The Kingsley Coach

Kingsley Coach is engaged in the business of manufacturing motorhomes, medical transport vehicles and emergency response vehicles, all under the tradename "Kingsley Coach." Although available for a broad variety of uses, each Kingsley Coach has the same structural design.

The Kingsley Coach, in essence, is a vehicle body (be it an R.V. body or a speciality body) mounted onto a stretched truck chassis. We open the back of the cab and weld the body to the open frame, creating a walk-through vehicle with the safety of uni-body construction. In the R.V. industry, the direct competitors of the Kingsley Coach are the Type A Motorhomes. These are the larger recreational vehicles that have the engine and living quarters integrated. But the construction and features of the Kingsley Coach distinguish it from any motorhome on the road today:

* The walls are 2 " thick. The floor and the roof are double- reinforced.

* Up front is a Class 8 truck engine. We currently put a diesel engine producing up to 600 horsepower in each Kingsley Coach. It gets approximately 9.3 miles per gallon, and is rated to haul 85,000 pounds. The average Kingsley Coach weighs less than 38,000 pounds.

* The combination of heavy-duty construction and high power engine gives the passengers a stable, vibration-free, sway-free ride.

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* A Kingsley Coach can be serviced at almost any truck stop, whereas a conventional motorhome generally needs a motorhome mechanic. In addition, a Kingsley Coach carries reserve tanks that hold up to a full week's supply of power and water, and is equipped with our proprietary gray water system that extends the water supply significantly. So a Kingsley Coach can cover much more ground between RV stops than a conventional motorhome.

* The Kingsley Coach looks like a truck, but is as user-friendly as a sedan. It features automatic transmission, cruise control, and a rear-view, back-up camera.

* Our proprietary technology makes the possible uses of a Kingsley Coach almost limitless. For example, our loading lift (patent pending) enables the owner to carry any manner of cargo in the rear compartment - be it motorcycles, snowmobiles, or ATVs.

Recreational Vehicles

We have been selling the Kingsley Coach as a recreational vehicle since 1996. Until 2004, however, we custom-made all of our vehicles, sometimes using the customer's own truck. Early in 2004 we introduced our "Kruiser" model, which is a fully-standardized vehicle produced in assembly-line fashion at our facility in Minnesota. Because of the standardization, we are able to purchase components for the Kruiser in bulk, thereby reducing materials cost substantially. In addition, the production of a Kruiser requires approximately 25% of the man-hours we devote to manufacturing a customized Camelot model, permitting us far greater flexibility in pricing.

Our line of recreational vehicles today consists of the following models:

Camelot Excalibur - 40' or longer Model. This coach, offering 300 square feet of living space fully expanded, is our base model in the Camelot line. It includes all of the features noted above plus a luxury, functionally designed interior, and is designed to compete effectively with the mid-range 40' RV models.

Camelot SURV - 40' Model. The SURV allows the owner the luxury standards of the Excalibur, with the added convenience of a rear utility garage. The rear garage, measuring 17' by 8', offers over 140 square feet of utility space, with a rear-attached metal (roll-up or ramp) door for easy access. A drop-down bed is mounted to the wall, for use when the owner doesn't need the storage space. If the owner lifts the bed, however, he has room for motorcycles, hot-air balloon, snowmobile - even horses.

Camelot Merlin - 45' Model. The Merlin offers a full 360 square feet of floor space. It includes all of the features noted above plus a luxurious, functionally designed interior, and is designed to compete effectively with the mid-range 45' RV models.

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Camelot Lancelot - 34' Model. The Lancelot retains the overall luxury characteristic of the Camelot line. It is priced, however, to appeal to customers who desire a customized vehicle, but whose buying decisions are more price-sensitive or who are simply more comfortable in a less-imposing vehicle.

Kruiser. The Kruiser incorporates all of the power, stability and comfort of our customized Camelot models in a vehicle adapted to assembly- line production. Customers are able to personalize their Kruisers through a choice of four interior designs and an array of paint options. However, because of the efficiencies build into our production of the Kruiser, we are able to offer it as a relatively low-cost vehicle that will appeal to a broad market, but a vehicle that should generate relatively high margins for Kingsley Coach

Kingsley Shells or Super Shells. This new line offers the customer a finished exterior with the interior left for either the customer or a professional conversion company to complete. The Shells are competitively priced, and open an additional market segment for us.

Mobile Medical Vehicles

The design characteristics of the Kingsley Coach make it suitable for use in a wide variety of specialized applications. Just as the stability of a Kingsley Coach allows it to carry passengers at high speed down a highway without any loss of equilibrium, so the design of a Kingsley Coach enables it to carry a CAT scanner through a city of potholed streets without losing its calibration. In the past three years, therefore, we have established our Medical Coach as a distinct and growing product line.

The Kingsley Coach is now marketed as the platform that carries PET (Positron Emission Tomography) scanners manufactured by CPS Innovations and distributed by Hitachi Medical Systems America. To date we have delivered several of these units, each to a physician who uses the vehicle to provide scanning services at multiple locations. The demand for this product alone appears to be sufficient that it could fill our production capacity for several years. Should we chose to expand, however, we can readily produce a Kingsley Coach that can transport virtually any large mobile medical device, be it a Magnetic Resonance Imaging system, a Cardiac Catheterization lab, or a CT scanner. During fiscal 2005, for example, we designed and developed a Mobile Hyperbaric Chamber unit, which we now offer to the medical community. The ability of the Kingsley Coach to safely carry motion-sensitive equipment over all types of road conditions makes it an ideal platform for the mobile medical industry.

Our Medical Coach incorporates many of the luxury features of our RV models: wood paneling, comfort seating in the waiting area, high-end stereo system, etc. The interior is appointed to provide the medical technician and his patients an environment that respects their dignity and reduces the stress of the medical event as much as possible. Behind the interior paneling, however, are walls of lead. And beneath the carpeted floor is an electric harness suited for the $2 million medical system that the coach carries. The entire 54,000 pound vehicle rides on a suspension specially designed to assure that neither highway speed nor city potholes jars the microscopic calibration of the scanner inside.

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Emergency Response Vehicles

We have recently entered into a third market - emergency response vehicles. As governments throughout our country, in response to 9/11, implement upgrades to their emergency response programs, a market ideally suited to the Kingsley Coach is opening up. Vehicles in this market often sell for $600,000 and up, but the up-front capital commitment by the manufacturer is similarly large. For this reason, until we increase our capital resources considerably, our participation in this market will be limited.

Our first contract for an emergency response vehicle was awarded in June 2004 by the Department of State Police of the State of Maryland. We recently completed manufacturing for the Department a Kingsley Mobile Command Center, designed to carry multiple communications systems safely into a disaster environment. The unit will incorporate highly sophisticated computers, electronics and state-of-the-art technology, including two 60' masts for satellite communications, permitting the operators of the Mobile Command Center to monitor and manage communications among federal, state and local emergency agencies and personnel. The unit is scheduled for delivery in the Fall of 2005 after our subcontractors complete installation of the specialized electronics. The contract price for the unit is $1,150,000.

Specialized Applications

The Kingsley Coach is suitable for use in a wide variety of specialized applications. By way of examples, we have already designed Kingsley Coaches for use by:

* Sports Teams. Within a single Kingsley Coach, we can provide sleeping space for 27, as well as room for the athletes to sit and stretch their legs. The amenities of a Kingsley Coach provide a significant step up from the traditional bus for a traveling Arena Football team or a college soccer club, without a significant step up in price. To date, we have sold seven Kingsley Coaches outfitted for sports teams, including the Kingsley that we delivered in December 2004 for the Tulsa Talons of the Arena Football League. Recently we built a Kingsley for the Bossier-Shreveport Mudbugs of the Central Hockey League. That vehicle will sleep 24 and provide a full range of amenities, including flip-down plasma screen televisions. We also recently developed a Kingsley capable of carrying 30 athletes in comfort.

* Snowbirds. Recently we built a Kingsley Coach that combines a passenger compartment with an auto carrier. Our customer intends to market the vehicle as an alternative to the "Autotrain" that Amtrak runs between Washington D.C. and Florida. Up to thirteen passengers will travel in the Kingsley Coach while their cars (up to six) will be hauled in the rear portion of the vehicle. The U.S. Patent and Trademark Office issued a patent for our design during 2005. -4-

Proprietary Technology

The quality of our vehicles depends, for the most part, on the know- how accumulated by our staff during many years of experience in vehicle manufacturing. We do, however, incorporate in our vehicles certain patented or proprietary technology that enhances the uniqueness of our Kingsley Coach.

We have filed a patent application covering the electronic mechanism that enables the garage/storage compartment in the rear of our vehicle to be easily lowered and raised. This represents a significant improvement over the inclined ramps commonly used, as loading at ground level is easier. In addition, the new mechanism permits loading to be accomplished in a smaller area than the ramp, which generally requires clearance in back of the vehicle.

We also have an exclusive license to use the technology involved in manufacturing our combined passenger vehicle/auto carrier. The owner of that technology has filed a patent application covering some of that technology.

One of the more important items of proprietary technology that we incorporate into our recreational vehicles is a system through which gray water from the showers, sinks and washer in a recreational vehicle can be used for the toilet function. This system reduces the demand for fresh water in the vehicle, making the storage systems more efficient.

Production

The production of a Kingsley Coach is conceptually simple:

* We contract for a truck chassis, made to order; * We obtain a body, made to our specifications; * We fabricate a heavy-duty lower section for storage and stability; * We buy some miscellaneous off-the-shelf components (generators, tanks, inverters, and the like); and * We bolt and weld it all together.

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Until recently, the bodies for our RVs were manufactured by Thor America, one of America's leading producers of Rvs, at Thor's plant in Middleburg, PA. In the Spring of 2005 Thor closed that plant. Our bodies, therefore, are now manufactured by E.B.S. of Elkhart, Indiana. As other sources are available, if we required them, we do not expect to experience any difficulty in obtaining the RV bodies we need on schedule.

The bodies for our Medical Coaches require a specialist in lead fabrication to prepare the walls. We have located a number of fabricators capable of performing this service, and have experienced no problem in obtaining these bodies.

Sales and Marketing

For most of its history, the Kingsley Coach was marketed primarily by word of mouth, supplemented by occasional print ads in trucking and RV magazines. In the past few months we have commenced a more aggressive marketing program. A prime component of our promotional program has always been our appearances at RV shows and upscale sporting events. These appearances are targeted to gain Kingsley Coach brand recognition among financially successful Baby Boomers. Now, however, we are supplementing and expanding this program with three 30-second television commercials designed to introduce and reinforce our brand to a national audience.

The Kingsley Coach is sold by our employee marketing staff - and by our customers. However, we are currently recruiting dealers in order to make larger inroads into the market. Our goal is to establish a nationwide presence for our brand.

No single customer accounted for more than 10% of the Company's sales during the years ended June 30, 2005, 2004 or 2003.

Backlog

On October 12, 2005 the Company's backlog was 9 units, representing $4,000,000 in potential sales. On October 12, 2004, the backlog was 10 units ($3,600,000 in potential sales). The increase in the dollar value of backlog reflects our efforts to increase the per unit prices for our vehicles.

Competition

The Class A Motorhome segment of the RV industry is dominated by five manufacturers, who account for over of annual domestic sales: Fleetwood, Winnebago, Coachman, Monaco, and Thor. These competitors have two major advantages over The Kingsley Coach: name recognition and capital resources. The Kingsley Coach will attempt to compete with these established companies primarily on the basis of the unique advantages of a truck chassis: strength, serviceability, and safety.

Research and Development

Until July of 2000, we were still developing our vehicles. Accordingly, research and development until that time represented nearly 30% of sales. From the 2001 fiscal year through 2003 we were marketing the products previously developed. Accordingly, our research and development expense was reduced to $123,400 during the year ended June 30, 2003. During fiscal 2004, as we developed the Kruiser, our research and development expense increased again to $204,000. In fiscal 2005, as we again focused on marketing the products already developed, we had no research and development expense. -6-

Employees

We currently employ 40 individuals, all of whom are employed on a full-time basis . Three are employed in administrative positions, eight in sales and marketing positions, and 29 in production. None of our employees are members of a union. We believe that our relations with our employees are good.

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