IMAGE: FX

1. IMAGE: FX RISK REDUCTION Advisor: Miss Mansfield Kathy Barasch · Rich Chen · Danny Chung · Spencer Gottlieb · Lynn Hurley Leya Linberg · Daniel Mak · Mary O’Sullivan · Anish Thakkar · Pawan Thakkar Kayleigh Wettstein · Zack Vertsman

2. RISK REDUCTION ISSUES Budget Proposal Patents and Licensing Corporate Module Risk Analysis Target Risk Analysis Competitive Markets Analysis

3. BUDGET PROPOSAL • Computer Workstations $75,000 • Business Insurance $1,200 • Payroll $750,000 • Licensing Fees $400,000 • Patent Processing Fees $20,850 • Patent Attorney $155,988 _____________________________________________ TOTAL: $1,382,188

4. PATENT ATTORNEY • Maintain office in Washington, D.C. to conduct research at USPO. • Furnished office rental as per Washington Post classified ad dated 1/6/04: • “BAILEYS XROADS --Ofcs. Furn, DSL, centr loc, ample prkg. Recap area/confirm [ideal for lawyers]. Starting at $499.” • $499 a month X 12 = $5,988 a year

5. PATENT APPLICATION • Prior art search found several patents Image: FX will need to recognize in their patent application to avoid infringement From the United States Patent and Trademark Office (USPTO) • Polarizing Film and Polarizing Composites: Patent # 5,926,310 7-20-1999 • Plastic Lens Systems, Compositions, and Methods: Patent # 6,634,879 B2 10-21-2003 • Finishing Agents and Method of Manufacturing the Same: Patent # 5,645,633 7-8-1997 • Method of Manufacturing Polarized Spectacle Lens: Patent # 6,650,473 B2 11-18-2003

6. LICENSING Based on information obtained from a teleconference with Sandra Matalonis, NEOSE Technologies • In-Licensing • Gaining permission to use an invention, design or technique belonging to another organization • License it ”in” to your company • Pay a royalty, typically a percentage of a sale • Out-Licensing • License your design or technique to another organization who wants to use your idea as part of something they are producing in return for a royalty

7. LICENSING OVERVIEW Licensor (ie. "owner" of the technology) • Formalizes the transfer of technology between themselves and the licensee • Owner of the technology permits the other party to share the rights to use the technology • If the other party uses such technology without the consent of the owning party, they risk a law suit against themselves for infringement.

8. POTENTIAL LICENSING PROBLEMS • Image: FX has not taken into consideration the need to gain permission to use certain materials and methods necessary for the production our product. • Without licensing agreements Image FX risks future legal liability. Major Problem Areas Plastics – Lenses – Nose Pads – Screws SLA (Stereo Lithographic Apparatus) Assembling and Manufacturing Methods

9. CORPORATE MODULE RISK ANALYSIS Finance Human Resources SAP / Information Technologies Research & Development Marketing

10. FINANCE MODULE • Finance predicts an inability to sustain operating expenses • Expected time frame for achieving profit is 5 years • Loss of revenue during time period PREDICTED BUSINESS OPERATIONS PROFIT YEAR 1:- $11 million YEAR 2: - $ 4 million YEAR 3: - $ 3 million

11. FINANCE MODULE RECOMMENDATIONS • Finance should reduce their operating expenses • Target is providing a twenty million dollar stimulus package • This money will only provide an artificial profit for the first years of the company • The expected time frame for turning a profit is within a five year margin.  However, there is loss of revenue during this period in which the company is just beginning

12. SAP/IT MODULE & RECOMMENDATIONS Short-Term Risks • Viruses and system hackers • Network and ISP failures • Scheduling problems • Hardware and software malfunctions Recommendations • Employment of specialized repair personnel • Back-up software and hardware • Portion of annual profits are set aside for problems in the future

13. MARKETING MODULE • Commercials • Airing commercials during sports games may create a limited audience • Target consumers [17-35 yrs. old] may be a narrow and inappropriate consumer base • Teens often watch more sports events than the target consumers • Posters • If shown in only Target stores, print-ads may not reach their full potential • Magazines • Magazines may not be read by potential customers

14. MARKETINGRECOMMENDATIONS • Target consumers between ages of 13 and 35 • Posters should be hung near transportation sites • subways, the beach, train stations, sports arenas, airports, cruise ships, magazines • Advertise in magazines that appeal to people of the target range • Time, Cosmopolitan, Maxim, Vogue, Glamour, People/Teen People, Seventeen

15. R&D MODULE & SOLUTIONS Risks • Design of sunglasses may not be appealing to both consumers and Target Corporation • Research flaws may lead to a defective, unfeasible and unprofitable product • Products may not be tested in the proper environment • R&D may overlook key problems with the prototype Recommendations • Survey people who fall into our “Target” market • Conduct a thorough analysis of how to properly test products • R&D should consider presenting a full report to Target with all potential prototype flaws

16. HUMAN RESOURCESMODULE & SOLUTIONS • Sexual Harassment • A policy packet will be distributed to all employees regarding sexual harassment • Image: FX has a NO TOLERANCE policy • The company defines what is considered sexual harassment and outlines what actions will be taken in response to any reports of harassment • Discrimination [gender, race, age, etc.] • The Equal Employment Opportunity Commission (EEOC) protects employees from discrimination • Gender, race, and age are NOT required during the application process. • Applicants are hired by a panel of employees who review criteria papers filled out by the interviewer.

17. TARGET RISK ANALYSIS • Website • Difficult to maneuver and the search option is inconclusive • When searching for “sunglasses”, a product that Target sells, no results appeared • This is detrimental to the Image: FX Corporation because the World Wide Web is a useful portal for retail sales • Customer Service (via telephone) • Risk Reduction made various calls to local Target stores and received minimal, at best, customer service • By being associated with a corporation that does not value customer service via telephone, Image: FX’s image may be unfavorably altered

18. TARGET RISK ANALYSIS • Internal Competition • Target currently sells lines of sunglasses, which would force Image: FX to compete for Target’s customers • Target has not yet announced whether they would remove all other sunglass lines from their stores • Price Competitiveness • All other sunglass lines sold at Target are priced more reasonably than Image: FX’s projected initial prices • The average price for the sunglasses sold at all Target locations is approximately $15 • 17% of the price Image: FX is planning to sell its sunglasses

19. COMPETITITIVE MARKETSANALYSIS • External • In looking at the sunglass prices of our competitors, our prices do not reflect the average cost of similar products offered by other department stores. It is the opinion of the risk reduction group that this will be a detriment to Image: FX • Internal • In all Target locations, the price range for sunglasses sold is $9.99-$21.99, which is much cheaper than the ImageFX brand sunglass. When comparing sunglasses, customers will be more inclined to purchase a pair that are more reasonably priced for the quality of the merchandise

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