+++++++++++++++++++++++++ Good afternoon and thank you for attending today's meeting. MXL has made significant progress over the past six months and the future looks even brighter.
Although we have been forthcoming with our announcements to the market there still seems to be wide spread misunderstanding about our business, the size of our potential market and lack of comparable product. Our Internet based management system broke new ground with its installation in October 2001. Consequently it was always going to take time for the market place to adopt it.
eMinerva is a student/college management system that manages the lifecycle of a student from the time they first come into contact with a college through to graduation and post graduation alumni marketing. Owing to its flexibility and architecture eMinerva caters for the smallest school to the largest education institution. eMinerva covers the entire education market spectrum. eMinerva is a fully integrated student and agent information system. This leads to productivity gains for the college administration, for students, teachers, agents and potential students by accessing the same information. Up to date information anytime, anywhere. Without systems such as eMinerva colleges/education centres are in the future, going to find it difficult to operate. Colleges will lose their advantage in an increasingly competitive education market.
I would like to give you some idea of the momentum we have subsequently developed. Three (3) months ago product demonstrations were hard to come by in a marketplace that is difficult to penetrate; today we are having difficulty to find the time to meet requests for demonstrations. To meet this demand demonstrations outside of business hours or in parallel are being conducted. Through word of mouth alone the Australian college market has started to endorse eMinerva.
A characteristic of the college market is that very few colleges trade in isolation. Each is either part of a larger organisation or belong to an association. In April 2002 we signed the 350 college strong ARELS group in the UK as their only recognised college management system. Subsequently ARELS affiliates in three (3) other countries, including Australia are in discussions with MXL to duplicate the ARELS deal.
The momentum developed by your company is substantial. At present 10 colleges are in the process of eMinerva installation. A further 24 agreed contracts are queued for installation, with another 12 proposals awaiting approval. I have not included the number of demonstrations we have conducted or are scheduled that have not progressed to a more concrete status. Therefore to date we have contracts or proposals with 45 organisations. But to give you an idea of the immediate visible potential of our market; there are an additional 60 campuses attendant to the 45 noted above that are likely to follow the successful eMinerva installation in the primary campus. As an insight three colleges in the installation process have 50 additional campuses between them. Around 200 average size colleges in Australia would pay the total budgeted costs over the next year out of the annuity component alone.
Its worthwhilereflecting on the business model once more. In the UK for example our system sells for GBP5000 up-front, of which we will keep 75%, then there is the ongoing annuity of GBP5 per student, per enrolment, per year. ARELS has signed a more favourable agreement due to the number of colleges that will provide a sizeable installed base in the short term. These concessional fees will apply only for a limited time.
Our market is highlighted by a number of undeniable factors:
1. Theinternational market for education management software is immense. The college industry has an annual annuity potential above $1b(aud). This market potential is essentially undiagnosed. There is no world recognised web based college management system in competition at the moment. To give some indication of the state of the market probably the most sophisticated of college groups in Japan manages its 10,000 annual student enrolment on an "access data base" which has limited functionality.
2. While there are a number of suppliers of software there is no stand-out product. Indeed prospective customers constantly tell us that "there is just nothing out there, and we have searched everywhere."
3. People Soft dominates the university market but they don't operate in the market immediately below that level where MXL is targeting.
4. The college market is going through consolidation at a global level and web based systems with multi-campus/multi-geography functionality are an absolute requirement. Portals for external access, "e-learning", and other student services are rapidly moving into this category.
5. The importance of college management software in the education sector can be compared to core banking systems in the financial sector. Owing to the organisational upheaval that accompanies a move to a new platform, the decision by the colleges often takes a long time. The period from inquiry to sale can be protractedwith a consequent delay in revenue flows to MXL.
6. The delayed revenue flows are of course offset over time once the annuity revenue that is at the core of our business model commences.
7. MXL's Australian sales activity while externally appearing dormant through the first four months of 2002 has in fact been very active, and the benefits of the activity will begin to emerge through June to December 2002.
8. The education sector globally is very tight knit and the keystone in the sales process is establishing credibility through reference site colleges. Success or failure in the broader market is dependent on getting these sites away successfully and then utilising the strong advocacy they bring. These referrals have just started to emerge in Australia and overseas. Over the last week for example we have had two college referrals to a number of prospective customers.
9. Our Australian sales activity during the year so far has been aimed entirely at establishing these sites and raising our profile within the education industry. We can confirm that a number of influential colleges will come on line through May and June. Owing to the demand we have moved to a multiple installation process so we can install a number of colleges concurrently. Following our latest software upgrade in May, the multiple installations are scheduled for June. We also have proposals with 2 Australian education peak bodies regarding the endorsement of eMinerva for use in their 250 colleges.
10. Our distributor in the UK after signing the ARELS agreement is at the stage of establishing reference sites and although things are progressing they are not as advanced as the Australian activities. We expect the dynamics in the UK to mirror that of the Australian market in that activity will quickly follow the influential sites. We have a proposal with a college group wanting installation of their Australian college by August. They have 1200 students and use a paper-based system to manage their students. The group also has at least one UK campus that is an ARELS member that represents further opportunity for us to consolidate in the ARELS group via Australia. These colleges will strengthen our reference base in the UK.
Other activities that are taking place involve international sales and distribution some of which we have already announced; others, which are in their initial stages, involve the geographies of Japan, France, and several south-east Asian countries. A Singaporean based, but south-east Asian circulated education magazine is running a feature on eMinerva in its June-July edition. Our strategic push for Asian distribution coincides with this story. A trade mission is planned for mid June supported by the NSW and Federal Govt's Trade Development Dept's. A number of appointments with interested parties have already been arranged.
Discussions are under way with a large Australian university for eMinerva to be used in the campuses it is establishing internationally. This particular group has aggressive expansion plans with over 100 campuses planned for south-east Asia and contiguous geographies. Discussions are also advanced with a number of other university's for the use of eMinerva in their attached college campuses.
Monthly cash flow breakeven is still some months away. However, the dilution we are voting on today is not proposed to be ongoing with only modest further dilution expected until monthly cash flow breakeven is achieved.
Probably the icing on the cake will be the next upgrade of eMinerva planned for later in 2002. The benefit of the upgraded product is that it will enable us to offer a tailored solution across the entire range of the market, from the smallest high school that may only want a core enrolment system, to the largest education institute in any country requiring full student management. This also includes the broad corporate market. We will have a product that can be adapted for all purposes. We have already been in discussion with individual private schools as well as one of their governing bodies, and there is strong interest. There are literally millions of potential customers out there.
It would be remiss of me not thank the staff for the mighty job they have done in gaining the recognition of our product. I can assure you we areon the radar screens of a number of major players both within our target market and the I/T industry in general. Most of the staff are present at the meeting. All have worked exceptionally long hours so that your company, and theirs becomes a success. All are only too happy to talk to the shareholders after the meeting so you will be able gain first hand an indication of their enthusiasm for your company's prospects.
G Tetley CHAIRMAN
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