Frank’s understanding of manufacturing as well as his development of the UltraHide advanced polyurethane hybrid coating that was designed to include the desirable qualities of bullhide (strength and flexibility), without the undesirable qualities (rapid deterioration over time, exposure of the wood core to moisture through the stitching seams) production increased. On the sales side, Grace's knowledge of 4 languages opened the international market to increase sales even further. However, Frank was unable to increase production any further because of a lack of “skilled” labor in Colorado, and was forced to turn down business. In 1999, Frank began speaking with Robert Ferrand of Saddletech, inventor of the horse and saddle measurement technology about employing CNC Technology to increase production. In late 2001, Frank actually purchased a 3-axis CNC router, hired engineers to program the computer, and began to build saddle tree bars by digitizing the bars, as the engineers had recommended. He soon began to realize that “digitizing” the bars was so labor intensive in its own right, that he did not achieve any gain in productivity. Once Frank realized that “digitizing was a trap” and that Saddletech Technology provided significant advantages, Frank and Robert began developing a new Business Plan to employ CNC technology to make saddle trees real fast. This Plan is an evolution of that work, begun years ago. In 2002, Ken Partridge, the Chief Financial Officer of the Paiute Economic Development Corporation, approached Frank Bellavia about a possible Investment into the company and Relocation to the Paiute Reservation in Benton, California. Since Frank’s concern was “skilled” labor to be able to increase production, Frank was open to the idea and began negotiations. Ken Partridge represented that the Paiute Reservation had plenty of people who could work for the company that had the appropriate skills. This proved not to be true. In early 2003, a new CEO, Elliott Bellinn, was hired by the Piute Economic Development Corporation and Ken Partridge was replaced. The new CEO began negocations again, with Frank, and by August 1, 2003 an agreement to partially invest in the Company with full buy-out within 5 years was concluded. By May of 2004, the Superior Saddle Tree Company moved from Grand Junction, Colorado, to the Paiute Reservation in Benton, California. At the time, none of the other 45 tribal member wanted to purchase the company, And that is when the trouble began……… It quickly became apparent to not only to Frank, but also his Production Manager, Lorenzo Javalara, that there were only two Paiute Indians on the reservation that had the skills to work for the company. No skilled labor could be found on the reservation because of drug and alcohol dependence. Since the reservation is physically 40 miles north of Bishop California, the issue of finding skilled labor became critical, and is now the company’s Achilles’ heal. Since Frank, and Robert Ferrand, of Saddletech have been working on the idea of using CNC routers to increase production, they began early development on such a program. Unfortunately, when Frank presented the plan to employ Saddletech Technology and CNC Routers to increase production, the CEO Bellinn, and Tribal Chairman Joseph Saulque, choose not to invest in the technology. The two officers explained to Frank “We will just put on another shift”. Frank and the Production Manager, Lorenzo’s position was, “How can you add a shift, when we can NOT even find enough employees to get the first shift running?” So, with no prospects of skilled labor to increase production, and no prospects to employ Saddletech Technology and CNC Routers to increase production, Frank was watching a colossal market opportunity, just sitting there, going nowhere. However, since Frank still had controlling interest in the company, he open to another opportunity, which is the subject of this Business Plan. Frank was so upset with the situation he returned to Grand Junction, Colorado, to speak with his attorney about his options….and that is when he suffered the stoke. With an understanding of Frank’s situation, coupled with a series of very enlightening phone calls with John Whiteshirt, CEO of the American Indian Prevention Coalition, Robert saw an opportunity to create a new Business Plan and Licensing Agreement with Pathfinders Leathers, that would be to the benefit of all concerned….and you are reading it.

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Strategic Advantage Over the past decade, there have been a multitude of articles in trade journals, equine magazines, and even a few books, revealing that “Saddle Fit” is becoming of greater concern to the saddle customer. The reason is simple, because there is NO standard of measurement in the saddle industry to be able to relate the shape of the horse’s back to the shape of the saddle, so that any “FIT” could be determined, many saddle customers are finding, months after they purchase the saddle, the saddle does not fit and cannot be returned. They then must purchase another saddle, only to go through the cycle again. This situation can injure the horse and it gets expensive quickly. Almost every saddle company makes some sort of saddle fitting claim in order to convince the customer that the saddle will fit, so they can sell the saddle “This tree fits all horses”, “We have never had a problem with saddle fitting” “This tree evenly distributes the pressure”. Whatever the story, the issue is: virtually none of the saddle company’s have ever performed any scientific research on the pressure under saddle, in order to determine if any of these claims are, in fact, valid. The reason is simple…..they know the saddle tree manufacturers employ no measurement standard, so, even if they were to determine there was a problem with the fit of the saddle, there would be no way to do anything about it. So they bury their head in the sand, say what ever it takes to sell the saddle and hope the problem of saddle fit will go away. However, this situation provides an unparallel opportunity to take over the saddle industry by providing, “THE VALID SOLUTION” TO FITTNG A SADDLE TO A HORSE, that can be proven “OBJECTIVELY” Hold on there a minute, if there is a “valid solution” the “expert saddle fitters” never thought about, how was it discovered? Well, that explanation requires us to step back and understand where, why and how Saddletech was founded. Back in 1987, Robert Ferrand, (see #36 – Inventor on Horse Back) author of this Business Plan, invented a state-of-the-art hospital bed for the treatment of bedsores and pulmonary complications. As part of the hospital bed development, he researched extensively at Stanford University on the Effect of Pressure on Blood Flow in Mammalian Tissue, to better understand how to prevent pressure sores on humans. With this background, Robert approached saddle fitting with a “scientific” perspective and the resources of the Silicon Valley. It was during the bed’s research and development phase, Robert began developing a computer interface pressure mapping system to better understand how the pressure was distributed under the patient. At the same time, living in Woodside, California, premier horse country, he returned to his fascination with horses. However, when Robert went out to buy a saddle, he discovered that no one had a viable method to fit a saddle to a horse. Understanding that saddle sores on horses were caused by the same physiological problems as bedsores on humans, Robert connected the dots. He retired, as Chairman and Director of Research and Development, from the hospital bed company and began focusing his prior skills and research on saddle fitting. In 1992, he founded a new company called SADDLETECH and developed the world’s first computer saddle pressure mapping system and received U.S. Patent #5,379,397. In 1996, applying what he learned decades earlier building boats, he invented the SADDLETECH GAUGE, that measures the polyform shape of the horse’s back and corresponding saddle with angles and arcs, and he received U.S. Patent #6,334,262. This was followed in 1997, by the SADDLETECH SIZING STAND to build measured saddle databases, so that horses could be matched to saddles. In 1999, the SADDLETECH ADJUSTABLE JIG was developed to make traditional western saddles as well as molded plywood bars to SADDLETECH MEASUREMENTS, In 2001, he developed an attachment to the SADDLETECH ADJUSTABLE JIG that permits thermoplastic "ORTHOTICS" (U.S. Patent Application # 60/385,526) to be made to SADDLETECH MEASUREMENTS to compensate for poorly fitting saddles. Once he had a calibrated three dimensional measurement device that could measure the horse as well as the saddle and then be able to test those results with the actual interface pressure exerted by the saddle and rider on the horses back, he discovered the obvious - that GRAVITY is a factor in saddle fit. Virtually, all the current saddle fitting “experts” claim that you place the saddle on the horse and make sure that it fits “EVENLY. While this sounds like a plausible story, Ferrand discovered, by actually “objectively” measuring, that the saddle that APPEARS TO FIT DOES NOT FIT, BECAUSE THE WEIGHT OF THE RIDER CAUSES THE HORSE’S BACK TO BEND JUST ENOUGH TO CAUSE THE SADDLE THAT FIT “EVENLY” WITHOUT THE RIDER NOT TO FIT WHEN THE RIDER MOUNTS INTO THE SADDLE. He invented a mathematical formula that corrects for that error, that can be calibrated using interface pressure measurement for validation. In 2001, he received U.S. Patent U.S.Patent 6,344,262 for this invention. This patent is the subject of the License Agreement attached, that is the critical “Proprietary Technology” employed in this Strategic Reorganization and Modernization Business Plan Needless to say, Robert has a significantly different view of saddle fitting than the “saddle fitting experts” because his research is totally based on an “OBJECTIVE” EVIDENCED SADDLE FITTING METHOD, and that is why the American Saddle Tree Company can provide “THE VALID SOLUTION” TO FITTNG A SADDLE TO A HORSE. This proprietary research is why this plan can execute an effective MARKET TAKE OVER STRATEGY, by providing the saddle industry a significantly better fitting saddle trees as well as permitting compliance with FEDERAL REGULATIONS AND CONSUMER PROTECTION LAW.

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The Saddle Industry’s Achilles’ Heal TODAY, MOST SADDLE MAKERS CLAIM THAT WIRE TRACINGS CAN BE USED TO DETERMINE THE FIT OF A SADDLE THIS IS NOT TRUE, YOU CANNOT JUMP FROM MALE TO MALE TEMPLATES AND HAVE ANY 3-D ACCURACY

MALE TO MALE WIRE TRACING

3 - 1-D TEMPLATES

The prevalent technique of using baling wire or flexible curves to determine the fit of the saddle creates a significant error, because the three points required to determine an ARC are not defined. Remember, High School Geometry 101 – It requires three points to determine an arc. Three independent shapes cannot mathematically determine an arc. You can use the flexible curve to determine the ONE-DIMENSIONAL shape of the contour of the horse’s back in a number of positions down the back and those shapes can be transferred to a piece of cardboard, however THE REALITY IS: IT REQUIRES A FEMALE TO MALE TEMPLATE TO HAVE ANY 3-D ACCURACY

FEMALE TO MALE MALE

FEMALE

Now, building a three-dimensional template that does lock the individual ONE-dimensional cross-sections together so that the THREE-dimensional shape of the horse’s back can be duplicated requires significant skill. The techniques to build such three-dimensional shapes have been well established in the boat building trades, for centuries. This technique is called “Lofting” and it requires precise measurements of the x, y and z axis coordinates for each of the individual parts. Boat builders do use flexible curves to connect the dots, but the dots are precisely measured to establish reference points relative to each other, and that is how the accuracy is achieved.

Even if we assume that all this is done accurately, unfortunately, the shape is incorrect because the effect of gravity caused by the weight of the rider is not considered. This is why a “female” template is required to place on the horse, to be sure that no errors were introduced. Once the accuracy of the female template is established, the male template can be built by using the female template for reference and adjust for the effect of the rider’s weight. Without a method to “double check” the accuracy of the three-dimensional shape, all credibility in this method is lost because there is no reference point or feed-back loop. This is the reason no one actually builds these template, so there is a significant misrepresentation to the consumer that flexible wire has any value in saddle fit. There are some who believe that a plaster cast or thermoplastic sheet draped over the horse’s back is the solution to determining saddle fit. This creates a “mirror image” of the shape of the “Unmounted” horse’s back, which also ignores the effect of gravity. However, this shape does not have any numerical values, so it cannot be calibrated, it cannot be entered into a database, it cannot be mathematically referenced to other three-dimensional shapes. Baling wire, Plaster cast or plastic sheets, do not employ numerical values, so these techniques are useless in the manufacture of saddle trees using 3-Axis CNC Routers, because there are no numbers to drive the computer NUMERICAL controlled router programs. Nonetheless, a number of so called “saddle fitting experts” have jumped to the conclusion that this shape must be the shape of the saddle that fit’s the horse’s back. Unfortunately, the experts have NO “objective” evidence that any of the techniques are accurate. Even worse, a mathematically formula has been invented that defines this error precisely (“262” Patent). So if the saddle consumer follows the “experts” directions the saddle will not fit. In the United States there are a number of Consumer Protection Laws against making such false statements that mislead the saddle consumer into purchasing a product that is not “FIT” for the use intended..

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Federal Regulations and Consumer Protection Law A very significant strategic development in the production of saddle trees will be the impact that Federal Regulations relating to saddle “Labeling” and claims of “saddle fit” will have on the saddle industry. While these Regulations are by in large ignored, today, since this saddle industry represents about $500,000,000 year to the consumer it is likely that the Federal Trade Commission and plaintiff’s attorneys will enforce existing “Consumer Protection” statues, sooner or later. So, in the long run, it best to ride on the right side of the law. As one store owner told Robert, a few years ago, “I know the Saddletech Gauge works, but last week-end I sold 11 saddles, if I had a Saddletech Gauge, I would not have sold any saddles”. While this statement may appear humorous, it is also illegal to knowingly make false statements in order to sell something. Saddle Tree Makers, Saddle Makers, Saddle Distributors, Tack Shops and Saddle Fitters claim they can determine whether an individual saddle will “FIT” an individual horse despite: 1. There is a documentable saddle “product defect” because, in an effort to reduce costs over the past three decades saddle makers have: a. Made English saddle panels incrementally smaller under the rider, causing the “rock” of the saddle not to be able to be adjusted sufficiently to fit the horse, causing “bridging”, and the saddle not to fit. b. Made Western saddle tree bars incrementally smaller under the rider as well making the bars themselves out of 2 inch stock rather than 4 inch stock so that the “rock” and “twist” is less than required to fit the horse, causing “bridging”, and the saddle not to fit. In point of fact, it is mathematically impossible to reduce the surface area and able to reduce pressure. 2. There is NO ACCURATE “Product Labeling” standard to: a. Permit the Saddle Tree Makers, Saddle Makers, Saddle Distributors, Tack Shops and Saddle Fitters to permit consumers to be able to make “value comparisons” so that shape of the saddle could be related to the shape of the horse in order to be able to accurately determine “FIT”. b. Permit the consumer to make “value comparisons” and be able to protect the horse or their financial investment, by determining saddle fit prior to purchase. c. Provide any numerical measurement to determine the three-dimensional shape of the horse, so that the shape of the saddle that would “FIT” the horse could be determined. d. Correct for the effect of gravity of the rider on the shape of the horse’s back, numerically In point of fact, it is mathematically impossible to determine 3-D relationships without numerical measurement. 3. Saddle Tree Makers, Saddle makers and saddle fitters claim that they can determine the three-dimensional shape of the horse’s back by employing one-dimensional line tracing, despite the fact that: a. Saddle makers do not actually build the three-dimensional template, because it takes too much time, which is why no photo of such a device has ever been found. b. Saddle makers do not provide the actual three-dimensional template so the consumer could determine if the “custom” saddle that are purchasing actually “FITS” the horse c. To employ such a method accurately, a “female” template would be required to place on the horse and a second “male” template would need to be made against the first template to then be able to fit the second template to the saddle, which would increase time significantly, so they are never made. d. Even if such a 3D template were constructed, it would be of the “UNMOUNTED” horse and it would therefore be inaccurate because the effect of the riders weight, due to gravitational forces, on the shape of the horse’s back would not have been considered and would not FIT the horse. In point of fact, mathematically, it requires a minimum of three (3) points to define an arc. Testing a one dimensional shape in three places, fails, because the interrelationship between the points are not defined. 1D X 3 is not 3D. In the absence of an actual rigid three-dimensional structure it is mathematically impossible to determine if the saddle, rocks, bridges or “FITS”. 4. Saddle makers claim that their saddle can “reduce pressure”, however they do not actually measure the “interface pressure” under the saddle which would permit: a. The saddle maker to IDENTIFY AND CORRECT THE PRODUCT DEFECTS b. The consumer to immediately see the “Product Defect” or if the saddle fits prior to purchase. c. The horse to be protected from saddle related injury. d. The consumer can avoid purchasing saddle that do not fit. In point of fact, it is mathematically impossible to determine pressure without interface pressure measurement, The U.S. Saddle Market is preying on the ignorance of the saddle consumer, in violation of a number of consumer protection laws. In the absence of any standard of horse and saddle measurement, no one really has any idea whether a saddle does or does not fit. This situation permits the opportunity to take over the saddle tree and saddle market, by providing a solution, that can “objectively prove” the saddle fit. The patented Saddletech Saddle Fitting Method is the critical proprietary technology that permits this market take over strategy.

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Uniform Commercial Code (UCC 2-315) § 2-315. Implied Warranty: Fitness for Particular Purpose: “Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.” Despite all the claims relating to saddle fit, the truth is, without a method of measurement, the saddle customer cannot determine for themselves if the saddle “fits” or “does not fit”, so the saddle customer must “rely” on the expertise of the saddle makers or saddle retailer to choose the saddle. All saddle companies that make such recommendations have “crossed the line” and warranted their products for fitness for a particular purpose. As an example of how the Uniform Commercial Code relates to saddle fit, in 2001 the Orthoflex saddle company was sued for poor saddle fit and the trial was shown on Judge Wopner’s Animal Court. “This Saddle Makes My Horse’s Back Sore”. After hearing the explanations from the Plaintiff, equestrian, and the Defendant, saddle fitter, the Judge ruled that the “product could not be used in the manner it was intended” and the equestrian deserved a refund, for the saddle that did not fit.

Federal Trade Commission Act The Federal Trade Commission Act - Section 5 states, "underlying legal requirement of advertising substantiation - that advertisers and ad agencies have a reasonable basis for advertising claims before they are disseminated… this existing legal requirement that advertisers substantiate express and implied claims, however 8 conveyed, that make objective assertions about the item or service advertised. . Clearly, with no standards of measurement and no "objective" evidence that a saddle does fit, most claims of "saddle fit" constitute a violation of Section 5 of the Federal Trade Commission Act.

Fair Packaging and Labeling Act In the Fair Packaging and Labeling Act. § 1451. Congressional declaration of policy "Informed consumers are essential to the fair and efficient functioning of a free market economy. Packages and their labels should enable 3 consumers to obtain accurate information as to the quantity of the contents and should facilitate value comparisons." Most saddle makers claim that their saddles fit the horses they are intended to be used upon. Most customers purchase a saddle with the expectation that the saddle will fit their horse. Since the saddle industry does not use any unified method of measurement for the horse or for the saddle or any method to "objectively" determine that the saddle really does fit, the current method of saddle labeling and many claims of saddle fit violate a number of statutes in the United States Code of Federal Regulations.

United States Saddle Standard In 1999, Robert Ferrand wrote and sponsored this standard. Abstract: This Standard pertains to saddles. It establishes a "scientific" understanding of the physiological effects of the saddle on the horse. It establishes a standard to determine saddle seat sizes as well as a method of three dimensional saddle measurement of the underside of the side of the saddle. It establishes a method to "objectively" fit a saddle to a horse. It establishes methods to "calibrate" measurement instruments. It establishes requirements for development and coordination, the assignment of design values when called for, and the preparation of grading rules applicable to saddles. It provides for implementation of the Standard through an accreditation and certification program to assure uniform industry-wide labeling and inspection. It defines principal trade terms and procedures to provide a basis for the use of uniform methods in the measurement, grading, labeling, inspection, and description of saddles. It includes the organization and functions of the United States Saddle Standard Committee, the Board of Review, and the National Grading Rule Committee. Commercial names of the principal types of saddles, definitions of terms used in describing saddles and commonly used industry abbreviations. The United States Saddle Standard draft v.1.0 was written to initiate the development of this standard by the United States Saddle Standard Committee in accordance with procedures of the U.S. Department of Commerce. This effort to establish this saddle standard was rejected by all the major saddle making companies. By employing Saddletech Measurement Technology, any Federal or private attorney’s enforcement of Consumer Protection Laws, or adoption of the above saddle standard would provide the American Saddle Tree Company a significant competitive advantage. The truth is the Saddle Industry has run themselves into a legal box canyon, we are just providing a legal escape route, so that they can comply with Federal Regulations, by purchasing “calibrated” American Saddletech Saddle Trees, that permit the saddle consumer to determine the “FIT” of the saddle prior to purchase. A Simple and Easy solution to a serious legal problem, which will permit a market take over strategy and returns 2 to 3 times greater than calculated in this Business Plan.

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Product Line Superior Saddle Tree Company offered the custom saddle maker & saddle manufacturing companies 450 high quality saddle tree styles to choose from. They have many old-time saddle tree patterns that most of our competitors are not privileged to own. Hercules has a duplicate set of these sample patterns. Superior is also the premier manufacturer for the original copies of U.S. Calvary McClellan Army saddle tree that are used by most of the Civil War reenactors. These historical patterns can be adapted to fit modern horses’ back shapes, by employing Saddletech Measurement technology and Saddletech CNC Software. TM

Superiors UltraHide covered saddle tree is the only one of it's kind in the industry today. The UltraHideTM product has taken 3 years to develop and we have an exclusive agreement with the company that produces the UltraHideTM material for us that we are the only licensed company in the saddletree industry to use this material on saddle trees. All of the Saddle Tree Product Line employs the Ultrahide, product. (It should be noted this process is a trade secret, but alternative processes are available.) American Segment Buster –This tree been designed to compete with a high quality tree at a low price against the low-

end tree market for the mass produced saddles. However, unlike competing saddle trees which are made with no quality control, because they are not measured, these trees are “calibrated” to a specific shape so the consumer can determine fit prior to purchase. All these saddle trees are wood covered with TM. UltraHide

TM.

– This tree is made to “traditional” measurements and patterns.

TM.

– Stat – This tree is as above, except it is available immediately for an extra charge.

American Custom UltraHide American Custom UltraHide

All the Saddletech Saddle Trees have the added value of “Calibrated” 3-D Measurement American Saddletech Saddle Tree – This tree is made to the Saddletech Gauge “3-D” measurements. The CNC Router

program changes the twist and rock of the bar to correspond the shape of the horse’s back adjusted for the weight of the rider for a better fit. Since no other saddle tree manufacturer has this capability, this saddle tree can be “market differentiated”.

American Saddletech - Performance – This tree is made to the Saddletech Gauge “3-D” measurements, and in

addition, has the front of the bar hollowed, so that the horse’s scapula can move back unobstructed, for greater performance

American Saddletech - High Performance– This tree is made to the Saddletech Gauge “3-D” measurements, and in

addition, has the front of the bar hollowed, so that the horse’s scapula can move back unobstructed, however, these are interchangeable tree bars and made in sets so the competitor can change the bars on the spot to fine tune the fit. This feature also provides adjustability by changing the shape of the bar.

American Saddletech Tree with Orthotic –

This tree is actually fit to the orthotic and the orthotic is made to the Saddletech Gauge “3-D” measurements to fit the horse. This feature provides adjustability by changing the shape of the Orthotic.

Saddletech – Orthotic –

This is not a tree. This is just the plastic Orthotic made to the Saddletech Gauge “3-D” measurements. This is made for a existing saddle, either English or Western. TM

Duplicate Trees UltraHide

– This is a copy of an existing tree, using the Saddletech Gauge “3-D” measurements.

McClellan & Hope Trees – These are reproduction of old Historic Saddle Trees, once popular be cowboys of the old

west. These trees are built for reenactors and saddle collectors.

Pack Saddles UltraHide

– This tree is a “traditional” pack saddle used for packing equipment for hunters and people TM who camp in the high country, covered in UltraHide

Philip Pack Saddle Redux - This a modern reproduction of a World War II, U.S. Cavalry Phillips Pack Saddle This pack

saddle is made to Military Specifications, and is to be sold to U.S. Army Special Forces, National Park Pack Strings, and individuals they want the best possible pack saddle system available. (This is the Best Pack Saddle Design ever invented to protect the animal)

Saddle Maker’s “Virtual Apprentice” – This is an integrated process, using the Saddletech CNC Software, that cuts all

the leather parts of the saddle, to fit with the specific saddle tree, and provided as a “Saddle Making Kit” to the saddle maker.

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Accuracy adds Value sm The key to improving accuracy is measurement. Currently, the saddle industry really does not have any standard of measurement. The best some saddle makers do is use a piece of flexible wire molded over the wither of the horse. However, if a three dimension template is not constructed that information is useless. Even if a three dimension template were constructed, that would be the wrong shape because it ignores the effect of gravity on the shape of the horse’s, due to the riders weight. Regardless, cardboard, baling wire, or even a plaster cast are totally meaningless to a modern computer numerical controlled routers, that require numerical values to operate. Therein, is the opportunity to dominate the saddle tree business.. The Saddletech System is a method of horse and saddle measurement that includes: 1. The Saddletech Gauge to numerically define the 3-D Measurement of the horse’s back and saddle, 2. The Ferrand Formula to compensate for the effect of gravity using the rider and horse weight, 3. The Saddletech Sizing Stand – to 3-D measure saddles, for database sorting 4. The Saddletech Adjustable Jig to align the “custom” saddle tree at the time of assembly, 5. The Saddletech Computer Saddle Fitting System, to measure the interface pressure between saddle and horse with the weight of the rider mounted in the saddle. 6. The Saddletech CAD-CAM Software, to generate the G-Code tool paths that can drive a modern computer numerical controlled 3 – Axis routers using Saddletech 3-D measurements 7. The Saddletech Static Jig for mass production line assembly of saddle trees.

Measure the Horse

Measure the Saddle

Adjustable Jig

“Objective” Computer Verification of Fit

Employing this measurement technology will permit saddle makers and equestrians to determine the precise shape of saddle required for an individual horse. Stock saddle trees can be measured and chosen for the horse or if none of the shapes are appropriate, a custom saddle can be made to the precise Saddletech 3-D measurements. Integrating this measurement technology with Computer Numerical Control (CNC) Routers twill be permit the company to exploit this market opportunity. No other Saddle tree manufacturer has such 3-axis CNC routers, coupled with an accurate method to measure the polyform shape of the horse’s back and be able to correct for gravitational forces to build a better fitting saddle, thereby providing the American Saddle Tree Company a significant market differentiation and superiority. While employing such measurement has obvious practical as well as marketing advantages, there is a significant upside potential that is not reflected in the financial estimates. This relates to Federal Regulations that have been ignored by the saddle industry in general. These regulations do require “labeling” to be accurate and claims to be “objective”. Currently, the saddle industry sizes saddles with terms such as “Narrow”, “Regular”, “Wide”, “Quarter horse Bars” or “Arab Bars”. These are relative terms and cannot describe a three-dimensional surface much less relate that shape to the actual shape of the horse’s back, so that “FIT” could be determined. So these terms are misleading, this in turn makes any claims relating to the “Fit” of the saddle are at best questionable. By using Saddletech Measurements compliance with Federal Regulations is possible. By employing measurement instruments that include a “Feed Back Loop”, American Saddle Tree Company can provide a “Guaranteed Fit” (as long as all the factors effecting fit remain the same.) This is possible by pricing the product to permit “readjustment” or exchanging the bars themselves. By employing the Saddletech Gauge a good fit can easily be established, however, by additionally employing the Saddletech Computer Interface pressure Mapping System, using the data of the actual pressure exerted by the rider and saddle on the horse, the saddle tree can be placed back on the CNC Router and “fine tuned” to new measurements based on “objective” data or a new bars set can be made. By repeating this process “Saddle Fit” can be guaranteed to the customers satisfaction. By adding significantly greater accuracy permits the profit margins to be significantly increased without the associated increase in cost of goods. There are no saddle tree manufacturing companies in the world capable of competing on this level, with this or any other proprietary technology. PERIOD

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ORTHOTIC SOLUTION – AN UPSIDE MARKET OPPORTUNITY Some people believe that they can get around the problem of saddle fit by using a particular type of saddle pad. Saddle pads can only provide subtle improvements to a saddle that already fits. SADDLETECH RESEARCH HAS PROVEN THAT DIFFERENCES BETWEEN THE SADDLE AND THE HORSE GREATER THAN 10 DEGREES CANNOT BE PROPERLY FITTED BY JUST ADDING A SADDLE PAD, REGARDLESS OF THE CLAIMS MADE BY SADDLE PAD MANUFACTURERS.

The Laws of Physics dictate that regardless of the type of material that makes up the saddle pad that material will become compressed or denser under the weight of the rider. So rather than being softer in the higher pressure areas, the pads are actually denser or harder right where we want the opposite to be true. Unfortunately, until the Laws of Physics are repealed, saddle pads will have a limited “utility” in correcting for poor saddle fit, because the real problem is the difference between the shape of the saddle relative to the shape of the horse’s back, and until that is corrected no pad made of a uniform density material can correct for the discrepancy caused but an incorrectly shaped saddle. THE SOLUTION IS TO CORRECT FOR THE DIFFERENCE BETWEEN THE SADDLE AND THE HORSE WITH AN ORTHOTIC AND THEN FIT THE SADDLE TREE TO THE ORTHOTIC

The challenge to any effort to fit a horse with a saddle, over a number of years, is that the shape of the horse’s back is changing, so any attempt to view saddle fit as a static occurrence is prone to failure. The Saddletech “ORTHOTIC” has been designed from the beginning to be adjustable and replaceable, so that the ORTHOTIC can easily be “refit” to the shape of the horse, or replaced with a new shape, over time. The “ORTHOTIC’ is adjusted to the Saddletech Gauge Measurements and Formula as well as to the Saddletech Computer Interface Pressure Measurements permitting a ‘FEEDBACK LOOP’ to fine tune the accuracy of the fit for that horse, saddle and rider for that moment in time, providing ‘‘EVIDENCE BASED PROOF OF FIT”. The Orthotic is made of PETG thermoplastic inserted below the saddle tree and above an open cell foam and fleece. The plastic itself is flexible. However, that flexibility is dependant on the accuracy of the saddle fit itself. If the saddle “FITS” the Orthotic can flex to some degree. However, if the saddle DOES NOT FIT, the ORTHOTIC must overcome the poor fit of the saddle and is put under stress and cannot flex as much. This “flexibility” can be controlled by shimming the saddle tree to the Orthotic. With an extra set of pockets to hold “bead bag shims” which contour to the difference between the saddle and the orthotic, the balance of the saddle as well as the distribution of pressure on the orthotic is also adjustable - permitting the full use of the material properties of the plastic to flex with the horse’s back. The ORTHOTIC also has the unique feature of “SCAPULA RELIEF”. You will note that the front of the bar has a significant relief to permit the horse’s scapula to move backward without obstruction. On asymmetrical horses this relief can be adjusted asymmetrically. Another unique feature is that there is NO pad material over the withers of the horse. Saddle Pads can apply pressure on the top of the wither by a hammocking effect from the saddle pressing down on the sides of the pad – No Pad / No Pressure. The ORTHOTIC facilitates Saddle Fit Management due to 1. The accuracy of the measurement method, 2. The flexibility of the manufacturing process, and 3. The computer “feedback loop” providing objective validation of saddle fit.

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The Manufacturing Challenge THE GREATEST MARKET OPPORTUNITY IS WORTHLESS, IF YOU CANNOT MAKE THE PARTS. The traditional Saddle Tree Manufacturing process is at best antiquated. However, paradoxically, it requires significant skill to accomplish with any measurable quality. Historically, many early saddletree companies sprang up in the San Francisco Bay Area, in the late 1800’s, to draw on ship builders for employees, because they had the skills to manufacture parts with various angles and arcs. Today, few wooden boat builders or ship builders survive. Modern cabinet makers and house framers, basically work with parts that have 90-degree angles. Therefore, the labor pool, even nationally, for craftsmen that can work with these polyform shapes to make the parts of a saddle tree is limited, at best Superior Saddle Tree Company was fortunate to have a “key man”, Lorenzo, that is such a craftsman. That is the good news. The bad news is there is only one of him! Tim, iwas coming along fast to support Lorenzo, but then what? To make 75 Saddle Trees per day, it would have taken 5 – 8 Lorenzo’s or 15 – 20 Tim’s or 1 “CAD CAM” CNC Work Cell = to make $1,500,000 Gross Income per year. Skilled Labor is the manufacturing challenge. TO ILLUSTRATE THE MANUFACTURING CHALLENGE: to make one (1) saddle tree requires. BAR FORK CANTLE Trace Part – 1 min. Trace Part – 1 min. Trace Part – 1 min. Band Saw – 3 min Band Saw – 3 min Band Saw – 3 min Duplicate – 8 min Duplicate – 8 min Duplicate – 8 min Sand/Finish – 3 min Sand/Finish – 3 min Sand/Finish – 3 min Total time – 15 min. X 2 Total time – 15 min. Total time – 15 min. That is a Total Production Time of about 1 hour to Rough Cut each Saddle Tree. BUT, Here is the bottleneck in the process – ASSEMBLY. Since the parts are only rough-cut, the SKILLED CRAFTSMAN must “FIT” the individual parts to each other and then ASSEMBLE the Saddle Tree A SKILLED CRAFTSMAN can FIT and ASSEMBLE a SADDLE TREE in 20 – 30 minutes. An UNSKILLED CRAFTSMAN FIT AND ASSEMBLE a SADDLE TREE in 60 + minutes. THE MANUFACTURING CHALLEGE IS THE ASSEMBLY PROCESS, because the whole process takes 1 ½ - 2 hours per saddle tree Superior Saddle Tree Company has a significant labor challenge, because of the unusual skills that are required to build saddles trees. You cannot easily find skilled wood workers of any sort, anywhere in the country, much less capable of complex three-dimensional shaping, fitting and assembly. While one may think that such skills can be trained, that is far easier said than done. To make matters even more difficult, due to the remote location of the manufacturing facility itself, a premium price will have to be paid to find any workers with these skills, that will drive such distances. A more serious issue is the inherent DANGERS of working with equipment that has sharp, motorized unguarded blades that can easily sever a hand in a moment of inattention. This is a significant disincentive to any employee as well as a significant liability to the company. Since employees need and want a safe working environment, that traditional methods and technology can not possibly provide. THERE MUST BE A BETTER SOLUTION !

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Production Time Graph

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The “Obvious” Solution is a Trap ! While it is easy to jump to the conclusion that automation is the SOLUTION, it must also be understood that automation can also present a significant problem when adapted to saddle tree manufacturing. The reason for this is: the almost infinite number of permutations of types of saddle tree shapes. Superior has over 450 patterns for saddle trees, if you then multiply by the over 200 different back measurements, determined from the Saddletech Gauge, you find that there are over 80,000 possible combinations. This explains one of the reasons why saddles do not fit horses, and why antiquated technology cannot compete with Saddletech Technology coupled with modern 3-Axis CNC routers. One, two, or three sizes cannot possibly “Fit” all horses.

Current Technology

State-of-the-Art CNC Technology

Automating the manufacture of a single part of one shape is easily accomplished by “digitizing” the part. Meaning that the three-dimensional shape of that part is described “digitally” in the x, y and z coordinates. From this “CLOUD” data set, the router can be programmed to make that particular part. THE PROBLEM is that part has no reference point to other parts or to the horse, nor is it in a language that any saddle maker would understand. The process of digitizing the part, itself, can be as or more laborious, than making the part the old fashioned way. If you need to change the shape to fit the horse, that becomes a significant engineering redesign, but what data is the new shape based upon? So what is the point of automation? As Superior has discovered over the past few years, after spending 10s of thousands of dollars on 3-axis routers and engineers, taking a single bar, digitizing it, duplicating it with CNC routers, and then having to still fit and cantle and fork to the bar DID NOT provide an automation advantage, nor was it cost effective. It was a “TECHNOLOGICAL” TRAP, Why? Because there was no common reference point, that could relate the horse, saddlemaker, the computer program, the CNC duplicator, and the ASSEMBLY JIG. If you have to make and fit a new jig for every new shape then the whole process is no longer cost effective The key to increased productivity is JIGGING the parts, so NO SKILLLED LABOR IS REQUIRED. Once you introduce that the saddle must “FIT’ the horse, into the equation, that “digitized” data set now becomes useless without a method to relate the shape of the horse’s back to the polyform shape of that part and its associated jig. The CNC router cannot provide the cost effective solution, because the router needs a mathematical equation to drive the tool paths, if that tool path has no relationship to the horse, all you can do is make the same shape over and over, and that shape will not “FIT’ the multitude of different horses back shapes, which is the whole basis of the saddle tree manufacturing business, in the first place. The issue is not only to make the parts more accurately and faster, but most importantly to reduce or eliminate the “Fitting” of the individual parts to each other, that “traditionally” requires time and skill. Ideally, the parts should come off the “3-Axis CNC Router” and be able to be dropped into a dedicated “Jig” and “FIT”, period. Employing The Saddletech CAD-CAM manufacturing method a common mathematical reference point permits “unskilled” labor to assemble the saddle trees. . The bars drop into the jig, the glue is applied to the fork and set on to the bars and clamped and the same is done for the cantle. Let the glue set and you pull the assembled saddle tree off the jig – finish sand and it is ready for Ultra-Hide spray. This permits an assembly line process. This new manufacturing method changes the business model and employment strategies. By shifting the complex work to the computer program and computer numerical controlled routers, almost any one could build saddle trees. GREAT IDEA, BUT HOW DO YOU ACTUALLY BUILD SUCH A PROGRAM AND WORK CELL?

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The Saddletech Solution The saddle tree must be of some shape or another, there is no way around it. To be able to program the computer numerically controlled (CNC) routers to cut any shape, you must FIRST accurately describe that shape numerically. While saddle makers refer to a “quarter horse tree”, the truth is such a description is meaningless to everyone, especially the computer, because there are no numerical values associated with the term “quarter horse tree”. The key to improving accuracy is measurement. Measurement requires numbers. What the Saddletech Gauge does is to numerically describe the polyform shape of the horse’s back that is in contact with the saddle. In the illustration, on the left below, you can see a series of pencils on the horse’s back illustrating the saddle contact area, this is exactly what the Saddletech Gauge measures, that permits a common reference point throughout the manufacturing process. (“262” Patent)

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The Saddletech System is a method of horse & saddle measurement that includes : The Saddletech Gauge to numerically define the three-dimensional (3-D) measurement of the horse’s back The Ferrand Formula to compensate for gravitational forces, due to rider vs horse weight, The Saddletech Adjustable Jig to align the saddletree at the time of assembly, and The Saddletech Computer Saddle Fitting System, to measure the interface pressure between the saddle and horse with the weight of the rider, to verify the accuracy of the saddle fit. 5. The Saddletech CAD-CAM Software to build “calibrated” saddle trees, 6. The Saddletech Static Jig for mass-production assembly of saddle trees. PERMITTING A COMMON NUMERICAL REFERENCE POINT THROUGHOUT THE SADDLE TREE MANUFACTURING PROCESS. 1. 2. 3. 4.

Using this “calibrated measurement” technology will permit saddle makers and equestrians to determine the precise shape of saddle required for an individual horse. Stock saddle trees can be measured and chosen for the horse or if none of the shapes are appropriate, a custom saddle tree can be made to the precise Saddletech measurements. The important difference that using Saddletech Technology provides is a common “numerical language” that can relate the shape of the horse’s back to the shape of the saddle tree, so that a computer numerical controlled router can cut the parts, and a jig can be built to assemble those parts accurately, without skilled labor. There is no way to accomplish this complex task, without such a three-dimensional measurement method to relate all the factors throughout the saddle manufacturing processes. (“262” Patent) This technology provides a “Tipping Point Phenomenon” to gain market share and dominate the saddle industry

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The Saddletech CAD-CAM Software The Saddletech CAD-CAM software is a powerful (COMPUTER AIDED DESIGN (CAD) and COMPUTER AIDED MANUFACTURING (CAM) software program, built upon AutoDesk’s state-of-the-art Inventor 10. and EdgeCAM software. It includes the ability to draw in three dimensions, to generate CNC “G-code”, to print both the drawing and the CNC program, and to upload to and download to a CNC 3-Axis Router. The program is a full-featured Windows application. It can paste objects to and from other applications, such as MS Word and MS Excel. DXF format files can be easily imported and exported. Point Cloud information can be drawn by pasting the XY & Z values from a spreadsheet. External programs can generate complex geometry and then paste the objects into the CAD-CAM program. The CAD-CAM program operates with an Object-Action interface, like the popular Microsoft Windows applications.

The Saddletech CAD-CAM software can import an external geometry and build a data file based on these external coordinates. This is a critical feature for this application because the Saddletech Gauge measurement instrument that is used to measure the horse must be the numerical standard for the saddle shape and in turn the G-code for the CNC router’s tool path, which also permits simplified “Jigging” for assembly

Since the mathematical properties of the Saddletech Gauge are established, once the appropriate numbers are entered into the computer program, the “program” can create the coordinate set which is equal to the top surface of the Saddletech Adjustable Jig and creates a “wire frame” that can be the basis for all other calculations. The various properties of the Saddle Tree bar, cantle and fork are then defined in relationship to each other, relative to this wire frame. In this manner a direct relationship between the shape of the “mounted” horse’s back and the shape of the saddle tree “that will fit the horse” can be made or adjusted using the CAD-CAM Program. The tool path geometry will be generated by the Visual Basic program by a series TOP SECRET of macros, that define the shape of the parts of the saddle tree. The parts are defined as Saddletech Gauge Coordinates, Bar Style, Gullet Width, Bar Flair, Bar Size, Bar CrossNEW Section, Stirrup Mortise, Fork Mortise, and Cantle Mortise, as well as additional parameters. Having defined this data, it is entered into the Geometry Calculator screen INVENTION shown below. The user inputs the various Parameters in the program boxes, and clicks the Calculate button. All the geometry required to mill the left and right saddle bars is PATENT calculated and automatically pasted into a Saddletech CAD-CAM drawing. The machinist PENDING then uses the Saddletech Edge-CAM module to generate a working program that creates the G-Code that actually controls the path of the CNC Router. Total manufacturing time to build one saddle tree is expected to be about ten to fifteen minutes, or less, and operated by a relatively unskilled worker, using the TOP SECRET – SADDLETECH STATIC JIG – PATENT PENDING The following is an example of a possible user interface screen, the “Bar Style” may be more appropriate as a dropdown menu or separate screen since there may be as many as 25 different perimeter shapes. This is only a suggested layout.

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SADDLETECH COMPUTER NUMERICAL CONTROLLED (CNC) 3-AXIS ROUTER

PARAMETRIC DATA SET PROOF OF CONCEPT

FIRST “VIRTUAL” TEST 1/27/2005

SADDLETECH GAUGE COORDINATES

FIRST PROTOTYPE CUT - 2 / 7/ 2005

FIRST SCALED BAR SET TEST - 3 / 7/ 2005

HISTORY IN THE MAKING

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Preliminary Roll Out Schedule

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Sales Plan Paradoxically, the American Saddle Tree Company’s immediate sales plan is to increase production capabilities so that Superior’s and Hercules’s original back orders can be fulfilled. Once a sustained production ramp up is underway, the next obvious thing to do is encourage existing customers to increase the size of their orders. The next sales effort is rather simple, Lorenzo Javalera will pick up the phone and close orders from all of the saddle companies that said that they would place thousand unit orders, if the company can deliver. Once the production pace can meet that increase demand, then the first focused sales effort can be launched to significantly increase market share. Fortunately, for the American Saddle Tree Company it will probably take more than one year or more for the company to ramp up to fulfill back orders and the latent demand for its products. In that year period, the Marketing effort should have taken root to create a “PULL THROUGH” demand for the company’s new products, which should significantly improve the sales efforts. This will follow with direct sales to the largest saddle companies to encourage them to shift their saddle tree orders from competitors to American Saddle Tree Company, focusing on quality and cost, which is the simplest method to gain market share. Our initial focus will be on the “Segment Buster” to significantly increase market share with a high quality low cost product – focusing on “PRICE”. This will be followed with a focus on “JUST IN TIME” permitting saddle makers and production facilities to increase response time and adding value to their product. The largest shift in our sales strategy will be with the follow on product focusing on “ACCURACY ADDS VALUESM” with American Saddletech Saddle Trees. As soon as we have the system on line and the “bugs worked out” we will market to our existing customers to shift from one single shape of saddle to actually “Fitting the Horse”. This will permit the saddle companies to increase their price for the saddle for a true “custom fit”, while not changing their production methods. Our focus on this shift is due to the increase margins we can achieve with American Saddletech Saddle Trees that do not cost any more to produce but yield significantly better margins due to the accuracy provided by the method of measurement and the automated CNC equipment. The most lucrative market for the American Saddletech Saddle Tree is “PERFORMANCE”. When barrel racers are winning or losing tens of thousands of dollars based on a fraction of a second. Or a cutting horse, or a reining horse would able to free up the scapula or shoulder to give the animal more freedom, and significantly greater performance that “Saddle Tree” is worth a lot of money. Since Saddletech is providing significantly greater accuracy with the combination of interface pressure measurement, 3 dimensional measurement and integrated CNC 3 – Axis routers, this will be promoted to Equine Veterinarians as “Prescription Grade” trees. The sales efforts for this level of product will be on two levels, a “PERFORMANCE” Model and a “HIGH PERFORMANCE” Model. The difference between the two products is the “PERFORMANCE” model will be essentially the same tree as the American Saddletech Saddle Tree made to Saddletech Gauge measurements, however it will have the additional feature of a calibrated hollow on the front of the saddle, rather than the traditional flair, permitting the scapula of the horse to rotate freely back under the saddle, without contact, to increase performance. Now, the “HIGH PERFORMANCE” Model will have the same features as the “PERFORMANCE” Model, however, the significant difference will be that the saddle bars themselves are interchangeable. So once the measurements the horse are determined, this saddle will be provided with a number of calibrated bars sets, so that the rider can fine tune the performance of the animal, by just changing the bars on the spot. This will be a very lucrative saddle tree, because it will be only available from American Saddle Tree Company, so a significant margin will be associated with the model, because it has very unique features, with little increase in cost of goods. While fitting the horse to the “nat’s whisker” is great for competitors, the vast market of riders are actually trail riders. The feature that is far more important to them is “ADJUSTABILITY”. For a variety of reasons, first, when training young horses, they grow and their bodies change. Just like humans, horse’s backs change as they age. Some people ride a number of horses with the same saddle. Some people change horses. For that we have, the new Performance Models noted above, as well as, the “ORTHOTIC”. This permits the rider to purchase one saddle and then purchase either a new bar set or a new “ORTHOTIC”, to accommodate their changing requirements, without having to buy a new saddle. This assurance will permit them to purchase more expensive saddles than they normally would have purchased, permitting saddle makers greater income. This product has significantly higher margins than the basic saddle tree, because the cost of the plastic sheet is insignificant and it is repeat business, generating 1000s of dollars over the life of the saddle, rather than just the profit that is generated by the sale of a single saddle tree. The final sales effort will be for “GOVERNMENT CONTRACTS”. There is significant use of horses by government agencies. Police and Search & Rescue are obvious. What is not so obvious is the U.S. Border Patrol, U.S. Army Special Forces as well as all the major National Park Trails that are maintained by government pack animals. All of these agencies require superior fitting equipment. Since our measurement capability permits us meet a “Military Specification”, this capability can even permit the Special Forces to fit indigenous animals in hostile territory.

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Marketing Plan – bottom up / top down The Pro Forma Financial Model includes $ 2,000,000, funded out of cash flow, for a sustained world class marketing effort over the next 5 years, to dominate the “horse market & media” to assure that the “Tipping Point Phenomenon” occurs. E-COMMERCE - The first marketing effort will be to establish a fully functioning e-commerce website (see Information Technology) on Netsuite. Since the author of this business plan won Inc Magazine’s 2002 Award for “Killer Application” for a similar Saddletech website, building a mirror web site will be rather straight forward. (visit www.saddletech.com > superior saddle tree company, currently operational, to sample the power of this website. VIDEO - The first level of actual marketing will be to existing customers. We will produce an eduational CD/DVD/Video about this revolutionary new method of saddle tree production. We will highlight not only the accuracy and quality of the product, but also how easily saddle makers can achieve a superior fitting saddle, just by using this new technology. We will focus on the Internet based ordering system, which will permit them to see the “virtual saddle tree” adjusted to their individual specifications, before they buy. We plan to market this CD/DVD/Video directly to our existing customers to increase sales, as well as directly to the largest saddle companies who are currently using competitor’s products. In addition, we will market directly to equestrians to demand our Superior Saddletech Saddle Trees to achieve a “Pull Through” by having this CD/DVD/Video available through our website on the Internet. BROCHURES – A number of brochures will be created highlighting the Product Line, the New Saddle tree making process, as well as price lists. These documents will be provided in Adobe Acrobat pdf files along with the CD/DVD/Video, so that the extraordinary expense of 4 color printing is minimize or eliminated. WHITE PAPERS – Saddletech has already written a number of white papers relating to the technical issues relating to saddle fit. These documents will be provided in Adobe Acrobat pdf files along with the CD/DVD/Video, so that the extraordinary expense of 4 color printing is minimize or eliminated. SADDLE INDUSTRY TRADE SHOWS - In all the years that Superior Saddle Tree Company has been operating it has had $55,000 to $65,000 in back orders. Thus, they have only attended an average of 2 Leather Trade shows a year TM to be able to meet and talk with our customers. UltraHide is so well known, our only reason to continue to attend these trade shows was to assure our customers that we could ship their product on time (sort of) and to keep them up to date on new advances. However, with our increased production capacity and greater accuracy provided by computer automation we will increase trade show marketing efforts, significantly. We will attend the three major Leathercrafters Shows each year. We will put on educational demonstrations, using the 3-Axis routers on site, proving the greater accuracy of the manufacturing method, with the computer interface pressure measurements. This will immediately, ”market differentiate” our saddle trees, because no competitor can meet this standard of saddle tree manufacturing. ROAD SHOW at HORSE SHOWS – There is a significant opportunity to revolutionize the saddle industry by educating Saddle Consumers. While there are many people that lecture on saddle fitting, they are all basically repeating the same old story. More significantly, none of these so-called “experts” objectively prove any of their “saddle fitting” claims using Interface Pressure Measurement. Therein is an opportunity to just take the business away from them, by “objectively” proving that this measurement method can provide a “Superior Saddle Fit”.

This effort will be a scripted, one hour, “Performance” tailored to educating the consumer. This will require a dynamic “Pitchman”, A video/audio technician, a horse handler, and rider and a trained horse or two, as well as a sales team operating the tradeshow booth. Since it is difficult to see saddle fit at a distance, a large screen projection system is required. The video camera can focus on the saddle, and by using a picture in a picture capability; the actual pressure scan of the saddle can be shown at the same time. This “Performance” will drop all saddle companies to their knees, because there is not one Saddle Company in the U.S. that can currently meet this standard. Why, can’t they? They do not have any accurate method of measurement that can correct for the effect of gravitational forces on the shape of the horses back, and they do not have manufacturing method accurate enough to make the saddle tree. So what is the easy solution for the saddle maker? Simple, only purchase American Saddletech Saddle Trees. Duh! These marketing efforts will be directed toward equestrians to achieve a “pull through” to encourage equestrians to demand American Saddletech Saddle Trees, by name. Since saddle customers can easily end up buying three or four saddles, at $1500 to $2000 each, many have been searching for an answer to find a saddle that fits their horse. Our marketing effort will present the story that while American Saddletech Trees are significantly more expensive than “standard” trees, however, if the customer ends up purchasing a number of saddles, sometimes costing more than $5,000, “American Saddletech Saddle Trees are good insurance and a safe way to save money while protecting your horse.”

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ENDORSEMENTS - One aspect of the horse market that is not readily understood is that all the top-level clinicians are for sale for a surprisingly small amount of money, All the equestrian magazines are for sale, for an amazingly small amount of money. So the simple solution is to budget to buy them….and we have done just that.

Top-level spokesman, such as Monty Roberts is available for about $50,000 per year; Pat Parrelli is available for $50,000. John Lyons is hungry these days and can be secured for $25,000. Lesser luminaries are available for $10,000. Therefore, a carefully sequenced $250,000 expenditure over the next three years could totally dominate the equestrian horses shows and media. A significant difference between our endorsement program and others is these big names are backed up by big science. We are not just paying for words from these people, we will teach them the “science” behind the Saddletech Fitting Method, so that they become “Evangelists”, not hired guns. An additional promotional campaign is a year-end financial award for the highest achieving competitors in a variety of classes that use American Saddletech Saddle Trees, such as reining, cutting, barrel racing and western pleasure. A $10,000 Award in barrel racing is a significant amount of money. A $100,000 investment will achieve significant “ink” in the magazines from major magazines as well as the exposure as the various horse how venues. In other venues, we can provide Saddles made with Superior Saddletech Saddle Trees as the prizes. This would provide exposure at horse shows and expositions. EQUESTRIAN MAGAZINES - This marketing effort will include “advertorial” feature stories on the Superior Saddletech Saddle Trees with national and regional journals. While journalistic integrity may exist in the mass media to a greater or lesser degree, in the equine magazine market it is total absent. The deal is simple, you buy full-page ads, and you get feature stories. No ticky - no laundry.

Major magazines such as Equus & Western Horseman have circulations of about 250,000 and charge about $5,000 for each full-page color ad. The second tier Magazines such as Horse and Rider and The Quarter Horse Journal have circulations of 150,000 and charge about $3500 for a full page advertisement. Then there are a multitude of regional magazines which charge $1,000 for a full-page advertisement. Therefore, a carefully sequenced use of a $250,000 investment every year, coupled with the endorsement contract noted above and you can own the entire U.S. horse industry. Pretty good bang for the buck. Since this is the first time that any company will have the measurement instruments and the accurate production equipment that can be tested by computer interface pressure measurement - this will be a story. The trade journals, such as TacknTogs, LeatherCrafters Journal, Saddlery &Harness News, Shop Talk and other will reach the Saddle Industry. In addition, direct marketing collateral material will be sent to major saddle companies supported by a newly designed web site which will feature great interactivity and sales order forms. The “story” starts with the measurement of the horse with the Saddletech Gauge, then shows the step by step process how American Saddle Tree Company converts those numbers to a saddle bar using new CNC, computer automation, and then assembles the saddle tree on the Saddletech Adjustable Jig, then follows the construction of a top of the line Custom Saddle and finally ends up on the horse, measured by the Saddletech Computer Saddle Fitting System. This is BIG news. There are no saddletree companies that have ever accomplished such a production standard. Magazines such as Equus, Western Horseman and scores of regional magazine will bring the news to the customers who have been searching for years for this product. NATIONAL PRESS / PRINT – While the American Saddletech Story is news in the horse industry, the “Story” that is worthy of National Attention is that a health care organization, called the American Indian Prevention Coalition, is enlighten enough to build a matrix of companies to provide career opportunities for the native Americans under their care. The fact that this is an Intertribal Organization only makes the story more interesting to the National Press. This is a good story. It has business, health, technology, and Indians doing something other than “Gaming”..and let us not forget fuzzy horses, who also benefit from this whole process. NATIONAL PRESS / TELEVISION – For the same reasons that the “Story” has value to the print media, it has even more appeal to television. Cowboys, Indians and fuzzy horses, making beautiful saddles and boots, all in the interest of health care, sounds like a good story to me. CLINICAL TRIALS – Veterinarians are high-end market opportunity that requires a higher standard. One method to penetrate this market is by creating a peer-review clinical trial that is suitable to be published in the Journals of the American Equine Practitioners. Saddletech has already written the protocol for such a Clinical Trial. Since many veterinarians do not have the time to read in depth, this Clinical Trial will be documented on video so that a short 7minute overview can be provided along with the one hour version. If the veterinarian wants further information the Published Clinical Trial will also be available on the CD/DVD/Video. This opens the door to “Prescription Grade Saddle Fit”, which would be very very lucrative, due to the greater accuracy required.

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Proprietary Position TM

Superior Saddle Tree Co. has 3-1/2 years of R&D into the UltraHide coating. They have perfected the product for the application to the wood tree, which was not an easy task. The original product advanced polyurethane was not developed for this type of application. It will be years before the formula for the product and its application could TM be figured out. With the agreements they (supposedly) have with the maker of this UltraHide product the potential TM competition is negligible for the time being. As proof that the UltraHide trade secret is relatively safe, over almost a TM decade since the UltraHide introduction, all the major saddle tree companies have tried to copy the product and FAILED. However, it should be noted a trade secret in not a patent and can be circumvented. TM

UltraHide coated saddle trees are (supposedly) covered by an agreement with the manufacture of highTM TM grade material that becomes UltraHide . UltraHide is a registered trade name of the Superior Saddle Tree Co. TM UltraHide is an exclusive product of this company. It would be useful to secure this technology, however, finding a plastic to replace this product should be relatively easy, employing silicon valley technology, Saddletech has thirteen (13) years of saddle fitting research, employing the most sophisticated horse and saddle measurements instruments available in the world – that Robert Ferrand actually invented. Because of this research, Saddletech knows many things that the other saddle companies do not know. This knowledge permitted Robert Ferrand the inventor, and the author of this business plan, to receive #1, U.S. Patent 5,375,397, in 1994 for “CURVE CONFORMING SENSOR ARRAY AND MTOHER FOR MEASURING PRESSURES ON A HORSE. This was followed by #2, U.S. Patent # 6,334,262, in 2002 – GAUGE AND METHOD OF MEASURING ANIMAL BACKS AND SADDLES. These patents are then augmented by #3, a US. Patent that is to be issued in June called SADDLE SUPPORT DEVICE AND ADJUSTABLE FORM JIG AND METHOD TO CORRECT FOR THE VARIATION BETWEEN ANIMAL BACKS AND SADDLES. Currently, a new patent application will be filled for #4 a METHOD TO RELATE CNC TOOL PATHS TO THREE DIMENSIONAL SADDLE TREE ASSEMBLY JIGS. This array of patents provides a unique proprietary position. What is most significant about this array of patents is that they would be very difficult to circumvent because they create a feed back loop that validates the process itself. Case in point, U.S. Patent # 6,334,262, which is the subject of the attached licensing agreement, is not just for the mechanical instrument itself, but includes the mathematical formula to adjust for gravitational forces, as well as the use of interface pressure measurement to calibrate the formula and in turn the gauge to validate the measurement method. This then coupled with the method to manufacture plastic or wooden shapes in accordance with this instrumental would be very difficult to duplicate or circumvent. We are in a very good proprietary position, which is what makes this array of patents so valuable….as well as having access to the inventor, himself, as Interim CEO, is equally valuable to assure the success of the company.

Trade Secrets & Goodwill The Superior Saddle Tree Company and Hercules have been in business in one form or another for 40 years. During that time the companies have accumulated over 450 saddle tree patterns. These patterns are the proprietary shapes that the parts of the saddle tree are made. These patterns represent historic saddle patterns as well as modern adaptations. Some are the ideas of particular saddle makers. While these are essential to making the saddle trees the “Old Fashion Way”, they do also represent a depository a 3-dimensional shapes that can be measured and put into the Saddletech CAD-CAM Software to duplicate these shapes with 3-Axis CNC routers. In May of 1996, Superior Saddle Tree Company in the never-ending quest to build a lighter and stronger TM saddletree, introduced their new UltraHide covered saddletree. After much early skepticism, and even ridicule, the TM UltraHide coated tree is becoming more and more popular with even the most experienced and traditional saddle TM makers. The UltraHide is an advanced polyurethane hybrid coating that was designed to include the desirable qualities of bullhide (strength and flexibility), without the undesirable qualities (rapid deterioration over time, exposure of TM the wood core to moisture through the stitching seams). The UltraHide coating completely seals and waterproofs the TM wood. The combination of the waterproofing capabilities of UltraHide and stability of the material over time allow a TM ten-year warranty to be placed on the tree. The track record of the UltraHide tree is also impressive – there have been NO warranty claims for over 15,000 Ultra Hide covered trees produced since May of 1996. No other saddletree company provides such a warranty. Additionally, the Superior Saddle Tree Company and Hercules Tree Company have customer lists that have been generated over its 40 year history. Obviously the current client list that includes all of the current back order are highly valuable, as well as the clients waiting for the production capabilities to increase. However, even more valuable is Lorenzo Javalera’s relationship with 1,000’s of individual saddle makers as well as mass production saddle companies world-wide. This “Goodwill” will permit the company to achieve impressive growth and to be a production driven company rather than a sales driven company. You build it – it is sold.

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Potential Competition To understand the “Competition” requires some context. Currently, there are no saddle tree manufacturing companies that employ a three dimensional measurement system, that can calibrate the saddle tree shapes to account for gravitational forces, and validate that shape with interface pressure measurement. So, if the criteria is that the saddle must “FIT” the horse, the Reorganized American Saddle Tree Company will have no competition. Nationally - However, that said, if the saddle is NOT required to “Fit” the horse, there is a lot of competition. Without a doubt, the 2000 pound Gorilla in the saddle tree market place is Ralide. The Company claims to be the World’s Largest Manufacturer of Saddle Trees with 50% of the U.S. Saddle Tree Market. If true, it would mean that Ralide produces more than 100,000 saddle trees per year. As their website explains, “Ralide trees are formed in one solid piece, with a rugged, unitized body and a consistent, uniform shape. there are no separate ground seats, horns or cantles. No joints to work loose. No wood to warp, split, mildew or rot. Ralide one-piece polyethylene saddle trees revolutionized the saddle-making industry. Good New – Bad News. The good news the saddles are all the same shape, the bad news is until horses can be breed to match that shape their saddles cannot possibly “FIT”, and are useless for a custom saddle, and thus only used in cheap low-end saddles. However, in the “Custom” Saddle Tree market, American Saddle Tree Company does have a number of significant competitors, from whom we plan to take their market share. Since the saddle tree is only a small part of the cost of the saddle when compared to the leather and the labor, as soon as a measurement standard is used to determine the shape of the saddle it will be increasingly difficult for the major American saddle tree companies to compete with the American Saddle Tree Company with QUALITY. PRICE, SPEED, & ACCURACY. The following three companies are the major U.S. competitors 1.) Ralide. Ashland City Tn. - Production 100,000+ plastic saddle trees per year Injection Molded Plastic Trees Price $89.00 or less each, control the bottom of the market 2.)Steel Saddle Tree Co. Ashland City Tn. - Production 50,000+ units per year Fiberglass covered wood Saddle Trees Price $100.00 each, No Guarantee 3.) Hadlock & Fox Saddle Tree Co. New Braunfels , TX., - Production 50,000 units per year Fiberglass covered wood Saddle Trees Price $89.00 each, No Guarantee 4.) Ritter Saddle Tree Co. Garland TX. - Production 10,000+ units per year Rawhide covered wood Saddle Trees Price $129.00 each, No Guarantee Fiberglass covered wood Saddle Trees Price $98.00 each, No Guarantee By comparison: Superior Saddle Tree Co – Benton, California . Production 3,000 units per year UltraHide covered wood Saddle Trees - Price $175.00 each 10 year Guarantee. Internationally Mexico - While it is difficult to get hard numbers, some estimates are as high as 75,000, maybe more, saddle trees are imported from Mexico every year. By in large these saddletrees are purchased because of price. These saddles are sold between $50 to $75 dollars and in some case even less, in large quanitity. Their Weakness is: while the price is low so is the quality. Mexican tree companies are using equipment that is more antiquated than U.S. Companies and their assembly fixtures are even more primitive. As long as “quality” and “FIT” are not a factor, Mexico will be a significant competitor. Germany - Now we need to keep an eye on Reiser Saddle System – 3-D Equiscan. This is one of Superior Saddle Tree Company’s customers that has recently surfaced attempting to use CNC Routers to make saddle trees. After listening to Frank explain what a good idea CNC routers are, he decided to do it himself. Reiser’s technology employs a wire frame to capture the shape of the unladen horse’s back. They then laser scan the wires, and integrate that with the shape of a laser scanned saddle tree to generate the tool paths. This is a far more “skilled” labor intensive than the Saddletech Method and it does not compensate for gravitational forces, without potentially violating the “262 Patent. Additionally this method cuts the tree from virtually solid wood, which in mass production, this waste, would be prohibitively expensive. Currently, they are not selling trees in the U.S. however, shipping and duty would make it more difficult for them to be competitive. Nonetheless, this is the only saddle tree manufacturer that could even attempt to compete with the Superior Saddle Tree Company. China & India – now these two countries have the potential to really devastate the low-end saddle market. India has been shipping low quality saddles to the U.S. for decades. Fortunately, due to the low quality of the leather, they have had limited success. But, the potential of either of these countries entering the low-end market cannot be ignored, which is another reason to heavily market that “FIT” matters, which will keep these two countries out of the market, because their manufacturing advantage is defeated by the number of permutations required.. However, once “FIT” is considered or Federal Regulations enforced – American will own the Market.

30 30

Information Technology The Reorganized of the American Saddle Tree Company will employ the most sophisticated small business software to operate all aspects of the company, called Netsuite. In point of fact, the author of this business plan: SADDLETECH FOUNDER AND 2002 INC WEB AWARD WINNER, ROBERT FERRAND, HAS BROUGHT THE BUSINESS OF SADDLE FITTING TO THE WEB. “Saddle fitting used to require the horse, the owner, and the saddle maker all in the same room, or stable, measuring the horse, conferring with the rider, and ordering the saddle. Not anymore. Saddletech founder and 2002 Inc Web Award winner, Robert Ferrand, has brought the business of saddle fitting to the Web through the use of a complicated formula and exhaustive database…… From here, the information is fed into an Oracle database that captures an array of information about the horse. Besides fitting horses with orthotics, Ferrand is also collecting data on various types of horses to determine if there's a common denominator between the type of horse and its measurements, so he can embark on another business -creating saddles for specific breeds of horses. As for Ferrand, he has no plans to return to a stable, unless it's his own, any time soon. "My concept for this company is to run it on horseback from Yosemite," he said.” From: Inc.com | November 2002 By: Rebecca Sullivan http://www.inc.com/articles/ecom/24851.html

NetSuite, Inc. is the first and only company to give small and midsize businesses Web-based business applications to run their entire company. With thousands of customers, NetSuite has earned numerous awards for market leadership and innovation from such leading publications as eWeek, CRM Magazine, InfoWorld, PC Magazine, and CPA Software News among others. Customers, analysts and press recognize that NetSuite alone provides integrated front office customer relationship management (CRM), back-office enterprise resource planning (ERP), and ecommerce in one powerful application with the modularity and flexibility to meet your specific business needs. NetSuite gives you a complete view of your company. Real-time Dashboards provide you business intelligence across all areas of your company—from accounting and sales, to fulfillment and support. Stop paying thousands of dollars to manage your business applications. With NetSuite, our integrated application is delivered via the Internet; all you need to do is open your browser, log-on and use the application. As your business grows, NetSuite provides a seamless migration path—allowing you to add functionality and pay as you grow. Please review the website, www.saddletech.com > equestrians > made to measure > calibrated saddle tress > superior saddle tree co to see the Superior Saddletech western saddle tree “order form” already operational using Netsuite. Business Insight Marketing Automation

Customer Self-Service Reporting / Executive Dashboard

Partner Relationship Management

ERP Accounting Features Order Processing Time & Billing Inventory Management Customer Relationship Management Sales Force Automation

Employee Management & Collaboration Employee Management & Payroll Employee Calendaring & Collaboration Web Presence Web Site / Web Store Partner / Vendor Management

Customer Service

Please review the website, www.netsuite.com to review all the features of this software.

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AMERICAN SADDLE TREE COMPANY

Pro Forma Financial Analysis Assumptions World Western Saddle Tree Market is estimated at around 500,000 Units Per Year Pro Forma Market Share is Calculated at a conservative 300,000 Units

Production Schedule This Pro Forma is a Production Driven “Don’t Spare the Horses” Calculation One New Shift every 3 Months & One New CAD-CAM Work Cell every 9 Months To determine resources required to Produce 7,000 Saddle Trees per Month 84,000 Saddle Trees per Year to achieve 25%+ Market Share in 5 Years Using 5 CAD-CAM Modular Production Lines

Product Mix American “Segment Buster” Saddle Trees 25% American “Traditional” Saddle Trees 50% American / Saddletech Saddle Trees 25%

(American / Saddletech Saddle Trees Provide Greater Margins)

Investment $ 1,000,000 Angel Investment Loan Loan Repaid at 7% from Cash Flow over 5 Years + $ 500,000 Lease Line of Credit for the 3-Axis CNC Routers over 5 Years Lease Expense Serviced from Cash Flow $ 2,000,000 Marketing Budget Paid from Cash Flow over 5 Years

Yields Cash Positive in 12 Months at 2.5% Market Share 30 Employees -

First $ 1,000,000 Net Profit in 24 Months At 15% market Share 60 Employees -

$ 20,000,000 Net Profit (before taxes) over 5 Years

$ 12,000,000 - $15,000,000 Net Profit (after taxes) over 5 Years at 25%+ Market Share 75 Employees

20 Times the Original $ 1,000,000 Investment Loan in 5 Years

Pro Forma Income Summary

2010 2009 2008 2007 2005

2006

49,000,000 39,000,000 29,000,000

YEARLY

19,000,000 9,000,000

2009

-1,000,000

CUMULATIVELY

2010

2008 2007

2006 2005

19,000,000 14,000,000 9,000,000 4,000,000 -1,000,000

GROSS SALES INCOME

NET INCOME (LOSS) BEFORE TAXES

Enlightened “Angel” Investment Financing Required This is a unique financial opportunity, with significantly reduced risk, therefore justifying a loan rather than equity investment, because it is a Strategic Reorganization of two (2) 40 year old companies, adding proprietary technology and experienced management. This is not exactly a Start Up. The “production driven”, American Pro Forma Financial Model details how a $1,000,000 Private “Angel” Investment Loan, (repaid from cash flow) plus a $500,000 Lease Line of Credit, over five years, for the acquisition of the 3-Axis CNC Routers and CNC Leather cutting machinery, can yield: cash positive in one year, a NET income of $1,000,000, within 2 years, with a 15% market share. Even better, this plan also permits over $20,000,000 in cumulative NET income before taxes, with a 25%+ market share, within the first five years of operation. This Business Plan provides a 20 times Return on Investment (R.O.I.) Loan over 5 years, if all occurs as planned. Even more amazing, is that there is an up-side potential of 2X-3X times net income, if existing Federal Consumer Protection Laws are enforced. (The full Excel Pro Forma analysis is on the attached CD titled American Pro Forma)

While the author of this Business Plan is from the Silicon Valley and has been involved in large Venture Capital Investments, which is reflected in the quality of this Business Plan, there is more to this Plan than just making MONEY. Obviously, if this were not a sound business venture there would be no reason to fund it. However, one needs to remember the “Mission” of the American Indian Prevention Coalition is Health Care. The enlightened vision is that by building a series of companies, career paths and gainful employment for hundreds of tribal members is possible. This particular market opportunity is more unique, because there is sufficient Cash generated by this Cow, to fund the American Indian Prevention Coalition, itself, and wean the organization from dependence on Government Grants. As an example, included in the Cost of Goods are the salaries for 75 employees providing $10,000,000 over five years, which is a significant benefit, that is not directly reflected in the Pro Forma Financial Statement, that is in addition to the $20,000,000 in net profit before taxes. Therefore, rather than seeking an equity investment, with returns of 15 to 20 times the investment over five years, should permit an enlightened “Angel” Investor to loan Pathfinder Leathers the initial $1,000,000 for Cash Flow to fund the Company in the first year of operations. The Use of Proceeds are detailed below. The Pro Forma Financials do include servicing the loan at 7% interest as well as the initial $250,000 lease line of credit at the same rate. There is sufficient cash flow to service the original $1,000,000 Loan at a higher interest rate, however, obviously a lower rate would be preferred, but the cash flow is there to pay higher rates, if required. Use of Proceeds $400,000 for Cash Flow to fund the Company in the first year of operations $250,000 for Up-Front Royalties Fee for the Proprietary Technology, the U.S. Patent # 6,344,262 $ 50,000 for the purchase of the Assets of Hercules Tree Company of Moab, Utah $ 50,000 for the purchase of the Assets of the Superior Saddle Tree Company of Benton California $250,000 for Contingency Reserves for the Unexpected $1,000,000 Private “Angel” Investment Loan – 7% Interest – Repaid over 60 Months from Cash Flow + $500,000 Lease Line of Credit, over 5 years, for the acquisition of the five (5) 3-Axis CNC Routers

1,000,000

24,000,000

750,000

19,000,000

500,000

14,000,000

250,000

9,000,000

7 1

4,000,000

-250,000

-1,000,000

-500,000

55 58 6 64 37 40 43 46 49 52 1 22 25 28 3 34

NET INCOME (LOSS) BEFORE TAXES

“262 PATENT ROYALTY

Intellectual Property – Brain “Real Estate” The key to the success of this Saddle Tree manufacturing “CAD-CAM Work Cell” is measurement. In particular, three-dimensional horse and saddle measurement, so that the shape of the saddle tree can actually be related to the shape of the horses’ back, and “objectively” validated. To accomplish this task accurately, also requires a method to compensate for gravitational forces, due to rider weight. Further this data must be translated into a (CNC) computer numerically controlled program that can control the 3-Axis routers to accurately actually cut the three dimensional shapes that constitute the saddle tree. The critical Proprietary Technology that makes this Strategic Reorganization Plan possible is the U.S. Patent # 6,334,262 – GAUGE AND METHOD OF MEASURING ANIMAL BACKS AND SADDLES, which is the subject of the attached Licensing Agreement. For obvious reasons it would be in Pathfinder Leathers interest to secure some “exclusive” rights to this technology, not only to modernize the company’s manufacturing methods, but to also prevent other saddle tree manufacturing companies to gain a competitive advantage. To that end, Saddletech is offering a “Limited Excusive” License to employ the U.S. Patent # 6,334,262 to use computer numerically control routers to manufacture western saddle trees. Under this License Agreement (attached below) no other saddle tree company could use this patented technology to manufacture western saddle trees in the U.S. with CNC technology, per the terms of the “Agreement”. Since Superior Saddle Tree Company has already attempted to develop this process, without Saddletech Technology, and failed, it proves that any other saddle tree manufacturing company will face an equally difficult challenge, without using this “262” U.S. Patent. So that there is no confusion, this agreement is “Limited” to the manufacture of western saddle trees using computer controlled routers, using coordinates based on the Saddletech Gauge measurement. This license does permit the use of Saddletech measurement to make western Saddle Trees with molded plywood bars, built on the Saddletech Adjustable Jig, such as Huston Saddlery, has been building for over five years. Since this process is very time consuming, it would not provide a completive threat to the Reorganized American Saddle Tree Company. This ‘limitation” also does not prevent a third party who has the Saddletech Sizing Stand, to measure the saddle or saddle tree “after manufacture” to determine the saddle’s fit. However, since the real profit is in the manufacture of “CALIBRATED SADDLE TREES” to exact measurements, it would be difficult to compete against Saddletech’s CNC Process, by making a saddle tree and then measuring “after manufacture”

Trade Secrets and Goodwill One of the reasons that this Strategic Reorganization Plan can yield such significant returns is that the Superior Saddle Tree Company and Hercules Tree Company are 40 year-old businesses. During the last four decades, both company has accumulated over 450 “proprietary” saddle tree patterns. These are bars, forks and cantles that range from truly historic designs to modern adaptations. While these patterns are critical to the manufacture of saddle trees using the “Old-Fashion” lathes, these patterns themselves can be measured and entered into the CAD-CAM database to be replicated using the 3-Axis CNC Routers. By integrating these historic shapes, with Saddletech Technology, the best of both worlds is possible, providing further “Market Differentiation”. In addition to the patterns and the associated lathes, Both of these companies have also acquired many traditional 3-phase powered machinery used in the lumber mills. These include large heavy-duty band saws with low speed high-torque motors that are necessary to cut thought the large heave 8 by 12 inch timbers that are required to make the forks and cantles. Supporting equipment for sanding and finishing are also part of the equipment required, as well as spray booths and Ultra Hide spray equipment. While this machinery is replaceable it maybe in the companies interest to acquire this equipment for historically and marketing purposes. TM

The proprietary UltraHide advanced polyurethane hybrid coating provides significant market TM differentiation. The combination of the waterproofing capabilities of the UltraHide and the stability of the material over time alls a ten-year warranty to be placed on the saddle tree. No other saddle tree company provides such a warranty. In contrast, other companies either use fiberglass, which is very time consuming, or bullhide, which warps the wood when the wet leather dries. We could circumvent this process, if required, but it would be easier to ride on the existing marketing of this product. Additionally, the associated “Trade Secret” manufacturing processes, developed over the past decade, have permitted the company to sustain the reputation for the highest quality saddle tree available, bar none. As proof, while other saddle tree companies have lowered prices to maintain market share, the Company has been able to raise prices of the years, and still maintain a consistent three months of back orders. These back orders and the saddle companies standing in line with large orders is a goldmine in itself. This “Goodwill” will permit the Company to be “Production Driven” rather than “Sales Driven”, at least initially, giving time for the marketing efforts to increase the demand. Additionally, the trade name of “Superior Saddle Tree Company and Hercules Tree Company have a significant 40 year history, that has always been associated with quality saddle trees

The VALUATION of the INTELLECTUAL PROPERTY The valuation of the “Proprietary Technology” is always the sticky issue. The licensing strategy must be carefully developed to provide opportunity for the company to grow, while also permitting, Robert Ferrand, the inventor of the technology to receive a return on 13 years of horse and saddle measurement research, as well. Using the attached, American Pro Forma Financial Analysis, it is estimated that Gross Sales Income of $50,000,000 yielding around $20,000,000 Net Income before taxes, could be achieved over five years, with just a 25% Market Share. This particular License Agreement has been written for a 20-year agreement, for the full term of the last patent in the series. Understanding that there is a ramp-up lag before such profits could be sustained, the percentage of the Royalty Payment has been adjusted to a sliding scale, to permit the Company greater growth in the early years. The “Limited Exclusive” Licensing Agreement was crafted to permit the Reorganized American Saddle Tree Company to sustain a net profit of around 30% while also permitting the inventor to secure 5% initially increasing to 15% of Gross Sales, as the production of saddle tree increases. This provides the Company assurance that the Production will be facilitated correctly the first time, because the inventor has an incentive, to do it right the first time. This Licensing Agreement is being segregated into four parts. 1. SECURING THE “LIMITED EXCLUSIVITY” Based on the estimate of $50,000,000 Gross Income over 5 years, would require a $6,000,000 Royalty. However, in the interest of growing the Reorganized American Saddle Tree Company, Saddletech is offering U.S. PATENT # 6,334,262 “LIMITED EXCLUSIVE” LICENSE for 20 years for an Upfront Royalty Fee of $250,000 to secure the “Limited Exclusive” use of this technology for the American Saddle Tree Company, subject to minimum performance levels. 2. SADDLE TREE MEASUREMENT THE “SADDLETECH ADJUSTABLE, STATIC JIG” & CNC SOFTWARE The “Key” piece of technology that permits this manufacturing process is the SADDLETECH ADJUSTABLE JIG and the STATIC JIG AND CNC SOFTWARE. This technology is provided under the terms of the licensing agreement as “specified technology”. The licensing fee for the ADJUSTABLE JIG and STATIC JIG is an up-front royalty fee of $10000and a royalty of $1500 per month for the term of the agreement, for each system set required. 3. IMPLEMENTATION OF THE TECHNOLOGY INTO A VIABLE SADDLE TREE MANUFACTURING PROCESS 1. The integration of hardware, software, with proprietary measurement technology is a serious endeavor. To be sure it is implemented correctly the “first time” Robert Ferrand, the inventor of the technology is offering to manage the program on a consulting basis, in the capacity of Interim CEO. Ferrand’s last employment as CEO was at the rate of $125,000 per year. However, in the interest of growing the company, and in support of his “proprietary technology” has will work on a six month contract at the rate of $75,000 per year, to implement the technology and train his replacement CEO. 4. PATENT ROYALTY FEE BASED ON THE PRODUCTION OF SADDLE TREES. In order to further assist the company’s growth, the patent royalty on the production of the saddle trees will be increased only as production increases, in increments of 1%, starting at 5% and capping at 15% of Gross Income. If the Reorganized American Saddle Tree Company is not successful………Ferrand is NOT successful. The following spreadsheet is only an estimate and does not infer anything Actual royalties will be based on Gross Sales Income. MARKET SHARE

TREES PER YEAR

TREES PER MONTH

TREES PER DAY

ROYALTY FEE %

GROSS YEARLY INCOME

ROYALTY FEE ESTIMATED / YR

1% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

3000 6000 12000 18000 24000 30000 36000 42000 48000 54000 60000

250 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

12.5 25 50 75 100 125 150 175 200 225 250

5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

525,000 1,050,000 2,100,000 3,150,000 4,200,000 5,250,000 6,300,000 7,350,000 8,400,000 9,450,000 10,500,000

26,250 63,000 147,000 252,000 378,000 525,000 693,000 882,000 1,092,000 1,323,000 1,575,000

The VALUATION of the TRADE SECRETS AND GOODWILL The valuation of the “Trade Secrets, Patterns and Goodwill” of Superior Saddle Tree Company and Hercules Tree Company is an equally sticky issue. What makes this more difficult is that both of these companies are not really fully functional businesses. Hercules Tree Company effectively, ceased operations October 2004, upon the demise of Jim Parry. On the other hand, the Superior Saddle Tree Company has been deteriorating since the acquisition by the Piute Economic Development Corporation. With Frank Bellavia’s stoke, and his wife, Grace’s focus on his health, there must be serious question about the viability of the company. Once, Lorenzo Javalara, the Production manager leaves, which is imininent, the Superior Saddle Tree Company is effectively out of business. So with that understanding exactly what is the value of these two companies, if we are not even going to use their manufacturing capabilities? 1. SECURING THE “TRADE SECRETS” Hercules Tree Company: Well, it is difficult to assess the “Trade Secrets” if there is no one left to tell us those trade secrets. So it is difficult, if not impossible to place a value on Hercules’s Trade Secrets. Superior Saddle Tree Company: Well, it is equally difficult to assess Superior’s “Trade Secrets”, since Frank Bellavia and Grace are no longer with the company. The most significant “Trade Secret” is the source of the “Ultra Hide” plastic. Now it first needs to be determined that there is a Secret or a Licensing Agreement, in the first place. If there is just an oral agreement between Frank and the manufacturer, that is pretty weak. If there is an actual “Licensing Agreement”, that is more significant. However, the value of the Ultra Hide process is more convenience and marketing. The trade name is known and established. There is a time value to get the operation on-line. That said, there are other ways to perform the same task, using high frequency catalization that might be cheap and more effective. So, there is a value to Ultra Hide, but at time moment I have no idea how to determine that value. 2. SECURING THE “CLIENT LISTS” Over the years, both the Hercules Tree Company and Superior Saddle Tree Company has developed a significant customer list that includes not only saddle makers and saddle companies in the United States as well as the world. Hercules Tree Company: was significantly smaller, due to its higher quality, since the company only sold less than a thousand tree per year, it probably only had 2,000 to 3,000 on the list. Which has some value. Superior Saddle Tree Company: Before Frank’s stroke, Superior had three months of Back orders, as well as a number of companies waiting until the production can be increased, to place large orders. Since Superior was doing 3,000 trees or more per year it may have 5,000 clients on the list. Unfortunately, many of the names on both of these lists are the same names. So the value needs to be corrected for duplication. 2. SECURING THE “GOODWILL” “Goodwill” is a rather vague terms with an equally vague value, however, the Marketing Story” of bringing these two “Sister” companies back together after a tragic story, does have a significant value, that must be considered. 3. SECURING THE PATTERNS Both of these companies copied reportedly 450 patterns and divided them in 1986, from there both sets of patterns were modified and added to the collection. I detailed inventory is first required, it determine any value. That said, the value of these patterns are for historical value and reference. Since with computer-controlled routers, we only need the basic measurements, which can be supplied by the clients themselves or acquired by going to museums. So, these patterns are not really required to start the company, however, they would be a handy reference and would provide a marketing and physiological value to our client base. 4.

SECURING THE SADDLE TREE MANUFACTURING EQUIPMENT.

The manufacturing equipment at both companies needs to be inventoried, before a real value can be determined. The old shop equipment will need to be renovated. Some equipment will have value some will have no value. Since we will be buying new CNC routers, the most valuable equipment would be the Ultra Hide Spray Equipment, however, if it is determined that there is no proprietary position, have value must be adjusted. The bottom line is if the assets can be acquired at a deep discount, there is value. Hercules Tree Company’s Executor has placed a value of $50,000 on the assets. We need to inventory those assets to determine if that is a reasonable price. To be determined. Superior Saddle Tree Company” is in flux, if Hercules is sold for $50,000 that will set the price for Superior at somewhere around the same price. $100,000 for both companies would be a good value.

Management President – To be provided by Pathfinder Leathers Vice President – To be provided by Pathfinder Leathers Chief Operation Officer – To be provided by Pathfinder Leathers

Consultants – Interim Management Robert Ferrand, Interim CEO – was raised in Santa Cruz, California. He started college at Cabrillo College, studying Business Administration. He then went on to study International Business and Marketing at American University in Washington D.C. He then studied Film and Mass Communications at the University of Aston in Birmingham, England. After traveling around the world, he returned to the Silicon Valley, and took the unusual step of study boat building, which provided him a unique understanding of how to improve the production of saddle trees. He then was commission to build a wooden respiration. This original research lead to the invention of a state of the art hospital bed, which included 12+ patents and a $16,000,000 venture capital back company. After retiring as Chairman and Director of Research and Development. He spun-off Saddletech with the basic research he employed the development of the hospital bed, and has received an additional three patents relates to horse and saddle measurement. Lorenzo Javalara, Interim VP of Manufacturing– He was schooled in Colorado. At the age 16 went to work on a horse ranch and ended up operating the ranch itself. He joined Superior in 1992 hired by the previous owner. He started at the bottom cutting parts and evolved over the past thirteen years into managing all aspects of saddletree production. He has continued to study the evolution of saddle tree, and has developed a high reputation amongst the best saddle makers in the country. Over the past 13 years, Lorenzo, has trained many craftsman, he has the ability to facilitate the training of the production staff which will be in significant numbers. This “Experienced” team provides a Turn Key Executive Staff to insure the success of this Strategic Reorganization and Modernization Business Plan and be able to train Pathfinder Leathers staff to replace them.

ROBERT FERRAND – INVENTOR ON HORSEBACK Robert Ferrand remembers two pivotal events, when he was ten years old. The first, was in a barn with the smell of horses, hay and saddle leather and this began his fascination with horses. The second, was aboard the Sailing Ship Balclutha, with the smell of Stockholm tar and the sea, and there his maritime career began. However, it would take another thirty years before he could reconnect with horses and rocky trails….and therein is the tale of how he developed the skills to solve the ancient saddle fitting challenge. After studies at American University in Washington D.C in the late 1960’s and traveling overland from Europe to India, working as a photojournalist, Robert took the unusual step of studying the art of boatbuilding. During these years he learned how to design and build three-dimensional boat hulls using lightweight wood construction techniques, which he would later apply to medicine and saddle fitting, this also permitted him to become an accomplished wood craftsman. By a stroke of luck, in 1977, Robert learned that David Crosby and Graham Nash of the rock band Crosby, Stills, & Nash wanted to build a respirator to take a friend, who had been confined to an Iron Lung for twenty-five years, sailing on David’s yacht Mayan. Robert, accepted the challenge and designed and built a Superlight Wooden Lung. During this research, he took another unusual step and rather than using the bellows which were used on the antiquated Iron Lungs, he used a newly developed Apple I I computer to control the air valves that adjusted the respiration. At the same time, he learned that people confined to Iron Lungs usually develop bedsores, so he added a computer controlled air mattress to the design. David and Graham lost interest in this project, but Robert continued the research at Stanford University on the Effect of Pressure on Blood Flow in Mammalian Tissue, to better understand how to build a system to prevent pressure sores on humans. In the late 80’s, Robert discovered a $500,000,000 rental market for high-tech hospital beds, in the U.S.. Furthering his research, Robert went out and asked nurses what they needed to provide better care, and designed and personally built a state-of-theart computer controlled plastic hospital bed. This bed 1. stood up, so patients could walk out, 2. tilted side to side, to reduce and treat respiratory complications, 3. had an articulated hip section, so nurses did not need to lift the patients, and 4. had a computer controlled air mattress for the prevention and treatment of bed sores. In 1987, he founded American Life Support Technology, and secured multiple rounds of venture capital funding of over $16,000,000 from Allstate Insurance, Hambrecht & Quist, Montgomery Medical Ventures, Humana Hospitals and Vencor Hospitals. Since then, Robert has received over a dozen patents for this Patient Support System. It was during the bed’s research and development phase, Robert began developing a computer pressure mapping system to better understand how the pressure was distributed under the patient. At the same time, living in Woodside, California, premier horse country, he returned to his fascination with horses. However, when Robert went out to buy a saddle, he discovered that no one had a viable method to fit a saddle to a horse. Understanding that saddle sores on horses were caused by the same physiological problems as bedsores on humans, Robert connected the dots. He retired, as Chairman and Director of Research and Development, from the bed company and began focusing his prior skills and research on saddle fitting. In 1992, he founded a new company called SADDLETECH and developed the world’s first computer saddle pressure mapping system and received U.S. Patent #5,379,397. In 1996, applying what he learned decades earlier building boats, he invented the SADDLETECH GAUGE, that measures the polyform shape of the horse’s back and corresponding saddle with angles and arcs, and he received U.S. Patent #6,334,262. This was followed in 1997, by the SADDLETECH SIZING STAND to build measured saddle databases, so that horses could be matched to saddles. In 1999, the SADDLETECH ADJUSTABLE JIG was developed to make traditional western saddles as well as molded plywood bars to SADDLETECH MEASUREMENTS, (using the technique he used twenty five years earlier to build the Wooden Lung). In 2001, he developed an attachment to the SADDLETECH ADJUSTABLE JIG that permits thermoplastic "ORTHOTICS" to be made to SADDLETECH MEASUREMENTS to compensate for poorly fitting saddles. Currently, Robert is developing a computer program to permit computer controlled routers to cut western saddle trees to SADDLETECH GAUGE MEASUREMENTS, using his new SADDLETECH GAUGE Mk II. Robert, and his trusty steed Ace, hail from the Silicon Valley, so there is a good reason he has a scientific perspective of saddle fitting. By employing what he had learned decades ago from the medical and maritime industries; Robert has been able to provide the Equestrian community the first Evidence Based Method to fit a saddle to a horse, and the horses are all the better for the effort. Ferrand ain’t no cowboy, but he does ride

2995 Woodside Rd. Suite 400, Woodside, CA 94062 Phone 650 - 631- 8400 E-mail â&#x20AC;&#x201C; inventor@saddletech.com WWW.SADDLETECH.COM

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