Software '_'
Im
Securexam helps you bring
into the
the exam room computer age.
Look around your college or univerevery • Flexible architecture enables us to sity and you'll see computers tailor the software to meet your school's * requirements. to student place but one: in the exam room. Yet computerizing examinations would benefit everyone. Students Exams are registered ID numbers, or computers, be blind-graded be shared. • Three built-in make cheating security features absolutely, posi-
rather than names so that exams can and laptops can
ith Securexam software, students can use their own laptops
could prepare
better-organized their perfor-
answers, improving
manee. Graders would no longer be hindered by illegible handwriting or
lost blue books. And professors in the exam room without being able to would get a truer measure their students have learned, of what
tively impossible.
access any other files or applications on their computer,
Securexam: the answer you've been • looking for. with the input of professors, and
In addition,
Securexam
also
provides you with simple, secure internet ordering and responsive support.
Developed
administrators, students,
on-line technical
Securexam
software exams easy
makes computerized for everyone. • Students
use their own laptops, integrates seamexam
so Securexam
lessly into your present process, requiring investment burden. • Securexam interacts
no financial
and no administrative
with
Microsoft® Word, the world's most popular program, with ease. word processing can use it
so students
What if you didn't have to change the way you administer tests?
www.softwa
resecu re=corn
Alarm Security System: In the unlikely event that a student the Lock System and attempts access other information, Securexam's capture alarm system will of every cracks to
Securexam
Grader
for easier
exam grading. Decrypts exams that have been created by the Securexam Student module and provides assis-
tance with grading. and store pictures Reduces grading confusion:
screen that is viewed, notifying you of any attempted breaches. It also
Answer prints out double-spaced, with course name, professor, page number on each page. Graders can and
keeps track of the time the student spends on the exam, making Securexam ideal for take home
Completely flexible:
review exam on screen, or print out as many exams at once as desired. Completely reliable: Exam answers
exams, as well as in-class exams. Encryption Prevents What makes Securexam so secure. Fear of cheating barriers is one of the major in the exam Security System:
exam answers from being
remain safely stored in encrypted form on the student's computer, with
accessed or altered after the exam. The appropriate tion is accessible Any attempt decryption applica-
in case there is a problem the grader's computer file transfer.
only to the grader, with this
or exam
to tamper
to computers
security feature before the exam will prohibit access to Securexam.
room. That's why security is our biggest priority. All of our security features have undergone scrutiny, and are regularly subjected computer to tests by our panel of rigorous
Securexam comes in separate modules for students and graders. Securexam Student experts. exam Lock Security System: Locks out taking. Gives students application, access to word processing then encrypts for grading. Uses Microsoft® Word: Allows access for better
access to all other files and programs on the computer during the exam. a student
the exam and saves it
This system also prevents from re-entering
an exam, except in
to Word's most basic word-processing functions. Crash proof: In the event of a system failure, exam file is restored, access to other computer remains restart, prohibited, and
the event of a system failure or crash,
Isn't it time you tried Securexam in your exam rooms? With Securexam, it's easy to bring
functions
even during
testing into the computer age. To learn more, just visit our web site at www.sot_ccaresecure.com or contact
us directly at 1-800-985-8868.
i
SECURE
Software
SOFTWARE
SECURE,
INC.
57 Harvard Avenue Suite Four Brookline, MA 02446 617-975-2850 dwinneg@softwaresecure.com
This Confidential Descriptive Memorandum constitutes proprietary information, including trade secrets, of Software Secure, Inc. (the "Company"). The Company is providing Recipient the enclosed material exclusively to assist Recipient in evaluating its interest in entering into a financial relationship with the Company. By acceptance hereof, Recipient agrees to keep the contents confidential, will not disclose or distribute this Confidential Descriptive Memorandum to others, in whole or in part, at any time without the prior written consent of the Company, and that it will keep permanently confidential all information contained herein. CONFIDENTIAL Property of Software Secure, Inc., Copyright 1999-2000
www.softwaresecure.corn
So'are
EXECUTIVE SUMMARY
1.1
Introduction: Securexam Brings The Exam Room Into The Computer Age
Software Secure Inc. (SSI) has developed a proprietary software program that allows students to use notebook computers to take exams in the classroom without being able to cheat. The product, "Securexam," enables students to take exams on their own computers while locking out access to all other files. With Securexam students will prepare better exam answers that are easier to grade. Students use computers in every aspect of their academic life except when they enter the exam room. As schools have incorporated computers throughout the academic process, students are increasingly unaccustomed to writing in long hand. Accordingly, faculty members are forced to grade reams of poorly organized and illegible exam answers that do not accurately reflect their students' knowledge. Securexam brings the exam room into the computer age. Students can use their own computers, faculty members can grade well organized legible exam answers, and schools can incorporate technology into the exam room without having to invest in additional infrastructure. 1.2 The Market for Securexam
The benefits of Securexam apply to all organization that administer closed book examinations. By providing a secure environment on the test takers' own computers, Securexam improves the testing process for both students and graders, without requiring additional investment in new computer equipment. The benefits of Securexam apply to the entire testing market. Total Potential Market Base Securexam Market / (valuation) Higher-Education / ($10/student) K-12 Schools / ($10/student) Distance Learning ($150/program) Corp Training (0.2%of current expenditures) Programs 4,100 117,000 2,200,000
NA
Enrollment 15,000,000 53,000,000
Value $150mm $530mm $330mm $120mm $1,130mm
Securexam's Initial Market: Higher Education Through 2001, college and graduate schools will be SSI's primary market. Securexam addresses the only concern that has prevented the exam room from entering the computer age: cheating. With Securexam, schools will permit students to use computers to prepare better exams that are easier for teachers to grade.
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Securexam Fits In Schools' Commitment to Mobile Computing. Securexam is a perfect fit for the mobile computing environments being embraced throughout higher education. Students are encouraged and sometimes required to purchase laptop computers so that the schools do not have to put their own computers in every room. Today students can access academic technology anywhere on campus by simply plugging in. Securexam extends that capability into the exam room. • • • • • • There are at least 100 schools that require students to own laptops - representing more than 200,000 students ("Laptop Schools"). Schools are entering into partnerships with computer manufactures who provide deeply discounted systems to the students. 85% of college students own a computer. 34% of college students intend their next computer to be a laptop. 30% of students at non-laptop schools own laptops. Schools are wiring classrooms.
SSI provides schools with the most cost effective and administratively easy way to computerize the exam room. Securexam Will Revolutionize Exams: "Making Exams Easier To Take -- For Everyone. " The Old Way Student brings pen to the exam room and receives blue books in which to write answer. Student scribbles exam answer as fast as possible - unable to make legible revisions. Teacher receives a stack of incoherent, illegible blue-books. After exam, student buys Epsom salt for aching hand. Teacher carries around a stack of exam booklets - or can only grade them at the office. Teacher strains to read answers and find free space to make
conllTlents.
• • • • • • •
Teacher gets new eyeglass prescription. The Securexam Way
• • • • •
Faculty registers exam at www.soflwaresecure.com. Student downloads Securexam software to laptop. Student enters exam room with laptop and takes exam using her own word processor. Student sends teacher completed exam electronically. Teacher grades exams anywhere; from double-spaced printouts or on the computer screen.
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Securexam's Secondary Markets After focusing on the higher education market, SSI will broaden its sales and marketing efforts toward other secure testing markets. K-12 Schools The convergence of three critical factors points toward a bright future for Securexam in the K-12 market. First, there is a strong movement to adopt more testing. Second, schools are making significant investment in classroom computers and technology. Third, teachers are seeking ways to reduce their administrative work-load. Distance Learning The distance learning market, which requires student and teacher use of computers, is the highest growth area in higher education. Securexam will enable schools to apply "traditional" assessment measures to the growing numbers of distance learning students. Certffication Exams Securexam will improve the testing experience for both test takers and graders of such exams as the Bar, CPA, Medical Boards, and the CFA. Corporate Training Rather than sending employees to independent testing centers, or building internal testing facilities, corporations will be able to use Securexam to perform employee testing on their own computers. 1.3 Sales and Marketing: Implementation Strategy
SSI will license Securexam for use to all the markets that give closed-book examinations. As a development stage company, SSI has prioritized these markets based on the users' current need for the product, technology infrastructure, and SSI's selling structure. Phase I: Target Early Adopters -- Laptop Schools. During the first and second quarter of 2000, SSI targeted a limited number of Laptop Schools to commercially test its already proven Securexam application. Each of the targeted schools has been selected for their desire to stay on the forefront of educational technology adoption.
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Phase II: Push into All Higher Education Schools. After Securexam has been commercially proven at some Laptop Schools in Phase I, SSI will begin to aggressively market its products to all colleges and graduate programs. During Phase II, SSI will employ a general marketing strategy and targeted sales push focusing on promotions, direct distribution, and partnerships. With Securexam, using computers will become an alternative way to take tests, as had been the case with typewriters before. Phase III: Broad Push for Branding and Market Recognition. By the end of the 2001 academic year, SSI will have achieved a modest level of name recognition and market presence in higher education. Our marketing strategy during Phase III will be to expand into Securexam's secondary markets, including: K-12 Education; Distance Learning; Certification Exams; and, Corporate Training. 1.4 SSrs Web Strategy
The principal behind SSI's Web strategy is to use the Internet to first maximize the adoption of Securexam and then maximize the revenue streams from those users. Phase I: Internet Makes it Easy to Use Securexam. During the first phase, SSI uses the Internet to simplify the transition from pen and paper to computer testing. SSI's use of the Internet to distribute and manage Securexam makes it easy for schools to attain the benefits of computer testing. • • • Securexam is downloaded to the students' computers from SSI's website. Completed exams are encrypted and sent to faculty over the Internet for grading. SSI's website displays a list of classes for which students are authorized to use Securexam - eliminating any confusion concerning when students can use their computer in the exam room. SSI's website displays the number of students who intend to use their computers for each exam, insuring that schools can provide the necessary support -- power supplies and seating. Phase II: Use the Internet to Help Teachers Create Exams. During the second phase, which will begin in the fourth quarter of 2000, SSI will use the Internet to assist faculty members create exams. Teachers will build exams at SSI's site, which will then be distributed to their students. SSI's site will enable teachers to do the following: • Compose exam questions on SSI's site. • Access a database of old exam questions. • Access publishing companies' data banks of test questions. • Create answer keys for computer grading of objective exams.
•
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Phase III: Educational E-Commerce Opportunities. SSI's Internet distribution of Securexam creates a captive audience. When a Securexam customer visits our website, we know who they are and what are there academic interests. Accordingly, SSI will have e-commerce opportunities with respect to complementary products such as study guides, reference materials, and textbooks. 1.5 Technology
Securexam locks down the windows operating system providing the user access only to a secure session of Microsoft's word processing program, Microsoft Word. Securexam operates on all computers running a Windows operating system. While we are currently focusing on essay formatted exams, our software architecture will support the integration of spreadsheet and database applications, which will broaden use of Securexam to all kinds of exam formats. SSI's software prevents the user from accessing any computer files during an exam, reports and catalogues the unlikely event of a user breaking out of the security features, and encrypts the file at the end of the exam enabling subsequent transfer to the teacher over a private network, the Internet, or via floppy disks. SSI has a patent pending covering our Securexam technology. 1.6 Business Model
Schools will pay SSI an annual license fee to make Securexam available to all their students and faculty members. In order to simplify the buying decision, and to encourage broad use of Securexam, SSI will charge schools for every enrolled student. All students and faculty members at Securexam licensed schools will have unlimited use of Securexam. 1.7 Competition
Our only competitor is ExamSoft Worldwide Inc. ExamSoft, founded in 1996, sells a secure testing software application exclusively to law schools and state bar examiners. In a short period of time, ExamSoft has demonstrated that there exists a robust market for secure testing software. SSI's Securexam application is easier to use, and has a much more stringent security system. Furthermore, Securexam's interaction with Microsoft applications will provide a significant marketing advantage. SSI does not face any other direct competitors. However, since a number of both traditional and Internet education companies are focusing on computer based teaching tools, we expect SSI may face additional competition in the future. SSI's advantage over these potential competitors is one of timing and expertise. We believe these companies more likely represent potential licensing opportunities for SSI.
Software
1.8 Summary of Financial Projections
During the first and second quarter of 2000, SSI engaged a limited number of colleges to commercially test its already proven Securexam application. SSI is currently holding discussions with a number of Laptop Schools interested in using Securexam for the 20002001 academic year. SSI will offer new schools a limited free trial period prior to entering into an annual license agreement. SSI currently projects revenue from Securexam licenses to begin in the fourth quarter of 2000, and become cash flow positive during the fourth quarter of 2001. 2000 330 (950) 37 2 2001 7,200 211 315 49 2002 24,000 10,200 880 390 2003 56,000 34,600 1,700 1,200 2004 104,400 73,000 2,900 2,400
Total Revenue ($000) EBIT ($000) Schools Using Securexam: Higher-Education K-12 1.9 Management
President: Douglas M. Winneg. Before founding SSI, Doug was an associate in the corporate litigation department of the Boston, Massachusetts law firm, Testa, Hurwitz & Thibeault, LLP. For three years, Doug practiced general corporate litigation, primarily for high growth, early stage private and public companies. Before law school, Doug was an associate equity analyst at The First Boston Corporation, a large New York investment bank. As an associate equity analyst, Doug covered the telecommunications industry. Prior to being an associate equity analyst, Doug was a financial analyst at First Boston providing corporate finance and mergers and acquisitions services for the telecommunications, media and electric utility industries. Director of Technology: Raymond Hayland. Ray brings more than 25 years of software programming and development experience; 10 years operating system level programming and 15 years of application programming. Ray co-founded and sold a systems programming and management consulting firm, Magic Software. Thereafter, Ray cofounded Software Works Corporation another systems programming and management consulting firm which was hired by SSI in December 1998 to build the Securexam application. Ray was the principal architect of the SSI software product, and joined SSI full-time in November 1999. Director of Technical Business Development: Yelly Theodoropoulos. Telly draws on a 13 year career designing, managing and selling critical technology solutions. Telly has developed his expertise in marketing, strategic planning, project design and implementation of technology for the computer dependent banking and financial services sector. As a Director at the investment bank Societe Generale, Telly developed and implemented a successful Y2K Business Continuity program. Subsequently he led the Equity trading systems special projects effort. Prior to joining SG, Telly consulted for major international banks on systems strategy and integration as a member of the
_ E C_ R Software
_
Financial Services team at Arthur Andersen LLP. Prior to Arthur Anderson, Telly worked at Fidelity Investments, and was the CTO for 8 years for Bankers Trust Company in Canada. Tellyjoined SSI in May 2000. 1.10 Company Funding:
SSI, a Delaware Corporation headquartered in Brookline Massachusetts, was founded in November 1998. SSI raised $325,000 of equity capital in March of 1999. Those funds were used to reach proof of concept of our technology, and create print and Intemet marketing material. In January 2000, SSI raised an additional $275,000 of capital which has been used to work with Securexam early adopters, including Clemson University and Seton Hall University. SSI intends to raise $2,000,000 of equity capital. SSI will use those proceeds to build-out a dedicated sales and technical staff, and develop the second version of Securexam which will enable us to further penetrate the more than 70 million students base.