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  • 1. VSTANDOFF E XPLOSIVES D ETECTION S YSTEMS (SEDS) S TRATEGIC B USINESS P LAN 2008 Wayne B. Norris, CEO BOSSGOV Inc. 300 Maple Park Blvd. Suite 301 St. Clair Shore, Michigan 48081 Phone 586-443-2000  Fax 586-443-2049
  • 2. Standoff Explosives Detection Systems Strategic Business Plan Table of Contents1. EXECUTIVE SUMMARY........................................................................................................................3 THE COMPANY................................................................................................................................................3 THE COMPANY’S MISSION.................................................................................................................................3 PRODUCTS AND SERVICES..................................................................................................................................3 MARKETING AND SALES STRATEGY....................................................................................................................4 THE COMPETITION............................................................................................................................................4 TARGET MARKET.............................................................................................................................................4 MANAGEMENT.................................................................................................................................................5 OPERATIONS....................................................................................................................................................5 STAGE OF DEVELOPMENT..................................................................................................................................6 FINANCIALS.....................................................................................................................................................6 FUNDS SOUGHT AND UTILIZATION......................................................................................................................62. COMPANY DESCRIPTION....................................................................................................................7 THE COMPANY MISSION...................................................................................................................................7 PRODUCTS AND SERVICES..................................................................................................................................73. INDUSTRY ANALYSIS AND TRENDS.................................................................................................9 BACKGROUND..................................................................................................................................................9 EXISTING COUNTER-IED MEASURES................................................................................................................10 THE COUNTER-IED INDUSTRY........................................................................................................................10 INDUSTRY TRENDS..........................................................................................................................................12 SOURCES:......................................................................................................................................................134. TARGET MARKET................................................................................................................................14 MARKET DESCRIPTION....................................................................................................................................14 MARKET SIZE AND TRENDS.............................................................................................................................145. COMPETITION.......................................................................................................................................16 THE CURRENT PICTURE...................................................................................................................................16 BARRIERS TO COMPETITION.............................................................................................................................176. STRATEGIC POSITION AND RISK ASSESSMENT........................................................................18 COMPANY STRENGTHS....................................................................................................................................18 MARKET OPPORTUNITIES.................................................................................................................................19 RISK ASSESSMENT..........................................................................................................................................207. MARKETING PLAN AND SALES STRATEGY................................................................................218. MANAGEMENT AND ORGANIZATION...........................................................................................22 OPERATIONS..................................................................................................................................................22 PERSONNEL PLAN...........................................................................................................................................229. DEVELOPMENT, MILESTONES, AND EXIT PLAN.......................................................................24 DEVELOPMENTAL TIMEFRAME..........................................................................................................................24 MILESTONES..................................................................................................................................................25 EXIT STRATEGY.............................................................................................................................................25Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 2
  • 3. Standoff Explosives Detection Systems Strategic Business Plan1. Executive SummaryThe CompanySEDS (Standoff Explosives Detection Systems) is a technology startup companyinvolved in the on-going design and development of a counter-IED solution formilitary applications. The Company plans to utilize its proprietary knowledge ofapplied thermal neutron beam technologies to create a system that will becapable of detecting Improvised Explosive Devices (IEDs) from a safe (“standoff”)distance. Once detected, the IED can then be disabled or destroyed beforecausing any harm. SEDS has completed a number of successful preliminary labexperiments at the Department of Defense’s (DOE) Oak Ridge NationalLaboratories. The results of these lab experiments are highly sensitive, but theCompany is satisfied that these tests accurately reflect the underlying capabilityof its future technology in addressing this critical mission. SEDS is a fully ownedsubsidiary of BOSSgov, a technology solutions firm in St. Clair Shore, Michigan.The Company’s MissionSEDS’ views its mission as reducing human casualties and suffering bysuccessfully producing a counter-IED system capable of detecting the presenceof an explosive device from a safe distance. The Company plans to pursueopportunities to manufacture and support counter-IED systems and derivativeproducts for U.S. and allied military forces as well as non-governmental securitycustomers. SEDS is currently involved in discussions with the Joint IED DefeatOrganization ("JIEDDO") – an organization established by the Pentagon tospecifically oversee and promote the development of viable counter-IEDsolutions.Products and ServicesSEDS has successfully developed a core technology with the tested ability todetect IEDs from a standoff distance and is subsequently preparing to build its“Sauron System” prototype. The Sauron System will be based on thecontemporary application of a 50 year old proven technology known as ThermalNeutron Activation Analysis (TNAA). In basic terms, TNAA involves bombardinga specific target with neutrons and scientifically interpreting the results. Sinceall explosives contain detectable levels of nitrogen, TNAA technology can beconfigured to help identify the presence of IEDs from a safe distance. Theprojected target price for each counter-IED device is projected to beCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 3
  • 4. Standoff Explosives Detection Systems Strategic Business Planapproximately $1 million with a 40% gross profit margin. Over the system’sdesign life, subsidiary sources of revenue, including service, upgrades, training,and customization are expected to increase revenues by 100% to 300%.Marketing and Sales StrategyThe actual process of selling militarized products and services to theDepartment of Defense is relatively well established. However, to assist in thisprocess, the Company has developed several key contacts within the militaryand in the Congress. In addition, SEDS also uses a number of large lobbyingfirms in Washington, DC to develop an effective long-term strategy for doingbusiness with the U.S. military. Most importantly, the Company has beenworking closely with officials at the Pentagon’s Joint IED Defeat Organization("JIEDDO") – an organization that was specifically created to promote andstreamline the commercial development of viable counter-IED solutions.The CompetitionIEDs are currently the number one killer of U.S. troops in Iraq and Afghanistan.Worldwide, more than 21,000 U.S. troops have been killed by IEDs.Consequently, the search for a viable counter-IED solution has now become aglobal preoccupation. Yet in spite of the widespread effort, no one has beenable to develop a dependable method for detecting and disabling IEDs.Nevertheless, there are currently dozens of military R&D firms, niche technologycompanies, and top-tier defense contractors searching for a solution. Thefollowing defense companies continue to work closely with the U.S. military inthe development of counter-IED related products:  Lockheed Martin  Boeing  Northrop Grumman  General Dynamics  BAE Systems  Foster Miller (and subsidiaries)  L3 Communications (and subsidiaries)  RaytheonTarget MarketThe principal U.S. market for manufactured counter-IED solutions is the U.S.Department of Defense (DoD) and the branches of the U.S. military. In 2004, thePentagon formed the Joint IED Defeat Organization (JIEDDO) to help jumpstartCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 4
  • 5. Standoff Explosives Detection Systems Strategic Business Planthe development of effective IED countermeasures. The JIEDDO works closelywith national laboratories, the Department of Energy, defense contractors, andacademia. Potential counter-IED technologies are frequently tested at the U.S.Army’s National Training Center at Fort Irwin, California. The technologies beingevaluated include electronic jammers, radars, X-ray equipment, roboticexplosive ordnance disposal equipment, physical security devices, and armor forvehicles and personnel.ManagementSEDS’ current management team consists of a talented and seasoned group ofscientists, physicists, and military technology specialists. As the Companyachieves its key technological objectives, it plans to bolster its managerialcapabilities with manufacturing and business development expertise. TheCompany is actively developing the professional ties and operational disciplineit needs to ensure that its technology is thoroughly tested, carefully evaluated,and is in accordance with the specific requirements of the Joint IED DefeatOrganization. The current SEDS team includes:  BOSSgov Team and Consultants  Martin Tibbitts – Chairman  Wayne B. Norris – Principal Investigator  Dr. Ken Ricci, Ph.D. – Consulting nuclear physicist (subcontracted from LaunchPoint Technologies)  Dr. Nathan Bramall. Ph.D. – Consulting nuclear physicist and data acquisition/device driver software consultant  Greg Pepus – Consultant  Oak Ridge National Laboratories Staff  Dr. Chuck Alexander, Ph.D. – Senior Scientist, Californium User Facility for Neutron ScienceOperationsIn October, 2007, SEDS opened its lab in California to start building a prototypecounter-IED system (called the Sauron System). The fully-equipped laboratorywill be used for system design, testing, and assembly-related activities.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 5
  • 6. Standoff Explosives Detection Systems Strategic Business PlanStage of DevelopmentIn 2006, BOSSgov applied for a comprehensive 75-claim patent to protect itsunderlying technology and unique design. In March 2007, the SEDS teamcompleted a series of successful preliminary lab experiments at the Departmentof Defense’s Oak Ridge National Laboratories.SEDS seeks $3.3 million in first-round funding to carry it to the prototypephase. Once it has produced its prototype, SEDS expects to secure JIEDDO fundsto produce the first production unit. In September, they visited JIEDDO (the JointIED Defeat Organization) to present their preliminary findings. The responsefrom JIEDDO was exceptionally positive and encouraging. In October 2007, SEDSopened its lab in California to begin building the prototype. SEDS believes that itcan build a preliminary prototype within 6 months and a first production unitwithin 20 months. The Company’s developmental timeframe and associatedcosts are shown below: Developmental Stage Duration Anticipated Cost Proof of Concept 120 days $800,000 Prototype (Sauron System) 180 days $2.5 million Production Unit 240 days $5 millionFinancialsThe financial strategy of SEDS emphasizes the reinvestment of income forgrowth during the first few years of operation, with the company reachingprofitability by year three. Annual revenue projections are summarized in thetable below: Year 2008 2009 2010 2011 2012 Units Sold* 2 10 25 40 75 Price per Unit $1.5 million $1.5 million $1.25 million $1 million $0.75 million Gross Revenue $3 million $15 million $3.25 million $40 million $56.25 million Gross Margin $1.2 million $6 million $12.5 million $16 million $22.5 million Net Profit $0.6 million $3 million $6.25 million $8 million $11.25 million * 2008 units will be pre-commercial prototypesFunds Sought and UtilizationSEDS seeks $3.3 million in first-round funding to complete its Sauron Systemprototype. With a demonstrable prototype, SEDS expects to secure JIEDDO fundsto produce the Company’s first production unit.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 6
  • 7. Standoff Explosives Detection Systems Strategic Business Plan2. Company DescriptionStandoff Explosives Detection Systems (SEDS) is a fully owned subsidiary ofBOSSgov. SEDS has designed a technically-innovative system that is capable ofdetecting IEDs (Improvised Explosive Devices) from a safe (standoff) distance.SEDS plans to use this technology to create a demonstrable prototype known asthe “Sauron System”. The Sauron System will be used to demonstrate theCompany’s technology and fund the development of its first production unit.This will enable the Company to begin the full-scale development, sales, andsupport of commercialized standoff counter-IED systems.The Company Mission SEDS’ overriding goal is to produce the world’s first counter-IED system that is capable of reducing human casualties and suffering by successfully detecting the presence of an explosive device from a safe distance. To achieve this objective, the Company is in the process of developing a cutting-edge solution that is based on proven technologies, innovative designs, rigorous testing, and extensive field trials.The Company’s principal design objective is to develop a vehicle-mountedproduction unit that can detect nitrogen-containing IEDs, explosively formedpenetrators (EFPs), and truck bombs, from a distance of up to 20 meters, in lessthan one second (see diagram on next page). In terms of its key businessdevelopment goals, SEDS is looking for a successful prototype and subsequentprofitability within the next three years. In addition to selling counter-IEDsystems, SEDS’ business model also includes product maintenance services,system upgrades, customization, and training.Products and ServicesSEDS has successfully developed a technology with the tested ability to detectIEDs from a standoff distance and is in the process of preparing to build its“Sauron System” prototype. The Sauron System will primarily be based on theinnovative application of a 50 year old proven technology known as ThermalNeutron Activation Analysis (TNAA). In basic terms, TNAA involves bombardinga specific target with neutrons and scientifically interpreting the resultsFor a short time, TNAA technology was the focus of considerable interest withinthe counter-IED technology sector. However, it was ultimately put on the back-burner by the incumbent contractor community because of the apparentCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 7
  • 8. Standoff Explosives Detection Systems Strategic Business Plandifficulty in achieving adequately large thermal neutron fluxes and precisegamma ray detection capabilities – the technical requirements associated withits potential value. Fortunately, neutron source and gamma ray detectiontechnologies have begun to mature significantly during the last few years. Inparticular, technological advances are beginning to improve the value andpracticality of using TNAA. At the same time, increased interest and greatercompetition has begun to lower the cost of acquiring and operating TNAA-based devices. For these (and other) reasons, TNAA technology clearlyrepresents the key to the successful detection of nitrogen-containing IEDs froma safe distance. Accordingly, the Company’s counter-IED system will rely on twokey components: 1. An azimuthally scanning (bi-directional) thermal neutron source that is capable of emitting a narrow thermal neutron beam that can be aimed at any target and; 2. A gamma ray detector to decipher the resultant gamma rays in order to accurately detect the presence of explosives (see diagram below).Fortunately, thermal neutron beams are capable of penetrating most substances(including lead and steel). As a result, camouflaging or shielding an IED is not aneffective strategy for concealing its presence. Additional details about theCompany’s technology are available upon request. IED on Light Pole Thermal Neutron Beam Vehicle-mounted Gamma Rays Counter-IED System IED Explosively Formed Azimuthally Scanning Penetrator (EFP) Thermal Neutron Source Narrow Band Gamma Detector Above-Ground IED Below-Ground IED SEDS’ Vehicle-mounted Counter-IED SystemCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 8
  • 9. Standoff Explosives Detection Systems Strategic Business Plan3. Industry Analysis and TrendsBackgroundImprovised Explosive Devices (IEDs), often referred to as “roadside bombs” bythe press, are essentially makeshift explosive devices. The most destructive IEDis known as an explosively formed projectile (EFP), capable of penetratingvirtually every known type of armor. Normally used in unconventional warfareand terrorist-driven conflicts, IEDs are usually placed above, next to, or beneatha road. Preferred targets include convoys and civilian SUVs, as insurgentsbelieve these transport government officials and intelligence agents. Fueltankers are also ideal targets as the flames and billowing smoke from a burningfuel tanker makes for compelling television footage.By definition, IEDs are inexpensive, simple to construct, and easy to use. Eventhough it has the potential to destroy numerous lives and cause millions ofdollars in damage – the total cost of a typical IED may be less than $200. IEDtriggering devices often consist of everyday items such as cell phones, garagedoor openers, or radio-controlled toys. Some are as simple as driving over arubber hose to produce enough air pressure to activate a detonator. In thepresent conflict in the Middle East, insurgents have made the IED thecenterpiece of their fight against coalition forces. As a result:  IEDs have caused about half of all the U.S. combat casualties in Iraq, and about 30% of all combat casualties in Afghanistan.  IEDs are currently the number one killer of U.S. troops in Iraq and Afghanistan. Worldwide, more than 21,000 U.S. troops have been killed by IEDs.  In the current conflict in Iraq, the number of IED attacks has doubled each year. As of September 2007, IEDs have killed 1609 U.S. troops and have wounded over 18,000. Many of those wounded will experience devastating long-term consequences and lifelong suffering.  In Iraq and Afghanistan, 60% of all IEDs explode before being found.  The IED fatality count for citizens in Iraq is estimated to be ten times greater than for U.S. troops.  IEDs represent a global dilemma. Currently, 20 nations are threatened by their escalating use.IED use will not stop with the end of the conflict in Iraq nor will their useCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 9
  • 10. Standoff Explosives Detection Systems Strategic Business Plandiminish over time. Until there is a reliable method for detecting and defeatingthem, IEDs will continue to be the weapon system of choice for insurgents, rebelforces, guerrilla fighters, and terrorists. Meanwhile, the death toll, thedevastation, and the number of casualties will continue to mount. This is theprincipal driving force behind the world-wide counter-IED effort.Existing Counter-IED MeasuresExisting “solutions” for disabling and locating IEDs are primarily limited tovehicle-mounted jamming devices and the systematic detection of indicatorparameters or “correlates” of the explosive device.Examples of existing vehicle-mounted electronic jamming systems include theIED Countermeasures Equipment (ICE) and the Warlock. Both systems utilizelow-power radio frequency energy to block the signals of radio controlledexplosives initiators, such as cell phones, satellite phones, and long-rangecordless telephones. The detection of indicator parameters or “correlates” of theexplosive device typically include: Casings – Normally found with World War II style metal detectors or earth- penetrating radar. However, if an IED is uncased or buried deep enough, it is nearly impossible to detect. Vapors – Usually detected by manual swabbing, vapor sniffing devices, trained canines, or short-range optical methods. Vapor detection is highly problematic in a war environment where nuisance vapor signals and explosive gasses are frequently present. Relying on vapors as a detection method can also be highly dangerous given that personnel must be in close proximity to the IED. Emplacement Evidence – Identified by analyzing the physical and visual characteristics of disturbed soil. Limited to subsurface IED placement, emplacement evidence is easily concealed with rudimentary camouflaging techniques. Triggering Devices – Traditionally found with electronic scanning, high- power microwaves, and other similar tactics. However, disabling triggering devices is becoming more difficult over time due to the relentless development of new triggering technologies.The Counter-IED IndustryThe official leader of the counter-IED effort in the U.S. is the Joint IED DefeatCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 10
  • 11. Standoff Explosives Detection Systems Strategic Business PlanOrganization (JIEDDO). In July, 2004, the Pentagon established the JIEDDO tooversee and streamline the numerous counter-IED programs that were beingconducted by virtually every branch of the military. Although the JIEDDO wasinitially a U.S. Army task force, the Pentagon ultimately expanded theorganization’s operational and strategic influence. Specifically, in June 2005, thePentagon designated the Secretary of the Army as the JIEDDOs executive agentand adopted a much broader organizational structure.In addition to the JIEDDO, there are dozens of other governmental organizationsthat are actively participating in the search for counter-IED solutions. Thefollowing is a partial list of the governmental and quasi-governmentalorganizations involved with counter-IED efforts in the U.S. The length of the list,as well as the importance of its members, clearly reveals the gravity andmagnitude of the counter-IED effort. Defense Advanced Research Army Cold Regions Research & Army Communications Electronics Projects Agency Engineering Laboratory Command Naval Research Laboratory Department of Homeland Security Electronic Systems Command Office of Naval Research National Security Agency) Federal Bureau of Investigations Army Research Laboratory Defense Intelligence Agency Air Force Research Laboratory Joint Info. Operations Center National Reconnaissance Office Joint Warfare Analysis Center Army Night Vision Laboratory Department of Energy Electronic Systems Command MIT – Lincoln Laboratory Defense Threat Reduction Agency Special Operations Command Los Alamos National Laboratory Department of State Asymmetric Warfare Group Sandia National Laboratory Central Intelligence Agency Rapid Equipment Force Pacific Northwest National Army Soldier and Biological FBI - Terrorist Explosive Device Laboratory Chemical Command Analytical Center Lawrence Livermore National Space & Naval Warfare Systems National Geospatial Intelligence Laboratory Command AgencyIn addition to governmental agencies and Federal laboratories – today’scounter-IED industry consists of a varied collection of military R&D firms, nichetechnology companies, and top-tier defense contractors.According to sources in the Joint IED Defeat Organization, total funding for IEDcountermeasures administered through the JIEDDO for 2005 was $1.34 billion.In 2006, it was $3.49 billion. The 2007 Defense Appropriations bill, as approvedby the House and Senate conference committee, provides $1.9 billion in fundingfor the JIEDDO. According to a GAO report, the JIEDDO has already receivedmore than $6 billion, and has managed to spend around 30% ($1.8 billion). Theagency operates out of a secure building in Crystal City, Virginia, about a milefrom the Pentagon. The JIEDDO employs approximately 360 people consisting ofCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 11
  • 12. Standoff Explosives Detection Systems Strategic Business Planmilitary personnel, civilians, and outside contractors. Additionally, the JIEDDOhas teams working in Iraq, Afghanistan, and other military “hot-spots”. TheJIEDDO also serves as a funding agency for academic, industrial, andgovernment entities who submit proposals to the various boards for evaluationand approval. Science and technology projects are also funded through the so-called OXR agencies (AFOSR, ARO, ONR, DARPA, and the DoD).Industry Trends Despite its numerous members, vast resources, and technological diversity – the counter-IED community has been largely ineffective in combating IEDs. To date, the principal result has been a steady stream of impressive new technologies that seem to do everything but actually stop IEDs. A good example is the ubiquitous electronic jamming device. Used extensively by the military, jamming devices initially appeared to be the perfect solution for disabling the underlying circuits that detonate most IEDs. However, in the real world, jammers have proven to be largely inadequate given that insurgents switch methods rapidly when they learn that existing detonation methods have been compromisedFurthermore, many countries (including Iraq and Afghanistan) have unmanagedand unregulated Radio Frequency (RF) spectrums. As a result, sophisticatedcounter-IED jamming devices often interfere with mission-critical radiocommunications. For instance, when soldiers need to use their radios, theyoften have to turn off their IED jamming devices. This invariably creates adangerous window of opportunity for alert IED operators. Similarly, counter-IEDjamming devices will sometimes lock onto other electronic combat systems inthe area – severely compromising their functionality and usefulness.Nevertheless, there is presently a wide range of counter-IED technologies beingdeveloped today including radar-based detection systems, X-ray equipment,robotic explosive ordnance disposal equipment, physical security equipment,and ancillary armor for vehicles and personnel. Other IED countermeasuresbeing explored include a system that can generate a pulse of high-powerelectromagnetic energy to detonate an IED or destroy its internal circuitry. Anexample is the Neutralizing Improvised Explosive Device with Radio Frequency(NIRF). The system purportedly generates an extremely high-frequency field at avery short range that is capable of neutralizing the IED’s internal circuitry. Inspite of these efforts, detection technologies, to date, have proven quitedisappointing, and no working system exists to reliably identify the presence ofIEDs from a safe (“standoff”) distance. Here are some other key issues that arecurrently defining and shaping the counter-IED effort:Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 12
  • 13. Standoff Explosives Detection Systems Strategic Business Plan  The U.S. Government has appropriated $12 billion to find a solution to IEDs. Roughly one quarter of that has been spent to date, mostly on armor and electronic jamming systems.  The counter-IED market is expected to grow by about 12% CAGR from 2008 to 2012. Unused IED Expenditures will decline by 21% CAGR during the same period.  Total counter-IED market over the period 2008–2012 will be $23.2 billion with an outlay of $28.5 billion.  The international market for counter-IED technology is expected to grow from $5.3 billion in 2008 to $6.3 billion in 2012.  Detection technologies to date have proven quite disappointing, and no working system exists to find IEDs from a safe (“standoff”) distance.  The civilian populations in conflict zones (e.g., Iraq and Afghanistan) remain largely without any protection from IEDs.Sources:  SEDS Internal Documentation  ‘Global Counter IED Markets and Technologies Forecast 2008 – 2012’ Homeland Security Research Corporation  ‘Congressional Research Service Report for Congress’ September 25, 2006 by Clay WilsonCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 13
  • 14. Standoff Explosives Detection Systems Strategic Business Plan4. Target MarketMarket DescriptionThe principal U.S. market for manufactured counter-IED solutions is the U.S.Department of Defense (DoD) and the various branches of the U.S. military. In2004, the DoD created the Joint IED Defeat Organization (JIEDDO) to assess andidentify effective IED countermeasures. To help achieve its goals, potentialcountermeasures are frequently tested at the U.S. Army’s National TrainingCenter at Fort Irwin, California. The technologies being evaluated typicallyinclude electronic jammers, radars, X-ray equipment, robotic explosiveordnance disposal equipment, physical security equipment, and armor forvehicles and personnelThe Department of Defense’s actual process of purchasing counter-IEDsolutions is often complex and obscure. One reason is that IED countermeasureequipment funding has traditionally come through congressional plus-ups andfiscal reprogramming actions – not through ordinary line-item funding in theannual budget. For example, on May 24, 2005, Congress approved a transfer of$129.7 million from the Iraqi Freedom Fund to purchase mobile jammers. OnJuly 13, 2005, a reprogramming action transferred $10 million from the IraqiFreedom Fund for two new anti-IED systems: $3.5 million for 50 modularelectronic protection systems and $6.5 million to purchase 187 expendablerobots for explosive ordnance disposal. From 2004 to 2006, approximately $6.1billion has reportedly been spent on U.S. efforts to defeat the threat from IEDs.Market Size and TrendsThe total counter-IED market over the next five years is expected to reach $23.2billion with an outlay of approximately $28.5 billion. The market is expected togrow by approximately 12% CAGR over the same period. Meanwhile, unusedcounter-IED expenditure will decline by 21% CAGR during the same five yearperiod.One interesting trend is a recent effort to streamline the DOD’s technologyacquisition process. The impetus may have been a recent GAO report indicatingthat acquisition delays may have increased the vulnerability of U.S. forces to theIED threat. Actions taken by the DoD to minimize future acquisition delaysinclude implementing a “Rapid Fielding Initiative” (RFI) to ensure that soldiershave the latest available equipment. The RFI has reportedly reduced someacquisition cycles to weeks or even days. Similarly, in April, 2005, the Army wasCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 14
  • 15. Standoff Explosives Detection Systems Strategic Business Plangranted “rapid acquisition authority” by Defense Secretary Donald Rumsfeld.This meant that the traditional D0D acquisition process could be set aside insome cases. In one instance, a manufacturer of a portable IED jamming devicewas selected in only 2 weeks. Other key market-related findings and factorsinclude:  The total counter-IED market between 2008 and 2012 will be approximately $23.2 billion with an outlay of $28.5 billion. Counter-IED outlay levels will remain stable during the next few years. As of 2010, counter- IED outlay will largely depend on the evolution of conflicts around the world along with the ability of the JIEDDO to achieve some significant progress in countering IED threats.  Counter-IED investments will grow steadily in India, China, and South America, with funding focusing foremost on defeating IEDs directly (as opposed to preventing their overall use). Compared with the American outlay, funding in these regions is apt to be relatively modest.  Outlay focus in Western Europe and the U.S. will likely be on R&D, advanced jamming systems, and standoff detection systems. Growth will be much more pronounced in Europe, since the current outlay is much smaller than that of the U.S.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 15
  • 16. Standoff Explosives Detection Systems Strategic Business Plan5. CompetitionThe Current PictureFrom virtually any perspective, the counter-IED industry appears extremelycompetitive. At the present time, dozens of companies and organizationsworldwide are working on the IED problem. In one day during a recent industryevent, the JIEDDO received more than 800 counter-IED project proposals.Furthermore, since the Joint Experimental Research Complex in Yuma ProvingGround, Arizona, was constructed, nearly 400 counter-IED systems have beentested.Yet in spite of the widespread effort and extensive commitment – no one hasbeen able to develop an effective and reliable method for detecting anddisabling IEDs. Nevertheless, there are presently hundreds of military R&D firms,niche technology companies, and top-tier defense contractors searching for asolution. Traditionally, the U.S. military tends to rely on a select group ofdefense contractors for most of their products and services. These include:  Lockheed Martin  Boeing  Northrop Grumman  General Dynamics  BAE Systems  Foster Miller (and subsidiaries)  L3 Communications (and subsidiaries)  RaytheonAll of these companies are heavily invested in the search for a viable counter-IED solution. Likewise, every element of the U.S. military is currently engaged incounter-IED efforts, from satellites, through UAVs, intelligence, infantry andarmored units. Yet in spite of these efforts, detection technologies to date haveproven to be technically inadequate and functionally unacceptable. As a result,no working system exists today that is capable of finding IEDs from a safe(“standoff”) distance. In the meantime, the counter-IED market is beginning toshift away from immediate, tactical solutions (i.e. jammers and armored trucks)to technologies and systems that take a broader perspective of the problem andthe ways to counter it. Put another way, the counter-IED market is beginning toevolve and mature.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 16
  • 17. Standoff Explosives Detection Systems Strategic Business PlanBarriers to CompetitionWhile the counter-IED market has a number of attractive qualities, there are anumber of potential growth inhibitors that must be carefully considered. At thetop of the list is the perceived inability of the U.S. to mount an effectivecounter-IED effort despite huge investments. The predictable result is a growingsense of doubt and uncertainty within the stakeholder community. Otherpotentially significant inhibitors include:  Counter-IED authorities, both in the U.S. and in the U.K. complain that most companies do not take into consideration all of the issues before approaching the government with proposals. The specific source of this sentiment is unclear but it does indicate the need for improved communications among the various stakeholders.  The lack of sufficient security clearances tends to prevent many in private industry from understanding the precise nature of the problem that the government wants to solve.  According the GAO, the JIEDDO had managed to use only a quarter of its budget. Some believe that this demonstrates an acute shortage of administrative capabilities compared with the substantial funds allocated to the counter-IED effort.  The secrecy surrounding counter-IED efforts is largely designed to provide an element of surprise against insurgents. However, it has also served to prevent potential stakeholders from sharing crucial information, exchanging ideas, and combining forces.  JIEDDO sings its own praises as a skilled user of small and big industry players. In practice, they still tend to work with the “traditional” top-tier defense contractors. In that sense, they are not different from any other DOD operation. As a practical matter, this means that small companies may have to ultimately rely on strategic partnerships, political alliances, and well-connected consultants.  In some regions of the world, there is a pervasive sense of vulnerability and hopelessness regarding the IED phenomenon (particularly in Europe). This could potentially impact counter-IED funding in these areas.  There is the mistaken belief, in some political and counter-insurgency circles, that the IED threat is a passing phenomenon that will eventually dissipate with the resolution of the conflicts in Iraq and Afghanistan.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 17
  • 18. Standoff Explosives Detection Systems Strategic Business Plan6. Strategic Position and Risk AssessmentCompany StrengthsSEDS’ approach with the Sauron System entails the contemporary application ofa proven core technology (TNAA) to detect nitrogen-containing IEDs from astandoff distance. To succeed as a counter-IED system, the Sauron System willhave to be coupled with a complementary technology that is capable ofdisabling or destroying the IED, once it has been identified. The ramifications ofthis dependence are unknown at this time but it does suggest that the SauronSystem will most likely be coupled with other counter-IED solutions before itcan be delivered as a complete solution.This component-based design provides SEDS with a key advantage over othersingle, tactical solution vendors. Specifically, the Sauron System will be able totake advantage of a wide array of IED-disabling technologies. This inherentability to operate with numerous solutions provides the Company (and itspartners) with a level of flexibility that may be crucial over the long run. Thismodular design also is consistent with the current technological shift from a‘single solution’ mode to an integrated, multi-solution platform. It is alsocompatible with an industry that is presently realigning the solution deliverycapabilities of major defense players by a series of mergers and acquisitions. Since the Company’s inception, it has pursued a number of core intellectual property objectives using internal investment, and has vigorously pursued patents on this technology. This approach was specifically designed to establish a sole source for the Company in future customer-funded product development contracts, as well as create barriers to potential competition. Specifically, the Company’s patent applications, in conjunction with its significant proprietary knowledge, will be used as a justification for sole source contracts in accordance with Federal Acquisition Regulations, and thereby could serve to reduce the likelihood of competitive solicitations.Presently, 75 patent applications are pending. X of the 75 pending patentapplications have received Government initiated "national security related"secrecy orders. The U.S. patent office imposes secrecy orders when thedisclosure of an invention by publication of a patent would be detrimental to theUnited States’ National SecurityCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 18
  • 19. Standoff Explosives Detection Systems Strategic Business PlanMarket OpportunitiesThe counter-IED effort undoubtedly represents one of the most unique andpotentially rewarding business opportunities ever seen in the military R&Dsector. In addition to saving lives and reducing injuries – successful counter-IEDsolutions could literally shift the balance of power throughout much of theworld. Accordingly, there are now billions of dollars available for thedevelopment and production of effective counter-IED solutions. Furthermore,dozens of governmental agencies and scientific institutions are fully prepared tolend their significant support and vast resources to any company that is able todevelop a viable solution to this deadly problem. These are some of the keyfindings and factors that will impact any company wishing to succeed in thisunique business setting:  The potential reduction in casualties and the high cost of replacing personnel and equipment represents a major return on investment for counter-IED funding efforts. This is one of the major reasons why there is so much financial support available.  Small companies with promising technologies (in the standoff threat detection arena) will enjoy a significant level of attention from a wide range of interested parties and counter-IED stakeholders.  The probability of developing a single “silver bullet” solution to the IED predicament is extremely improbable. Accordingly, successful counter- IED solutions are apt to be the result of collaborative development strategies. As a result, small companies with specialized technologies will have a much easier time leveraging their R&D investment dollars.  Current counter-IED technologies and tactics do not provide more than a partial, temporary solution. This means that opportunities for success are greater than ever.  Given its significant impact, the IED threat is likely to expand from Iraq, Afghanistan, and the Middle East to the U.S., Western Europe, and other countries. As a result, counter-IED efforts and budgets are here to stay.  There is now an increased perception in much of the radical Muslim world that IEDs (including suicide bombers) are a suitable “response” to Western “aggressiveness.” Consequently, a much higher share of military budgets will be allocated to counter-IED systems over the next decade.  Reduction in the size of the conflicts in Iraq and Afghanistan will not necessarily bring about a proportional reduction in IED threats. In fact, the result may be the opposite as ‘unemployed’ IED experts take their skills to other countries.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 19
  • 20. Standoff Explosives Detection Systems Strategic Business PlanRisk AssessmentIn spite of the numerous opportunities and extraordinary rewards, the counter-IED market is clearly one of the most competitive business environments in theworld. While the JIEDDO has done an exceptional job in the promotion of itsmandate, it has a well-earned reputation for preferring to work with top-tierdefense contractors. For small companies like SEDS, this predilection mayultimately necessitate the need for a strategic alliance with an establisheddefense company. However, in the long run, this may enable the Company toenjoy a wide array of unexpected tactical business advantages. In spite of the unprecedented effort and vast resources that have gone into solving the IED detection problem, no one has been able to come up with a viable technology-driven solution to date. This underscores the inherent difficulty in fighting improvised and rapidly evolving weapons used by ideologically driven insurgents. So far, IED designers and operators have demonstrated an uncanny ability to stay one step ahead of the military’s technological progress. As a result, any developed solution will have to be inherently resistant to technical and strategic oversights and work- arounds.While each of these risk factors may pose a significant challenge to SEDS, theyare inherently indiscriminatory, and thus will impact practically any companyinvolved in the development of counter-IED solutions. In addition, smallcompanies seem to have a knack for competing aggressively and successfully inthe technology sector. The counter-IED industry, in spite of its size, may not bethe exception.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 20
  • 21. Standoff Explosives Detection Systems Strategic Business Plan7. Marketing Plan and Sales StrategyBecause the process of selling to the Department of Defense is often complex,the Company has developed several contacts within the military and in the U.S.Congress. Likewise, the Company also uses a number of large lobbying firms inWashington, DC. In addition, the Pentagon’s JIEDDO has set up severalspecialized programs to help streamline and expedite the process of bringingviable counter-IED solutions to market. These are just a few:  Twice a year, the JIEDDO holds a day of meetings and sessions with industry representatives. The next JIEDDO industry day is set for April 2008 in the Western United States. The specific location is not yet settled.  The JIEDDO has admittedly had a difficult time keeping track of proposals. As a result, the organization now allows companies to submit proposals online. Taking the process online has enabled the JIEDDO to establish a consistent format while simplifying the distribution and review process. Although JIEDDO officials are still working out the kinks, it has improved the evaluation process.  The JIEDDO frequently asks for feedback on certain promising kinds of counter-IED devices. SEDS plans to submit comments when the opportunity arises.  The JIEDDO plans to develop guidelines for small companies that have viable counter-IED solutions. While this program isn’t yet complete, it should help companies to save time and conserve resources.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 21
  • 22. Standoff Explosives Detection Systems Strategic Business Plan8. Management and OrganizationLike most technology start-ups, SEDS plans to initially maintain a managerialstructure that stresses product R&D. At the same time, the Company has begundeveloping a formal business structure to handle its administrative, financial,and business development requirements. As the Company achieves its keyobjectives, it expects to shift the managerial emphasis from R&D tomanufacturing and business development. Presently, the Company is activelydeveloping the professional ties, organizational structure, and operationaldiscipline it needs to ensure that its technology is thoroughly tested, carefullyevaluated, and is in accordance with the specific requirements of the Joint IEDDefeat Organization. The current team members include:  BOSSgov Team and Consultants  Martin Tibbitts – Chairman  Wayne B. Norris – Principal Investigator  Dr. Ken Ricci, Ph.D. – Consulting nuclear physicist (subcontracted from LaunchPoint Technologies)  Dr. Nathan Bramall. Ph.D. – Consulting nuclear physicist and data acquisition/device driver software consultant  Greg Pepus – Consultant  Oak Ridge National Laboratories Staff  Dr. Chuck Alexander, Ph.D. – Senior Scientist, Californium User Facility for Neutron ScienceEach team member’s background and qualifications are currently being written.OperationsIn October, 2007, SEDS opened its lab in California to start building the SauronSystem prototype. Need some details about the facility.Personnel PlanTo support its counter-IED initiative, SEDS plans to first hire N new employees.As further funding is secured, additional employees will be brought into thecompany. The following table shows the Company’s anticipated hiring schedulefor 2008-2009:Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 22
  • 23. Standoff Explosives Detection Systems Strategic Business Plan Month Personnel 1 2 3 4 5 6 7 8 9 10 11 12 Position n n n n n n n n n n n n Position n n n n n n n n n n n n Position n n n n n n n n n n n n Position n n n n n n n n n n n n Position n n n n n n n n n n n n Position n n n n n n n n n n n n Total Personnel N N N N N N N N N N N NCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 23
  • 24. Standoff Explosives Detection Systems Strategic Business Plan9. Development, Milestones, and Exit PlanSEDS long-term goal is to pursue opportunities to design, manufacture, andsupport counter-IED systems and derivatives for U.S. and allied military forcesas well as non-governmental security customers. Because SEDS plans to developadditional innovations, they anticipate that additional product variations may beutilized on other military platforms in the future as customers identify new waysto implement the Company’s technology.The Company also expects that the successful deployment of their counter-IEDtechnology will create additional opportunities for the follow-on developmentand production of derivative systems for other U.S. and allied military forces.Based on feed-back from interested parties, the Company plans to developpackaged kits and "palletized" versions of its counter-IED technology. Thesepalletized systems are designed for rapid integration into existing combat-ready vehicles or other platforms supplied by the customer.Developmental TimeframeIn 2006, BOSSgov applied for a comprehensive 75-claim patent to protect itsunique design and underlying technology. In March 2007, the SEDS teamcompleted a series of successful preliminary lab experiments at the Departmentof Defense’s Oak Ridge National Laboratories. The Company has also devisednumerous design items using industry-standard simulation codes.SEDS seeks $3.3 million in first-round funding to create a demonstrableprototype (the Sauron System). Once it has produced its prototype, SEDS expectsto secure JIEDDO funds to produce the first production unit. In September, theyvisited JIEDDO (the Joint IED Defeat Organization) to present their preliminaryfindings. The response from JIEDDO was exceptionally positive and veryencouraging. In October 2007, SEDS opened its lab in California to beginbuilding the prototype. The Company’s developmental timeframe andassociated costs are shown in the following table: Developmental Stage Duration Anticipated Cost Proof of Concept 120 days $800,000 Prototype (Sauron System) 180 days $2.5 million Production Unit 240 days $5 millionSEDS believes that it can build a preliminary prototype within 6 months and afirst production unit within 20 months. The estimated target price for eachCopyright © 2008 BOSSgov, Inc. CONFIDENTIAL 24
  • 25. Standoff Explosives Detection Systems Strategic Business Plansystem is projected to be approximately $1 million with a 40% gross profitmargin. In addition, ancillary sources of revenue including system maintenance,upgrades, training, and customization, are expected to increase revenues by asmuch as 100% to 300%. Expected sales for the next 5 years are shown below: Year 2008 2009 2010 2011 2012 Units Sold* 2 10 25 40 75 Price per Unit $1.5 million $1.5 million $1.25 million $1.0 million $0.75 million Gross Revenue $3.0 million $15 million $3.25 million $40 million $56.25 million Gross Margin $1.2 million $6.0 million $12.5 million $16 million $22.5 million Net Profit $0.6 million $3.0 million $6.25 million $8.0 million $11.25 million * 2008 units will be pre-commercial prototypesMilestones  2005-06 – BOSSgov (SEDS’ parent company) theorizes an IED-detection system based on proven technology and applies for a 75-claim patent.  March, 2007 – BOSSgov performs successful preliminary lab experiments at the Department of Defense’s (DOE) Oak Ridge National Laboratories.  September, 2007 – The SEDS team visits JIEDD and receives encouraging response and positive feedback.  October, 2007 – SEDS opens its lab in California to start building the prototype.  Month, 2008 – SEDS completes the laboratory prototype to determine the feasibility of the product, and to generate technical and operational data.  Month, 2008 – SEDS completes the field-ready prototype (the Sauron System) to generate technical and operational production data.  Month, 2009 – SEDS completes the first production version.Exit StrategyOnce SEDS has completed a successful prototype, they will have several optionsfor moving forward. These include:  Selling the Company to a major defense player  Selling or licensing the technology to a major defense player.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 25
  • 26. Standoff Explosives Detection Systems Strategic Business Plan  Partnering with a major defense player.  Securing contracts with the government and begin producing customer- funded systems.Copyright © 2008 BOSSgov, Inc. CONFIDENTIAL 26

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