Economics, Profitability, and Harvest Potential

An initial start-up of $ 200,000 is required for a small and expanding license business prototype
lab, offices and warehouse needed for producing the components and software in the audio-text
hardware. At completion, patent fees are incurred. Consultation fee is another thought, to insure
intellectual property and project protection a registered agency is needed. After the completion of the
patent paper work, the production of second generation prototype audio-text interface will need to be
made. An ergonomic hand held design will need to be produced with the fastest and smallest
microphone, processor, display, battery and input output plugs. At least 10 alpha and beta version will
need to be produced for the software and will need to be test in different languages and places.

The contribution analysis (operating and the cash conversion cycles):

1. Start up (1 month)
 Prototype lab, offices and warehouse (utilities inclusive): $ 12,000
($ 1000 per month for 12 months)
 Attraction and collection of ‘Love money’ and Angel funding
 Plastic case manufacturing unit $ 7,000
 Electrical and audio oscilloscopes and meters $ 500
 Order parts for prototype development:
 software code writing software $ 200
 microphone $ 10
 processor $ 50
 display $ 20
 battery $ 20
 input/output parts $5
2. Prototype development (6 months)
 Salary for 1 month (40 hours a week) x 2 staff (production
managers) $ 20 per hour $ 21,000
 Miscellaneous parts and shop supplies $ 500
3. Patent process (1 year)
 File local (Canadian) patent $ 150
 Patent examination $ 200
 Final issuing of patent $ 150
 Maintenance fees for five years $ 75
 Registered consultant patent agent $ 10,000
 U.S. and international fillings $ 20,000
4. Search for venture capital (6 months)
 Travel costs $ 4,000
 Presentation materials:
 Projectors $ 1,000
 Laptop $ 5,000
  Meeting room rents $ 500
5. Second generation prototype development
 Parts: 10 x (microphone, processor, display, battery and input/output) parts: $ 1,000
 Alpha and beta testing $ 800
 Salaries (Six people annual) $ 216,000
6. Search for license opportunities (3 months)
 Travel $ 5,000
 Salary for staff promoting the opportunity ($ 10 per hour) $ 10,000
7. Contingency $ 15,000

Total of expenses: $ 330,000.

The plan as stated above is intended to produce steady income after patent for a 20-month
plan. The following details the assumptions and data needed to calculate revenue. At least one of the
currently 25 conference organizing companies will implement the technology.

 Retail sales:
 Targeting 50 countries
 4000 in Canada alone (targeting Quebec as the biggest market)
 1/2 of them purchased translating devices to record
minutes of meeting and translate languages
 An average of $ 500 retail price per equipment

Retail sales = 50 x 4,000 x 1/2 x 500 = $ 50 million

 Fraction of retail sales profited:

 The license agreement earns 3% of retail sales from manufacturer

Revenue = $ 50,000,000 x 3%

Total of revenue = $ 250,000 per year.

Breakeven will take 3 years and 6 months, for a revenue value of $ 250,000 and an initial investment
value of $ 330,000. Revenues will exceed $ 250,000 per year target as expansion is expected. Selling
license will bring $ 10,000 per month and will grow as demands rise. The new manufacturer revenue is
suggested to hold as small as 1.5% of the market.
  Growth projection:
Old manufacturer rev + New manufactuer rev
 Growth potential=
Last year rev
where New manufacturer revenue = $ 250,000 x 3%
New manufacturer revenue = $ 75,000)
hence Growth potential = 1.3 in first year

This means there is a 30% growth potential in the first year after breakeven point. Full manufacturing is
purchased if the technology is successful instead of license deal. This venture would provide revenue for
starting and operations capital of newer projects in the future.