This is an excerpt from the original AMSADD business plan drafted. Serious interested parties will have access to the latest full version on request.
Business Goals and Objectives
Charter
AMSADD has the following charter:
To raise the funding to support the development and growth of AMSADD in accordance with revenue and earnings projection.
To provide the product development and implementation expertise to support AMSADD sales and marketing plan.
To provide the management expertise to sustain on going operations and implement a program to produce net profits for all equity holders.
To prepare for an Initial Public Offering within four years, if deemed necessary by the equity holders.
Objectives
The business objectives of the company are:
To dominate the advanced terrain warning for controlled flight into terrain (CFIT).
To achieve annual sales of $100 million within four years after implementation of this plan.
To achieve earnings after tax of 30% of sales.
To achieve a market valuation for the Company of $600 million within the forth year of operation based upon 20 times P/E multiple.
Investment level and application of funds
AMSADD intends to raise 5 million from investors, or implement an alliance with another avionics company, or private party to implement this plan.
Build organizational infrastructure.
Develop the market and channels to the market.
Produce sufficient inventories of product to implement this marketing plan.
Complete AMSADD commercialization and develop new products.
Provide working capital as needed.
Product Plan
Product Strategy
The strategy is to develop a line of affordable aircraft advanced terrain warning systems for controlled flight into terrain (CFIT) to include large passenger aircraft, business jets, medium turbo props, and private aircraft. We have developed a patented product that incorporates proprietary applications of state-of-the-art technology using GPS (ground positioning satellites). AMSADD has features and capabilities differentiated from competing systems. AMSADD is designed from the pilot's perspective to insure market acceptance. AMSADD has been developed to be compatible with new and older existing aircraft with applicability to any cockpit configuration. AMSADD can be produced with relatively low cost and with high margin potential. AMSADD is patented and the screen displays are copyrighted. This protects the screen displays and the manner in which AMSADD collects, arranges, and displays data. Only AMSADD can display minimum safe altitude using GPS. This is a very strong point in regard to other competing systems.
Product Description
AMSADD is a microprocessor-based system connecting a GPS receiver to a data of altitude blocks from a world wide data base. This information is processed, and using proprietary, patented and copyrighted software, is sent to a small display screen placed near the altimeter.
The operation AMSADD is automatic and does a self diagnostic test on power up. The "carry-on" system can be positioned anywhere in the cockpit. An attachment mechanism provides flexibility in this regard. The suggested position is near the altimeter or on top of the glare shield. The AMSADD computer module has a small footprint (about the same size as a palm type computer) and weights less then 4 pounds. The systems flexible antenna is attached to a window in the cockpit.
The installed system has the display mounted above or near the altimeter. The computer module is transparent and mounted in a non conspicuous space on the aircraft.
AMSADD provides real time information that can prevent the pilot from a situation in which a warning would sound from another competing terrain device. The pilot can see the MSA (minimum safe altitude) as a numerical reference for comparison at all times and an unsafe condition never occurs.
The AMSADD supports five operational modes:
Takeoff (runway) Mode- When the aircraft is stationary or is taxiing prior to takeoff.
Flight Mode- (includes departure and go around) normal flight operation.
Approach Mode- when the aircraft has entered an airport area and is attempting an approach and landing.
No GPS Data Mode- warning provided on screen (fail-safe for no false data displayed).
No MSA data Mode- warning provided on screen (fail-safe for no false data displayed).
Of particular importance is the "approach" mode because one half of all CFIT accidents occur during that time. The approach phase is that portion of the flight when the aircraft has navigated to the airport approach area, but has not completed an instrument approach and landing. AMSADD automatically senses when the aircraft is in the airport area and determines the boundaries defining the normal approach flight path. If the aircraft deviates from this boundary, AMSADD provides the "climb" or "check altitude" warnings.
Product Calendar
We foresee three separate AMSADD models and a suite of related software as the initial product line.
The product calendar over the following time frame of this plan is projected to be:
| Product | Market Segment | Market Entry |
| AMSADD 100 | General Aviation, small aircraft | Eight months after plan initiation |
| AMSADD 200 | Business aircraft (turbo-props & jets) | Eighteen months after plan initiation |
| AMSADD 300 | Military aircraft and passenger aircraft | Twenty months after plan initiation |
| Minimum Safe Altitude Databases | ||
| Safe-Sky™
MSA U.S. Region 1 Database |
Flight
routes east of the Mississippi River |
Eight months after plan initiation |
| Safe-Sky™
MSA U.S. Region 2 Database |
Flight
routes west of the Mississippi River |
Eight months after plan initiation |
| Safe-Sky™ MSA U. S. Database | Flight routes across the entire U.S. | Eight months after plan initiation |
| Safe-Sky™
MSA North America Database |
Flight routes across North America | Eight months after plan initiation |
| Safe-Sky™
MSA South America Database |
Flight routes across South America | Fifteen months after plan initiation |
| Safe-Sky™ MSA Database | Flight routes across Central America | Fifteen months after plan initiation |
| Safe-Sky™ MSA Europe Database | Flight routes across Europe | Eighteen months after plan initiation |
| Safe-Sky™ MSA World Database | Flight routes across the world | Twenty months after plan initiation |
Gross Product Margin
The following table presents the projected gross product margins over the time frame of this plan. We project production cost reductions as a result of increasing production volumes over a period of time. This will support retail price reductions which must be anticipated as a result of increasing competition. These price reductions will further stimulate sales, resulting in larger production runs and decreasing production costs.
Year 1 Year 2 Years 3 - 4 AMSADD 100 Suggested retail $3995 $3795 $3495 Wholesale price $2500 $2350 $2200 Manufactured cost $1100 $1000 $900 Gross margin via distribution 56% 55% 57% Gross margin via distribution 72% 74% 76% AMSADD 200 Suggested retail - $5995 $5795 - $5495 Wholesale price - $1400 $1300 - 1200 Gross margin - 77% 78% AMSADD 300 Suggested retail - $9995 $9995 Wholesale price - $1800 $1800 Gross margin - 85% 85% Safe-Sky TM MSA Data Base Suggested retail $199 - $499 $169 - $399 $139 - $299 Wholesale price $99 - $199 $79 - $149 $59 - $129 Manufactured cost $15 $12 $10 Gross margin via distribution 85% - 92% 85% - 92% 83% - 92% Gross margin via distribution 92% - 97% 93% - 97% 93% - 97%
Factors Impacting the Market
The biggest factor impacting this market is the Federal Aviation Agency's proposed mandate that terrain warning systems be installed on all aircraft seating six or more passengers in the near future. This mandate has not been finalized, but according to industry magazine WAVELINK, it is possible that the final mandated requirement will apply to planes seating 10 - 19+ passengers. In terms of market impact, the final wording is not particularly relevant. What is relevant is the fact that the Federal government will require terrain warning on a significant portion of the aviation fleet, thus creating and fostering a market that presently hardly exists. Precedents for this type of government market stimulation include fuel efficient automobiles, motorcycle helmets, seat belt, airbags, pollution control devices, smoke detectors, etc. Based upon experience with other mandated markets and products, it can be anticipated that a portion of the aviation community not covered by the mandate will choose to purchase terrain warning systems also, if reasonability priced.
Overall Market Size
Every aircraft used for business aviation, commercial passenger transport, private general aviation, and military transport represents a potential sale for AMSADD. The data presented here was obtained from industry magazines, newspapers, trade journals, and Internet databases.
Business Aircraft
During 1997, 12,157 operators flew 18,308 turbine powered business aircraft worldwide. Over 60 percent of the operators (7,611) and the aircraft (11,798) were located in the United States. Europe was home to the second largest concentration of operators (1,228) and aircraft (2,011), while South America ranked third in both categories, with 1,111 operators and 1638 aircraft. The remaining 18 percent of the operators and 16 percent of the aircraft are scattered throughout the rest of the world.
The next most prevalent business aircraft are jets, with over 9,244 currently in service. Of these, the largest segment is the light jets, with over 4500 in service averaging over 15 years in age. The business jet fleet has nearly tripled since 1978. In fact, steady growth has occurred in each of the last 20 years.
Because business aircraft have such a long and useful life, there continues to be an active market for sales of previously owned aircraft. In 1997, worldwide sales of business jets was 1,666, of which 389 (23 percent) were new 1,277 (77 percent) were used. Of the 1,289 turboprops sold worldwide, 125 (10 percent) were new and 1,164 (90 percent) were used.
General Aviation Aircraft
Of the approximately 187,000 general aviation aircraft in service today, in the United States, more than 100,000 are dedicated primarily to personal use, according to the FAA. General aviation accounts for almost 40 percent of the 47 million instrument landings at FAA facilities each year, the largest share of any aviation segment.
Commercial Passenger Aircraft
The world fleet will more than double by 2017. World travel growth is projected to be 4.9% during the second decade of the forecast period. Air cargo is projected to grow at an average annual rate of approximately 6.4 percent . The world fleet is projected to reach 26,200 passenger airplanes by the end of the 20 year forecast period. By 2017, single aisle airplanes are projected to represent 69 percent of the world fleet versus 73 percent of today's world fleet. The percentage of intermediate size airplanes is projected to increase from 19 percent to 24.5 percent in 2017. The population of largest airplanes is expected to gradually decline from 8 percent to 6.5 percent over the forecast period.
Military Transport Aircraft
While some fighters and bombers have their own internal terrain warning systems integrated into their avionics, AMSADD would be applicable to the military transport market. The types of aircraft include the KC-135, C-130, C-141, and the C-17. In aggregate, about 1100 of these planes are on active duty, while another 1000 are in the reserve.
The following table presents the potential market for AMSADD assuming 100% market penetration of just existing aircraft.
| Aircraft Type | Number in Use | System Price | Average Installation Cost | Market Potential |
| General Aviation | 187,000 | $3995 | no installation | $747,065,000 |
| Business Turbo Prop | 18,308 | $5995 | $5000 | $201,388,000 |
| Business Turbo Jet | 9,244 | $5995 | $5000 | $101,684,000 |
| Commercial Passenger | 12,300 | $5995 | $5000 | $135,300,000 |
| Military Transport | 2100 | $9995 | $5000 | $21,000,000 |
| Totals | 228,952 | $1,206,437, 000 |
Our strategy is to address the huge general aviation market segment first with a low cost, "carry on" product. No one appears to be addressing this market since it is currently not part of the FAA mandate. We intend to be a market leader in this niche through a pricing strategy that will stimulate the early adopter portion of this market segment. These aviators desire to have the same safety features as installed systems on commercial passenger aircraft, both from a position of greater safety as well as having knowledge of the minimum safe altitude while in flight.
When our FAA certified AMSADD system is ready, we will have an existing and growing customer base. We will vigorously set upon the business and commercial aircraft market by offering an equivalent functionality with respect to competing products at a significantly lower price. We expect to seize a significant market share from the expensive Honeywell ® system, which currently commands 100% of the market.
We will establish brand awareness through extensive advertising and public relations campaigns. This include sales literature development, exhibiting at trade shows, national aviation magazines press releases comparing the Honeywell ® system with AMSADD. Additionally, an endorsement from a celebrity pilot is being planned.
Competition
Currently, there is one known main competitor, the Honeywell ® Enhanced Ground Proximity Warning System (EGPWS). The following table compares this system to AMSADD.
Factor AMSADD EGPWS Clearly indicates the Minimum Safe Altitude at all times Yes No Indicates the the approaching higher MSA Yes No Shows MSA over towers and structures Yes No Constantly indicates rapid descent MSA over mountains Yes No Requires EFIS "glass cockpit" No* Yes Monitors altitude on ILS, VOR and ADF/GPS approaches Yes No Depends on inputs from other aircraft systems No** Yes Continues to function with a total aircraft electrical failure Yes No "Carry On" model available Yes No Easily integrated into any flight deck environment Yes No Cost $3995 to
$11,500$50,000 to
$150,000* AMSADD works on any aircraft.
** AMSADD continues to function when an aircraft avionics failure occurs.
There are other companies developing products to challenge EGPWS. According to the trade magazine WAVELINK, the companies include Universal Avionics, Dassault Electronique, Teldyne, as well as small independent companies like AMSADD. We believe that competing products under development would mimic EGPWS and not address the markets or the low cost price associated with AMSADD.
It is important to remember that AMSADD displays indicating minimum safe altitude are patented and copyrighted. No other manufacturer can display minimum safe altitude using ground positioning satellites (GPS) on their displays.
Risk Factors
As an emerging company, there are risks and potential problem areas that may be encountered. Several have been identified and actions and strategies to minimize their impact have be formulated.
Aggressive Competition Enters the General Aviation Market
In this scenario, if others decide to enter the general aviation market with a corporate strategy to attain market leadership through an aggressive marketing campaign and penetration pricing. This would impact margins as prices would be lowered to meet the competition. We see little risk under this scenario. Competition would most likely result in faster market acceptance of terrain warning systems. While AMSADD would lose market share, the overall market size will increase so that projected revenues would be similar or greater than with no competition. Because AMSADD Inc. has been structured for low overhead operation, we have sufficient product margins to meet almost any pricing strategy attempted by larger companies. Additionally, we estimate it would take about one year for other competitors to develop, test, and market a stand alone product for the general aviation market. Through our patent and screen copyrights, we would retain product differentiation.
Downside Market Risk
In this scenario, market growth is much slower than anticipated. To account for this possibility, the company's operating plan has been structured to be an incremental time phased commitment of resources with defined performance measures. This minimizes financial exposure as a downside market will be apparent quickly. The major expenditures associated with this plan, which are weighted toward product and market development, can be readily adjusted to reflect market conditions. Because production is out-sourced to contract manufacturers, we are positioned to tailor production to market demand. We do not require major investments in capital equipment for product development or production. Existing inventories would have virtually an "infinite" shelf life (i.e., terrain features are basically fixed, the technology driving product is stable, etc.). Therefore, the Company is positioned to deal effectively in a downside situation.
Upside Market Risk
In this scenario, the market explodes because of the likely FAA mandate before the Company can bring its products to market. Competitors with available products would become the market leaders, placing our revenue projections in jeopardy. Because we are addressing the general aviation market first with market timing under our control, there is little upside market risk with respect to this market segment. The upside risk situation would most likely occur for the business and commercial passenger aircraft segment since the FAA certification must be obtained first. The timing for this part is out of the Company's control. To date, there is only one certified system available, the Honeywell® EGPWS system.
Because the AMSADD system design is inherently less complex, we should be able to speed up the certification process. We would actively market advance orders, taking full advantage of AMSADD significantly lower installed price.
Catastrophic Product Failures
Under this scenario, the products systematically fail in the field. This is highly unlikely. The underlying technology and product components are mature and have been applied successfully for many years. To obtain FAA certification, the product must be designed and tested for high reliability. The Company's organization includes a Quality Control operation to oversee both product design and manufacture and to prevent any defective products from being shipped.
Delay in Implementing the FAA Mandate
The initial product offering addresses a market segment outside the FAA mandate and is priced to be affordable to a substantial portion of the general aviation market. We project sales of the AMSADD 100 model to be $100 million. We believe that AMSADD is a self sustaining business irrespective of the FAA mandate. The actions delineated for the downside market described above apply to this situation.
Return on Investment
Based upon the projections as a result of implementing this plan, AMSADD Inc. believes a highly profitable opportunity exists. This plan has been structured to take full advantage of this opportunity and will draw upon $5 million for its implementation. The time adjusted rate of return (present value) from business operations only (i.e., not including market value after a successful Initial Public Offering) on the original $5 million investment is approximently 85 percent by the end of this four year plan. At a 40 percent equity position, the initial $5 million investment would be worth $269 million after a successful IPO.
The EGPWS system has not proven itself as a determinate product to prevent CFIT. There have been several "close calls" that have been documented. As their product continues to be refined, it is possible that future problems will diminish. However, if a CFIT accident occurs with the EGPWS system working normally, or an aircraft component fails that inputs to EGPWS, then their product may be suspect by the aviation community. AMSADD could be in position to take the lead in market share of Terrain Warning Systems.
Investors
We are looking for an investor(s), partner, or established company that would like to implement AMSADD into their avionics products. We would also be interested in licensing or selling the AMSADD product completely, including patent and copyrights. Our only requirements are that the investor(s) be far sighted and visionary.
