FreeHand Systems International, Inc. (Pink Sheets: FSYI)

Dear Reader,

You enter a music class and see a music student unzipping his backpack, pulling out a thin-screen digital sheet music tablet and placing it on a stand in front of him. Next, the student hits a button and the screen lights up and displays a Mozart concerto.  It’s one of a thousand pieces of music this digital sheet music tablet can hold.  At the student’s feet is a pedal that he can use to effortlessly turn the pages of the digital masterpiece as the music progresses.  When class ends, our student will pack the lightweight tablet back into his bag and head for home.  Tonight he'll practice the piece and while doing so, have access to helpful instruction received during class from his teacher on the more difficult passages. 

In one technological sweep today's featured company has created the grist of a musical revolution of the technical variety by crafting a device that enhances every aspect of a musician's experience.  And it's not just for students.  It’s for musicians everywhere.

Just ask Francis Gaskins, frequent StockUpTicks’s contributor and professional concert violinist.  He sees the product as a god-send for musicians of all varieties, merging necessity and innovation and creating a product that could become as ubiquitous in musical circles as the personal computer is in offices.

Sound intriguing?  It is, and we are pleased to introduce the purveyor of this musical feat, FreeHand Systems International, Inc. (Pink Sheets: FSYI). Their story follows.
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About FreeHand Systems

FreeHand Systems International, Inc. and FreeHand Systems, Inc. (“FreeHand” "FSYI") is a digital music company with new technology that is shaping the future of the music industry. FreeHand is now revolutionizing the sheet music performance market and has a unique opportunity because of market potential, the Company's advanced technology, and its highly motivated and experienced management team.

FreeHand's flagship product is the MusicPad Pro® Plus ("MusicPad"). The MusicPad is a hardware/software product that enables convenient usage, storage, and access to sheet music in digital format, based on patented technology.  FreeHand is the only company that manufactures a digital music performance tablet.  FSYI has a sales rate of approximately 1,500 MusicPads per month leading to over $1.0M in monthly revenue. 

Additionally, FreeHand is in the Digital Sheet Music business, via its Sunhawk.com web site, that delivers robust, flexible, and attractive downloadable sheets of music, which it achieves by converting printed sheet music into a digital format using a low cost/high-speed process. FSYI began securing rights for Digital Sheet Music in April 2003 and the site is now the largest in the industry with over 50,000 titles.

and  YES that's  Jon Anderson  (an FSYI Advisory Board member)  of the legendary rock band  YES using his MusicPad while visiting the FreeHand booth at the 2005 NAMM show.

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Very little has changed in the music industry in over a hundred years in either the distribution or use-in-performance of sheet music. FreeHand provides both a new method of distribution and a new method to enhance a performance. 

FreeHand has bundled both in a powerful 4 lb digital music tablet and a robust, easy-to-use web site to purchase digital music.  In the future, sheet music will not be printed but maintained by digital masters and downloaded globally. There will be no six to eight week delivery time and very little paper involved in education or professional performances.  It costs FreeHand pennies to deliver a digital title to China where it costs the traditional publisher as much as $20 for a $4.95 purchase. 
 

The Market and the Strategy for FreeHand Products

FSYI is targeting its products toward existing sheet music and musical instrument retailers, schools and universities, military bands, and specialized musical instrument Internet distributors. FSYI has distribution agreements in the U.S., Asia, Canada, South America and Europe. 

1. Establishing larger channels for its MusicPad Pro and digital sheet music in US, Canada, Asia, Europe, and So. America. This strategy includes selling both products through 'Big Box' stores like: Best Buy, Virgin Records, and Sharper Image.

2. Acquisitions. Through the acquisition of Sunhawk.com, the Company gained additional patents, proprietary digital rights management, a significant library of digital sheet music (approximately 50K titles currently available) and technological expertise. FreeHand will continue to acquire existing sheet music Internet sites and sheet music publishers with intellectual properties to enhance and support its sustaining business model – the sale of digital music. FSYI recently completed an acquisition of the largest international digital music site.

3. FreeHand is currently in negotiations with a well-known Japanese instrument manufacturer and a well-known US piano manufacturer to integrate the hardware and software into their most popular instruments on a branded OEM basis.  FreeHand expects to realize significant revenue in year 3 and year 4 from these partnerships.

4. FreeHand is currently in discussions with large internet sites like Yahoo, Microsoft, and Apple to create partnerships that will link FreeHand’s site to their audio download sites to provide additional content. FreeHand currently has approximately 2 million visitors per year on the digital sheet music site.

FreeHand does not have any competitors in the MusicPad technology sector. Nobody manufactures a music tablet and provides digital sheet music content. When a FreeHand title is downloaded it is specifically formatted for the tablet and immediate use.

According to NAMM (North American Music Merchants), a leading industry trade group, music product sales are an approximate $7B industry in the US. In addition, the global market for music products, which the FreeHand Systems MusicPad and Digital Music will be sold into, recently reached $15.4B in total annual sales. 

Music products are sold in over 8,000 music retail stores in the US and over 17,800 globally. Only a small percentage of sales are currently taking place online. As online and digital distribution becomes more prevalent, the industry is expected to realize additional growth. In the US, 53% of all households have one musical instrument, 40% have two.

There are currently 1 billion digital audio downloads per year with an expected growth rate of 134% in 2005. With these changes in the purchase and management of recorded music, it becomes clear that the niche market of sheet music is not far behind. 

Opportunities That Exist In The Current Sheet Music Market:

•   The process of finding sheet music is difficult and time consuming
•   High printing costs force publishers to place large amounts of music in out-of-print status making it difficult to obtain and causing lost revenue
•   Current sheet music format does not allow for easy key transposition
•   Churches, schools, and military bands spend hundreds of dollars copying and distributing their music
•   Performers and educators can spend up to 95% of their time managing their paper music

The Recent FSYI Acquisition of SheetMusicNow

     Step II
*Engrave active / dormant titles using FreeHand’s proprietary digitization process
*Cost savings to digitally engrave of greater then $30 per sheet compared to today's engraving methods

     Step III
*Sell product via a digital distribution model such as the Internet, etc. vs traditional stores
*Greater selection and product availability for the end user; no waiting on back order or discontinued items

SheetMusicNow’s catalog offers the world's largest selection of classical and jazz sheet music from the world's best artists and publishers including Chick Corea, Sir James Galway, Joe Lovano, Steven Isserlis, Oxford University Press, Schott, Universal Edition and many more. These titles constitute the largest independent catalog of digitized classical and jazz sheet music available to download and print.aaaaaa
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FSYI Fosters And Supports Its Markets

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Mozart's Oboe Quartet as performed by a high school chamber music group 
using the MusicPad Pro at the nationally renowned Interlochen Arts Academy

The FreeHand MusicPad

Jordan Rudess of Dream Theater with his MusicPad Pro.

The MusicPad Pro

• 30 day money back guarantee - 1-year warranty 
• MusicPad offers unlimited storage to digitally store sheet music 
• Light weight - only 4 lbs
• MusicPad offers noiseless touch screen or foot pedal page turning
• Makes musical key transposition quick and easy
• Multiple tools for rehearsal such as pitch pipe, metronome, and easy sheet editing
• No more costs for preprinted inventory
• Mac and PC compatible
• Newest MusicPad Pro Plus model features a high resolution screen

• Brings all the exceptional features of the MusicPad Pro and features for use by conductor
• Larger than the MusicPad, the Maestro provides a 2-page view so a conductor or bandleader can see the entire score
• Innovative touch screen allows marks and notations right on the page of music
• The Maestro's wireless networking capability allows the bandleader to communicate with the entire network

It is important to note that FreeHand’s proprietary and patented editor and Digital Rights Management software uses a format which has major distinctions from its competitors. The ability to transpose keys and to be able to purchase and download directly to the MusicPad are a few examples.  In addition, Midi/MP3 playback distinguishes FreeHand’s product in this market space.

FreeHand’s technology allows it to digitize existing sheet music at a cost of less then $10 per page vs. $40 for the current engraving method. As a result, the Company is able to electronically engrave active as well as dormant sheet music titles, at an extremely low cost. 

Mary Rich (Piano Professor, Lon Morris College, Texas),
and Vicki Conway (Piano Professor, University of Texas at Tyler) 
performing the Rachmaninoff Suite No. 2 at the Piano Wellness Seminar, 
at University of Texas at Arlington.

The FreeHand Web Site

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Digital Sheet Music Products

Private Labels: Offers large traffic retailers’ web sites the FreeHand catalog of music to be sold to its customers giving the retailer a percentage of the sales. FreeHand is currently set up on the WWBW/Music123 web site, which receives 3 million hits per month.

eMusicExpress™: Allows private dealers access to 50,000 titles at no cost to them, expanding FreeHand’s digital sheet music sales from single customers to larger markets. There are currently nearly 500 eMusicExpress retail customers. FreeHand’s target is to have 1,000 digital retail customers by the end of fiscal year 2006.

Affiliates: In addition to eMusicExpress, FreeHand web site can be linked with individual store's web sites for their customers to buy music from FreeHand’s Web site.
 

There are numerous videos available at the FSYI Web site (Click Here)  that features the MusicPad being used by performers in different genres You can view the videos in:  QuickTime (56K) QuickTime (DSL) QuickTime (T1) Real Player Windows Media

Mike Garson accompanies  David Bowie at "Fashion Rocks"  – see the MusicPad Pro in action

Recent News From FSYI

LOS ALTOS, Calif., Nov. 2, 2005 (PRIMEZONE) -- FreeHand Systems International, Inc. (Other OTC:FSYI.PK - News), announced today that it has acquired Denmark-based SheetMusicNow A/S. This acquisition ensures FreeHand's position as one of the largest source for downloadable digital sheet music and further enhances its reputation as a leader in the digital music industry whose revolutionary patented technology is shaping the future of distribution and performance of sheet music. In addition to its digital sheet music business, FreeHand is the developer, manufacturer and marketer of the world's first digital music tablet, the MusicPad Pro(r) Plus. 

To read the entire release and disclaimer, the link is HERE

Press Release Source: FreeHand Systems International, Inc. 
Tuesday October 25, 2:00 pm ET 

LOS ALTOS, Calif., Oct. 25, 2005 (PRIMEZONE) -- FreeHand Systems, Inc. (Other OTC:FSYI.PK - News) ("FreeHand") the digital music company whose revolutionary technology is shaping the future of the distribution and performance of sheet music, announced today that it has reached a $35 million agreement with Acton International Corporation, Ltd (``Acton''), a wholly owned subsidiary of Tom Lee, Ltd., the largest musical instrument distributor and retailer in Asia, to distribute FreeHand's digital MusicPad Pro(R). FreeHand is the world leader in digital sheet music publishing and the developer, manufacturer and marketer of the industries first digital music tablet, the MusicPad Pro(R) Plus. 

To read the entire release and disclaimer, the link is HERE
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The FSYI Management Team

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The FreeHand management team is highly skilled in each area of expertise demonstrated success in management, sales, administration, engineering and investment banking. Each member of the management team has strong leadership and is highly motivated.

The management team has ownership in the company and incentives that are tied to FreeHand’s overall performance. The majority of the management has been there since inception. The engineering department has seasoned technical expertise. All the engineers have start-up company to large IPO experiences and have a huge knowledge base in the music electronics applications. Most of them are in bands or play instruments and understand the ultimate application of FreeHand’s products.
 

Kim Lorz is the CEO and Chairman of FreeHand

Mr. Lorz has mentored and managed FreeHand Systems from inception to present, managing the financing and development of its various products and successfully completing the acquisition of two leading digital catalog companies. His keen sense of how to assess the management and performance potential of emerging growth companies and his understanding of strategic and tactical business planning has been applied to assist FreeHand, as it has with many companies in financial restructuring to maximize valuation. Mr. Lorz has over 25 years of experience in investing in early to later stage technology companies, has had active roles on boards of directors, held senior management positions at these various portfolio firms, and has been responsible for taking private companies public.

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The FSYI Advisory Board

aaa	The FSYI Advisory Board  is diversified and highly distinguished.  From Jon Anderson of YES to the conductor of the Cleveland Institute, from a Ph.D. in musicology at Stanford, to a specialist  in Medieval music theory, the members represent the market.

Financial Highlights For FSYI

TO CONTACT FSYI

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