EDSR INFORMATION 02-14-2000 - Laserfiche WebLink

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Page 3 of 4 • • The senior market we have identified moves very slowly and methodically in making its purchase decisions. Management has taken this information and developed"marketing responses" designed to improve upon the sales trends experienced to date: • An outbound telemarketing staff has been recruited and trained in an effort to help "close" sales. • Telemarketers have been provided with special financing options tailored to needs of our audience to assist them in dealing with consumer resistance to price. • A"Free 30 Day Trial" offer has been developed in an effort to show consumers first hand how helpful the product can be within their own homes. This"Free 30 Day Trial" offer is featured in a new, stronger, magazine ad appearing in the February issue of Rxemedy magazine. The same ad is scheduled to appear in March issues of selected versions of Health Monitor, and will then be re-run in the April issue of Rxemedy. We are doing our best to make the most of a limited budget, and we are all convinced that we are moving in the right direction. The most difficult part of operating with such budgetary limitations, however, is that it takes that much longer to achieve the end result. Turning specifically to the company's financial picture, you will find attached the unaudited financial statements for the periods ended December 31, 1999 and December 31, 1998. • •. Sales of nearly $19,000 in 1999 were even with last year. Note though that 75% of this year's sales are from higher margin consumer direct shipments. In addition, 75%of 1999 sales occurred during the last 4 months of the year at the higher per unit step price of$79.95. • The company has experienced very few returns to date. A returns reserve has, however, been established to recognize our guarantee to customers that if they are not completely satisfied with the product for any reason, they can return it for full credit for a period of 90 days. • The company's current cost per step is approximately $28. As sales increase, management sees a definite opportunity to significantly reduce this cost,thus further improving margins. • Distribution Expense includes the costs associated with the company's outsourced telemarketing and fulfillment center. • Sales and Marketing Expense includes costs associated with development of new brand and corporate names and logo treatments,the design and launch of the company's web site,scripting and production of the new video and the development and execution of all related marketing activities. • The company's Balance Sheet includes significant balances in terms of both loans and Accounts Payable. We do have a$150,000 line of credit with Riverside Bank that has enough availability to get us into the April time period,but the company will have to raise additional capital soon in order to continue operations. It is probably no surprise that the company has a negative net worth, even though we