The Competition

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					                                                                     Bobby, Jeremy, Kelly, Erika


                                        The Competition

Competing with BrainWorks LLC in manufacturing and distribution of electroencephalograph
(EEG) patient-monitoring devices to the target market (neurological research communities with
eventual penetration into clinical and home markets) are companies fitting into the following
categories of:

       Irradiation Apparatus Manufacturing (NAICS Code 334517)
       Analytical Laboratory Instrument Manufacturing (NAICS Code 334516)
       Electromedical and Electrotherapeutical Apparatus Manufacturing (NAICS Code
        334510)

The North American Industry Classification System (NAICS) is used as a standard by United
States “federal statistics agencies in classifying business establishments for the collection,
analysis, and publication of statistical data related to the business economy” (US Census
Bureau). The NAICS allows for comparability in business statistics among BrainWorks
competitors. Irradiation apparatus manufacturing (NAICS Code 334517) is medical diagnostic
equipment in the form of gamma-rays, beta-rays, X-rays or any other form of ionizing radiation.
Irradiation devices are an indirect competitor to an EEG patient-monitoring device because
irradiation can be used to diagnose some of the medical issues the EEG device will eventually
be able to detect. The category of analytical laboratory instrument manufacturing (NAICS Code
334516) contains products such as magnetic resonance imaging (MRI) apparatus in which
images are produced using magnetic fields. MRI apparatus is used to diagnose metabolic
disorders, including brain issues. The EEG patient-monitoring device also focuses on diagnosing
medical conditions by monitoring brain function but utilizes electrical activity not images of the
brain, as does MRI. BrainWorks faces competition from the analytical laboratory industry
manufacturers because its devices can provide the same diagnoses but through different
methodology. The electromedical and electrotherapeutical apparatus manufacturing includes
production of any electronic-based patient monitoring. Competitors in the electromedical and
electrotherapeutical apparatus manufacturing are direct competitors of the BrainWorks EEG
patient-monitoring device. Competitors in this category are also producing EEG patient–
monitoring devices, though BrainWorks’ device is differentiated.

Primary Competitors
Primary competitors are those companies who manufacture neurodiagnostic devices for
research and/or clinical application. Sixteen companies have been identified. Revenue share
information was available for ten of the companies through online publications; however, the
industry itself is comprised of hundreds of companies. These companies vary by the type of
product mix they offer. The offerings vary from laboratory machines, portable machines, and
ambulatory devices.

Viasys Healthcare is noted to be the industry leader in United States for their quality and
satisfaction, according to an independent study, of their EEG devices. Analysis has shown that
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Viasys holds the largest market share out of the companies analyzed with 17% of the total
market for EEG machines in the United States.

A narrower segment of the EEG market is the brain research market. According to a 2007
business report, Compumedics Ltd. holds 90% of the U.S. brain research market and 1% of the
world neurodiagnostics market. Compumedics is an international company based out of
Australia that has been operating for over 20 years. Their primary focus is on sleep diagnostics,
and they have a market leadership position in both the U.S. and Australia in sleep diagnostics
product sales.

Another competitor to note is Natus Medical Incorporated. Through the acquisition of XLTEK
and Bio-Logic, Natus has a significant presence in both the research and clinical markets with
over $65 million in combined revenues in those segments. Natus markets and sells its product
worldwide through distributors in over 80 countries.

A local geographic competitor to note is Cadwell Laboratories Incorporated. Cadwell is based
out of Kennewick, WA and was formed in 1979 by Washington University graduate John
Cadwell. He produced the first microprocessor-based instrument that combined EP, EMG and
NCV capability into one unit. Cadwell is a private company, so access to financial data is limited.
Cadwell currently sell ambulatory EEG devices and portable EEG devices used for research and
clinical application.

Market Share Distribution
After the identification and analysis of sixteen manufacturers of EEG devices the following pie
chart was created to provide a picture of the overall EEG market in the United States.
Current Total Market Share Distribution for EEG devices in the United States
                                                             Com pumedics USA Ltd.
                             Electrical Geodesics, Inc.             2%
                                         1%
                                                                  Cleveland Medical Devices
                                                                            Inc.
                                CyberKinetics
                                                                            2%
                                    0%
                                                                        Em bla (sub. of Flaga
                                                                              Group)
                                                                                3%
                                                                               XLTEK (sub. of Natus)
                                                                                       4%

                                                                                    Bio-Logic (sub. of Natus)
                                                                                              4%




                                                                                          Grass Tech. (sub. of Astro-
                                                                                                 Med, Inc)
                                                                                                    7%




                               Private/Other
                                   52%

                                                                                           Nihon Kohden America, Inc.
                                                                                                     8%


                                                          VIASYS (sub. of
                                                          Cardinal Health)
                                                               17%
                                                                    Bobby, Jeremy, Kelly, Erika



Advantages over Competition
BrainWorks has several advantages in relation to its competitors:

       Leading researcher for the neuroscience industry on staff
       Full band frequency capabilities, meaning more channels open for research and
        diagnosis
       Compact structure of equipment makes for easy use and mobility
       Wireless capability of equipment allows for offsite as well as onsite monitoring
       Ability to make a higher quality product for a lower cost
       Close proximity to research community for future growth and collaboration
       Full access to licensing rights for the patented product design
       Large base for qualified scientists, programmers, and business employees at local
        research university

Competitive Positions
BrainWorks ranks its competitors as follows:

   1.   VIASYS Healthcare Inc.
   2.   Compumedics, Inc.
   3.   Nihon Kohden America, Inc.
   4.   Grass Technologies
   5.   Bio-Logic
   6.   XLTEK
   7.   Cadwell Laboratories
   8.   Embla
   9.   Cleveland Medical Devices Inc.

MD Buyline is a leading independent healthcare research company that has ranked VIASYS
Healthcare Inc as the number one company for EEG machines (for all neurophysiologic
diagnostic and monitoring devices). They based this ranking on user reviews and satisfaction
ratings. VIASYS is known for quality in products as well as the multimodality of their products
(EEG machine can also operate as an EMG machine). The company is currently in a replacement
market as it moves clinics from analog machines to digital machines. Cardinal Health bought
VIASYS on June 21, 2007. This positions it to be the number one competitor with the new
financial strength from Cardinal Health. The recent acquisition makes VIASYS a small part of a
huge company, which causes them to lose some of the advantages of being a mid to small size
company (e.g. nimbleness). The VIASYS product lines are now added to a long line of other
products provided by Cardinal Health. Having a large product mix can lead to inefficiencies in
operations and a downgrade in the level of customer service.

Compumedics is a significant competitor in the brain research market. They currently hold 90%
of the brain research market in the United States and have a significant presence worldwide.
                                                                    Bobby, Jeremy, Kelly, Erika


Also, Compumedics is a significantly large company with resources (over $21 million in current
assets) at its disposal to react to any new entrant into the market. Compumedics is also making
great strides in the sleep market with a current 3rd place position in the United States.
Compumedics is primarily a sleep diagnostic company, which happens to sell its products to
brain researchers. Their focus isn’t to serve and meet needs of the researchers a primary goal,
but rather to serve them since it is a natural offshoot of their current technology. A company
with a technology specifically suited to meet the needs of researchers may find it easy to
penetrate the market.

The current state of the art wireless instrumentation provided by competitors contains
relatively few channels operating over a narrow frequency range. The devices that do provide
broader ranges are bulky and expensive. Customer needs are being satisfactorily met; however,
a better product can be provided using BrainWorks' technology.

Barriers to Entry
There are hundreds of neurodiagnostics device companies in the clinical market due to low
barriers to entry. Creating a simple EEG device does not take much specialized knowledge and
equipment for manufacturing the device is relatively simple and available. Because there is not
a useful application for broad frequency and more complex technology in the clinical market at
this time, the expectation is for simple machines that are easy to operate. This has allowed for
many competitors to enter the clinical market.

The research market, however, has high barriers to entry. The expectation for performance in
these devices is much higher due to the need for broader frequency for new research. The
complexity of technology and specific knowledge needed to create these devices is much higher
than in the clinical market. The amount of money spent on research and development for these
types of devices also limits the number of competitors able to enter the research market. As
the research community influences the clinical community in seeing the value to higher quality
products, barriers to entry in the clinical market will rise with higher expectations.

Strategic Opportunities
Strategic opportunity of BrainWorks lies in the reputation and personal network of the
researcher/product developer. The neurological research industry is nearly impenetrable
without the trusted opinion of a pioneer in the field. The relationships and professional
alliances between the researcher/product developer are invaluable.

                              Strategic Position & Risk Analysis
BrainWorks LLC has a goal of becoming the industry standard in sleep diagnostics and opening
up the markets for multi-channel full band patient monitoring applications. In order to achieve
this goal, we have committed to the following strategic position:

      Personalized and relationship based sales
      Risk free trial period for new equipment
      In-service training for technology set up in clinics
                                                                     Bobby, Jeremy, Kelly, Erika


       Customer service follow up on products and for troubleshooting
       A commitment to furthering research in the field and allowing application of this
        research in the clinical market

The strategic position for BrainWorks is based on evaluating the following factors:

   A.   Industry Trends
   B.   Our Target Market
   C.   The Competitive Environment
   D.   Our Strengths
   E.   Risks

Industry Trends
Neurological diseases and psychiatric illnesses represent the largest and fastest growing unmet
medical market: 2 billion people worldwide. The neurotech industry as a whole grew in excess
of 33.7% over the three years from 2003—2006, compared to an overall GDP of approximately
20.3% during that period. The worldwide economic burden for brain-related illnesses reached
more than $2 trillion per year in 2006 (more than $1 trillion in the U.S. alone). This burden has
increased the demand for neurological research and study.

The growth of the sleep industry is quite evident, as seen by the National Institutes of Health’s
total sleep-related research funding increase from $72.8 million in 1995 to $175 million in 2002,
a 140% increase. Electronic monitoring devices are ideal for diagnosis and treatment of sleep
disorders. Also, membership in the American Academy of Sleep Medicine has more than
doubled since 1993, and the number of sleep facilities has jumped from three in 1978 to 2,000
in 2003, with most of this growth in 2000 alone.

Target Market
BrainWorks will primarily target neurological research communities in the United States, which
are comprised largely of universities with research clinics and a small percentage of private
researchers. There is a large customer base of research-based universities. After research
market penetration, BrainWorks plans to extend to clinical and home markets. The clinical
market is comprised of over 2060 sleep and epilepsy clinics nation wide. EEG monitoring
systems are the standard for the sleep industry in diagnosing sleep disorders and related
diseases including psychiatric, cardiovascular, obesity, and more.

Competitive Environment
The neurodiagnostic market is crowded with hundreds of companies. There are many indirect
competitors in the diagnosis field including imaging systems and irradiation devices. There are
fewer competitors that sell EEG patient monitoring systems. Most of these companies, in direct
competition with BrainWorks, sell narrow-band devices, which meet the basic needs of
researchers and sleep clinics. However, there are very few, if any, companies producing
technology with device specifications comparable to BrainWorks. The multi-channel wireless
                                                                       Bobby, Jeremy, Kelly, Erika


EEG monitor vastly exceeds the current state of neurodiagnostic devices by offering a superior
monitor in a compact form with a full-band of frequencies.

Our Strengths
BrainWorks will be a competitive force in the neurological diagnostic field. BrainWorks' team
consists of leading researcher in the neuroscience industry. The passion and dedication of the
BrainWorks team to the sleep disorder diagnosis is an invaluable resource. The EEG patient-
monitoring device is a strength in itself. The product features full band frequency
capabilities which results in more channels open for future research and even greater
diagnosis. The compact structure of equipment makes for easy use and mobility and
the wireless capability of equipment allows for offsite as well as onsite monitoring.
BrainWorks' EEG patient-monitoring device is a higher quality product than those on the
market and is available at a lower cost pricing structure. BrainWorks headquarters is located in
close proximity to research community, which will lead to future growth, collaboration, and a
position at the forefront of the market. The university located near the BrainWorks
headquarters provides full access to licensing rights for the patented product design and a large
base for qualified scientists, programmers, and business employees.

Risks
A major risk facing BrainWorks is the possibility of the clinical market not understanding the
added value of multi-channel full band monitoring devices in comparison to the simpler models
already in use. The research on neurological disorders in the wider frequency range is limited at
this time and so far does not have widespread application within the clinical market. Until this
need is felt in the clinical market, it will be difficult for BrainWorks to market the added benefits
of the increased capacity of our product. An additional threat to the company is the buying
cycles for sleep clinics in the market. The purchasing power for these clinics is typically low with
a strong inclination to use products that have an established name in the market. While the
technology is fully developed, the final prototype for human use of the product has not reached
a complete design stage. We run the risk of not being able to create a design that is attractive
to the market in time for rollout into the clinical market. Finally, BrainWorks faces the risk of
being beaten to the market by other wireless EEG products. While these other products may
not be as powerful for multi-channel full band diagnostics, earlier entrants could sweep the
market with simpler models of wireless EEG devices.

                                          Strategic Position
The largest threat facing BrainWorks is the possible lack of understanding in the clinical market.
While the benefits of the expanded use of our product is easy to see for the future, it may be
difficult to convince clinics with limited budgets to switch to invest in our product even though
it will be competitively priced.

The increased functionality of the BrainWorks wireless EEG device far surpasses the limited
ability of existing products. We are confident that our product will be able to capture a majority
of the market for wireless EEG devices. Current EEG devices can only operate on a small band of
frequencies, thus becoming ineffective as the market and applicability of new research
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expands. Not only this, these devices are heavily wired to send results to a computer. This
wired version forces sleep clinics to monitor patients on site, creating higher expenses in
staffing and facilities as well as changing the natural sleep environment of the patient. The
wireless EEG device would allow mobility as well as increased capacity for such facilities. The
benefits of this product will prove to be successful in the marketplace because it has higher
quality and a competitive price.

In order to respond to the risk of lack of understanding in the clinical market, we commit our
resources to the development of research in the multi-channel full band neuroscience field.
This will include sales of the product within the research-based market and support for
scientists in researching and publishing new findings. Having a leading scientist in the
neuroscience market on staff will also greatly impact our ability to encourage development
within this field. The personal and professional relationships that he has created will create an
enthusiasm for cutting edge research in this field to increase the output of applicable material.
Finding ways for this research to be quickly applied to practical use and diagnostics will be
important to the business strategy of our company.

In order to maintain this strategic position, we will focus on staying on the cutting edge for
research in the field as well as EEG devices. Having a personalized selling staff in close contact
with consumers will play a large roll in linking the cutting edge of research to the cutting edge
of diagnostics in the clinical market.