Executive Summary

Mission Statement
It is ar.com's goal to enhance the development of electronic music by being the premier,
comprehensive resource on the Internet for electronic music aficionados and producers.
ar.com will democratize music, creation, distribution and consumption by:

assisting artists in the production of their music by providing samples and sound
fonts at no cost
giving talented artists with few connections or resources the chance to distribute
their music
giving small record labels the chance to distribute their music online, increasing
their viability

allowing a fan of the music anywhere in the world instant access to a huge selection of
releases from across the globe at very reasonable prices.
Executive Summary
A formidable opportunity has arisen from the combination of the advent of the Internet as a medium for
music distribution, and the rise in popularity of a genre of music that is entirely composed with computer
software - electronic music. Analysts predict that as much as 10% of music retailed in the U.S. in year 2002
will be purchased over the Internet 1. "While sales (of this genre of music) account for less than 10 percent
of overall music sales, the genre is growing."2 This genre has been largely ignored by most mainstream
retailers and labels because of its non-traditional song formats that make it non-conducive for radio play.
It is audiorush.com inc.'s (ar.com's) plan to market the electronic genre of music via a web site (please see
Appendix 6 on page 35) whereby consumers will download the music to their PCs. As a convenience,
ar.com will write the purchased songs to CD and ship them directly to consumers who are not yet equipped
to download music. The web site is designed for maximum user-friendliness, unlike any other music site
today. ar.com's unique web design allows users to browse the selection effortlessly, while being able to
automatically hear excerpts from each virtual CD.
The electronic genre of music is ideal for online distribution for the following reasons:

There is a proliferation of artists worldwide within this genre because of the low price and
accessibility of the necessary equipment and software
The music is created on PC; artists simply send ar.com music files via the Internet from anywhere
in the world
Even very popular artists within this genre are accessible to negotiate contracts with since they
tend to be self-distributed, or own small record labels
Because of the genre's rapid evolution and its individualistic nature, aficionados constantly
demand new material

Ar.com is distinguished from its competitors in that:

The site uses flash software, the latest generation in web site technology that allows users to view
complex graphics and animations, and hear high-quality audio
It uses a "push" marketing approach in that there is no need to download individual music files
It combines the advantages of CD-quality, piracy-protected downloadable music, custom-mixed
shipped CDs, an electronica focus, event information, and musician resources

Music sales over the Internet are made possible by:

Rapid penetration of high-bandwidth connections

Compression software that renders music files 1/20 their original size with CD-quality sound
The resulting combination allows the user to download a 45-min. CD in 11 minutes versus 36
hours
Secured online credit card transaction processing

The market
The market for electronic music is largely composed of University students. According to Jupiter
Communications:
College students, typically have free broadband access that makes digital distribution much more feasible,
not to mention the highest penetration rate of any online demographic. This audience is the first that will be
compelled to purchase writable drive peripherals specifically for the digital delivery of commercial music. 3
Aficionados of electronic music are raised in the age of the World Wide Web, making Internet distribution
in tune with their lifestyle.
Management Team
ar.com's management has the proven entrepreneurial and management skills to succeed in running this
innovative, market-driven company. They have the rare combination of top business school training and a
strong connection with the electronic music market.
Offer and Use of Proceeds
The estimated net proceeds to be received by ar.com from the sale of common shares, is $330,000
(including $30,000 of expected expenses associated with the offering). ar.com intends to allocate $50,000
of the net proceeds towards the purchase its web site design, and the balance, in the amount of $250,000,
towards funding salaries and working capital. The investor will receive 10% of the common shares in
exchange.
Capitalization
The following table sets forth the capitalization of ar.com as at the dates indicated, before and after giving
effect to the issue of common shares contemplated hereby.

Pro forma as at April 30,

Pro forma as at
1999
April 30, 1999 after giving effects to the
Common shares

Shareholders' equity
No. of common shares (without par value)
Book value of equity (in $US)

2,970,000

3,300,000

$297

$330,297

Ownership of Common Shares

As at April 30, 1999, on a pro forma basis, before the issue of common shares being offered, the ownership
of ar.com's common shares will be as follows:

Office Number of Common Shares

Christianne Brunelle
Ranya El-Masri
Exit Strategies

President

1,782,000

Vice President Marketing

1,188,000

Three exit strategies are possible through which investors should be able to realize on their investment:

with the accumulation of substantial cash flow, dividend payments could repatriate the investment
in view of the rapid growth anticipated for the downloadable segment of the music industry, it is
entirely possible that a company wanting to capture ar.com's market penetration would acquire
ar.com
should future public equity markets react as current markets, an initial public offering of ar.com's
common shares, coupled with the offering of the investors shares, could provide an extremely
lucrative exit route for investors

Summary Financial Information

3,300,000 outstanding
shores
Revenue
Net Income
Net Book Value
Return on Ave. Equity
Gross Margins
Earnings per share

2000

2001

2002

2003

2004

$730,354 $2,921,377 $8,821,193 $23,336,002 $54,262,701

($101,670)

$418,280 $1,893,405 $5,896,208 $14,462,886

$71,044

$489,324 $2,382,729 $8,278,937 $22,741,824

$186,739

$282,368 $1,436,263 $5,368,429 $15,822,695

54%

54%

54%

54%

54%

($0.05)

($0.03)

$0.13

$0.57

$4.38

1 Jupiter Communications, "Music Industry and the Internet", p.5

2 "Techno Tackles the Net", Niall McKay and Christopher Jones,
http://www.wired.com/news/print version/culture/story/16764.html?wnpg=all
3 Jupiter Communications, "Music Industry and the Internet", September 1998, p.9