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Summary

LexiClone ("LexiClone" or the "Company") has developed a unique enabling methodology which vastly improves search success, both online (Internet) and in relation to large organizational databases (intranet/extranet/commercial). It is based on a multi-disciplinary approach to information retrieval which allows for a streamlined search process, the results of which are specifically targeted to each user's unique requirements and personal characteristics. Patent protection has been secured in the United States; application has also been made under the Patent Cooperation Treaty ("PCT") for the international market. LexiClone technology is universally applicable; it benefits users from professionals to casual Web surfers and optimizes the usage of corporate, institutional, and proprietary databases, with additional potential for broad e-commerce applications. Given such a broad universe of applications, the Company expects to market/license its technology separately for each specific use. LexiClone could also operate as a specialty software house or as a vertical application service provider ("ASP"). A flexible operating approach will enable the Company to apply its core technology to serve a wide variety of markets. Specific applications include Internet search, intranet/extranet search, custom search, and commercial ventures targeting both businesses and consumers such as patent and legal search, online dating search, and multiple e-commerce applications.

LexiClone is a development stage company formed in 2003 to capitalize on the work of Ilya Geller, a multi-talented scientist and computer consultant to major companies such as Morgan Stanley. Mr. Geller, who is also a linguist and expert in the "philosophy of language", emigrated from Russia to the United States in 1992 and is now a US citizen. However, he has maintained his connections in Russia where much of the development and programming has been completed at a substantial cost savings. Mr. Geller's multi-disciplinary background, combining several areas of science typically thought of as unrelated, has been the critical element in the development of LexiClone.

The LexiClone methodology is an important advance over current search techniques which produce thousands of virtually undifferentiated search results, depending on the query. The market potential for a new, more effective search methodology is virtually unlimited. According to a Wall Street Journal survey, using a search engine is the second most popular Internet activity, engaged in by at least 88% of all Internet users. Certain applications could be commercialized immediately and generate revenues prior to completion of the Company’s comprehensive Internet search product. A full capability launch of the Internet application, which requires the greatest lead time, should be completed by mid-2002. Initial Internet testing in Russia has produced successful results. LexiClone provides:

  • A Revolution in Retrieval. An improved search technique targeting the private database and Internet markets would constitute a major technological and commercial advance. LexiClone tailors results to each user's unique characteristics and needs, eliminating the user frustration associated with screening undifferentiated search results, thereby both streamlining and customizing the process.
  • Uniqueness. The LexiClone methodology was created by drawing upon a fortuitous combination of disciplines mastered by Mr. Geller, including information technology, telecommunications/Internet technology, linguistics, philosophy and sociology. Most search engine designers lack such diverse knowledge. Only combining them can create a major technological breakthrough like LexiClone.
  • Multiple Applications. LexiClone can be applied to any type of search and is especially effective when results must very closely relate to user preferences or personal characteristics. In addition to Internet searches, LexiClone has broad application to e-commerce, from patent search to an "intelligent purchasing agent" product; it has application to both business-to-business ("B2B") and business-to-consumer ("B2C") environments. In addition, the technology can be applied to private corporate databases, or intranets/extranets, an area which has been underserved historically but is now attracting investor attention. Since most Internet sites must also rely on internal search capabilities within the site, the market for the LexiClone technology appears virtually unlimited. Especially successfully LexiClone technology can be applied to libraries catalogues, which use the invariable for 2,500 years technique.
  • Configuration. The broad applicability of the LexiClone methodology dictates a market-oriented approach, with each application being treated as a separate product. The business could also be structured as an ASP serving multiple markets and applications. ASPs typically own or license software which they then provide to customers under lease agreements for a monthly fee. The recurring nature of the income stream creates an attractive business model which is also scalable and highly flexible. LexiClone could also license certain applications and act as a software consulting firm for others.
  • Early Commercialization. The Company is considering early partnering with commercial ventures which need to match interests to produce results. The LexiClone methodology is straightforward when applied to a limited database and can be introduced without further development. Certain niche markets exist to which LexiClone is admirably suited due to its recognition of individual characteristics and preferences. Final development work on the data-intensive general search application could take place concurrently. Initial applications might include patent and legal search.
  • Business Model Flexibility. While the ASP model seems to provide a flexible organizational structure which can serve many applications, LexiClone maintains the option to license its technology and to provide separate custom and commercial services.
  • Unique User Database. Over time, the Company will amass commercially valuable information such as user buying preferences and user interests which should be extremely attractive for market research and advertisement purposes.

Understanding the Search Functions

Search engines are a necessity for locating information, especially in large to ultra-large databases such as the World Wide Web. Data and Web pages are first cataloged so they can be screened using key words and phrases input by the user. Search methodologies are generally similar in concept but can differ based on the engine provider's approach. To date, competition among search engines has been based largely on the number of sites/pages indexed (discovered) by a search engine and statistics of their use rather than the utility and effectiveness of the search result for the end user. In fact, search engines and users are typically separated by an intermediary such as a portal which contracts for the use of the search engine and then offers it to visitors. Thus, search engine companies do not actually receive revenues directly from users. Consequently, user preferences and needs tend to be subordinate to the business objectives of the intermediary contracting for usage. While search engine companies recognize that user satisfaction is important in the long-term, currently the short-term objectives of the buyer are paramount over those of the end user. In addition, technically optimizing the search function has proven to be very difficult to accomplish. A great deal of talent has been directed to improving search techniques with only limited success.

Currently, no search engine has been able to keep pace with the rapid proliferation of Web-based information. According to a study reported in the journal, Nature, no one engine indexes more than about 16% of Web content According to International Data Corporation ("IDC"), there will be 7.7 billion Web pages by 2002, up from about 1 billion today. It is estimated that, at present, approximately 1 million pages are added to the Web every day. In addition, there are constant changes to pages already catalogued such as editing, deleting, and rearranging which can affect search results. Furthermore, different search engine techniques display different results to the same query, or search "string". Adding refinements such as Boolean operators varies widely among available engines. Given the enormous amount of data available and its continuous growth, it is likely that search engine operators will begin to intensify their efforts to achieve greater user satisfaction including turning to external sources to locate search engine enhancements. Media response to the effectiveness of search engines has frequently been negative.

Types of Search Engines.

Hundreds of companies refer to themselves as search engines, however, the term is often used loosely. At present, it is estimated that there are at least four hundred in operation, although many are actually directories not engines that actively find sites. Of these, fewer than twenty are widely used, and no competitor has a clear advantage. The typical user has no real grasp of how search capabilities differ, or does the general media divulge such information. Search engines actually vary (a) by type, (b) by method of searching, as well as (c) by business model. The proliferation of content on the Web and the inherent difficulty in making improvements to search technology should dramatically raise industry entry barriers, already significant as evidenced by the talent and education required to initially launch and now sustain the engines currently in operation.

  • Genuine search engines actively crawl the Web (using programs called "spiders") in search of new or revised sites. Many so-called "search engines" do not actually search the Web, but are directories or listings of Web sites (URLs), pages and documents acquired from others.
  • The "depth" of crawl also varies widely, as some engines only catalog part or all of the home page, while others catalog all of the pages on the site. Also, the amount of information retrieved and stored for each page found differs (e.g., some engines only catalog the page title while others consider all of the information encoded in the page). Thus, the level of detail and, therefore, the "quality" of the information available in a given engine’s database varies widely. Among the active crawlers, the "depth" of the crawl also varies widely, as does the amount of information stored for each document found (home page v. full site). Thus, the level of detail a given engine is capable of providing varies widely across the industry.
  • Some "search engines" rely entirely on accessing databases owned by other companies, which arrangement may include access to all or only part of the third party’s database. These secondary engines may filter information in a proprietary manner and/or use unique placement algorithms for ranking search results.
  • Search engines may be general purpose or specialized. A good example of a general purpose engine is Google; an example of a specialized engine is PriceWatch.com.
  • "Meta" search engines (e.g., AskJeeves) send user’s search requests to several search engines simultaneously and aggregate the "top" listed results from these unrelated engines to produce their own "results".

Industry Metrics.

In addition to size and level of detail, search engines may be measured by speed of execution and the "freshness" of the information (updating) that they contain. Since many "search engines" use information actually developed by others, differences may relate strictly to the methodologies used to rank results, how results are filtered, or how much of a third party database is actually purchased. Users are unlikely to be aware of these nuances which can substantially affect the success of their search. The search engine industry is based on multiple, constantly changing inter-relationships.

Development and Operations of LexiClone

How, then, does the end user sift through the vast number of sites, pages and documents listed in search results to find the information and sources that best meet his needs?

LexiClone intends to remedy this dilemma. The LexiClone methodology is grounded in the work of Ilya Geller, a multi-talented scientist, author, computer consultant, and expert in the "philosophy of language". The LexiClone methodology is unique and patented – it identifies certain preferences and characteristics specific to end users, passively creating a customized, but anonymous, user document's summary . In the case of the Intranet, a summary is similarly created for any record. LexiClone then compares user summaries with record summaries to produce a customized result. The methodology is non-intrusive since creating the summary requires no invasion of privacy. The summary will typically be created and updated automatically and reflects many attributes including educational, areas and levels of knowledge and expertise, and linguistic ability and preferences. LexiClone also permits the user to override the parameters set by the summary when a larger, undifferentiated universe of results are required.

An operating prototype has been successfully tested and results have been extremely promising. The development should require approximately two months due to the time needed to package the product. Recently, the Company has been fortunate to obtain employment commitments from a few programmers with outstanding experience. In order to further enhance its competitive advantage, the Company anticipates extending its technology to languages based on pictographic alphabets as well as to graphics, placing LexiClone in a new category relative to current search technology.

Initial Commercialization Potential

It would be possible to commercialize several applications of the Company's technology shortly. Initial applications could include any service where matching people's preferences with a product or service are needed. Patent search would be an obvious example since the patent database is available to the public. It is assumed that each such business opportunity would be implemented separately and employ different operating management.

Nature of the Transaction/Use of Proceeds

To date, the project has been funded by its principal, friends and family.



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