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Voice Control

Executive Summary

Voice Control, Inc. was created to provide a solution to orthopedic surgeons. Specifically, the solution deals with the input of patient data into a medical records database.

The solution utilizes an increasingly popular and accurate speech recognition component known as “telephony.” This solution will provide the orthopedic surgeons with the ability to input patient data as they give the actual exam. This will fill a major gap not available in the current competitive product offerings.

The value proposition to the physician is the ability to see more patients and decrease their operating costs. This provides higher revenue and greater operating margins.

The company will be differentiated from its competitors as a result of offering the first turnkey solution for electronic medical records utilizing telephony.

Market research collected at the American Academy of Orthopedics last fall revealed that 86% would purchase electronic medical records with telephony input capabilities versus traditional input.

Additional market research demonstrated that less than 10% of the industry currently utilizes electronic medical records. Further, 89% of the market plans to purchase electronic medical records within the next five years. Of that, 42% within 18 months, 36% within three years and 11% within five years.

Currently, most physicians collect patient information on paper. That information will include patient demographics, patient examinations, lab reports and referral physician information.

All of this information forms an individual patient file. Electronic medical records represents all patient information being stored in a database creating the potential for a paperless office.

With approximately 15,000 licensed orthopedist in the United States, this represents a mature market with the need and ability to pay for electronic medical records services. Our plan is to penetrate a minimum of 13% in this market by our fifth year.

The execution of this plan will require initial financing. The cash reserves in the fifth year will be substantial. This will provide the opportunity for the owners to begin buying back the shares of the company required to fund the start-up. The owners currently desire to buy back all outstanding shares during this year.

Voice recognition software business plan, executive summary chart image

1.1 Objectives

Our main objective is to exceed $22 million in sales revenue and $7 million in net profit in the fifth year.

PRIMARY OBJECTIVES ARE:

  1. Penetrate 13% of the electronic medical records business in the orthopedic dictation market by year five.
  2. Prepare a business model that can be successfully launched in additional vertical medical markets by year five.
  3. Penetrate 7% of the orthopedic dictation market with speech recognition by year five.

1.2 Mission

Voice Control, Inc. will utilize advancing technology to provide a quick, content-secure method of input, review and sharing of patient information.

Our customers are the lifeline to our mission. Every effort will be made to meet all customer expectations. Our quality of product, service and quality towards customer concerns will set the industry standard.

Voice Control, Inc. will provide an environment for employees that will render individual growth opportunities, creativity, fair compensation, family values, and the opportunity for civic participation.

1.3 Keys to Success

The keys to our success are:

  1. Acceptance of speech recognition software as an alternative process to current methods of dictation/transcription.
  2. Establishing our market leadership position by providing a “custom” solution to individual, end-users’ dictation/transcription needs.
  3. Developing a “voice-created” medical records package that will provide printed patient records while capturing the information for the eventual “paperless” record.
  4. Profitably managing the explosive growth opportunities in this emerging market.
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Company Summary

Under the name Vitec, we have been providing speech recognition software to orthopedics since 1998. Another division of Vitec has been providing bone screening products since 1983. As a result, we have become the industry leader in providing speech recognition solutions for dictation.

Voice Control, Inc is a new company start-up, intending to acquire Vitec. We will have a dedicated beta site in Beavercreek, Ohio. The medical practice known as Springfield Surgery Center will perform beta site testing of our software. Michael Begal, MD is currently using speech recognition technology to capture his patient exams in “real time.”  Dr. Begal has provided consulting services to our speech recognition software efforts since 1998. There are seven physicians currently practicing at Springfield Surgery Center.

We have a partnership with WWBB (a 25 percent equity partner), a proven leader in database software and speech recognition development. We believe the union of this cutting edge software development, combined with our in-depth knowledge of the medical market and speech recognition, will provide an optimum product and delivery system.

2.1 Company Ownership

Voice Control, Inc. is a privately held Ohio Corporation. James Brown, Jim Hendrix (Intuitive Medical Records, LLC), and Steve Wonder are the major shareholders. Michael J. Begal, MD is a minor shareholder.

2.2 Start-up Summary

The primary start-up expenses include the acquisition of selected assets of Vitec and establishment of Voice Control, Inc. as a legal entity.

Assets acquired from Vitec will include copyrights, trademarks, license rights, accounting records, customer database, website, computers, office furniture, trade show exhibit, and inventory of dictation and orthopedic screening products. This expenditure is reflected in the following table under heading Start-up Assets Needed, Other Short-term Assets.

Initial investment will come from the major shareholders, investors and venture capital as depicted in the table below. Detailed information is available in the Financial Plan sections.

Voice recognition software business plan, company summary chart image

Start-up
Requirements
Start-up Expenses
Legal $5,000
Accounting $2,500
Stationery etc. $1,000
Brochures $2,000
Consultants $5,000
Insurance $600
Rent $3,266
Purchase of VCI Assets $50,000
Expensed equipment $2,000
Decision Tree $75,000
Total Start-up Expenses $146,366
Start-up Assets
Cash Required $1,453,634
Start-up Inventory $0
Other Current Assets $30,000
Long-term Assets $0
Total Assets $1,483,634
Total Requirements $1,630,000
Start-up Funding
Start-up Expenses to Fund $146,366
Start-up Assets to Fund $1,483,634
Total Funding Required $1,630,000
Assets
Non-cash Assets from Start-up $30,000
Cash Requirements from Start-up $1,453,634
Additional Cash Raised $0
Cash Balance on Starting Date $1,453,634
Total Assets $1,483,634
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $0
Capital
Planned Investment
James Brown $10,000
Jim Hendrix $10,000
Steve Wonder $10,000
Private Investors $1,600,000
other $0
Additional Investment Requirement $0
Total Planned Investment $1,630,000
Loss at Start-up (Start-up Expenses) ($146,366)
Total Capital $1,483,634
Total Capital and Liabilities $1,483,634
Total Funding $1,630,000

2.3 Company Locations and Facilities

We anticipate initially locating at the Entrepreneurs Center, an incubation facility located at 714 E. Monument Ave, Springfield, Ohio. We have chosen this location due to the attractive cost efficiencies, and entrepreneurial environment. The unit we will lease will be approximately 950 square feet. With the exception of the West Coast, this location provides access to most major markets within 90 minutes of air travel.

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Products and Services

We sell products that create a paperless medical practice and improve operational efficiencies along with traditional orthopedic screening products.

These products include:

  1. Electronic medical records.
  2. Dictation/transcription solutions using speech recognition software.
  3. Software for the management of scanned paper documents and digital files, (early conversion to paperless office).
  4. Orthopedic products.

It is anticipated that our competitors will be able to duplicate our efforts within 18-24 months. Our strategy is to license the telephony module of our electronic medical record software to our competitors. We believe this will help protect price erosion, and provide high-margin, low-maintenance revenue.

3.1 Product and Service Description

Electronic Medical Records
This product is slated for development and represents the principle need for funding.

It is our intention to develop an electronic medical record software product based on a speech recognition technology known as telephony, as the primary method of data entry (for telephony definition, see technology section).

Physicians will enter patient information into electronic medical records utilizing speech recognition software. The software will intuitively populate the database (a digital medical record) with the patient information using the telephony model of speech recognition. Telephony technology will provide the perfect accuracy that is necessary for medical records.

In real terms the software will be programmed to react to a specific word, by listening for another predictable group. This sequence will continue until the spoken word becomes the information that populates the database. In database programming, this is called a “decision tree” and is widely used.

This software will permit the physician to provide in-depth, accurate physical examinations while capturing all the pertinent information in real-time.

The benefit to the physician is that the examination will not be slowed down by the typical need to click or type information. Competing solutions, currently on the market, require the physician or staff to manually type the various fields to populate the electronic medical record.

The value proposition is a breakthrough adaptation of technology that will greatly increase the doctor’s accuracy and efficiency. Another benefit is reducing the lost productivity and revenue through rejections by government and insurance companies.

Additionally, once the physician has completed the examination, the electronic medical records software will generate the necessary referral letter for the physician.

This eliminates the need for the physician to dictate a referral letters for transcription. The added benefit to the physician is the time gained by not having to dictate referral letters at the conclusion of the day.

Current market research has shown that a popular competitive product is sold for $20,000 and each physician using the software pays an additional $7,000. There is a recurring revenue stream derived from an annual service agreement.

The price of the agreement is equal to 18% of the purchase price. (e.g., $27,000 x 18% = $4,860 annual recurring revenue) This is the pricing model we have selected to launch the voice medical record product, (see Important Assumptions section).

Note: None of the figures included in this business plan represent revenue from the sale of computer hardware. We recognize the volatility of the computer hardware market. Therefore, our business focus and core competency will remain consistent with providing software solutions using technology.

The company will provide all in-house training and software installation. We will also provide the first line of software support.

Speech Recognition
We are a value added reseller (VAR) of Dragon NaturallySpeaking software. We are offering this technology as a method of gaining a relationship with our customer group. We will provide dictation solutions for physicians.

The value proposition to the physician is decreased, or eliminated, transcription costs and improved efficiency of their staff. The product pricing will vary from $199 to $995 with additional customization fees billed or packaged at $165 per hour.

Management of Scanned Documents and Digital Files
We are a value added reseller of ScanSoft software. We will be offering this technology as a method of gaining a relationship with our customer group. We will provide an early transition to a paperless office.

The value proposition to the physician is eliminating filling space currently necessary for accounts payable. This not only provides more room, but also increases staff productivity as a result of eliminating the need for filing. The product price is $99, with additional customization fees billed or packaged at $165 per hour.

Orthopedic Screening Products

TELLER ACUITY CARDS
This product line is part of the assets of the management buyout of Vitec. Pediatric orthopedist and orthoptists utilize this product to help screen for the visual acuity and/or visual disorders of infants as young as six months of age. Product pricing ranges from $1,100 to $2,200.

CARDIFF ACUITY CARD TEST SYSTEM
The CARDIFF ACUITY CARD TEST SYSTEM is positioned for physicians and orthoptists to help screen for the visual acuity and/or visual disorders of toddlers over the age of 36 months. This product utilizes “vanishing optotypes” familiar in a toddler’s life. Thus, it is more interactive than the Teller Acuity Cards and helps keep the patient’s attention. It can also be used as a preferential looking device. The product sells for $914.

logMAR ACUITY CARDS
The logMAR ACUITY CARDS are positioned for physicians and orthoptists to help screen for visual acuity and for visual therapy training on children who have reached letter recognition capability. The product sells for $740.

3.1.1 EMR Components

Electronic medical records consist of three areas:

  1. Front office (front end)
  2. Patient medical records (examination/referral letters)
  3. Back office (back end).

FRONT OFFICE
This consists of patient demographics such as patient name, address, insurance information, employer information, telephone numbers, etc. Patient scheduling is another important part of the information captured.

PATIENT RECORDS
This consists of all the notes that a technician or physician would have previously written. When captured in an Electronic medical records package there are no handwritten entries. Information is either typed or entered with a mouse and drop down toolbars.

BACK OFFICE
This consists of billing the insurance companies, accounts receivable, accounts payable, and payroll.

Physicians purchase electronic medical records software for two reasons:

  1. Insurance companies and the government have started requiring electronic billing. A billing package (back office) is often the first component a physician has computerized.
  2. The second component being patient scheduling (front office).

3.2 Competitive Comparison

Electronic Medical Records
Our Electronic medical records will be the first to successfully interface telephony as the primary means of inputting data. Current conventional wisdom of the competition is to offer speech recognition as a “bolt-on” product. (This refers to adding it to their existing product and making it work the best they can, as opposed to being the driving force on how information is input.) While this will offer the physician the speech recognition software for dictation, it does not answer the primary market needs to reduce “labor intensive” input. From a competitive view point, the physician gains nothing. A successful software package should eliminate the need for the physician to spend hours after work dictating referral letters and/or patient records. A “bolt-on” solution does not eliminate that dictation, it only offers speech recognition as a tool to facilitate that “after hours” dictation.

Our primary market, orthopedics, cannot take the time to view a monitor to see if information is being delivered into the proper field or to move from field to field. They are constantly looking into the patient’s orthopedic(s.) Therefore, any electronic medical records software that can provide a voice activated solution that does not require constant viewing of a monitor will have a significant competitive advantage. “Bolt-on” products that utilize speech to navigate and continue to require the orthopedist to view a monitor will not have a competitive advantage, even if offered with a significantly lower price.

Speech Recognition
We differentiate our speech recognition/dictation solution offerings by offering our experience and knowledge of our customer’s individual needs while our competitors sell only the products themselves.

Orthopedic Screening Products
VCI orthopedic products are all considered the first of their kind to enter the marketplace. Therefore, we have captured the minds of the scientific community as being the market leaders. As a result of this positioning our products are often the first to be used in subsequent research and frequently named in published studies.

The products have become “brand names” known to the end-user and asked for by name.

3.3 Fulfillment

VCI assembles its own products using local vendors for materials.

Our speech recognition software is manufactured by Dragon Systems, Inc. Dragon Systems is recognized as a speech industry leader, well known for its technology breakthroughs and award winning dictation products.

On November 28, 2001 ScanSoft, Inc., Peabody, MA announced the purchase of L&H speech recognition assets, including Dragon Systems. They have announced that there are no plans to alter the current distribution of speech recognition software.

NOTE: The development of our Voice Control, Inc. software IS NOT dependent on Dragon NaturallySpeaking software. We are utilizing a telephony model of speech recognition, known as Nuance, as our speech engine in our electronic medical records software.

We also offer miscellaneous handheld recorders and headsets. These miscellaneous items, along with our software, are purchased from 1450 in Florida. An alternative source has already been arranged and is located in Minneapolis, MN.

The key component to our orthopedic products is the high quality that must be maintained in the printing process. This process is done exclusively by Hammer Graphics in Piqua, Ohio.

3.4 Technology

Speech recognition software is comprised of two distinctive offerings. They are “Telephony” and “Continuous Speech.”

Telephony is the more accurate of the two methods. The other key benefit to telephony is that it does not require any training by the user. It is highly utilized by call-in centers, airline ticketing/reservation centers, and Wall Street brokers. The accuracy is based on reducing the number of words the software listens for versus continuous speech software widely used for dictation. Telephony searches through predetermined word groups. For example, a credit card activation call center has the system listening for only 10 words. Zero though nine. It stores this information into a temporary database and then reads them back to the caller. The system then asks the caller if this is correct. Now the system is listening for two words, “yes” or “no.” This limited word search is what drives the accuracy so high in the telephony model.

Continuous speech recognition technology searches through 130,000, or more, words for each utterance it hears. The user must also perform training before the software can be used. Then, the software must develop a “vocabulary” for that user. A vocabulary is the predictability of what words “typically” follow each other in the users speech habits. This is developed over time, and is what eventually provides accuracy for current continuous speech recognition software.

Our orthopedics screening product, “Teller Acuity Cards®” is a registered trademark. Vitec has the exclusive rights to the name and manufacturing process to this product worldwide.

3.5 Future Products and Services

 It is our goal to vertically penetrate other medical markets with our electronic medical records software. Through the relationships we gain in our regional dictation and paper management sales, we will choose and enter strategic markets. Our goal is to secure these relationships through  2007.

The successful integration of the orthopedic market will provide us the knowledge we need to begin vertical integration into multiple markets in 2007 and beyond.

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Market Analysis Summary

Our initial target market will be the orthopedist in the medical industry, (see definition of orthopedist below.) This market has been chosen due to:

  1. The expertise of our management team in this industry.
  2. The expressed interest for this product by orthopedics at trade shows for the past two years.
  3. A member of our management team is considered an industry expert in providing speech recognition solutions to orthopedics.

There are approximately 15,000 practicing orthopedist in the United States. This represents a potential $212 million market in Electronic medical records.

We will concentrate our speech recognition solutions to subspecialty orthopedist. These orthopedist are required to dictate extensive referral letters. These physicians have reported transcription costs ranging from $5,000 to $20,000 per year. The savings in these transcription costs, as well as our current visibility in this market, make this an integral part of our overall strategy.

Definition – The orthopedic industry is served by two specialties.

  1. Orthopedist
  2. Orthopedic surgeons

We are aware of Health Insurance Portability & Accountability Act of 1996 (HIPAA) activity in regulating patient privacy rules. The need for an industry standard for patient confidentiality has not been developed. We intend to be active with industry efforts to establish a standard, and to keep abreast of regulatory activities within U.S. Department of Health & Human Services (HHS) and HIPAA.

At the American Academy of Orthopedics annual meeting in New Orleans, November 2001, we asked visitors to our exhibit to respond to a survey about electronic medical records. We found that 91% of the market currently does not use electronic medical records. We found that 86% of the market would favor electronic medical records software, where the physician input was via speech vs. traditional keyboard or touch screen. When asked their purchase plans the following was revealed:  38% plan to purchase within the next 18 months; 35% plan to purchase within the next 36 months; and 16% plan to purchase within the next 5 years.

  1. Reduced physician reimbursement from government and insurance companies (Medicaid/Medicare).
  2. Increased aging population, “baby boomers” reach age 60 in 2002, thus increasing demand for medical care.
  3. Legislation in congress to eliminate handwritten records. This impacts all physicians patient documentation.
  4. Deaths from medical errors due to misread handwritten clinical data.
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Strategy and Implementation Summary

Our business objectives will be reached by combining the synergies of our dictation/transcription speech recognition and document scanning and archival efforts with our electronic medical record software. Relationships built from these efforts in the orthopedic market will be leveraged in our electronic medical records business. As we identify our second, third, and fourth vertical markets for our electronic medical records business, we will follow our strategy of first building relationships in those markets with our dictation/transcription speech recognition business.

5.1 Strategy Pyramid

Our strategy is a two phase process. The first phase provides a solution for medical dictation using speech recognition software and/or document and image management software. This strategy involves not only our core orthopedic customer, but also involves medical professionals in a regional area defined in a triangle formed by Dayton, Cincinnati and Columbus, Ohio. The first phase seamlessly opening markets to later vertically integrate with the second phase. The second phase is vertically integrating our electronic medical records software into different medical markets.

It is our strategy to leverage relationships formed from our sales of these solutions. We believe we can gain the trust of our customers and be recognized as leaders in the use of speech recognition and/or document and image management in phase one. Thus, when we penetrate other vertical markets we will already have key testimonials from “peers” within the market in order to shorten the recognition cycle that is always a barrier.

Naturally, our first market is orthopedics. We already have market awareness and name recognition.

5.2 Milestones

The table and chart below outlines our critical milestones through year end 2003. A comprehensive list of marketing and sales milestones is included in our marketing outline, which is available upon request. Once funded, a monthly meeting will be held to review for analysis of the plan vs. actual. Our shareholders and advisers will be provided a copy of this monthly analysis.  

Voice recognition software business plan, strategy and implementation summary chart image

Milestones
Milestone Start Date End Date Budget Manager Department
Statement of work (SOW), level 1 3/15/2002 4/15/2002 $0 Jim R&D
Demonstration product 4/1/2002 5/30/2002 $0 Jim KLSS
AAO show demo 5/30/2002 10/1/2002 $0 Jim KLSS
Beta site testing 10/1/2002 4/1/2003 $100,000 Jim KLSS
Version 1.0 product 4/1/2003 10/1/2003 $100,000 Jim KLSS
Recruit and hire VRS sales rep 10/1/2002 11/1/2002 $2,000 Steve VRS
Recruit and hire EMR sales rep 10/1/2002 11/1/2002 $2,000 James EMR
Recruit and hire database coordinator 9/1/2002 9/30/2002 $0 Steve Cust Srvc
Recruit and hire EMR installation associate 1/1/2003 2/1/2003 $1,000 James Cust Srvc
Totals $205,000

5.3 Strategy Review

Upon entering the year 2005, we will review our strategy of providing dictation solutions. As stated earlier, we believe that speech recognition will be provided as a standard option on all new computer sales. Therefore, the profitability generated on selling off-the-shelf software will diminish. Continuing momentum will likely be more difficult.

By the year 2005 we should have developed a large base of satisfied customers. It is expected that the actual service provided from this group will gradually shift from custom dictation solutions to speech integration solutions. It may be necessary to spin off this group, or sell it to the managers/employees if it no longer has strategic synergies with our core electronic medical records business.

In 2005 we will review the strategy of continuing with our orthopedic screening business. If it no longer has strategic synergies with our long-term objectives, it may be necessary to divest ourself of this business unit.

5.4 Sales Forecast

The following table and charts contain our sales forecast for the first five years.  First year monthly forecasts are included in the appendix.

Voice recognition software business plan, strategy and implementation summary chart image

Voice recognition software business plan, strategy and implementation summary chart image

Sales Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Sales
EMR $0 $1,951,400 $3,366,100 $11,586,600 $19,294,600
VRS $126,000 $262,638 $536,242 $1,069,048 $1,643,331
Ophthalmic Products $121,000 $112,000 $103,000 $95,000 $87,000
Installation & Training Income $0 $90,000 $195,000 $675,000 $1,050,000
Total Sales $247,000 $2,416,038 $4,200,342 $13,425,648 $22,074,931
Direct Cost of Sales Year 1 Year 2 Year 3 Year 4 Year 5
EMR $0 $29,856 $51,675 $178,875 $278,250
VRS $39,000 $79,570 $160,694 $308,258 $456,233
Ophthalmic Products $51,000 $47,000 $43,000 $40,000 $37,000
Installation & Training Income $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $90,000 $156,426 $255,369 $527,133 $771,483

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Management Summary

Our company will initially employ three people. They will all be principals of the company. These three people will fill the key management roles as the company moves forward. Specifically, those roles are: president, vice president electronic medical records, and vice president voice recognition and imaging systems. Our technology partner, WWBB, will develop the software and provide the support for our speech recognition, databased products, and technology needs.

Our near term needs will include a database coordinator and two sales representatives. We will have a human resource consultant to provide hiring assistance, routine human resource duties, and job descriptions. This will allow for our management team to remain focused on sales initiatives, profit initiatives, and product development.

Our management philosophy will be based on customer relationships. This single guiding philosophy will provide all team members an environment that encourages creativity, customer satisfaction, and business goal achievement.

6.1 Management Team

Jim Hendrix – president, is currently the president and chief executive office of a privately-held company providing orthopedic-screening and speech recognition software products to the orthopedic industry. Jim was recruited to the company to direct its return to profit and growth. In 1998, after successfully turning the company, Jim launched a new software diorthopedic. Utilizing speech recognition, the company pioneered dictation solutions for the orthopedic industry. Today, Jim is recognized as an industry expert in speech recognition for the orthopedic industry.

Jim has thirty years of entrepreneurial challenges, management, and sales experience. His experience includes sales management, production management, remote facility management, system installation, and training. He has also served as an adjunct professor at Cuyahoga Community College, in Cleveland Ohio.

Jim started his entrepreneurial challenges as a partner with Op-Tech, Inc., a company providing computerization of a manufacturing process. The company went on to become the leader in the manufacturing process of spectacle orthopedic wear. He then helped launch Orthopedic Laboratories, a company that manufactured spectacle orthopedic wear. His experience in publicly held companies came during his tenure as district manager for orthopedic-Ease, a diorthopedic of BMC industries. He directed a turnaround from $1.2 million to $12 million in revenue during his twelve years with orthopedic Ease.

Jim is currently chairman of the CEO Development Initiative for the Dayton Area Chamber of Commerce. In January 2002 he will begin serving a three year term on the board of directors, Dayton Area Chamber of Commerce. He is a member of the Rotary Club of Dayton and is an active instructor and evaluator of ice hockey officials for USA Hockey.

James Brown has over twenty-five years of business management, marketing and sales experience. His extensive background includes P&L responsibility, sales management, marketing management, production management, facility management and personnel responsibilities. He currently serves as an adjunct professor at Central Missouri State University. He has entrepreneurial experience through the current ownership of a small printing business located in Warsaw, Missouri.

James gained senior level management recognition as president of TSI Graphics, a privately-held company. He directed a company with $16 million in revenue and losses of $1.2 million per year to $31 million in revenue with operating profits of $3 million. He is highly recognized in the graphic arts industry for embracing new technology implementation. This is demonstrated through his efforts helping companies convert from conventional to computer-based operations improving throughput, costs, and customer satisfaction.

James holds a BS degree in Graphic Arts Technology and Management from Central Missouri State University and worked on an MBA at Drexel University in Philadelphia. As a private pilot, he is active in the EAA “Young Eagles” program designed to introduce young people to aviation. He is active in several local charities and is the vice president of an organization formed to raise funds for Children’s Mercy Hospital in Kansas City, Missouri.

WWBB, Inc. – Technology Partner, was formed in 1997. It was established to provide command and control and flightline logistics expertise to the Air Force Research Labs and other commercial and military operational customers. Their role expanded to include research in decision-maker simulations, voice recognition, and rule-based expert systems through the Small Business Innovative Research (SBIR) program. The company has also applied these technologies in expanding their business base to Space Launch Range Support at both Air Force Ranges at Patrick and Vandenburg AFBs as well as to other commercial applications.

Their mission is to develop a team of orthopedicary functional experts that, when combined with highly skilled, state-of-the-art technical personnel, create innovative and affordable solutions to logistics end-user problems, by developing and integrating new, available and emerging technologies.

Steve Wonder is one of the owners of WWBB. During his Air Force career, Steve built a wing-level simulation to evaluate personnel required to support flightline aircraft maintenance. After his retirement in 1986, the simulation was selected for use by the Joint Strike Fighter (JSF) System Program Office to help define and refine requirements for the JSF. In 1995, the Air Force Research Laboratory became interested in the technology and initiated formal R&D of the technology through the SBIR program.

While visiting a Maintenance Operations Center, WWBB discovered that controllers manually enter identical information into two or more automated systems, and technicians usually wait until the end of the day to enter job-tracking information. Mr. Wonder suggested reevaluation of voice recognition technology and that it be applied to monitoring FM radio net communications and passively extracting critical aircraft status and job-tracking information.

Air Force Research Labs awarded WWBB a Phase 1 SBIR and their demonstration revealed voice recognition technology had matured enough to support passive data collection. During the Demonstration Phase, WWBB focused on analyzing and determining which FM net transmissions contained important status and failure data, then capturing the correct data. They also performed an extensive evaluation of voice recognition technology that would function in high noise environments and that did not require individual training for each voice input. During this phase, other applications of this technology were investigated, including the ability to verbally query status and have the system automatically generate a voice response. The ability for the system to read inspection checklist items to the user, as well as the development of interfaces and supply systems for direct data entry, were also investigated.

This technology gained widespread Phase III (outside funding) support from numerous organizations. WWBB received additional funding from the Warner Robins Air Logistics Center F-15 Depot Maintenance organization to use voice recognition technologies to support the Evaluation and Inspection (E&I) portion of depot maintenance. Checklist items are read to inspectors and failure data is recorded and input into the Depot failure data system.

Three products have resulted from this research and are currently available. They are:

  • Problem Reporting for Inspection and Scheduled Maintenance (PRISM). PRISM utilizes voice recognition technology to allow maintenance technicians to perform aircraft inspections and input discrepancies into PDMSS in a hands-free environment.
  • Aircraft Status Reporting Tool (ASRT). ASRT passively collects maintenance failure data and launch status information from FM radio transmissions. Key logistics terms can be successfully converted to the required data codes, thus eliminating the need for the technician to determine them by searching through their Air Force Technical Order code manual. Examples are Work Unit Codes, How Malfunction Codes, and When Discovered Codes. ASRT creates a CAMS job whenever it receives a voice input that contains failure data.
  • Speech Activated Inspection Tool (SA-IT). Much of aircraft maintenance requires that the technician complete various steps defined in applicable technical data. Using voice technology, SA-IT is able to audibly present the next step to the technician, receive and process a voice response and move to the next step, all without the user touching a keyboard or pencil. While the mechanic goes through the checklist, AVIRT tracks each step’s status as reported by the mechanic’s voice. The tool presents the status of each step in a management system that constantly tracks the work status and captures critical task information.

Below is a matrix of how the functional responsibilities are distributed within the organization.

Functional  Responsibilities

VCI

WWBB

Outsource

Research and Development

x

Documents and Manuals

 x

x

1st Line of  Support

x

2nd Line of Support

x

Customer Services:

Training

x

Installation

x

Consultation

x

Equipment Installation

 

 

x

6.2 Management Team Gaps

  1. We will need to add a senior level database programmer. This person will have the responsibility of future updates of our software, coordinating installation, and telephone support.
  2. Accounting services will be provided by Brady, Ware, & Schoenfeld  to perform all quarterly tax preparation in addition to yearly preparation.
  3. Legal services will be provided by Coolidge, Wall, Womsley, & Lombard.
  4. We will utilize Michelle O’Neil to fill the gap for our human resource needs. Michelle is well known in the Dayton area for her expertise in human resources.

6.3 Personnel Plan

Our personnel plan reflects the need to match key associates to our growth objectives. Our head count will have substantial increases in 2004, 2005, and 2006. This reflects the associates necessary to successfully meet our growth plans.

Personnel Plan
Year 1 Year 2 Year 3 Year 4 Year 5
Production Personnel
Shipping Clerk $0 $0 $20,800 $62,400 $104,000
Other $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal $0 $0 $20,800 $62,400 $104,000
Sales and Marketing Personnel
EMR Sales Representatives $25,500 $159,500 $227,000 $639,500 $927,000
VRS Sales Representatives $90,876 $57,502 $115,000 $182,504 $297,508
Name or title $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal $116,376 $217,002 $342,000 $822,004 $1,224,508
General and Administrative Personnel
CEO $0 $0 $0 $0 $0
President $99,996 $100,000 $150,000 $150,000 $200,000
VP VRS $99,996 $100,000 $150,000 $150,000 $200,000
VP EMR $99,996 $100,000 $150,000 $150,000 $200,000
Data Base Coordinator $90,000 $90,000 $90,000 $110,000 $125,000
Project Manager $15,000 $75,000 $150,000 $410,000 $620,000
Administrative Ass’t $0 $0 $60,000 $60,000 $66,000
Customer Service Mgr. $0 $0 $60,000 $60,000 $66,000
Human Resources Mrg $0 $0 $0 $0 $75,000
CFO $0 $0 $0 $0 $125,000
Other $0 $0 $0 $0 $0
Subtotal $404,988 $465,000 $810,000 $1,090,000 $1,677,000
Other Personnel
Programmers $0 $75,000 $150,000 $225,000 $450,000
Customer Support $12,501 $62,500 $187,500 $502,500 $715,000
Software Installation Team $12,501 $62,500 $187,500 $502,500 $715,000
Bookkeeper $0 $19,393 $22,704 $45,408 $68,112
Secretary/Bookkeeper $0 $0 $37,152 $55,728 $111,456
HR Consultant $0 $0 $0 $0 $0
Software Development Consultant $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal $25,002 $219,393 $584,856 $1,331,136 $2,059,568
Total People 9 15 33 62 86
Total Payroll $546,366 $901,395 $1,757,656 $3,305,540 $5,065,076

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Financial Plan

Substantial funding is required to execute this business plan. The tables shown in the sections to follow, and in the appendix, detail the investment and use of capital.

September thru December 2002 – Funding will be required to allow the company to begin operation, complete their acquisition, hire staff, develop technology, purchase additional computer equipment needs, and fund marketing campaigns.

January thru August 2003 – Further funding will be required to allow the company to complete expansion of staff, complete beta testing, fund marketing campaigns and  purchase computer equipment needs. 

September 2003 – An additional infusion will be required to satisfy our capital needs.

7.1 Important Assumptions

FACTS
The orthopedic screening products currently do not have synergies with our core products being developed. It is being maintained to provide exposure to our current market interests and it provides necessary positive cash flow during the early stage of start-up. We may divest these offerings after positive cash flow is maintained from our core software.

Many of the orthopedist visiting our exhibit at the American Academy of Orthopedics annual meeting and American Society of Cataract and Refractive Surgeons annual meeting in 1999 and 2000, reported interest in electronic medical records. The majority said they had interest in a package that would employ speech recognition. Most said they wanted to be updated as developments were available. In 2001 a survey was taken of visitors at our exhibit at the American Academy of Orthopedics. We found that 86% of the market would rather purchase on electronic medical records software package that was speech enabled.

Revenues associated with speech recognition technology and products are projected to grow from an estimated $400 million in 1999 to $9 billion in 2003, representing an 88% compound annual growth rate, (source: Let’s Talk, Speech Technology, Stephan Hart, Aug 4, 1999, Niche Industry 2000.)

Additional sales from current VRS customers are not figured in any of the revenue scenarios. (In other words once a physician has purchased the dictation product how many additional sales will office/partners purchase? These figures are not included in any of the revenue scenarios.)

The American Academy Orthopedics has 15,000 members in the United States. They claim this represents 95% of the Orthopedist in the country.

Clinitec International, Inc. is a unit within MicroMed Healthcare Information Systems, Inc., a diorthopedic of Quality Systems, Inc. They have approximately 300 users in various disciplines of medicine. Their pricing is $20,000 per practice for the license rights to the software, plus $7000 per physician, per practice using the software. In addition, they charge 18% of this initial fee as a yearly maintenance fee. There are additional charges for hardware and training.

Billed as a follow up to the 1999 Institute of Medicine (IOM) report that documents nearly 100,000 patient deaths a year from medical errors, today the IOM issued a new report focused on system-wide concerns with health-care delivery. The report also points to Congress to create a $1 billion innovation fund to help support promising projects for health-care reform, and calls for elimination of most handwritten clinical data and development of a nationwide technology-based information network, (source: American Academy of Orthopedics, Washington Report, Volume VI, Issue 4, March 1, 2001.)

At the American Academy of Orthopedics annual meeting in New Orleans, November 2001, we asked visitors to our exhibit to respond to a survey about electronic medical records. We found that 91% of the market currently does not use electronic medical records.

At the American Academy of Orthopedics annual meeting in New Orleans, November 2001, we asked visitors to our exhibit to respond to a survey about electronic medical records. When asked their purchase plans the following was revealed: 38% plan to purchase within the next 18 months; 35% plan to purchase within the next 36 months; and 16% plan to purchase within the next 5 years.

ASSUMPTIONS
Of the 15,000 orthopedist in United States, we make the assumption that there is an average of three per practice. This assumption is based upon a survey we performed from physicians that have attended our trade exhibits over the past three years. The data demonstrated that there was an average of 2.8 physicians per practice. This represents a total market size of 5,000 offices. The average selling price estimate would be $42,500, ($20,000 base price and $7,500 per orthopedist). 5,000 offices at an average selling price of $42,500 = $212.5 million.

The yearly recurring maintenance fee is 18%. The recurring maintenance revenue was based on 15,000 practices with an average of three physicians per practice, purchasing software at an average selling price of $42,500.

Current electronic medical records packages will attempt to utilize speech recognition software in the near future. Extensive knowledge and usage of speech recognition software will not be their strength. The opportunity exits to “brand” our technology into their product offerings.

Orthopedist who utilize speech recognition for dictation and/or patient records/charts will be less resistant to purchasing electronic medical records employing telephony.

Regular orthopedic sales will continue to decline approximately 13% per year without new products, based on past performance.

At the end of 2003, or sometime during that time period, our number of demos should increase due to increased awareness and use of technology.

Every new employee will require a new computer at the cost of $2,500 (monitor, and CPU. Each CPU will have a fax modem, zip drive, CD ROM and current specs show 512 MB RAM). The anticipated software for each system will be approximately $1,000 of the total price.

We will share existing printers, from the network. Therefore, additional printers needed will be minimum year to year.

A new phone system will be needed in the year 2005.

Every other year, new computers will need to be purchased for everyone, with the exception of accounting, to keep up with a technology relative to our core software.

Our closing rate will increase as we gain market penetration and word-of-mouth sales.

Bank finance charges are figured on credit card charges for 90% of VRS sales and 90% of orthopedic sales. The credit card charge is figured at 1.5%.

Revenue from electronic medical records sales will NOT be on credit cards. We believe these sales will be paid for from bank financing arranged by the individual physicians, OR through lease companies provided by us. It is not our intent to provide financing for these sales. A 20% to 25% deposit will be required with the balance due prior to final shipment.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0

7.2 Projected Profit and Loss

The company is projected to reach profitability in FY 2005. The gross margin for this type of company is very different from a manufacturing facility. According to the IRS the cost of software development is depreciated over a three year period. The only cost of goods are the CD the software is burned on to, the printed instruction manual, and the runtime license for the speech recognition software. This produces an extremely high gross margin, but is accurate for this type of business. Companies like Microsoft, Peachtree, Corel, etc., will mirror unusually higher gross margins, when compared to typical manufacturing industries.

Voice recognition software business plan, financial plan chart image

Voice recognition software business plan, financial plan chart image

Voice recognition software business plan, financial plan chart image

Voice recognition software business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $247,000 $2,416,038 $4,200,342 $13,425,648 $22,074,931
Direct Cost of Sales $90,000 $156,426 $255,369 $527,133 $771,483
Production Payroll $0 $0 $20,800 $62,400 $104,000
Other $0 $0 $0 $0 $0
Total Cost of Sales $90,000 $156,426 $276,169 $589,533 $875,483
Gross Margin $157,000 $2,259,612 $3,924,173 $12,836,115 $21,199,448
Gross Margin % 63.56% 93.53% 93.43% 95.61% 96.03%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $116,376 $217,002 $342,000 $822,004 $1,224,508
Advertising/Promotion $350,000 $350,000 $350,000 $400,000 $450,000
Travel – trade shows $12,000 $18,000 $20,000 $25,000 $140,000
Trade Shows & Exhibits $30,000 $45,000 $45,000 $65,000 $165,000
Travel $180,000 $242,000 $324,000 $612,000 $864,000
Miscellaneous $12,000 $12,000 $12,000 $18,000 $24,000
Total Sales and Marketing Expenses $700,376 $884,002 $1,093,000 $1,942,004 $2,867,508
Sales and Marketing % 283.55% 36.59% 26.02% 14.46% 12.99%
General and Administrative Expenses
General and Administrative Payroll $404,988 $465,000 $810,000 $1,090,000 $1,677,000
Account Name $0 $0 $0 $0 $0
Depreciation $105,822 $161,600 $186,100 $120,295 $135,100
Leased Equipment $1,800 $1,800 $1,800 $1,800 $1,800
Utilities $11,900 $26,700 $58,100 $121,600 $200,000
Insurance $12,000 $32,000 $150,000 $500,000 $750,000
Bank Service charges (credit cards) $4,100 $8,700 $18,100 $36,700 $50,000
Dues & Subscriptions $3,000 $3,500 $4,000 $4,500 $6,500
Meals & Entertainment $7,500 $10,000 $20,000 $50,000 $125,000
Meetings & Training $7,000 $15,000 $33,000 $62,000 $86,000
Misc $3,000 $4,000 $6,000 $8,000 $15,000
Office Supplies $5,500 $7,000 $9,000 $12,000 $20,000
Postage $360 $500 $700 $2,000 $5,000
RV Insurance $500 $2,400 $2,400 $5,000 $5,000
RV Mileage $4,500 $36,000 $36,000 $83,200 $83,200
Install/Training Costs $0 $90,000 $195,000 $675,000 $1,050,000
Royalties $12,100 $83,800 $178,600 $588,900 $973,500
R&D $0 $0 $0 $268,500 $441,500
Rent $19,200 $29,600 $38,800 $57,000 $57,000
Payroll Taxes $136,593 $225,349 $439,414 $826,385 $1,266,269
Total General and Administrative Expenses $739,863 $1,202,949 $2,187,014 $4,512,880 $6,947,869
General and Administrative % 299.54% 49.79% 52.07% 33.61% 31.47%
Other Expenses:
Other Payroll $25,002 $219,393 $584,856 $1,331,136 $2,059,568
Consultants $0 $0 $0 $0 $0
Executive Hire Search $0 $0 $0 $15,000 $0
Professional Fees $24,000 $24,000 $30,000 $30,000 $75,000
Human Resources Consultant $6,000 $10,000 $15,000 $30,000 $0
Total Other Expenses $55,002 $253,393 $629,856 $1,406,136 $2,134,568
Other % 22.27% 10.49% 15.00% 10.47% 9.67%
Total Operating Expenses $1,495,241 $2,340,344 $3,909,870 $7,861,020 $11,949,945
Profit Before Interest and Taxes ($1,338,241) ($80,732) $14,303 $4,975,095 $9,249,503
EBITDA ($1,232,419) $80,868 $200,403 $5,095,390 $9,384,603
Interest Expense $4,353 $17,648 $26,046 $24,277 $22,403
Taxes Incurred $0 $0 $0 $1,237,705 $2,306,775
Net Profit ($1,342,594) ($98,380) ($11,743) $3,713,114 $6,920,325
Net Profit/Sales -543.56% -4.07% -0.28% 27.66% 31.35%

7.3 Projected Cash Flow

The following chart and table are the projected Cash Flow for Voice Control, Inc.

Voice recognition software business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $0 $0 $0 $0 $0
Cash from Receivables $200,500 $2,007,697 $3,864,431 $11,688,900 $20,446,625
Subtotal Cash from Operations $200,500 $2,007,697 $3,864,431 $11,688,900 $20,446,625
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $90,000 $200,000 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $604,000 $0 $0 $0 $0
Subtotal Cash Received $894,500 $2,207,697 $3,864,431 $11,688,900 $20,446,625
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $546,366 $901,395 $1,757,656 $3,305,540 $5,065,076
Bill Payments $866,143 $1,420,810 $2,212,294 $6,016,754 $9,713,977
Subtotal Spent on Operations $1,412,509 $2,322,205 $3,969,950 $9,322,294 $14,779,053
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $5,906 $15,222 $16,817 $18,578 $18,890
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $465,000 $43,000 $122,500 $105,000 $265,000
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $1,883,415 $2,380,427 $4,109,267 $9,445,872 $15,062,943
Net Cash Flow ($988,915) ($172,730) ($244,836) $2,243,028 $5,383,682
Cash Balance $464,719 $291,989 $47,153 $2,290,181 $7,673,863

7.4 Projected Balance Sheet

The following chart and table are the projected Balance Sheet for Voice Control, Inc.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $464,719 $291,989 $47,153 $2,290,181 $7,673,863
Accounts Receivable $46,500 $454,841 $790,753 $2,527,501 $4,155,807
Inventory $10,384 $18,048 $29,464 $94,176 $154,848
Other Current Assets $30,000 $30,000 $30,000 $30,000 $30,000
Total Current Assets $551,603 $794,879 $897,369 $4,941,858 $12,014,518
Long-term Assets
Long-term Assets $465,000 $508,000 $630,500 $735,500 $1,000,500
Accumulated Depreciation $105,822 $267,422 $453,522 $573,817 $708,917
Total Long-term Assets $359,178 $240,578 $176,978 $161,683 $291,583
Total Assets $910,781 $1,035,457 $1,074,347 $5,103,541 $12,306,101
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $81,647 $119,925 $187,376 $522,034 $823,159
Current Borrowing $84,094 $268,872 $252,055 $233,477 $214,587
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $165,741 $388,797 $439,431 $755,511 $1,037,746
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $165,741 $388,797 $439,431 $755,511 $1,037,746
Paid-in Capital $2,234,000 $2,234,000 $2,234,000 $2,234,000 $2,234,000
Retained Earnings ($146,366) ($1,488,960) ($1,587,340) ($1,599,084) $2,114,030
Earnings ($1,342,594) ($98,380) ($11,743) $3,713,114 $6,920,325
Total Capital $745,040 $646,660 $634,916 $4,348,030 $11,268,355
Total Liabilities and Capital $910,781 $1,035,457 $1,074,347 $5,103,541 $12,306,101
Net Worth $745,040 $646,660 $634,916 $4,348,030 $11,268,355

7.5 Business Ratios

The software industry ratio statistics have not been easy to obtain. As mentioned before, the cost of goods for this type of company is extremely low. Basically, we will have our runtime license for the speech recognition software, a CD and printed instruction material, (the instruction material may also be incorporated into the CD.) Companies like Microsoft, Peachtree, etc., traditionally will have low cost of goods and high gross margins as a result. We used NAICS code 541511, Custom Computer Programming Services, as a rough comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 878.15% 73.85% 219.63% 64.42% 10.70%
Percent of Total Assets
Accounts Receivable 5.11% 43.93% 73.60% 49.52% 33.77% 26.43%
Inventory 1.14% 1.74% 2.74% 1.85% 1.26% 4.70%
Other Current Assets 3.29% 2.90% 2.79% 0.59% 0.24% 40.37%
Total Current Assets 60.56% 76.77% 83.53% 96.83% 97.63% 71.50%
Long-term Assets 39.44% 23.23% 16.47% 3.17% 2.37% 28.50%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 18.20% 37.55% 40.90% 14.80% 8.43% 38.17%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 19.44%
Total Liabilities 18.20% 37.55% 40.90% 14.80% 8.43% 57.61%
Net Worth 81.80% 62.45% 59.10% 85.20% 91.57% 42.39%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 63.56% 93.53% 93.43% 95.61% 96.03% 100.00%
Selling, General & Administrative Expenses 607.12% 97.60% 93.70% 67.95% 64.68% 84.53%
Advertising Expenses 141.70% 14.49% 8.33% 2.98% 2.04% 1.06%
Profit Before Interest and Taxes -541.80% -3.34% 0.34% 37.06% 41.90% 1.55%
Main Ratios
Current 3.33 2.04 2.04 6.54 11.58 1.49
Quick 3.27 2.00 1.98 6.42 11.43 1.17
Total Debt to Total Assets 18.20% 37.55% 40.90% 14.80% 8.43% 66.93%
Pre-tax Return on Net Worth -180.20% -15.21% -1.85% 113.86% 81.89% 3.01%
Pre-tax Return on Assets -147.41% -9.50% -1.09% 97.01% 74.98% 9.11%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -543.56% -4.07% -0.28% 27.66% 31.35% n.a
Return on Equity -180.20% -15.21% -1.85% 85.40% 61.41% n.a
Activity Ratios
Accounts Receivable Turnover 5.31 5.31 5.31 5.31 5.31 n.a
Collection Days 57 38 54 45 55 n.a
Inventory Turnover 10.91 11.00 10.75 8.53 6.20 n.a
Accounts Payable Turnover 11.61 12.17 12.17 12.17 12.17 n.a
Payment Days 27 25 25 20 25 n.a
Total Asset Turnover 0.27 2.33 3.91 2.63 1.79 n.a
Debt Ratios
Debt to Net Worth 0.22 0.60 0.69 0.17 0.09 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $385,862 $406,082 $457,938 $4,186,347 $10,976,772 n.a
Interest Coverage -307.42 -4.57 0.55 204.93 412.87 n.a
Additional Ratios
Assets to Sales 3.69 0.43 0.26 0.38 0.56 n.a
Current Debt/Total Assets 18% 38% 41% 15% 8% n.a
Acid Test 2.98 0.83 0.18 3.07 7.42 n.a
Sales/Net Worth 0.33 3.74 6.62 3.09 1.96 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

7.6 Exit Strategy

Beginning in the fifth year of the plan, significant cash reserves will have been established. It is anticipated that the fifth year of the plan will provide the opportunity for the owners to begin buying back the shares of the company required to fund the start-up. The owners currently desire to buy back all outstanding shares during this year.

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Appendix

Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Production Personnel
Shipping Clerk $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales and Marketing Personnel
EMR Sales Representatives $0 $0 $0 $0 $0 $0 $0 $0 $0 $8,500 $8,500 $8,500
VRS Sales Representatives $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $4,792 $4,792 $4,792
Name or title $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $13,292 $13,292 $13,292
General and Administrative Personnel
CEO $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
President $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333
VP VRS $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333
VP EMR $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333 $8,333
Data Base Coordinator $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500
Project Manager $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,000 $5,000 $5,000
Administrative Ass’t $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Customer Service Mgr. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Human Resources Mrg $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
CFO $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $37,499 $37,499 $37,499
Other Personnel
Programmers $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Customer Support $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,167 $4,167 $4,167
Software Installation Team $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,167 $4,167 $4,167
Bookkeeper $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Secretary/Bookkeeper $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
HR Consultant $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Software Development Consultant $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal $0 $0 $0 $0 $0 $0 $0 $0 $0 $8,334 $8,334 $8,334
Total People 4 4 4 4 4 4 5 5 5 9 9 9
Total Payroll $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $59,125 $59,125 $59,125
General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $9,600 $13,400 $26,500 $17,900 $15,900 $28,500 $28,500 $17,900 $19,300 $22,300 $21,000 $26,200
Direct Cost of Sales $4,000 $5,700 $9,510 $6,470 $5,640 $10,240 $10,240 $6,440 $6,940 $7,940 $7,440 $9,440
Production Payroll $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $4,000 $5,700 $9,510 $6,470 $5,640 $10,240 $10,240 $6,440 $6,940 $7,940 $7,440 $9,440
Gross Margin $5,600 $7,700 $16,990 $11,430 $10,260 $18,260 $18,260 $11,460 $12,360 $14,360 $13,560 $16,760
Gross Margin % 58.33% 57.46% 64.11% 63.85% 64.53% 64.07% 64.07% 64.02% 64.04% 64.39% 64.57% 63.97%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 $13,292 $13,292 $13,292
Advertising/Promotion $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,167 $29,163
Travel – trade shows $4,000 $3,000 $0 $2,500 $0 $2,500 $0 $0 $0 $0 $0 $0
Trade Shows & Exhibits $0 $0 $2,500 $13,750 $0 $0 $0 $12,500 $0 $0 $0 $1,250
Travel $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
Miscellaneous $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Total Sales and Marketing Expenses $57,667 $56,667 $56,167 $69,917 $53,667 $56,167 $53,667 $66,167 $53,667 $58,459 $58,459 $59,705
Sales and Marketing % 600.70% 422.89% 211.95% 390.60% 337.53% 197.08% 188.31% 369.65% 278.07% 262.15% 278.38% 227.88%
General and Administrative Expenses
General and Administrative Payroll $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $32,499 $37,499 $37,499 $37,499
Account Name $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation $4,884 $5,463 $6,042 $6,621 $7,200 $7,779 $9,858 $10,437 $11,016 $11,595 $12,174 $12,753
Leased Equipment $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150
Utilities $992 $992 $992 $992 $992 $992 $992 $992 $992 $992 $992 $988
Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Bank Service charges (credit cards) $342 $342 $342 $342 $342 $342 $342 $342 $342 $342 $342 $338
Dues & Subscriptions $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Meals & Entertainment $625 $625 $625 $625 $625 $625 $625 $625 $625 $625 $625 $625
Meetings & Training $583 $583 $583 $583 $583 $583 $583 $583 $583 $583 $583 $587
Misc $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250
Office Supplies $460 $460 $460 $460 $460 $460 $460 $460 $460 $460 $460 $440
Postage $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30 $30
RV Insurance $0 $0 $0 $0 $0 $0 $0 $100 $100 $100 $100 $100
RV Mileage $0 $0 $0 $0 $0 $0 $0 $0 $1,200 $1,200 $1,200 $900
Install/Training Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Royalties $960 $1,340 $1,180 $760 $660 $1,280 $1,280 $760 $830 $970 $910 $1,170
R&D $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent 15% $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Payroll Taxes 25% $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $14,781 $14,781 $14,781
Total General and Administrative Expenses $54,875 $55,834 $56,253 $56,412 $56,891 $58,090 $60,169 $60,328 $62,177 $72,427 $72,946 $73,461
General and Administrative % 571.61% 416.67% 212.28% 315.15% 357.81% 203.82% 211.12% 337.03% 322.16% 324.78% 347.36% 280.39%
Other Expenses:
Other Payroll $0 $0 $0 $0 $0 $0 $0 $0 $0 $8,334 $8,334 $8,334
Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Executive Hire Search $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Professional Fees $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Human Resources Consultant $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Total Other Expenses $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $10,834 $10,834 $10,834
Other % 26.04% 18.66% 9.43% 13.97% 15.72% 8.77% 8.77% 13.97% 12.95% 48.58% 51.59% 41.35%
Total Operating Expenses $115,042 $115,001 $114,920 $128,829 $113,058 $116,757 $116,336 $128,995 $118,344 $141,720 $142,239 $144,000
Profit Before Interest and Taxes ($109,442) ($107,301) ($97,930) ($117,399) ($102,798) ($98,497) ($98,076) ($117,535) ($105,984) ($127,360) ($128,679) ($127,240)
EBITDA ($104,558) ($101,838) ($91,888) ($110,778) ($95,598) ($90,718) ($88,218) ($107,098) ($94,968) ($115,765) ($116,505) ($114,487)
Interest Expense $0 $0 $0 $0 $0 $0 $750 $740 $731 $721 $711 $701
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($109,442) ($107,301) ($97,930) ($117,399) ($102,798) ($98,497) ($98,826) ($118,275) ($106,715) ($128,081) ($129,390) ($127,941)
Net Profit/Sales -1140.02% -800.75% -369.55% -655.86% -646.53% -345.60% -346.76% -660.76% -552.93% -574.35% -616.14% -488.32%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash from Receivables $0 $320 $9,727 $13,837 $26,213 $17,833 $16,320 $28,500 $28,147 $17,947 $19,400 $22,257
Subtotal Cash from Operations $0 $320 $9,727 $13,837 $26,213 $17,833 $16,320 $28,500 $28,147 $17,947 $19,400 $22,257
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $90,000 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $604,000 $0
Subtotal Cash Received $0 $320 $9,727 $13,837 $26,213 $17,833 $106,320 $28,500 $28,147 $17,947 $623,400 $22,257
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $40,999 $59,125 $59,125 $59,125
Bill Payments $2,585 $77,511 $76,291 $81,672 $83,843 $70,042 $83,052 $76,605 $80,359 $74,757 $80,687 $78,738
Subtotal Spent on Operations $43,584 $118,510 $117,290 $122,671 $124,842 $111,041 $124,051 $117,604 $121,358 $133,882 $139,812 $137,863
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $1,162 $1,171 $1,181 $1,191 $1,201
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $145,833 $20,833 $20,833 $20,833 $20,833 $20,833 $110,833 $20,833 $20,833 $20,833 $20,833 $20,837
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $189,417 $139,343 $138,123 $143,504 $145,675 $131,874 $234,884 $139,599 $143,362 $155,896 $161,836 $159,901
Net Cash Flow ($189,417) ($139,023) ($128,397) ($129,667) ($119,462) ($114,041) ($128,564) ($111,099) ($115,215) ($137,949) $461,564 ($137,645)
Cash Balance $1,264,217 $1,125,194 $996,797 $867,130 $747,668 $633,627 $505,063 $393,964 $278,748 $140,799 $602,364 $464,719

Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $1,453,634 $1,264,217 $1,125,194 $996,797 $867,130 $747,668 $633,627 $505,063 $393,964 $278,748 $140,799 $602,364 $464,719
Accounts Receivable $0 $9,600 $22,680 $39,453 $43,517 $33,203 $43,870 $56,050 $45,450 $36,603 $40,957 $42,557 $46,500
Inventory $0 $4,400 $6,270 $10,461 $7,117 $6,204 $11,264 $11,264 $7,084 $7,634 $8,734 $8,184 $10,384
Other Current Assets $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 $30,000
Total Current Assets $1,483,634 $1,308,217 $1,184,144 $1,076,712 $947,764 $817,075 $718,761 $602,377 $476,498 $352,986 $220,490 $683,104 $551,603
Long-term Assets
Long-term Assets $0 $145,833 $166,666 $187,499 $208,332 $229,165 $249,998 $360,831 $381,664 $402,497 $423,330 $444,163 $465,000
Accumulated Depreciation $0 $4,884 $10,347 $16,389 $23,010 $30,210 $37,989 $47,847 $58,284 $69,300 $80,895 $93,069 $105,822
Total Long-term Assets $0 $140,949 $156,319 $171,110 $185,322 $198,955 $212,009 $312,984 $323,380 $333,197 $342,435 $351,094 $359,178
Total Assets $1,483,634 $1,449,166 $1,340,463 $1,247,822 $1,133,086 $1,016,030 $930,770 $915,361 $799,878 $686,183 $562,925 $1,034,198 $910,781
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $0 $74,974 $73,572 $78,861 $81,524 $67,266 $80,503 $73,920 $77,874 $72,065 $78,069 $75,923 $81,647
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $90,000 $88,838 $87,667 $86,486 $85,295 $84,094
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $74,974 $73,572 $78,861 $81,524 $67,266 $80,503 $163,920 $166,712 $159,732 $164,555 $161,218 $165,741
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $0 $74,974 $73,572 $78,861 $81,524 $67,266 $80,503 $163,920 $166,712 $159,732 $164,555 $161,218 $165,741
Paid-in Capital $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $1,630,000 $2,234,000 $2,234,000
Retained Earnings ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366) ($146,366)
Earnings $0 ($109,442) ($216,743) ($314,673) ($432,072) ($534,870) ($633,367) ($732,193) ($850,468) ($957,183) ($1,085,264) ($1,214,653) ($1,342,594)
Total Capital $1,483,634 $1,374,192 $1,266,891 $1,168,961 $1,051,562 $948,764 $850,267 $751,441 $633,166 $526,451 $398,370 $872,981 $745,040
Total Liabilities and Capital $1,483,634 $1,449,166 $1,340,463 $1,247,822 $1,133,086 $1,016,030 $930,770 $915,361 $799,878 $686,183 $562,925 $1,034,198 $910,781
Net Worth $1,483,634 $1,374,192 $1,266,891 $1,168,961 $1,051,562 $948,764 $850,267 $751,441 $633,166 $526,451 $398,370 $872,981 $745,040
Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
EMR 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
VRS 0% $0 $0 $14,700 $10,300 $9,300 $15,700 $15,700 $10,300 $11,000 $12,600 $11,900 $14,500
Ophthalmic Products 0% $9,600 $13,400 $11,800 $7,600 $6,600 $12,800 $12,800 $7,600 $8,300 $9,700 $9,100 $11,700
Installation & Training Income 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $9,600 $13,400 $26,500 $17,900 $15,900 $28,500 $28,500 $17,900 $19,300 $22,300 $21,000 $26,200
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
EMR $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
VRS $0 $0 $4,510 $3,270 $2,840 $4,840 $4,840 $3,240 $3,440 $3,840 $3,640 $4,540
Ophthalmic Products $4,000 $5,700 $5,000 $3,200 $2,800 $5,400 $5,400 $3,200 $3,500 $4,100 $3,800 $4,900
Installation & Training Income $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $4,000 $5,700 $9,510 $6,470 $5,640 $10,240 $10,240 $6,440 $6,940 $7,940 $7,440 $9,440

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