(www.yachtstore.com)

“The definitive source for all things yachting”

Executive Summary

Confidential

May 5, 2000

For more information or additional copies, contact:

Michael W. Halstead
Yachtstore, Ltd.
P.O. Box 1085
New Canaan, CT  06840

(203) 972-6300
Fax:  966-1621

Mwh@yachtstore.com

http://www.yachtstore.com

©2000 Yachtstore Holdings, LLC  All Rights Reserved
DO NOT COPY THIS DOCUMENT

Note to Recipients

Information in this document is subject to change without notice and does not represent a commitment on the part of Yachtstore, Ltd. and Yachtstore Holdings LLC (“Yachtstore”).  This document contains business plans, marketing plans, logos, trademarked items, and other proprietary information which is the property of and confidential to Yachtstore.  All trademarks are the property of their respective owners. This Confidential Descriptive Document (the “Document”) contains information regarding the operations and business of Yachtstore and Yachtstore.com (collectively, “Yachtstore” and the “Company”).  This Memorandum is provided solely for purposes of allowing potential investors the opportunity to determine whether they are interested in collaborating with, or investing in, the Company.

The recipient of this Memorandum agrees by its receipt (1) not to copy or disclose any of its contents to third parties without the express written consent of Yachtstore except as required by law, (2) to restrict the use of this information to those people within their organization who need to have such information in connection with their analysis, (3) that recipient recognizes this Memorandum contains material information concerning the Company and its future prospects that has not been publicly disclosed and that the use of material inside information with respect to an issuer in connection with transactions in the securities of an issuer is restricted by law and (4) to return the Memorandum (along with any other documents which may be provided) promptly to Yachtstore, either upon Yachtstore’s request or if a decision is made not to continue discussions further.

Except for the information contained herein, no person has been authorized to make any representation or give any information with respect to the Company or any offered securities.  Prospective strategic partners should not rely on information not contained in this Memorandum and exhibits hereto.

Recipients are not to construe the contents of this Memorandum as legal, business or tax advice.  Each prospective strategic partner should consult its own attorney, business advisor and tax advisor as to legal, business, tax and related matters.  Neither the delivery of the Memorandum (at any time) nor any sale made pursuant hereto shall imply that information contained herein is correct at any time subsequent to the date set forth on the cover hereof.

The statement, estimates and projections as to future revenue, expenses and results of operations of Yachtstore Holdings LLC, Yachtstore, Ltd. and Yachtstore.com contained herein are based upon information provided by the Company.  The projections of future financial and operating performance have been provided to assist in an evaluation of the future of the Company, but are not to be relied upon as an accurate representation of future results.  Furthermore, because the projected financial information is based on estimates and assumptions about circumstances and events that have not yet taken place and is subject to variation, there can be no assurance that the projected results will be attained.

All communications, inquiries and requests for information should be directed to Yachtstore, Ltd.  at the address set forth on the title page, marked to the attention of Michael W. Halstead and/or Paul M. Madden.

			

"Clearly, a showdown is brewing 
between the old world and the new"

May 3, 1999 article on Yachtstore in FORBES MAGAZINE
Entrepreneurs/Up&Comers 

1.0	EXECUTIVE SUMMARY

1.1	Yachtstore
Yachtstore (Holdings) LLC (“Yachtstore” or the “Company”) is building the premier e-commerce gateway for the purchase, sale and charter of yachts as well as value-added content and information geared to the yachting market and the yacht brokerage industry.  The Company is positioning  www.yachtstore.com as the comprehensive site for global yachting market participants in the high-end, pre-owned boat market by providing a comprehensive array of brokerage, listing and auction services to facilitate commerce in this highly fragmented, multi-billion dollar market.  

Yachtstore represents the marriage of the “first mover” in selling and chartering luxury boats on the Internet and one of the world’s leading names in conventional yacht charter and brokerage. The Company has brought its own “clicks and mortar” strategy to the yacht brokerage business through its recent merger with Edmiston & Company (“Edmiston”), a premier European yacht broker with operations in London and Monaco.  Edmiston brokered approximately $60 million of yacht sales in 1999 and represents the flagship brand for the Company’s traditional yacht brokerage segment.  More recently, Yachtstore has agreed to acquire yacht management and brokerage company, Palm Beach Yacht Group.  The Company will leverage the strong market presence created by this rollup into its online brokerage business by building a proprietary online, global brokerage for boats of 30’ and greater.  This will enable Yachtstore to quickly become the premier yacht charter and brokerage business worldwide through intelligent and innovative application of Internet efficiencies to this highly fragmented industry.  Yachtstore will apply the leverage of the World Wide Web and aggressive and innovative technologies and marketing techniques with an unmatched “on the ground” delivery and service capability.

Through a considerable network of strategic partnerships, Yachtstore offers a broad and growing range of yachting-related services, including yacht charter (crewed and bare boat), yacht management, purchase financing and insurance.  The Company is implementing branding initiatives built around its partnerships with Bob Saxon Associates and others, mainly the proprietary “Five Star Fleet” line of charter boats, as well as a line of private-label merchandise and sponsored yachting events.   The Company also has exclusive “click through” cross marketing and revenue sharing arrangements in place with i-cruise.com, aircharter.com and in the works with the USA’s leading marine retailer, West Marine Products, in the areas of yacht charter and brokerage. 

Yachtstore is more than another startup Internet boating “portal.”  For five years, the Company has been engaged in the charter and sale of luxury yachts over the Internet and has achieved proof of concept in both high end sales and charter. In recent months, Yachtstore has chartered a 172 foot yacht in the Mediterranean to a Texas family for over $150,000 and has sold a catamaran to a Canadian software developer for just under $800,000.  Yachtstore’s management team includes both Internet entrepreneurs and successful boating industry executives and has an exceptional depth of experience in areas that will be key to the company’s success. 

1.2	Yachtstore Strategy
Yachtstore is now in the process of expanding its business into a global Internet "trading community" and “vertical hub” with a sharp focus on the high end of the boating and leisure travel industry.  Yachtstore will achieve this using various proprietary marketing and sales initiatives, e.g. The Five Star Fleet, Yacht-TV and Web-based business-to-business, business-to-consumer and consumer-to-consumer sale of new and used boats and other marine equipment and supplies over the Internet. Yachtstore has devised an impressive array of listing services, innovative consumer-to-consumer (“C2C”) online auctions and marketing techniques with which it will surround its traditional brokerage operations to build a full-service, vertical transactional hub to address all segments of the yacht brokerage market.  The Company’s site will broadly facilitate the B2B, B2C and C2C segments of the brokerage community.

1.3	Yachtstore Core Business Initiatives:  Sales and Charter
Yachtstore’s greatest business opportunity and area of highest priority lies in the sale of new and used boats. Yachtstore will disintermediate a substantial portion of the world's multi-billion dollar boat brokerage business and participate, on a 24 hour per day/seven days per week basis, both in the business-to-business area of yachting and the consumer-to-consumer segment of the marketplace where the vast majority of used boat transactions occur. Yachtstore’s mission is to attract and provide access to the largest number of buyers and sellers worldwide and put itself in the middle of each sales transaction by facilitating all facets of the purchase and sale process. This will include delivering detailed and comprehensive information on the best available boats and supplying a variety of value-added services, such as financing, insurance, escrow services, broker-assistance, boat transport and power-train warranty.

In addition to its core brokerage and sales business, Yachtstore will exploit important ancillary markets where new entrants to the boat-owning population are found: yacht charter and fractional ownership.  Through its industry experience and contacts and extensive research, Yachtstore has identified new categories of yachts that will expand the high end boating market by making charter and ownership economically viable for the owner/investor and user-friendly for the wider, virtually untapped group of upscale consumers who currently spend their leisure time and money elsewhere.

1.4	Additional Opportunities
Yachtstore intends to develop a number of business opportunities logically connected to its core yacht sale and charter businesses. Through a considerable network of strategic partnerships, Yachtstore offers a broad and growing range of yachting-related services, including yacht management, purchase financing and insurance.  The Company is implementing branding initiatives built around its partnerships with Bob Saxon Associates and others, mainly the proprietary “Five Star Fleet” line of charter boats, as well as a line of private-label merchandise and sponsored yachting events.  The Company also has exclusive “click through” cross marketing and revenue sharing arrangements in place with i-cruise.com, aircharter.com and one in late stage discussions with the USA’s leading marine retailer, West Marine Products, in the areas of yacht merchandise, yacht chandlery and provisioning and yacht charter and brokerage.  Other opportunities include  live auctions of “mega-yachts,” sale of fractional yacht ownership, customized boating-related electronic content and consumer information and data aggregation.
1.5	The Market For Yachtstore’s Products and Services
As a result of two decades of global prosperity and a strong bull market, most segments of the boat market are in the midst of a dramatic upsurge in interest and participation.  The baby boomer generation has turned its considerable disposable income to active lifestyle-oriented activities such as boating.  In 1997 (the last year for which data is available), over $10 billion of used boats changed hands worldwide.  According to Boating Industry International, $5.3 billion worth of broker-listed inventory is presently listed in the leading multi-listing databases.

Yachtstore is targeting the upscale consumer (78 million in the U.S. and an estimated 120  million worldwide) who participates in boating.  According to market research, the typical cruising yachtsman is 50 years and has a college education and a median income of $134,000.  A separate but related market is the affluent consumer of high-end luxury vacations, who frequently uses the yacht charter as a “stepping stone” to the purchase of a yacht.  A third market is the many high end consumers who presently enjoy other leisure options but may well consider yachting once it is demystified and made more accessible and user-friendly.  These various segments have considerable disposable income and are Internet savvy.

Unlike mass consumer items, the charter and sale of yachts requires experienced, credible and competent personnel to service its discriminating clientele and help them handle what in many cases are relatively sophisticated transactions.  For this reason, Yachtstore is pursuing a “clicks and mortar” strategy of acquiring and/or joint venturing with complementary leading yacht brokerage, charter and management businesses, creating new efficiencies between the same and leveraging the whole through the power of the Internet.  Yachtstore’s management has targeted key brokers and marketing organizations in each important global market to become Yachtstore “franchisees,” serve as a source of valuable local market intelligence and extend Yachtstore’s “Five Star” services to its customers on a local basis.  This exclusive network of the world’s best brokers will create a formidable barrier of entry to others desiring to enter the high end yachting space.

And unlike many Internet startups, Yachtstore’s existing and rolled up “bricks and mortar” components make it a viable business proposition from day one, creating positive net returns for investors even before the scaling and leverage of the Internet take full effect.  Yachtstore’s core business is built upon its five years of experience combined with that of Edmiston & Company, an existing yacht brokerage and charter business with $60 million in annual sales. With its proven Web domain expertise and extensive industry experience and key strategic partnerships and acquisitions, Yachtstore will quickly establish itself as the definitive vertical “hub” for high-end boating ecommerce. 

1.6	Competition
The Company’s competition is categorized into two principal segments: (i) traditional (i.e., offline) yacht businesses that are trying to access incremental business growth through the Internet, and (ii) Internet opportunists that are trying to apply the e-commerce template to this fragmented market.  As will be discussed in more detail below, Yachtstore enjoys several important points of difference that will ensure its success in what is quickly becoming a crowded field. 

1.7	Business Strategy and Marketing Plan
The three cornerstones of Yachtstore’s business strategy are a) its focus on the upper end of the boating and recreation market, b) its preemptive “clicks and mortar” strategy, and c) its strategy to capture market share through a number of aggressive marketing and multi-faceted ecommerce techniques. Yachtstore will participate directly in search engine positioning, banner-promotions and direct e-mail solicitations with the major listing services. It will also utilize innovative commission structures to attract traditional brokerage boat inventory, and it will employ a customer-focused, user friendly approach and a host of convenient, value-added features that will attract consumer-to-consumer transactions to its site. Yachtstore’s branding efforts will be assisted by utilization of one or more high profile celebrity spokespersons (e.g., Lauren Hutton), key strategic relationships with other high-traffic Internet sites and selective high-profile advertising placements and sponsorship positions. To attract and maintain a large community of boating enthusiasts and aspirants (and, in Internet parlance, make its sites “sticky”), Yachtstore is introducing “Yacht-TV™,” the yachting world’s first and only streaming video Internet “TV network,” and “YachtWire™,” a WAP based wireless information service that will deliver customer specific yachting and other information to Yachtstore’s customers.

Yachtstore caters to a very specific upscale market segment and will make effective use of carefully targeted and highly-focused advertising and promotion combined with the leverage of the Internet and its key strategic co-marketing relationships.  As a result, it will not have to spend massive amounts of advertising dollars to brand itself and suffer the astronomical “burn rates” required by Internet startups targeted at a more mass market.  Moreover, Yachtstore’s position at the crossroads of this area of upscale consumer and business activity will make it an attractive advertising and promotional venue for companies whose goods and services are targeted at the upscale consumer, and this will allow Yachtstore to accumulate valuable marketing and statistical information on this group.

1.8	Strategic Alliances
Yachtstore is establishing ecommerce links and co-ventures with various marine industry category leaders and complementary upscale sites to extend its brands and reach and to be able to deliver the highest quality products and services to its customers.  

Current partners:

•  Bob Saxon Associates, a leading yacht management company with over $750 million of yachts under contract, will form the nucleus of Yachtstore’s Five Star charter fleet and provide management expertise to Yachtstore’s clients.

•  i-cruise.com, the Internet’s premier cruise ship portal, will provide Yachtstore with home page banner ads and work exclusively with Yachtstore in its product and service category.  A “yacht charter” option will appear on the home page of the i-cruise.com site that will refer i-cruise visitors directly to Yachtstore.  I-cruise has an aggressive PR and advertising campaign underway that is generating 1 million visitors per month.  Yachtstore will also provide an i-cruise option on its web site and share equally any commissions on cruise ship business referred to i-cruise.

Partners in late stage discussions:

•  Ganis Marine Finance, Ganis Credit Corporation (www.ganiscredit.com), a division of Deutsche Bank, is one of the major national providers of credit to finance the purchases of yachts. Ganis has agreed to enter into a marketing alliance for marine credit to Yachtstore’s customers as well as related escrow and documentation services, for which Yachtstore will receive a selling commission.

•  West Marine Products, the world’s largest marine retailer whose 240 retail outlets generate a half billion dollars in annual sales from 7.5 million walk-in customers.  As part of the relationship under discussion, West Marine will cross advertise and promote with Yachtstore, develop and market co-branded products and serve as a back office delivery mechanism for a broad array of marine products and services.  Yachtstore and West Marine are also considering installation of Yachtstore “mini brokerages” in West Marine retail locations.

•  i3 Mobile, the leading provider of wireless information services, and Yachtstore are discussing a relationship in which i3 will serve as the service provider for a YachtWire WAP-based wireless information service to be provided for free to Yachtstore customers and jointly marketed to others.

1.9	Management and Staffing
Yachtstore brings together a seasoned management team with a variety of professional experience from within and outside the yachting industry. Yachtstore was founded by Co-Chairman and COO Paul Madden, who has 25 years of experience as a sailor, yacht broker and consultant to some of the world’s largest yacht brokerage operations.  President and CEO Michael Halstead brings 26 years of experience in television and event management and marketing and overall corporate management as a senior executive at Mark McCormack’s International Management Group (IMG) and as founder and CEO of Sports & Company.  Nicholas Edmiston, Co-Chairman and Head of Worldwide Brokerage, is the founder and managing director of Edmiston & Company, which recently merged with Yachtstore and former managing director of Camper& Nicholsonsand contributes his 30 years of yachting business experience with some of the world’s leading brokerages.  CFO, Steve Ward, has 27 years of experience as a senior financial and human resources executive for Fortune 500 companies.

Yachtstore’s management team has experience in all areas vital to the Company’s success, including overall corporate management, corporate strategy, media, technology, finance, consulting, consumer marketing, licensing, distribution channel management, yacht brokerage, production boat manufacturing and marketing, Internet business development, webcasting and database analysis.  Yachtstore has also assembled a network of experienced representatives and brokers to service its clientele and a family of consultants and vendors committed to its long term success. Yachtstore will continue to build out its team with appropriate players as it realizes the various stages of its business plan.

In summary, Yachtstore’s  success will be built upon:

•	Preemptive Web first-mover advantage at the top end of the marine business
•	A strong foundation of boating industry experience and relationships
•	Innovative market-making ecommerce transaction techniques 
• 	Blending Internet  leverage with bricks and mortar credibility and capability by creating a global network of Yachtstore brokerages
•	Utilization of state-of-the-art information delivery technologies
•	Innovative video content, and other community building information services
•	Creation of new value-added goods and services for yacht owners/renters

1.10	Financial Summary

The Company (pro forma the merger of Yachtstore, Ltd. and Edmiston) expects to generate approximately $8 million of revenue in the fiscal year ending March 2001 and expects to ramp up its revenue substantially and achieve profitability beginning in FY2002, as shown below: For more detail see Section 14: Financial Overview. 

Yachtstore Holdings Ltd  2001-2003  Financial Projections (FY ending March)					
		($ in thousands)			
	2001	2002	2003		
Revenue					
Brokerage Revenue	 $       6,228 	 $     12,731 	 $     19,800 		
Other	1,970 	8,719 	21,660 		
Total Revenue	 $       8,198 	 $     21,450 	 $     41,460 		
					
Operating Expenses	$9,271 	$13,336 	$16,298 		
					
Operating Profit	 $      (1,073)	 $       8,114 	 $     25,162 		

1.11	Funding Request and Investor Exit Strategy
Based on first round “friends and family” investments and its operating history (and the mergers with Edmiston & Company and Palm Beach Yacht Group), Yachtstore currently enjoys a “pre-money” valuation of $35 million.  This valuation is being enhanced on a daily basis through the buildout and enhancement of Yachtstore’s web site and ecommerce mechanisms and formation and exploitation of a number of key strategic partnerships. The Company is currently raising $15 million through its first institutional offering.  The bulk of these funds will be devoted to key strategic acquisitions and the balance towards build out the transactional aspects of its Internet infrastructure and to fund a number of early branding and marketing initiatives with its various strategic partners. This and subsequent investments will be used to gain substantial market share, entice new customers to yachting and establish Yachtstore as the world’s premiere transactional portal for high end boating with the ultimate objective of a successful Initial Public Offering or possible acquisition by a larger marine industry or Internet company. New York based Technology Partners, an Internet merchant bank and advisor to Yachtstore, is leading the current institutional offering (contact:  Porter Bibb, e-mail: pbibb@excite.com, tel: (212) 759-3022.