Animal - Racehorse Trainer/Facility

Executive Summary
The Company

Ereidi Farm began as a home-based part-time endeavor while the owner raised her young child.
Her many years in the industry made her well suited for the services offered by the farm. Ereidi
Farm functions as a quality thoroughbred breeding and training farm specializing in highly
individualized care programs designed for each horse's needs. Ereidi Farm has always focused
on its clients and their equine investments and genuinely enjoys assisting clients.
Our committment to our clients is long term, our focus has never ended at the point of sale - we
are absolutely committed to the success of our clients and we go above and beyond the normal
practices when providing our clients with all the information they require to make knowledgeable,
informed decisions concerning their bloodstock investments. Due to the demand for our
services, our farm is planning on relocating to a larger facility and is now in the process of
incorporating to better facilitate the accounting end of the business management.

The Product

Ereidi Farm provides the following services to its market: breaking and training of young
racehorses, broodmare care, and rehabilitative care for injured racehorses. Our programs are
individualized and no horse is pushed through a program just to get the job done. Horses
graduating from our programs are confident, fit, healthy and relaxed about the work, they are
winners!! We offer exceptional care for pregnant and foaling mares. We will except high-risk
mares - our farm has had a 100% live foal ratio every single year despite foaling out older and
problem mares, we take very good care of these special ladies! Our rehabilitative services have
horses from all states of the region arriving at our farm for post-operative work and therapy.
The thoroughness of our care insures that these athletes recover completely with minimal
complications. All of the horses rehabilitated by the farm have gone on to useful careers, many
returning to racing and running in improved form. Our home-grown sales reflect the owner's
knowledge of equine genetics; horses from the farm's breeding program have won races at their
very first asking and have posted bullet works in training. They are bright stars and have done a
fabulous job representing the farm and their owners. Most importantly we provide "Full Circle"
service for our clients. Our committment to their success is long lasting and at a depth not found
in the racing community at large. Their success is our success and we are deeply aware of this
need within the industry.

The Market

The thoroughbred industry continues to grow in the United States. The racing industry within the
state of Pennsylvania is poised for an explosive period of growth within the next year as slot
machine legislation is approved and passed. The demand for Pennsylvania-bred horses is on
the rise as is the need to raise and train these individuals. Pennsylvania is focused on becoming
the premier racing state in the country, surpassing all other states in its purse and bonus monies
awards, this is attracting large numbers of horses to Pennsylvania and the need for facilities to
house them is growing rapidly.
This growth, coupled with the deterioration of traditionally strong racing state programs has
caused a flurry of activity as owners of breeding and racing stock within these declining
states seek to relocate their investments. We have targeted these owners as well as brand new
investors and Pennsylvania owners looking to upgrade their programs as clients for our
expanded farm. Our marketing programs are focused on promoting using the venues that are
commonly used by those in our target market. These programs are designed to bring potential
clients to our farm, the location where sales are most frequently completed. We realize that
technology is absolutely necessary in today's markets and we have embraced its use happily
and with success.
Financial Projections

Our farm has started out small for specific reasons, we are now looking forward to an expansion
that will allow us to utilize all of our skills. The owner's husband is currently the parts and service
director at his place of business, responsible for $13.3 million dollars of parts and service sales
annually and maintaining a large inventory. He has 65 employees reporting to him. He will be
mentoring the owner on the financials.

In summary, the financial projections represent the growth that will occur upon the relocation of
the farm to its new world class facility. They represent the planned growth that is possible with
the securing of a facility that is large enough to accommodate the ever-growing needs of the
marketplace. We expect profits for two reasons: 1) we are timing our market expansion at a
critical time, just as the Pennsylvania thoroughbred industry enters its largest growth phase in its
history and 2) our services to clients and their bloodstock is exceptional, it is simply world class.

1.1 Keys to Success

A well-targeted marketing plan utilizing modern technologies as well as traditional formats.

Providing a quality facility that is attractive to our clients.
Following through on delivering the quality of service that our marketing and facility images
promise. Ereidi Farm has built its reputation by exceeding our client's expectations. Our
attention to detail and our commitment to our clients remains unsurpassed within the industry.

1.2 Mission

The purpose of Ereidi Farm is to increase our clients' opportunities for successful thoroughbred
investment by providing word class quality, individualized care and training programs at a safe
facility which is staffed by caring, experienced personnel. Everyone at Ereidi Farm has a deep
commitment to our clients. We believe that constant communication, unquestionable integrity
and our ability to provide "Full Circle" services are the hallmarks of the success and growth of our
farm.
1.3 Objectives

1. Secure financing to purchase a turn-key facility that is located on a parcel of land in a

developing area. The facility must represent real value, selling for less than its cost to
build and having a location that is targeted for long-term growth and development, thus
increasing the value of the land.
Land parcel must be suitable for other uses than farming to provide long-term
development options. Interstate access, both locally and regionally must be excellent.
Land must be located in an area that has required support structures in place suitable to a
horse farm.

2. Close sale on current farm facility to generate approximately $300,000 of capital to

reinvest into business expansion.

3. Achieve break-even status within one year of relocating to the larger facility.

4. Maintain a comfortable net profit into the second and third years.

Animal - Racehorse Trainer/Facility

Ereidi Farm
 Plan Outline

Company Summary

Ereidi Farm, Inc. is a subchapter S corporation (incorporation is in progress at this time)

currently located in Schwenksville, Pennsylvania. Ereidi Farm began as a part-time business
when its owner's only child was a toddler. Ereidi Farm's owner has worked within the horse
industry for over twenty years and the services offered by the farm are in high demand.
Due to changes in Pennsylvania's thoroughbred racing program, the demand for quality
services has escalated dramatically. After the planned purchase of our new facility is
complete, we will relocate to Pine Grove, Pennsylvania. The farm offers exceptional "Full
Circle" services to owners and breeders of thoroughbred bloodstock. Our specialty is our
highly individualized training and care programs with a strong focus on client
communications and education. We are committed to the success of our clients'
thoroughbred investments and go above and beyond the normal requirements to secure
the best opportunities for our clients and their horses.

2.1 Company Ownership

Ereidi Farm was formed as a sole proprietorship by its current owner, Heidi Trimbur.
Current growth patterns of the farm have made it prudent to incorporate and its new
subchapter S corporation status is now pending. The business remains a private entity, held
by its owner.
2.2 Company History

The owner of Ereidi Farm, in addition to being formally educated in equine science and
management, has worked within the equine industry for over 20 years. Ereidi Farm was
officially formed as a thoroughbred facility three years ago. The farm, despite being a part-
time venture at start-up, as the owner's child was a toddler, held close to the break-even
point in its first year.

Second year sales were directly affected by the events of September 11, 2001 as the Fall
yearling thoroughbred sales began on September 10th of that year. Despite this loss, Ereidi
Farm came back strong in 2002, generating a profit and sales have been profitable in 2003
with the farm's largest sales quarter in the Fall.

The need for expansion has become obvious as the farm has had to turn clients away due to
lack of space at its current location. With the pending growth of Pennsylvania's
thoroughbred industry poised to enter an extremely lucrative period, expansion strategy
and its timing have become top priorities of the farm.

PAST PERFORMANCE
FY 2001 FY 2002 FY 2003
Sales $20,485 $50,905 $19,347
Gross Margin $20,485 $50,905 $19,347
Gross Margin % 100.00% 100.00% 100.00%
Operating Expenses $35,144 $45,863 $17,000
Collection Period (days) 0 0 0
BALANCE SHEET
 FY 2001 FY 2002 FY 2003
Current Assets
Cash $2,000 $9,192 $3,282
Accounts Receivable $0 $0 $12,937
Other Current Assets $79,300 $85,485 $87,684
Total Current Assets $81,300 $94,677 $103,903
Long-term Assets
Long-term Assets $480,000 $480,000 $490,000
Accumulated Depreciation $5,815 $5,616 $2,800
Total Long-term Assets $474,185 $474,384 $487,200
TOTAL ASSETS $555,485 $569,061 $591,103
Current Liabilities
Accounts Payable $0 $0 $0
Current Borrowing $0 $4,300 $13,000
Other Current Liabilities (interest
free) $0 $0 $0
Total Current Liabilities $0 $4,300 $13,000
Long-term Liabilities $200,000 $195,000 $193,000
Total Liabilities $200,000 $199,300 $206,000
Paid-in Capital $0 $0 $0
Retained Earnings $355,485 $369,761 $385,103
Earnings $0 $0 $0
Total Capital $355,485 $369,761 $385,103
TOTAL CAPITAL AND
LIABILITIES $555,485 $569,061 $591,103
OTHER INPUTS
Payment Days 0 0 0
Sales on Credit $0 $0 $0
Receivables Turnover 0.00 0.00 0.00

Services

Ereidi Farm specializes in providing highly individualized services to the thoroughbred

racehorse industry. These services include breaking and training of youngsters with a
personalized, non-production line type of focus; broodmare management and foaling, we
specialize in high-risk pregnancies and older mares; boarding for youngsters with daily
attention and handling; and intensive care, post-operative rehabilitative service for
recovering race horses.

Ereidi Farm breeds and sells a few quality Pennsylvania-bred foals per year and offers
consulting and genetic services for those new to the industry and/or developing their own
breeding programs.
Market Analysis Summary

Ereidi Farm's largest market segment will be owners of quality thoroughbreds who do not
reside in Pennsylvania. As racing purses and breeding fund monies begin or continue to
decline in several traditionally strong racing states, owners are searching for more profitable
venues in which to place their horses. This coupled with the anticipated growth in purse
and bonus monies available to Pennsylvania-breds and in Pennsylvania races, has made this
state an attractive possibility for owners relocating their bloodstock to more lucrative
markets.

This trend is beginning to reveal itself in statistical data. Pennsylvania has increased its U.S.
Foal Crop share (2.7%) and is now in the top ten of all producing states. The average stallion
book size has also increased and Pennsylvania now is ranked in the top ten for stallion book
size. Top ten states posting a decrease include: California, Texas, Maryland, Oklahoma and
Illinois, indicating declines in their racing programs. Neighboring New Jersey has also posted
a decline (-38.1%) reflecting the health of the industry within its borders. Ereidi Farm has
received many requests for boarding and foaling services from residents of Maryland and
New Jersey reflecting the need of residents from these states to relocate their thoroughbred
operations.

Research indicates that today's thoroughbred owner is most likely to fit the following
profile: male (special note: women thoroughbred investors are on the rise although they
usually invest in ownership through partnerships); average age is 45+, lower than previous
years supporting overall national salary statistics and many more owners are pooling their
resources and forming partnerships; income in excess of $90,500 per year; is a
knowledgeable investor and takes a business approach to thoroughbred investing; focus is
on quality not quantity and understands and expects to pay for better quality services; over
80% utilize the Internet and its resources.

Pennsylvania provides great opportunity for new or migrating investors as our state's
historical position of thoroughbred production and racing has been one of "low end"
quality. These facts make Pennsylvania an opportunity zone for those with quality
bloodstock programs and for those who can offer quality services and facilities to
accommodate incoming horses.

4.1 Market Segmentation

Ereidi Farm has targeted the following markets for its growth strategy:
1. Potential clients who are currently breeding and racing their horses in states with
declining racing and breeding programs. These clients are not only looking to
relocate, they are used to spending more per horse than the traditional Pennsylvania
thoroughbred owner. States with declining racing programs will have declining Foal
Crop share percentages as owners relocate their mares to more lucrative states.
Declining US Foal Crop share is present in: California (-26.6%), Texas (-12.4%),
Louisiana (-19.0%), Maryland (-35.8%), Oklahoma (-39.6%), Illinois (-35.4%), New
Jersey (-38.1%), Virginia (-32.9%). These figures correspond directly to overall racing
programs and conditions within each of these states. Thoroughbred owners within
 these states have been specifically targeted by Ereidi Farm.

2. Pennsylvania thoroughbred owners who are looking to upgrade the quality of their
racing and breeding programs. Small owners who fail to upgrade their programs
within the state will get squeezed out by incoming competition, upgrading will
become key to staying in business.
Pennsylvania has begun to prepare for the upgrading that slot machines will have on
racing purses within the state by bringing in new, better quality stallions.
Pennsylvania is now in the top ten for Distribution of Active Stallions and Mares
Bred, standing 103 stallions in 2002, breeding 1,009 mares in 2002 posting an
average book size of 9.8% (increasing from 2001's 8.5%).

3. New thoroughbred investors/partnerships represent great opportunities and

investors are comparing state programs. Pennsylvania scores high posting not only
increasing purse monies but also substantial owner/breeder/stallion owner awards.
The breeder of any registered Pennsylvania-bred foal earns 20% to 30% (depending
on state stallion stands in) residual income from the bonus program if a foal finishes
first through third in any Pennsylvania race, not including stakes races.
The owner of the horse at the time of racing is eligible for an additional 40% in bonus
awards and the stallion owner (if a registered Pennsylvania stallion) receives a 10%
bonus - all residual income! Ereidi Farm will specifically market to non-thoroughbred
owners with incomes in excess of $90,500 who are professionals with investment
backgrounds. We have attracted several new clients this way including non-U.S.
residents.

MARKET ANALYSIS
2003 2004 2005 2006 2007
POTENTIAL
CUSTOMERS GROWTH CAGR
Non-resident owners 65% 56,211 92,748 153,034 252,506 416,635 65.00%
Resident owners
upgrading 32% 35,132 46,374 61,214 80,802 106,659 32.00%
New investor
partnerships 26% 49,185 61,973 78,086 98,388 123,969 26.00%
Total 46.50% 140,528 201,095 292,334 431,696 647,263 46.50%

4.2 Target Market Segment Strategy

Ereidi Farm provides a high-end type of quality and service within our industry, it is
therefore imperative that we define, locate and attract clients who have the funds available
in which to purchase our services. Understanding the historical flow of regional racing is
important to client recruiting.

The better regional racing stables traditionally raced on the New York, New Jersey and
Maryland circuit. Horse that could not win in these states were shipped to the "low-end"
racing circuits (i.e., smaller purse sizes) of Pennsylvania and West Virginia. Because horses
racing in these "low-end" states did not earn as much money, their owners did not have the
means to pay higher prices for services, hence most farms in Pennsylvania (there are some
exceptions) focus on price before quality and rely on quantity numbering to reach their
quotas.

As our standards for acceptable care are quite different from the traditional Pennsylvania
farm, it was most important to define and locate clients who would meet our defined "ideal
client" profile. Our clients are well-educated professionals, they utilize Internet resources to
stay current with industry changes and trends. They expect outstanding service and are
willing to pay for it.

Upon securing financing for our expansion, Ereidi Farm is prepared to roll out its marketing
campaign. We will target our client base through the use of: Internet advertising of sites
frequently visited by our clients, our website, print advertising in selected magazines and
national newspapers, industry sales, seminars and trade shows, business-to-business
contacts, organizational memberships and open houses at our facility.

4.3 Service Business Analysis

The thoroughbred industry in the United States is the largest in the world, offering 55,127
yearly races (2001). Japan is ranked second with 23,820 races and Australia third with
21,218 races. Thoroughbred racing as an entertainment choice is growing. Pari-mutual
handle on thoroughbred racing in the United States topped $15 billion for the first time last
year according to the statistics contained in the 13th edition of The Jockey Club Fact Book
released 02/07/03. Handle on U.S. races in 2002 reached $15,062,131,835. (including
separate pool first reported in 2000), an increase of 3.5% against 2001. This marked the
ninth consecutive year of growth in handle.

U.S. purses, meanwhile, advanced 0.6% in 2002 to $1,074,247,738. The bulk of the
increase was derived from states whose tracks offer expanded forms of gaming, namely
Delaware, Louisiana, New Mexico and West Virginia. Pennsylvania will join this list upon the
passing of current slot machine legislation and its purse sizes will increase as will the
number of thoroughbreds racing for the increased purse offerings.
In addition to purse offerings, owners and breeders have another source of income and this
income is residual. The Pennsylvania Horse Breeders Association (www.pabred.com)
manages the Pennsylvania Breeding Fund Program. This program distributes more money,
on a per foal basis, than nearly every other state-bred program now in operation. Currently,
it distributes approximately $9.5 million annually with specific percentages being awarded
to owners, breeders and stallion owners.

These specific percentages are awarded to the human connections of the horses finishing
first, second or third in Pennsylvania races. The criteria for qualifying for these residual
income awards are simply that the horse must be a registered Pennsylvania-bred foal. To
be a registered Pennsylvania-bred foal, a mare must foal in the state of Pennsylvania and
meet residency requirements. This has increased the demand for quality foaling and
boarding facilities within the state. Awards are based off of percentages from purse monies
earned and they are a very attractive incentive to draw clients from outside of Pennsylvania.
Pennsylvania racing is poised for a lucrative and dramatic growth period, smart investors are
positioning themselves within the state, preparing to capitalize on the new purse structure
that slot machines will provide. This has already lead to a shortage of stall space at tracks
and farms throughout the state as well as increased demand for quality services and
programs.

Ereidi Farm realizes that market entry into any expanding market is always time critical, it is
our intention to be properly positioned to absorb the expanding growth as it occurs within
our state. Research indicated that most of the expected growth will occur as outside
owners enter Pennsylvania. These owners have already been targeted as those most
desired by our farm, it is our strategy to have completed our relocation prior to this time in
order to better provide the services the incoming owners will be searching for.

4.3.1 Competition and Buying Patterns

Pennsylvania has many small farms operating with a "Price is Vital" philosophy. These farms
were created to service the traditional Pennsylvania thoroughbred owner. It is not our
intention to run our facility in this manner, our focus has always been on exceptional quality
care and outstanding customer service.

Pennsylvania does have a few large farms that do market themselves as being full service
facilities. A few of them do attempt to market to our intended client base. These farms
include: Pin Oak Stud, Xanthus Farm, Reigle Heir Farm, Castle Rock Farm and Swatara
Farm. Of these, only Pin Oak Stud positions itself as a full service facility, the others are
focused on the stallion and breeding market.
One of the most frequent comments we hear from our clients is how happy they are with
the care their horses receive while at our farm. We exceed their expectations. Another
frequent comment is how comfortable our clients feel talking with us. Their focus is on the
quality of our programs and our business relationship. Price has not been an issue for our
clientele as they understand the cost of delivering world class care and service. These are
the driving factors our clients consider when making decisions about where to send their
horses.

Strategy and Implementation Summary

Ereidi Farm will focus its expansion on the following markets: Thoroughbred owners and
breeders in state racing programs that are in decline, Pennsylvania thoroughbred owners
and breeders that realize they must upgrade their current stock in order to remain
competitive and new potential first time owners, usually in the form of partnerships.
Attracting these clients will be done using modern technology (i.e., Internet and website
resources) as well as specifically defined print advertising. We will make ourselves more
present at public venues where our potential clients gather. Locations such as public
thoroughbred sales, seminars, racetracks and trade shows have been targeted.
Our farm has been built on its reputation for exceeding clients expectations on the care of
their horses and providing outstanding customer service. These are and will remain the
hallmarks of our farm.

5.1 Competitive Edge

Ereidi Farm's competitive advantage is multi-faceted. We are different from our

competitors for the following reasons:
1. Our people: We invest in quality, client-focused people and provide them with
opportunities for continued learning and skill utilization. Our people are well-
informed, engaging and embrace the Ereidi Farm "Full Circle" service philosophy.

2. Our programs: Our programs are comprehensive and individualized. No detail is

overlooked and no horse gets lost in a "production line" type of program. Our
intensive management practices have made us a number one choice for difficult
youngsters and "high risk" pregnant mares.
The results are tangible: Untrainable horses have gone on to the races and our farm
has a 100% live foal percentage for every year. Our programs consistently exceed
our client's expectations, it is the number one reason our current facility is full to
capacity.

3. Our "Full Circle" service: We genuinely love what we do and enjoy sharing with
others! We build long-lasting relationships with our clients through constant
communication and our abilities to procure the information and resources clients
need to make knowledgeable decisions regarding their thoroughbred investments.
We adhere to a high level of integrity and make sure we deliver as promised.
 4. Our facilities and location: Our expanded facility will offer world class amenities in a
conveniently accessible location for local and East Coast regional commutes.

5.2 Sales Strategy

Our marketing programs are designed to create a desire for new potential clients to contact
us and schedule a visit to our farm as most sales within our industry are closed upon visual
inspection of the facilities, personnel and current horses in training.
Our sales strategy therefore is to provide our clients with an immaculate, safe facility,
staffed by knowledgeable, service-oriented people that allows them the opportunity to
thoroughly inspect the quality of our programs and the health and condition of the horses in
our care. We permit inspections during training hours and our clients are always welcome.
These details, coupled with outstanding references and recorded results make closing the
sale at a profitable margin possible and pleasant for all parties.

5.2.1 Sales Forecast

Sales forecasting is based on the yearly cycle of the demand for each particular service.
Training requests will increase as the Fall months arrive and grow steadily into the Winter
when they will stabilize. Broodmare services will begin to climb as Winter approaches and
the foaling season begins (late Winter through Spring). The boarding of weanlings, yearlings
and rehabilitative horses (classified together as Other in the sales charts) will begin to grow
as the Fall months commence.
Our home-grown sales always occur during the fall months, it is the time of year when the
market is actively looking to buy. The dramatic rise is sales reflects the expansion of our
facility. Horses require lots of space and our current facility cannot handle a large number
of horses. This expansion will enable us to make our services available to a larger group of
clients and we will gain more market share.
SALES FORECAST
FY 2004 FY 2005 FY 2006
SALES
Training $157,200 $165,060 $173,313
Broodmare w/foal $61,680 $69,082 $77,371
Boarding other $27,370 $31,476 $36,197
Home-grown sales $18,000 $27,000 $40,500
Total Sales $264,250 $292,617 $327,381
DIRECT COST OF SALES FY 2004 FY 2005 FY 2006
Training $13,100 $13,755 $14,443
Broodmare w/foal $8,500 $9,520 $10,662
Boarding other $5,400 $6,210 $7,142
Home-grown sales $8,000 $12,000 $18,000
Subtotal Direct Cost of Sales $35,000 $41,485 $50,247

5.3 Marketing Strategy

Our top marketing strategy is an ecstatic client!

Ereidi Farm's owner has extensive experience in developing marketing campaigns, direct
mail campaigns, editing communications and utilizing technology. Our target market
consists primarily of: Thoroughbred owners and breeders based outside of Pennsylvania,
currently in deteriorating state racing/breeding programs; Pennsylvania thoroughbred
owners and breeders who realize they must upgrade their programs to remain competitive
in our state's changing market; new investors in the thoroughbred industry, usually working
within a partnership to minimize cost and risk while realizing a set quality level.
We will rely heavily on technology to generate awareness of our expansion, utilizing the
Internet to reach those potential clients who are known Internet users. Our farm utilizes
digital imaging, it was the number one reason for our increased sales in the past twelve
months. Specific Internet sites in which to advertise our expansion have been identified and
our farm maintains its own website.

We are building an e-mail mailing list to mass market at high speed. Selected print
publications have been targeted to reach those in deteriorating racing states as well as
potential new investors. We will increase our presence at industry sales, seminars and trade
shows, continue to build our-business-to-business network and provide open houses (open
farm days) for interested individuals to visit our farm.

5.4 Milestones

The accompanying table lists important program milestones, with dates and managers in
charge, and budgets for each. The milestone schedule indicates our emphasis on planning
for implementation.

What the table doesn't show is the commitment behind it. Our business plan includes
complete provisions for plan-vs.-actual analysis, and we will hold monthly follow-up
meetings to discuss the variance and course corrections.

MILESTONES
MILESTONE START DATE END DATE BUDGET MANAGER DEPARTMENT
Locate suitable
expansion property 1/1/2002 5/15/2003 $1,500,000 ABC Marketing
Secure financing 5/15/2003 6/30/2003 $22,000 Eric & Heidi Accounting
Expand current
website 7/5/2003 8/31/2003 $0 Heidi Trimbur Marketing
Complete expansion
marketing roll out 7/5/2003 8/31/2003 $1,000 Heidi Trimbur Marketing
Contract 20 training
horses 7/10/2003 12/1/2003 $0 Heidi Trimbur Marketing
Contracting 12
broodmares 7/10/2003 12/1/2003 $0 Heidi Trimbur Marketing
Set up accounting
system 8/1/2003 9/15/2003 $0 Eric Trimbur Accounting
Contracting head
trainer 7/4/2003 10/1/2003 $0 Heidi Trimbur Admin
Hiring farm hand(s) 9/15/2003 10/15/2003 $150 Eric Trimbur Admin
Build public
awareness of PA 9/5/2003 12/31/2003 $1,000 Eric & Heidi Marketing
Totals $1,524,150

Web Plan Summary

The owner of Ereidi Farm built and maintains the farm's website. The site was created to
provide an Internet presence that represented the farm through digital images and text.
Our farm site provides the viewer with actual images of the horses in our care and gives
them a visual comparison, easily accessible when they are shopping for services.
The text gives us the opportunity to share our philosophy on horse care and condition plus
supporting our sales photographs. Ereidi Farm has attracted new clients through its
website. Due to our viewing audience, construction was done with overall ease of use in
mind. We plan on adding digital video to the site in early fall of 2003, just in time for the
sales and training seasons. Our Web address is: www.ereidifarm.net - Welcome!

6.1 Website Marketing Strategy

As our expansion occurs, the search engines will be reviewed and updated as will direct links
to our site from other targeted sites. As viewers visit our site, their addresses will be utilized
on our e-mail direct mail list.
All print advertising will feature the Web address as will all communications.

Management Summary

The current management team consists of the owner and her husband. As expansion occurs
we will expand our personnel as required beginning with a training manager to oversee the
actual training of the horses.

As growth continues we will need to expand management opportunities into the

broodmare, young stock, financial and maintenance areas. Long-term development might
include a Stallion manager as well. All will report to the owner and the owner will maintain
an in-depth contact with all horses on the farm as well as the clients themselves.

7.1 Personnel Plan

The Personnel table indicates the number of employees required during the initial
expansion. This table will grow as the farm fills with client horses.

Additional employees that will be added during the expansion phase will be: additional
grooms, exercise riders, maintenance workers, broodmare specialists and office workers. A
stallion manager and specially skilled stallion grooms will be long-term additions.

PERSONNEL PLAN
FY 2004 FY 2005 FY 2006

Owner $14,000 $24,000 $36,000

Head Trainer $14,000 $24,000 $30,000

Groom 1 $7,218 $14,436 $15,900

Groom 2 $4,812 $14,436 $15,900

Total People 4 4 4

Total Payroll $40,030 $76,872 $97,800

Financial Plan

Ereidi Farm is intending to grow its cash profits by expanding to a larger turn-key facility.
Although more expensive to purchase, a turn-key facility of world class quality allows the
immediate generation of cash flow at the higher end of the market. The facility we are
purchasing does not require the additional expenditure of capital resources to be fully
functional, it is ready for business.

Our farm sells a service and does not maintain an inventory.

We operate on a "Cash Only" basis and choose our clients accordingly. It is very rare that
we except payments of any type although we may do so when selling one of our home-
grown foals to a well-known and trusted client. Our cash only approach allows us to
maintain sufficient cash on hand and not waste valuable time and resources collecting
amounts due.

At this time, the owner's husband supplies additional capital as needed from his current
job. He will continue in his current employ.
8.1 Important Assumptions

Important assumptions concerning the thoroughbred market and Ereidi Farm's targeted
market include:

The thoroughbred market industry in Pennsylvania will continue to grow. The added slot
machine legislation will cause a dramatic growth spurt in racing programs within the state,
quickly causing an increase in the demand for services within the state.

Statistics will continue to indicate the decline of racing programs in traditionally strong
racing states. Owners of bloodstock within these distressed states will actively seek out new
locations in which to relocate their horses and operate a profitable, quality stable.
New owners will invest in the industry, they will be reached by large industry umbrella
operations such as the NTRA and TOBA. (National Thoroughbred Racing Association and
Thoroughbred Owners and Breeders Association) respectively.

Our targeted markets will continue to post personal income growth despite fluctuating
economic conditions. They will continue to invest in non-traditional "exotic" investments
such as thoroughbred racehorses.

GENERAL ASSUMPTIONS
FY 2004 FY 2005 FY 2006
Plan Month 1 2 3
Current Interest Rate 5.88% 6.00% 5.88%
Long-term Interest Rate 7.00% 7.00% 7.00%
Tax Rate 23.58% 23.00% 23.58%
Other 0 0 0

8.2 Projected Profit and Loss

Our planned expansion realizes a profit after total expenses are deducted from gross profit.
As growth occurs, expenses increase accordingly, however our net profit also continues to
grow. This reflects the typical cost of doing business in the horse industry as a whole.
PRO FORMA PROFIT AND LOSS
FY 2004 FY 2005 FY 2006

SALES $264,250 $292,617 $327,381

Direct Cost of Sales $35,000 $41,485 $50,247

Other Costs of Sales $0 $0 $0

Total Cost of Sales $35,000 $41,485 $50,247

Gross Margin $229,250 $251,132 $277,135

Gross Margin % 86.75% 85.82% 84.65%

EXPENSES

Payroll $40,030 $76,872 $97,800

Sales and Marketing and Other
Expenses $0 $0 $0

Depreciation $2,400 $2,400 $2,400

Rent $0 $0 $0

Payroll Taxes $6,005 $11,531 $14,670

Other $0 $0 $0
TOTAL OPERATING
EXPENSES $48,435 $90,803 $114,870

Profit Before Interest and Taxes $180,816 $160,329 $162,265

EBITDA $183,216 $162,729 $164,665

Interest Expense $14,274 $14,290 $14,274

Taxes Incurred $38,402 $33,589 $34,901

NET PROFIT $128,140 $112,450 $113,090

Net Profit/Sales 48.49% 38.43% 34.54%

8.3 Projected Cash Flow

Ereidi Farm is a "Cash Only" type of business. Although we do accept payments for the
horses we raise and sell, the rest of our business is cash based in order to increase cash flow
and limit the farm's liabilities.
PRO FORMA CASH FLOW
FY 2004 FY 2005 FY 2006

CASH RECEIVED

Cash from Operations

Cash Sales $224,613 $248,725 $278,274

Cash from Receivables $41,176 $42,669 $47,608

Subtotal Cash from Operations $265,788 $291,393 $325,882

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $265,788 $291,393 $325,882

EXPENDITURES FY 2004 FY 2005 FY 2006

Expenditures from Operations

Cash Spending $40,030 $76,872 $97,800

Bill Payments $81,830 $104,452 $113,007

Subtotal Spent on Operations $121,860 $181,324 $210,807

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current
Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal
Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $121,860 $181,324 $210,807

NET CASH FLOW $143,928 $110,069 $115,075

Cash Balance $147,210 $257,280 $372,354

8.4 Projected Balance Sheet

The balance sheet in the following table shows sufficient growth of net worth, and a
sufficiently healthy financial position. The monthly estimates are included in the appendix.
Please note that specific variable and fixed expense categories have intentionally been left
blank as these expenses are already figured into our "cost-per-horse" expense.

PRO FORMA BALANCE SHEET

FY 2004 FY 2005 FY 2006
ASSETS
Current Assets
Cash $147,210 $257,280 $372,354
Accounts Receivable $11,399 $12,622 $14,122
Other Current Assets $87,684 $87,684 $87,684
Total Current Assets $246,293 $357,586 $474,161
Long-term Assets
Long-term Assets $490,000 $490,000 $490,000
Accumulated Depreciation $5,200 $7,600 $10,000
Total Long-term Assets $484,800 $482,400 $480,000
Total Assets $731,093 $839,986 $954,161
LIABILITIES AND CAPITAL FY 2004 FY 2005 FY 2006
Current Liabilities
Accounts Payable $11,850 $8,293 $9,377
Current Borrowing $13,000 $13,000 $13,000
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $24,850 $21,293 $22,377
Long-term Liabilities $193,000 $193,000 $193,000
Total Liabilities $217,850 $214,293 $215,377
Paid-in Capital $0 $0 $0
Retained Earnings $385,103 $513,243 $625,693
Earnings $128,140 $112,450 $113,090
Total Capital $513,243 $625,693 $738,783
Total Liabilities and Capital $731,093 $839,986 $954,161
Net Worth $513,243 $625,693 $738,783

8.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on
the Standard Industrial Classification (SIC) code 0752.0102, [Breeding services, horses:
racing and non-racing], are shown for comparison.

RATIO ANALYSIS
FY 2004 FY 2005 FY 2006 INDUSTRY PROFILE

Sales Growth 1265.84% 10.73% 11.88% 10.13%

PERCENT OF TOTAL ASSETS

Accounts Receivable 1.56% 1.50% 1.48% 11.58%

Other Current Assets 11.99% 10.44% 9.19% 31.09%

Total Current Assets 33.69% 42.57% 49.69% 51.94%

Long-term Assets 66.31% 57.43% 50.31% 48.06%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 3.40% 2.53% 2.35% 23.95%

Long-term Liabilities 26.40% 22.98% 20.23% 24.54%

Total Liabilities 29.80% 25.51% 22.57% 48.49%

Net Worth 70.20% 74.49% 77.43% 51.51%

PERCENT OF SALES

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 86.75% 85.82% 84.65% 38.83%

Selling, General & Administrative
Expenses 37.53% 46.76% 49.28% 25.23%

Advertising Expenses 0.00% 0.00% 0.00% 0.43%

Profit Before Interest and Taxes 68.43% 54.79% 49.56% 1.11%

MAIN RATIOS

Current 9.91 16.79 21.19 1.47

Quick 9.91 16.79 21.19 0.89

Total Debt to Total Assets 29.80% 25.51% 22.57% 1.73%

Pre-tax Return on Net Worth 32.45% 23.34% 20.03% 64.10%

Pre-tax Return on Assets 22.78% 17.39% 15.51% 4.81%

ADDITIONAL RATIOS FY 2004 FY 2005 FY 2006

Net Profit Margin 48.49% 38.43% 34.54% n.a

Return on Equity 24.97% 17.97% 15.31% n.a

ACTIVITY RATIOS

Accounts Receivable Turnover 3.48 3.48 3.48 n.a

Collection Days 60 100 99 n.a

Accounts Payable Turnover 7.91 12.17 12.17 n.a

Payment Days 27 36 28 n.a

Total Asset Turnover 0.36 0.35 0.34 n.a

DEBT RATIOS

Debt to Net Worth 0.42 0.34 0.29 n.a

Current Liab. to Liab. 0.11 0.10 0.10 n.a

LIQUIDITY RATIOS

Net Working Capital $221,443 $336,293 $451,783 n.a

Interest Coverage 12.67 11.22 11.37 n.a

ADDITIONAL RATIOS

Assets to Sales 2.77 2.87 2.91 n.a

Current Debt/Total Assets 3% 3% 2% n.a

Acid Test 9.45 16.20 20.56 n.a

Sales/Net Worth 0.51 0.47 0.44 n.a

Dividend Payout 0.00 0.00 0.00 n.a