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`package envelope
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`and confidential to 0evId Monroe,
`snito. November i0, 1990
`
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`PHOTOTEELESIS
`Business Plan
`
`i9877
`
`r
`
`1984
`
`

`
`PHOTOTELESSI
`
`Business Overview Copy #
`
`January 27, 1987
`
`The information contained in this memorandum concerning image transmission products
`for government applications is furnished to the recipient on a confidential basis for the
`recipient's exclusive use. By acceptance of this confidential memorandum the recipient
`agrees not to transmit, divulge, reproduce, or make available to anyone other than
`himself, this confidential memorandum and any exhibits and documents supplied in
`connection therewith.
`Violation of this confidentiality requirement may place the recipient
`and the preparers of this document in violation of the Texas and Federal securities laws
`and the applicable securities laws of other states.
`
`Any decision to invest in this enterprise should be deferred until the recipient has had the
`opportunity to review a confidential private placement memorandum now in the process of
`completion which will describe the specific terms under which an investment may be
`made and the substantial risks involved in any such investment in addition to any risks
`which may be described herein.
`
`Prior to the sale of any securities related to the corporation described herein, the
`preparers of this memorandum will undertake to make available to the recipient hereof the
`same kind of information that is specified in Schedule A of the Securities Act of 1933, to
`the extent such persons possess such information or can acquire it without unreasonable
`effort or expense.
`
`Signature
`
`1985
`
`

`
`PHOTOT0ELI Business Overview Copy #
`
`January 27, 1987
`
`The information contained in this memorandum concerning image transmission products
`for government applications is furnished to the recipient on a confidential basis for the
`recipient's exclusive use. By acceptance of this confidential memorandum the recipient
`agrees not to transmit, divulge, reproduce, or make available to anyone other than
`himself, this confidential memorandum and any exhibits and documents supplied in
`Violation of this confidentiality requirement may place the recipient
`connection therewith.
`and the preparers of this document in violation of the Texas and Federal securities laws
`and the applicable securities laws of other states.
`
`Any decision to invest in this enterprise should be deferred until the recipient has had the
`opportunity to review a confidential private placement memorandum now in the process of
`completion which will describe the specific terms under which an investment may be
`made and the substantial risks involved in any such investment in addition to any risks
`which may be described herein.
`
`Prior to the sale of any securities related to the corporation described herein,
`the
`preparers of this memorandum will undertake to make available to the recipient hereof the
`same kind of information that is specified in Schedule A of the Securities Act of 1933, to
`the extent such persons possess such information or can acquire it without unreasonable
`effort or expense.
`
`Rinnat Ira
`Signature
`
`1986
`
`

`
`CONTENTS
`
`Executive Summary
`About the Company
`The Market
`Competition
`Marketing
`Technology
`Products
`TEMPEST
`Risks
`Contracts and Agreements
`Financials
`Appendix
`
`PHOT07EL
`
`B-CONFIDENTIAL
`
`1987
`
`

`
`EXECUTIVE SUMMARY
`
`Overview
`The charter of PHOTOTELESIS is to provide advanced image communications and
`processing systems to the U.S. Federal Government market. These systems are being
`developed using proprietary technology and integration of industry-standard
`components. The company provides total solutJfio.ns.to its customers including
`development, integration, manufacturing, marketing, support and training, using
`resources within the company as well as external contract resources.
`
`The PHOTOTELESIS product line permits the capture, manipulation, storage and
`communication of images, documents and graphics using advanced techniques which
`permit communication to take place over ordinary voice grade telephone lines or
`specialized radio or satellite circuits.
`
`The company specializes in providing products which may be connected to U.S.
`Government approved encryption devices, permitting secure (scrambled) operation
`over a variety of existing equipment designed for secure voice communications.
`PHOTOTELESIS also provides specialized packaging of its products to meet needs in
`desktop, airborne, naval and vehicular environments.
`
`The company's objective is to develop its business to achieve annual revenues of over
`$7 million by the end of fiscal 1991, with pre-tax earnings of $1.6 million.
`
`Company Background
`PHOTOTELESIS was founded in September, 1985 to address specific vertical
`markets with image communications product needs. The company conducted
`extensive test marketing before selecting the Federal Government sector as the most
`promising area to develop. After consulting many high-level users within policy-making
`groups, the company generated product requirements which it felt would address
`broad needs within selected government departments and agencies.
`
`The products developed from these requirements were announced at a major trade
`conference in May of 1986, and active marketing began. Initial product shipments
`commenced in June of 1986.
`
`In the fall of 1986 the company completed development of its business strategy,
`assembled the executive team, and began work on a business plan to solicit funding
`for a significant expansion of marketing and manufacturing activities.
`
`PHOTOVEL SD-CONFIDENTIAL
`
`1988
`
`

`
`EXECUTIVE SUMMARY
`
`The PHOTOTELESIS management team brings together broad skills in the
`management of high technology companies, as well as specific expertise in the
`development and marketing of image communications and processing systems. The
`company intends to focus its personnel on the key activities of marketing, product
`development, and administration, while utilizing outside contractors for manufacturing,
`certain specialized engineering, contract development and technical publications.
`
`Market Potential
`PHOTOTELESIS conducted intensive market research in 1986 in selected segments
`of the Federal Government market, and concluded that a significant opportunity exists
`for the company's products. Key indicators in forming this conclusion include:
`
`*
`
`*
`
`*
`
`*
`
`*
`
`An identified and unfulfilled need for low cost image communications to support
`the development of major program-level initiatives in Communications,
`Command, Control and Intelligence systems (known as C3 1) for defense-related
`applications. The current budget calls for expenditures of $17.4 billion in fiscal
`1987 to support major programs.
`
`The planned deployment of a new generation of secure and mobile
`communications equipment for the D.O.D. arena, with program-level
`expenditures on the order of billions of dollars in the next five years.
`
`The burgeoning market for products designed to government standards for
`handling classified information, called TEMPEST, presently estimated at $350
`million and expected to double or triple in size by 1990.
`
`The absence of significant entrenched competition in providing packaged image
`systems to Department of Defense and related markets.
`
`The trend toward use of commercial equipment as opposed to high cost
`procurement of MIL-SPEC components.
`
`The above indicators prompted PHOTOTELESIS management to test market reaction
`to its image communications technology and determine the applications, feature
`requirements and price points necessary for success in the targeted markets.
`
`PHOTO7ELEB -CONFIDENTIAL
`
`1989
`
`

`
`EXECUTIVE SUMMARY
`
`These activities resulted in the identification of highly receptive user groups in the
`following government departments:
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`Department of Defense
`
`Executive Office of the President
`
`Department of Energy
`
`Department of Justice
`
`Department of Treasury
`
`NASA
`
`PHOTOTELESIShas made revenue shipments of evaluation quantities to target
`customers during 1986 and has received orders for additional equipment for delivery
`in 1987. In addition, high-level user groups have been identified in each of the above
`departments who are prospects for sale in 1987.
`
`Marketing Strategy
`PHOTOTELESIS sells its products directly to major accounts in its target markets
`through government purchasing contracts, and plans to offer its products on the G.S.A.
`(General Services Administration) price lists. The company will also develop indirect
`marketing channels through Prime Contractors, Sales Representatives, and Value
`Added Resellers who specialize in government electronics marketing.
`
`The company markets "top down" by identifying major program initiatives in high-level
`policy-making groups, and selling "seed units" to elite users who can set requirements
`for large volume contracts in the future.
`
`PHOTOTELESIS management believes that rapid deployment of its image
`communications technology in high-level user groups will lead to the company's
`products becoming a defacto standard, as new users develop who require compatible
`technology. This strategy will provide a significant barrier to future competition in the
`image communications arena.
`
`PHOTO VfiE30-CONFIDENTIAL
`
`1990
`
`

`
`EXECUTIVE SUMMARY
`
`Product Line Overview
`The PHOTOTELESIS products are known as Remote Image Transceivers, or R.I.T.'s.
`The RIT is based on technology and components purchased on an O.E.M. basis from
`Image Data Corporation, who markets their product as The PhotophoneTM .
`
`The company has developed three versions of the RIT which are specialized for its
`target markets:
`
`Desktop
`Products
`
`ATR-RIT
`Products
`
`Briefcase
`Products
`
`The company provides desktop RIT's which offer specialized
`communications options for secure, radio, or cellular operation, and
`provides an advanced high-resolution camera and shipping cases as
`standard features. A version of the desktop secure product is being
`developed for use in classified applications which require special design
`features and certification by the National Security Agency.
`
`This product is a repackaging of the desktop technology into an industry
`standard Aircraft Transport Racking (ATR) form factor suitable for
`mounting in aircraft, marine or mobile environments. The ATR-RIT is
`offered with both secure and non-secure communications options and
`may be powered by an optional battery pack or available DC power. The
`ATR-RIT permits image communications to take place from field locations
`such as battlefields, airspace or intelligence monitoring sites where
`conventional packaging techniques would be impractical.
`
`Test marketing has uncovered a great interest in a portable or "briefcase"
`version of the RIT for both secure and non-secure applications where
`portability is a necessity. The packaging technology for the ATR-RIT will
`be adapted for the briefcase products, yielding a package that will fit
`inside a standard briefcase form factor, including display, keypad,
`electronics, battery pack and communications interface. This product will
`siignificantly increase the market potential of the RIT technology and push
`the product into applications in which image communications has pot
`heretofore been available. Target field applications include infantry;
`disaster recovery, paramedic, construction, survelliance and security.
`
`PHOTOVf ELEBO-CONFIDENTIAL
`
`1991
`
`

`
`EXECUTIVE SUMMARY
`
`Financial Overview
`PHOTOTELESIS anticipates that revenues from its presently identified markets will be
`in excess of $13 million over the next three years, with near break-even profitability
`achieved during 1987 on revenue of $1.6 million. Pretax profits are planned to grow to
`$1.6 million by the end of calendar 1989 on revenues of $7.2_million. These forecasts
`assume penetration of presently identified markets only and do not include substantial
`potential for the company's products in other markets which have been tested.
`
`The company's financial projections assume that the corporation is funded with
`$750,000 by the end of May, 1987. The funds will be used to expand marketing and
`product development activities, and to ramp up volume manufacturing through a
`subcontractor.
`
`PHOT07ELEI -CONFIDENTIAL
`
`1992
`
`

`
`Notes
`
`PHOTO7EI MO-CONFIDENTIAL
`
`1993
`
`

`
`The Company %%
`The Company
`
`1994
`
`

`
`ABOUT THE COMPANY
`History
`
`Founded
`PHOTOTELESIS was founded in SEPTEMBER 1985 and was chartered as a Texas
`Corporation in January 1987. The business purpose of the corporation is to address
`specific vertical markets with customized video transmission products.
`
`Test Marketing
`Specific product concepts were successfully test marketed at policy-making levels within
`NASA, the Pentagon, and Federal law enforcement agencies. User groups within each
`market sector were also consulted, and specific product specifications were derived.
`
`Product Announcement
`The first products were announced at the Armed Forces Communication & Electronics
`Association (AFCEA) 1986 International Conference & Exhibition in Washington, D.C. in
`May of 1986.
`
`Development
`The first product prototypes, Sec-RIT and ATR-RIT, were completed in January of 1987.
`
`Orders and Shipments
`Shipment of the Com-RIT product to the FBI occurred in June of 1986. Initial orders for
`Sec-RIT and ATR-RIT were taken in October and November of 1986, respectively.
`
`Organization
`Additional marketing and financial expertise were added when it became apparent the
`business opportunity was there. In December of 1986, a corporate strategy and business
`plan were developed.
`
`NOTE: See product literature in this package for more details about specific products.
`
`PHOTOWSlS-CONFIDENT
`
`IAL
`
`1995
`
`

`
`ABOUT THE COMPANY
`Strategy
`
`Our business strategy
`Our business strategy is to take commercially available, "off-the-shelf" products, add our
`own technology, packaging, and marketing expertise, then sell to our customers. We will
`make use of contract personnel when appropriate to keep overhead costs down. Here's
`how it works:
`
`Suppliers
`Suppliers provide us with commercially available products, such as
`
`* Image communication subassemblies
`. Video equipment
`* PC's and PC peripheral equipment.
`
`PHOTOTELESIS
`Then we add our own technology and packaging to create our product. And we market
`these products to our vertical market sector.
`
`Contract Personnel
`We use contract professionals where possible. In particular, this is appropriate for legal
`work; certain engineering work, technical publications, documentation, advertising, and
`manufacturing.
`
`As a result, we can produce specialized products from off-the-shelf products at very
`competitive prices. We offer these products through a variety of distribution channels. By
`using contractors where possible for our needs, we greatly reduce overhead costs.
`
`PHOT07ELEBO-CONFIDENTIAL
`
`1996
`
`

`
`ABOUT THE COMPANY
`Strategy Illustration
`
`FedHeral Law Enforcemen
`Selected Commercial
`PHOTOTIELE S-CONFIDENTIAL
`
`1997
`
`

`
`
`
`___IUITa__l~ l~ l~P( slPlse
`
`WAMWNWW
`
`+,
`
`iW AYIW M
`
`ABOUT THE COMPANY
`Organization
`
`Present Organization
`Presently our staff includes:
`
`* David Monroe, President
`
`* Larry Glidewell, Marketing and Sales
`
`* George Leonard, Marketing and Sales
`
`* Mike Huffman, Finance and Administration
`
`* Eric Schweppe, Engineering
`
`Planned Expansion
`During 1987, we plan to add these staff functions:
`
`* Hardware Engineer
`
`* Software Engineer
`
`* Secretary
`
`* Clerk
`
`External Functions
`These functions will be handled by contract personnel:
`
`* Manufacturing
`
`* Government Contract Development
`
`* Customer Service
`
`* Accounting and Legal
`
`* Technical Publications and Documentation
`
`* Engineering Services
`
`l
`PHOTOUELERJ
`
`-CONFIDENTIAL
`
`1998
`
`

`
`ABOUT THE COMPANY
`Organization Chart
`
`PHOTOVEfLE86-CONFIDENTIAL
`
`1999
`
`

`
`ABOUT THE COMPANY
`Management Profiles
`
`The PHOTOTELESIS executive team contains the key strengths in management,
`finance, engineering and marketing that are required for success in the high technology
`systems field. This section presents brief profiles of each individual on the team.
`
`David A. Monroe
`David Monroe, 34, has worked as an engineer and scientist throughout his career, from
`individual contributor positions progressing to President and Founder of
`PHOTOTELESIS Corporation.
`
`Prior to starting PHOTOTELESIS, Mr. Monroe was Vice President and Co-Founder of
`Image Data Corporation, where he developed the PHOTOPHONE video telephone
`product from concept through manufacturing startup and product introduction.
`
`Mr. Monroe was previously Vice President of Office Graphics Systems of Datapoint
`Corporation, where he was responsible for the management of several of Datapoint's
`most complex development programs, including the company's Laser Printer, Color
`Graphics System, Impact Printers and Facsimile products. Prior to Datapoint, Mr. Monroe
`was Principal Engineer with Mnemonics, Inc., a San Antonio and Sunnyvale-based
`startup in the field of solid state memory systems.
`
`As President, Mr. Monroe brings vital skills in management of high-technology startups,
`including research and development, product and market strategy, and general
`management of electronics and computer products companies.
`
`Mr. Monroe's educational background includes Undergraduate curricula in Physics and
`Computer Science, University of Kansas, 1970-1973, Wharton Short Course on Finance,
`1979, and AMA Management Course, 1980.
`
`PHOT07ELEBO-CONFIDENTIAL
`
`2000
`
`

`
`ABOUT THE COMPANY
`Management Profiles
`
`Larry P. Glidewell
`Mr. Glidewell, 35, has a varied professional background in communications,
`organizational development, training, and marketing. Mr. Glidewell created the
`marketing function at PHOTOTELESIS to conduct the market research and test
`marketing required to define the business opportunities for the company's technology.
`
`Prior to PHOTOTELESIS, Mr. Glidewell was a partner in Interactive Video Solutions in
`San Antonio, where he developed the marketing opportunity for computer controlled
`laser videodisc technology in the military and goverment markets. Mr. Glidewell
`previously was Founder and President of MAP Development in Houston, which was a
`pioneer in the use of interactive video and computer aided instruction for the oil and
`gas industry. Prior to this, Mr. Glidewell held management positions at NL Industries
`and Modern Management Methods in industrial and business training and
`development.
`
`Mr. Glidewell's background provides the company with key strengths in management,
`business and marketing, as well as specific expertise in the application of high
`technology videodisk and teleconferencing systems in business.
`
`Mr. Glidewell's educational background includes a B.S. in Communication, 1973, and
`an M.A. in Organizational Development, 1975, both from Oklahoma State University.
`
`PHOTOUEE6-ONFI-CONFDDENTIAL
`
`2001
`
`

`
`W .
`
`. IMMWI
`
`a
`
`i .IYm
`
`ABOUT THE COMPANY
`Management Profiles
`
`Michael L. Huffman
`Mr. Huffman, 37, has an extensive background in finance, accounting, administration,
`and planning. Mr. Huffman joined PHOTOTELESIS to assume the management of the
`financial and administrative operations for the company.
`
`Prior to this, he was Director of Finance and Administration for Network Standards
`Corporation in San Antonio, where he managed all financial, accounting and
`administrative operations for the company. Previously, Mr. Huffman held management
`positions in finance and administration at Datapoint Corporation, where he was actively
`involved in both marketing and product development functions. Prior to this, he held
`positions in financial analysis and business development with Duncan Smith Co. and
`Electronic Data Systems.
`
`Mr. Huffman brings excellent credentials and experience to the company in the
`management of finance,.accounting and planning functions, with specific expertise in
`high technology businesses.
`
`Mr. Huffman's educational background includes a Bachelor of Arts and a Bachelor of
`Science in Civil Engineering from Bucknell University, 1972, and an MBA in Finance
`and Management from the University of Texas, 1978.
`
`PHOTO lTELESO-CONFIDENTIAL
`
`2002
`
`

`
`ABOUT THE COMPANY
`Management Profiles
`
`George L. Leonard
`Mr. Leonard, 37, has a varied background in high technology electronic systems that
`includes product development, product management, marketing and sales. He joined
`PHOTOTELESIS to provide additional emphasis in the marketing and sales of the
`company's products.
`
`Prior to joining the company, Mr. Leonard was Director of Marketing and Sales,
`Advanced Products Division, for Datapoint Corporation, where he managed the market
`research, introduction and marketing activities for a new generation of desktop
`networked video conferencing equipment. Previously, Mr. Leonard held various
`management positions in product marketing, product development and planning for
`Datapoint's office automation product line. Prior to this, Mr. Leonard was engaged in
`product development and engineering management at Basic Four Corporation,
`Panhandle Eastern Pipeline, and GeoSource International.
`
`Mr. Leonard brings key skills to the company in sales, marketing, and product
`management, with specific expertise in the field of desktop video conferencing.
`
`Mr. Leonard's educational background includes a Bachelor of Science, Electrical
`Engineering, 1972, and a Master of Electrical Engineering, 1973, both from Rice
`University.
`
`PHOTOVELIES9-CONFIDENTIAL
`
`2003
`
`

`
`Notes
`
`PHOTO7ELLI-CONFIDENTIAL
`
`2004
`
`

`
`The Market
`The Market
`
`2005
`
`

`
`THE MARKET
`Background
`
`Initial Marketing Contacts
`In the fall of 1985 PHOTOTELESIS became interested in the possible application of
`video telephone technology in the Department of Defense. Through an association
`with General Doyle Larson, USAF (Ret.), introductions were made to Donald Latham,
`Assistant Secretary of Defense, Communication, Command, Control, and Intelligence.
`
`After an initial briefing on the product in Washington, Mr. Latham was sufficiently
`impressed with the product that he arranged a briefing with General Rice, Chief of-Joint
`Special Operations Command, and General Perroots, Director of the Defense
`Intelligence Agency, and their staffs, to introduce them to the image transmission
`capabilities that PHOTOTELESIS had to offer. This meeting, although scheduled for
`only twenty minutes, lasted for two and a half hours.
`
`What We Learned
`The need for image transmission was well known at the policy levels represented in
`the briefings, and there was significant interest expressed for products which could
`provide this need. Mr. Latham was a strong proponent for the military buying and, if
`necessary, modifying existing commercial equipment rather than incurring the time and
`expense of developing specifications for bid with large companies that specialize in
`custom government products. Our product not only fit his model of acquisition and
`cooperation with the corporate sector, but also fulfilled a need within the C31
`(Communication, Command, Control; and Intelligence) community, which is involved in
`communications across all branches of the military.
`
`We learned that several changes to the standard desktop product would be necessary
`for widespread use within the C31 arena. First, the unit would have to be made
`compatible with standard encryption devices (known as COMSEC, for Secure
`Communications), already in use in the military. Second, the product would have to be
`modified to meet a government standard known as TEMPEST, in order to permit it to
`handle classified information in a manner that could not be detected electronically by
`enemy groups.
`
`We also presented a prototype of a portable image transceiver which fit in a briefcase.
`There was a great deal of interest in this product for use in the field where small size,
`battery power and radio or satellite communications is required.
`
`PHOTOELEO
`
`-CONFI DENTIAL
`
`2006
`
`

`
`THE MARKET
`Background
`
`Results
`Based on the positive reception to our product concept, we were given points of
`contact within specific user groups and encouraged to discuss our capabilities and
`their requirements for image transmission products. We concluded that discussions
`and demonstrations with these groups would allow us to test whether there was indeed
`a market opportunity for our products.
`
`PHOTO~EL
`
`UBC-CONFIDENTIAL
`
`2007
`
`

`
`THE MARKET
`Test Marketing
`
`Objectives
`The enthusiastic reception to our products in the C31 market convinced us that a project
`should be initiated to test the overall market firsthand. The use of image transmission
`technology in this market was so new that there was no market research data readily
`available, but we determined that collecting primary market data from potential users
`would be even more valuable. The objectives of the market test were to determine
`
`* the user needs and potential volume for image transmission products
`
`* how the government would go about purchasing the products
`
`* what competitive products might already exist
`
`* what features and pricing would be required
`
`Initial Product Demonstrations
`Initial user groups that were contacted within the C31 community included the National
`Security Agency, Joint Chiefs of Staff, Special Operations Command Atlantic
`(SOCLANT), FBI, NASA, Secret Service, White House Communications, Defense
`Communications Agency, Defense Intelligence Agency, and groups from the
`Department of the Army. We held additional briefings in Washington with Army
`Intelligence, Drug Enforcement Administration, U.S. Postal Investigation Service, Voice
`of America, Joint Special Operations Agency, and Army Psychological Operations.
`
`The information that was collected fromn presenting the product to these user groups
`confirmed that there was a substantial market opportunity for off-the-shelf image
`transmission equipment. The requirements for COMSEC compatibility and TEMPEST
`certification were also validated by these groups. We also collected additional
`information on the need for units that could operate in mobile or portable applications,
`communicating imagery back.to a central "base station" Many groups indicated that the
`product concept and price range was superior to other imaging products available to
`the government, and that in fact there was no incumbent product in widespread use.
`
`PHOTO ELES9-CONFIDENTIAL
`
`2008
`
`

`
`THE MARKET
`Test Marketing
`
`Placement of First Units
`The test marketing activities led directly to purchases of initial units from the FBI and
`Army groups located at Ft. Eustis and Ft. Belvoir. Ft. Bragg SOCLANT, who provided
`valuable information in defining product features and assistance in compatibility
`testing, took delivery of the first two prototype encryption-compatible units, which
`would later become the Sec-RIT. The FBI purchased two units for evaluation, including
`the first delivery of a unit later called the Com-RIT that could transmit images from a
`vehicle over cellular telephone. An Army group awarded us a contract for a unit that
`could be mounted on an aircraft and transmit images over satellite-based secure voice
`equipment to a distant command center.
`
`Conclusions - the Opportunity
`Several conclusions were evident from the market test. First, there appeared to be a
`substantial immediate market opportunity in the groups that were sampled for a
`relatively low-cost, off the shelf image transceiver. Although the purpose of our test
`marketing was to gather information, we received orders in addition. There did not
`appear to be substantial entrenched competiton for encryption-compatible image
`transceivers that could operate over existing voice communications facilities. Although
`more market data was needed to properly measure the total opportunity, there was
`enough primary data available from talking to prospects and initial customers to justify
`moving ahead with a major product announcement.
`
`Conclusions - Product Requirements
`Second, specific product modifications in the packaging and communications areas
`were mandatory to allow interested groups to use even evaluation quantities of units.
`We concluded that three product families would be required:
`
`* desktop units, for command centers and other stationary installations
`
`* mobile units, for use in vehicle, aircraft or marine platforms
`
`* portable units, for personal use anywhere in the field
`
`Each of these families had to operate over existing secure voice communications
`systems, and at least the desktop