document capture technologies (otcbb: dcmt)

†BOLD WORDS ARE REFERENCED IN THE GLOSSARY ON PAGES 45-47.

Global Provider of Demand-Driven, Mobile Imaging Solutions

Snapshot April 5, 2011

Over the past decade, information management has become increasingly important worldwide, particularly with regard to how information is stored and shared. Accordingly, Document Capture Technologies, Inc. (“DCT” or “the Company”) develops document and image capture products that transform business-critical papers into a manageable digital format. DCT has worked for the past several years to provide cost-effective and accurate mobile scanners†

as alternatives to manual data entry. The Company’s flexible and mobile scanning solutions create usable electronic content suited for database, document, content, and other systems. In doing so, these solutions are intended to reduce organizations’ operating costs, improve information accuracy, and speed-up processing time. DCT seeks to provide a seamless operational link between the scanner and data-collecting device by providing a customized interface based upon specific client needs. The Company believes that it has created a competitive barrier that separates it from a commodity-type business. To DCT’s knowledge, it ranks among the world’s largest developers of USB-powered, page-fed document capture platforms today. Since its first scanner was introduced in 2002, DCT has shipped an estimated four million products for both business and personal use.

Recent Financial Data

Key Points

� DCT emphasizes vertical markets and business-to-business sales, working with large branding companies to bring imaging solutions to market. At present, the Company offers over 30 proprietary scanners, which are distributed globally through Tier 1 original equipment manufacturers (OEMs), value-added resellers (VARs), and other systems integrators.

� Global spending for information management is valued in the trillions of dollars. In particular, the mobile scanning market has expanded over the past several years in response to the following factors: (1) the prevalence of broadband, which is nearly ubiquitous in the U.S. today; (2) legislation (the Check 21 Act, the USA Patriot Act) that has aided the establishment of a digital marketplace; and (3) increasing demand for technology solutions that enhance information and identification security and efficiency.

� DCT’s USB-powered scanners include smart functionalities, software support, and innovative security features. Going forward, the Company is also working to introduce next-generation autonomous products that incorporate capabilities such as Wi-Fi and Bluetooth connectivity with the ability to upload scanned documents to mobile devices (e.g., smartphones) or cloud-based solutions.

� DCT holds more than 20 patents, two pending patent applications, three patent applications in pre-submission status, and five trademarks.

� The Company believes that it is well situated to retain a solid position in the document and image capture sectors due to its novel proprietary products, ability to customize products to meet customer needs, commitment to research and development (R&D), global clientele, sales growth of approximately 29% in 2010, and a cash position of $2.3 million as at December 31, 2010.

� In August 2010, DCT received $4 million from NCR Corp. via a private placement of Common Stock at $1.036 per share. At present, DCT is profitable with no debt. In 2010, net revenue totaled $14.8 million.

Ticker (Exchange) DCMT (OTC.BB) Recent Price (04/05/2011) $0.40

52-week Range $0.15 – $0.95

Shares Outstanding* ~20.5 million

Market Capitalization ~$8.2 million

Average 200-day Volume 63,579

Insider Owners ~5%

Institutional Owners + >5% ~73%

EPS (Year ended 12/31/2010) $0.01

Employees 29

EXEC

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Document Capture Technologies, Inc.

4255 Burton Drive Santa Clara, CA 95054 Phone: (408) 436-9888

Fax: (408) 436-6151 www.docucap.com

* As of March 8, 2011.

CRYSTAL RESEARCH ASSOCIATES, LLC EXECUTIVE INFORMATIONAL OVERVIEW® PAGE 2

Table of Contents

Snapshot ....................................................................................................................................................... 1�

Recent Financial Data ................................................................................................................................... 1�

Key Points ..................................................................................................................................................... 1�

Summary ....................................................................................................................................................... 3�

Company Background ................................................................................................................................... 4�

Growth Strategy ............................................................................................................................................ 6�

Intellectual Property ...................................................................................................................................... 8�

Company Leadership .................................................................................................................................... 9�

Core Story ................................................................................................................................................... 13�

Product Portfolio ................................................................................................................................... 13

Customer and Partner Relationships.................................................................................................... 22

Market Opportunities ............................................................................................................................ 24

Competition ................................................................................................................................................. 30�

Milestones ................................................................................................................................................... 33�

Historical Financial Results ......................................................................................................................... 34�

Risks ............................................................................................................................................................ 38�

Recent Events ............................................................................................................................................. 44�

Glossary ...................................................................................................................................................... 45�


Summary

� Approximately 31% of all U.S. healthcare costs are related to paperwork, which is a leading contributor to rising costs within this industry. Providers and insurance companies alike face pressure to control costs and simplify complicated processes, and thus seek new, more efficient approaches.

� Compact devices, such as DCT’s platforms, can function as stand-alone document and image scanners or as part of larger systems facilitating digital healthcare records.

� DCT’s products transform business-critical paper information into a manageable digital format for a variety of enterprises, including government agencies, corporations, small offices and home offices (SOHO), professional practices, and consumers. Through efficient document management solutions, DCT enables reduced operating costs, more accurate information, and increased processing speeds.

� The Company is focused on delivering lightweight, cost-effective products that have a small footprint and are simple to integrate with other systems. Its patented scanners are designed to produce quality images at low power consumption levels.

� DCT offers customized document and image capture solutions equipped with proprietary software development kits (SDKs) for integration with new and existing third-party systems. SDKs support multiple applications, faster time to market, and ease of integration for partners/customers.

� Over the past decade, the Company’s DocketPORT®, TravelScan

®, SimpleScan

®, and DocuPass

®

brands have been distributed through a global network of original equipment manufacturers (OEMs) and value-added resellers (VARs), including NCR Corp. (NCR-NYSE), Qualcomm, Inc. (QCOM-NASDAQ), Burroughs Payment Systems, Inc., and Brother Industries, Ltd. (6448-TYO).

� In August 2010, DCT closed a $4 million strategic direct investment with NCR Corp., a global information and technology solutions provider. DCT anticipates using the NCR investment to enhance future product offerings by developing core assets and intellectual property and expanding into new market segments. In conjunction, NCR retained an option to further invest in DCT.

� Information and communications technology (ICT) helps businesses create cost efficiencies, boost labor productivity, and remain competitive. Vertical markets, such as financial services, tend to have the greatest level of ICT. DCT targets diversified, growing vertical markets, such as banking, healthcare, travel and hospitality (e.g., reading passports, ID cards), bulk freight transport, and an array of other industries benefitting from the secure digitization of paper forms and images.

� One of the fastest-growing trends in banking technology is remote deposit capture (RDC), fueled by banks and others seeking to differentiate their mobile and online services. RDC has become a key contributor to customer satisfaction and retention. DCT has previously entered into agreements with Bridgeport Technologies, Digital Check, Burroughs, and NCR to develop RDC services using USB-powered mobile terminals—which reduce the processing costs of deposits and related transactions and allow partners to customize RDC solutions for improved service and ongoing revenue growth.

� The Company is led by a management team with expertise in research and development (R&D), business development, corporate finance, sales, and marketing, among other fields. Corporate leadership is focused on identifying and pursuing the most beneficial global opportunities for DCT, and has recently strengthened its R&D team in order to enhance core competencies and create new scanning solutions for greater penetration of high-growth markets.

� DCT is profitable with no debt. Net revenue totaled $14.8 million in 2010 ($11.5 million in 2009), and earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding non-recurring expenses, was $1.6 million ($394,000 in 2009). At December 31, 2010, DCT had cash and cash equivalents of $2.3 million. DCT believes that its financial position is a result of serving diversified markets with products that are reliable, flexible, efficient, well supported, and delivered on time.

� The Company’s progress during 2010 was favorable, particularly with regard to its working capital of $4.8 million and no debt. With revenue growth and additions to leadership, DCT believes that it is poised to pursue business expansion and a greater global presence in 2011 and beyond.


Company Background Corporate History Document Capture Technologies, Inc. (“DCT” or “the Company”), a Delaware corporation, formerly operated under the name Syscan Imaging, Inc. (“SII”) and was a subsidiary of a Chinese company. Initially, SII created proprietary image-sensing technologies in chip form but transitioned to supplying an end-user product that encompasses the technology. SII completed a reverse merger in 2004 to become a public company with shares traded on the Over-the-Counter Bulletin Board (OTC.BB) under the ticker “SYII.” In June 2006, SII changed its name to Sysview Technology, Inc. and began trading under the ticker “SYVT.” During this time, the Company pursued a crossover of its technology from mobile image-scanning devices to light-emitting diode (LED) display technology, with the objective of supplying the intellectual property and technological capabilities needed by large suppliers of monitors, flat-panel televisions, and other electronics. In 2008, management initiated a refocus on its core product line of document capture platforms, which were the Company’s primary revenue generator. As part of the refocus toward core competencies, the display business was sold, Mr. David Clark (biography on page 9) became chief executive officer (CEO), and the Company was renamed Document Capture Technologies. The ticker was changed to “DCMT” in January 2008. Since 2008, DCT has worked to streamline its business and deliver new mobile scanning products. In September 2010, DCT combined its corporate office and warehousing facilities, at which time the Company also expanded its domestic production capabilities. This move was anticipated to create significant operational efficiencies and better position DCT to capitalize on certain market opportunities, specifically those presented by U.S. government agencies that require products to be manufactured in the U.S. under the Trade Agreements Act. Headquarters and Employees DCT is headquartered in Santa Clara, outside of San Jose, California, and employs 29 individuals in R&D, sales, operations, and administration. Of these employees, three are located in China, two are in Europe, and the remaining individuals are based in the U.S. To support growth (as described on pages 6-7), the Company is expanding offices in Europe and has plans to add sales personnel. The Santa Clara location contains 32,000 square feet for corporate offices, product development, inventory management, and distribution. The Company also has field service/sales offices and inventory management and distribution facilities in the Netherlands (contact information below). As depicted in Figure 1 (page 5), the majority of DCT’s manufacturing presently occurs in China and Taiwan. Logistics services, such as transportation, storage, and distribution, are provided by third parties. Document Capture Technologies, Inc. IJsselburcht 3, Suite 212 6825BS Arnhem Netherlands Phone: (+31) 26-36 53 440 Fax: (+31) 26-36 53 441


GLOBAL PRESENCE


Figure 1

Source: Document Capture Technologies, Inc.

Arnhem, NetherlandsApeldoorn, Netherlands

ƒ European sales andmarketing

ƒ WarehousingChina

ƒ Manufacturing base

ƒ Engineering pool

ƒ China mass market access

Taiwan

ƒ Tooling fabrication

ƒ Sourcing and merchandizing

Silicon Valley, U.S.

ƒ Sales and marketing

ƒ R&D advanced technology development

ƒ Warehousing and U.S. assembly

New York, New York

ƒ Investor Relations


Growth Strategy DCT emphasizes vertical markets and business-to-business sales, working with large branding companies to bring products to market. This model enables DCT to focus on its core strengths, which are creating technologies, designing products, and establishing solutions that other companies/organizations then supply to their customers. The Company expects to continue following this business model going forward. In addition to exploiting DCT’s chief expertise, this strategy has the added effect of limiting the Company’s exposure to the retail environment. Monitoring demand through its global OEM and VAR partners, DCT believes that sales are likely to continue to grow, especially throughout the EU and other large markets. A paramount objective for DCT during 2011 is to ensure that it remains a customer-centered organization, attuned and responsive to the needs of its clients. DCT intends to focus on deepening its relationships with its Tier 1 OEM partners—NCR, Qualcomm, Burroughs, and Brother—while also working more closely with top VAR customers. With the expansion of its R&D team in 2009, DCT continues to develop products in-house. One growth segment relates to information security, which has become a critical issue in many industries, including travel, healthcare, and banking. In February 2011, a report from International Data Corporation (IDC) forecasted growth of security products at nearly 8% in 2010, as markets rebound from the prior years’ recession (Source: Worldwide IT Security Products 2011–2014 Forecast and 2009 Vendor Shares: Comprehensive Security Product Review). Organizations that had postponed investments in new technologies are now expected to continue with upgrades, including for IT and security. At the same time, DCT is evaluating synergistic partnership opportunities that combine skills from each company and that have the potential to speed the development process and cycle time for bringing new products to market. Business Strategy: Focus on Hardware, Software, Sales, and New Global Vertical Markets Going forward, DCT’s business strategy is to increase market penetration by expanding its document scanning hardware portfolio, broadening the scope of its proprietary input devices, improving speed-to-market, and initiating sales in new vertical markets. Rather than developing an internal retail network to reach the end consumer, DCT emphasizes vertical markets and business-to-business sales. The Company works with large branding companies to bring products to the consumer. This model enables DCT to focus on its core strengths, which include creating technologies, designing products, and establishing solutions that other companies/organizations then supply to their customers. DCT has an ongoing commitment to bringing new R&D technologies to market that specialize in adaptability and mobility. The Company expects to continue to follow this business model. Through accelerating investments in internal R&D as well as inlicensing, DCT is working to expand the scope of its proprietary input devices. There are a wide range of uses for document capture platforms as input devices. DCT recognizes the importance of addressing each of these and being able to offer various software bundles based on what the Company’s partners and customers require in order to serve their customers. Accordingly, DCT expects software to become an even larger component of its portfolio going forward. The Company is continuing to enhance its multi-platform (Windows

®, Mac, Linux, Windows

®

Mobile, and Windows® CE) SDKs and leverage them in the creation of cloud-based software applications to facilitate a range of input devices.


In addition to providing customer support to existing Tier 1 OEM partners and VAR customers, the Company is also investing in expanding its connections with customers, suppliers, and partners in international markets, particularly across Europe and Asia. Moreover, DCT is working to enhance sales and marketing in new vertical arenas where the Company believes there are growth opportunities, such as point-of-service (POS), home POS, and remote POS (e.g., self-service) transactions, among many other areas. Pages 25-29 present a detailed description of DCT’s current and targeted global markets. To support these efforts, the Company has recently expanded its leadership, appointing Mr. Craig H. Weber (biography on page 10) as president and chief operating officer (COO) in November 2010, Mr. Jacques F. vonBechmann (biography on page 10) as senior vice president of sales in January 2011, and Mr. Karl Etzel (biography on page 11) as product and business development manager in February 2011.


Intellectual Property DCT’s product development strategy is fueled by its intellectual property with the objective of creating market-driven products. The Company has an aggressive intellectual property strategy to protect its proprietary technology. DCT holds multiple patents related to scanning devices, including for efficient low-power designs, and specializes in adaptability, integration into new and existing systems, and mobility, with an ongoing commitment to R&D. As of November 2010, DCT reported that its intellectual property portfolio comprised five trademarks, more than 20 patents, two pending patents, and three patent applications in pre-submission status. Current patents do not expire until 2017. In addition to its current patent and trademark portfolio, DCT is collaborating with various third parties with the intent of licensing novel new features that can be combined with the Company’s intellectual property to create stronger barriers to entry.


Company Leadership Over the past several months, DCT has added three new members to its executive management team, with expectations of transforming the Company into an organization capable of fueling revenue and profitability growth and accelerating new product development and deployment. The Company intends to continue to selectively add new talent to its team. Further, DCT expanded its R&D team during the third quarter 2009 to ramp-up R&D. New team members, Mr. Peng-Cheng Chen and Mr. Suleman Saya, bring a combined 37 years of hardware and software expertise to DCT from companies such as Cirrus Logic, Inc. (CRUS-NASDAQ) and Siemens AG (SI-NYSE). The Company expects its strengthened R&D team to facilitate development of new scanning solutions for greater penetration of high-growth markets, including remote deposit capture (RDC) and healthcare. The accompanying pages list DCT’s management, Board of Directors, and advisors. Table 1 provides a summary of the Company’s key individuals, followed by detailed biographies.

David P. Clark, Chief Executive Officer (CEO) and Director Mr. Clark became DCT’s CEO in March 2008. Since July 2004, he had served as DCT’s senior vice president of business development and as a director. He joined the Company from Nautical Vision, Inc. where, as president, he created and implemented a business plan in the image display industry. From 2001 to 2003, Mr. Clark actively invested in and consulted to several companies with a focus on business development, corporate finance, sales, and marketing. He was also president and CEO of Homebytes.com from 1998 to 2001, where he raised over $25 million in funding from investors, including America Online (AOL-NYSE), FBR Technology Venture Partners L.P., PNC Bank (PNC-NYSE), and Bank of America Corp. (BAC-NYSE), as well as was instrumental in the acquisition of a key competitor. Previously, Mr. Clark was director and the head of distribution of Take-Two Interactive Software, Inc. (TTWO-NASDAQ), which resulted from Take-Two’s acquisition of Inventory Management Systems, Inc. (IMSI), of which Mr. Clark was co-founder and president. Prior to founding IMSI, he held management positions with Acclaim Entertainment, Inc. and the Imagesoft Division of Sony Music Holdings. Mr. Clark received a B.S. in business from the State University of New York, Binghamton in 1990.

David P. Clark Chief Executive Officer and Director

Craig H. Weber, MBA, J.D. President, Chief Operating Officer, and Secretary

M. Carolyn Ellis, MBA, CPA Chief Financial Officer

Jacques F. vonBechmann, III, MBA Senior Vice President of Sales

Pim (Willem) Blom Vice President Business Development EMEA

(Europe, Middle East, Africa)

Karl Etzel, M.S. Product and Business Development Manager

Table 1


CORPORATE LEADERSHIP



Craig H. Weber, MBA, J.D., President, Chief Operating Officer (COO), and Secretary

Mr. Weber joined DCT as president and COO in November 2010. During a more than 25-year career, Mr. Weber has served as president and CEO, chief financial officer (CFO), COO, and chief legal officer (CLO), among other executive roles. Most recently, he was executive vice president, corporate development and CFO of Home Care Delivered, Inc., a supplier of disposable medical supplies, where he was also responsible for strategic planning and growth initiatives, acquisitions, and leadership development. Previously, he was managing partner of Hollymeade Group, LLC, a private investment firm; president and CEO of Whitlock eBusiness Solutions, a business and technology consulting company; COO, strategic planning officer, and legal officer of Homebytes.com; and vice president, business development and chief legal, administrative, and human resources officer for Walco International, Inc., a $400 million pharmaceutical distribution company owned by Bain Capital. Before beginning his business career, Mr. Weber practiced law as a partner at McGuireWoods in Richmond, Virginia, and as an associate at Sullivan & Cromwell in New York City where he specialized in corporate finance, mergers and acquisitions (M&A), and banking. Mr. Weber holds an MBA from the College of William and Mary; a J.D. from the University of Virginia, where he was a member of the Virginia Law Review; and a B.S. from Cornell University. Since 2002, Mr. Weber has been a member of the Board of Directors of Optical Cable Corp. (OCCF-NASDAQ), where he is chairman of the Compensation Committee and serves on the Audit Committee.

M. Carolyn Ellis, MBA, CPA, Chief Financial Officer (CFO)

Ms. Ellis was appointed DCT’s CFO in November 2007. She had been an independent contractor to the Company since 2006 in the role of supervising financial reporting obligations. Prior to her work with the Company, Ms. Ellis served as a director, secretary, and treasurer of Knovative, Inc., a telecommunications R&D company that she co-founded in 2003 and where she remains a member of the Board of Directors. From April 2000 to July 2003, Ms. Ellis served as the vice president of finance for Correlant Communications. She has been a certified public accountant (CPA) since 1989. She earned a Bachelor’s degree in economics and accounting from Hendrix College in 1986 and an MBA from the University of New Mexico in 1994.

Jacques F. vonBechmann, III, MBA, Senior Vice President of Sales Mr. vonBechmann joined DCT as senior vice president of sales in January 2011. Previously, he was senior vice president of sales and marketing at Home Care Delivered. He has held executive positions in sales and marketing for companies ranging from Internet start-ups to Fortune 100 companies, including national accounts, Allergan, Inc. (AGN-NYSE); vice president, marketing of Cendant Corporation; and vice president, sales at Allianz. He is also experienced with a variety of markets that include pharmaceutical, consumer products, technology, and financial institutions and has worked with companies such as Capital One Financial Corp. (COF-NYSE), Bank One Corp. (now part of JPMorgan Chase & Co. [JPM-NYSE]), Qwest, Genworth Long Term Care, Columbia HCA, Double Click, Orbitz Worldwide, Inc. (OWW-NYSE), The Walt Disney Co. (DIS-NYSE), Continental Airlines and United Airlines (both part of United Continental Holdings, Inc. [UAL-NASDAQ]), American Airlines, Inc. (AMR-NYSE), Expedia, Inc. (EXPE-NASDAQ), and Blue Cross and Blue Shield. Mr. vonBechmann also taught marketing, economics, and leadership courses as an adjunct professor at the University of Richmond. He is a graduate of the University of Virginia and received an MBA from the College of William and Mary.

Pim (Willem) Blom, Vice President Business Development EMEA (Europe, Middle East, Africa)

Mr. Blom, a native Dutchman, joined DCT in October 2005. He has extensive experience in the distribution of well-known document imaging brands, such as Kodak, Kofax, Microtek, Agfa, Polaroid, Fujitsu, and Omnipage. Before joining DCT, he was the European sales manager at Fibrenetix Group in the UK, where he was responsible for sales, marketing, and distribution of mass storage devices for document imaging and video applications. Mr. Blom has over 20 years of experience in marketing and sales of a variety of IT products and equipment in the international marketplace and started his career in the IT sector at Philips Telecommunications and Data Systems in 1988. Other experience includes serving as director of sales and marketing at Phertron, a Netherlands-based company, where he managed a sales group in the Benelux countries with international accounts including Philips and DuPont Optical, Mitsubishi Chemical Holdings Corp. (4188-TYO), Agfa, and Teac Corporation (6803-TYO).


Karl Etzel, M.S., Product and Business Development Manager Mr. Etzel holds a Master’s in mechanical engineering from the University of California at Irvine. He joins the Company after more than a decade as program manager for the U.S. Navy as well as product manager for the Data Communications Division of Cypress Semiconductor Corp. (CY-NASDAQ) and Intel Corp.’s (INTC-NASDAQ) Digital Health Group. His graduate education was fully funded by a National Science Foundation Graduate Research Fellowship. DCT expects that Mr. Etzel can help facilitate the continual strengthening of the Company’s product engineering department. Throughout his career, Mr. Etzel has demonstrated an ability to accelerate the development of new products, and manage those products from concept through launch to the forging of sales partnerships. His past assignments have addressed several industry verticals of importance to DCT, including leading the development, marketing, and OEM support for a hardware reference design for the healthcare sector. Board of Directors Table 2 provides a summary of DCT’s directors, followed by detailed biographies. The Board of Directors oversees the conduct of and supervises the Company’s management.

Edward M. Straw, MBA, Chairman Mr. Straw is currently executive vice president of PRTM Management Consultants, an operational strategy consulting group. From 2000 to 2005, he served as president of global operations for Estée Lauder Companies Inc. (EL-NYSE). From 1998 to 1999, he served as senior vice president of supply chain management and manufacturing for Compaq Computer Corp. (now part of Hewlett-Packard Co. [HPQ-NYSE]). Prior to Compaq, he served as president of Ryder Integrated Logistics Inc. from 1996 to 1998. Before joining the private sector, Mr. Straw had a distinguished 30-year career in the U.S. Navy, retiring as a three-star admiral in 1996. He holds a B.S. from the U.S. Naval Academy and an MBA from George Washington University, and is also a graduate of the National War College. David P. Clark, CEO and Director Biography on page 9. Roseann Larson, CPA, Director Ms. Larson has held several executive positions with Estée Lauder in her more than 20 years with the company. Most recently, she held the position of vice president and program manager, EMEA for Estée Lauder, responsible for centralizing, standardizing, and streamlining information systems across Estée Lauder’s global enterprise. At the commencement of her career at Estée Lauder in 1989, Ms. Larson was manager, internal audit where she conducted operational, IT, financial, and environmental audits and contributed to fraud investigations for all divisions worldwide. Prior to her tenure at Estée Lauder, Ms. Larson held several accounting and financial positions at Citicorp (part of Citigroup Inc. [C-NYSE]) from 1982 to 1989. She is a CPA and a member of the American Institute of Certified Public Accountants (AICPA). She earned a B.B.A. in accounting from Bernard Baruch College (New York) in 1980.

Edward M. Straw, MBA Chairman

David P. Clark Chief Executive Officer and Director

Roseann Larson, CPA Director

Darwin Hu, M.S. Director

Jody R. Samuels, J.D. Director


Table 2


BOARD OF DIRECTORS


Darwin Hu, M.S., Director Mr. Hu became chairman, president, and CEO of the Company on April 2, 2004, in connection with the acquisition of Syscan, Inc. He resigned as president and CEO on March 1, 2008, and stepped down as chairman of the Board of Directors on July 15, 2008. He continues to serve as a director of the Company. Prior to April 2, 2004, Mr. Hu was the president and CEO of Syscan, Inc., DCT’s wholly owned subsidiary. Mr. Hu has over 21 years of experience in the high-tech industry and has held various management-related positions within organizations related to color graphic imaging input scanning, display output and imaging communication product development, manufacturing, and sales and marketing. Before joining Syscan in April 1998, Mr. Hu held senior management positions at Microtek International, Inc. (2305-TPE), Xerox Corp. (XRX-NYSE), OKI Electric Industry Co. Ltd., Advanced Vision Research, Inc., Olivetti S.p.A., and Grundig Business Systems. He holds a Bachelor’s degree in engineering science from National Cheng-Kung University, Taiwan, and a Master’s degree in computer science and engineering from California State University. Jody R. Samuels, J.D., Director Mr. Samuels became a director of DCT in September 2009. He is currently of counsel to the law firm of Richardson & Patel LLP and from 2006 through 2009 was a partner of Richardson & Patel LLP. Prior to that, he was an associate and then a partner with the law firm of Ellenoff, Grossman & Schole from 2004 through 2006. From 1996 through 2004, Mr. Samuels was an associate at the law firm of Gersten Savage LP. Mr. Samuels has been the Company’s corporate counsel since Syscan merged with Bankengine Technologies, Inc. in 2004. Mr. Samuels represents many public and private companies in connection with their corporate and securities transactions, including public offerings, private investment public entity (PIPEs), and reverse mergers, as well as M&A transactions and regulatory compliance. Mr. Samuels also represents broker-dealers in connection with public and private securities offerings. He received a B.S. in accounting from Brooklyn College in 1991 and a J.D. from New York Law School in 1995.


Core Story Document Capture Technologies, Inc. (“DCT” or “the Company”) provides demand-driven solutions for the paper-to-digital revolution that emphasize convenience, speed, and quality. DCT produces more than 30 document and image capture platforms, which are distributed globally. Over the course of its operations, the Company has shipped nearly four million scanning products. Customers include Tier 1 original equipment manufacturers (OEMs), value-added resellers (VARs), and other systems integrators. To the Company’s knowledge, it is one of the largest manufacturers of USB-powered, page-fed, mobile scanners worldwide. Based on its research, DCT believes that scanning is in its infancy and is an intimidating process for many people. With compact designs and “plug and go” ease of operation, DCT’s products are intended to be user-friendly. The Company’s USB-powered scanners also feature low power and space requirements (i.e., a small footprint), with an aim to provide a simple form of document management at a low cost that is easy to integrate with existing processes. Another challenge that DCT faces is changing the way that people view scanning. The Company believes that the average individual is unaware of the number of ways that information can be stored, shared, and managed, and the efficiencies created by digitizing paper files and images. DCT strives to demonstrate these benefits by promoting scanners as efficient devices easily employed for many daily tasks. The Company defines its products as more than just a scanner that uploads a document and attaches it to an email. Rather, DCT gives its document capture platforms “smart” functionalities where the devices can integrate scanned data into a database or another application, reducing human error and increasing efficiencies. With smart, fully functional scans, consumers use document capture platforms to not only upload documents but also to digitize pictures, manage expense reports, and deposit checks, among many other activities. In addition, in response to globally heightened concerns for security, DCT is working to address an increased demand for state-of-the-art information, identity, and financial transaction protection. Overall, DCT believes that its products’ advanced information management features can continue to lead to greater efficiencies in many industries. DCT’s products are not only applicable to traditional areas where scanners have typically been used but they have also extended the reach of document capture platforms into new markets. The Company’s devices and technologies can be used for remote deposit capture (RDC), bank note and check verification, document and information management, scanning barcodes, scanning IDs, passports, or other security measures, reading business cards, and as optical mark readers, such as for lottery terminals. Pages 13-21 describe DCT’s product lines, highlighting the specifications, security features, and software support for current products. Pages 22-23 overview DCT’s customer and partner relationships, and pages 24-29 detail the expanding vertical markets where the Company’s scanners are currently employed and where DCT is seeking greater market penetration. PRODUCT PORTFOLIO DCT markets over 30 products across five classes (as listed in Table 3 [page 14]) designed to accommodate the diverse needs of a variety of enterprises and markets, which include government agencies, large and small corporations, small office/home office (SOHO) settings, professional practices, and consumers. While all of DCT’s products are built from the same patented technologies, the product groupings have varying features and configurations. Through its diverse product lines, the Company manages the processing of millions of forms, documents, and transactions annually. Captured content is efficiently converted into usable digital information that can be integrated into databases, documents, and other types of information management systems.


DCT markets its products domestically and internationally through a network of more than 45 independent distributors and channel partners across North America, Europe, and Asia, as well as through several retail and Internet-based channels. DCT is committed to research and development (R&D) and product innovation, a focus that it believes helps it stay at the forefront of the paper-to-digital revolution. Using patented technology, DCT optimizes product designs to be compact, lightweight, and capable of providing quality images at low power.

Currently, the DocketPORT

® and TravelScan

® lines comprise the Company’s most popular product

groups, which are further profiled on the accompanying pages. These secure document imaging platforms possess the following attributes: � USB powered; � Mobile; and

� Page-fed. Product Evolution DCT’s initial scanners were centered on portability, which defined the Company’s early stages. Launched in 2002, DCT’s first scanners were approximately the size of the cardboard tube within a roll of paper towels and ran solely on USB power. These products were geared toward “road warriors” (people who travel extensively for business) and capitalized on the expanding use of notebook computers. To the Company’s knowledge, it was among the first to develop a portable scanner, a high-speed portable scanner using USB 2.0, and a duplex (dual-sided) USB-powered scanner. Since these developments, the Company has continued to release a consistent flow of new and next-generation products, some of which are currently being field-tested. Table 4 summarizes DCT’s key historical product development milestones.

Table 3


PRODUCT CLASSES

A4: Letter Size

A5: Leaflet or Flyer

A6: ID Card; Check

A8: Business Card

CMOS-based Passport/ID


2000 Introduced the first portable scanner with a PCMCIA interface

2004 Introduced USB 2.0 high-speed portable scanners

2005 Introduced A4 Duplex products

2006 Introduced a "Check 21" version of the A4 Duplex scanner

2007 Introduced an A6 Duplex scanner

2008 Brought new products to market, including the “7” series, DP 488, and DP 688

2009 Launched a next-generation controller (TS-PRO-XL, 4 Xena models)

2010 Introduced RDC solutions and the new CMOS DP 540


KEY PRODUCT DEVELOPMENT MILESTONES


Table 4


Over the past decade, the Company’s DocketPORT®, TravelScan

®, SimpleScan

®, and DocuPass

® brands

have been distributed through a global network of solution providers and VARs. As illustrated in Figure 2, these product classes have included a number of models over the years.

These products have supported popular computing platforms such as Windows

®, Mac OS, Linux,

Windows® Mobile, and Windows

® CE. In addition, DCT offers proprietary Software Development Kits

([SDKs] described on page 17) for custom integration, application control, and VAR configurations. Current Scanners DCT’s most popular current scanners are largely concentrated within the DocketPORT

® product line,

which represents fourth-generation compact document and image capture. The DocketPORT® products

share several common features, including the following: (1) USB powered; (2) optical resolution of 600 dots per inch (dpi); (3) lightweight; (4) small footprint; and (5) a minimal power requirement. Several of the products offer duplex capabilities, where they can scan both sides of a two-sided document simultaneously. Additionally, DCT’s products meet stringent product compliance requirements from various countries, including the EU’s Restriction of Hazardous Substances (RoHS) Directive and Waste Electrical and Electronic Equipment (WEEE) Directive. The Company’s products have been RoHS compliant since January 2006. Both DCT and its product manufacturer have established ongoing surveillance programs in coordination with requirements set by multiple standards organizations, such as Underwriters Laboratories, the Canadian Standards Association, CB Safety Standards, the Federal Communications Commission (FCC class B), the EU (CE mark), and Japan (Voluntary Control Council for Interference [VCCI] compliance).

2002 2003 2004 2005 2006 2007 2008 2009 2010

PRODUCT EVOLUTION


Figure 2


Mob

ile S

cann

ing

Solu

tions

A4: Letter Size

A6: ID Card; Check

A8: Business Card


Figure 3 depicts several currently available DocketPORT® products. A detailed description of DCT’s

newest image capture platform, the DocketPORT® 540 (DP 540), follows the Figure.

DocketPORT® 540 (DP 540) In September 2010, DCT released its latest platform, the DP 540, which is targeted for scanning passports and ID cards. The 500 series entails flatbed scanners, such as depicted in Figure 4. In keeping with the Company’s signature design, the DP 540 has a small footprint and was built to be up to 10 times faster than conventional scanning technologies—with image capture achieved in two seconds. It is the Company’s smallest and fastest ID scanner.

The DP 540 is targeted for the domestic and international travel industries, which have strict security and identification requirements. In February 2011, DCT showcased the DP 540 to approximately 3,000 international travel IT professionals at a Travel Technology Show in London. The DP 540 has a flat surface; thus, it is equipped to rapidly and efficiently scan bulky passports, personal ID papers, tickets, and vouchers by airlines, airports, hotels, and travel agents. It can also be integrated into kiosks and custom housings, and includes multi-country adapter plugs. DCT believes that the DP 540 is among the most efficient low-cost technologies for the travel industry. In addition, the DP 540 can be used in a variety of other markets, including healthcare, retail, and commercial, which require paper-to-digital processing of bulky documents.

A SELECTION OF CURRENT PRODUCTS


Figure 3


DocketPORT® 467

DocketPORT® 687 DocketPORT

® 667 DocketPORT

® 540 DocketPORT

® 531

DocketPORT® 488 DocketPORT

® 487 DocketPORT

® 468

Figure 4


500 SERIES

Quickly converts bulky passports and IDs to electronic records



The DP 540 is compatible with 32- and 64-bit versions of Windows® 7, Vista, and XP and uses the

TWAIN 1.9 imaging standard for both Windows® and Mac operating systems. The TWAIN standards are

specifications created by the TWAIN Working Group, a nonprofit organization representing the imaging industry to link applications and image capture devices. These specifications help scanner and camera vendors write the drivers for their devices. Drivers that follow TWAIN specifications are known as “TWAIN drivers” or “TWAIN-compatible drivers.” As the DP 540 is TWAIN compliant, it may have hundreds of commercial applications. CMOS Image Sensor In the 1990s, DCT’s wholly owned subsidiary, Syscan, Inc., began creating a new generation of patented contact image sensors (CIS) that are complementary metal-oxide-semiconductor (CMOS) imaging sensor devices. Many document scanners use CIS technology, which gathers light from red, green, and blue LEDs (which when combined provide white light) and directs the light at the document being scanned. The light reflected back is absorbed by a lens and directed at an image sensor array that records the images based on light intensity. The DP 540 utilizes a camera-based (CMOS) image capture system. This fast image capture technology uses multiple light sources for enhanced accuracy. It also incorporates color, grayscale, and infrared scanning modes. The DP 540 has no moving parts. As a result of its work in this area, DCT holds multiple patents for linear imaging technology. Its patented CIS and mobile imaging scanner technology lead to high-quality images at low power consumption levels. This characteristic allows DCT to deliver compact scanners that are simple to use and easily integrated with computers, peripherals, and other systems. Software The Company custom designs document capture solutions that are lightweight, have a small footprint, and, most importantly, are easily integrated with third-party systems. The ease of integration comes from proprietary software development kits (SDKs) and application programming interfaces (APIs), which allow the scanners to interface with both new and existing systems at a rapid rate. The Company can develop an interface, if one does not already exist, with any computing device where there is a need for a small footprint scanner. Competitors’ small retail scanners are generally not equipped for such integration. In addition to ease of integration, the Company’s SDKs and APIs allow for a broad range of applications and a faster time to market. DCT’s standard software packages include drivers to support Microsoft

®

Windows® 7/Vista/XP, Windows

® CE, Linux, and Mac OS. Since the software is bundled with the scanner

to meet specific customer needs, DCT’s products can be configured to run via servers or cloud-based solutions. DCT’s products can be easily configured to support different languages, and the Company provides ongoing support for Romanized, Cyrillic, and Sinographic character software. Thus, its products are believed to be well suited for sales opportunities in many international markets. Going forward, DCT intends to focus on software applications as well as hardware applications. As the Company develops wireless capabilities (Bluetooth and Wi-Fi), its software components are likely to become more innovative to meet new demands. For example, next-generation autonomous scanners could allow users to display and edit the digital image directly on the scanner via an LCD screen (as addressed under Pipeline Initiatives on page 18). Furthermore, the Company recognizes the need for expanded functionality. As such, DCT is developing software solutions to support its partners’ and customers’ novel or best-of-breed cloud-based services. For example, a USB or Bluetooth connection with a simple user interface could allow the end-user to interact with various features in the cloud, such as contact management. Essentially, DCT aims to offer a database unique to the user that would be maintained in the cloud, with plug-ins enabling such activities as expense report management for small and micro businesses or the business traveler, photo services (e.g., scanning photos to an online account), and access to a secure electronic vault, among many other possible functions via the scanner. Ultimately, there are many uses for mobile scanners as an input device.


Security Features DCT incorporates multiple security features into its hardware and software to meet varying market requirements. Its scanners sold in the healthcare industry are Health Insurance Portability and Accountability Act (HIPPA) compliant. To help ensure the security of private patient information, scanned images are not stored on the devices but rather are transferred and then erased from the buffer with no residual image to interfere with various healthcare privacy regulations. Greater details on the application of DCT’s products to the healthcare field are provided on pages 26-27. In addition, each scanner has digital serialization, which can be used in many different ways from marketing to security. As a marketing tool, digital serialization enables recognition of where scanners are deployed. As a security tool, it provides users with verification functions. One example of a verification feature occurs during the remote check deposit process. When a check is scanned, it is digitally serialized. Before being deposited, the digital serial number must match the specified customer and scanner. This gives banks an additional verification measure before the deposit is completed. Manufacturing DCT’s goal is to remain cost-competitive by efficiently sourcing components and materials, driving manufacturing costs lower and carefully controlling overhead. Much of the Company’s manufacturing occurs in China and Taiwan. DCT purchases the majority of its finished products from Shenzhen Syscan Technology (SST), a wholly owned subsidiary of Syscan Technology Holdings Ltd. A pricing agreement, negotiated periodically, is in place between DCT and SST. Further, the Company believes that using this supplier provides better control over both product quality and cost, as DCT’s engineers work closely with the manufacturing team from the early stages of product design. DCT procures and delivers to SST substantially all of the critical components and tooling required for scanner manufacture. SST is in the process of relocating its primary manufacturing facilities from Shenzhen, China, to Wuhan, Hubei Province, China, as a strategy to reduce direct and overhead costs. This relocation is on-track to be complete with fully functional facilities by the end of April 2011. Pipeline Initiatives DCT is focused on introducing new hardware to remain competitive going forward. Among these initiatives, the Company has targeted wireless scanning. As well, its Xena project seeks to produce an autonomous scanning device capable of interaction with a wider variety of user modes and devices. Autonomous products could include scanners that operate on a lithium ion battery and that incorporate a small LCD screen and Bluetooth connectivity, allowing users to scan documents and upload the scans to their mobile device—personal digital assistants (PDAs), iPhones, iPads, or BlackBerry or Droid smartphones—via Bluetooth. DCT aims to begin shipping a selection of these new products during 2011. DCT believes that mobile banking and mobile transactions will likely increase in the future with Web-based solutions becoming more prominent. To capitalize on this trend, the Company is developing products with Wi-Fi connectivity and autonomous products that do not need a host device (e.g., a computer) but rather connect to a cloud. As an example, Hewlett-Packard Company (HPQ-NYSE) has introduced printers with an independent IP address so consumers can print from a cell phone to a printer and bypass the need for a computer.


Current Product Specifications The DocketPORT

® 488, listed in Table 5, can scan size ranges from business cards to legal documents

and represents the third generation of DCT’s duplex scanners. It is fully USB powered with no required AC power adaptor. Another featured product of the DocketPORT

® 400 series, the 487, scans full-size

documents on both sides simultaneously in as quickly as 10 seconds. Separately, the 468 simplex scanner was designed for improved document handling and user interface.

Table 5

PRODUCT SPECIFICATIONS


DocketPORT® 488 DocketPORT® 487 DocketPORT® 468 DocketPORT® 467

Interface USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed)

Image Sensor CMOS CIS CMOS CIS Linear color CMOS

Resolution 600 dpi 600 dpi (optical) 600 dpi 600 dpi (optical)

Scan Speed

Scan Area 8.5" x 14" max. 8.5" x 14" max.

Weight 21 oz. w/o cable 17.8 oz. 12 oz. w/o cable 12 oz.

12.25" x 2.0" x 2.65" 11.8" x 2.4" x 1.9" 11.5" x 2.0" x 1.7" 11.7" x 2" x 1.7"

Cable Length 150 cm 152 cm (detachable) 150 cm 152 cm (detachable)

Paper Sensor Mechanical Electro-mechanical Mechanical Electro-mechanical

Paper Thickness 0.1 mm~1.2 mm 0.1 mm to 1.0 mm 0.1 mm~0.6 mm 0.1 mm to 0.8 mm

CE, FCC Class B CE, FCC Class B

RoHS, WEEE RoHS, WEEE RoHS, WEEE RoHS, WEEE

Dual, 2 linear color

CMOS


Bundled Software

Operating Systems

Environmental Requirement

Regulatory Requirement

Windows® 7, Vista,

XP, 2003, 2000; Mac

OS X 10.4 and later

DocketSCAN II with

Scan-to-PDF utility

Windows® 7, Vista,

XP, 2003, 2000; Mac

OS X 10.4 and later

Presto!

PageManager 7

Windows® 7, Vista,

XP, 2003, 2000; Mac

OS X 10.4 and later

Power Consumption

Dimensions (L x W x H)

Scanning Modes Internal 48-bit analog-

to-digital conversion

for R,G,B three-color

channels

0.01W suspend;

0.2W standby;

2.0W during scan

10 ppm B/W;

4 ppm color

48-bit color (internal),

24-bit color (output),

8-bit grayscale,

1-bit B&W

6 ppm B/W;

3 ppm color

Business cards to

legal documents

0.2W standby;

2.0W during scan

FCC Class B, CE,

USB-IF.org

Internal 48-bit analog-

to-digital conversion

for R,G,B three-color

channels

5 ppm B/W;

2 ppm color

0.01W suspend;

0.2W standby;

2.0W during scan

Windows® 7, Vista,

XP, 2003, 2000; Mac

OS X 10.4 and later

DocketSCAN II with

Scan-to-PDF utility



8-bit grayscale,

1-bit B&W

6 ppm B/W;

3 ppm color

Business cards to

legal docs, A4 format

0.2W standby;

2.0W during scan

FCC Class B, CE,

USB-IF.org


The DocketPORT® 687 offers quick and convenient scanning for ID cards and licenses with supported

document sizes ranging from business cards to 4” x 10” documents. Like many of DCT’s other products, the DocketPORT

® 687 is a fully USB-powered, portable duplex scanner. The DocketPORT

® 531 has a

flatbed design and scans security documents with an infrared source. This platform is optimal for passports, drivers’ licenses, bank checks, ID cards, photos, and digital watermarked documents.

Table 5 (continued)


PRODUCT SPECIFICATIONS

DocketPORT® 687 DocketPORT® 667 DocketPORT® 540 DocketPORT® 531

Interface USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (high speed) USB 2.0 (full speed)

Image Sensor Linear color CMOS CMOS Area

Resolution 600 dpi (optical) 600 dpi (optical) 600 dpi (optical)

Scan Speed Under 2 seconds 3 to 12 seconds

Scan Area 4.13" x 10" A6 format 4.13" x 10" A6 format 3.8" x 5.0" 5" x 3"

Weight 10.6 oz. 8.4 oz. 2 lbs. 20 oz.

8" x 2.75" x 1.8" 7.5" x 2" x 1.7" 7.6" x 8.6" x 3.8" 8.6" x 6.1" x 1.7"

Cable Length 152 cm (detachable) 152 cm (detachable) 183 cm 152 cm (detachable)

Paper Sensor Electro-mechanical Electro-mechanical None, flatbed design

Paper Thickness 0.1 mm to 1.0 mm 0.1 mm to 0.7 mm No limit, flatbed design

CE, FCC Class B FCC Class B, CE

WEEE, RoHS WEEE, RoHS RoHS WEEE, RoHS

DocketSCAN TWAIN driver only

Dual, 2 linear color

CMOS



8-bit grayscale,

1-bit B&W

6 ppm B/W;

3 ppm color

0.2W standby;

2.0W during scan

FCC Class B, CE,

USB-IF.org

Linear color - infrared

CMOS




8-bit grayscale,

1-bit B&W

Scanning Modes

Dimensions (L x W x H)

Power Consumption

Regulatory Requirement

Monochrome, Color,

and Infrared filter

0.2W standby;

2.0W during scan

Windows® XP, 2000,

ME, 98SE

Windows® 7, Vista,

XP, 2003, 2000

Presto!

PageManager 7

Infrared, Grayscale,

Color

Environmental RequirementOperating SystemsBundled Software

100-240 VAC,

50/60 Hz

0.2W standby;

2.0W during scan

FCC Class B, CE,

USB-IF.org

Windows® 7, Vista,

XP, 2003, 2000

DocketSCAN 2 with

Scan-to-PDF utility

Windows® 7, Vista,

XP (64- and 32-bit)


Legacy Products Figure 5 illustrates some of DCT’s legacy products, for which the Company offers technical support and software downloads through its website, www.docucap.com. These comprise a selection of DocketPORT

® devices as well as the TravelScan

® line, which are entry-level document management

products. Similar to the aforementioned DocketPORT

® products, the TravelScan

® scanners are lightweight, have a

small footprint, and are full-speed USB powered. As they require minimal workspace, they can be conveniently carried with laptops, enabling users to efax, email, and organize business documents on the go. The optical resolution of the scanners in the TravelScan

® line is 300 dpi, and each of these is also

RoHS compliant. They entail minimal power consumption and are designed for simple operation at the touch of a button.

Figure 5


LEGACY PRODUCTS


DocketPORT® 485

DocketPORT® 665

TravelScan® 660TravelScan

® 662

TravelScan® FS531TravelScan

® PRO 2300 U/UP

TravelScan® 464/464M

DocketPORT® 685

TravelScan® PRO600/600ND

DocketPORT® 465


CUSTOMER AND PARTNER RELATIONSHIPS DCT supplies document capture systems for use at a range of enterprises, including government agencies, large corporations, SOHO setups, professional practices, and consumers. However, the Company’s sales and marketing efforts are not targeted toward the end-users of its products but rather to its direct customer base. As represented in Figure 6, DCT’s imaging products are distributed globally through private-label solutions to Tier 1 original equipment manufacturers (OEMs), value-added resellers (VARs), and other system integrators, including NCR Corp., Qualcomm, Inc., Burroughs Payment Systems, Inc. (formerly part of Unisys Corp. [UIS-NYSE]), and Brother Industries, Ltd., among others.

NCR is a global technology company that supplies automated teller machines (ATMs), retail point-of-sale (POS) workstations, self-service kiosks, check and document imaging, and other solutions that aim to help businesses connect, interact, and transact with their customers. Qualcomm specializes in wireless communications worldwide, particularly for mobile communications and consumer electronics. Brother International Corp. (the U.S. subsidiary of the Japanese parent, Brother Industries) provides products for the home, home office, and office, including industrial products, home appliances, and business products manufactured by Brother Industries. Other well-known Brother products include printers, fax machines, and electronic labeling. In addition, DCT has worked with multiple other third parties, such as CardScan

®, a developer of contact

management technology for scanning business cards and managing the contact information in a database. In 2008, CardScan

® was merged into DYMO, the technology division of Newell Rubbermaid

Inc. (NWL-NYSE), which supplies a variety of organization and productivity solutions. DCT also designs and manufactures product for Visioneer, Inc., a developer of intelligent imaging solutions. Visioneer has an exclusive licensing agreement with Xerox Corp. to develop and market Xerox-branded document scanners and digital projectors. Altogether, DCT markets its scanners through a global network of more than 45 independent distributors and channel partners in North America, Europe, and Asia.


Figure 6

DCT has provided products to many entities in the document capture market, including but not limited to…

Sources: Crystal Research Associates, LLC and Document Capture Technologies, Inc.

A SELECTION OF THE COMPANY'S PARTNERS

Ambir Technology Inc.

NCR Corp. DYMO-CardScan®, the technology division of Newell Rubbermaid Inc.

Qualcomm, Inc.

Brother Industries, Ltd. Xerox Corp., via a relationship with Visioneer, Inc. Digital Check Corp.

Burroughs Payment Systems, Inc.


One of the primary benefits that DCT offers its customers is a vertically integrated business structure. The Company designs, develops, and manufactures, allowing for quicker time to market. DCT also handles product compliance and seeks to address any other concerns presented by its clients. Many customers, such as NCR, visit the Company’s manufacturing facility on a biannual basis. As such, these relationships serve to validate DCT’s capabilities. In addition, the Company maintains a product service and support group for over 50 key channel partners that entails Web-based driver support, call center support, and warranty and repair support. Figure 7 provides a sample illustration to highlight how DCT’s product designs become branded third-party products.

Revenues DCT reported net revenues of over $14.8 million in 2010 (up from $11.5 million in 2009), generated solely through sales of its document and image capture products. This increase of 29% was due to a 33% increase in the number of scanners sold by the Company during 2010, as the average selling price remained relatively constant. Sales included purchases by recurring customers for use in existing products as well as for use in next-generation offerings. NCR’s Recent Investment in DCT On August 5, 2010, DCT received $4 million from NCR Corp. via a private placement of Common Stock at $1.036 per share. In connection with the investment, NCR was given the right, at its election, to designate one member to the Company’s Board and was granted a two-year option to purchase an additional $4 million of Common Stock at $1.036 per share. To date, NCR has not exercised its right to designate a Board member. The investment by NCR signifies both a strategic and financial milestone. DCT expects to direct these funds toward further partnership with NCR for the development of turnkey transaction solutions in both the remote deposit capture (RDC) and healthcare markets. Because DCT’s technology is synergistic with NCR’s products in multiple areas, this investment may also facilitate the Company’s entry into new markets, such as hospitality and travel. As part of the investment, NCR and DCT strengthened their existing strategic supplier master procurement agreement. This agreement, initiated in July 2009, pertains to DCT’s manufacture and sale of scanning products intended for resale by NCR. What was originally a three-year term on this agreement is now extended until August 2014. Under the terms, DCT may not provide any products to any other entity engaged in RDC or that seeks to facilitate electronic document management on a bank’s secure server.

FROM DESIGN TO REALITY


Figure 7



MARKET OPPORTUNITIES Information and Communications Technology (ICT) ICT generally entails any device, service, or technology concerned with the storage, retrieval, manipulation, transmission, or receipt of digital data. During 2009, the global ICT market contracted approximately 3% in response to the worldwide economic crisis. In contrast, overall global trade declined roughly 12.2% in 2009 (Source: the World Trade Organization, March 2010). As the world markets recover (world trade was expected to expand 9.5% during 2010), the ICT market as well is set to rebound—fueling spending for products and solutions that enhance information management.

Based on research conducted by IHS Global Insight, Inc., a division of IHS Inc. (IHS-NYSE), the World Information Technology and Services Alliance ([WITSA] www.witsa.org) anticipates worldwide ICT growth of over 8% during 2011, stabilizing near 6% in 2013 (Source: WITSA’s Digital Planet 2010: the Global Information Economy, June 2010). From 2009 to 2013, Digital Planet 2010 forecast regional growth rates ranging from 5.9% per year for the Americas to 9.5% for Asia-Pacific, although the Americas will likely still be the largest market for ICT products and services in 2013. Figure 8 depicts findings that government and business account for a sizeable share of ICT spending due to ICT’s ability to create cost efficiencies, boost productivity, and enhance competitiveness. Moreover, vertical markets, such as financial services and telecommunications, tend to have the greatest level of ICT (Source: WITSA, November 23, 2010).

Figure 9 highlights global ICT spending levels during 2009 for a number of major industries. Financial services, noted in Figure 9 to be among the largest existing markets for ICT products, is expected to remain a leading sector over the next several years as well (Source: Digital Planet 2010). As detailed on the following pages, DCT targets many of these vertical industries, particularly finance and healthcare.

Figure 9

Source: Figure 7, page 16 of Digital Planet 2010 from the World Information Technology and Services Alliance and IHS Global Insight, Inc.

ICT SPENDING BY INDUSTRY SEGMENT IN 2009 ($US Billions)

Financial Services

Government

Services

Manufacturing

Telecom

Transportation

Healthcare

Retail Trade

Wholesale and Distribution

Hospitality, Hotels, and Leisure

Energy and Utilities

Construction

Natural Resources

Educational Services

- 50 100 150 200 250 300 350 400

Hardware

Software

Services

Communications

($US Trillions, forecasted)

GLOBAL ICT SPENDING BY MAJOR SEGMENT

Figure 8

Source: Figure 5, page 15 of Digital Planet 2010 from the World Information Technology and Services Alliance and IHS Global Insight, Inc.

5.0

4.0

3.0

2.0

1.0

0.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Consumer Business/Gov't


Mobile Document Capture Over the past several years, a mobile scanning market has developed in response to the widespread prevalence of broadband, which is nearly ubiquitous in the U.S. today. Broadband is essentially high-speed Internet access that is always available. With reliable broadband service, consumers and enterprises alike benefit, as businesses have the ability to operate websites 24 hours a day, seven days a week, and can deliver products and services in real time. Government, education, and healthcare institutions also profit from offering online services, such as interactive home-based medical monitoring, multi-media distance learning, or sending and receiving data to run a home business, among other applications (Source: Communications Workers of America). Accordingly, consumers have gravitated to electronic forms of communication, transmitting documents via email or otherwise online rather than in paper form. DCT is capitalizing on the paper-to-digital revolution, which is fueled by advancements within the broadband sector itself, particularly with regard to the speeds that are now available for consumers that make transmitting large files online far less time consuming than previously. Check 21 Act As a result of all of the changes brought about by the technological revolution over the past several decades, people and businesses alike are in need of solutions to address newly arising security concerns. In particular, recent new legislation has aided the establishment of a digital marketplace, which requires advanced technologies and information-protection measures, such as DCT’s mobile scanners with built-in security features (described on page 18). For example, after the Check Clearing for the 21

st

Century Act (“Check 21”) became effective in October 2004, DCT began working to address several new market opportunities created through this law. Check 21 allows banks to process electronic checks in the same way that paper checks are processed. The establishment of Check 21 enabled remote deposit capture (RDC) as a means for account holders to remotely upload images of their paper checks to banking institutions instead of physically depositing the paper check. As well, and perhaps a lesser known effect of Check 21, is that it was also designed to enable banks to handle checks electronically between branches and institutions. Traditionally, banks had to physically move paper checks from the bank where they were deposited to the bank that paid them. A Selection of the Company’s Targeted Vertical Markets Through its customer relationships, DCT has targeted global vertical markets that it believes have growth potential and that could benefit from faster, easier-to-use products offering enhanced security. DCT’s imaging products are supplied to partners in diversified industries encompassing banking, transportation, healthcare, justice, law enforcement, and entertainment. Several trends today are helping to drive demand for document capture solutions such as DCT’s, as noted below: � A proliferation of “green” initiatives intended to efficiently reduce waste; � Increasing demand for digital storage to reduce paper storage; � Greater requirements and legislation for secure information processing (e.g., the Health Insurance

Portability and Accountability Act [HIPPA]); and � Increasing demand for secure, efficient, and remotely performed financial transactions. To that extent, efficiency is a key advantage driving the adoption of DCT’s products. USB-powered scanners can make a number of processes more efficient. Between the widespread adoption and increased speeds of broadband, Check 21 and other legislation, and various other general security concerns, DCT has identified a range of vertical markets that could benefit from integrating its page-capture platforms into both new and existing systems. Such target markets include healthcare, passport/ID cards, RDC and banking, security, and transport, among many others (as listed in Table 6 [page 26]).


DCT evaluates direct and focused opportunities where its products can be simple to use and be integrated at a lower cost with ease to its customer base as well the end-user. Below are overviews of several market sectors where the Company’s platforms are currently employed and where it believes there are further near-term expansion opportunities. In addition, DCT works within the SOHO arena, and expects the point-of-sale to become more of an opportunity in the future as well. Further, the Company’s pipeline includes products that capitalize on trends toward mobile and Web-based transactions. Healthcare Historically, healthcare has represented over 50% of the Company’s revenues on an annual basis. Going forward, DCT continues to see considerable healthcare opportunities, particularly in light of the U.S. government’s focus on digitizing healthcare documents. Fraud detection has been a critical driver of DCT’s healthcare business. Patient fraud occurs when someone goes into a healthcare provider and supplies their personal insurance card and identification but fills out the appropriate forms on behalf of a friend or relative who actually has the health issue and is in need of the care but lacks insurance. Often, once the receptionist photocopies the ID and insurance information and places it in the patient’s file, it is not verified again. To address this issue, the healthcare system has started implementing multiple points of identity verification. Thus, when an individual checks in at the receptionist, their information is uploaded to an electronic file, which is available for verification by physicians and other medical personnel as they see the patient. For example, when a physician orders an X-ray or an MRI for a patient, the technician can pull up the patient’s information and view a photograph of the patient to ensure that the correct person is receiving treatment. These procedures may help reduce insurance fraud.

Additional scanner applications within the healthcare industry include, but are not limited to, the following: (1) updating medical records at nursing stations, examining rooms, or other remote locations; (2) patient or customer registration and verification through a kiosk; (3) facilitating insurance claim documentation; and (4) co-payment processing. Often, claims are rejected by insurance companies due to manual errors; however, electronically capturing patient information and sharing it with other providers and insurance partners may minimize the potential for error. As illustrated in Figure 10, compact products (e.g., the DocketPORT

® 600

series) are optimal for scanning information at the front desk of a healthcare facility, such as IDs and insurance cards. DCT’s scanners can lead to shortened registration times, reduced errors, and reduced costs.

Healthcare and Medical Applications Financial Sector and Banking

Passport and ID Card Security Readers Gaming and Lottery

Remote Deposit Capture (RDC) Bulk Freight In-Cab Solutions (Trucking and Transport Form Input)

Document Management Legal and Sales Contracts

Corporate IT Solutions Faxing and Mobile Imaging Communication

Business Cards and Receipts


EXAMPLES OF DCT'S VERTICAL MARKETS FOR MOBILE SCANNERS


Table 6


Scanners for IDs and Insurance Cards

600 SERIES


Figure 10


In a move to further establish contacts in the healthcare industry, DCT entered into a consulting agreement with National Health Media in August 2010. The Company expects this relationship to provide ongoing representation in the healthcare industry, generating awareness for DCT’s products’ significance and application in the industry beyond solely ID card scanning. Specifically, this relationship is expected to help the Company capitalize on the current U.S. government’s push toward the digitization of healthcare documents and the storage of that information in a cloud-based environment. Healthcare represents more than 17% of gross domestic product (GDP) in the U.S. today (Source: The Week October 29, 2010), and is a crucial area for DCT going forward. Rising Healthcare Costs Create Opportunities for More Efficient Technologies The U.S. spent $2.3 trillion on healthcare in 2008, which was more than double the per capita spending of European countries, Japan, and other industrialized nations (Source: The Week). With ongoing pressure to control costs and simplify complicated processes, healthcare providers and organizations are seeking new, more productive approaches. Such methods may include implementing new technologies geared toward creating low-cost efficiencies, such as DCT’s platforms, which can work as stand-alone document and image scanners or as part of larger systems for automated healthcare records. Approximately 31% of all U.S. healthcare costs are related to paperwork, which is a leading contributor to the rising cost of healthcare (Source: New England Journal of Medicine 349:768-775; 2003). There is also a significant need for IT systems that reduce administrative expenses and improve healthcare resources and processes, particularly as it relates to insurance plan management (Source: Health Affairs Vol. 28 [4]: 544:554; 2009). Recent federal healthcare reform in the U.S. included two new laws signed in March 2010: (1) the Patient Protection and Affordable Care Act; and (2) the Health Care and Education Reconciliation Act of 2010. Among other changes, these acts include provisions that require most individuals to obtain health insurance, establish new regulations on health plans, establish health insurance exchanges, and modify certain payment systems to encourage more cost-effective care and to reduce inefficiencies and waste, including through new tools to address fraud and abuse. Passports and ID Cards Identification verification, insurance card scanning, and scanning patient documents are believed to be among the most common uses for document capture platforms. DCT’s passport and ID scanners, such as the DP 540 (described on pages 16-17), also enable transaction verification by capturing images of photo IDs or drivers’ licenses, among other forms. The USA Patriot Act, passed in response to the September 11, 2001, terrorist attacks, encompasses numerous provisions aimed at improving security and identification measures in the U.S., particularly with regard to border controls, law enforcement, and financial activities. As a result, institutions have a greater responsibility to collect and maintain identifying information about their customers. As drivers’ licenses and passports are among the most common forms of identification presented, there is increased demand for efficient ID scanners and devices that can capture this paper-based information for secure digitization, transmittal, or storage. Remote Deposit Capture (RDC) RDC is one of the fastest growing trends in banking technology because it allows customers the convenience of depositing checks from any location equipped with a scanner, computer, and Internet connection. Recently, RDC has expanded to smartphones, which now have the ability to photograph a check and send it to the bank. RDC is a service used by both businesses and individuals. It is expected to expand considerably during 2011, as financial institutions and companies such as PayPal.com seek to further differentiate their mobile and online services. RDC is a new, disruptive technology that only came into fruition after the U.S. Congress implemented Check 21 in October 2004. This act permitted banks to deposit checks based on images of the original checks without requiring the physical document. RDC offers banks and consumers alike multiple benefits, including convenience, speed (as funds are often available earlier using RDC than in-person deposits), reduced processing and paper costs, and enhanced operational efficiencies.


RDC is associated with security concerns, such as consumers’ account information being hacked if checks are transmitted over an unsecured connection. Thus, it is important for banks and other RDC vendors to be selective in choosing RDC platforms that address potential security issues. DCT has previously entered into agreements with Bridgeport Technologies, Digital Check, Burroughs, and NCR to develop RDC services using DCT’s USB-powered mobile scanners. The Company and its partners supply RDC products and applications to reduce the processing cost of deposits and related transaction costs. Moreover, DCT’s proprietary technologies allow its partners and clients to customize their RDC solutions, with the goal of creating improved customer service and ongoing revenue growth by increasing customer satisfaction and retention. In particular, DCT entered into a strategic OEM agreement with NCR in August 2009 to supply an RDC solution targeting small businesses. DCT’s technologies have served to augment NCR’s existing portfolio, thereby helping NCR’s financial customers implement effective RDC programs. DCT also recognizes an opportunity to integrate RDC solutions within its healthcare offerings. Such functionality allows a healthcare provider to deposit co-payment checks instantly, making funds more readily available while reducing the overhead costs associated with processing such payments. Financial Sector and Banking The Company’s relationships with NCR and Burroughs have contributed to its identification of financial institutions as new targets for the use of document capture. The small and micro business banking sector represents an example of how large banks could employ DCT’s products. Based on research from NCR, DCT estimates that there are over 25 million small and micro businesses in the U.S. that have a business checking account. Moreover, the Company believes that this market has been underserved by financial institutions due to the costs of providing greater business services to smaller companies. However, with the introduction of lower cost, lightweight, easy to integrate, mobile scanners, such as those provided by DCT, banks may be able to renew programs where small and micro businesses are incentivized to open an account and remain a customer. For instance, the bank could offer a complimentary portable scanner with new accounts, which the customer could then use to remotely deposit checks into the new online business checking account. On a larger scale, small and micro businesses (or any other customer for whom this approach is employed) could scan and upload important documents via their secure banking relationship to a virtual safety deposit box. DCT’s research has determined that this “electronic vault” concept will likely need to be offered by a financial or insurance institution due to concerns over security and privacy; however, those institutions could supply a plug-in allowing the consumer to open an online secure storage area sponsored by the institution. Consumers could scan and upload birth certificates, vehicle titles, social security cards, and many other documents to what is essentially a virtual safety deposit box that could be accessed from any terminal worldwide. The Company’s products may help facilitate the management of business cards, expense reports, and a number of other new services that banks could be able to initiate for customers. By incorporating DCT’s platforms, banks benefit by being able to offer cost-efficient perks that aid customer retention. By having a dedicated device to interact with their online banking, customers may be less likely to move to a different bank. This is a sample scenario of how DCT may be able to expand its sales going forward by targeting the banking sector. In addition, DCT also works with various kiosk manufacturers for financial transactions, such as NCR. In recognition of the growth opportunities in the financial and banking sector for both DCT and its RDC partners, the Company exhibited at the Banking Administration Institute’s (BAI) Retail Delivery Conference during October 2010 in Las Vegas, which is one of the largest global retail financial services events. There, DCT profiled its new DP 540 ID scanner, among other products, highlighting the platform’s abilities to deliver cost efficiencies and increased revenues.


Gaming and Lottery In gaming and lottery, DCT is working with a foreign government entity in order to incorporate its scanning technology into cable set-top boxes. One of the objectives in this scenario is to allow cable customers to enter the state-run lottery from their home, just as they currently do at retail locations. Next-generation technology could expand the gaming industry to homes by allowing customers to scan gaming documents (e.g., Keno cards) through their home Internet connection. Government A wide range of other government agencies represent target customers for DCT including but not limited to the following: (1) the Veterans Administration (VA); (2) U.S. Customs and Border Protection; (3) the Transportation Security Administration (TSA); (4) the Department of Homeland Security; and (5) the Department of Defense’s (DOD) procurement system. Essentially, any government agency that reviews and verifies documentation at multiple processing points, or process documents remotely, is a potential customer for DCT. Bulk Freight In-Cab Solutions During 2011, DCT anticipates that its products could be used within the bulk freight field as well. There were over 5.6 million commercial trailers, including semis, registered in the U.S. during 2009 (Source: the U.S. Department of Transportation’s Federal Highway Administration, January 2011). Several entities have begun creating full in-cab solutions, which entail an in-cab satellite-based computer system for fleet management. Typically, drivers collect a receipt/bill of lading for each delivery and turn these in when they arrive back to dispatch. Once the paperwork is received by accounting, invoicing can occur. In contrast, with an in-cab computer system and DCT’s mobile scanners, drivers could scan and send the bills of lading immediately after delivery, enabling a much faster start to the invoicing process. In April 2009, DCT entered into an agreement with Belgium-based, transportation management company, Punch Telematix n.v., which has since been acquired by Trimble Transport & Logistics. Trimble provides integrated onboard computers, wireless communication services, and Web-based back-office applications for the transport and logistics sector. Per the agreement, DCT’s mobile scanning technologies were adopted for Punch’s CarCube™ onboard computer system. The inclusion of DCT’s products was expected to allow drivers to communicate instantly with their back offices and clients, improving cost-effective information delivery of invoices, purchase orders, and trip routes. Other transportation applications include long-haul carrier delivery verification; enabling real-time rail and multi-mode manifest updates; emergency and public safety vehicles; and border patrol processing of commercial vehicles. Corporate Beyond the vertical markets described on the preceding pages, DCT’s product lines are also applicable for general corporate IT functions, such as facilitating paper-to-digital submissions of contracts, agreements, critical records, and other documents. Due to the scanners’ lightweight, compact nature, sales and field forces could capitalize on DCT’s mobile units to scan meeting notes, upload business cards, or save and organize receipts, as could telecommuters and individuals who fax for convenience. Likewise, large consultancy, insurance, and financial firms can equip mobile employees with DCT scanners designed to securely integrate with corporate document management systems. Some products are designed especially for capturing business card data, while others aid record-keeping and archiving, such as for receipts and tax documents.


Competition

DCT’s products may compete with the document capture platforms offered by large corporations, such as Canon Inc. (CAJ-NYSE) and Fujitsu Ltd (6702-TYO). However, it is important to note that many retail scanners are multiple page-fed devices, which increases their price and entry level. DCT has positioned itself as supplying entry-level niche products with the potential to expand the scanning market.

While DCT may encounter competition from companies providing scanners to the retail market, the Company most closely competes with entities that target vertical markets as they mature. To maintain a competitive advantage, DCT focuses on R&D and factory efficiency, which is intended to enable improved time-to-market product cycles and quality products. Table 7 summarizes what DCT believes to be its competitive advantages.

The companies listed below are not intended to be an exhaustive collection of DCT’s competitors but rather an indication of the type of competitors the Company may encounter as it seeks further market penetration. DCT’s customers are not included in this competition overview.

Canon Inc. (CAJ-NYSE)

Canon is a Japanese multinational corporation that focuses on manufacturing imaging and optical products. The company was founded in 1937 and is headquartered in Tokyo. Canon has manufactured various types of scanners, and its present portfolio comprises nine document scanners, four photo scanners, and four film or negative scanners, as well as a variety of higher-end business scanners capable of over 40 pages per minute (ppm). One of the company’s most recent products relevant to DCT’s business is the imageFORMULA P-150 personal document scanner. The P-150 or as it is also called, the Scan-tini, is a compact, USB-powered scanner, that is designed for user friendliness and estimated to process 15 ppm. This product represents Canon’s first personal scanner and its first USB-powered, professional-grade document scanner. The P-150 incorporates the company’s CaptureOnTouch Lite software, allowing users to “plug-and-scan.” Canon-branded products are available through numerous resellers as well as its Canon Business Solutions, Inc. unit.

Fujitsu Limited (6702-TYO)

Headquartered in Tokyo, Fujitsu offers a variety of products in the document imaging and computing industries. Recently, Fujitsu showcased the ScanSnap S1100, which is reported to be one of the world’s smallest portable document scanners. ScanSnap S1100 is USB powered and weighs roughly 12 ounces. Additionally, the ScanSnap S1100 enables the user to scan documents into Evernote

® and Google

Docs™ cloud services. Similarly, Fujitsu’s ScanSnap S300M, designed for Macintosh operating systems, is USB powered and is reported to have a scanning speed of 16 ppm.

Table 7


POTENTIAL COMPETITIVE ADVANTAGES

ƒ Product quality and performance

ƒ Patented and proprietary-based products

ƒ Established reputation, experience, and presence in the USB-powered document and image capture market

ƒ Relationships that allow DCT to identify and work closely with customers to meet market demands

ƒ A vertical integration design and manufacturing business model that reduces the time to introduce a new or

improved product to the market

ƒ Broad distribution channels



Plustek Inc. (Closely held) Headquartered in Taiwan, Plustek originated in 1986 as an OEM and has since become a global manufacturer of imaging solutions. Plustek leverages its factories and engineering skills for just-in-time manufacturing on a contract basis. Currently, Plustek’s imaging products comprise a number of product lines, including the MobileOffice scanner series. MobileOffice models entail portable, lightweight scanners, many of which are powered by USB. Plustek has created units geared for home and road use, as well as for healthcare, pharmacy, financial, and transportation (e.g., in-truck use) applications worldwide. The company positions its MobileOffice D428 as an easy to use, high-speed, compact scanner for vertical markets that require scanning of plastic cards or documents up to 8.5” x 14” in size. The D428 is applicable to front desk, teller, patient intake, and pharmacy applications. Its USB-powered MobileOffice S420 simplex scanner captures paper documents and business cards at a rate of approximately 12 ppm. Additional models enable duplex scanning, scans of rigid cards and small items such as insurance cards, ID cards, checks, deposit slips, receipts, and medical prescriptions, and offer functions such as scanning to a searchable PDF. Rather than focusing solely on the retail customer, Plustek targets its products as industry solutions for vertical markets, such as accounting, education, financial, healthcare, and transportation. In addition, Plustek’s SDK is a collection of development libraries that includes a barcode reader library, a check reader library, and an ID card scanning library, thus allowing software developers and system integrators to integrate the use of Plustek scanners into their software applications. The company’s technologies are available through software vendors, VARs, and solution and distribution partners. The Neat Company (Closely held) Headquartered in Philadelphia, Pennsylvania, the Neat Company develops and markets scanner and software solutions. It was founded in 2002 and formerly operated as NeatReceipts. The Neat Company offers products ranging from lightweight, USB-powered mobile scanners to complete digital filing systems. The company markets NeatDesk

®, a system that is capable of scanning receipts, business cards, and

other documents, and NeatScan®, a toolbar for installation in Microsoft Word

®, PowerPoint

®, Excel

®, and

Outlook® that enables document scanning and editing within the applications. The Neat Company also

created NeatReceipts®, a mobile scanner and digital filing system that scans business cards, receipts,

and other documents to produce expense reports, capture contact information, and create searchable PDFs. Neat Company products are also designed as a way to add scanning into existing solutions through integrated scanner and software solutions. The Neat Company is a Microsoft Certified Partner, and has partnered with synergistic solution providers, ExpenseWire and MyBusinessExecutive. Neat Company products are available for purchase through the Neat Company’s store, retail stores, and authorized resellers. The company has also created an infomercial campaign for “As Seen on TV” sales. VuPoint Solutions (Closely held) Headquartered in California, VuPoint produces scanners and other electronics, such as printers and waterproof binoculars. VuPoint’s current focus has been producing lightweight and portable scanners. One recent innovation of VuPoint is the Magic Wand™. The Magic Wand™ weighs less than a pound. The Magic Wand Jr.™ is similar to the Magic Wand™ but weighs less than four ounces. Both products are USB powered, with varying capacities. I.R.I.S. s.a. (IRIS-NYSE Euronext Brussels) With global headquarters in Belgium, I.R.I.S. develops and provides intelligent document recognition and electronic document management products and technologies. Currently, the company has operations in eight countries and sells products to 90 countries worldwide. The I.R.I.S. home and office product lines include optical character recognition (OCR) software to convert and edit paper documents and PDF files instantly, pen scanners that insert text onto a computer and digital pens, mobile scanners, photo scanners, and card scanners that scan and export business cards to a contact manager. The company’s corporate products also entail document server software, high-speed scanning software, invoice solutions, form solutions, toolkits and OEM services that enable integration of I.R.I.S. technologies into third-party applications, and products for sorting, indexing, and archiving.


I.R.I.S. markets IRIScan™ 2, a portable, lightweight scanner that is USB connected and equipped with an extended software suite. IRIScan™ 2 can scan photos as well as convert documents into editable text files and business cards into Outlook

® contacts. The company also offers IRIScan™ Anywhere 2, a

battery-powered scanner that allows users to scan without a computer. IRIScan™ Anywhere 2 saves files to the scanner itself or to a memory card and can be recharged using a USB cable. In July 2009, Canon acquired approximately 17% of I.R.I.S. for approximately €22 million. PlanOn System Solutions Inc. (Closely held) Headquartered in Ontario, Canada, PlanOn provides mobile scanning and printing solutions. The company offers full-page scanners and printers, and believes that it may possess imaging products among the smallest in the world. For example, PlanOn’s DocuPenXtreme X05 portable scanner is the size of a standard pen but includes a rechargeable battery, 200 MHz computer processor, and Bluetooth. PlanOn products are available for purchase online, through retail stores, and through a network of resellers. Bluepoint Solutions Inc. (Closely held) In February 2011, Bluepoint Solutions announced that several additional credit unions opted to use Bluepoint’s QwikDeposit ToGo as their mobile RDC platform. In contrast to physical check deposits or PC-based uploads, this mobile platform allows users to deposit checks securely with a camera-equipped smartphone. The application was designed to support the majority of smartphones currently on the market. Bluepoint develops software used by companies in the financial services industry, specifically credit unions, in order to process checks and digitally manage forms in compliance with Check 21. Bluepoint provides RDC solutions for financial institutions at the home, business, store, ATM, teller window, or branch level. All points of capture are fully integrated with Bluepoint’s Transport Service, which makes items available for immediate clearing and which the company believes may result in savings on dollar amount or per item transmission fees. Bluepoint also maintains a central repository for captured images, thus images are available for retrieval institution-wide. In addition to RDC, the company offers image-based item processing, electronic document management, and receipt management. Cachet Financial Solutions Inc. (Closely held) In March 2011, Cachet launched a new product called CheckReview™, which is intended to enable financial institutions to easily recognize potential check fraud. Cachet expected to begin coupling CheckReview™ with its existing RDC solutions in April 2011. Cachet provides consumer and commercial deposit capture solutions for financial institutions and their customers. Its RDC Select™ software program reduces the need for financial institutions to create and maintain internal RDC businesses. Cachet’s software is developed for both Windows

® and Mac operating systems and is designed to clarify the

process of implementing and servicing RDC.


Milestones Recent Milestones � Reported a record fourth quarter 2010 with revenues totaling $4.6 million. � In 2010, DCT’s revenue totaled $14.8 million ($11.5 million in 2009), and earnings before interest,

taxes, depreciation, and amortization (EBITDA), excluding non-recurring expenses, totaled $1.6 million ($394,000 in 2009).

� Hired Mr. Karl Etzel as product and business development manager. � Hired Mr. Jacques F. vonBechmann as senior vice president of sales to bring sales and marketing

expertise to the Company’s key global markets.

� Appointed Mr. Craig H. Weber, who brings extensive management, corporate finance, and legal experience to DCT, as president and chief operating officer (COO).

� Participated in several exposition and trade shows where the Company could further profile its scanner portfolio, meet with decision makers, and introduce innovative new technologies and products. Forums included the Documation 2011 Trade Show at the Paris La Defense, March 23-24, 2011; the Travel Technology Show in London, February 8-9, 2011; and the Banking Administration Institute’s (BAI) Retail Delivery Expo in Las Vegas, October 19-21, 2010.

� Introduced the DocketPORT® 540 (DP 540) passport and ID scanner.

� Received a $4 million equity investment from NCR Corp. in August 2010. Potential Milestones � Expand product offerings to meet end-user needs as identified by DCT’s OEM and VAR customers. � Expand global presence to penetrate international markets. � Develop new uses for existing technology (e.g., as a virtual safety deposit box).


Historical Financial Results From 2008 through 2010, DCT strengthened its financial position and eliminated debt. The Company’s Statements of Operations, Balance Sheets, and Statements of Cash Flows are included in Tables 8, 9, and 10 (pages 35-37). Significant Capital Transactions On September 27, 2007, the Company repurchased and retired 8,000,000 (35% of the then outstanding shares) of its restricted Common Stock from its majority stockholder. On August 5, 2010, DCT received $4 million from NCR Corp. via a private placement of Common Stock at $1.036 per share. In connection with the investment, NCR was given the right, at its election, to designate one member to the Company’s Board and was granted a two-year option to purchase an additional $4 million of Common Stock at $1.036 per share. To date, NCR has not exercised its right to designate a Board member. On September 10, 2010, DCT’s Board of Directors authorized a $2.5 million Share Repurchase Program of the Company’s Common Stock. To date, under this authorization, DCT has repurchased and retired 2,969,000 shares of Common Stock (or 13% of the shares outstanding on September 10, 2010). As of the end of March 2011, $303,000 remained available for repurchase under the existing repurchase authorization limit. As a result of these capital transactions, DCT believes that it has a solid foundation on which to move forward.


2010 2009

Net sales 14,849$ 11,529$

Cost of sales 9,030 6,936

Gross profit 5,819 4,593

Operating expenses:Selling, general, and administrative 5,098 3,880

Research and development 1,088 1,013

Total operating expenses 6,186 4,893

Operating loss (367) (300)

Non-operating income (expense):Change in fair value of Stock Option liability and derivative instruments 733 9

Interest income 1 1

Interest expense (57) (54)

Other 71 9

Total non-operating income (expense) 748 (35)

Net income (loss) before income taxes 381 (335) Provision (benefit) for income taxes 102 (74)

Net income (loss) 279 (261)

Accretion of Preferred Stock redemption value — (30)

Net income (loss) available to Common Stockholders 279$ (291)$

Basic earnings (loss) per share 0.01$ (0.02)$ Diluted earnings (loss) per share 0.01$ (0.02)$

Weighted average Common Shares outstanding – basic 20,581 18,775 Weighted average Common Shares outstanding – diluted 27,092 18,775


CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)

Document Capture Technologies, Inc. and Subsidiary

Table 8

Years Ended December 31,


December 31, December 31,2010 2009

ASSETSCurrent assets:

Cash and cash equivalents 2,322$ 328$

Trade receivables 2,539 1,497

Inventories, net 1,730 1,674

Income tax receivable — 65

Prepaid expenses and other current assets 259 67

Total current assets 6,850 3,631

Restricted cash — 5

Other non-current assets 44 —

Fixed assets, net 145 176

Total assets 7,039$ 3,812$

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:

Line of credit $ — 202$

Trade payables to related parties 654 341

Trade payables and other accrued expenses 546 440

Accrued compensation and benefits 712 124

Deferred revenue and customer deposits 29 111

Income tax payable 100 —

Total current liabilities 2,041 1,218

Stock Option liability 811 —

Long-term deferred rent 70 —

Commitments and contingencies

(See Note 11 of DCT's Form 10-K filed 03/16/2011)

Stockholders’ equity:

Preferred Stock $.001 par value, 2,000 authorized, 0 issued and

outstanding at December 31, 2010 and December 31, 2009

Common Stock $.001 par value, 50,000 authorized, 20,479 and

19,406 shares issued and outstanding at December 31, 2010

and 2009, respectively 20 19

Additional paid-in capital 36,940 35,697

Accumulated deficit (32,843) (33,122)

Total stockholders’ equity 4,117 2,594 Total liabilities and stockholders’ equity 7,039$ 3,812$

CONSOLIDATED BALANCE SHEETS (in thousands)


Table 9



2010 2009Operating activities

Net income (loss) 279$ (261)$ Adjustments to reconcile net income (loss) to cash used in operating activities:

Depreciation expense included in operating expenses 49 58

Depreciation expense included in cost of sales 54 —

Fair value of Common Stock and Common Stock Warrants issued for services rendered 74 111

Stock-based compensation cost-options 940 525

Change in fair value of Stock Option liability and derivative instruments (733) (9)

Non-cash interest expense 45 18

Changes in operating assets and liabilities:

Trade receivables (1,042) (131)

Inventories (56) (321)

Prepaid expenses and other current assets (131) (69)

Other non-current assets (44) —

Trade payables to related parties 313 (52)

Trade payables and other accrued expenses 106 164

Accrued compensation and benefits 588 2

Income taxes payable 100 (75)

Deferred revenue and customer deposits (82) (76)

Long-term deferred rent 70 —

Cash provided (used) by operating activities 530 (116)

Investing activitiesCapital expenditures (72) (91)

Cash (used) provided by investing activities (72) (91)

Financing activitiesProceeds from issuance of Common Stock, net of issuance costs 3,971 —

Net advances (payments) on bank line of credit (225) 225

Loan origination fees (13) (20)

Cash paid upon the maturity of Preferred Stock — (75)

Payments for repurchase of Common Stock (2,197) —

Cash provided by financing activities 1,536 130

Increase (decrease) in cash and cash equivalents 1,994 (77)

Cash and cash equivalents at beginning of year 328 405

Cash and cash equivalents at end of year 2,322$ 328$

Supplemental disclosures of cash flow information:Cash paid during the year for:

Interest 16$ 31$

Income taxes 2$ 67$

Non-cash investing and financing activities:Conversion of Warrants to Common Stock $ — 350$

Conversion of Convertible Preferred Stock to Common Stock $ — 75$

Issuance of Common Stock Warrants in connection with debt $ — 35$

Transfer of tooling equipment deposits to fixed assets $ — 45$

Years Ended December 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)


Table 10



Risks Some of the information in this Executive Informational Overview

® (EIO

®) relates to future events or future

business and financial performance. Such statements can only be predictions and the actual events or results may differ from those discussed due to the risks described in DCT’s statements on Forms 10-K, 10-Q, 8-K, as well as other forms filed from time to time. The content of this report with respect to DCT has been compiled primarily from information available to the public released by the Company through news releases, Annual Reports, and U.S. Securities and Exchange Commission (SEC) filings. DCT is solely responsible for the accuracy of this information. Information as to other companies has been prepared from publicly available information and has not been independently verified by DCT. Certain summaries of activities have been condensed to aid the reader in gaining a general understanding. For more complete information about DCT, please refer to the Company’s website at www.docucap.com. Investors should carefully consider the risks and information about DCT’s business described below. Investors should not interpret the order in which these considerations are presented as an indication of their relative importance. The risks and uncertainties described below are not the only risks that the Company faces. Additional risks and uncertainties not presently known to DCT or that the Company currently believes to be immaterial may also adversely affect its business. If any of the following risks and uncertainties develops into actual events, the business, financial condition, and results of operations could be materially and adversely affected, and the trading price of the Company’s shares could decline. RISKS RELATING TO DCT’S BUSINESS A significant percentage of DCT’s revenue is derived from sales to a few large customers, and if the Company is not able to retain these customers, or if they reschedule, reduce, or cancel orders or delay or default on payments, DCT’s revenues would be reduced and its financial condition and cash flows would suffer. Total sales to significant customers (customers that represent more than 10% of DCT’s net sales) were 62% and 64% during the years ended December 31, 2010 and 2009, respectively. For further details, refer to Note 1 included in Part II, “Item 8: Financial Statements,” of the Company’s Form 10-K filed with the SEC on March 16, 2011. DCT expects that its largest customers will likely continue to account for a substantial portion of the Company’s net sales for the foreseeable future. None of its customers are obligated to purchase a minimum number of products in the aggregate or during any particular period. DCT cannot provide assurance that any of its customers will continue to purchase products at historic or current levels. The Company has experienced a history of recurring operating losses and may continue to incur losses for the foreseeable future. DCT’s operating loss was $367,000 and $300,000 for the years December 31, 2010 and 2009, respectively. Its accumulated deficit as of December 31, 2010, was $32,843,000. The Company cannot provide assurance that it can achieve operating profitability in the future. DCT currently subcontracts the manufacturing of its image-capture products to one company and this reliance on one company exposes DCT to risk that could damage its reputation and adversely affect business. If the Company’s manufacturer (refer to Part III, “Item 13: Certain Relationships and Related Transactions, and Director Independence” of the March 16, 2011, Form 10-K for further details) becomes unable or unwilling to provide products to DCT in a timely manner, the Company may not be able to deliver products to customers on time, which could increase costs, damage its reputation, or result in the loss of customers. Although DCT has the right to utilize other manufacturers at any time, identifying and qualifying a new manufacturer to replace the current manufacturer could take 6 to 12 months.


At the end of January 2010, Shenzhen Syscan Technology (SST) announced a relocation of its primary manufacturing facility, currently in Shenzhen, China, to Wuhan, Hubei, China. The purpose of the relocation relates to an opportunity for SST to reduce its direct and overhead costs. Based on information provided to it by SST as of March 31, 2010, DCT anticipated the new manufacturing facility to be fully functional by April 2011 with minimal impact to the manufacturing process; however, DCT cannot provide assurance that production will not be negatively impacted. In the event that there is a delay in the relocation of the manufacturing facility, DCT’s business operations could be materially adversely affected.

DCT depends on a limited number of suppliers to provide the components and raw materials necessary to manufacture its products; any interruption in the availability of these components and raw materials used in the products could reduce revenues.

Although many alternative suppliers exist, DCT relies on a single or limited number of suppliers for many of the significant components and raw materials required to manufacture its document and image capture products. This reliance leads to a number of significant risks, including the following:

� Unavailability of materials and interruptions in delivery of components and raw materials from suppliers;

� Manufacturing delays caused by such unavailability or interruptions in delivery; and

� Fluctuations in the quality and the price of components and raw materials.

DCT does not have any long-term or exclusive purchase commitments with any of its suppliers. Failure to maintain existing relationships with current suppliers, or failure to establish new supplier relationships in the future, could negatively affect the Company’s ability to obtain necessary components and raw materials in a timely manner. If DCT is unable to obtain ample supply of materials from existing suppliers or alternative supply sources, it may be unable to satisfy customers’ orders, which could reduce revenues and adversely affect relationships with customers. Because DCT relies on a limited number of suppliers, any cost increases or other changes that impact suppliers could be imposed on the Company and may require it to incur additional costs in order to obtain an adequate supply of components and raw materials.

DCT faces growing competition and expects competition to increase in the future.

The Company faces an increasingly competitive market with larger competitors and rapidly evolving technologies. DCT anticipates pricing pressure from domestic and international markets requiring ongoing management attention. Any material decrease in its revenues as a result of any such pricing pressures, without a corresponding reduction in cost of goods sold, would have a material adverse effect on gross profit.

DCT’s executive officers and key personnel are critical to its business and the loss of their services could adversely affect business.

DCT’s success depends to a significant degree upon the continuing contributions of its key executive officers and managers. Although the Company has employment agreements with most of these individuals, it cannot guarantee that it can retain these individuals. In addition, it has not obtained “key man” life insurance on the lives of any of the members of its management team.

The authorization and issuance of “Blank Check” Preferred Stock could have an anti-takeover effect detrimental to the interests of stockholders.

DCT’s certificate of incorporation allows the Board of Directors to issue Preferred Stock with rights and preferences set by the Board without further stockholder approval. In particular circumstances, issuance of these “Blank Check Preferred” shares could have an anti-takeover effect. For example, in the event of a hostile takeover attempt, it may be possible for management and the Board to impede the attempt by issuing Blank Check Preferred Shares, thereby diluting or impairing the voting power of other outstanding shares of Common Stock and increasing the potential costs to acquire control of the Company. The Board of Directors has the right to issue Blank Check Preferred Shares without first offering them to holders of Common Stock, as the holders of the Common Stock have no preemptive rights.


DCT’s results of operations could vary as a result of the methods, estimates, and judgments that it uses in applying accounting policies.

The methods, estimates, and judgments that DCT uses in applying its accounting policies have a significant impact on results of operations (refer to “Critical Accounting Estimates” in Part II, Item 7 of the March 16, 2011, Form 10-K). Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions. Factors may arise over time that lead DCT to change its methods, estimates, and judgments. Changes in those methods, estimates, and judgments could significantly affect results of operations. DCT’s results of operations could be impacted by macroeconomic and other factors, including currency exchange rates, harming its results of operations.

Such factors include fluctuations in foreign currency exchange rates, specifically the fluctuation between the Chinese Yuan and the U.S. dollar, and fluctuations in interest rates. RISKS RELATED TO INTELLECTUAL PROPERTY AND TECHNOLOGY

Unauthorized use of DCT’s intellectual property and proprietary technology could adversely affect the Company’s business and results of operations.

DCT’s success and competitive position depend in large part on its ability to obtain and maintain intellectual property rights to protect its products. DCT currently, and may in the future, rely on a combination of patents, copyrights, trademarks, service marks, trade secrets, confidentiality provisions, and licensing arrangements to establish and protect its intellectual property and proprietary rights. Unauthorized parties may attempt to copy aspects of its products or obtain, license, sell, or otherwise use information that DCT regards as proprietary. Policing unauthorized use of its products is difficult, and the Company may not be able to protect its technology from unauthorized use.

Additionally, DCT’s competitors may independently develop technologies that are substantially the same or superior to the Company’s without infringing its rights. In these cases, DCT would be unable to prevent competitors from selling or licensing these similar or superior technologies. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S. Third parties have claimed and may claim in the future that DCT or its customers are infringing, or contributing to the infringement of, their intellectual property. DCT could be exposed to significant litigation or licensing expenses or be prevented from selling its products if such claims are successful.

DCT may be unaware of intellectual property rights of others that may cover some of its technologies and products. If it appears necessary or desirable, the Company may seek licenses for these intellectual property rights. However, it may not be able to obtain licenses from some or all claimants or the terms of any offered licenses may not be acceptable to the Company, and DCT may not be able to resolve disputes without litigation. Any litigation regarding intellectual property could be costly and time-consuming and could divert the attention of management and key personnel from business operations.

In the event of a claim of intellectual property infringement, DCT may be required to enter into costly royalty or license agreements. Third parties claiming intellectual property infringement may be able to obtain injunctive or other equitable relief that could effectively block the Company’s ability to develop and sell products.

RISKS RELATING TO COMMON STOCK

The stock market has experienced volatility that often has been unrelated to the operating performance of listed companies. These broad fluctuations may be the result of unscrupulous practices that may adversely affect the price of stock, regardless of operating performance.

Shareholders should be aware that, according to SEC Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include the following: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and


undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of DCT’s share price.

The limited prior public market and trading market may cause possible volatility in stock price.

To date, there has only been a limited public market for DCT’s securities and there can be no assurance that the Company can attain an active trading market for its securities. Its Common Stock trades on the Over-the-Counter Bulletin Board (OTC.BB), which is an unorganized, inter-dealer, OTC market that provides significantly less liquidity than the national securities exchanges. Quotes for securities on the OTC.BB are not listed in the financial sections of newspapers as are those for the national securities exchanges. Moreover, in recent years, the overall market for securities has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies. The trading price of DCT’s Common Stock is expected to be subject to significant fluctuations that are affected by, but not limited to, the following:

� Quarterly variations in operating results and achievement of key business metrics;

� Changes in earnings estimates by securities analysts, if any;

� Any differences between reported results and securities analysts’ published or unpublished expectations;

� Announcements of new products by DCT or its competitors;

� Market reaction to any acquisitions, joint ventures, or strategic investments announced by DCT or its competitors;

� Demand for DCT’s products;

� Shares sold pursuant to Rule 144 or upon exercise of Warrants and Options or conversion of Series B Convertible Preferred Stock; and

� General economic or stock market conditions unrelated to DCT’s operating performance.

These fluctuations, as well as general economic and market conditions, may have a material or adverse effect on the market price of DCT’s Common Stock.

The OTC.BB is a quotation system, not an issuer listing service, market, or exchange. Therefore, buying and selling stock on the OTC.BB is not as efficient as buying and selling stock through an exchange. As a result, it may be difficult to sell Common Stock or investors may not be able to sell Common Stock for an optimum trading price.

The OTC.BB executes trades and quotations using a manual process and cannot guarantee the market information for securities. In some instances, quote information, or even firm quotes, may not be available. The OTC.BB’s manual execution process may delay order processing and as a result, a limit order may fail to execute or a market order may execute at a significantly different price due to intervening price fluctuations. Trade execution, execution reporting, and legal trade confirmation delivery may be delayed significantly. Consequently, one may not be able to sell shares of Common Stock at the optimum trading prices.

OTC.BB securities are frequent targets of fraud or market manipulation not only because of their generally low price, but also because the OTC.BB reporting requirements for these securities are less stringent than for listed or NASDAQ-traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of Common Stock.


When fewer shares of a security are traded on the OTC.BB, the security’s market price may become increasingly volatile and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes of DCT’s Common Stock, there may be a lower likelihood that one’s orders for its Common Stock will be executed, and current prices may differ significantly from the price one was quoted by the OTC.BB at the time of one’s order entry.

Orders for OTC.BB securities may be canceled or edited like orders for other securities. All requests to change or cancel an order must be submitted to, received, and processed by the OTC.BB. The OTC.BB executes trades using a manual process, which could cause delays in order processing and reporting, and could hamper one’s ability to cancel or edit one’s order. Consequently, selling shares of DCT’s Common Stock at the optimum trading prices may be impossible.

The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of DCT’s Common Stock on the OTC.BB if the stock must be sold immediately. Further, purchasers of DCT’s Common Stock may incur an immediate “paper” loss due to the price spread. Moreover, dealers may not have a bid price for DCT’s Common Stock on the OTC.BB. Due to the foregoing factors, demand for the Company’s Common Stock on the OTC.BB may be decreased or eliminated.

DCT’s Common Stock is considered a “penny stock.” The application of the “penny stock” rules to its Common Stock could limit the trading and liquidity of the Common Stock, adversely affect the market price of its Common Stock and increase transaction costs to sell those shares.

The Commission has adopted regulations that generally define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, DCT’s shares of Common Stock are subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established clients and “accredited investors.”

For transactions governed by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities, must obtain the purchaser’s written consent to the transaction, and must deliver to the purchaser a SEC-mandated, penny stock risk disclosure document, all prior to the purchase. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell DCT’s shares of Common Stock and may affect the ability of investors to sell such shares of Common Stock in the secondary market and may affect the price at which investors can sell such shares.

Additional authorized shares of DCT’s Common Stock and Preferred Stock available for issuance may result in substantial dilution to its shareholders.

DCT is authorized to issue 50,000,000 shares of its Common Stock. As of March 8, 2011, there were 20,479,276 shares of Common Stock issued and outstanding. The total shares of Common Stock issued and outstanding does not include shares reserved in anticipation of the exercise of Options or Warrants. As of March 8, 2011, DCT had the Common Shares listed in Table 11 reserved for future issuance.

Stock Options – employees, directors, and contractors 15,244,498

NCR Option 3,861,004

Warrants outstanding 798,027

Total 19,903,529

COMMON SHARES RESERVED FOR FUTURE ISSUANCE


Table 11



The numbers above do not include 71,667 shares that are available for future grant under employee Stock Option plans. To the extent that Options or Warrants are exercised, the holders of the Company’s Common Stock will experience further dilution. In addition, in the event that any future financing should be in the form of, be convertible into or exchangeable for, equity securities, and upon the exercise of Options and Warrants, investors may experience additional dilution. While the Company has no present plans to issue additional shares of Preferred Stock in the future, its Board of Directors has the authority, without stockholder approval, to create and issue one or more series of such Preferred Stock and to determine the voting, dividend, and other rights of holders of such Preferred Stock. The above bulleted numbers do not include any future issuance of Preferred Stock. The issuance of any of such series of Preferred Stock will cause further dilution to holders of Common Stock. Future sales of DCT’s Common Stock could put downward selling pressure on its Common Stock, and adversely affect the per share price. There is a risk that this downward pressure may make it impossible for an investor to sell shares of Common Stock at any reasonable price, if at all. From time to time, certain of the Company’s stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933 (Securities Act), subject to certain limitations. In general, Rule 144 permits the unlimited sale of securities by stockholders that are non-affiliates that have satisfied a six-month holding period, and affiliates of the Company may sell within any three-month period a number of securities that does not exceed 1% of DCT’s then outstanding shares of Common Stock. Any substantial sale of Common Stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of its securities. Limitations on director and officer liability and indemnification of officers and directors may discourage shareholders from bringing suit against a director. DCT’s certificate of incorporation and bylaws provide, with certain exceptions as permitted by governing Delaware law, that a director or officer shall not be personally liable to the Company or its shareholders for breach of fiduciary duty as a director, except for acts or omissions that involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage shareholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by shareholders on DCT’s behalf against a director. In addition, the Company’s certificate of incorporation and bylaws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Delaware law.


Recent Events 03/31/2011—Document Capture Technologies, Inc. provided an update on the $2.5 million Share Repurchase Program approved by the Board of Directors on September 10, 2010. 03/21/2011—Announced that it was presenting its latest products and technologies to over 6,000 global professionals and decision makers at the Documation 2011 Trade Show at the Paris La Defense, March 23-24, 2011. Representatives included key management and information technology (IT) executives from the global finance, healthcare, security, and insurance sectors as well as large end-users and channel partners. 03/16/2011—Announced 2010 revenues of $14.8 million, a 29% increase over 2009. Net income rose to $279,000 in 2010 versus a loss of $291,000 in 2009. Earnings per share (EPS) were $0.01 for 2010, and working capital plus line of credit availability increased to $6.5 million at December 31, 2010, from $3.3 million at December 31, 2009. Further year-end financial data is presented on pages 34-37. 02/16/2011—Announced the hiring of Mr. Karl Etzel (biography on page 11) as product and business development manager. 01/31/2011—Announced that it was presenting the latest of its scanning technologies, particularly the recently announced DocketPORT

® 540 (DP 540), to IT travel professionals at the Travel Technology

Show (Booth A20) in London, February 8-9, 2011. 01/07/2011—Announced the hiring of Mr. Jacques F. vonBechmann (biography on page 10) to the position of senior vice president of sales. Mr. vonBechmann’s marketing expertise in the pharmaceutical, consumer products, technology, and finance sectors is expected to help grow and enhance sales in the Company’s key global markets. 11/15/2010—Reported third quarter 2010 sales of $3.5 million, an increase of 19% over the same period in 2009, and year-to-date sales of $10.3 million, an increase of 28% over 2009. Year-to-date EBITDA increased to $690,000 versus a loss of $6,000 for the same period in 2009. Year-to-date net loss improved 40% to a loss of $305,000 from a loss of $505,000 for the same period in 2009. 11/11/2010—Announced the appointment of Mr. Craig H. Weber (biography on page 10) as president and chief operating officer (COO). 10/14/2010—Announced that the Company was exhibiting in Booth 213 at the Banking Administration Institute’s (BAI) Retail Delivery Conference at the Mandalay Bay Hotel in Las Vegas from October 19-21, 2010. DCT believes that this conference is one of the largest retail financial services events in the world. 09/23/2010—Announced the release of the DP 540 passport and ID card scanner. 09/14/2010—Announced that the Board of Directors authorized a $2.5 million share repurchase program of the Company’s Common Stock. 08/11/2010—Reported second quarter 2010 revenues of $3.3 million, an increase of 10% from the second quarter 2009. For the first six months of 2010, revenues were $6.7 million. Net income for the year-to-date 2010 period rose to $123,000 from a loss of $576,000 in the first half of 2009. 08/09/2010—Announced that it received $4 million through a private placement of its Common Stock to NCR Corp. at $1.036 per share. 06/10/2010—Announced the appointment of Ms. Roseann Larson (biography on page 11) to its Board of Directors and as chair of DCT’s Audit Committee. 05/25/2010—Reported first quarter 2010 revenues of $3.4 million, a 70% increase over first quarter 2009.


Glossary Best-of-Breed—A term of art used to describe a product believed to be the best of its type. Organizations often purchase software from different vendors in order to obtain the best-of-breed for each application area, such as a human resources package from one and an accounting package from another. Bill of Lading—A document signed by a carrier (a transporter of goods) or the carrier’s representative and issued to a consignor (the shipper of goods) that evidences the receipt of goods for shipment to a specified designation and person. Bluetooth—A short-range wireless technology designed to allow connection of portable devices in a wire-free manner. Broadband—Of or relating to or being a communications network in which the bandwidth can be divided and shared by multiple simultaneous signals (as for voice, data, or video). Buffer—(computer science) A part of RAM used for the temporary storage of data that is waiting to be sent to a device. It is used to compensate for differences in the rate of flow of data between components of a computer system. CE Mark—Conformité Européenne. A mandatory European marking for certain product groups to indicate conformity with the essential health and safety requirements set out in European Directives. To permit the use of a CE Mark on a product, proof that the item meets the relevant requirements must be documented. Check 21 Act (“Check Clearing for the 21st Century Act”)—Signed into law on October 28, 2003, and effective on October 28, 2004, Check 21 is designed to foster innovation in the payments system and to enhance efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. Chip—Short for microchip, the complex yet tiny modules that store computer memory or provide logic circuitry for microprocessors. Many special-purpose chips, known as application-specific integrated circuits, are being made today for automobiles, home appliances, telephones, and other devices. Cloud—(as it relates to computing) Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on-demand. Complementary Metal-Oxide Semiconductor (CMOS)—A semiconductor technology process that is also applied on the image sensor device of all of DCT’s mobile scanners to convert the light intensity of the exposed document into a digitized electronic signal for computing process. DCT’s CMOS image sensor also uses linear-type CMOS sensors to line up a number of segments to form a size A4 or A6 length to capture images applied in the mobile sheet-fed scanner. It consumes less power, making them suitable for use in battery-powered devices, such as portable scanners, computers, and memory devices. Contact Image Sensors (CIS)—A relatively recent technological innovation in the field of optical flatbed scanners in low power and portable applications. A CIS places the image sensor in near direct contact with the object to be scanned, in contrast to using mirrors to bounce light to a stationary sensor, as is the case in conventional scanners. A CIS typically consists of linear array of detectors, covered by a focusing lens and flanked by red, green, and blue LEDs for illumination. LED use allows the CIS to be power efficient, with many scanners being powered through the minimal line voltage supplied via a USB connection.


Dots per Inch (dpi)—A measure of output resolution produced by printers or monitors. The greater the dpi, the better the clarity and resolution of an image. End-user—The final consumer of a product. The end-user may differ from the person or entity that initially purchases the product. Footprint—The area taken up by some object. Health Insurance Portability and Accountability Act (HIPPA)—Legislation passed in 1996 that includes a privacy rule creating national standards to protect personal health information. Home POS—The point-of-service (POS) at home could include services such as interactive gaming (e.g., lottery, Keno), couponing, and special purchase opportunities online and via cable. Information and Communications Technology (ICT)—Any device, application, service, or technology concerned with speeding and facilitating the exchange and distribution of information. ICT includes products that store, retrieve, manipulate, transmit, or receive information electronically in a digital form. Keno—A game of chance, adapted from lotto for gambling purposes. Light-emitting Diode (LED)—A semiconductor or “solid state” light source that can produce a very bright light for a small amount of power. Linux—A Unix-like operating system that was designed to provide personal computer users a free or low-cost operating system comparable to traditional and usually more costly Unix systems. Linux has a reputation as an efficient and fast-performing system. Micro Businesses—A very small business that is privately owned and operated with a small number of employees and a relatively low volume of sales. Optical Mark Readers—A scanning device that can read carefully placed pencil marks on specially designed documents. These are frequently used in forms, questionnaires, and answer-sheets. Original Equipment Manufacturers (OEMs)—Entities that supply equipment to other companies to resell or incorporate into another product using the reseller’s brand name. OEMs may also be considered to be the companies that acquire a product or component and reuse or incorporate it into a new product under the new brand name. Point-of-Sale—Combination of hardware and software that records customers’ purchases, accepts payments, and adjusts inventory levels. Remote Deposit Capture (RDC)—A system that allows a customer or bank to scan checks remotely and transmit the check images to a bank for deposit, usually via an encrypted Internet connection. RDC is made possible by the Check 21 Act, passed in October 2003 and implemented in October 2004, which allows banks to clear checks based on images of the original checks, rather than necessarily having the physical checks in hand in order to post the deposit. Restriction of Hazardous Substances (RoHS) Directive—Bans the use of certain hazardous substances (such as lead, mercury, cadmium, hexavalent chromium, and some polybrominated flame-retardants) in electrical and electronic equipment. RoHS allows possible exemptions. In July 2006, the EU began requiring all electronics products sold within the EU to be RoHS compliant pursuant to the European Directive 2002/95/EC as amended by European Directive 2003/108/EC(e). Reverse Merger—In a reverse takeover, shareholders of the private company purchase control of the public shell company and merge it with a private company. The publicly traded corporation is called a “shell” as all that exists of the original company is its organizational structure. The private company shareholders receive a substantial majority of the shares of the public company and obtain control of its Board of Directors.


Scanners—Electronic devices that generate a digital representation of an image for data input to a computer. Set-top Boxes—Devices that enable a television set to become a user interface to the Internet as well as to receive and decode digital television broadcasts. TWAIN 1.9—An image capture standard for Microsoft

® Windows

® and Apple Macintosh operating

systems. The TWAIN standard was first released in 1992, and is currently ratified at version 2.1 as of July 2009. TWAIN is typically used as an interface between image processing software and a scanner or digital camera. USA Patriot Act—The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot) Act is a U.S. law passed in the wake of the September 11, 2001, terrorist attacks. Its goals were to strengthen domestic security and broaden the powers of law-enforcement agencies with regards to identifying and stopping terrorists. USB (Universal Serial Bus)—The most widely used hardware interface for attaching peripherals to a computer. USB 1.0 (1996) and USB 1.1 (1998) provide a low-speed 1.5 Mbps subchannel for keyboards and mice and a full-speed channel at 12 Mbps. High-speed USB 2.0 (2001) offers a top rate of 480 Mbps (up to 40 times faster than USB 1.0) while SuperSpeed USB 3.0 (2008) provides a 10 times increase to 4.8 Gbps. Value-added Resellers (VARs)—A company that integrates the hardware and software of several vendors with its own software, then resells the entire package. Vertical Markets—In business, all of the potential purchasers within a business sector; a market that meets the needs of a particular industry by producing similar goods or services (e.g., banking, insurance, transportation). Voluntary Control Council for Interference (VCCI)—The Voluntary Control Council for Interference by Information Technology Equipment is the Japanese body governing radiofrequency emissions (i.e., electromagnetic interference) standards. It was formed in December 1985 and the VCCI mark also appears on some electrical equipment sold outside Japan. Waste Electrical and Electronic Equipment (WEEE) Directive—Sets out the financial and other responsibilities of EEE producers with regard to the collection and recycling of waste from a broad range of EEE at their end of life. Wi-Fi—A logo from the Wi-Fi Alliance that certifies that network devices comply with the IEEE 802.11 wireless Ethernet standards. In the early 2000s, Wi-Fi/802.11 became widely used, and within a short time, all laptops and other handheld devices were equipped with built-in Wi-Fi. Earlier laptops can be Wi-Fi enabled by plugging in a Wi-Fi adapter via the USB port or PC card. Windows® CE—Microsoft

® Windows

® CE is an open, scalable, 32-bit operating system that integrates

real-time capabilities with advanced Windows® technologies for a range of small footprint devices. A

typical Windows® CE–based device is designed for a specific use, often runs disconnected from other

computers, and requires a small operating system that has a deterministic response to interrupts. Examples include enterprise tools, such as industrial controllers, communications hubs, and point-of-sale terminals, and consumer products, such as cameras, Internet appliances, and interactive televisions.


Jeffrey J. Kraws and Karen B. Goldfarb

Phone: (609) 306-2274 Fax: (609) 395-9339

Email: [email protected] Web: www.crystalra.com

Legal Notes and Disclosures: This report has been prepared by Document Capture Technologies, Inc. (“DCT” or “the Company”) with the assistance of Crystal Research Associates, LLC (“CRA”) based upon information provided by the Company. CRA has not independently verified such information. In addition, CRA has been compensated by the Company in cash of forty-three thousand, five hundred dollars and four hundred thousand warrants for its services in creating this report, for updates, and for printing costs. Some of the information in this report relates to future events or future business and financial performance. Such statements constitute forward-looking information within the meaning of the Private Securities Litigation Act of 1995. Such statements can be only predictions and the actual events or results may differ from those discussed due to, among other things, the risks described in DCT’s 10-K, 10-Q, press releases, and other forms filed from time to time. The content of this report with respect to DCT has been compiled primarily from information available to the public released by the Company. DCT is solely responsible for the accuracy of that information. Information as to other companies has been prepared from publicly available information and has not been independently verified by DCT or CRA. Certain summaries of activities and outcomes have been condensed to aid the reader in gaining a general understanding. For more complete information about DCT, the reader is directed to the Company’s website at www.docucap.com. This report is published solely for information purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any state. Past performance does not guarantee future performance. Additional information about DCT and its public filings, as well as copies of this report, can be obtained in either a paper or electronic format by calling (408) 436-9888.

document capture technologies (otcbb: dcmt)

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image capture products

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