APBA Offshore Powerboat Racing, LLC.
Prepared: July 2002 By Michael D. Allweiss Chairman/CEO APBA Offshore 111 2d Ave. N.E. Ste. 620 727-821-APBA (2722) Mallweiss@aol.com __________________________________ This document and its contents are confidential and the property of APBA Offshore Powerboat Racing, LLC. No reproduction of all or any part of this plan or any redistribution thereof is permissible without the prior written consent of APBA Offshore Powerboat Racing, LLC. This business plan is intended to convey information only, and shall not constitute or be construed as an offer to sell or the solicitation of an offer to buy securities.
Executive Summary I.
APBA Offshore Powerboat Racing, LLC. (“Offshore”) is a Florida Limited Liability Company founded in April 2000. Offshore holds an exclusive 99year license (the “License”) from the American Powerboat Association (“APBA”). The License grants Offshore full right, power and authority to exercise all aspects of the sport of offshore power boat racing (and related activities and special events) under the APBA name and sanctioning authority and, correspondingly, provides that APBA shall not, itself or through any other party or in any manner, conduct any such activities. APBA is a New York not-for-profit corporation founded in 1903 that, among other things, prior to the License, acted and was recognized as the primary organizational and sanctioning body for offshore power boat racing and related special events throughout the United States and North America. Prior to the License APBA conducted its offshore racing operations through an unincorporated division known as the Offshore Category (the “Category”). The functions of the Category included oversight and management of racing competition, including technical rule making, event rules enforcement, and event production and television production of those events at both the national and divisional/ regional levels. The License grants all such authority to Offshore for 99 years. Offshore is a distinct for-profit business organization owned and managed by a small group of current APBA/Category members (the “Members”). Offshore was formed for the purpose of assuming all responsibility and authority relating to, and conducting the foregoing business activities of the Category and other business activities relating to the sport including but not being limited to membership marketing and sales, licensing and merchandising, poker run event sanctioning and production, endurance run sanctioning and production, speed record run sanctioning and production, marine manufacturer show production, television production and promotion of such events, product development and sales, and sponsorship sales
OFFSHORE’S CORE BUSINESS – SANCTIONING BODY
The APBA has been sanctioning offshore powerboat races throughout the United States, Caribbean and Canada for over 40 years. Since entering into the License Offshore has sanctioned a national racing circuit (“The Pro Series”) consisting of 8-10 events per year, including a year-end World Championship, and 16 regional/divisional races, in California, Florida, Maryland, Canada, Texas, Michigan, New York, Georgia, Massachusetts, Ohio, Arizona, and New Jersey.
The principal “profit centers” relating to Offshore’s core sanctioning body business are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Series Sponsorships Event Sponsorships Competitor Contingency Sponsorships Television Sanction Fees Profit Sharing with Event Organizers Entry Fees Boat Registration Fees Membership Fees Licensing a. Apparel b. Merchandise c. Racing Related Products and Services
The principal “product” relating to Offshore’s core sanctioning body business shall be its Pro Series national racing circuit and regional/divisional racing circuits. The Pro Series Circuit shall consist of 8-10 events annually. The divisional/regional racing shall consist of Western, Central, Northeast and Southeast Regions with a minimum of 10-20 races per year. The racing shall be comprised of boats competing in 4 classifications: Super Cats, Super Vees, Factory Vees, and Outlaws.
OFFSHORE’S STRATEGIC GOALS AND OBJECTIVES
Over the next four years, Offshore’s primary strategic goal and objective will be to become the premier offshore boat racing sanctioning body in the United States and thus a well recognized, highly respected, and financially successful motorsport entertainment property. To achieve this goal, Offshore shall: 1. Continue to develop a competition based rules model for its racing operations and activities that emphasizes: a. Relatively low cost, affordable, “level playing field” racing for its competitors, and participating marine industry manufacturers; b. Participation of the marine industry from a competition and financial perspective; and c. Close, exciting competition for its racers and fans, that yields multiple winners throughout the various racing series.
2. Continue to develop a professional staff that effectively develops, implements and manages the rules making and enforcement process with fairness and integrity. 3. Continue to develop a professional staff that effectively manages the offshore racing specific logistics and operations at the events. 4. Secure relationships with experienced, professional event organizers to annually produce 8-10 high quality family oriented entertainment events, which feature offshore powerboat racing, and a stable consistent racing schedule, on a national basis, plus 10-20 similar but smaller scale regional/ divisional events. 5. Stage these events in major metropolitan areas or destination locations in North America, the Caribbean and abroad. 6. Develop a strong national sponsorship and racer contingency sales program 7. Produce first class, high quality, exciting television entertainment through its television division, APBA Offshore Television. 8. Produce an exciting, interactive, informative and entertaining website and internet presence. 9. Produce high quality, comprehensive, product licensing, merchandising and apparel programs. 10. Produce effective and informative public relations and media programs. 11. Produce a comprehensive, valuable, consumer oriented affinity membership program consisting of racers and non-racers (consumers). 12. Produce these events, races and programs in a manner that enhances and promotes the APBA Offshore brand and the sport of offshore powerboat racing for the benefit of all of our business partners. Offshore will seek strategic licensing relationships with qualified business partners to help it design and execute many of these programs. Additionally, Offshore will soon embark on a capital campaign to raise approximately $2.0 million to enhance the operations and management of Offshoreâ€™s business activities and further assist it in the achievement of its goals and objectives. The funds will be used primarily: 4
1. To develop a national sponsorship and racer contingency sales organization; 2. To develop a national race event production/logistics organization. 3. To build a management team that will allow APBA Offshore to grow and develop its national and regional racing series. 4. To allow Offshore to expand the scope of its television, public relations, promotional, membership, retail sales and internet programs. IV.
ECONOMICS OF OFFSHORE
Offshore has experienced tremendous growth since 1998 when the Category still operated under the control of APBA. Specifically, in 1998 series sponsorship sales were less than $350,000 and total revenues were less than $750,000. The average fleet count at national races was less than 50 boats and the World Championships that year yielded only 68 boats. In 1998 APBA had two primary competitors in the offshore powerboat racing sanctioning body business: US Offshore (USO) and Super Boat International Productions, Inc. (SBI). Both organizations achieved similar results that year. In 1999, which was the first year under current Chairman Michael D. Allweiss and the last year the Category operated under APBA control, series sponsorship sales increased to approximately $750,000 and total revenues exceeded $1million. The average fleet count increased to over 65 boats per event and the World Championships had over 100 boats in attendance. In 2000, Offshore’s first year of operations, sponsorship sales exceed $1million and total revenues were slightly less than $2million. Offshore had a tax loss of only $187,000. The average fleet count increased to over 90 boats per race and 146 teams attended the World Championships. Offshore’s infrastructure also grew completing the year with 3 full time staffers and 40 total national staff members. In 2001 Offshore’s sponsorship revenues remained at 2000 levels despite the severe downturn in the U.S. and World economies. Total revenues, however, exceeded $2million for the first time in APBA history. The financial bottomline for Offshore improved substantially over the previous year due to Management’s decision to drop its TNN television package in favor of increased coverage on Speedvision while maintaining its full compliment of sponsors. The loss from operations was approximately $100,000. The total Pro Series boat count was down slightly in 2001 due primarily to class consolidation and the economy. In 2002 sponsorship sales declined approximately 40% due to a number of factors including the continued economic recession, the severe decline in the sponsorship sales 5
and advertising markets overall, the virtual depression experienced by Offshore’s primary sponsorship market, the high performance marine industry, and the inability of Offshore’s outside sales people and new VP of Sales to create any incremental sales since being retained in 2001. Overall revenues also decreased dramatically due to a further reduction in the number of teams able to participate this season caused by the continuing economic recession. Accordingly, Offshore has cut expenses and raised another $150,000 through a capital call of its current shareholders. Offshore further will drastically reduce its expenses beginning in July of 2002, by further eliminating staff, reducing the pay of its remaining staff and hiring a new CEO who can help with sales and cost containment, reducing its television production commitment by 50%, and eliminating 2 events (St. Petersburg and Atlantic City). With these timely reductions in expenses and an expected fully funded event in the Bahamas in October, Offshore will be able to meet its remaining financial commitments for this year. By comparison, as of this season, USO is out of business and SBI has lost virtually all of its corporate support and national television exposure and is averaging approximately 20 boats per event. IV.
SHORT TERM TACTICAL PLAN
With respect to the near term (i.e. this year) Offshore intended to raise $500,000 in additional capital through its current investors. When the Members founded the business, the plan was to initially capitalize it with $500,000 and a total initial commitment of $1,000,000. Since the inception of the company, the Members have bought out one of the original Members thus reducing the actual initial paid in capital amount to $400,000 and the total commitment to $900,000. The original plan also called for the company to reach profitability within 5 years. Unfortunately, Offshore did not anticipate the severe decline and ultimate recession that has afflicted the U.S. economy for the past two years. The additional $500,000 would have funded the company’s programs this year, however, since only $150,000 has been raised to date Offshore will implement the cost reductions outlined above. V.
FUTURE OF OFFSHORE
As Offshore moves ahead, it is poised to become the premier boat racing sanctioning organization in the United States as NASCAR is to stockcar racing, NHRA is to drag racing, and Formula One is to open wheel racing. Offshore has no real competition. The lack of competition and the now extreme financial barriers for third parties to enter the business should allow it to grow and become a financially successful motorsports entertainment property to the benefit not only of its Members but all of its business partners including racers, sponsors and participating manufacturers. 6
INTRODUCTION Background Since its inception in 1903, the APBA has been a not for profit enterprise, which mostly sanctions races in numerous different categories, including offshore racing, throughout the US and Canada. Until 2000 APBA conducted its offshore racing operations through an unincorporated category (the â€œOffshore Categoryâ€?) managed by volunteers and unpaid elected members of the Category. This not for profit business model had left the sport of offshore powerboat racing in a constant state of under capitalization and volunteer workforce overload, which in turn led to constant leadership/management turnover and institutional instability. Furthermore, several groups had left APBA over the past 19-15 years to form their own competing offshore racing sanctioning bodies. Only one, Super Boat International Productions, Inc., remains today and it is almost out of business The Category despite its rich history and affiliation with APBA had for years struggled financially and had also failed to achieve any measurable recognition as a viable
mainstream motorsports entertainment product. The Category also had been unable to keep talented leaders and attract investors and sufficient working capital to grow and prosper. This, in turn, prevented APBA from realizing the full financial and marketing potential of its largest category. In 1999 the Offshore Division made great strides, securing TNN and Speedvision to televise its events and an impressive array of National sponsors. Nevertheless, it once again required a substantial financial and time investment from its then acting Chairman. Historically, the Category Chairmen had been asked to subsidize the sport, and work exceptionally long hours at great personal sacrifice with no help and no expectation of any real financial return, all for the “love of the sport”. That led to constant turnover in the Category’s leadership and thus, a very unstable and uncertain business environment and no real advancement of the sport. The Members of Offshore and the leaders of APBA believed that the solution to these problems was to combine the strengths of a for profit business entity (i.e. smart, proactive, private investors who are closely connected to the sport, sufficient capital, and talented and experienced leadership) with those offered by the APBA’s 96 year history (brand awareness and national/international recognition and credibility). This combination was not possible, however, under the pre-2000 Category structure. Investors would not invest in the APBA as a not-for-profit company because of their lack of control over APBA and APBA’s institutional lack of focus on, understanding of, and ability to operate offshore racing as its core business activity. Investors from inside the sport also were not interested in forming or otherwise investing in an enterprise not affiliated with APBA as that had been tried in the past and always failed. To overcome these problems and give Offshore a chance to thrive APBA and Offshore entered into a 99 year license arrangement which grants Offshore full right, power and authority to exercise all aspects of the sport of offshore power boat racing (and related activities and special events), previously held by the Category, under the APBA name and sanctioning authority on a for profit basis and, correspondingly, that APBA shall not, itself or through any other party or in any manner, conduct any such activities.
Offshore Today APBA Offshore Powerboat Racing, LLC. (“Offshore”) is a Florida Limited Liability Company founded in April 2000. Offshore is a distinct for-profit business organization owned and managed by a small group of current APBA/Category members (the “Members”). Offshore was formed for the purpose of assuming all responsibility and authority relating to, and conducting the foregoing business activities of the Category and other business activities relating to the sport including but not being limited to 8
membership marketing and sales, licensing and merchandising, poker run event sanctioning and production, endurance run sanctioning and production, speed record run sanctioning and production, marine manufacturer show production, television production and promotion of such events, product development and sales, and sponsorship sales. The company currently has several divisions and a single affiliate for its operational activities. There also are currently over 40 members of the Offshore National Staff, a 5 fold increase since 1999. A complete list of staff members along with their respective duties and responsibilities as well as their reporting functions is attached as Exhibit ___. The growth in this infrastructure has allowed Offshore to better serve its members and sponsors, as well as to achieve its competition goals of close, exciting, fair, relatively affordable offshore racing. The Members The Members and their respective interests in Offshore are as follows: Michael Allweiss – Chairman of the Category since 1999 and current Chairman/CEO/ Managing Member of Offshore. Holds a 50% stake in the company. Allen Allweiss -- Former Executive V.P and General Counsel for Subsidiary Operations for the Home Shopping Network. Holds a 10% stake in the company; Gordon Kraft – Former computer software and internet executive currently has numerous business interests in this area. Holds a 10% stake in the company; Mark Nemschoff—Owner/CEO of Nemschoff Furniture, a large Wisconsin based family owned furniture manufacturing company, as well as several other manufacturing related businesses. Holds a 10% stake in the company; Nigel Hook -- Owner Dataskill Communications, a California based computer systems business. Holds a 10% stake in the company; Lee Mills – Former Chairman of publicly traded JanBelle Marketing, Inc. Mills holds an option on 10% of the Company which is contingent on the fulfillment of certain business agreements currently being negotiated by the parties.
Divisions and Affiliates Offshore currently has several divisions and affiliates: 9
APBA Offshore Events – Produces and was established to produce in the future, several different Offshore controlled events such as offshore powerboat races, boatshows, poker runs, speed record runs, endurance runs, and offshore fishing tournaments. APBA Offshore Television – Produces the television programs of Offshore sanctioned or produced events and manages Offshore’s programming and broadcast rights and properties. APBA Offshore Internet – Produces and maintains Offshore’s website and related video and audio broadcasts of Offshore sanctioned/produced events. APBA Offshore Sales and Marketing – Develops, implements and manages all sales/ marketing programs for Offshore, its affiliates and divisions excluding membership products and services. APBA Offshore Membership Products and Services – Develops, implements and manages Offshore’s racing and non-racing membership programs. APBA Offshore Licensing – Develops, implements and manages all licensing relationships for Offshore including merchandising and apparel but excluding racing and marine performance related products and services. Certified Racing Equipment – Administers the technical rulemaking and enforcement programs for Offshore’s racing activities, and also administers the sales and licensing of “APBA Offshore Proven” marine related products and services to race teams and outside third party vendors of boats and marine related products and services. This is a separate Florida corporation that holds a license from Offshore to perform its functions.
Management Executive Management Offshore’s executive management staff consists of the following individuals: Michael Allweiss – Mr. Allweiss, 39, is the Chairman/CEO of Offshore and manages every facet of the company’s day to day activities and is responsible for the formulation and implementation of the company’s strategic plan. He became Chairman of the Category in 1999 and then succeeded to his current position when Offshore was formed in 2000. He has served as a member of the Category governing board as well as legal counsel for the Category. He has also served on APBA’s national legal committee and currently serves on APBA’s national board of directors. He is an accomplished racer as 10
well achieving boat racing’s highest honor in 1998 when he was inducted into the APBA Hall of Champions. Martin Sanborn – Mr. Sanborn, 40, is the VP of Sales and Marketing for Offshore. He was retained in July of 2001 after a very successful career with Matco Tools and as the top sales manager for Fountain Powerboats. Mr. Sanborn manages all sales and marketing activities of the company. He is an accomplished racer having won a World Championship and set a World Speed Record at over 140mph. He previously served as the Executive Director of Factory Racing for the Category and has successfully secured numerous sponsorships for his own racing programs.
National Staff Chiefs Other key members of the Offshore team include: Randy Hegwood – Mr. Hegwood is the National Race Operations Director. His duties include general race logistics management and implementation functions for Offshore at Pro Series events. Lynn Eason – Ms. Eason serves as the Executive Assistant to the CEO and VP of Sales. She also implements and manages the implementation of the Pro Series sponsorship fulfillment program; and acts as the liason between executive management and executive staff and related support staff/personnel, Offshore and Pro Series sponsors, the television division, other divisions and affiliates.
Steve Miklos – Mr. Miklos serves as Offshore Competition Director and the General Manager for CRE. He is responsible for the formulation of technical and competition rules and policy as well as the products and services for CRE. He was largely responsible for the creation of the Factory Series and current Super Series technical and competition rule platforms. As a racer, Miklos is a multi-time race winner, regional champion and 2 time world speed record holder. He still competes on a regular basis to stay connected to the sport. He also is the Chairman/CEO of several successful small businesses. Richard Mann – Mr. Mann is the Executive Producer of APBA Offshore Television. He has over 20 years experience in the television production industry. He is responsible for the production, assembly and management of the television production crews, television production logistics, distribution, sales and marketing, content and creative for the shows and sponsorship television benefits fulfillment. Jim Poplin – Mr. Poplin serves as the Chief Medical, Safety and Rescue Officer for Offshore. He is responsible for the design, implementation and management of the national offshore medical, safety and rescue programs and also manages the Pro Series event medical and safety activities and acts the Pro Series Risk Manager. Mr. Poplin is a retired firefighting paramedic and works outside of boat racing as the Chief of the Hamilton County, Tennessee Special Tactics & Rescue Services, a special operations tactical team on which many Offshore rescue team members also share membership. Mike Tomlinson – Mr. Tomlinson serves as the Chief Referee for Offshore and has done so for the last 10 years. As such he manages the rulebook and rule enforcement process. Paul Abreu – Mr. Abreu serves as the Chief Technical Inspector for Offshore and has done so for three seasons. He manages the technical inspection process at Pro Series Events. Dee Kimes – Ms. Kimes serves as the Chief Scorer for Offshore and has done so for the past 15 years. She manages the timing and scoring process at all Pro Series events.
THE BUSINESS PLAN OVERVIEW Over the next four years, Offshore’s primary strategic goal and objective will be to become the premier offshore boat racing sanctioning body in the United States and thus a 12
well recognized, highly respected, and financially successful motorsport entertainment property. To do this Offshore must concentrate on developing its core sanctioning body business. The elements of this business: o Racing Product – includes racing classes and related technical and competition rules, as well as management and support personnel. o Race Event Organization – includes sanctioned events produced by independent organizers and by the affiliated events company. o Membership – includes racer and consumer programs, products and services. o Sponsorship Sales – includes series, event and contingency programs. o Television – includes the production and distribution of race events related television programs. o Internet – includes the design and maintenance of an official website which delivers relevant up to date information, and audio and videocasts of its events to current and potential members, sponsors, and consumers, as well as potential members and sponsors. o Promotion of the Business – Public Relations, Publicity and general promotion of the business and its activities. Management firmly believes that for the business to grow and be successful, the sanctioning body must be strong and stable. Thus, the goals and objectives for 2002-2005 can be summarized as follows: o Near Term – 2002 Season Raise $500,000 in operating capital Complete the 2002 schedule but eliminate St. Petersburg and Atlantic City and add the Bahamas Collect remaining accounts receivable Resolve Crouse and TNN litigation Create $199.00 premium fan/consumer oriented membership and sell 150 of such memberships by year end Communications • Create email database and identified groups for mass communications for racers, members and staff. • Vision o Short Term – 2003 Season National Sponsorship Sales Contingency Sponsorship Sales Event Sponsorship Sales Television Internet 13
Promotion and Public Relations
o Intermediate Term – 2002-2005 Class Rules Development Technical Rules Development Competition Rules Development Staff Schedule Membership National Sponsorship Sales Contingency Sponsorship Sales Event Sponsorship Sales Television Internet Promotion and Public Relations Capital Raising Campaign o Long Term – 5-10 Years Exit Strategy
NEAR TERM PLAN – 2002 Season Capital Needs With respect to the near term (i.e. this year) Offshore needed to raise $500,000 in additional capital in order to maintain its growth and fulfill its television and schedule commitments. When the Members founded the business, the plan was to initially capitalize it with $500,000 and a total initial commitment of $1,000,000. Since the inception of the company, the Members have bought out one of the original Members thus reducing the actual initial paid in capital amount to $400,000 and the total commitment to $900,000. The original plan also called for the company to reach profitability within 5 years. The business suffered a loss of $187,000 in its first year of existence. In 2001 while it was expected to earn a small profit, an unexpected loss of $70,000 in revenue due to Amercian Express’s anticipated failure to pay the balance of its sponsorship obligations, as well as a failure of certain other sponsors to pay their obligations in full or otherwise on a timely basis, caused the company to lose approximately $80,000 for the year. This year Offshore has experienced other losses such as non-payment or delayed payment of sponsorship obligations due to declining economic conditions, as well as much greater event production expenses relating to the events it produces on its own such as Daytona, 14
Cape Cod, Savannah and Cleveland. Offshore also planned to produce events in Atlantic City and St. Petersburg. Remaining Races Cleveland The Cleveland race is on schedule. The event organizer anticipates approximately $100,000 in event sponsorship sales as well as approximately $100,000 in concession and admission revenue. Offshore has included in its budget a $100,000 sanction fee and no direct expenses for the production of the event. Atlantic City Insufficient sponsorship sales, a lack of alternative revenue sources and insufficient event production capital necessitate the cancellation of this event for the 2002 season. Eric Treadwell has indicated a desire to produce the event in 2003 but unless there is guaranteed advanced funding and a sanction fee the event should not be added to the 2003 schedule. St. Petersburg For the same reasons this event must be cancelled for the 2002 season. Key West The event is on schedule and promises to be better than last year. We are working to produce a concert featuring Nick and Aaron Carter as well as other celebrities. We have secured the use of the Truman Annex and Outer Mole as the Dry Pits and spectator venues. Bahamas We have received a written Letter of Intent from the Bahamian government to stage an event on Grand Bahama Island this October 18-20. The financial commitment is $325,000 and we are awaiting the signed contract. We also have submitted a proposal to the primary resort group on the island, Our Lucaya, which has preliminarily agreed to a sponsorship package in the $300,000 range. We also intend to present a proposal to the Grand Bahama Port Authority for a sponsorship in the $300,000 range. This event is critically important to our financial success this year. We likely will designate this event as our National Championships. Racing Product â€“ Classes, Rules and Staff 15
Overview Offshore must continue to refine its class structure to consolidate the classes that are no longer yielding at least 10 boats at each Pro Series event, and create new ones based on production boats and spec engine packages, to encourage the participation of the major boat manufacturers and engine builders and marinizers such as General Motors, Ford, Chrysler and Mercury. Offshore must continue to develop a competition based rules model for its racing operations and activities that emphasizes: o relatively low cost, affordable, “level playing field” racing for its competitors, and participating marine industry manufacturers; o broad participation of the marine industry from a competition and financial perspective; and o close, exciting competition for its racers and fans, that yields multiple winners throughout the various racing series. Offshore must also continue to develop a professional staff that effectively develops, implements and manages the rules making and enforcement process with fairness and integrity. Rulebook – Offshore completely revised and restructured its poorly organized rulebook prior to the 2002 season.
Racing Class Development For 2002, the goal was to develop the racing divisions/classes to look like this:
SUPER SERIES •
Catamarans o Super Cat (designated by numbers only)
The Boats: Super Cat is the premier class of Offshore consisting of 9500lb twin engine racing catamarans (canopies only) ranging from 38' to 40'. To control costs and increase competitive balance the boats must be produced from dedicated molds and pre-approved
for competition by Offshore. Top speeds are approximately 135mph. Manufacturers include Marine Technologies, Motion and Douglas Marine Skater. The Engines and Drives: The "Super Cat" engines are 510cid, 750hp, engines utilizing specified aluminum Brodix heads and intake systems, and single Barry Grant carburetors. To increase competitive balance virtually no engine modifications are allowed. Builders include Mercury and Sterling Performance. Only the Mercury #6SSM drive is permitted on new boats through the 2003 season. o Super Cat Light (designated by numbers only) The Boats: Slightly smaller versions of the Super Cats, these boats are 8000lb twin engine racing catamarans (canopies only) ranging from 32’-36’. To control costs and increase competitive balance the boats must be produced from dedicated molds and preapproved for competition by Offshore. Top Speeds are approximately 110mph. Manufacturers include Skater, Eliminator, Motion and Spectre. The Engines and Drives: The engines are stock Mercury Racing 502cid HP500 EFI's. All engines are dynode, sealed and certified to be within a certain specification by Offshore through CRE, to ensure competitive balance. Only the Mercury Bravo One and #6SSM drives may be used. o Super Cat Light Outboard Twin and Triple Engine (designated by numbers only) The Boats: Slightly smaller versions of the Super Cats, these boats vary in weight and length depending on the number of engines and other factors delineated in the rules. For the most part the boats are twin and triple outboard powered racing catamarans (canopies only) ranging from 28’- 37’. To control costs and increase competitive balance the boats must be produced from dedicated molds and pre-approved for competition by Offshore. Top Speeds are approximately 110mph. Manufacturers include Skater, Eliminator, Motion and Spectre. The Engines and Drives: The engines are stock Mercury Racing 2.5 outboards.
V-Bottoms o Super Vee (designated by numbers only)
The Boats: Super Vees are the biggest and fastest of Offshore’s V-Bottom classes. The boats are 9000lb twin engine racing v-bottoms (canopies only) ranging from 38’- 40’. To control costs and increase competitive balance the boats must be produced from 17
dedicated molds and pre-approved for competition by Offshore. Top Speeds are approximately 115mph. Manufacturers include Fountain, Wellcraft and Extreme. The Engines and Drives: The "Super Vee" engines are 510cid, 800hp, utilizing specified aluminum Brodix heads and intake systems, and single Barry Grant carburetors. To increase competitive balance virtually no engine modifications are allowed. The engines are virtually identical to the Super Cat engines with a slightly larger carburator. Builders include Mercury, Baker Engineering, Fluke Marine and Sterling Performance. Only the Mercury #6SSM drive is permitted on new boats through the 2003 season, although the boat known as Tommy Bahama remains eligible to compete with shaft drives. The Pier 57 boat with BPM drives that competed in 2001 remains eligible as well provided it competes in a 2002 event. o Super Vee Light 2 (twin) (designated by numbers only) The Boats: Slightly smaller versions of the Super Vees, these boats are 8000lb twin engine racing v-bottoms (canopies only) ranging from 32’- 39’. To control costs and increase competitive balance the boats must be produced from dedicated molds and preapproved for competition by Offshore. Top Speeds are approximately 100mph. Manufacturers include Fountain, Extreme, Cigarette, and Wellcraft. Donzi and Outer Limits also are expected to field entries in 2003. The Engines and Drives: The primary engine is the GM Vortec HP3 – 8100 496cid that was validated by APBA Offshore during the 2001 season. The engine is a fuel injected 496cid creating approximately 525hp. The engine is marinized by CRE through its primary sub-contractor Innovation Marine in Sarasota, Florida. The engines are CRE dynoed, sealed and certified for competition. The only drive is the Mercury BravoXR drive, although the Imco lower is permitted and one boat with Mercury Racing #5 drives (Pier 57 Stainless Marine) is also grandfathered for competition. o Super Vee Light 1 (single) (designated by numbers only) The Boats: Slightly smaller versions of the Super Vee Light twins, these boats are 5000lb single racing v-bottoms (canopies only) ranging from 28’-30’. To control costs and increase competitive balance the boats must be produced from dedicated molds and preapproved for competition by Offshore. Top Speeds are approximately 90mph. Manufacturers include Extreme, Phantom, Activator, Warlock and Eliminator. The Engines and Drives: Same as the SVL twins. FACTORY SERIES – o Factory 2 (designated by F2) 18
The Boats: These boats are stock 8000lb, 30' to 39' twin engine production based vbottoms. These boats appear virtually identical to the pleasure performance v-bottoms that can be purchased from a local new boat dealer. To control costs and increase competitive balance these boats must be produced from the same dedicated molds as their production counterparts without modifications. Minimum production number and dealer network requirements ensure that the boats are not dedicated raceboats produced by nonmainstream builders. Top speeds are approximately 90 mph. Manufacturers include Baja, Fountain, Cigarette, Formula, Hustler, Warlock and Eliminator. The Engines and Drives: The engines are stock Mercury Racing 502cid HP500 EFI's. All engines are dynoed, sealed and certified to be within a certain specification by Offshore through CRE, to ensure competitive balance. Only the Mercury Bravo One drive may be used. o Factory 1 (designated by F1) The Boats: Slightly smaller versions of the Factory 2 boats, these boats are stock 4000lb-5000lb, 24' to 30' single engine production based v-bottoms. These boats appear virtually identical to the pleasure performance v-bottoms which can be purchased from a local new boat dealer. To control costs and increase competitive balance these boats must be produced from the same dedicated molds as their production counterparts without modifications. Minimum production number and dealer network requirements ensure that the boats are not dedicated raceboats produced by non-mainstream builders. Top speeds are approximately 83 mph. Manufacturers include Activator, Baja, Fountain, Cigarette, Formula, Hustler, Warlock and Eliminator. The Engines and Drives: The engines and drives are the same as the Factory 2 boats. OUTLAW SERIES This is Offshoreâ€™s grass roots divisional racing series and caters to the high performance offshore sports boat market. The purpose of the series is to develop new racers for the professional classes. Indeed, many of todayâ€™s top professional racers started their racing careers in these classes. One of the most exciting aspects of offshore performance powerboating is the great diversity of engine and boat products offered to consumers. The Outlaw Series will be an exciting yet cost effective way to showcase these products while complimenting the featured racing offered by the Factory and Super Series boats.
o Reindl Powerboats V-24 Series 19
The Boats: Exclusively 24’ Ocke Mannerfelt Design V-24’s manufactured and sold by Reindl Powerboats. Known as the “Bat Boats”. The Engines and Drives: Currently the Volvo Penta 315hp smallblock and DPX sterndrive. The plan is to convert the boats to the new 320hp Volvo diesel currently under development in Sweden.
Outlaw Performance Series o o o o o o
PX – 110mph+ - Any boat and engine combination P1 – 100-110mph - Any boat and engine combination P2 – 90-100mph - Any boat and engine combination P3 – 80-90mph - Any boat and engine combination P4 – 70-80mph - Any boat and engine combination P5 – 60-70mph - Any boat and engine combination
The Super Series and Factory Series are the premier racing series. There are 7 total classes in these series and 8 classes in the Outlaw Series for a total of 15 classes in Offshore. Technical Rules Development Prior to the 2002 season Offshore took the following measures: o The Super Cat and Super Vee engine and boat rules remained unchanged for the 2002 season. Nevertheless, the engine rules are currently under review and Offshore is talking to Mercury Racing about adopting a one-engine program such as the one it uses in the Factory Series for Super Cat. The purpose would be to further increase competitive balance while reducing costs for the competitors and making it easier for new teams to join the circuit. o Amended its Super Cat Light Inboard boat homologation technical rules to mirror the Super Cat rules except length and weight rules remained the same. This allowed manufacturers to introduce new models and thus increase participation in the class; o All Factory 2 rules remained unchanged; o All Factory 1 rules remained unchanged; o Commenced analysis of approving the new GM Vortec HP3 - 8100 and Mercury Racing HP525 as approved Factory Series and Super Cat Light Series engine 20
packages. The process is ongoing. If approved for Factory V-Bottom racing weight and other adjustments will be necessary to maintain competitive balance among the teams opting to continue to race with their HP500 engines; o Commenced consideration of removing Outlaw A and B classes and placing those boats in the Outlaw P division as these classes are not producing boats at Pro Series events. This consolidation will make the sport easier to explain and understand and will help the event organizers save money on unused trophies; o Approved the new Super Vee Light classes, in both single and twin engine configurations. Competition Rules Development The primary focus of the competition rules is the development of shorter racecourses to enhance racer and marine mammal safety, and better spectator viewing and television programs. The shorter courses enhance rescue response time and the effectiveness of our marine mammal watch programs. The courses also enhance spectator viewing and the television programs because of closer more exciting competition that results. All racecourses should be no more than 4-6 miles. Offshore will continue to monitor the competitive balance in all of the classes and make rule changes when and where necessary to ensure that the racing remains exciting and close. Offshore is considering the following rule changes and event format changes: 1.
Yellow Flag Procedural Amendment – Enact a rule clarifying that although teams are permitted to race to the start/finish line in the event of a yellow flag situation, they are required to race with extreme caution when coming upon an accident scene and further prohibiting initiating, attempting or completing a pass within 100ft. prior to or after the accident scene. Pole Position Qualifying – For the Super and Factory Series Sunday racing classes only. Prior to the Cleveland Race Offshore intends to enact a qualifying procedure that uses a measured speed run or timed lap competition. The competition will be held during the “Happy Hour” period on Saturday afternoon during race weekend. Options include one boat on the track at a time; multiple boats on the track using a staggered start procedure or multiple boats on the track using a multi-boat start procedure similar to the normal race starts. A points system will be created for qualifying finishing order. Inverse Start Provision – For the Super and Factory Series Sunday racing classes only. Commencing in Corpus Christi Offshore intends to enact a rule
that requires the winning boat from the immediately preceding race to start at the extreme outside of the starting grid at the next race. Penalties – Offshore intends to enact a penalty assessment provision that allows it to deduct points from a team for certain violations such as technical or course infractions.
Racing Product – Sanction Agreement, Events, Schedule and Staff Overview Besides the actual boatracing, the most important element of the racing product is the event and related activities surrounding the on-water competition during the race weekend. Since the inception of the Category the events have been produced by mostly local enthusiasts of the sport rather than experienced, professional event organizers. Most events were established and produced without much strategic consideration of the venue’s value either in the long or short term. Most of the events, moreover, were produced without written sanction agreements. This, in turn, often led and continues to lead to uncertainty over the parties’ respective duties and responsibilities, and thus miscommunications and ultimately disputes. With some events, in particular Fort Myers Beach and Sarasota, and to a lesser extent Corpus Christi, Texas, there developed an adversarial relationship between the event organizer and Offshore that became very unproductive and ultimately led to the parties parting ways. To be successful in the future, Offshore must: o Develop a written sanctioning agreement and require all producers, including Offshore’s Production entity if it is an Offshore produced event, to sign the agreement before approving an event for the Pro Series schedule. Offshore has developed the agreement and it is in place for the Corpus Christi event only as of now; o Secure relationships with experienced, professional event organizers to produce annually 10-12 high quality family oriented entertainment events, which feature offshore powerboat racing, and a stable consistent racing schedule, on a national basis. o Stage these events in major metropolitan areas or destination locations in North America, the Caribbean and abroad. o Continue to develop a professional staff that effectively manages the offshore racing specific logistics and operations at the events.
o Develop an event production staff that can assist the local producers in the sales, marketing and production of the overall events, in particular in the area of venue selection and layout, government relations and pre- and post event production meetings with the local production team and officials. The Sanction Agreement In an effort to bring some consistency and order to its business, Offshore has developed a uniform sanction agreement, including a supporting handbook, for use with its event organizers. All event organizers will be required to execute this agreement as a condition to producing a Pro Series event, and it shall govern the business relationship between the parties and thus determine their respective duties and responsibilities. The goal will be to secure a written agreement with each event organizer in 2003 using this new form, a copy of which is attached hereto as composite exhibit _. The Events The goals for 2003 are as follows: o Sanction 6-8 Pro Series events. o Ensure all events are self-funded. o Establish a new minimum $100,000 sanction fee for all IEO events, which shall include prize money. o Establish venues in major metropolitan markets or destination communities. o Form a new Offshore affiliate events/promotions company that will:
Produce the Daytona Beach, Marathon, Savannah, Bahamas, Tampa Bay and Key West events. Provide expert advice and assistance to the IEO events. Develop the new race event template to be utilized by all events and incorporated into the sanction agreement and handbook. Perform the task of securing new venues. Develop new revenue generating special events, such as a national concert tour and corporate brand promotions to be incorporated at the race events.
o Commence development and begin implementation of the APBA Offshore event template to include the following elements: 23
20 Banners bearing the Offshore logo to be posted throughout the venue. 20 Flags bearing the Offshore logo to be posted around the venue. The “Offshore Compound” to include the Volvo Tractor, High Tech Trailer, Offshore Motorcoach, at least one merchandise trailer, the banners and flags, and the CRE experience. “APBA Offshore Experience” (formerly known as the Dry Pits) template designating specific areas for the Super Series, Factory Series and Outlaw Series boats. Season Series credentials including parking passes issued to all Offshore Staff. Uniform schedule of events. Consistent white uniforms for national staff bearing their names and titles, Offshore logo on left front, and patches of primary series sponsors.
o Produce timely, accurate online driver’s packets. o Maintain current entry fee schedule and meet 2003 budget goals.
The Schedule The goals for 2003 are as follows: o Set the schedule, consisting of events that satisfy the event goals and objectives, by no later than October 1, 2002. o Set the 2004 schedule by October 1 as well in order to stabilize the schedule for the longterm. o Secure written sanction agreements with all event organizers. Currently, the possible schedules are as follows:
PROPOSAL #1 Race # 1.
Date April 24-27
Location Daytona Beach, FL
Marathon, FL; Fort Myers Beach, FL
Cape Cod, MA; Fort Myers Beach, FL Corpus Christi, TX; Tampa Bay, FL
Fort Myers Beach, FL
Corpus Christi, TX
September 19-21 or 26-28
St. Petersburg, FL; Tampa, FL; Atlantic City, NJ
National Championships October 10-12 or 17-19 Grand Bahama Island,
World Championships November 17-23 Key West, Florida
============================================================= The plan to achieve the scheduling goals is as follows: First, we must address the current racesites that do not fit the event template and/or are unprofitable. o Cape Cod Offshore spent approximately $28,000 in direct costs on the event in 2002 plus television, staff related costs and prize money. According to the promoter, Maurice Wyman, the local committee has another $3000-$7000 to remit to Offshore thus reducing o Corpus Christi Offshore loses money because the sanctioning fee and boat attendance (which impacts entry fee revenue) are too low, and travel and local accommodation costs are high. Offshore also has no additional revenue sources there as we do not receive a percentage of event gross revenues, and we are 25
prohibited from securing independent deals with hotels and other local sponsors. There is little chance the boat attendance issue will ever change and unless the event organizer agrees to pay the new sanction fee and/or otherwise increase our revenue sources, the longterm prospects of this event becoming profitable for Offshore are low. The event is also not in a major metropolitan or destination area. The primary reason to keep the event is for schedule stability as it has been a part of the Offshore schedule for over 5 years. Accordingly, Allweiss and the event organizer, Elaine Motl have a meeting scheduled for the Cleveland race to discuss options. If the event is to continue, however, Motl will be required to execute the new sanction agreement.
o Sarasota Offshore loses money as well although the losses are not as steep as in Corpus Christi. The primary reason is the low sanction fee. Moreover, Sarasota officials have become increasingly uncooperative when dealing with racers and Offshore personnel. Their focus is almost entirely on their charity and they do not see the value of the race as part of the overall event and they thus behave accordingly. The boat count in Sarasota is also not as strong as it once was when compared to our other events as these events have improved. The racecourse is too long and too far from the beach for viewing purposes. The weather is a consistent problem. Further, the business deal is simply unfair. In the last two years Sarasota has raised over $600,000 net for the charity while Offshore has lost money. Historically the event has made money and Offshore has lost money. The problems are compounded by the death of a sea turtle during this year’s event which is now causing the environmental regulatory agencies to closely scrutinize the timing and local control aspects of the event. Kevin Brown’s poor treatment of these officials and Mote Marine officials (manatee watch program coordinators) may cause us problems with our other Florida events unless we distance ourselves from them. Finally, these problems are further compounded by the fact that the Fourth of July holiday likely offers us greater opportunities in other communities. 26
We recently received a letter from Sarasota advising us that they believe we have one more year left on a three year deal at the lower sanction fee BUT that they cannot tell us for another 3-4months whether they will even be able to produce the event because of the environmental issues. We have notified them that there will be no event unless the course is shortened to 5-6miles. In another letter we advised them that since they cannot guarantee us that they can produce the event, we cannot guarantee them the 4th of July date or that we can award them a Pro Series event. The primary reason to keep the event is its 17year history as the premier event of Offshore racing. Many of our competitors identify with the event and likely will not want us to leave the venue unless it is for a far superior event with big prize money.
o Fort Myers Offshore loses money here again because of the low sanction fee. We had an agreement with them to increase the sanction fee to $30,000 and pay the full $50,000 prize purse for 2001 but they breached that agreement and have not responded to our notices regarding same. The event does not meet our requirement of major metropolitan or destination areas. We have notified them that we will not be returning there in 2002. The reason to keep the event is its history and the logistics were drastically improved this year. For the short term, proposed schedule #1 provides the most preferable situation because it would give Offshore a stable schedule for 2002 and guaranteed revenue. To replace these races likely will require us to finance new events which will be more expensive than keeping these races. This would also enable us to concentrate on the Detroit event for 2002 and work on securing the new venues we want for 2003 and beyond. This means proposed schedule #1. Second, we will address the other events on the proposed schedule #1 as follows: o Daytona Martin Sanborn is communicating directly with Glyn Johnston at the Daytona International Speedway (DIS) regarding the following: • Developing the event plan which will entail creating the World’s Largest Toybox on the ground in DIS to include a high performance boat and marine equipment show, a general boatshow featuring local dealers, rv show, 27
motorcycle show, personal watercraft show, and several other APBA category exhibition events which will occur on the lake in DIS such as Prop Formula One, Outboard dragboats, OPC and others. The plan deadline is September 1. Martin will be responsible for executing the racing exhibition and high performance boat and marine equipment show portions of the plan as well as managing DIS’s execution of the other parts of the plan. Lynn Eason and Carrie Rasmussen will assist. •
Developing the sales and marketing plan for DIS event sponsorships as well as exhibitors. We will use a shared revenue and commission formula with DIS. The deadline for the plan is September 1. Martin will be responsible for executing the high performance boat and marine equipment show portions of the plan as well as managing DIS’s execution of the other parts of the plan. The attached budgets reflect the target revenue and expense figures.
Martin and Carrie are also working with Glyn Johnston and Don Large to develop the race event plan. A local committee has been formed and is operating, meeting at least twice per month now. We are scheduling a meeting for the week of August 20 to discuss the operating model for the racing aspect of the event. Our long term preference will be for the local committee to assume the role of an IEO. This year the event likely will remain an Offshore produced event using the assistance of the committee for local sponsorship procurement and race event logistics. The specific duties and responsibilities of the local committee and Offshore, including revenue expectations, target sponsors etc. must be set forth in the plan. We must also assist the local committee in the development of local sponsorship packages. We have our sales materials and sample price list but most develop the specific local packages.
o Detroit Offshore is working with General Motors on an event title sponsorship package for $150,000 to help fund the event. We also are working with Mike Raguso, a race event organizer for the Great Lakes Silver Cup Series with strong ties in the Detroit area, and Teresa Ewbanks, the IEO in Cleveland, to produce the event. We have a meeting scheduled for August 9th with the USCG regarding the timing, course location and permitting for the event date set forth in proposed schedule #1, above. After the Cleveland 28
event we will decide whether to secure an IEO to produce the event (perhaps Raguso and Ewbanks forming an IEO company to produce the Great Lakes Pro Series and select divisional races) or make it part of the Offshore event/promotions division or new affiliate entity. o Cleveland We will secure a written sanction agreement with the IEO for 2002 and 2003. o Mississauga We will secure a written sanction agreement with the IEO for 2002 and 2003. o Atlantic City This likely will remain an Offshore produced event for 2002. We will explore an opportunity to conduct this event in conjunction with the annual Beach Fest that is produced by Kay Selig. Once the 2001 event is secured we will begin working with Selig and Trump on 2002-2003. We will also work with Dan DuVall to evaluate whether this event is one that can be sold to an IEO. o St. Petersburg This event may shift to an Offshore produced event. This event may be moved to Clearwater if the business deal currently being negotiated with the City of St. Petersburg cannot be secured. We will secure a written sanction agreement for 2002 and 2003. o Key West We are working on a 99year license arrangement as well as several other alternative scenarios. Third, we must explore the other venue options in the event that any or all of the Sarasota, Corpus Christi, and Fort Myers Beach events do not return.
Offshore must produce a plan to build a comprehensive, valuable, consumer oriented affinity membership program consisting of racers and non-racers (consumers). The current total membership of Offshore, consisting of racers, race officials and non-racers, is approximately 1500. The purpose of the plan is to increase its annual membership revenue and significantly grow the Company’s customer base in order to efficiently and cost effectively serve its licensing and merchandising program and thus increase its overall net earnings. Other sanctioning bodies such as NHRA (85,000 members), SCCA (55,000 members), and the AMA (250,000 members), have done this with great success. The membership goals of Offshore for 2002 are as follows: o Create a premium fan/consumer oriented membership Target price of $199.00 Target cost (including amortized development and implementation, fulfillment and commissions) of $99.99/membership Target number of members is 2000 (150 for balance of 2001) o Increase general participant membership by 10% o Maintain membership in other categories o Create a low cost fan/consumer oriented membership Target price of $24.99 Target cost (including amortized development and implementation, fulfillment and commissions) of $12.00/membership o Increase the net earnings of the overall membership program from the current $52,150.00 to $212, 170.00.
13. Develop a strong national sponsorship and racer contingency sales program 14. Produce first class, high quality, exciting television entertainment through its television division, APBA Offshore Television. 15. Produce an exciting, interactive, informative and entertaining website and internet presence. 16. Produce high quality, comprehensive, product licensing, merchandising and apparel programs. 17. Produce effective and informative public relations and media programs. 18. Produce a comprehensive, valuable, consumer oriented affinity membership program consisting of racers and non-racers (consumers). 30
19. Produce these events, races and programs in a manner that enhances and promotes the APBA Offshore brand and the sport of offshore powerboat racing for the benefit of all of our business partners. Offshore will seek strategic licensing relationships with qualified business partners to help it design and execute many of these programs. Additionally, Offshore seeks approximately $1.0 million in financing to enhance the operations and management of Offshore’s business activities and further assist it in the achievement of its goals and objectives. The funds will be used primarily: 5. To develop a national sponsorship and racer contingency sales organization; 6. To develop a national race event production/logistics organization. 7. To build a management team that will allow APBA Offshore to grow and develop its national and regional racing series. 8. To allow Offshore to expand the scope of its television, public relations, promotional, membership, retail sales and internet programs.
OFFSHORE’S CORE BUSINESS – SANCTIONING BODY
The APBA has been sanctioning offshore powerboat races throughout the United States and Canada for over 40 years. In 2000 the APBA will have sanctioned 9 national events, including a year-end World Championship, and 16 regional races, in California, Florida, Maryland, Canada, Texas, Michigan, Ohio, Arizona, and New Jersey. The principal “profit centers” relating to Offshore’s core sanctioning body business shall be as follows: 3. Series Sponsorships 4. Competitor Contingency Sponsorships 5. Sanction Fees 6. Profit Sharing with Event Organizers 7. Entry Fees 8. Boat Registration Fees 9. Membership Fees 10. Licensing a. Apparel b. Merchandise c. Racing Related Products and Services
Funds Sought, Terms and Conditions
The total amount projected by APBA Offshore to be necessary to properly capitalize the business is $2,000,000 with an initial capitalization of $500,000-$700,000. 5.4
Projected Use of Funds
The Company intends to use a portion of the funds raised to hire the necessary professional personnel, purchase the necessary equipment, and satisfy any shortfalls in the Company’s cash flow needs for the first year of operation 5.5
Revenues and Expenses
Revenues The Company’s revenues initially will be generated primarily from the following sources: 1. Membership Fees 2. Sanction Fees 3. Entry Fees 4. Boat Registration Fees 5. Safety Fees 6. Environmental Fees 7. Officials Fees 8. Marketing Fees 9. Sponsorship Sales 10. Entitlement Fees 11. Television Advertising Fees 12. Retail Sales 13. On Site Concession Sales
Expenses The Company’s main areas of expense will be as follows: 1. Administrative 32
2. Payroll 3. Marketing 4. Advertising 5. Travel and entertainment 6. Television Production 7. Time Buys 8. Promotions 9. Equipment 10.Legal 11. Insurance 12. Race Production 13. Prize and Contingency Purses 5.8
Company Vision and Goals
Vision The Company’s vision is to create a total motorsports entertainment company which produces made for television championship offshore powerboat races and supporting family oriented festivals that benefit worthy charities, on a for profit basis.
Core Purpose The core purpose of the Company will be to establish offshore powerboat racing as a premiere American motorsport which rewards its participants and their families, as well as its fans, volunteers and charities, with a wonderful all around entertainment and life experience.
5.8.4 Core Values •The customer is always right •The racers always come first. •Sacrifice in the short-term and the long-term will take care of itself. •Reward positive attitudes and enthusiasm among employees. •Reward the volunteers. •Cultivate a culture of honesty and integrity within the organization. •Turn problems into opportunities. •Believe and you can achieve. 33
•Teamwork. •Charity and Service
220.127.116.11 Intermediate Goals: 1-10 years • • • • •
Create viable for profit motor-sports entertainment production company. Establish credibility of entity as well as the look and feel of our product. Increase membership to 100,000. Average 100 raceboats at all Pro-Tour Events. Produce 26 1 hour TNN shows each season.
18.104.22.168 Near Term Goals 1999 • • • •
Establish infrastructure Implement business model Implement new racing specs Finalize licensing deal with APBA 2000
• • • • •
Capitalize the entity Successfully produce 4 profitable Pro Tour Series events, each with a minimum of $100,000 in prize money, and at least 10 TNN shows. Increase membership to 10,000. Implement the Super Series, Factory Series and Outlaw Series competition models. Break-even
The Market The demand for motorsports television programming and onsite event entertainment is at an all-time high, as is the performance pleasureboat industry and the powerboating industry in general. Indeed, consumers spent over $10 billion on new and used powerboats and related equipment last year. Similarly, there are now over 34
15 million registered powerboat owners in the US alone and that number is growing. These trends are expected to continue due to the country's ongoing economic expansion and prosperity. There are, moreover, more people than ever travelling to beach resort destinations all over the country for vacations. Major media outlets, corporate sponsors and networks are seeking additional motorsports programming and event marketing opportunities to exploit the demand for new motorsports entertainment. With car racing fully developed through NASCAR, Formula One, NHRA, Indy Car and others, APBA Offshore is distinctly positioned to capitalize on this new demand in the area of professional powerboat racing where there is a complete dearth of viable competition. .2
The Competition Limiting the scope of the industry to domestic offshore powerboat racing, the Company’s competition comes from two other sanctioning bodies: US Offshore ("USO") which is a small club based primarily in the NE United States, and Superboat International Productions ("SBI") which is a small organization based in Key West, Florida. Both organizations were founded by former APBA members for reasons similar to the current split in Indy car racing. Neither organization has any national infrastructure and both have very small membership bases in comparison to APBA Offshore. Also, neither organization has any coherent event marketing program and both suffer from chronic gross under-capitalization. They mainly cater to outdated and non-conforming equipment which is generally uncompetitive or illegal for APBA competition. SBI is also in the final year of a 3 year "time buy" agreement with ESPN2, a cable sports network which is considerably smaller than TNN.
5.10.1 Overview APBA Offshore intends to use a multi-tiered marketing formula similar to that utilized by several successful motorsports entertainment companies. The purpose of this program will be to produce value for sponsors and members, and revenue and, thus, profits for its investors. The formula consists of the following components: • • • •
Event Marketing Television Marketing Local Television, Radio and Print Marketing/Advertising Membership Marketing 35
The primary difference between this and what the Division has done in the past is that the Company will now be well capitalized and fully staffed to take advantage of the incremental opportunities it has missed because of shortfalls in these areas. 5.10.2
In addition to the racing, the event marketing model consists of family oriented outdoor charity festivals supporting the race action. These festivals generally include live music concerts, with at least one national level feature act, kids play areas, sponsor exposition areas, boat shows, dry pit and wet pit areas, corporate hospitality, fireworks shows and "Tastes" featuring the local area's finest restaurants. The model is designed to safely attract the most number of fans as possible in a concentrated area to maximize sponsor exposure. Revenue is generated through national, regional and local sponsorships, as well as admission charges, and sales of food, beverage and retail merchandise like t-shirts, hats, replicas and pins. The model also emphasizes creating a first class event for the racers and their families while treating volunteers as the most valued assets of the organization. All Offshore events will have the same basic look and feel with the Pro Tour Series events larger and more national in scale than the Regional Tour events. .3
Television Marketing The television marketing model consists of televised broadcasts of the racing action on TNN and Speedvision. The TNN shows will feature the Super Boats and Factory Boats from Pro Tour events, while the Regional races including the Outlaw boats will be carried on Speedvision. The shows will depart from the traditional "as if live" coverage model usually accorded boat racing events. Instead these shows will employ a hipper style featuring music, story telling and character development as well as highlights of the best racing action for that event. Revenues from the shows will be generated through the sale of entitlements and straight media advertising.
Local Television, Radio, and Print Marketing/Advertising With its staffing and capitalization needs met, the Company now also will be able to promote its events more thoroughly on a local level through local and regional television, newspaper and radio advertising. The plan also is to work with Cox Enterprises to implement a more comprehensive national media plan similar to that used for the World Championships. Here the Division works with several Cox owned radio stations to sell local and regional sponsorships and lever those stations' relationships with other media outlets to thoroughly promote the event and all of its corresponding activities, as well as the chosen local charity. Of course the Company 36
intends to thoroughly develop and strengthen its relationships with industry media such as Powerboat, Hot Boat, Boating, and Raceboat International, as well as other national non-traditional media outlets. 5.10.5 Membership Marketing Once properly capitalized, Offshore also intends to engage in a concerted membership campaign to grow its non-racing membership. The purpose of the plan is not only to significantly grow the Company’s customer and revenue base, but also to broaden the reach of the sport and its exposure throughout the country. Other sanctioning bodies such as NHRA (85,000 members), SCCA (55,000 members), and the AMA (250,000 members), have done this with great success. This plan will have two components: •
First, Offshore will develop a comprehensive membership benefits package, the value of which will exceed its price, which it will sell via direct mail and voice relay to its target demographic. The package should include such things as: photo id’s; official pins; discounts on race site hotels; pit passes; insurance etc.
Second, Offshore will leverage its relationships with its marine industry sponsors to include these packages as an added value to the products sold to the sponsors' customers. For example, as a method of further promoting Baja products and its relationship with Offshore, Baja will include APBA Offshore membership displays in its dealerships and/or include the memberships as part of each boat sold. This way a sponsor such as Baja can get the word to its customers about its relationship with Offshore and drive these customers to Offshore events where it can continue to develop the customer relationship.
The Company will essentially become a motorsports entertainment company, producing and managing events and television broadcasts of the racing associated with those events. It will sell event and television related entitlement sponsorships as well as offshore racing related merchandise. The Company also will deal with rules and technical issues relating to the boats and the conduct of its races and must deal with all of these issues from an operations standpoint on a daily basis. 6. 7.
7.2 Racing Format 7.2.1
The Company's event marketing model has two inter-related/co-dependent components: •
The first component is the production of offshore powerboat races at select venues throughout the United States and Canada.
The second component is the production of family oriented entertainment festivals held in conjunction with the races which benefit a local, regional, or national charity.
7.2.2 The Offshore Powerboat Races 22.214.171.124 Overview - Currently, APBA conducts national series races and multiple regional series races in the West, Great Lakes, Northeast and Southeast regions of the United States. There is virtually no joint planning or coordination of these various series which has led to scheduling conflicts and other related problems. The Company's ultimate goal is to centralize the planning and coordination process to avoid these problems and thus to annually produce a single major national style professional tour and several complimentary regional style tours, each with its own series title sponsor. 126.96.36.199 The APBA Offshore Professional Tour a) Pro Tour Events: Commencing with the 2000 racing season, the company plans to stage a professional offshore racing tour consisting of 7-9 major race events at strategic sites throughout North America in the Company’s 4 major regions (hereinafter the "APBA Pro Tour" or "Pro Tour"). The Pro Tour will culminate in a World Championships final to be held annually in late November in St. Petersburg, Florida. World Championships will be awarded only to those class winners in each of the Super Series and Factory Series Classes. These events will generally include 2 days of weekend racing. The initial plan calls for the Factory and Super Series boats to test, and qualify or compete for pole position on Saturday, and then race on Sunday during a two day event. The Outlaw Series boats will race on Saturday. The World Championships will be a week long event with qualifying and several days of racing. The Company will also stage large family entertainment festivals, including concerts, food fests, fireworks shows, boat shows and sponsor expos in conjunction with the races. The Pro Tour will be the Company's premier racing tour and Tour Title Sponsor entitlement opportunities will be offered accordingly.
b) Pro Tour Television: The television plan calls for each Pro Tour race to be shown on a tape delay basis on TNN during the 4th quarter of the year in a consecutive week “mini-series” style format. The shows are part of TNN’s Outdoors programming lineup and will appear in one of its most successful time slots – 11:30-12:00am. The purpose of this format is to drive current TNN viewers to watch the show while making it easier for new viewers and fans to find the shows and thus schedule time to watch those shows and follow the series. In the past, the shows from other series such as SBI, have been shown in scattershot fashion on other networks, thus, making it difficult to follow or even find these shows with any consistency. The number of events and shows, as well as the length of those shows should expand as the Company moves ahead. c) Pro Tour Boats: All Pro Tour events will feature the top Super Series and Factory Series boats in the country. As will be discussed below, the top Outlaw Series boats from the region where the Pro Tour event takes place will compete as well.
d) Pro Tour Race Format: i) Number of days and race composition - The racing at each Pro Tour event will be conducted over two days (except for the World Championships which will be held over 3 days), typically a Saturday and Sunday. The Outlaw Series boats will compete on Saturday with the Super and Factory Series boats competing on Sunday in separate races. The schedule of events and times, including drivers meetings, parties, sponsor functions, expositions, festivals, and concerts, will be the same from event to event. ii) Course and race length - To ensure tight racing the boats will compete on courses 5.5-7.5 miles in length. The smaller courses will be oval types and the longer courses will be road types with a number of turns. The Factory Series boats will race for 60-70 miles; the Super Series boats for a minimum of 100 miles; and the Outlaw Series boats for 40-50 miles. iii) Testing – All boats may test during race week according to rules of the road criteria. The Super Series and Factory boats will also appear on Saturday during a designated testing period known as "Happy Hour". The boats will be required to test on the established race course to enhance the entertainment experience for the fans. This will be the only test period on Saturday. The testing period likely will be held in between races. e) Pro Tour Championships: 39
i) Super Series - Pro Tour Championship Points will be awarded to the boats competing in the 2 premier classes comprising the Super Series: Super Cat and Super Vee. The boats accumulating the most points through the entire season in its respective class will be awarded the Super Series Pro Tour Championship for that class. Thus, as an example, if Baja purchased the title sponsorship for the Pro Tour the boat accumulating the most points in Super Vee would be awarded the "Baja Super Series Pro Tour Championship” and so on and so forth. This championship would be awarded in lieu of a national championship as has been given in the past. Again this is similar to NASCAR's model for its Winston Cup and Busch Grand National series where the title sponsors have become synonymous not only with the championships but the racing machines as well (ie. "Winston Cup" and "Busch"cars). The sponsors have thus received a tremendous "brand recognition" value in return for their investment. ii) Factory Series – a. Factory Constructer’s Championship - The participating Factory Class manufacturer for each class accumulating the be returned to the following year’s winner. The Champion will be determined by tabulating the cumulative points of the top 3-5 of a manufacturer’s boats participating at each Pro Tour event. The manufacturer with the most points at the end of the season wins the Championship. b. Factory Racer’s Pro Tour Championship – The boat accumulating the most points in this series will receive the Factory Racer’s Pro Tour Championship. f) Pro Tour Prize and Contingency Money: By year two the Company intends to offer prize purses of at least $100,000 at certain designated events. In 2000 the minimum prize purse will be $40,000 for each Pro Tour event. The money will be distributed on a 60/40 basis between the Factory Series and Super Series. The class in each series with the highest number of boats at the event will receive a proportionately higher percentage of the prize money allocated to that series. Prize purses must be generated through sponsorships. g) Pro Tour Sponsor Opportunities: In addition to television advertising, the company will offer Pro Tour title and presenting sponsor entitlements, Pro Tour Associate and Official product category entitlements, individual Pro Tour race sponsorships (including but not being limited to title, area, product category and event) team sponsorships, and Super Series, Factory Series and Outlaw Series title 40
sponsorships. The sponsors thus receive a tremendous "brand recognition" value in return for their investment. h) Pro Tour Schedule: The proposed 2000 APBA Offshore Professional Tour will be as follows: Race # 1 Race # 2 Race # 3 Race # 4 Race # 5 Race #6 Race #7 Race #8 Race #9 WORLDS -
April 28-30 San Diego, California May 19-21 Fort Myers Beach, Florida June 9-11 Corpus Christi, Texas July 1-2 Sarasota, Florida July 28-30 Freeport, Bahamas OPEN DATE Aug. 25-27 Baltimore, Maryland Sept. 15-17 Toronto, Canada Oct. 6-8 New Orleans, Louisiana Nov. 13-19 St. Petersburg, Florida
188.8.131.52 The APBA Offshore Regional Tours – a) Overview: APBA currently sanctions Divisional races in four regions throughout North America: West, Central, Northeast and Southeast. These events have been smaller in size and scope typically than the national events occurring mostly in smaller communities and catering to regionally based racing teams and fans. The West, through POPRA, and the Central Division, through the Great Lakes Offshore Powerboat Racing Association (“GLOPRA”) generally produce 6-8 races annually which also are televised on Speedvision. A large group of racers from POPRA and GLOPRA also typically attend the Sarasota race and the World Championships each year. Unfortunately, however, there has been virtually no communication or coordination between APBA and these organizations. This lack of support from APBA has led to an awkward competition between the groups for racers, sponsors, and even race dates. Due to USO’s presence in the Northeast and the number of national events in the Southeast, moreover, there has been very little Divisional racing in these regions of the country. All of this has hampered the sport’s overall growth and prosperity. b) Purpose: Notwithstanding the foregoing, however, the Company believes that Divisional racing forms the backbone of the sport. Specifically, it introduces more people to its participant ranks through relatively inexpensive grass roots racing programs and thus serves as a wonderful feeder system for the Pro Tour. Further, it offers additional opportunities for corporate sponsors; it broadens the reach of its charity programs; it provides additional revenue and 41
profit opportunities to the Company; and it simply exposes the sport and, therefore, its benefits to more people. c) The Regional Tours and Management: Commencing with the 2000 racing season, the Company plans to stage 4 distinct regional racing tours in the West, Central, Northeast and Southeast regions of the United States and Canada. POPRA and GLOPRA will manage the West and Central Division regional tours, respectively. APBA Offshore will form a new company, the Atlantic Offshore Powerboat Racing Association (“Atlantic Offshore”), to manage the Northeast, and will work in conjunction with the Offshore Powerboat Racing Association (“OPBRA”) to manage the Southeast. With the approval of these regional management organizations (“RMO’s”) the tours shall be renamed as follows to reflect their affiliation with the Company: • • • •
APBA Offshore West or Pacific Tour APBA Offshore Central or Great Lakes Tour APBA Offshore Northeast Tour APBA Offshore Southeast Tour
d) Regional Tour Events: Initially, Offshore will encourage each of these organizations to limit the number of races in their region to 5-6 including any Pro Tour events occurring there. This would enable the organizations to coordinate the Regional and Pro Tour schedules, thus making it easier on and creating more options for the racers themselves. This should also make it easier for the Company to oversee and assist the RMO’s with their businesses and thus improve those businesses. The Company’s goal is for these regional events, although initially smaller in scope, to nevertheless have the same look and feel as Pro Tour events. They will run the same classes under the same format, where feasible, and where possible they will be held in conjunction with family entertainment festivals to generate profits for the Company and the RMO’s. These events also should be held in locations strategically selected as potential Pro Tour sites. e) Regional Tour Television: The longterm television plan calls for each Regional Tour race to be shown on a tape delay basis on Speedvision or TNN if the financing is available. Currently, GLOPRA and POPRA televise their events on Speedvision. The Company intends to assist these RMO’s with funds to increase the quality of the shows starting no later than the second year of operation. The Company also intends to invest in television for the other two regions as soon as the funding is available. The number of events and shows, as well as the length of those shows should expand as the Company moves ahead.
f) Regional Tour Boats: All Regional Tour events will feature the top Super Series and Factory Series boats from that region. The top Outlaw Series boats from that region will compete as well. g) Regional Tour Race Format: i) Number of days and race composition - The racing at each Regional Tour event will be conducted over two days, where possible, a Saturday and Sunday, otherwise one day, preferably a Sunday. In a two day event the Outlaw Series boats will compete on Saturday with the Super and Factory Series boats competing on Sunday in separate races, otherwise the boats will compete together. The schedule of events and times, including drivers meetings, parties, sponsor functions, expositions, festivals, and concerts, will be the same from event to event. ii) Course and race length - To ensure tight racing the boats will compete on courses 5.5-7.5 miles in length. The smaller courses will be oval types and the longer courses will be road types with a number of turns. The Factory Series boats will race for 60-70 miles; the Super Series boats for a minimum of 100 miles; and the Outlaw Series boats for 40-70 miles. iii) Testing – All boats may test during race week according to rules of the road criteria. The Super Series and Factory boats will also appear on Saturday during a designated testing period known as "Happy Hour". The boats will be required to test on the established race course to enhance the entertainment experience for the fans. This will be the only test period on Saturday. The testing period likely will be held in between races. h) Regional Tour Championships: i) Super Series – For each region, Regional Tour Championship points will be awarded to the boats competing in the 2 premier classes comprising the Super Series: Super Cat and Super Vee. The boats accumulating the most points in its respective class in a specific region will be awarded the Super Series Regional Tour Championship for that class and region. Thus, for example, if Jelly Belly purchased the title sponsorship for the APBA Offshore West Tour, the boat accumulating the most points in its class would be awarded the "Jelly Belly APBA Offshore West Regional Championship” for that class and so on and so forth. ii) Factory Series –
a. Factory Regional Tour Championship – For each region, Regional Tour Championship points will be awarded to the boats competing in each of the four Factory Classes. The boats accumulating the most points in its respective class in a specific region will be awarded the Factory Series Regional Tour Championship for that class and region. Thus, for example, if Jelly Belly purchased the title sponsorship for the APBA Offshore West Tour, the boat accumulating the most points in its class would be awarded the "Jelly Belly APBA Offshore West Regional Championship” for that class and so on and so forth. b. Factory Constructer’s Championship - The participating Factory Class manufacturer for each class accumulating the most points in the Regional Tour events for a specific region will be awarded “The Factory Constructer’s Regional Tour Championship” for that region in accordance with the same formula established for the Pro Tour Constructor’s Championship. iii) Outlaw Series - For each region, Regional Tour Championship points will be awarded to the boats competing in each Outlaw Class. The boats accumulating the most points in its respective class in a specific region will be awarded the Outlaw Series Regional Tour Championship for that class and region. Thus, for example, if Jelly Belly purchased the title sponsorship for the APBA Offshore West Tour, the boat accumulating the most points in its class would be awarded the "Jelly Belly APBA Offshore West Regional Championship” for that class and so on and so forth.
i) Regional Tour Prize and Contingency Money: By year two the Company intends to offer prize purses of at least $25,000 at certain designated events. The prize purses must be generated through sponsorships. j) Regional Tour Sponsor Opportunities: In addition to television advertising, the company will offer Regional Tour title and presenting sponsor entitlements, Regional Tour Associate and Official product category entitlements, individual Regional Tour race sponsorships (including but not being limited to title, area, product category and event) team sponsorships, and Super Series, Factory Series and Outlaw Series title sponsorships. The sponsors thus receive a tremendous "brand recognition" value in return for their investment.
k) Regional Tour Schedule: The proposed 2000 APBA Offshore West, Central, Northeast and Southeast Tours schedules will be determined in the next 60 days.
7.2.3 The Family Oriented Entertainment Festivals Each Pro Tour and Regional Tour event will be held in conjunction with a family oriented entertainment festival designed to generate profits for the company through area and event sponsorships, admissions charges, merchandise sales, participation fees, and concession sales. These festivals will generally be 3-5 days long. The standard model will include most if not all of the following events, areas and activities: • • • • • • • • • • •
Golf, fishing and/or tennis tournament(s) Charity auction Manufacturer's expo Kid's activities areas Wet and Dry pit viewing areas National act concerts on at least one evening Fireworks show on at least one evening Boat show Retail merchandising and sponsor display/sampling areas Winner's Circle Offshore powerboat racing
The Company will invest in certain infrastructure such as trucks and tents etc. which will be customized to include the Company’s logos, trademarks etc, in order to generate a uniform look at its venues. The aim is to ensure that fans everywhere know when they are at an APBA Offshore event and thus feel like part of our family. Most importantly, a certain percentage of profits from each event will be donated to a designated event charity. The charities will be carefully selected to ensure they promote worthy causes. These organizations must also have solid volunteer bases in order to assist the local producers in the direction and production of the races and festivals. 8. Conclusion The Company has the knowledge, expertise and experience to take the sport of offshore powerboat racing to the next level after 45 years. The television and venue race relationships are in place as is the event production model. The Company, thus, with the necessary capital in place, will successfully build the premiere powerboat racing entertainment company in the country.