Imagine where... Executive Summary IXR, Inc. is a private Utah "C" corporation originally organized in 1994 as the LiveWire Project, Ltd., a Utah R&D partnership, to develop interactive video fitness technology. IXR invented Exerscape(TM), the real video-based interactive digital entertainment system for indoor exercise equipment. Exerscape integrates fitness equipment, DVD and IXR's patented XPlayer(TM) digital video technology. Helmet cam video is filmed on location worth world-class athletes. The video playback speed is dynamically controlled in real time by the users exercise speed. Workout data is automatically monitored and saved. The resulting experience mentally transports users to a desirable outdoor environment while exercising. Workout data sharing and other motivational communication is enabled over the Internet. Users may also film and playback their own favorite trails. The first Exerscape-equipped product is the Blackburn Motivator. The Market Baby boomers drive multi-billion dollar fitness industry Over forty six million US individuals now use exercise equipment. Exerscape's real video-based outdoors theme is aimed directly at the over-35 segment, the "baby boomers," that have fueled the growth of this fitness boom into an equipment market estimated to be over $5 billion at retail by the Sporting Goods Manufacturers Association and fitness club market of over $10 billion. The fitness equipment industry is historically reticent to introduce new products. When something new becomes successful, the rest of the industry jumps in to try to knock it off as the segment grows towards half a billion dollars. Most industry experts expect the next big fitness trend will come from the integration of digital media and the Internet into fitness equipment. The first products in this space include Icon Health and Fitness' iFit treadmills; fitness networks from Fitlynxx, Technogym, Netpulse, and E-Zone; and in animation-based interactive systems from Computrainer and Ultracoach. Exerscape-equipped fitness equipment is a uniquely compelling, simple yet powerful, use of dynamic user feedback with high quality video content. "The Exerscape display is without a doubt the best of any [similar] training device." ----------------------Roger Young, President, In-Training, Inc., four-time Olympic Coach IXR's first retail product was the Motivator for Blackburn Designs, a brand of Bell Sports. Exerscape-equipped demonstration equipment has also been shown at trade shows by Stairmaster, Icon Health and Fitness, and StarTrac. IXR is currently testing Exerscape systems in front of group cycling classes, in rehabilitation centers, and in a scientific study at Pepperdine University. Virtually any indoor aerobic exercise equipment, including treadmills, stationary cycles and trainers, steppers, and cross-country skiers, is easily adaptable to the Exerscape system. In 2004 IXR continued steady progress towards its goal of combining digital media with fitness equipment to provide motivational exercise systems. NDS, one of the worlds largest satellite and cable technology companies, recently ported Exerscape to their new XTV platform and introduced it at the 2004 IBC trade show in Amsterdam. IXR recently received a fundable score for an NIH SBIR grant application for porting the Exerscape technology to the Sony PlayStation2 platform. This project, which will also be supported by Icon Fitness, will utilize Icon's Nordictrack iFit indoor cycles in an 11 week study with 20 pairs of mothers and daughters. The technology DVD + Internet = WebDVD The combination of rich digital media from DVD and future broadband networks, with the connectivity of the Internet, will enable compelling new products. Electronic hardware platforms will range from current high-end PC's with DVD ROM, to future TV set-top boxes and game consoles, such as the Sony Playstation 2, and broadband servers. Various estimates indicate an installed base of between 100 and 160 million DVD ROM equipped devices will exist in 2003, most with Internet connectivity.IXR's core variable rate digital video software algorithms work with most standard types of digital video, including MPEG1, MPEG2, MPEG4 and AVI, that can be played on PCs and video games. The Exerscape.com web server will also support user's sharing their personal workout data over any Web browser, receiving coaching expertise and motivational feedback, and remotely monitoring rehabilitation workouts. Future versions may even enable users to ride with or against each other remotely via broadband connections. Users may shoot their own favorite trail videos, and then trade them on CD-RW or broadband. Between five to twelve million broadband Internet connections are expected to be installed in homes by 2003. IXR's patented smooth variable-speed video technology may also be useful in other markets, including inspection, simulation, training, and gaming applications. IXR is currently exploring licensing potential in various digital video player applications. The competive advantage New patented digital video technology "Exerscape pushes the envelope of interactivity, and is an exciting example of how the dramatic visual impact of DVD can create an immersive, responsive user experience." ----------------------Jim Taylor, author of "DVD Demystified" and the "DVD FAQ" IXR's Exerscape(TM) leverages XPlayer(TM), a US patented technology that dynamically controls the video speed by monitoring the users' current exercise speed. IXR plans to exploit this technology and produce revenue streams from : 1) OEM production and licensing of the initial hardware, software and content; 2) follow-on video content production and sale on DVD and broadband; and 3) follow-on communication with and between an active, affluent user base. IXR also plans on licensing the core video speed control technology for use in other digital video player programs for the travel industry, sports analysis and coaching, video inspection and other industries where dynamically controlled video technology can be leveraged. An outdoor workout experience, indoors! Inspiration for the Exerscape system originally arose from Ray Bradbury's short story "The Veldte" and was fed by long hours of winter indoor training for bicycle racing, watching Lemond win the Tour de France on videos from World Cycling Productions. This seed has germinated into the most compelling, realistic product of its kind. As the cost of digital video technology continues to plummet, Exerscape will become a dominant player in the fast growing interactive entertainment segment of the five billion dollar US fitness equipment industry. Exerscape leverages two popular themes, health and fitness and the great outdoors, enhanced with the connectivity of the Internet, into an exciting new product category. Competitive souls may "virtually" race in world-famous competitions, comparing their performances with others. Group indoor fitness activities will become even more compelling with large screen videos. Spiritual benefits may even be realized from exercising in God's greatest places. A whole world of content is out there waiting to be captured and brought to these educated, affluent consumers. The Blackburn Motivator Interactive Real Video Training System is the first of many Exerscape-equipped fitness products for a convergent digital marketplace. "Melding beautiful digital video and indoor fitness equipment, for our health!" ----------------------Bruce Ewert, Founder, IXR, Inc.