A brief history of the company, a brief description of what the company does, and briefly why the company is successful. Did I mention it s

Company History: Wave Guitars (WG) manufacturers acoustic and electric guitars and was founded in 2004 by Valentina Velazquez who has an extensive background in the music industry. Through her connections, developed over several years, Ms. Velazquez was able to hire a talented group of artisans, managers, and other employees who have all contributed to the company’s success. WG is a C-corporation and headquartered in San Bernardino. The company was started with an investment of $475,000 from Ms. Velazquez and a $300,000 private stock sale to family, employees, and other investors. Senior management is made up of highly experienced people that worked with Ms. Velazquez at Gibson, Guild, and Fender. The board of directors includes prominent people from the San Bernardino area that are also investors in the company. Sales increased rapidly and WG achieved profitability in the second year of operations. WG has continued to add new products and innovations over the years. The company began by offering made- to-order electric and acoustic guitars and created a reputation for quality artisanship. WG has received numerous industry awards and is one of the top custom guitar manufacturers in the world.

In 2006 WG began offering limited-edition collectable models. These guitars are designed by the company to showcase the expertise and creativity of the company. There are 2 acoustic, and 2 electric

models each year with the designs announced on the company website. Each design is limited and typically sold out prior to production. The sale proceeds are donated to local school music programs. Capitalizing on the excellent reputation for quality and the growing brand identity, WG began producing a line of standard guitars (both electric and acoustic) in 2008 to appeal to a broader customer base. These models are produced in volume using a more automated manufacturing process. These guitars are sold on the company website and through music retail stores throughout the country. WG received a significant loan from TSV Capital Partners in 2008 which helped the company finance equipment, expand into the standard line of guitars, and provided working capital for the rapid sales growth. TSV made additional loans to WG in 2009 and 2011. TSV exercised an option to convert the debt to equity in 2012 and continues to provide WG with management consulting. The brand continues to develop and WG has been able to utilize traditional advertising methods and social media to help promote the company. WG’s creative marketing department utilizes several platforms and methods and has been highly successful in improving brand recognition. Ms. Velazquez gave a TED Talk in October of 2019 that has been viewed by over 8 million people. YouTube posts of people using WG guitars are popular and growing. WG gained additional notoriety when Green Day front-man Billie Joe Armstrong was photographed with his custom WG guitar for the cover of Guitar World Magazine. In 2018 influential guitarist Kaki King ordered a custom acoustic model from WG and used it in several music videos and interviews. Several other famous guitarists are now owners of a WG instrument.

The company website provides a complete customer experience and supports sales. Customers have several proprietary tools available to assist them in the design process. A WG trained employee works with the customer to complete the design and remains in contact through production and delivery of the finished guitar.

Products: Custom Customers can log onto the WG website and upload their concept for a guitar or use the website tools to create a design then work directly with a craft person at WG to complete their vision. In addition to having a unique shape the customer can choose from several customization features including having a name or message scripted into the fretboard, use of exotic tonewoods, alternative neck profile, choice of electronics, cutaways, armrests, etc. These one-of-a-kind models are priced from $7,500 to $12,000 (average $9,000) or more depending on the material and extent of customization being requested (2021 pricing). For an additional charge, the customer can have the entire fabrication process recorded. The finished guitar is delivered in a custom WG case.

Collectables The limited-edition models are designed by the company and only 10 units per design are ever made. The company introduces four unique designs each year, 2 acoustic and 2 electric, and these models are typically sold out before they are manufactured. The cost for these guitars is based on materials used and the length of time to complete fabrication. More expensive models can cost up to $40,000, with an average cost of $25,000 (2021 pricing). The typical buyer is a guitar collector or aficionado. All profits from the collectables are donated to local school music programs (approximately $800,000 annually). The design for each collectable model is announced on the WG website and through a press release which generates a considerable amount of free publicity for the company. The collectable guitars have helped establish the WG brand and continue to identify the company as being innovative and producing the highest quality instruments. Past models have sold for a premium on the secondary market.

Standard Models These models feature the well-known WG quality and have a more traditional look. Because the standard models offer no customization options WG can produce them in volume at a lower cost per unit. The standard line also has several models designed specifically for women and younger players. These guitars have slightly narrower fretboards, smaller bodies, and are more comfortable for anyone with smaller hands and reach. The design of these models was based on industry trends and company research.

The WG standard line is sold at various retail music stores including Sam Ash, Guitar Center, and over 400 independent and small chain music retailers. The standard line is also available for purchase directly from WG’s website and other online retailers (Sweetwater, American Musical Supply, zZsounds). Standard models are wholesale priced from $1,200 to $2,000, with an average of $1,600 (2021 pricing). WG website sales retail the standard models from $2,400 to $4,000 with an average of $3,200. Retail outlet sales were originally 80% of the standard line but now account for only 45%. This trend was increased with the recent COVID pandemic as music stores closed and more people went directly to WG’s website to order. The company also improved their shipping capabilities in 2020 and most standard model guitars orders are filled within 2 business days.

Immediate Need: Two weeks ago the owner of the building WG is currently leasing offered to sell the property. After negotiating a sale price of $21,000,000 WG began working on a business plan to request a loan of $14,700,000 (70% LTV) from a bank. The company and shareholders will provide the necessary down payment and closing costs:

Sources Amount Uses Amount

Company cash $4,000,000 Purchase price $21,000,000

New stock sale proceeds $3,100,000 Closing costs $800,000

Loan amount $14,700,000

Total $21,800,000 Total $21,800,000

Building specifics:

• 145,600 square foot building • 4.74 acres of land • Concrete tilt-up construction • Built in 1989 • 22’ ceilings

• 300 car parking • 9,000 square feet of office space • Employee lunch and break room • Fully fenced secured yard • 7 dock-high loading doors

The Next 5-years: The company is focused on brand development, improving their website and social media presence, and continuing to grow the number of retail stores that carry their products. The WG workforce will see a modest increase over the next 5-years. WG has explored adding electric bass guitars to their products. This is a much smaller market, and the company will continue to research the interest in customized bass guitars over the next year.

In early 2022 WG will launch an instructional series on their website that will provide advanced guitar lessons from some of the best-known players in the world. The series of 30 lessons was recorded over several months and was designed to provide experienced guitar players with techniques used by famous artists including Billie Joe Armstrong, Kaki King, Dan Auerbach, Slash, Ani DiFranco, Jack White, and Nancy Wilson. As the WG brand is becoming more recognizable the company will add a line of branded clothing (t- shirts, hats, hoodies, etc.), instrument cleaning products, music stands, instrument cases, and other accessories beginning in 2022. These items will not significantly change sales but will help to establish the brand name.

Exit Strategy: The company estimates annual sales will reach $200,000,000 in 8-years at which time the company will either go public or sell to a competitor. If WG goes public, the stock price is expected to be $30 per share and the company could raise $200 million, which would allow the early investors to cash out some of their stock holdings. If WG sells to a competitor, the sale is expected to be 5 to 7x EBITDA ($70 million to $100 million). This information is for background purposes only and should not be shared with outside individuals or prospective lenders. Marketing: The company has used a limited amount of traditional print media to advertise the website and products. WG runs a half-page ad in Guitar World Magazine, Premier Guitar, and Acoustic Guitar Magazine a few times a year. The company also advertises in on-line publications including Guitar World Magazine, Rolling Stone, and Billboard. Traditional marketing has not been as effective for the company according to recent studies. Several amateur guitar players have posted videos using WG models to YouTube, TikTok, Facebook and other platforms. The company would like to explore other innovative ways to market the products and build brand identity, including guerrilla marketing campaigns. The focus is for more exposure on social media. Factory tours are available on a reservation basis. Typically, the company gives tours to about 80 people per week. This was suspended during the COVID pandemic and has only recently started again. The marketing department is working on a factory tour that can be posted to the website. WG is a member of the National Association of Music Merchants (NAMM) and has attended their trade shows over the years. The company has a custom booth that they use for this and other similar events including concerts, fairs, and conventions. The booth can be used to show interested people how WG makes a guitar and displays the standard models currently available for sale. The company website is a featured sales tool and allows users to design a custom guitar, interact with company craftsman, and follow the production of their guitar. All custom-made guitar orders start with a website visit. Orders for standard models can also use the website. WG marketing budget is typically about 7% of sales. In 2021 the company spent $4,650,000 on marketing and advertising. This was lower than a typical year due to the COVID pandemic cancelling several events that the company would have attended.

Organizational Structure:

Valentina Velazquez – CEO and President Ms. Velazquez has an extensive background in music including learning to play the guitar at age 4. She graduated from California State University San Bernardino with a BA in marketing in 1997 and was hired by Guild Guitars (then a part of Fender Musical Instrument Corporation) to work in their marketing department. In 1999 she was promoted and began working for the parent Fender brand as VP of marketing. In 2005 she left Fender and became the SVP of marketing and promotions for Gibson Brands, Inc. in Nashville, Tennessee. Over these years she developed a network of contacts and increased her knowledge of the music industry. Ms. Velazquez stayed with Gibson until the founding of Wave Guitars in 2012. COO: CFO: CHRO: CMO:

Valentina Velazquez CEO and President

COO

Production Manager

Supply Manager

CFO

Accounts Manager

CHRO CMO

Sales Manager

Marketing Manager

IT Manager

Board of Directors: Michael Stull – Board Chair Dr. Stull is the Director of the School of Entrepreneurship at CSUSB and the Director of the Inland Empire Center for Entrepreneurship. He has over 30-years of entrepreneurship experience. Dr. Stull received his BA/MBA from CSUSB and an EDM from Case Western. Dr. Stull is the Chair of the Board.

Connie Liu, CPA Ms. Liu is a partner with the accounting firm of Anderson, Turk & Smith, LLP in San Bernardino and has over 25-years of public accounting experience. Ms. Lie has a BA from UCR and an MBA in accounting from CSUSB. Ms. Liu is the Vice Chair of the board and chair of the Finance and Audit committee. Don Edwards, Esq. Mr. Edwards is a partner with the law firm of Edwards, Charles, Lewis & Tork in Redlands. He has over 35-years of experience in corporate law. He has a BA from UCLA and a JD from Stanford University. Mr. Edwards is the board Secretary.

Susan Rodriguez Ms. Rodriguez is the owner of SSR Manufacturing, Inc. in Fontana, which she founded in 1983. SSR manufacturers wood furniture and had sales over $240 million in 2021. Ms. Rodriguez has an BA from CSUSB and an executive MBA from USC Marshall School of Business. Ms. Rodriguez is the board Treasurer. Sheri Moore Ms. Moore is the President and CEO of San Bernardino Music, a nonprofit dedicated to providing music lessons and services to underserved communities in the San Bernardino community. Ms. Moore has a BA from CSUSB. Ms. Moore is the chair of the Governance committee. Debra Vega Ms. Vega is a Vice President and co-owner of TSV Capital Partners, an early investor venture capital fund. TSV Capital funded a loan for Wave Guitars in 2008 and exercised an option to convert the debt to equity in 2012. Ms. Vega has a BA in finance from Michigan State University and an MBA in finance from Harvard University. Prior to founding TSV Capital in 2008 Ms. Vega was with Founders Fund in San Francisco and Matrix Partners in Cambridge, Massachusetts. Valentina Velazquez Ms. Velazquez is the founder of Wave Guitars. She graduated from California State University San Bernardino with a BA in marketing in 1997 and received a Master of Science in Entrepreneurship & Innovation degree from CSUSB in 2015. Her prior work experience includes management positions with Guild, Fender and Gibson.

The board meets 8 times a year to review financial information, approve projections, assist in resource management, provide feedback on products and production. Board members are paid a stipend for each board and committee meeting and receive annual stock options. Stock ownership after funding the building purchase is projected to be: Valentina Velazquez 37.9% TSV Capital Partners 30.4% Board members 7.7% Employees 9.8% Outside shareholders 14.2%

Strengths

• Length of history • Experienced management team • Experienced production team • Customization ability • Financial stability • Growing sales trend • Brand recognition

Weakness

• Expensive product subject to economic downturn • Standard and custom models have conflicting marketing approaches • Limited products – no horizontal diversification • Sales are heavily domestic and subject to US economic recession

Opportunity

• Expand products to include bass guitars and other instruments as well as accessories • Increase social medial presence • Develop and expand retail sales internationally • Seek out co-branding opportunities

Threat

• Tight labor market will limit ability to recruit trainees • Competitors are beginning to utilize similar web-based sales techniques • Recent shortage of certain wood types may continue