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Document Capture Technologies (OTCBB: DCMT)

Document Capture Technologies (OTC.BB: DCMT.OB - News) is a worldwide leader in the design, development, manufacturing, and sale of USB powered mobile page-fed document capture platforms. DCMT provides more than 30 different products across multiple distinct categories, which are distributed globally through private label solutions to leading Tier 1 OEMs, VARs and other system integrators, including Brother, Burroughs Payment Systems, Digital Check, NCR and Qualcomm.

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Document Capture Technologies (OTCBB: DCMT)

  1. 1. Document Capture Technologies, Inc. 4255 Burton Drive Santa Clara, CA 95054 Phone: (408) 436-9888 Fax: (408) 436-6151EXECUTIVE INFORMATIONAL OVERVIEW Global Provider of Demand-Driven, Mobile Imaging Solutions Snapshot April 5, 2011 Over the past decade, information management has become increasingly important worldwide, particularly with regard to how information is stored and shared. Accordingly, Document Capture Technologies, Inc. (“DCT” or “the Company”) develops document and image capture products that transform business-critical papers into a manageable digital format. DCT has worked for the past several years to provide cost-effective † and accurate mobile scanners as alternatives to manual data entry. The Company’s flexible and mobile scanning solutions create usable electronic content suited for database, document, content, and other systems. In doing so, these solutions are intended to reduce organizations’ operating costs, improve information accuracy, and speed-up processing time. DCT seeks to provide a seamless operational link between the scanner and data-collecting device by providing a customized interface based upon specific client needs. The Company believes that it has created a competitive barrier that separates it from a commodity-type business. To DCT’s knowledge, it ranks among the world’s largest developers of USB- powered, page-fed document capture platforms today. Since its first scanner was introduced in 2002, DCT has shipped an estimated four million products for both business and personal use. Recent Financial Data Ticker (Exchange) DCMT (OTC.BB) Recent Price (04/05/2011) $0.40 52-week Range $0.15 – $0.95 Shares Outstanding* ~20.5 million Market Capitalization ~$8.2 million Average 200-day Volume 63,579 Insider Owners ~5% Institutional Owners + >5% ~73% EPS (Year ended 12/31/2010) $0.01 Employees 29 * As of March 8, 2011. Key Points DCT emphasizes vertical markets and business-to-business sales, working with large branding companies to bring imaging solutions to market. At present, the Company offers over 30 proprietary scanners, which are distributed globally through Tier 1 original equipment manufacturers (OEMs), value-added resellers (VARs), and other systems integrators. Global spending for information management is valued in the trillions of dollars. In particular, the mobile scanning market has expanded over the past several years in response to the following factors: (1) the prevalence of broadband, which is nearly ubiquitous in the U.S. today; (2) legislation (the Check 21 Act, the USA Patriot Act) that has aided the establishment of a digital marketplace; and (3) increasing demand for technology solutions that enhance information and identification security and efficiency. DCT’s USB-powered scanners include smart functionalities, software support, and innovative security features. Going forward, the Company is also working to introduce next-generation autonomous products that incorporate capabilities such as Wi-Fi and Bluetooth connectivity with the ability to upload scanned documents to mobile devices (e.g., smartphones) or cloud-based solutions. DCT holds more than 20 patents, two pending patent applications, three patent applications in pre- submission status, and five trademarks. The Company believes that it is well situated to retain a solid position in the document and image capture sectors due to its novel proprietary products, ability to customize products to meet customer needs, commitment to research and development (R&D), global clientele, sales growth of approximately 29% in 2010, and a cash position of $2.3 million as at December 31, 2010. In August 2010, DCT received $4 million from NCR Corp. via a private placement of Common Stock at $1.036 per share. At present, DCT is profitable with no debt. In 2010, net revenue totaled $14.8 million. † BOLD WORDS ARE REFERENCED IN THE GLOSSARY ON PAGES 45-47.
  2. 2. Table of ContentsSnapshot ....................................................................................................................................................... 1Recent Financial Data ................................................................................................................................... 1Key Points ..................................................................................................................................................... 1Summary ....................................................................................................................................................... 3Company Background................................................................................................................................... 4Growth Strategy ............................................................................................................................................ 6Intellectual Property ...................................................................................................................................... 8Company Leadership .................................................................................................................................... 9Core Story ................................................................................................................................................... 13 Product Portfolio ................................................................................................................................... 13 Customer and Partner Relationships.................................................................................................... 22 Market Opportunities ............................................................................................................................ 24Competition ................................................................................................................................................. 30Milestones ................................................................................................................................................... 33Historical Financial Results ......................................................................................................................... 34Risks............................................................................................................................................................ 38Recent Events ............................................................................................................................................. 44Glossary ...................................................................................................................................................... 45 ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 2
  3. 3. Summary Approximately 31% of all U.S. healthcare costs are related to paperwork, which is a leading contributor to rising costs within this industry. Providers and insurance companies alike face pressure to control costs and simplify complicated processes, and thus seek new, more efficient approaches. Compact devices, such as DCT’s platforms, can function as stand-alone document and image scanners or as part of larger systems facilitating digital healthcare records. DCT’s products transform business-critical paper information into a manageable digital format for a variety of enterprises, including government agencies, corporations, small offices and home offices (SOHO), professional practices, and consumers. Through efficient document management solutions, DCT enables reduced operating costs, more accurate information, and increased processing speeds. The Company is focused on delivering lightweight, cost-effective products that have a small footprint and are simple to integrate with other systems. Its patented scanners are designed to produce quality images at low power consumption levels. DCT offers customized document and image capture solutions equipped with proprietary software development kits (SDKs) for integration with new and existing third-party systems. SDKs support multiple applications, faster time to market, and ease of integration for partners/customers. Over the past decade, the Company’s DocketPORT®, TravelScan®, SimpleScan®, and DocuPass® brands have been distributed through a global network of original equipment manufacturers (OEMs) and value-added resellers (VARs), including NCR Corp. (NCR-NYSE), Qualcomm, Inc. (QCOM- NASDAQ), Burroughs Payment Systems, Inc., and Brother Industries, Ltd. (6448-TYO). In August 2010, DCT closed a $4 million strategic direct investment with NCR Corp., a global information and technology solutions provider. DCT anticipates using the NCR investment to enhance future product offerings by developing core assets and intellectual property and expanding into new market segments. In conjunction, NCR retained an option to further invest in DCT. Information and communications technology (ICT) helps businesses create cost efficiencies, boost labor productivity, and remain competitive. Vertical markets, such as financial services, tend to have the greatest level of ICT. DCT targets diversified, growing vertical markets, such as banking, healthcare, travel and hospitality (e.g., reading passports, ID cards), bulk freight transport, and an array of other industries benefitting from the secure digitization of paper forms and images. One of the fastest-growing trends in banking technology is remote deposit capture (RDC), fueled by banks and others seeking to differentiate their mobile and online services. RDC has become a key contributor to customer satisfaction and retention. DCT has previously entered into agreements with Bridgeport Technologies, Digital Check, Burroughs, and NCR to develop RDC services using USB- powered mobile terminals—which reduce the processing costs of deposits and related transactions and allow partners to customize RDC solutions for improved service and ongoing revenue growth. The Company is led by a management team with expertise in research and development (R&D), business development, corporate finance, sales, and marketing, among other fields. Corporate leadership is focused on identifying and pursuing the most beneficial global opportunities for DCT, and has recently strengthened its R&D team in order to enhance core competencies and create new scanning solutions for greater penetration of high-growth markets. DCT is profitable with no debt. Net revenue totaled $14.8 million in 2010 ($11.5 million in 2009), and earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding non-recurring expenses, was $1.6 million ($394,000 in 2009). At December 31, 2010, DCT had cash and cash equivalents of $2.3 million. DCT believes that its financial position is a result of serving diversified markets with products that are reliable, flexible, efficient, well supported, and delivered on time. The Company’s progress during 2010 was favorable, particularly with regard to its working capital of $4.8 million and no debt. With revenue growth and additions to leadership, DCT believes that it is poised to pursue business expansion and a greater global presence in 2011 and beyond. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 3
  4. 4. Company BackgroundCorporate HistoryDocument Capture Technologies, Inc. (“DCT” or “the Company”), a Delaware corporation, formerlyoperated under the name Syscan Imaging, Inc. (“SII”) and was a subsidiary of a Chinese company.Initially, SII created proprietary image-sensing technologies in chip form but transitioned to supplying anend-user product that encompasses the technology.SII completed a reverse merger in 2004 to become a public company with shares traded on the Over-the-Counter Bulletin Board (OTC.BB) under the ticker “SYII.” In June 2006, SII changed its name toSysview Technology, Inc. and began trading under the ticker “SYVT.” During this time, the Companypursued a crossover of its technology from mobile image-scanning devices to light-emitting diode (LED)display technology, with the objective of supplying the intellectual property and technological capabilitiesneeded by large suppliers of monitors, flat-panel televisions, and other electronics. In 2008, managementinitiated a refocus on its core product line of document capture platforms, which were the Company’sprimary revenue generator. As part of the refocus toward core competencies, the display business wassold, Mr. David Clark (biography on page 9) became chief executive officer (CEO), and the Company wasrenamed Document Capture Technologies. The ticker was changed to “DCMT” in January 2008. Since2008, DCT has worked to streamline its business and deliver new mobile scanning products.In September 2010, DCT combined its corporate office and warehousing facilities, at which time theCompany also expanded its domestic production capabilities. This move was anticipated to createsignificant operational efficiencies and better position DCT to capitalize on certain market opportunities,specifically those presented by U.S. government agencies that require products to be manufactured in theU.S. under the Trade Agreements Act.Headquarters and EmployeesDCT is headquartered in Santa Clara, outside of San Jose, California, and employs 29 individuals inR&D, sales, operations, and administration. Of these employees, three are located in China, two are inEurope, and the remaining individuals are based in the U.S. To support growth (as described on pages 6-7), the Company is expanding offices in Europe and has plans to add sales personnel.The Santa Clara location contains 32,000 square feet for corporate offices, product development,inventory management, and distribution. The Company also has field service/sales offices and inventorymanagement and distribution facilities in the Netherlands (contact information below). As depicted inFigure 1 (page 5), the majority of DCT’s manufacturing presently occurs in China and Taiwan. Logisticsservices, such as transportation, storage, and distribution, are provided by third parties.Document Capture Technologies, Inc.IJsselburcht 3, Suite 2126825BS ArnhemNetherlandsPhone: (+31) 26-36 53 440Fax: (+31) 26-36 53 441 ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 4
  5. 5. Figure 1 Document Capture Technologies, Inc. GLOBAL PRESENCE Arnhem, Netherlands Apeldoorn, Netherlands New York, New York European sales and Investor Relations marketing China Warehousing Manufacturing base Silicon Valley, U.S. Engineering pool Sales and marketing China mass market R&D advanced access technology development Warehousing and U.S. assembly Taiwan Tooling fabrication Sourcing and merchandizingSource: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 5
  6. 6. Growth StrategyDCT emphasizes vertical markets and business-to-business sales, working with large brandingcompanies to bring products to market. This model enables DCT to focus on its core strengths, which arecreating technologies, designing products, and establishing solutions that other companies/organizationsthen supply to their customers. The Company expects to continue following this business model goingforward.In addition to exploiting DCT’s chief expertise, this strategy has the added effect of limiting the Company’sexposure to the retail environment. Monitoring demand through its global OEM and VAR partners, DCTbelieves that sales are likely to continue to grow, especially throughout the EU and other large markets.A paramount objective for DCT during 2011 is to ensure that it remains a customer-centered organization,attuned and responsive to the needs of its clients. DCT intends to focus on deepening its relationshipswith its Tier 1 OEM partners—NCR, Qualcomm, Burroughs, and Brother—while also working moreclosely with top VAR customers.With the expansion of its R&D team in 2009, DCT continues to develop products in-house. One growthsegment relates to information security, which has become a critical issue in many industries, includingtravel, healthcare, and banking. In February 2011, a report from International Data Corporation (IDC)forecasted growth of security products at nearly 8% in 2010, as markets rebound from the prior years’recession (Source: Worldwide IT Security Products 2011–2014 Forecast and 2009 Vendor Shares:Comprehensive Security Product Review). Organizations that had postponed investments in newtechnologies are now expected to continue with upgrades, including for IT and security.At the same time, DCT is evaluating synergistic partnership opportunities that combine skills from eachcompany and that have the potential to speed the development process and cycle time for bringing newproducts to market.Business Strategy: Focus on Hardware, Software, Sales, and New Global Vertical MarketsGoing forward, DCT’s business strategy is to increase market penetration by expanding its documentscanning hardware portfolio, broadening the scope of its proprietary input devices, improving speed-to-market, and initiating sales in new vertical markets.Rather than developing an internal retail network to reach the end consumer, DCT emphasizes verticalmarkets and business-to-business sales. The Company works with large branding companies to bringproducts to the consumer. This model enables DCT to focus on its core strengths, which include creatingtechnologies, designing products, and establishing solutions that other companies/organizations thensupply to their customers. DCT has an ongoing commitment to bringing new R&D technologies to marketthat specialize in adaptability and mobility. The Company expects to continue to follow this businessmodel.Through accelerating investments in internal R&D as well as inlicensing, DCT is working to expand thescope of its proprietary input devices. There are a wide range of uses for document capture platforms asinput devices. DCT recognizes the importance of addressing each of these and being able to offer varioussoftware bundles based on what the Company’s partners and customers require in order to serve theircustomers. Accordingly, DCT expects software to become an even larger component of its portfolio goingforward. The Company is continuing to enhance its multi-platform (Windows®, Mac, Linux, Windows®Mobile, and Windows® CE) SDKs and leverage them in the creation of cloud-based software applicationsto facilitate a range of input devices. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 6
  7. 7. In addition to providing customer support to existing Tier 1 OEM partners and VAR customers, theCompany is also investing in expanding its connections with customers, suppliers, and partners ininternational markets, particularly across Europe and Asia. Moreover, DCT is working to enhance salesand marketing in new vertical arenas where the Company believes there are growth opportunities, suchas point-of-service (POS), home POS, and remote POS (e.g., self-service) transactions, among manyother areas. Pages 25-29 present a detailed description of DCT’s current and targeted global markets.To support these efforts, the Company has recently expanded its leadership, appointing Mr. Craig H.Weber (biography on page 10) as president and chief operating officer (COO) in November 2010, Mr.Jacques F. vonBechmann (biography on page 10) as senior vice president of sales in January 2011, andMr. Karl Etzel (biography on page 11) as product and business development manager in February 2011. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 7
  8. 8. Intellectual PropertyDCT’s product development strategy is fueled by its intellectual property with the objective of creatingmarket-driven products. The Company has an aggressive intellectual property strategy to protect itsproprietary technology. DCT holds multiple patents related to scanning devices, including for efficient low-power designs, and specializes in adaptability, integration into new and existing systems, and mobility,with an ongoing commitment to R&D.As of November 2010, DCT reported that its intellectual property portfolio comprised five trademarks,more than 20 patents, two pending patents, and three patent applications in pre-submission status.Current patents do not expire until 2017. In addition to its current patent and trademark portfolio, DCT iscollaborating with various third parties with the intent of licensing novel new features that can becombined with the Company’s intellectual property to create stronger barriers to entry. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 8
  9. 9. Company LeadershipOver the past several months, DCT has added three new members to its executive management team,with expectations of transforming the Company into an organization capable of fueling revenue andprofitability growth and accelerating new product development and deployment. The Company intends tocontinue to selectively add new talent to its team.Further, DCT expanded its R&D team during the third quarter 2009 to ramp-up R&D. New teammembers, Mr. Peng-Cheng Chen and Mr. Suleman Saya, bring a combined 37 years of hardware andsoftware expertise to DCT from companies such as Cirrus Logic, Inc. (CRUS-NASDAQ) and Siemens AG(SI-NYSE). The Company expects its strengthened R&D team to facilitate development of new scanningsolutions for greater penetration of high-growth markets, including remote deposit capture (RDC) andhealthcare.The accompanying pages list DCT’s management, Board of Directors, and advisors. Table 1 provides asummary of the Company’s key individuals, followed by detailed biographies. Table 1 Document Capture Technologies, Inc. CORPORATE LEADERSHIPDavid P. Clark Chief Executive Officer and DirectorCraig H. Weber, MBA, J.D. President, Chief Operating Officer, and SecretaryM. Carolyn Ellis, MBA, CPA Chief Financial OfficerJacques F. vonBechmann, III, MBA Senior Vice President of SalesPim (Willem) Blom Vice President Business Development EMEA (Europe, Middle East, Africa)Karl Etzel, M.S. Product and Business Development ManagerSource: Document Capture Technologies, Inc.David P. Clark, Chief Executive Officer (CEO) and DirectorMr. Clark became DCT’s CEO in March 2008. Since July 2004, he had served as DCT’s senior vicepresident of business development and as a director. He joined the Company from Nautical Vision, Inc.where, as president, he created and implemented a business plan in the image display industry. From2001 to 2003, Mr. Clark actively invested in and consulted to several companies with a focus on businessdevelopment, corporate finance, sales, and marketing. He was also president and CEO from 1998 to 2001, where he raised over $25 million in funding from investors, includingAmerica Online (AOL-NYSE), FBR Technology Venture Partners L.P., PNC Bank (PNC-NYSE), andBank of America Corp. (BAC-NYSE), as well as was instrumental in the acquisition of a key competitor.Previously, Mr. Clark was director and the head of distribution of Take-Two Interactive Software, Inc.(TTWO-NASDAQ), which resulted from Take-Two’s acquisition of Inventory Management Systems, Inc.(IMSI), of which Mr. Clark was co-founder and president. Prior to founding IMSI, he held managementpositions with Acclaim Entertainment, Inc. and the Imagesoft Division of Sony Music Holdings. Mr. Clarkreceived a B.S. in business from the State University of New York, Binghamton in 1990. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 9
  10. 10. Craig H. Weber, MBA, J.D., President, Chief Operating Officer (COO), and SecretaryMr. Weber joined DCT as president and COO in November 2010. During a more than 25-year career, Mr.Weber has served as president and CEO, chief financial officer (CFO), COO, and chief legal officer(CLO), among other executive roles. Most recently, he was executive vice president, corporatedevelopment and CFO of Home Care Delivered, Inc., a supplier of disposable medical supplies, where hewas also responsible for strategic planning and growth initiatives, acquisitions, and leadershipdevelopment. Previously, he was managing partner of Hollymeade Group, LLC, a private investment firm;president and CEO of Whitlock eBusiness Solutions, a business and technology consulting company;COO, strategic planning officer, and legal officer of; and vice president, businessdevelopment and chief legal, administrative, and human resources officer for Walco International, Inc., a$400 million pharmaceutical distribution company owned by Bain Capital. Before beginning his businesscareer, Mr. Weber practiced law as a partner at McGuireWoods in Richmond, Virginia, and as anassociate at Sullivan & Cromwell in New York City where he specialized in corporate finance, mergersand acquisitions (M&A), and banking. Mr. Weber holds an MBA from the College of William and Mary; aJ.D. from the University of Virginia, where he was a member of the Virginia Law Review; and a B.S. fromCornell University. Since 2002, Mr. Weber has been a member of the Board of Directors of Optical CableCorp. (OCCF-NASDAQ), where he is chairman of the Compensation Committee and serves on the AuditCommittee.M. Carolyn Ellis, MBA, CPA, Chief Financial Officer (CFO)Ms. Ellis was appointed DCT’s CFO in November 2007. She had been an independent contractor to theCompany since 2006 in the role of supervising financial reporting obligations. Prior to her work with theCompany, Ms. Ellis served as a director, secretary, and treasurer of Knovative, Inc., atelecommunications R&D company that she co-founded in 2003 and where she remains a member of theBoard of Directors. From April 2000 to July 2003, Ms. Ellis served as the vice president of finance forCorrelant Communications. She has been a certified public accountant (CPA) since 1989. She earned aBachelor’s degree in economics and accounting from Hendrix College in 1986 and an MBA from theUniversity of New Mexico in 1994.Jacques F. vonBechmann, III, MBA, Senior Vice President of SalesMr. vonBechmann joined DCT as senior vice president of sales in January 2011. Previously, he wassenior vice president of sales and marketing at Home Care Delivered. He has held executive positions insales and marketing for companies ranging from Internet start-ups to Fortune 100 companies, includingnational accounts, Allergan, Inc. (AGN-NYSE); vice president, marketing of Cendant Corporation; andvice president, sales at Allianz. He is also experienced with a variety of markets that includepharmaceutical, consumer products, technology, and financial institutions and has worked withcompanies such as Capital One Financial Corp. (COF-NYSE), Bank One Corp. (now part of JPMorganChase & Co. [JPM-NYSE]), Qwest, Genworth Long Term Care, Columbia HCA, Double Click, OrbitzWorldwide, Inc. (OWW-NYSE), The Walt Disney Co. (DIS-NYSE), Continental Airlines and United Airlines(both part of United Continental Holdings, Inc. [UAL-NASDAQ]), American Airlines, Inc. (AMR-NYSE),Expedia, Inc. (EXPE-NASDAQ), and Blue Cross and Blue Shield. Mr. vonBechmann also taughtmarketing, economics, and leadership courses as an adjunct professor at the University of Richmond. Heis a graduate of the University of Virginia and received an MBA from the College of William and Mary.Pim (Willem) Blom, Vice President Business Development EMEA (Europe, Middle East, Africa)Mr. Blom, a native Dutchman, joined DCT in October 2005. He has extensive experience in thedistribution of well-known document imaging brands, such as Kodak, Kofax, Microtek, Agfa, Polaroid,Fujitsu, and Omnipage. Before joining DCT, he was the European sales manager at Fibrenetix Group inthe UK, where he was responsible for sales, marketing, and distribution of mass storage devices fordocument imaging and video applications. Mr. Blom has over 20 years of experience in marketing andsales of a variety of IT products and equipment in the international marketplace and started his career inthe IT sector at Philips Telecommunications and Data Systems in 1988. Other experience includesserving as director of sales and marketing at Phertron, a Netherlands-based company, where hemanaged a sales group in the Benelux countries with international accounts including Philips and DuPontOptical, Mitsubishi Chemical Holdings Corp. (4188-TYO), Agfa, and Teac Corporation (6803-TYO). ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 10
  11. 11. Karl Etzel, M.S., Product and Business Development ManagerMr. Etzel holds a Master’s in mechanical engineering from the University of California at Irvine. He joinsthe Company after more than a decade as program manager for the U.S. Navy as well as productmanager for the Data Communications Division of Cypress Semiconductor Corp. (CY-NASDAQ) and IntelCorp.’s (INTC-NASDAQ) Digital Health Group. His graduate education was fully funded by a NationalScience Foundation Graduate Research Fellowship. DCT expects that Mr. Etzel can help facilitate thecontinual strengthening of the Company’s product engineering department. Throughout his career, Mr.Etzel has demonstrated an ability to accelerate the development of new products, and manage thoseproducts from concept through launch to the forging of sales partnerships. His past assignments haveaddressed several industry verticals of importance to DCT, including leading the development, marketing,and OEM support for a hardware reference design for the healthcare sector.Board of DirectorsTable 2 provides a summary of DCT’s directors, followed by detailed biographies. The Board of Directorsoversees the conduct of and supervises the Company’s management. Table 2 Document Capture Technologies, Inc. BOARD OF DIRECTORSEdward M. Straw, MBA ChairmanDavid P. Clark Chief Executive Officer and DirectorRoseann Larson, CPA DirectorDarwin Hu, M.S. DirectorJody R. Samuels, J.D. DirectorSource: Document Capture Technologies, Inc.Edward M. Straw, MBA, ChairmanMr. Straw is currently executive vice president of PRTM Management Consultants, an operationalstrategy consulting group. From 2000 to 2005, he served as president of global operations for EstéeLauder Companies Inc. (EL-NYSE). From 1998 to 1999, he served as senior vice president of supplychain management and manufacturing for Compaq Computer Corp. (now part of Hewlett-Packard Co.[HPQ-NYSE]). Prior to Compaq, he served as president of Ryder Integrated Logistics Inc. from 1996 to1998. Before joining the private sector, Mr. Straw had a distinguished 30-year career in the U.S. Navy,retiring as a three-star admiral in 1996. He holds a B.S. from the U.S. Naval Academy and an MBA fromGeorge Washington University, and is also a graduate of the National War College.David P. Clark, CEO and DirectorBiography on page 9.Roseann Larson, CPA, DirectorMs. Larson has held several executive positions with Estée Lauder in her more than 20 years with thecompany. Most recently, she held the position of vice president and program manager, EMEA for EstéeLauder, responsible for centralizing, standardizing, and streamlining information systems across EstéeLauder’s global enterprise. At the commencement of her career at Estée Lauder in 1989, Ms. Larson wasmanager, internal audit where she conducted operational, IT, financial, and environmental audits andcontributed to fraud investigations for all divisions worldwide. Prior to her tenure at Estée Lauder, Ms.Larson held several accounting and financial positions at Citicorp (part of Citigroup Inc. [C-NYSE]) from1982 to 1989. She is a CPA and a member of the American Institute of Certified Public Accountants(AICPA). She earned a B.B.A. in accounting from Bernard Baruch College (New York) in 1980. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 11
  12. 12. Darwin Hu, M.S., DirectorMr. Hu became chairman, president, and CEO of the Company on April 2, 2004, in connection with theacquisition of Syscan, Inc. He resigned as president and CEO on March 1, 2008, and stepped down aschairman of the Board of Directors on July 15, 2008. He continues to serve as a director of the Company.Prior to April 2, 2004, Mr. Hu was the president and CEO of Syscan, Inc., DCT’s wholly owned subsidiary.Mr. Hu has over 21 years of experience in the high-tech industry and has held various management-related positions within organizations related to color graphic imaging input scanning, display output andimaging communication product development, manufacturing, and sales and marketing. Before joiningSyscan in April 1998, Mr. Hu held senior management positions at Microtek International, Inc. (2305-TPE), Xerox Corp. (XRX-NYSE), OKI Electric Industry Co. Ltd., Advanced Vision Research, Inc., OlivettiS.p.A., and Grundig Business Systems. He holds a Bachelor’s degree in engineering science fromNational Cheng-Kung University, Taiwan, and a Master’s degree in computer science and engineeringfrom California State University.Jody R. Samuels, J.D., DirectorMr. Samuels became a director of DCT in September 2009. He is currently of counsel to the law firm ofRichardson & Patel LLP and from 2006 through 2009 was a partner of Richardson & Patel LLP. Prior tothat, he was an associate and then a partner with the law firm of Ellenoff, Grossman & Schole from 2004through 2006. From 1996 through 2004, Mr. Samuels was an associate at the law firm of Gersten SavageLP. Mr. Samuels has been the Company’s corporate counsel since Syscan merged with BankengineTechnologies, Inc. in 2004. Mr. Samuels represents many public and private companies in connectionwith their corporate and securities transactions, including public offerings, private investment public entity(PIPEs), and reverse mergers, as well as M&A transactions and regulatory compliance. Mr. Samuels alsorepresents broker-dealers in connection with public and private securities offerings. He received a B.S. inaccounting from Brooklyn College in 1991 and a J.D. from New York Law School in 1995. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 12
  13. 13. Core StoryDocument Capture Technologies, Inc. (“DCT” or “the Company”) provides demand-driven solutions forthe paper-to-digital revolution that emphasize convenience, speed, and quality. DCT produces more than30 document and image capture platforms, which are distributed globally. Over the course of itsoperations, the Company has shipped nearly four million scanning products. Customers include Tier 1original equipment manufacturers (OEMs), value-added resellers (VARs), and other systems integrators.To the Company’s knowledge, it is one of the largest manufacturers of USB-powered, page-fed, mobilescanners worldwide.Based on its research, DCT believes that scanning is in its infancy and is an intimidating process formany people. With compact designs and “plug and go” ease of operation, DCT’s products are intended tobe user-friendly. The Company’s USB-powered scanners also feature low power and space requirements(i.e., a small footprint), with an aim to provide a simple form of document management at a low cost thatis easy to integrate with existing processes.Another challenge that DCT faces is changing the way that people view scanning. The Company believesthat the average individual is unaware of the number of ways that information can be stored, shared, andmanaged, and the efficiencies created by digitizing paper files and images.DCT strives to demonstrate these benefits by promoting scanners as efficient devices easily employed formany daily tasks. The Company defines its products as more than just a scanner that uploads adocument and attaches it to an email. Rather, DCT gives its document capture platforms “smart”functionalities where the devices can integrate scanned data into a database or another application,reducing human error and increasing efficiencies. With smart, fully functional scans, consumers usedocument capture platforms to not only upload documents but also to digitize pictures, manage expensereports, and deposit checks, among many other activities.In addition, in response to globally heightened concerns for security, DCT is working to address anincreased demand for state-of-the-art information, identity, and financial transaction protection. Overall,DCT believes that its products’ advanced information management features can continue to lead togreater efficiencies in many industries.DCT’s products are not only applicable to traditional areas where scanners have typically been used butthey have also extended the reach of document capture platforms into new markets. The Company’sdevices and technologies can be used for remote deposit capture (RDC), bank note and checkverification, document and information management, scanning barcodes, scanning IDs, passports, orother security measures, reading business cards, and as optical mark readers, such as for lotteryterminals.Pages 13-21 describe DCT’s product lines, highlighting the specifications, security features, and softwaresupport for current products. Pages 22-23 overview DCT’s customer and partner relationships, and pages24-29 detail the expanding vertical markets where the Company’s scanners are currently employed andwhere DCT is seeking greater market penetration.PRODUCT PORTFOLIODCT markets over 30 products across five classes (as listed in Table 3 [page 14]) designed toaccommodate the diverse needs of a variety of enterprises and markets, which include governmentagencies, large and small corporations, small office/home office (SOHO) settings, professional practices,and consumers. While all of DCT’s products are built from the same patented technologies, the productgroupings have varying features and configurations. Through its diverse product lines, the Companymanages the processing of millions of forms, documents, and transactions annually. Captured content isefficiently converted into usable digital information that can be integrated into databases, documents, andother types of information management systems. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 13
  14. 14. Table 3 DCT markets its products domestically and internationally Document Capture Technologies, Inc. through a network of more than 45 independent distributors and channel partners across North America, Europe, and PRODUCT CLASSES Asia, as well as through several retail and Internet-basedA4: Letter Size channels.A5: Leaflet or Flyer DCT is committed to research and development (R&D) andA6: ID Card; Check product innovation, a focus that it believes helps it stay at theA8: Business Card forefront of the paper-to-digital revolution. Using patentedCMOS-based Passport/ID technology, DCT optimizes product designs to be compact, lightweight, and capable of providing quality images at lowSource: Document Capture Technologies, Inc. power.Currently, the DocketPORT® and TravelScan® lines comprise the Company’s most popular productgroups, which are further profiled on the accompanying pages. These secure document imagingplatforms possess the following attributes: USB powered; Mobile; and Page-fed.Product EvolutionDCT’s initial scanners were centered on portability, which defined the Company’s early stages. Launchedin 2002, DCT’s first scanners were approximately the size of the cardboard tube within a roll of papertowels and ran solely on USB power. These products were geared toward “road warriors” (people whotravel extensively for business) and capitalized on the expanding use of notebook computers.To the Company’s knowledge, it was among the first to develop a portable scanner, a high-speedportable scanner using USB 2.0, and a duplex (dual-sided) USB-powered scanner. Since thesedevelopments, the Company has continued to release a consistent flow of new and next-generationproducts, some of which are currently being field-tested. Table 4 summarizes DCT’s key historical productdevelopment milestones. Table 4 Document Capture Technologies, Inc. KEY PRODUCT DEVELOPMENT MILESTONES 2000 Introduced the first portable scanner with a PCMCIA interface 2004 Introduced USB 2.0 high-speed portable scanners 2005 Introduced A4 Duplex products 2006 Introduced a "Check 21" version of the A4 Duplex scanner 2007 Introduced an A6 Duplex scanner 2008 Brought new products to market, including the “7” series, DP 488, and DP 688 2009 Launched a next-generation controller (TS-PRO-XL, 4 Xena models) 2010 Introduced RDC solutions and the new CMOS DP 540Source: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 14
  15. 15. Over the past decade, the Company’s DocketPORT®, TravelScan®, SimpleScan®, and DocuPass® brandshave been distributed through a global network of solution providers and VARs. As illustrated in Figure 2,these product classes have included a number of models over the years. Figure 2 Document Capture Technologies, Inc. PRODUCT EVOLUTION Mobile Scanning Solutions A4: Letter Size A6: ID Card; Check A8: Business Card 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: Document Capture Technologies, Inc.These products have supported popular computing platforms such as Windows®, Mac OS, Linux,Windows® Mobile, and Windows® CE. In addition, DCT offers proprietary Software Development Kits([SDKs] described on page 17) for custom integration, application control, and VAR configurations.Current ScannersDCT’s most popular current scanners are largely concentrated within the DocketPORT® product line,which represents fourth-generation compact document and image capture. The DocketPORT® productsshare several common features, including the following: (1) USB powered; (2) optical resolution of 600dots per inch (dpi); (3) lightweight; (4) small footprint; and (5) a minimal power requirement. Several ofthe products offer duplex capabilities, where they can scan both sides of a two-sided documentsimultaneously.Additionally, DCT’s products meet stringent product compliance requirements from various countries,including the EU’s Restriction of Hazardous Substances (RoHS) Directive and Waste Electrical andElectronic Equipment (WEEE) Directive. The Company’s products have been RoHS compliant sinceJanuary 2006. Both DCT and its product manufacturer have established ongoing surveillance programs incoordination with requirements set by multiple standards organizations, such as UnderwritersLaboratories, the Canadian Standards Association, CB Safety Standards, the Federal CommunicationsCommission (FCC class B), the EU (CE mark), and Japan (Voluntary Control Council for Interference[VCCI] compliance). ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 15
  16. 16. Figure 3 depicts several currently available DocketPORT® products. A detailed description of DCT’snewest image capture platform, the DocketPORT® 540 (DP 540), follows the Figure. Figure 3 Document Capture Technologies, Inc. A SELECTION OF CURRENT PRODUCTS ® ® ® ® DocketPORT 488 DocketPORT 487 DocketPORT 468 DocketPORT 467 ® ® ® ® DocketPORT 687 DocketPORT 667 DocketPORT 540 DocketPORT 531Source: Document Capture Technologies, Inc.DocketPORT® 540 (DP 540)In September 2010, DCT released its latest platform, the DP 540, which is targeted for scanningpassports and ID cards. The 500 series entails flatbed scanners, such as depicted in Figure 4. In keepingwith the Company’s signature design, the DP 540 has a small footprint and was built to be up to 10 timesfaster than conventional scanning technologies—with image capture achieved in two seconds. It is theCompany’s smallest and fastest ID scanner. Figure 4 The DP 540 is targeted for the domestic and Document Capture Technologies, Inc. international travel industries, which have strict security and identification requirements. In February 2011, DCT 500 SERIES showcased the DP 540 to approximately 3,000 Quickly converts bulky passports and IDs to international travel IT professionals at a Travel electronic records Technology Show in London. The DP 540 has a flat surface; thus, it is equipped to rapidly and efficiently scan bulky passports, personal ID papers, tickets, and vouchers by airlines, airports, hotels, and travel agents. It can also be integrated into kiosks and custom housings, and includes multi-country adapter plugs. DCT believes that the DP 540 is among the most efficient low-cost technologies for the travel industry. In addition, the DP 540 can be used in a variety of other markets, including healthcare, retail, and commercial, which require paper-to-digital processing of bulky documents.Source: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 16
  17. 17. The DP 540 is compatible with 32- and 64-bit versions of Windows® 7, Vista, and XP and uses theTWAIN 1.9 imaging standard for both Windows® and Mac operating systems. The TWAIN standards arespecifications created by the TWAIN Working Group, a nonprofit organization representing the imagingindustry to link applications and image capture devices. These specifications help scanner and cameravendors write the drivers for their devices. Drivers that follow TWAIN specifications are known as “TWAINdrivers” or “TWAIN-compatible drivers.” As the DP 540 is TWAIN compliant, it may have hundreds ofcommercial applications.CMOS Image SensorIn the 1990s, DCT’s wholly owned subsidiary, Syscan, Inc., began creating a new generation of patentedcontact image sensors (CIS) that are complementary metal-oxide-semiconductor (CMOS) imagingsensor devices. Many document scanners use CIS technology, which gathers light from red, green, andblue LEDs (which when combined provide white light) and directs the light at the document beingscanned. The light reflected back is absorbed by a lens and directed at an image sensor array thatrecords the images based on light intensity. The DP 540 utilizes a camera-based (CMOS) image capturesystem. This fast image capture technology uses multiple light sources for enhanced accuracy. It alsoincorporates color, grayscale, and infrared scanning modes. The DP 540 has no moving parts.As a result of its work in this area, DCT holds multiple patents for linear imaging technology. Its patentedCIS and mobile imaging scanner technology lead to high-quality images at low power consumption levels.This characteristic allows DCT to deliver compact scanners that are simple to use and easily integratedwith computers, peripherals, and other systems.SoftwareThe Company custom designs document capture solutions that are lightweight, have a small footprint,and, most importantly, are easily integrated with third-party systems. The ease of integration comes fromproprietary software development kits (SDKs) and application programming interfaces (APIs), which allowthe scanners to interface with both new and existing systems at a rapid rate. The Company can developan interface, if one does not already exist, with any computing device where there is a need for a smallfootprint scanner. Competitors’ small retail scanners are generally not equipped for such integration.In addition to ease of integration, the Company’s SDKs and APIs allow for a broad range of applicationsand a faster time to market. DCT’s standard software packages include drivers to support Microsoft®Windows® 7/Vista/XP, Windows® CE, Linux, and Mac OS. Since the software is bundled with the scannerto meet specific customer needs, DCT’s products can be configured to run via servers or cloud-basedsolutions.DCT’s products can be easily configured to support different languages, and the Company providesongoing support for Romanized, Cyrillic, and Sinographic character software. Thus, its products arebelieved to be well suited for sales opportunities in many international markets.Going forward, DCT intends to focus on software applications as well as hardware applications. As theCompany develops wireless capabilities (Bluetooth and Wi-Fi), its software components are likely tobecome more innovative to meet new demands. For example, next-generation autonomous scannerscould allow users to display and edit the digital image directly on the scanner via an LCD screen (asaddressed under Pipeline Initiatives on page 18).Furthermore, the Company recognizes the need for expanded functionality. As such, DCT is developingsoftware solutions to support its partners’ and customers’ novel or best-of-breed cloud-based services.For example, a USB or Bluetooth connection with a simple user interface could allow the end-user tointeract with various features in the cloud, such as contact management. Essentially, DCT aims to offer adatabase unique to the user that would be maintained in the cloud, with plug-ins enabling such activitiesas expense report management for small and micro businesses or the business traveler, photo services(e.g., scanning photos to an online account), and access to a secure electronic vault, among many otherpossible functions via the scanner. Ultimately, there are many uses for mobile scanners as an inputdevice. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 17
  18. 18. Security FeaturesDCT incorporates multiple security features into its hardware and software to meet varying marketrequirements. Its scanners sold in the healthcare industry are Health Insurance Portability andAccountability Act (HIPPA) compliant. To help ensure the security of private patient information,scanned images are not stored on the devices but rather are transferred and then erased from the bufferwith no residual image to interfere with various healthcare privacy regulations. Greater details on theapplication of DCT’s products to the healthcare field are provided on pages 26-27.In addition, each scanner has digital serialization, which can be used in many different ways frommarketing to security. As a marketing tool, digital serialization enables recognition of where scanners aredeployed. As a security tool, it provides users with verification functions. One example of a verificationfeature occurs during the remote check deposit process. When a check is scanned, it is digitallyserialized. Before being deposited, the digital serial number must match the specified customer andscanner. This gives banks an additional verification measure before the deposit is completed.ManufacturingDCT’s goal is to remain cost-competitive by efficiently sourcing components and materials, drivingmanufacturing costs lower and carefully controlling overhead. Much of the Company’s manufacturingoccurs in China and Taiwan. DCT purchases the majority of its finished products from Shenzhen SyscanTechnology (SST), a wholly owned subsidiary of Syscan Technology Holdings Ltd. A pricing agreement,negotiated periodically, is in place between DCT and SST. Further, the Company believes that using thissupplier provides better control over both product quality and cost, as DCT’s engineers work closely withthe manufacturing team from the early stages of product design. DCT procures and delivers to SSTsubstantially all of the critical components and tooling required for scanner manufacture.SST is in the process of relocating its primary manufacturing facilities from Shenzhen, China, to Wuhan,Hubei Province, China, as a strategy to reduce direct and overhead costs. This relocation is on-track tobe complete with fully functional facilities by the end of April 2011.Pipeline InitiativesDCT is focused on introducing new hardware to remain competitive going forward. Among theseinitiatives, the Company has targeted wireless scanning. As well, its Xena project seeks to produce anautonomous scanning device capable of interaction with a wider variety of user modes and devices.Autonomous products could include scanners that operate on a lithium ion battery and that incorporate asmall LCD screen and Bluetooth connectivity, allowing users to scan documents and upload the scans totheir mobile device—personal digital assistants (PDAs), iPhones, iPads, or BlackBerry or Droidsmartphones—via Bluetooth. DCT aims to begin shipping a selection of these new products during 2011.DCT believes that mobile banking and mobile transactions will likely increase in the future with Web-based solutions becoming more prominent. To capitalize on this trend, the Company is developingproducts with Wi-Fi connectivity and autonomous products that do not need a host device (e.g., acomputer) but rather connect to a cloud. As an example, Hewlett-Packard Company (HPQ-NYSE) hasintroduced printers with an independent IP address so consumers can print from a cell phone to a printerand bypass the need for a computer. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 18
  19. 19. Current Product SpecificationsThe DocketPORT® 488, listed in Table 5, can scan size ranges from business cards to legal documentsand represents the third generation of DCT’s duplex scanners. It is fully USB powered with no requiredAC power adaptor. Another featured product of the DocketPORT® 400 series, the 487, scans full-sizedocuments on both sides simultaneously in as quickly as 10 seconds. Separately, the 468 simplexscanner was designed for improved document handling and user interface. Table 5 Document Capture Technologies, Inc. PRODUCT SPECIFICATIONS ® ® ® ® DocketPORT 488 DocketPORT 487 DocketPORT 468 DocketPORT 467Interface USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed)Image Sensor CMOS CIS Dual, 2 linear color CMOS CIS Linear color CMOS CMOSResolution 600 dpi 600 dpi (optical) 600 dpi 600 dpi (optical)Scanning Modes Internal 48-bit analog- 48-bit color (internal), Internal 48-bit analog- 48-bit color (internal), to-digital conversion 24-bit color (output), to-digital conversion 24-bit color (output), for R,G,B three-color 8-bit grayscale, for R,G,B three-color 8-bit grayscale, channels 1-bit B&W channels 1-bit B&WScan Speed 10 ppm B/W; 6 ppm B/W; 5 ppm B/W; 6 ppm B/W; 4 ppm color 3 ppm color 2 ppm color 3 ppm colorScan Area 8.5" x 14" max. Business cards to 8.5" x 14" max. Business cards to legal documents legal docs, A4 formatWeight 21 oz. w/o cable 17.8 oz. 12 oz. w/o cable 12 oz.Dimensions 12.25" x 2.0" x 2.65" 11.8" x 2.4" x 1.9" 11.5" x 2.0" x 1.7" 11.7" x 2" x 1.7"(L x W x H)Cable Length 150 cm 152 cm (detachable) 150 cm 152 cm (detachable)Power 0.01W suspend; 0.2W standby; 0.01W suspend; 0.2W standby;Consumption 0.2W standby; 2.0W during scan 0.2W standby; 2.0W during scan 2.0W during scan 2.0W during scanPaper Sensor Mechanical Electro-mechanical Mechanical Electro-mechanicalPaper Thickness 0.1 mm~1.2 mm 0.1 mm to 1.0 mm 0.1 mm~0.6 mm 0.1 mm to 0.8 mmRegulatory CE, FCC Class B FCC Class B, CE, CE, FCC Class B FCC Class B, CE,Requirement USB-IF.orgEnvironmental RoHS, WEEE RoHS, WEEE RoHS, WEEE RoHS, WEEERequirement ® ® ® ®Operating Windows 7, Vista, Windows 7, Vista, Windows 7, Vista, Windows 7, Vista,Systems XP, 2003, 2000; Mac XP, 2003, 2000; Mac XP, 2003, 2000; Mac XP, 2003, 2000; Mac OS X 10.4 and later OS X 10.4 and later OS X 10.4 and later OS X 10.4 and laterBundled DocketSCAN II with DocketSCAN II with Presto!Software Scan-to-PDF utility Scan-to-PDF utility PageManager 7Source: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 19
  20. 20. The DocketPORT® 687 offers quick and convenient scanning for ID cards and licenses with supporteddocument sizes ranging from business cards to 4” x 10” documents. Like many of DCT’s other products,the DocketPORT® 687 is a fully USB-powered, portable duplex scanner. The DocketPORT® 531 has aflatbed design and scans security documents with an infrared source. This platform is optimal forpassports, drivers’ licenses, bank checks, ID cards, photos, and digital watermarked documents. Table 5 (continued) Document Capture Technologies, Inc. PRODUCT SPECIFICATIONS ® ® ® ® DocketPORT 687 DocketPORT 667 DocketPORT 540 DocketPORT 531Interface USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (full speed)Image Sensor Dual, 2 linear color Linear color CMOS CMOS Area Linear color - infrared CMOS CMOSResolution 600 dpi (optical) 600 dpi (optical) 600 dpi (optical)Scanning Modes 48-bit color (internal), 48-bit color (internal), Infrared, Grayscale, Monochrome, Color, 24-bit color (output), 24-bit color (output), Color and Infrared filter 8-bit grayscale, 8-bit grayscale, 1-bit B&W 1-bit B&WScan Speed 6 ppm B/W; Under 2 seconds 3 to 12 seconds 3 ppm colorScan Area 4.13" x 10" A6 format 4.13" x 10" A6 format 3.8" x 5.0" 5" x 3"Weight 10.6 oz. 8.4 oz. 2 lbs. 20 oz.Dimensions 8" x 2.75" x 1.8" 7.5" x 2" x 1.7" 7.6" x 8.6" x 3.8" 8.6" x 6.1" x 1.7"(L x W x H)Cable Length 152 cm (detachable) 152 cm (detachable) 183 cm 152 cm (detachable)Power 0.2W standby; 0.2W standby; 100-240 VAC, 0.2W standby;Consumption 2.0W during scan 2.0W during scan 50/60 Hz 2.0W during scanPaper Sensor Electro-mechanical Electro-mechanical None, flatbed designPaper Thickness 0.1 mm to 1.0 mm 0.1 mm to 0.7 mm No limit, flatbed designRegulatory FCC Class B, CE, FCC Class B, CE, CE, FCC Class B FCC Class B, CERequirement USB-IF.orgEnvironmental WEEE, RoHS WEEE, RoHS RoHS WEEE, RoHSRequirement ® ® ® ®Operating Windows 7, Vista, Windows 7, Vista, Windows 7, Vista, Windows XP, 2000,Systems XP, 2003, 2000 XP, 2003, 2000 XP (64- and 32-bit) ME, 98SEBundled DocketSCAN Presto! DocketSCAN 2 with TWAIN driver onlySoftware PageManager 7 Scan-to-PDF utilitySource: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 20
  21. 21. Legacy ProductsFigure 5 illustrates some of DCT’s legacy products, for which the Company offers technical support andsoftware downloads through its website, These comprise a selection ofDocketPORT® devices as well as the TravelScan® line, which are entry-level document managementproducts.Similar to the aforementioned DocketPORT® products, the TravelScan® scanners are lightweight, have asmall footprint, and are full-speed USB powered. As they require minimal workspace, they can beconveniently carried with laptops, enabling users to efax, email, and organize business documents on thego. The optical resolution of the scanners in the TravelScan® line is 300 dpi, and each of these is alsoRoHS compliant. They entail minimal power consumption and are designed for simple operation at thetouch of a button. Figure 5 Document Capture Technologies, Inc. LEGACY PRODUCTS ® ® ® DocketPORT 485 DocketPORT 465 DocketPORT 685 ® ® ® DocketPORT 665 TravelScan PRO600/600ND TravelScan 464/464M ® ® TravelScan PRO 2300 U/UP TravelScan FS531 ® ® TravelScan 662 TravelScan 660Source: Document Capture Technologies, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 21
  22. 22. CUSTOMER AND PARTNER RELATIONSHIPSDCT supplies document capture systems for use at a range of enterprises, including governmentagencies, large corporations, SOHO setups, professional practices, and consumers. However, theCompany’s sales and marketing efforts are not targeted toward the end-users of its products but rather toits direct customer base. As represented in Figure 6, DCT’s imaging products are distributed globallythrough private-label solutions to Tier 1 original equipment manufacturers (OEMs), value-added resellers(VARs), and other system integrators, including NCR Corp., Qualcomm, Inc., Burroughs PaymentSystems, Inc. (formerly part of Unisys Corp. [UIS-NYSE]), and Brother Industries, Ltd., among others. Figure 6 Document Capture Technologies, Inc. A SELECTION OF THE COMPANYS PARTNERSDCT has provided products to many entities in the document capture market, including but not limited to… NCR Corp. DYMO-CardScan®, the technology Qualcomm, Inc. division of Newell Rubbermaid Inc. Brother Industries, Ltd. Xerox Corp., via a relationship with Visioneer, Inc. Digital Check Corp. Burroughs Payment Systems, Inc. Ambir Technology Inc.Sources: Crystal Research Associates, LLC and Document Capture Technologies, Inc.NCR is a global technology company that supplies automated teller machines (ATMs), retail point-of-sale (POS) workstations, self-service kiosks, check and document imaging, and other solutions that aimto help businesses connect, interact, and transact with their customers. Qualcomm specializes in wirelesscommunications worldwide, particularly for mobile communications and consumer electronics. BrotherInternational Corp. (the U.S. subsidiary of the Japanese parent, Brother Industries) provides products forthe home, home office, and office, including industrial products, home appliances, and business productsmanufactured by Brother Industries. Other well-known Brother products include printers, fax machines,and electronic labeling.In addition, DCT has worked with multiple other third parties, such as CardScan®, a developer of contactmanagement technology for scanning business cards and managing the contact information in adatabase. In 2008, CardScan® was merged into DYMO, the technology division of Newell RubbermaidInc. (NWL-NYSE), which supplies a variety of organization and productivity solutions.DCT also designs and manufactures product for Visioneer, Inc., a developer of intelligent imagingsolutions. Visioneer has an exclusive licensing agreement with Xerox Corp. to develop and market Xerox-branded document scanners and digital projectors. Altogether, DCT markets its scanners through aglobal network of more than 45 independent distributors and channel partners in North America, Europe,and Asia. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 22
  23. 23. One of the primary benefits that DCT offers its customers is a vertically integrated business structure. TheCompany designs, develops, and manufactures, allowing for quicker time to market. DCT also handlesproduct compliance and seeks to address any other concerns presented by its clients. Many customers,such as NCR, visit the Company’s manufacturing facility on a biannual basis. As such, these relationshipsserve to validate DCT’s capabilities. In addition, the Company maintains a product service and supportgroup for over 50 key channel partners that entails Web-based driver support, call center support, andwarranty and repair support.Figure 7 provides a sample illustration to highlight how DCT’s product designs become branded third-party products. Figure 7 Document Capture Technologies, Inc. FROM DESIGN TO REALITYSource: Document Capture Technologies, Inc.RevenuesDCT reported net revenues of over $14.8 million in 2010 (up from $11.5 million in 2009), generated solelythrough sales of its document and image capture products. This increase of 29% was due to a 33%increase in the number of scanners sold by the Company during 2010, as the average selling priceremained relatively constant. Sales included purchases by recurring customers for use in existingproducts as well as for use in next-generation offerings.NCR’s Recent Investment in DCTOn August 5, 2010, DCT received $4 million from NCR Corp. via a private placement of Common Stockat $1.036 per share. In connection with the investment, NCR was given the right, at its election, todesignate one member to the Company’s Board and was granted a two-year option to purchase anadditional $4 million of Common Stock at $1.036 per share. To date, NCR has not exercised its right todesignate a Board member.The investment by NCR signifies both a strategic and financial milestone. DCT expects to direct thesefunds toward further partnership with NCR for the development of turnkey transaction solutions in boththe remote deposit capture (RDC) and healthcare markets. Because DCT’s technology is synergistic withNCR’s products in multiple areas, this investment may also facilitate the Company’s entry into newmarkets, such as hospitality and travel.As part of the investment, NCR and DCT strengthened their existing strategic supplier masterprocurement agreement. This agreement, initiated in July 2009, pertains to DCT’s manufacture and saleof scanning products intended for resale by NCR. What was originally a three-year term on thisagreement is now extended until August 2014. Under the terms, DCT may not provide any products toany other entity engaged in RDC or that seeks to facilitate electronic document management on a bank’ssecure server. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 23
  24. 24. MARKET OPPORTUNITIESInformation and Communications Technology (ICT)ICT generally entails any device, service, or technology concerned with the storage, retrieval,manipulation, transmission, or receipt of digital data. During 2009, the global ICT market contractedapproximately 3% in response to the worldwide economic crisis. In contrast, overall global trade declinedroughly 12.2% in 2009 (Source: the World Trade Organization, March 2010). As the world marketsrecover (world trade was expected to expand 9.5% during 2010), the ICT market as well is set torebound—fueling spending for products and solutions that enhance information management. Figure 8 Based on research conducted by IHS Global Insight, Inc., a division of IHS Inc. (IHS-NYSE), the World GLOBAL ICT SPENDING BY MAJOR SEGMENT Information Technology and Services Alliance ($US Trillions, forecasted) ([WITSA] anticipates worldwide ICT growth of over 8% during 2011, stabilizing near 6% in 5.0 2013 (Source: WITSA’s Digital Planet 2010: the 4.0 Global Information Economy, June 2010). From 2009 to 2013, Digital Planet 2010 forecast regional growth 3.0 rates ranging from 5.9% per year for the Americas to 9.5% for Asia-Pacific, although the Americas will likely 2.0 still be the largest market for ICT products and services in 2013. 1.0 0.0 Figure 8 depicts findings that government and 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 business account for a sizeable share of ICT spending Consumer Business/Govt due to ICT’s ability to create cost efficiencies, boost productivity, and enhance competitiveness. Moreover,Source: Figure 5, page 15 of Digital Planet 2010 from the vertical markets, such as financial services andWorld Information Technology and Services Alliance andIHS Global Insight, Inc. telecommunications, tend to have the greatest level of ICT (Source: WITSA, November 23, 2010).Figure 9 highlights global ICT spending levels during 2009 for a number of major industries. Financialservices, noted in Figure 9 to be among the largest existing markets for ICT products, is expected toremain a leading sector over the next several years as well (Source: Digital Planet 2010). As detailed onthe following pages, DCT targets many of these vertical industries, particularly finance and healthcare. Figure 9 ICT SPENDING BY INDUSTRY SEGMENT IN 2009 ($US Billions) Financial Services Government Services Manufacturing Telecom Transportation Healthcare Retail Trade Wholesale and Distribution Hospitality, Hotels, and Leisure Hardware Energy and Utilities Software Construction Services Natural Resources Communications Educational Services - 50 100 150 200 250 300 350 400Source: Figure 7, page 16 of Digital Planet 2010 from the World Information Technology and Services Alliance and IHS GlobalInsight, Inc. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 24
  25. 25. Mobile Document CaptureOver the past several years, a mobile scanning market has developed in response to the widespreadprevalence of broadband, which is nearly ubiquitous in the U.S. today. Broadband is essentially high-speed Internet access that is always available. With reliable broadband service, consumers andenterprises alike benefit, as businesses have the ability to operate websites 24 hours a day, seven days aweek, and can deliver products and services in real time. Government, education, and healthcareinstitutions also profit from offering online services, such as interactive home-based medical monitoring,multi-media distance learning, or sending and receiving data to run a home business, among otherapplications (Source: Communications Workers of America).Accordingly, consumers have gravitated to electronic forms of communication, transmitting documents viaemail or otherwise online rather than in paper form. DCT is capitalizing on the paper-to-digital revolution,which is fueled by advancements within the broadband sector itself, particularly with regard to the speedsthat are now available for consumers that make transmitting large files online far less time consumingthan previously.Check 21 ActAs a result of all of the changes brought about by the technological revolution over the past severaldecades, people and businesses alike are in need of solutions to address newly arising securityconcerns. In particular, recent new legislation has aided the establishment of a digital marketplace, whichrequires advanced technologies and information-protection measures, such as DCT’s mobile scannerswith built-in security features (described on page 18). For example, after the Check Clearing for the 21stCentury Act (“Check 21”) became effective in October 2004, DCT began working to address several newmarket opportunities created through this law. Check 21 allows banks to process electronic checks in thesame way that paper checks are processed.The establishment of Check 21 enabled remote deposit capture (RDC) as a means for account holders toremotely upload images of their paper checks to banking institutions instead of physically depositing thepaper check. As well, and perhaps a lesser known effect of Check 21, is that it was also designed toenable banks to handle checks electronically between branches and institutions. Traditionally, banks hadto physically move paper checks from the bank where they were deposited to the bank that paid them.A Selection of the Company’s Targeted Vertical MarketsThrough its customer relationships, DCT has targeted global vertical markets that it believes have growthpotential and that could benefit from faster, easier-to-use products offering enhanced security. DCT’simaging products are supplied to partners in diversified industries encompassing banking, transportation,healthcare, justice, law enforcement, and entertainment. Several trends today are helping to drivedemand for document capture solutions such as DCT’s, as noted below: A proliferation of “green” initiatives intended to efficiently reduce waste; Increasing demand for digital storage to reduce paper storage; Greater requirements and legislation for secure information processing (e.g., the Health Insurance Portability and Accountability Act [HIPPA]); and Increasing demand for secure, efficient, and remotely performed financial transactions.To that extent, efficiency is a key advantage driving the adoption of DCT’s products. USB-poweredscanners can make a number of processes more efficient. Between the widespread adoption andincreased speeds of broadband, Check 21 and other legislation, and various other general securityconcerns, DCT has identified a range of vertical markets that could benefit from integrating its page-capture platforms into both new and existing systems. Such target markets include healthcare,passport/ID cards, RDC and banking, security, and transport, among many others (as listed in Table 6[page 26]). ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 25
  26. 26. Table 6 Document Capture Technologies, Inc. EXAMPLES OF DCTS VERTICAL MARKETS FOR MOBILE SCANNERSHealthcare and Medical Applications Financial Sector and BankingPassport and ID Card Security Readers Gaming and LotteryRemote Deposit Capture (RDC) Bulk Freight In-Cab Solutions (Trucking and Transport Form Input)Document Management Legal and Sales ContractsCorporate IT Solutions Faxing and Mobile Imaging CommunicationBusiness Cards and ReceiptsSource: Document Capture Technologies, Inc.DCT evaluates direct and focused opportunities where its products can be simple to use and beintegrated at a lower cost with ease to its customer base as well the end-user. Below are overviews ofseveral market sectors where the Company’s platforms are currently employed and where it believesthere are further near-term expansion opportunities.In addition, DCT works within the SOHO arena, and expects the point-of-sale to become more of anopportunity in the future as well. Further, the Company’s pipeline includes products that capitalize ontrends toward mobile and Web-based transactions.HealthcareHistorically, healthcare has represented over 50% of the Company’s revenues on an annual basis. Goingforward, DCT continues to see considerable healthcare opportunities, particularly in light of the U.S.government’s focus on digitizing healthcare documents.Fraud detection has been a critical driver of DCT’s healthcare business. Patient fraud occurs whensomeone goes into a healthcare provider and supplies their personal insurance card and identification butfills out the appropriate forms on behalf of a friend or relative who actually has the health issue and is inneed of the care but lacks insurance. Often, once the receptionist photocopies the ID and insuranceinformation and places it in the patient’s file, it is not verified again. To address this issue, the healthcaresystem has started implementing multiple points of identity verification. Thus, when an individual checksin at the receptionist, their information is uploaded to an electronic file, which is available for verificationby physicians and other medical personnel as they see the patient. For example, when a physician ordersan X-ray or an MRI for a patient, the technician can pull up the patient’s information and view aphotograph of the patient to ensure that the correct person is receiving treatment. These procedures mayhelp reduce insurance fraud. Figure 10 Additional scanner applications within the healthcare industry include, but are not limited to, the following: (1) Document Capture Technologies, Inc. updating medical records at nursing stations, examining 600 SERIES rooms, or other remote locations; (2) patient or customer Scanners for IDs and Insurance Cards registration and verification through a kiosk; (3) facilitating insurance claim documentation; and (4) co- payment processing. Often, claims are rejected by insurance companies due to manual errors; however, electronically capturing patient information and sharing it with other providers and insurance partners may minimize the potential for error. As illustrated in Figure 10, compact products (e.g., the DocketPORT® 600 series) are optimal for scanning information at the frontSource: Document Capture Technologies, Inc. desk of a healthcare facility, such as IDs and insurance cards. DCT’s scanners can lead to shortened registration times, reduced errors, and reduced costs. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 26
  27. 27. In a move to further establish contacts in the healthcare industry, DCT entered into a consultingagreement with National Health Media in August 2010. The Company expects this relationship to provideongoing representation in the healthcare industry, generating awareness for DCT’s products’ significanceand application in the industry beyond solely ID card scanning. Specifically, this relationship is expectedto help the Company capitalize on the current U.S. government’s push toward the digitization ofhealthcare documents and the storage of that information in a cloud-based environment. Healthcarerepresents more than 17% of gross domestic product (GDP) in the U.S. today (Source: The WeekOctober 29, 2010), and is a crucial area for DCT going forward.Rising Healthcare Costs Create Opportunities for More Efficient TechnologiesThe U.S. spent $2.3 trillion on healthcare in 2008, which was more than double the per capita spending ofEuropean countries, Japan, and other industrialized nations (Source: The Week). With ongoing pressureto control costs and simplify complicated processes, healthcare providers and organizations are seekingnew, more productive approaches. Such methods may include implementing new technologies gearedtoward creating low-cost efficiencies, such as DCT’s platforms, which can work as stand-alone documentand image scanners or as part of larger systems for automated healthcare records. Approximately 31% ofall U.S. healthcare costs are related to paperwork, which is a leading contributor to the rising cost ofhealthcare (Source: New England Journal of Medicine 349:768-775; 2003).There is also a significant need for IT systems that reduce administrative expenses and improvehealthcare resources and processes, particularly as it relates to insurance plan management (Source:Health Affairs Vol. 28 [4]: 544:554; 2009). Recent federal healthcare reform in the U.S. included two newlaws signed in March 2010: (1) the Patient Protection and Affordable Care Act; and (2) the Health Careand Education Reconciliation Act of 2010. Among other changes, these acts include provisions thatrequire most individuals to obtain health insurance, establish new regulations on health plans, establishhealth insurance exchanges, and modify certain payment systems to encourage more cost-effective careand to reduce inefficiencies and waste, including through new tools to address fraud and abuse.Passports and ID CardsIdentification verification, insurance card scanning, and scanning patient documents are believed to beamong the most common uses for document capture platforms. DCT’s passport and ID scanners, such asthe DP 540 (described on pages 16-17), also enable transaction verification by capturing images of photoIDs or drivers’ licenses, among other forms.The USA Patriot Act, passed in response to the September 11, 2001, terrorist attacks, encompassesnumerous provisions aimed at improving security and identification measures in the U.S., particularly withregard to border controls, law enforcement, and financial activities. As a result, institutions have a greaterresponsibility to collect and maintain identifying information about their customers. As drivers’ licensesand passports are among the most common forms of identification presented, there is increased demandfor efficient ID scanners and devices that can capture this paper-based information for secure digitization,transmittal, or storage.Remote Deposit Capture (RDC)RDC is one of the fastest growing trends in banking technology because it allows customers theconvenience of depositing checks from any location equipped with a scanner, computer, and Internetconnection. Recently, RDC has expanded to smartphones, which now have the ability to photograph acheck and send it to the bank. RDC is a service used by both businesses and individuals. It is expected toexpand considerably during 2011, as financial institutions and companies such as seek tofurther differentiate their mobile and online services.RDC is a new, disruptive technology that only came into fruition after the U.S. Congress implementedCheck 21 in October 2004. This act permitted banks to deposit checks based on images of the originalchecks without requiring the physical document. RDC offers banks and consumers alike multiple benefits,including convenience, speed (as funds are often available earlier using RDC than in-person deposits),reduced processing and paper costs, and enhanced operational efficiencies. ®CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW PAGE 27