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HomeMy WebLinkAbout03-15-2006 Council Economic Development CommitteeAGENDA City of Iowa City City Council Economic Development Committee Wednesday, March 15, 2006 3:00 p.m. City Hall Lobby Conference Room 410 East Washington Street 1. Call to Order 2. Approval of Minutes - March 10, 2006 3. Discussion of application from McConnell Revenue Cycle Solutions, Inc. for CDBG Economic Development Funds 4. Discussion of job description for Economic Development Coordinator 5. Discuss dates for visit to Nucleus Retail Incubator, Cedar Rapids 6. Adjournment MINUTES PRELIMINARY CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE MARCH 10, 2006 CITY MANAGER'S CONFERENCE ROOM Members Present: Regenia Bailey, Connie Champion, Bob Elliot Members Absent: None Staff Present: Steve Atkins, Karin Franklin, Steve Long, Tracy Hightshoe Others present: Joe Raso (ICAD) Call to Order Chairperson Bailey called the meeting to order at 9:03 a.m. Approval of the minutes of the February 16, 2006 meeting: Champion moved and Elliot seconded approval of the minutes of the Feb. 16, 2006 meeting as submitted. Motion passed, 3-0. Discussion of the future role of City in economic development: Franklin presented an overview of the current duties of the Economic Development Coordinator (attached), pointing out that this position has been funded at a .5 FTE level. She indicated economic development efforts have historically been divided between ICAD, the Chamber of Commerce and the City. In a very general fashion, ICAD's role has been that of recruiter for new businesses, the Chamber has nurtured existing businesses, and the City has played a responsive role, facilitating financial assistance and incentives and acting as a guide to and through government bureaucracy. The Committee was then asked for their views on the future of this position in the City. Elliot indicated it was important to have a City staff person with sufficient position and knowledge to be able to work with businesses and be responsive with information and decisions. Champion expressed her desire to at least keep the half-time position. Bailey suggested a more assertive role was necessary with a person who would be an active player in the Corridor and in spearheading and recruiting businesses for special projects in Iowa City such as Aviation Commerce Park South. Both Elliot and Bailey indicated the Committee had discussed on other occasions the need to have a full-time person devoted to economic development. Raso suggested the Chamber's focus is likely to be on legislative matters and business or entrepreneurial development using SEED as an example of their efforts. Discussion followed of the partnership that existed between the City, ICAD and the Chamber. Collaborations with the University of Iowa, through Meredith Hay's office, were cited and the need to further relationships with the University. Raso described the needs of ICAD, citing the importance of having a point person at the City especially for any primary sector project. It is critical to have someone he can go to for infrastructure information, financial incentive help, and to take a project through the processes of approval. The other activities Raso stressed were the ability to respond to information collected through ICAD's business surveys of existing industries and building relationships with the University. Discussion followed of the need to encourage retail development. Bailey asserted a need to manage retail and encourage it. Champion agreed that encouragement was appropriate but felt retail generally took care of itself. Elliot noted the downtown will never be like it was in terms of the presence of department stores. All agreed a vital downtown was essential to the success of the community and as an attraction to new industries. The Committee concluded there was merit in pursuing a full-time position in economic development and that the person in the position should be fairly high profile, knowledgeable and proactive. Raso suggested this person should be perceived as a business person. Discussion followed of the funding of this position with Champion and Bailey advocating moving forward with the position. Elliot expressed his discomfort with adding the half-time funding given his position on public safety. Franklin suggested a way to handle this would be to continue with the half-time position housed in the Planning Dept. for a year, with the Committee members fulfilling the functions of building relationships and partnerships to further economic development. This was not acceptable to a majority of the Committee. The staff was directed to move forward with developing a description of the full- time position to be reviewed by the Committee at its next meeting and taken to the full Council as soon as possible. Raso pointed out that with the changes occurring in the Chamber and the ICAD campaign, these organizations would not be prepared to partner on any efforts for a few months. Franklin pointed out it would likely take 3 or 4 months to recruit for the position, should the full Council concur anyway. Visit to Cedar Rapids retail incubator: Franklin asked for dates when people could take a couple of hours to go to Cedar Rapids. All agreed it would need to be sometime after spring break. It was also agreed to convene at the incubator and that other Council members would be invited to attend. Other business: KA Raso announced the ICAD campaign kick-off would be March 28 at 7:30 am at Brown Deer Golf Course with Kirk Ferentz as speaker. The next committee meeting was scheduled for Wednesday, March 15 at 3:00 p.m. to consider an application for CDBG funds for McConnell Revenue Cycle Solutions, Inc., a hospital finance and accounting outsourcing company. Meeting adjourned at 10:05 a.m. Minutes submitted by Karin Franklin 3 Council Economic Development Committee Attendance Record 2006 Name Term Expires 01118 02/16 03/10 Re enia Bailey 01/02/08 X X X Bob Elliott 01/02/08 X X X Connie Champion 01/02/08 O/E X X Economic Development As of 3-3-06 • Funded .5 FTE (.25 an associate planner & .25 CD/ED Coordinator) • Primary work tasks: o Respond to requests for information from ICAD, IDED, businesses o Facilitate and complete paperwork for TIF projects, discretionary tax exemption, CEBA, or jobs programs o Certify and monitor compliance with financial incentive agreements o Staff the Council Economic Development Committee o Evaluate and process requests for CDBG economic development funds o Monitor compliance with sub -recipient agreements for CDBG funds o Annual update of Community Profile o Primary contact for census information Work items, as time allowed: o Attendance at events relevant to economic development efforts; eg. Chamber business lunches;"Tom' events"; Chamber committee meetings; ribbon cuttings/openings of projects; etc. o Relationship building with UI Entrepreneurial Center, VP for Research, and other UI economic development personnel and entities o Work on concept of Iowa City as a "connected community" o Marketing of Iowa City; eg. update website; develop brochures City of Iowa City Application for Business Financial Assistance Business Requesting Financial Assistance: Business Name: McConnell Revenue Cycle Solutions, Inc. [MRCS] Name of Authorized Person to Obligate the Business: Cleo McConnell Business Address: 2939 Sierra Ct SW, Iowa City, IA 52240 Business Contact Person: Cleo McConnell Title: Chief Executive Officer Telephone:-319-621-1311 Fax: E-mail Address: info@mros-inc.com Business Federal ID#: 20-3744390 Date of Application Submittal: February 22, 2006 Release of Information and Certification NOTE: Please read carefully before signing I hereby give permission to the City of Iowa City (the City) to research the company's history, make credit checks, contact the company's financial institution, and perform other related activities necessary for reasonable evaluation of this proposal. I understand that all information submitted to the City relating to this. application is subject to the,Open Records Law (1994 Iowa Code, Chapter 22) and that confidentiality may not be guaranteed. I hereby certify that all representations, warranties or statements made or furnished to the City in connection with this application are true and correct in all material respects. I understand that it is a criminal violation under Iowa law to engage in deception and knowingly make, or cause to be made, directly or indirectly, a false statement in writing for the purpose of procuring economic development assistance from a state agency or political subdivision. SIGNATURE OF COMPANY OFFICER AUTHORIZED TO OBLIGATE BUSINESS: Vl L NOTE: The City will not provide assistance in situations where it is determined that any representation, warranty or statement made in connection with this application is incorrect, false, misleading or erroneous in any material respect. If assistance has already been provided by the city prior to discovery of the incorrect, false or misleading representation, the city may initiate legal action to recover city funds. I-- 9nh9 Section 1: Description of Business and Proposed Project 1 A Describe in detail the proposed "project" (for example, company relocation, plant expansion, remodeling, new product line, size of building expansion, number of new jobs, amount of investment in machinery and equipment etc.): MRCS is a Hospital Business Office Company acting as an extension of its clientele's existing business office including: Cash Acceleration Solutions, Claims Processing, Accounts Receivable Projects and other Business Office Functions including insurance verification, statement generation, management of collection agency relationships, correspondence processing and other complexities of third party billing. This is done by connecting to the clients existing operating system. 1.2. Provide a description and history of business: Hospitals are struggling with tighter budgets, shrinking reimbursements, increasing scrutiny over billing and collection practices, escalating regulatory requirements, aging population, rapidly evolving technology, and payers' changing rules. Most hospitals have found ways to implement one-time improvements to their revenue. However, hospitals must find other improvements that move beyond one-time opportunities and capture recurring improvements. MRCS has developed a system of outsourced hospital business office solutions that can integrate with virtually any type of medical provider organization seamlessly and in real-time. The claims processing, billing and bad debt reduction programs of MRCS will boast a 10 percent increase to Client Company bottom -lines on a monthly basis by reducing human resource liabilities, and by streamlining and reducing errors in claims, billing and collection processing. 1.3. Describe the organizational structure of the business, including any parent companies, subsidiaries, sister companies, etc. As MRCS is a start-up company, the organizational structure will initially consist of the owner/CEO as the- only officer, three billers, three insurance reps, three customer service reps, a receptionist, an administrative assistant, and IT Consultants for all IT processes. 1.4. List the names of the business owners and the percent of ownership held by each. McConnell Revenue Cycle Solutions will be a state of Iowa type 'S' corporation owned wholly by Cleo McConnell 1.5 List the business' five -digit and six -digit North American Industry Classification System (NAICS) codes or the primary and secondary Standard Industrial Codes (SIC codes)). The Company has identified organizations by four distinctive SIC (Standard Industry Classification) codes: (1) SIC 8011 Offices and Clinics of Medical Doctors, (2) SIC 8052 Intermediate Care Facilities, and (3) SIC 8062 General Medical and Surgical Hospitals. 1.5. Will the project involve a transfer of operations or jobs from any other Iowa City or Johnson County facility or replace operations or jobs currently being provided by another Iowa City or Johnson County company? If yes, please indicate the facility(s) and/or company(s) affected. No 1.6. What date will the project begin? Determined by funding and contract award oa ie Onn9 Be completed? Once operational, the business will be continuous. 1.7. Has any part of the project been started? If yes, please describe. No Section 2: Financial Contributions to the Proposed Project 2.0 What type and amount of financial assistance are you requesting from the City (for example, grant, forgivable loan, loan, property tax exemption, tax increment financing rebate, etc.)? Grant, Low interest loan in the amount of $60,000 2.1 a. If Community Development Block Grant Funds are being requested, please describe how the proposed project addresses the priorities, strategies, and goals cited in CITY STEPS 2001-2006. Page 123 & 124 of City Steps 2006-2010 2.1. Explain why assistance is needed from the City, and why it cannot be obtained elsewhere. (Specific supporting documentation evidenced by cash flow statements, income statements, etc., is requested.) If the City did not provide financial assistance, could the project proceed? The -project was submitted to Hills Bank & Trust for funding. The project was rejected. Rejection letter attached. 2.2. In what form is the business contribution to the project? Please explain clearly (for example, sale of stock, equity investments, subordinated debt, etc.). The owner of the company has already made an equity investment of $11,000 2.3. Identify all agencies or institutions involved in the project (financial and otherwise) and what their involvement is: Entrepreneurial Development Center, Inc. [EDC]. The EDC is a business accelerator located in Cedar Rapids and provides mentoring services to entrepreneurs. Targeted Client: Rural Hospitals throughout the State of Iowa Attorneys: Arenson & Zimmerman — Filed all of the paperwork required for an S Corp. They have also been retained to be the company attorneys. Accountants: Terry, Lockridge & Dunn - Retained to be the company accountants. Welt Ambrisco Insurance — Acting agents:for Health Insurance through Wellmark CitiGroup — Providers of retirement package 2.4. What type and amount of security will the assisted business provide the City? If no security is offered, an explanation must be provided. Note: as a general rule, for those businesses not publicly traded, personal guarantees are required in addition to other pledged business assets. Mortgage $60,000 (equipment) What seniority or position? 1$` position Personal guarantee: None Other $ None (if none, please explain) I have already put $11,000 of personal finances into the business. 2.5. Summary of Proiect Costs and PmnnsPd Financinn Sni mae USE OF FUNDS SOURCES (Summarize All Sources From Question 2,T) Activity Cost A B C D Land acquisition $ Site preparation $ Building acquisition $ Building construction $ Building remodeling $3,700 3,700 Machinery & equipment $60,000 60,000 Furniture & fixtures $5,300 5,300 Permanent working capital $50,000 50,000 (detail) Other $90,000 90,000 Other: Legal, Accountant, M isc $2,000 2,000 TOTAL: $211,000 $11,000 $60,000 $50,000 $90,000 2.6. Terms of Proposed Financina Code Source (include all sources in Question 2.6) Amount Type Rate Rate Term Source A: Personal Financing $11,000 Source B: City of Iowa City $60,000 Loan 2% 7 years. Source C: TSBA $50,000 Forgivable 2% 7 years Source D: Private Lender $90,000 Loan 7.5% 5 years I Total: 1 $211,000 1 (')For example: forgivable loan, direct loan, grant, equity, tax abatement, etc. 2.7. Generally a decision by the City on this application can be expected within 30 days of receipt of the application. If there is an urgent need for a more immediate decision on this application, please indicate the desired timeframe and the reason for the urgency. The company is actively bidding on contracts and will be required to begin the project within 2 weeks of signing. The equipment must be purchased and the phone system put into place so that the company is ready upon contract award. Section 3: Quality of Jobs to Be Created 3.1. How many employees are currently employed by the company worldwide (total employment including all locations, subsidiaries, divisions, affiliates, etc.)? The company will begin with 12 employees 3.2. If an existing Iowa City business, how many total individuals have been employed by the company at the Iowa City facility during the past year? N/A Start-up 3.3. If awarded funds, how many new full-time employees will you add to the payroll at the Iowa City facility within 12 and 24 months of the award date? The business acknowledges if it fails to create the jobs pledged below by the end of the project period and maintain them for a period of time (usually 36 months from the date of the award, it may be required to reimburse City funds for the employment shortfall, if the loan/grant was based on job creation. Full -Time: 12 12 months 12 Cumulative Full -Time: 24 months _ 25 Cumulative Part -Time: 1 12 months 1 Cumulative Part -Time: 24 months 2 Cumulative Note: Jobs created or retained using Community Development Block Grant Funds must be "held by" or "available to" low- or moderate -income individuals. 3.4. What is the estimated annual payroll for the new employees resulting from this project? $195,680 for all employees 3.5. What is the starting average hourly wage rate (not including fringe benefits) projected to be: For the new employees? $13/hr For existing employees? N/A For existing and new employees? $13/hr 3.6. In the following table, list positions and hourly rates for each job classification to be created and retained. List of Positions and Hourly Rate for Created and Retained Positions (use additional sheets if needed) CreateRetain Position TitlePer No. Hours Week Hourly Pa 1 Director Salaried 60,000 Annual 1 Trainer/Manager Salaried 40,000 Annual 1 Receptionist 40 $10 3 Customer Service Rep 40 $12 3 Billers 40 $15 3 Insurance Rep 40 $13 Note: Every applicant should provide average hourly wages for all new and existing jobs which meet or exceed the average county wage rate by industry. Ninety percent of the project positions should have a wage greater than the federal poverty wage rate for Iowa City (30% of median income for a four person household in Iowa City). Under special circumstances, consideration will be given to those companies who cannot meet this requirement. (Contact the Economic Development Coordinator at the City for current figures.) 3.7. Will any of the current employees lose their jobs if the project does not proceed? If yes, how many? Explain why: The business is dependant upon contracts with the hospitals. If the business does not secure contracts, the business will not exist. 3.8. Please describe the types of worker safety programs that would be available for your employees. Fire Plan Ergonomics 3.9. Does the business provide standard medical and dental insurance for full-time employees? If so, what percentage of the standard medical and dental insurance . package expense does the company provide? Yes. The company will provide 80%. Section 4: Economic Impact 4.1. Please document how much of your operating expenditures (raw materials, supportive services, machinery, equipment, and labor) will be spent within Johnson County. The company anticipates the majority of operating expenditures to be spent in the county. 4.2. What Johnson County companies do you expect to sell to that currently buy from non -eastern Iowa companies? What percentage of your sales will fall into this category? Office furnishings — Local vendor Office supplies — Local vendor 4.3. What other Johnson County companies could be considered to be your competitors? There are no competitors in the county. The company will not have any local competition. The company is targeting rural hospitals throughout the State of Iowa. The company is working with Kirkwood Community College to develop curriculum specific to hospital billing to include in their current medical billing course. 4.4. How will this project benefit the City/County? The business will create job opportunities for recent graduates from Kirkwood Community College. The company is working with Kirkwood Community College to create curriculum directly related to the business resulting in opportunity for advancement for Iowans. 4.5 How will this project grow the property tax base of Iowa City? The company will lease existing office space within the Iowa City Market. 4.6 Beyond the present project, what future growth potential is there for the Iowa City operation? Future growth of the company will result in 100's of jobs for Iowans. Section 6: Environmental Impact 5.1. Please describe the energy and resource efficiency programs, waste reduction, waste exchange, and recycling programs at your Iowa City operation. Correspondence received from clients will be scanned and integrated into the software system utilized by the company. The company will recycle paper, discarded printer ribbons, and copier toner products. 5.2. Do you use recycled materials in the production of any products or through the provision of any services at your facility? If so, please describe. The company will use recycled copy paper. 5.3. Will you be treating, transporting, storing, and disposing above ground, on or about your business premises, in tanks or otherwise, for any length of time or for any purpose; petroleum products, agricultural or other chemicals, waste oil or other liquid waste, or any other inflammable, corrosive, reactive, or explosive liquid or gas? If yes, please specify. N/A 5.4. Will the Iowa City operation develop renewable energy resources or products that conserve energy? If so, please describe. [10 Section 6: Community Involvement; Compliance with Law; Repayment Agreement 6.1. Please describe your business' history of contributing to the community through volunteer work, financial contributions, or other means. If a new start-up business, please describe commitment to becoming involved in the community. The company is a start-up. The company is a member of the local Chamber of Commerce. The company owner has been asked to join the board of the PTDN and the , company is working with Kirkwood Community College to develop curriculum directly related to the company core competency. 6.2. Has the business been cited or convicted for violations of any federal or state laws or regulations within the last five years (including environmental regulations, Occupational Safety And Health laws, Fair Labor Standards, the National Labor Relations Act, the Americans With Disabilities Act)? If yes, please explain the circumstances of the violation(s). N/A New Business 6.3. Financial assistance from the City of Iowa City requires a repayment. clause in the loan agreement with the City. The repayment clause requires a prorated repayment of the financial assistance if the company does not meet its job attainment obligation and other obligations of this agreement. Is the company willing to enter into a loan agreement that contains a repayment clause? If necessary for funding, the company is willing to enter into a low interest loan agreement that contains a repayment clause over a 7year period. Section 7: Required Attachments Check off each attachment submitted. If not submitted, explain why. [ xj Business plan (if new business) Ix l Profit and loss statements (3 year historical and 2 year projections) x ] Balance sheets and Cash Flow Statement - Balance sheets (3 year historical if an existing business) and 2 year projections using the forms provid .d h .r .in. One year of projected cash flow (using the format provided herein). x ] Letters of commitment of project funds (from banks, applicant, etc.) Rejection letter from Hills Bank attached. I x) Description of fringe benefits provided to employees Vacation, Holiday Pay, Group Insurance — Medical and Dental Coverage, Short Term and Long Term Disability, 401(k) Plan, Employee Incentive Awards, and at some point an Education Reimbursement Program will be created. Copies of the company's quarterly Iowa "Employer's Contribution and Payroll Report" for the past year and a copy of the most recent monthly payroll register Start-up x J Map indicating the location of the project within the community -)nni 4n x ] Cost estimates for construction, machinery/equipment, permanent working capital, and purchases. Office Furniture - $5,300; computers, software, hardware - $50,000; Telephone System - $12,000, Copier - $15,000 x I Certificate of Good Standing from the Iowa Secretary of State or an authorization to conduct business in Iowa. x I Certificate of Incumbency listing the current board of directors and current officers if a corporation or a listing of the general partners if a partnership On file for review [x I Corporate resolution authorizing the application for City funds x ] Corporate signatory authorization naming an officer to execute the City application and City loan documents, if approved I I Other Explanation/other comments: Upon review of a submitted application, the City reserves the right to request additional information in order to assist the City with its evaluation of an application. len 1- IM9 44 Uorporation Nummary rage 1 of 1 Home I Site Map I Contact Us i Search Business Services Home -+ Business Services -+ Search IA Corps -+ Summary Search Databases Business Services Online Filing • Addresses Agents Filings Names Officers Stock Summary Search Aaain Voter/Elections Corporation Summary Notaries Nonprofits Searched McConnell Revenue Cycle Solutions Print Certificate of Standing Students/Youth Legal Name Chapter Corp No. MCCONNELL REVENUE CYCLE SOLUTIONS, CODE 490 DOMESTIC 319063 Press/Media INC. PROFIT Publications Expiration Date Type Modified PERPETUAL Legal No i About the Office Effective Date State of Inc. Useful Links Nov 02, 2005 IA Contact Us Filing Date Status Nov 02, 2005 Active Names (vipwinn 1 of 1) Type Status Modified Name Legal Active No MCCONNELL REVENUE CYCLE SOLUTIONS, INC. Reaistered Aaent or Reservina Partv Full Name CLEO MCCONNELL Address 2939 SIERRA COURT SW City, ST, Zip IOWA CITY, IA, 52240 Home Office No Data Home I State of Iowa I Site Mao I Contact Us http://www.sos.state.ia.us/corp/corp_summary.asp?corpno=5CA71 AEB6E01 D8F480612E8014ABD85... 2/23/2006 February 24, 2006 Cleo McConnell Dear Cleo: Thanks for providing me with the business plan and overview for McConnell Revenue Cycle Solutions, Inc. We have looked at the information and determined that at this time we would be unable to assist you in the loan of $200,000 that you requested. Specifically, your plan has much potential; however, because of its start up nature and because of the uncertainty of the collateral, we are unable to assist. We would encourage you to work with Curtis to identify "angel" investors who would be interested in working with someone like you. It is obvious from your background and from your presentation that you have had experience in this area and it also appears that there will be continued need for the types of services that you would be able to provide. Thank you again for visiting with me. Please let me know if you have other questions. Sincerely, Brad Langguth Vice President BML/ay McConnell Revenue Cycle Solutions, Inc McConnell Revenue Cycle Solutions, Inc Business Plan Contact: Cleo McConnell Phone: (319) 621-1311 Email: info@mres-inc.eom McConnell Revenue Cycle .Solutions, Inc EXECUTIVE SUMMARY: McConnell Revenue Cycle Solutions (MRCS) is an Iowa based hospital finance and accounting outsourcing (FAO) company whose core competency is to provide members of the healthcare industry with tools and strategies to help them improve their revenue cycle, leading to better financials and more satisfied patients. MRCS will serve as an extension of the healthcare entity's business operations and, in the name of the institution, transparent, seamless customer service. SITUATION: U.S. Hospitals are finding it more and more difficult to produce positive financial performance. Operating costs continue to increase along with patient loads. The average patient age continues to climb while Medicaid and Medicare reimbursements have simultaneously decreased due to the Balanced Budget Act. And insurance carriers continue to whittle away at the amount they are willing to pay for services in an effort to remain competitive. Coupling these issues with typical accounts receivable cycles and bad debt expense has brought many hospitals to the breaking point. Specific issues impacting average hospitals include: ❑ Inaccurate billing and coding ❑ Lower reimbursement dollars ❑ Tighter budgets o Rapidly evolving technology ❑ Governmental legislation ❑ Payers' changing rules ❑ Denial management ❑ Collection tactics ❑ Scarcity of qualified labor ❑ Patient satisfaction And while hospitals cannot, in most cases, control the outside influences on their ongoing revenue stream, they are learning that they can control the quality of their business processes and the timing of their accounts receivable through finance and accounting outsourcing, or FAO. TREND: Outlined in Outsourcing Journal, January 2006: Whv Finance And Accounting Outsourcing Will Experience Double Digit Growth By Paul Nowacki, Engagement Director, Nikhil Rajpal, Engagement Director, Everest Group 2006 will probably be a year of rapid growth for finance and accounting outsourcing (FAO). We believe FAO has reached the "emerging rapid growth stage" in its life cycle, thanks to a constellation of events that have come together to create the perfect conditions for growth. According to research from the Everest Research Institute, the number of new FAO contract signings started to take off in 2002. Of the 108 FAO contracts signed to date, 70 percent were signed since 2002. FA McConnell Revenue Cycle Solutions, Inc But the real growth started in 2004 when 31 deals were signed and continued through 2005. We expect this kind of growth to continue this year. We predict FAO will enjoy strong double-digit growth for the next five years. We anticipate the cumulative average growth rate (CAGR) to be 24 percent over that five-year period. Why now? Here are the reasons: 1. FAO has reached a critical mass. The annual revenues thus far have shown a steadily rising trend since 2000 Annul FAO,.-. I1001-200) Wl gy.at.rr US$ "goon �CumuhOwy. US14.3 Noon In 1"W"1 F*V~$ h0. ba.n cok'I" lftm Dec -soon ,s,n E'P YNYirvtrKldn.wrdOKlt nrrGq 7C-05. Pltbon ]OOO ,.l1H w'wY Qa.Pr Mr � BnMrtvexn,.JKYr.«4/. i005 My S.rO!we IIN,aMxtt,9+W ., MIpYNM �. E.er.YRrirrnFtlNe The FAO market has reached a critical mass by the dawn of 2006. The Everest Research Institute reports total contract value (TCV) for FAO deals has now reached $12 billion. Today enough companies have outsourced their finance and accounting functions for long enough to produce proven results. And these results have been so successful that their competitors are discovering they cannot compete unless they embrace FAO, too. Once you get to a critical mass, the acceptance snowballs. 2. Offshoring has produced significant cost savings. In 2002, many skeptics said the savings offshoring produced were a fluke or a one-time occurrence. But then FAO buyers also enjoyed those same savings in 2003. By 2004 the savings were changing the dynamics of the marketplace. Today, there is significantly higher permission to offshore. Over 50 percent of the Forbes 2000 are offshoring some business function, according to the Institute. It reports offshoring FAO functions can reduce costs of the F&A function by 30-40 percent. These significant savings are a huge driver. The combination of large savings and higher acceptance offshoring is creating a compelling reason to outsource. 3. Sarbanes-Oxley concerns are no longer an issue. In 2002 companies were worried about sending work offshore and meeting the stringent reporting requirements of the new Sarbanes-Oxley Act. Company executives, who faced jail time if they could not certify their financial results, were not so eager to outsource these functions. Many US companies took a wait -and -see attitude toward FAO. By the end of 2004 the marketplace had resolved these issues. In fact, outsourcing improved control and reporting, making it easier to comply with the law. This realization removed a big barrier and the contract signings soared. 4. Suppliers have matured. W McConnell Revenue Cycle Soludons, Inc Supplier experience has grown with the marketplace. This maturity has allowed suppliers to produce better offerings; one result is lowered risk to buyers. In addition, these suppliers are adding more value through new tools and technology. S. New suppliers have entered the market. The FAO market has seen a surge of new entrants. One path has been captives that have transformed themselves into full-fledged suppliers. Genpact is a good example. The company started as a business unit of GE and quickly scaled up. Last year the subsidiary received venture capital to become a spin-off. Now GE is just one of its many finance and accounting customers. Another example is WNS, which started life as an Indian captive of British Airways. In 2002 it also received investor funding to become an independent company. The Everest Research Institute reports two-thirds of the total FAO contract value signed to date has yet to be collected, showing the youth of this market. We believe additional new suppliers will enter the market this year because we believe they see a huge market potential for growth. And the barriers to entry are low. Since the buyers typically want to continue to use their own systems, the new suppliers don't have to make large capital investments in costly ERP systems. They just have to be able to handle the imaging, manage the workflow, and have a source of well -trained, low-cost labor. Of course, new suppliers are emerging from different constituencies. BPO suppliers like Xchanging are extending their offering to FAO, and Indian offshore IT players like Progeon are moving strongly into FAO as well. What This Means for Buyers, Suppliers What does this mean for buyers? They will find even better options than the pioneers. And the competition for new customers has intensified as both established and new providers fight for market share. What do these developments mean for suppliers? New entrants translate into lots of competition. Suppliers will have to be able to differentiate themselves from the pack if they are going to thrive in the long-term. Lessons from the Outsourcing Journal (Summary): 1. 2006 will be another year of rapid growth for FAO. The Everest Research Institute predicts double-digit growth through 2011. 2. A constellation of events is fueling this growth. They include: • The market has reached a critical mass. • Offshoring has produced savings in the 30-40 percent range. • Sarbanes-Oxley concerns have disappeared. • New suppliers have entered the market and the current players have matured, creating better and less risky offerings for buyers. 4 McConnell Revenue Cycle Solutions, Inc 3. Buyers have more options and can take advantage of the competition between suppliers. Suppliers are in a riskier position and will have to differentiate themselves to win market share. STRATEGY: McConnell Revenue Cycle Solutions (MRCS) intends to capitalize on this growing marketplace by applying 80 years of combined direct industry experience to smaller, underserved hospitals within a 250-mile radius of their Iowa City, IA facility. Cleo McConnell, MRCS CEO, has for the past three years, managed the Iowa City, IA arm of a Texas based FAO company, specifically handling the University of Iowa Hospitals and Clinics account. With over 30 employees under her supervision, Cleo managed the entire FAO operation for one of the largest hospitals in the United States. Cleo's excellent operational and customer service skills earned her a recommendation from U of I Hospital and Clinics. When Cleo left the employment of the Texas firm to pursue MRCS, the quality of service from her previous employer deteriorated and the contract was terminated. Cleo and many of her long-time personnel will be able to immediately apply their experience with no learning curve, reducing start-up risk. The trend toward FAO has been focused primarily, if not exclusively, on the larger, more technically sophisticated hospitals and hospital organizations. Smaller community hospitals with less technical expertise will lag behind unless specific providers can specialize in, and cater to their needs, including education and hands-on support. MRCS intends to focus specifically on this niche in a tight enough geography to be able to provide the necessary level of customer service and hands-on support. MRCS will provide a comprehensive range of high -quality accounts receivable management services to hospital business offices. MRCS services will combine in-depth healthcare payor knowledge with technical expertise to streamline billing and follow-up activities in order to accelerate payment. When a hospital takes on the outsourcing initiative, studies have shown that most organizations model encounters multiple unplanned transitional problems. MRCS has demonstrated the technical capability, flexibility, and communication skills necessary to mitigate issue severity and minimize transition timeframes. MRCS will offer the following services: Cash Acceleration Solutions: Whether it's a one time placement or a continuous engagement of aged or specific financial class accounts, MRCS will provide immediate mobilization of cash acceleration programs using proven third party and self pay recovery techniques. Claims processing: This will include third -party billing and follow-up, eliminating existing backlogs and preventing new ones. 5 McConnell Revenue Cycle .Solutions, Inc Accounts Receivable Projects: The Company will focus on two kinds of A/R Projects. AIR one- time placements focus on recovering cash from a one-time placement of all or portions of the client's aging accounts receivables (by age, payer class, dollar value, or a combination). AIR with ongoing placements focus on accelerating cash recovery from accounts placed during varying stages following the billing cycle. Concentration is directed on an initial assignment of accounts with subsequent placements of accounts receivable. The end result is an increase in cash flow and a reduction in bad debt. As one of MRCS' most flexible programs, arrangements can be customized to meet client needs, including one-time placements and ongoing placements. Third Party Billing and Follow-up: The Company will help clients with Third Party Billing & Follow -Up by following up on billed claims, which will eliminate roadblocks to payment, tracking adjudication. It will also position the accounts appropriately. The Company will use its knowledge to resolve open accounts quickly, ensuring that claims meet deadlines. As a result, MRCS will eliminate all existing backlogs and prevent new ones. Self -Pay: This service focuses on isolating this specific financial class and accelerating revenue recovery from accounts placed. MRCS will offer customized programs to meet the special needs of healthcare providers and their patients. The Company's experienced patient account representatives will utilize proven collection methods that ensure the hospital's integrity and the patients' satisfaction. Self -Pay will provide the following benefits: ❑ Communication is seamlessly under the identity of the hospital to ensure satisfaction. ❑ Customized correspondence schedules are developed to meet the needs of the healthcare provider and its patients. ❑ Statement and collection letter generation enhances the collection process and creates a streamlined effort. ❑ Bad address verification services save time and money by optimizing the .effectiveness of mail correspondence. Bad Debt Collection/Reduction: MRCS will also manage Bad Debt Collection by using collection agencies discretely or as part of a complete self -pay solution. The Company will ensure that the specially trained representatives are businesslike with patients, yet also sensitive to their situations. FDCPA-compliant services will help clients to ensure that they have explored all available collection opportunities prior to legal intervention. Other Business Office Functions: MRCS will also offer insurance verification, statement generation, management of collection agency relationships, correspondence processing and other complexities of third party billing. TARGET CLIENTS: MRCS's initial primary target market will be Iowa Community Hospitals. For the past 20 years, The Iowa Hospital Association (IRA) has published its "Profiles — Documenting the Social and Economic Importance of Iowa Hospitals and Health Systems". The book summarizes the environment in which Iowa hospitals and health systems operate, by providing basic information about the hospital and health system community: organization, integration activities, utilization, economics, finance, payment sources, personnel, population, demographics, and elderly services. ,, McConnell Revenue Cycle Solutions, Inc The document is intended to assist Iowa business and community leaders and health policy decision makers to understand the impact of their decisions on access and quality of healthcare in Iowa. IHA is the primary source for facts and information regarding Iowa hospitals health systems to provide clear understanding of the complex and changing healthcare environment in Iowa. General Information ❑ There are 116 community hospitals currently operating in Iowa ❑ 91 of the 99 Iowa counties has at least 1 community hospital ❑ Every Iowa resident lives within 25 miles of a hospital ❑ All Iowa hospitals are Medicare certified and licensed by the State of Iowa ❑ More than 75% of the Iowa community hospitals are part of a multi -hospital system/affiliation. Bed Size ❑ All community hospitals in Iowa have greater than 100 beds, which is higher than the national norm. ❑ Thirteen hospitals have 100-199 beds. ❑ Eleven hospitals have 200-399 beds. o Four hospitals (3.4%) have more than 400 beds. Nationwide, 8.7%. Distribution of revenue for all Iowa hospitals is $5,138.0 for inpatient and $4,509.3 for outpatients (in millions). o Rural Hospitals $223.9 $331.9 $555.8 o Rural Referral $562.9 $533.2 $1,096.1 o Critical Access $389.1 $792.1 $1,181.2 o Urban $3,962.2 $2,852.0 $6,814.2 Currently five Iowa hospitals are outsourcing their core business office functions and the FAO providers were mainly selected based on company size rather than the overall quality of their services. As such, many are experiencing less than expected performance. MRCS will focus primarily on capturing Iowa Community Hospital accounts with a high quality of service (QOS) guaranteed by proven experience and regional proximity. DIFFERENTIATION: MRCS will differentiate from competitive offerings by providing tailored customer service and operational excellence guaranteed by years of experience to smaller, community hospitals seen as to small for the larger competitors to pursue. MRCS will focus on a tight geographic area (Iowa) to insure the ability to provide the kind of "hands-on" support and QOS necessary to be successful. MARKETING: MRCS will sell its products on a direct -to -client basis mainly through referrals. Clients will be 7 McConnell Revenue Cycle .Solutions, Inc brought on one at a time. The full practice analysis will be conducted with each need being identified. When we have successfully met the needs of each client, the client will be more inclined to promote our business to other clients that would benefit from our service. Studies have shown that the most common way to expand a medical reimbursement business is through referrals from current clients. Associated testimonial -based collateral materials for targeted direct mail programs, as well as regional based advertising materials will also be produced and executed accordingly. A company website will be created.and we will make sure that all marketing collateral points to the Company's website. The website will be filled with information on the process, the product, and the management team. It will be a publishing location for the company's achievements and an educational portal for industry professionals. The core function of the website is to supplement the marketing process, creating a sense of trust and professionalism, and a wealth of applicable information for prospective customers. In addition to the on -going program discussed above, MRCS will incorporate numerous other strategies simultaneously. In general they are: ❑ A listing in the local Yellow Pages. We realize the importance of stability and professionalism; anyone who has been in business any length of time can be located in the Yellow Pages. We will only be utilizing a one -line listing for we feel this will not be the main source of clients contacting us, but will provide the professional appearance we need. ❑ Networking as members of the Chamber of Commerce, local civic organizations, and county medical associations. ❑ Attending and volunteering services for medical fundraisers and health fairs, maintaining an information booth at local medical trade shows. ❑ Attending Medicare, Medicaid, Blue Shield and Worker's Compensation activities. ❑ Networking with other professionals, such as medical and professional consultants, attorneys, and accountants whose clientele is predominately medical, pharmaceutical representatives, and medical equipment salespeople. ❑ Affiliation with local and national peer organizations, including those available on the Internet. ❑ Advertising in local/hospital newsletters. ❑ Membership in the Better Business Bureau. o Submitting several press releases annually to local newspapers. TEAM: The keys to success for MRCS must be in its employees. The company will invest in its employees. MRCS believes in positive reinforcement and communication of faith in a person. If 1.1 McConnell Revenue Cycle Solutions, Inc training in a group setting is not effective with an associate, we will move to one-on-one. If that isn't effective the first time, we will do it a second time. What we intend to promote is that, "This is an investment in you." A second key to our success will be flexibility. Clients would like to feel as though they are the suppliers, only client and are moving away from the giants in the industry to get customized care and attention. Because of the volatility in the marketplace and rapid technology changes, revenue cycle organizations are finding it very difficult to plan five or 10 years out. This makes our approach of acquiring one client per quarter very attractive. We can accordion our services up or down, depending on the client's needs. Services can be managed remotely or on a client's site. Our services will be designed for hospitals desiring comprehensive solutions through outsourcing and MRCS will offer our customers the combined benefits of "Best Practice" protocols and advanced technology. Where technology is driving a process and costs need to be reduced for investments elsewhere, outsourcing is the only way to go. A third key to our success in the business is controlled growth. Growth will encompass the Iowa market with expansion to new geographic markets within the Midwest. The fourth key is product quality. The value added experience of the MRCS team will ensure customer satisfaction. The MRCS team will be led by Cleo McConnell. McConnell Revenue Cycle Solutions is the culmination of Cleo McConnell's more than 20 years of healthcare industry experience. Cleo has an exceptional range of experience as a manager and executive in the medical field. She most recently served as Onsite Project Manager for the Patient Accounting Service Center at the University of Iowa Hospitals and Clinics. She reported directly to the Client Director, supervising the day-to-day billing operations in a high volume, hospital business office and customer service environment. She was team leader for the billing staff and representatives, helping maximize the self -pay needs of customers and the organization. She also supervised daily activities of the hourly staff to ensure maximum billing, identified quality issues, advised management and implemented solutions, and established and monitored performance standards. Previously, Ms. McConnell was President of MQCCI, McConnell Quality and Compliance Consulting, a HIPAA consulting firm. She performed self -assessment and site review processes, established written Business Associate Agreements to healthcare entities conducting electronic transactions, and worked with clients to achieve their quality system certification goals. She also provided clients with an independent capability to develop and continually improve internal processes by establishing quality standards, and generated provider training to ensure continual upgrading of skills and knowledge to achieve HIPAA compliance. Ms. McConnell was a Quality Assurance Specialist for Johnson County Mental Health Developmental Disabilities (MH/DD), where she was responsible for daily management, as well as the development, execution, preparation and reporting of the Consumer Satisfaction Survey. She performed quarterly file reviews of 100% County -funded case records, oversaw all aspects of claims, and maintained effective communications with State agencies, County agencies, providers, and consultants for operational and informational purposes. For Kelsey-Seybold Medical Clinic, she held three positions. As an Administrative Supervisor, she interfaced with Physician leadership, finance and business office. She also researched arld negotiated new managed care contract for thirty Pacific Care HMO members, was responsible 0 McConnell Revenue Cycle Solutions, Inc for managing budgetary planning, and provided research for Medicare rules and regulations to physician leadership. As Administrative Coordinator, she conducted team development, was responsible for detailed appointment scheduling, and responsible for medical record maintenance and tracking. As Operations Specialist, she developed specialty department's standard operating procedures for ancillary staff now instituted as company policy and procedure. She also designed customized policies and procedures for various departments and developed training programs for new employees and departmental needs based on researched criteria. Ms. McConnell has also served as a Year 2000 Compliance Technician for the Mayo Clinic Foundation --surveying, testing, and evaluating 17,000 PCs. Ms. McConnell graduated with a Bachelor of Science degree in Biology/Pre-Med from the University of California at San Diego. She has three Masters Degrees: one in Public Health from Columbia University (where she assisted in the development of policies for New York's inter -city betterment program among other duties), a Masters in Business Administration from Columbia University, and a Masters Degree in Healthcare Administration from the University of Iowa. She has also completed the course work required for her PhD in Policy Management Health from the University of Iowa and is classified as All But Dissertation (ABD). Ms. McConnell is a member of the American Health Information Management Association (AHIMA) and Alpha Kappa Alpha Sorority, Incorporated (AKA). Ms. McConnell has extensive knowledge of applicable state and federal regulations related to billing and collections, as well as an extensive knowledge in budgeting and accounting principles. Her administrative expertise, as well as her experience as a leader and organizer, will enable great prosperity for the Company. Additional team members include Bruce Jutten, Victoria Sanders, Listi Elskamp, Phyllis Gibbs, Deborah Wilson, Connie Timm, Carol Rogers, Charles Gibbs, Angela Nelson, and Christian Nora, all previous employees of Ms. McConnell Advisory Board: Sara Votroubek, Brian Roth, Carroll Reasoner, Donald Brown, Steve Ver Meer (There are five additional seats to be filled). (Remainder of page left blank intentionally) 10 McConnell Revenue Cycle Solutions, Inc FINANCIAL: (Projected income & cash flow projections attached) Due to the gross margins afforded, MRCS will attain cash -positive financial performance on a monthly basis 90 days after acquisition of its first customer and will reach overall postive cash performace in month seven (7). Initial start-up expenses as outlined are focused exclusively on building a quality team as well as necessary telecommunications and computer network infrustructure. NRCS services provide an attractive margin and a single customer can provide the foundation for a highly successful business. Outlined below are two scenarios: Scenario A assumes adding only one new customer per year and growing at a very conservative rate. Scenario B assumes adding a new customer every 90 days and provides a glimps at the performane opportunity provided. And although we are using Scenario A as our base plan, based upon the available maretplace as outlined herein, we believe performance will more closely match Scenario B by year two (2). A) Projected Income Statement — adding only one client per year 2006 2007 2008 Revenue $1,062,000 $2,124,000 $3,186,000 Expenses $723,301 $981,210 $1,271,122 NOP $338,699 $1,142,790 $1,914,888 B) Projected Income Statement— adding one new client per month Revenue $2,655,000 $6,903,000 $11,151,000 Expenses $1,141,809 $2,340,902 $3,492,845 NOP $1,513,191 $4,562,098 $7,658,155 SUMMARY: MRCS is strategically poised to take advantage of the growing FAO marketplace with an experienced team, available market opportunites, and a targeted marketing strategy. 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Statement of fucome - Year 1 (Fiscal Year March 2006 - February 2007) Mtamptioo: 1 client ooly throughout eutlm year Annual Start -op March April May dune Jul August Sqftmber October November December F ltevrnur, - Ineame per critical access client Facility fee (1) $ 630,000 $ 52,500 S 52,500 $ 52,300 $ 52,500 S 32,500 S 52,500 S 52,500 S 52,500 $ 52,500 $ 52,500 t 52,500 $ 52-M Profeariml fee (1) S 432,000 $ 36,000 $ 36,000 S 36,000 $ 36,000 $ 36,000 $ 36,000 $36,000 S 36,000 $ 36,000 S 36AM $ 36,000 t 36,000 TOT AL REVENUE S 1,062,000 $ 88,500 $ WOO $ 88,500 S 88,500 S 88,500 S 88,500 $ 88,500 S 98,500 S 88,500 t 88,500 S Ulott S 99300 ESQSIIStd Software Loan huereat Eme S 17,339 S - S 1,543 S 1,526 S 1.509 S 1,491 S 1,473 S 1,455 S 1.437 S 1,419 S 1,400 t 1,381 t 1,362 It 1,343 Bade LoL.-lmomst Expema (2) 5 13,8:30 S $ 1,250 $ 1,233 $ 1,215 t 1,198 $ 1,180 t 1,163 It 1,145 S 1,127 S 1,109 t 1,091 t 1,073 $ 1,054 Director Wages (3) 5 60,000 S S 5,000 $ 5,000 $ 5,000 S 5,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 t 5,000 S 5,000 S 5,000 t 5,000 Fixed Ws., (3) S 135AN S - $ 11,307 $ 11,307 S 11,307 $ 11,307 $ 11,307 S 11,307 t 11,307 S 1007 t 11,307 t 11,307 t 11,307 1 t 11,307 Variable Wage. per number of diema (3) S 193,440 S - S 16,120 S 16,120 $ 16,120 S 16.120 $ 16,120 S 16,120 $ 16,120 S 16,120 S 16,120 $ 16,120 S 16,120 S 16,120 T-mg (3) S 10,049 S 6,329 $ - S - S . S . t • $ . It - $ - S . t ..S 3,720 Payroll Texas - 10% (4) S 39917 S 633 $ 3,243 $ 3,243 S 3,243 $ 3.243 S 3,243 $ 3.243 S 3.243 S 3,243 S 3,243 S 3,243 t 3,243 t 3,615 Rcnt (5) S 49,000 S 7,000 $ 3,500 $ 3,500 S 3,500 $ 3,500 S 3,500 S 3,500 It %500 $ 3,500 $ 3,500 S 3,500 S 3.s00 S 3,500 Health & Denul ($250 per employee) (6) S 42.250 $ 3,250 S 3XO $3,250 $ 3,250 $ 3,250 S 3,250 S 3,250 1 t 3,250 S 3,250 t 3,250 $ 3,250 $ 3,250 $ 3,250 Liabili & Worker's Comp (6) S 1.404 $ 108 $ 109 $ 108 S 109 $ 108 S 108 $ 108 1 s 108 $ 108 $ 108 S 108 S 101 $ 108 Tele hoop (6) 5 12,000 $ S 1,000 5 I'm S 1,000 S 1,000 S 1,000 S 1,000 $ 1,000 S 1,000 S 1,000 t 1,000 S 1,000 $ l,000 Cell Ph.- (2) (6) S 4,800 S $ 400 $ 400 S 400 S 400 $ 400 $ 400 $ 400 $ 400 $ 400 S 400 $ 400 $ 400 Duce & Subscriptions (6) 5 "0 $ - $ 50 S 50 S 50 S 50 $ 50 $ 50 S 50 S 50 $ 50 S 50 S 50 S 50 Bank Fcea (6) 5 600 $ - $ 50 S 50 $ 50 $ 50 $ 50 S 50 $ 50 S 50 S 50 $ 50 S 50 $ 50 Lc VAccouutin Fccs (6) S 351000 1 5,000 S 2,500 $ 2,500 $ 2,500 $ 2,500 S 2,500 t 2,500 S 2,500 S 2,500 S 2,500 S 2,500 t 2,500 $ 2,500 Technologyh4aintenance (lT Team) (6) 1 S 30,M S $ 2,500 S 2,500 $ 2,500 $ 2,500 S 2,500 $ 2,500 $ 2,500 $ 2.500 $ 2,500 $ 2.500 S 2,500 S 2,500 Re airs & Maimonaroa (6) S L800 $ $ 150 S 150 $ 150 $ 150 $ 150 S 150 S 150 $ 150 $ 150 S 150 i 150 S 150 Copier Repair Maimornc< (6) $ 3,000 S S 250 $ 250 S 250 S 250 S 250 S 250 S 250 S 250 t 250 $ 250 S 250 S 250 Office Su ins (6) S 7,000 $ 1,000 S Soo S 500 $ 500 S 500 S 500 S 500 1 $ 500 S 500 $ 500 S 500 S 500 S 500 Travel (7) S 7,000 S 250 S 250 S 250 S 250 S 500 S 300 $ 500 S 750 S 750 S 750 S 750 $ 750 $ 750 Promotion/ Adverusi (6) S 1,700 $ 500 $ too S 100 S 100 S 100 S 100 S 100 S 100 S too S 100 S 100 S too It too De ra mtm S 56,081 S . S 4,655 $ 4,655 S 4,655 $ 4,655 $ 4,655 S 4,655 S 4,635 $ 4 655 S 4,635 S 4,656 $ 5.167 S 5,167 TOTAL EXPENSES S 723,*1 S 24,070 S 57726 $ 57,691 S 57,656 S 51971 $ 57836 $ 57,900 $ 58,014 $ 57978 $ 57,941 t 57,904 t 58 79 $ 62434 OPERATING INCOME(LOSS) S 3 99 S 4,070 S 30,774 S 30" t 30,844 S 30,629 S 30,664 S 30,706 S 30AU S W22 I S 30,559 $ 30,M S 30,121 5 26,066 (1) See attached Exhibit A for calculation of income perkospital, ummin8 150 bed, per client, for this projection only 1 client is assamed to be added per (2) See attacked Exhibits C & D for ban amortization schedules for working capital and software ban. (3) Sec attached Exhibit B for Unions of mployee positions and corresponding salm7 or hourly wages. (4) Estimate baud on FICA taxes of 7.65 % , state onesuployment tarn of 1%, federal nem ployment of .8%. (5) Based on nrtnt location, feed scut ez use which ludadn tall millfies and CAM charges. (6) Based on man wnt4 estimates. (7)1 Braced on mangemeu', esthante, and includes a vehicle lease starting in June. McConnell Revenue Cycle Solutions, Inc. Statement of Income - Year 2 (Fiscal Year March 2007 - February 2008) Assn Lion: 1 client only W boat eatice year Anneal Match A sit May June July August Septmkr October Novmber December Feb )teveaoes Income CRtleel 8CCG49 Chem Facility fee s 1,260,000 s 105,000 s 105,000 f 105,000 S 105,000 S 105,000 S 105,000 S 105,000 f 105,000 S 105,000 S 103.000 S 105,000 S 105,000 Profcosinal fee S 864,000 $ 72,000 f 72.000 f 72,D00 $ 72,000 S 72,000 $ 72,000 S 72,000 $ 72,000 S 72,000 $ 72,000 $ 72AW 9 72,000 TOTALREVENUE I s 2,124,000 f 177,000 S 177,000 S 177,000 $ 177,000 S 177,000 S 177,000 S 177,000 f 177,000 S 177,000 f 177,000 S 177,000 f 177,000 ExOeom Software Loan (merest Expewc S 14,565 S 1,324 3 1,305 $ 1,285 $ 1,265 S 1,245 S 1,225 S 1,205 s 1,184 S 1,163 $ 1,143 S 1,121 s 1,100 Bank Loan Interest Expeme s 11,179 f 1,036 $ 1,017 $ 999 $ 980 $ 961 S 942 S 923 $ 903 S .884 S 865 f 845 $ $23 Dusan, Wage, Is 66,000 $ 5,500 $ 5,500 S 5,500 S 5,500 S 5,500 s 5,500 S 5,500 S 5,500 f 5,500 f 5,5W S 5,5w S S,500 Fixed W.,. I s 139,750 $ 11,646 S 11,646 $ 11,646 s 11,646 $ 11,646 $ 11,646 S 11,646 S 11,646 $ 11,646 $ 11,646 S 11b46 $ 11,646 Variable Wn s per number of clients s 399,496 S 33,207 S 33,207 S 33,207 S 33,207 S 33,207 S 33,207 S 33,207 S 33,207 S 33,207 $ 33,207 S 33,207 f 33,207 Training s 3,720 $ - S - s - $ - $ - S - S - S - S - S - 3 - $ 3,720 Payroll Taxc9 - 10% s 54,196 S 4,485 $ 4,485 S 4,485 $ 4,485 S 4,485 S 4,495 S 4,495 $ 4,485 $ 4,485 S 4,483 1 S 4,485 S 4,857 Rant (1) s 43,260 It 3,605 S 3,605 S 3,603 1 S 3,605 $ 3,605 S 3,605 S 3,605 S 3,605 1 S 1,605 f 3,605 S 3.605 s 3,605 Hoalth A Dema] ($250 per c.pi.yee) (1) s 60AN $ 5,053 S 5,053 $ 5,053 S 5,053 $ 5,053 S 5,053 S 5,053 S 5,053 $ 5,053 S 5,053 f 5,053 S 5,053 Liability & Worker's Comp (1) s 1,335 $ III $ III $ III S III $ III S 111 S 111 $ III S III S III is III f III Tele bore (2) s 24,000 s 2,000 S 2,000 s 2,000 S 2,000 $ 2,000 S 2,000 $ 2,000 S 2,000 S 2,000 S 2,000 S 2AW S 2,000- Ce11Phooe(2) (1) s 4,944 s 412 $ 412 S 412 S 412 S 412 S 412 S 412 S 412 S 412 S 412 S 412 f 412 Due9 & Subscription I s 600 3 50 8 50 S 50 S 50 S 50 It 50 S 50 $ 50 $ 50 f 50 S 30 $ 50 Bank Fees I s 600 $ SO S s0 S 50 $ 50 i 50 S 50 $ 50 $ 50 f SO f 50 S 30 $ SO I. VAcco Fees (1) S 30900 $ 2,575 $ 2,575 S 2,575 $ 2.575 $ 2,575 S 2,575 S 2,575 $ 2,575 f 2,575 S 2,575 S 2,575 S 2,575 Tech-I.Mainten a (IT Team) (3) $ 33,000 $ 2,750 S 2,750 $ 2,750 $ 2,750 S 2,750 $ 2,750 1 s 2,750 S 2,750 f 2,750 S 2,750 f 2,750 S 2,750 Rcpairt & Maitemae $ 1,800 S 150 $ 150 S 150 S 150 $ 150 S 150 $ 150 f 150 f 150 S 150 f 150 $ ISO Copior Re it Mamtomnce (3) S 6,000 $ 500 S 500 $ Soo S 500 $ Soo S 500 S 500 S 500 S Soo $ 500 $ Soo S 500 Office Su lie, (4) S 12,000 $ 1,000 $ 1,000 S 1,000 S 1,000 S 1,000 S 1,000 $ 1,000 s 1,000 S 1,000 S 1,000 S 1000 S 1AN Treval (5) s 12,000 s 1,000 S I,m s 1,000 s 1,000 S 1,000 S 1,000 S 1,000 S 1,000 s 1,000 S 1,000 f 1,000 f 1,000 Promotion/ Adverb. s 1,200 S 100 f 100 S 100 f 100 $ 100 $ 100 S t00 $ 100 S 100 $ 100 S loll f 100 De ccimoa s 61,044 $ 5,167 $ 5,167 S 5,167 S 5,167 S 3167 f 5,167 f 5,167 S 5,167 $ 5,167 S 5167 S 4 7 5 4 7 TOTAL EXPENSES s 981,210 $ 81721 S $1683 $ 81645 S 91,606 f - 81567 $ 81,528 f 81489 $ 91449 S 81409 $ 91,368 S BO 7 S _ 98 OPERATING INCOME(LOSS) S 11142,790 f 93,279 8 95,317 $ 95,355 S - 9s 4 S 95,433 S 472 S 95,511 s 95,551 s "1 S 95,632 s 96,153 S 92,102 (1) Cow a..-d to barns at 3% (2) Cost nsmud to imams b $1000 pa client. (3) Cost assumed to Lcseate by S250 W client. (4) Cost aaaamed to incr $500 per client (5) Cost mussed to incase over the tint year amd thea ,main variable with the iucr c in fuel prices. McCostoe8 Iterenae Cycle Solutions. Inc. Statement of laeome - Year 3 (Fiscal Year Much 2009 - February 2009 Assum duo: 3 dents only throughout etN3re year A-1 Mauch April MAY June MY August Sepicamber October Novtother Deceakr Ines F H£YSSY!! bSOmC P., Critical aeee.. Ghent Facility fee S 1,890,000 $ 157,500 S 157,500 $ 157,500 S 157,500 S 157,500 S 157,500 S 157,509 S 157,500 S 157,500 $ 157,500 $ 157,500 $ 157.500 Pmfossiml foc 3 1,2%,000 $ 108,000 S 108,000 $ 108,000 S 108,000 $ 108,000 $ 108,000 S 10BAN S 108,000 $ 108,000 S 10B4O00 s 10RAN $ 108,000 TOTAL REVENUE S 31186,000 $ 265,500 S 265,300 $ 265,500 $ 265,500 S 265.500 S 265,500 $ 265,500 $ 265,500 S 265,500 S 265,500 S 2651500 $ 265,500 Soft- Loan ha-.t E -e (amortimtion table) S 11.464 $ 1,079 $ 1,057 S 1,035 $ 1,013 S 990 S 968 3 945 S 922 S 899 S 976 $ 852 S 928 Bank Loan lmerestE 3 8,314 1 805 S 785 S 765 S 745 S 724 $ 704 S 693 $ 662 S 642 S 621 $ 599 $ 579 Disecwr WS,s S 72,000 S 6,000 S 6,000 $ 6,000 $ 6,000 s 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 S 6,000 S 6,000 $ 6,BBo Fixed Wa s (see Exhibit E) S 140,100 - 1 11,995 s 11,646 S 11,646 S 11,646 $ 11.646 $ 11,646 S 11.646 $ 11.646 S 11,646 S 11,646 $ I1,646 $ 11,646 Variable W.V. due w new client (see Exbibit E) S 6131"1 S 51,305 $ 51,305 S 51,305 S 51,305 S 5005 $ 51.305 $ 51.305 S 51,305 S 51,305 S 51,305 S 51 05 s 51,305 T. S 3,720 S - $ - S - $ . $ - . $ . $ - $ - $ - $ - $ - $ 3,720 Pa roll Taxcs - 10% S 93,148 $ 6,930 $ 6,895 $ 6,895 $ 6,895 S 6,995 $ 6,995 S 6,895 S 6,895 $ 6,895 $ 6,995 S 605 $ 7.267 Ront S 44,558 S 3,713 $ 3,713 $ 3,713 1 $ 3,713 S 3,713 S 3,713 1 $ 3,713 f 3,713 S 3,713 S 3,713 S 3,713 $ 3,713 Health & Dental ($250 p,, emplo ee) S 82.909 $ 6,909 S 6,909 S 6,909 S 6,909 s 6,909 S 6,909 s 6,909 S 6,909 S 6,909 S 6,909 S 6.909 $ 6,909 -Em�bjtjty & Worker's Comp $ 1,37S S 115 $ 115 S 115 $ 115 $ I13 $ 115 $ 115 $ 115 $ 115 $ 115 S 115 $ its Telo boot - S 36AN $ 3,000 S 3,000 S 3,000 $ 3,000 $ 3,000 $ 3,000 S 3,000 S 3,000 $ 3,000 $ 3,000 S 3,000 S 3.000 Cell Phom (2) S S,092 S 424 S 424 $ 424 S 424 S 424 $ 424 $ 424 S 424 $ 424 S 424 S 424 3 424 Duos & Snbsoriptiom S 600 $ 50 $ 50 S 50 $ 50 $ 50 S 50 S 50 $ 50 $ 50 S so S 50 $ 50 Bank Feos s 600 s 50 S 50 $ 50 $ 50 S 50 $ 50 $- 50 $ 50 S 50 $ 50 S so $ so Lc I/Acco Fees $ 31,827 $ 2,652 $ 2,652 S 2,652 S 2,652 $ 2,652 $ 2.652 $ 2,652 $ 2,652 S 2,652 S 2,652 S 2.652 S 2a652 Tocbsnlo Maimcmnae (1T Teem) S 36,000 $ 3,000 s 3,000 S 3,000 S 3,000 $ 3,000 S 3,000 S 3,000 S 3,000 $ 3,000 $ 3,000 S 3,000 S 3,000 R ain & Mamtcw oe S 1,800 $ 150 $ 150 S I50 $ 150 $ 150 $ ISO s 150 S 150 1 $ 150 $ 150 $ 150 $ ISO Copier Repair Maisoemoce $ B,SW $ 500 $ 500 $ 750 $ 750 S 750 S 750 S 750 s 750 is 750 $ 730 $ 750 S 730 Office Suppli.. $ 1800 $ 1,500 $ 1.500 $ 1,500 s 1.500 $ 1.500 S 1,560 $ 1 j00 $ 1,500 f 1,500 $ I,S00 $ 1.500 Travel s 12,000 S 1000 3 1,000 $ 1,000 s 1,000 $ 1,000 s 1,000 $ 1,000 $ 1,000 $ 1,000 s IAOO $ IJOW Promotiod Adverb ' S 112" $ 100 $ 100 $ 100 $ 100 $ -100 $ 100 $ 100 $ 100 s 100 f 100 $ 100 De rooiation S 56.244 S 4687 S 4687 $ 4687 $ 4,687 S 4,687 $ 4687 $ 4,687 M$4,687 S 4,687 $ 4.687 $ 4,697 TOTALEXPENSES S 1.271,112 $ 103%5 $ 103 539 $ 105 741 $ 103704 $ 103661 $ 105,618 $ 105 75 $I05 487 $ 105,443 $ 105 98 a$4fig7 $ "14,888 s 159,535 S 159,%1 S 159.753 S k59,'/%159,862 S 159yiSS 160,013 S 168,037 $ 1601102 McConnell Revenue Cycle Solutions, Inc. Statement of lacome - Year 1 (Fiscal Year March 2006 - February 2007) Anarmption: 1 client/ 'td added per r Annual 8--up March April May June Jul October November December 7 Fekumry Revenues Income per critical access client Facility fee Professinal fee (1) (I) S 11575,000 $ - 1J180Ji00 $ - 52,500 $ 36,000 S 52,500 S 36,000 S 52,500 S 36,000 S io5,000 $ 72,000 S 105,000 $ 72,000 S 105,000 S 72,000 S 157,500 S 108.000 S 157,500 $ 108,000 S 157,500 S 108,000 S 210,000 $ 144,000 S 210,000 $ 144,000 $ 210,000 $ 144,000 TOTAL REVENUE S 2,655,000 $ 88,500 $ 89,500 S 88,500 $ 177,000 $ 177,000 $ 177,000 $ 265,500 S 265,500 $ 265,500 3 354,000 $ 354,000 $ 354,000 Emmons Software Loan Interest Expense Bank Loan Interest Expense Director Wages Fixed Wages Variable Wages per amber of clients Training Payroll Taxes - 10% Rent Health & Dental ($250 per employee) Liability & Worker's Comp Telephone Cell Phone(2) Dues & Subscriptions Bank Fees Legal/Accounting Fees Technology Maintenance (IT Team) Repsh & Maintenance Copier Repair Maintenance Office Supplies Travel Promotion/ Advertising Depreciation TOTAL EXPENSES (2) (2)l (3)1 (3) (11) (10) (4) (5) (9) (6) (8) (6) (6) (6) (6) (12) (6) (6) (8) (7) (6) $ 17,339 S 13AM S 60,000 S 135,680 S 483AN S 21 M S 70,049 S 49AN S $0,750 $ 1A04 S 30AN S 41: $ 600 $ 600 $ MAN S 34.500 $ I'm S 7,500 S 16AN S 7,000 $ 1,700 S 69,440 S 1,141,809 $ $ - S - S - $ - $ 6,329 $ 633 S 7,000 $ 3,250 $ 108 $ - S - S $ - S 51000 S $ S $ 1,000 $ 250 $ 500 S - S 24,070 $ 1,543 $ 1,250 S 5,000 S 11,307 S 16,120 $ - $ 3,243 $ 3,500 S 3,250 $ 108 $ 1,000 $ 400 $ 50 $ 50 S 2,500 $ 2,500 S 150 $ 250 $ 500 $ 250 $ 100 $ 5,531 $ 58,602 $ 1,526 $ 1,233 $ 5,000 S 11,307 $ 16,120 $ $ 3,243 $ 3,500 S 3,250 S 108 S 1,000 S 400 S 50 $ 50 $ 2,500 $ 2,500 $ 150 S 250 $ 500 S 250 $ 100 S 5,531 $ 58,567 $ 1,509 S 1,215 $ 3,000 S 11,307 S 16,120 S 3,720 $ 3,615 S 3,500 $ 5,000 $ 108 $ 1,000 $ 400 S 50 $ 50 $ 2,500 S 2,500 $ 150 $ 250 $ 500 $ 250 S 100 $ 5,531 $ 64,374 $ 1,491 $ 1,198 $ 5,000 S 11,307 S 32,240 $ - S 4,855 S 3,500 $ 5,000 $ 108 $ 2,000 S 400 $ 50 $ 50 $ 2,500 $ 2,750 $ 150 $ 500 S 1,000 $ Soo $ 100 $ 5,531 $ 80,229 $ 1,473 S 1,190 $ 5,000 S 11,307 $ 32,240 S S 4,855 $ 3,500 $ 5,000 S 109 S 2,000 $ 400 $ SO 1 $ 50 $ 2,500 $ 2,750 $ 150 S 500 $ 1.000 $ 500 $ 100 $ 5,531 S 90,194 $ 1,455 $ 1,163 $ 5,000 $ 11,307 S 32,240 $ 3,720 $ 5,227 $ 3,500 $ 6,750 $ l08 S 2,000 E 400 $. 50 $ 50 $ 2,500 $ 2,750 S 150 Is 500 1 $ I,000 1 $ 500 $ 100 S 5,531 S 96,000 S 1,437 $ 1,145 $ 5,000 $ 11,307 S 48,360 S $ 6,467 1 S 3,500 S 6,750 $ 109 $ 3,000 $ 400 $ 50 $ 50 $ 2,500 $ 3,000 $ 150 $ 750 $ 1,500 S 750 $ 100 S 5,531 $ 101,854 $ 1,419 S 1,127 $ 5,000 E 11,307 $ 48,360 $ S 6,467 $ 3,500 S 6,750 $ 108 E 3,000 S 400 $ 50 $ 50 $ 2,500 $ 3,000 S 150 S 750 $ 1,500 $ 750 $ 100 S 5,531 $ 101,819 S 1,400 S 1,109 $ 5,000 S 11,307 S 49,360 S 3,720 S 6,839 S 3,500 $ 9,500 $ 108 $ 3,000 S 400 E 50 $ 50 S 2,500 $ 3,000 S 150 $ 750 S 1,500 $ 750 $ 100 $ 5,531 $ 107,623 S 1,391 $ 1,091 $ 5,000 $ 11,307 S 64,480 S - $ 8,079 1 S 3,500 S 8,500 $ 108 $ 4,000 S 400 $ 50 $ 50 S 2,500 S 3,230 S -150 $ 1,000 $ 2,000 S 750 S 300 S 5,531 S 123,226 S 1,362 $ 1,073 S 5,000 S 11,307 $ 64,480 $ - $ 9,079 $ 3,500 $ 8,500 S 109 $ 4,000 $ 400 S 50 $ 50 $ 2,500 S 3,250 $ 150 $ - 1,000 $ 2,000 $ 750 $ 100 S 7,065 S 124,723 S 1,343 S 1,054 $ 5,000 $ 11,307 S 64,480 S 3,720 S 8,451 S 3,500 $ 10,250 S l08 $ 4,000 S 400 $ 50 $ 50 $ 2,500 $ 3,250 S ISO $ 1,000 $ 2,000 $ 750 $ 100 S 7,065 S 130,529 OPERATINGINCOME(LOSS) P(2) S 1,513,191 $24,070 $ 29,898 $ 29,933 S 24,126 $ 96,771 $ %,806 $ 91,000 S 163,646 $ 163,682 S 157,877 $ 230,774 $ 229,277 S 223,472 See atfacbed Exhibit Afor calculation ofincome per hospital,neuming 150 bds r client, for this projection 1 client is assumed to be ridded per quarter See attached Exhibits C & D for loco amortization schedules for workiug capitol and software loan. (3) See attached Exhibit B for fidmg of employee positions and corresponding eslary or hourly _ (4) Estimate based on FICA taxes of 7.65%, state unemplo neat taxes of 1%, federal unemployment of .8%. (5) Based oa current location, fixed test expense which includes all utilities and CAM charges. (6) Based on managemenfi estimates (7) Based on management's estimates and includes a vehicle lease starting I. June. (8) Cods aesomed to increase proportionately with addition of each new client. (9) Costs will increase by 51750 for each near client added, due to 7 new employes at 5250 per month per eugioyer. (10) Training Cods incurred with addition of eseb new client, estimated as 1 Mall week at an hourly rate, see otteehed Exhibit D. (11)1 Variable wages will increase by 7 new a eyees for each additional client added, see Exhibit D for holing of podtiona and emote. (12) Technology fees an awned to lucteasc by $250 for each additional client. McConnell Revenue Cycle Solutions, Inc Statement of hseome - Year 2 (Fiscal Year Mareb 2007 - February 2008) Assumption: 1 client/ hospital added per quarter Annual March April May June July August Se sober October November December February Reveluee Income per critical access client - Fecility fee s 4,0"AW S 262,500 S 262,500 S 262,500 S 315,000 S 315,000 S 315,000 $ 367,500 $ 367,500 S 367.500 S 420,000 $ 420,000 S 420,000 Professinal fen S 21808,000 $ 130,000 S 180,D00 S 190,000 S 216,000 $ 216,000 S 216,0D0 S 252,000 $ 252,000 S 252,000 S 289,000 $ 298,000 S 299,000 TOTAL REVENUE S 6,903,M $ 442,500 $ 442,500 $ 442,500 S 531,000 $ 531,000. S 531,000 S 619,500 S 619,500 $ 619,500 $ 708,000 $ 708,000 $ 709,000 Exoeosea Software Loan Interest Expense S 14,565 $ 1,324 $1,305 $ 1,295 $ 1,265 $ 1,245 S 1,225 $ 1,205 S 1,184 $ 1,163 $ 1,143 $ 1,121 S 1,100 Bank Loan Interest Expanse $ 11,179 S 1,036 S 1,017 S 999 S 980 S 961 $ 942 S 923 S 903 S 884 S 965 S 945 $ 825 Director Wages(2) $ 166,Mq S 13,933. $ 13,833 $ 13,833 $ 13,933 $ 13,833 $ 13,933 S 13,933 S 13,833 S 13,933 $ 13,933 S 13,933 $ 13,833 Fired Wages S 139,750 S 11,646 $ 11,646 $ 11,646 S 11,646 $ 11,646 $ 11,646 $ 11,646 S 11,646 S 11,646 $ 11,646 $ 11,646 $ 11,646 Variable Wages per number of clients S 1,295,081 $ 93,018 $ 83,018 $ 83,018 S 99,622 $ 99,622 S 99,622 $ 116,225 $ 116,225 S 116,225 $ 132,829 $ 132,829 $ 132,929 Training $ 1"26 S - S S 3,932 S • $ - Is 3,832 S - IS - S 3,832 S - is - S 3,932 Payroll Taxes -10•1 $ 161,616 $ 10,850 S 10,850 s 11,233 S 12,510 S 12,510 S 12,993 S 14,170 $ 14,170 S 14,554 S 15,931 S 15.831. S 16,214 Rent (1) S - 43,260 $ 3,605 S 3,605 $ 3,605 S 3,605 S 3,605 S 3,605 $ 3,603 $ 3,605 S 3,605 S 3,605 -$ 3,605 $ 3,605 Health & Dental ($250 per employee) (1) s 172,52E S 11,073 S 11,073 $ 12,875 $ 12,875 $ 12,875 $ 14,678 S 14,678 S 14,678 S 16,490 S 16,490 S 16,490 $ 18,283 Liability & Worker's Comp (1) S 1,335 $ 11I $ 111 $ ill S Ill $ III $ 111 $ ill $ 111 $ Ill $ ill $ 111 S Ill Telephone (2) S 78,000 $ 5,000 $ 5,000 $ 5,000 $ 6,000 $ 6,000 $ 6,000 S 7,000 $ 7,000 S 7,OD0 $ 8,000 S 8,000 $ 8,000 Cell Phone (2) (1) S 4,944 $ 412 S 412 S 412 S 412 S 412 $ 412 $ 412 S 412 $ 412 $ 412 S 4.12 S - 412 Dues & Subscriptions s 600 S 50 $ 50 $ 50 S 50 S 50 S 50 S 50 $ 50 S 50 $ 50 $ 50 S 30 Book Fees I S 600 $ 50 $ 50 $ 50 $ 50 $ 50 1 S 50 $ 50 $ 50 S 50 $ 50 IS 50 S 50 La i/Accamting Fees (1) S 30,900 S 2,575 S 2,575 S 2,575 S 2,575 S 2,575 S 2,575 S 2,575 $ 2,575 S 2,575 $ 2,575 $ 2,575 S 2,575 Technology Maintenance (IT Team) (3) S 46,500 $ 3,500 $ 3,500 $ 3,500 S 3,750 $ 3,750 S 3,750 S 4,000 S 4,000 S 4,000 $ 4,250 S 4,250 S 4,250 Repairs & Maintenance S lAw $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 S 150 $ 150 $ ISO S 150 $ 150 Copier Repair Maintenance (3) S 19,500 $ 1,250 $ 1,250 $ 1,250 $ 1,500 S 1,500 $ 1,500 $ 1,750 S 1,750 S 1,750 $ 2,000 $ 2,000 S 2,000 Office Supplies (4) S 39,000 S 2,500 S 2,500 S 2,500 S 3,000 $ 3,000 $ 3,000 $ 3,500 S 3,500 S 3,500 S 4,000 $ 4,000 S 4,000 Travel (5) S - 12,000 $ 1,000 $ 1,000 $ 1,000 S 1,000 S 1,000 S 1,000 $ 1,000 S 1,000 $ 1,000 S 1,000 S 1,000 $ 1,000 Promotion/ Advertising $ 1.200 $ 100 S 100 $ 100 $ 100 $ 100 S 100 S 100 $ 100 $ 100 $ 100 $ .100 $ 100 Depreciation j S 85,220 S 7,065 $ 7,065 S 7,065 $ 7,065 $ - 7,065 S 7,065 S 7,065 S 7,065 $ 7,065 S 7,065 $ 7,285 S 7,285 TOTAL EXPENSES S 2,340,902 $ 160,148 $ 160,110 $ 166,089 $ 182,D99 S 192,060 $ 188,039 S 204,043 $ 204,008 S 209,995 $ 225,994 $ 226,173 S 232,149 OPERATING INCOME(LOSS) S 4,%2,098 S 282,352 S 282,390 S 276,411 S 348,901 S 348,940 $ 342,962 $ 415,452 S 415,492 S 409,515 $ 492,006 $ 491,927 S 47S 831 (1) Costs assumed to increase at 3% per year. (1) Cost assumed to increase by S1000 per client (3) Cost assumed to increase by $250 per client (4) Coss aawmed to increm by S500 per client. (5) Cost asa®ed to increase over the first year and then remain variable with the increase in fuel prices McConnell Revenue Cyctc Solutions, Inc. Sdtement of lueame - Yea 3 (Fiscal Year March 2009 - February 2009) - Assnmptlon: I c , at/ hot ital adtkdper quarter AnmW S Mach Aril MAY hme Ally August September October November Deeeaber I Febroutry Rewauea Income per critical access client Facility fee Professinal fee S 6AI5,000 S 4,136,000 $ 472,500 $ 324,000 E 472,500 $ 324,000 $ 472,500 $ 324,000 $ 525,000 $ 360,000 S 525,000 $ 360,000 $ 525,000 $ 360,000 $ 577,500 S 3%,000 S 577,500 E 396,000 f 577,500 $ 396,000 S 630,000 $ 432,000 S 630,W0 $ 432,000 S 630,000 S 432,000 TOTAL REVENUE $ 11,IS1A00 S 796,500 $ 796.500 S 796,500 $ 985,000 S 995,000 $ $85,000 $ 973,500 S 973,500 S 973,500 $ 1,062,000 $ 1,062,000 S 1,062,000 E_ Software Loan Interest Expense Bank Lou Interest Expense Director Wages(2) Fixed Wages Variable Wages per number of clients Training Payroll Taxes- I0%. Rent Health & Dental (S250 per employee) Lisbihty&Worker's Comp Telephone Cell Phone(2) Dues & Subscriptions Bank Fees Le l/Accouuting Fees Technology Maintenance (IT Team) Repairs & Maintenance Copier Repair Maintenance Office Supplies Travel Promotion/Advertising Depreciation TOTAL EXPENSES - - S 11,464 S V14 S 27SAN S 44'1,58 S 2,154,815 $ 15,786 S 249,316 $ 43,260 $ 263,417 f 1,375 S 126,000 s SJ192 S 6W Is 600 I S 31,827 Is 58,S00 Is f"0 S 31,500 S 630W S IS,OW $ 1,200 S 874420 S 3,492,845 S - S - S - $ $ - S $ . $ S - S - $ - T S S S $ - E S - $ T - S S - S E 1,079 $ 805 $ 23,167 S 3,713 S 153,915 $ 18,080 $ 3,605 $ 19,548 $ 115 S 9,000 $ 424 $ 50 S 50 S 2,652 S 4,500 $ 150 S 2,250 $ 4,500 $ 1,250 $ 100 S 7,295 $ 255,237 S 1,057 $ 785 S 23,167 $ 3,713 S 153,915 I s 18,080 $ 3,605 $ 18,548 S 115 s 9,000 S 424 s 50 $ 50 $ 2,652 $ 4,500 $ 150 $ 2,250 S 4,500 S 1,250 S 100 $ 7,285 S 255,196 $ 1,035 S 765 S 23,167 $ 3,713 S 153,915 S 3.947 S 18,474 $ 3,605 $ 20,404 S 115 E 9,000 S 424 S 50 S 50 S 2,652 $ 4,500 $ 150 $ 2,250 $ 4,500 $ 1,250 $ 100 $ 7,295 S 261,351 $ 1,013 $ 745 S 23,167 $ 3,713 S 171,017 $ 19,790 $ 3,605 $ 20,404 $ 115 S 10,000 S 424 $ 50 $ 50 $ 2,652 $ 4,750 $ 150 $ 2,500 $ 5,000 S 1,250 $ 100 T 7,285 $ 277,790 S 990 S 724 E 23,167 $ 3,713 S 171,017 $ 19,790 $ 3,605 $ 20,404 T 115 S 10,000 S 424 $ 50 $ 50 $ 2.652 S 4,750 $ 150 S 2,500 $ 5,000 S 1,250 S 100 $ 7,285 $ 277.737 S %8 S 704 $ 23,167 S 3,713 $ 171,017 1 s 3,947 S 20,194 $ 3,605 S 22,261 $ 115 S 10,000 $ 424 $ 50 $ 50 $ 2,652 S 4.750 s 150 $ 2,500 $ 5,000 $ 1,250 $ 100 $ 7,28S S 283,892 S 945 $ 683 $ 23,167 $ 3,713 E 191,119 $ 21,500 S 3,605 S Z2,261 $ 115 S 11,000 $ 424 $ 50 $ 50 1 $ 2,652 S 5,000 $ 150 $ 2,730 S 5,500 $ 1,250 S 100 T 7,295 S 300,319 S 922 $ 662 S 23,167 $ 3,713 s 188,119 s 21,500 S 3,605 S 22,261 $ 115 S 11,000 $ 424 S 50 S 50 $ 2,652 $ 5,000 $ 150 S 2,750 $ 5,500 1 $ 1,Z50 S 100 S 7,285 $ 300,275 $ 899 S , 642 S 23,167 $ 3,713 S 199.119 S 3,947 S 21,895 S 3,605 $ 2.4,117 $ 115 S 11,000 $ 424 S 50 $ 50 $ 2,652 S 5,000 S 150 S 2,750 E 5,500 S 1,250 $ 100 S 7,285 S 306,429 $ 976 S 621 S 23,167 $ 3,713 $ 205,220 S 23,210 S 3,605 $ 24,117 $ 115 $ 12,000 S 424 $ 50 $ 50 S 2,652 .$ 5,250 $ 150 S 3,000 S 6,000 $ 11250 S 100 S 7,295 S 322,355 T 952 S 5" S 23,167 $ 3,713 $ 205,220 S 23,210 S 3,605 S 24,117 $ I15 $ 12,0W 1 $ 424 T 50 $ 50 $ 2,652 $ 5,250 S I50 S 3,000 $ 6,OW $ I,250 $ IW $ 7,285 S 122,210 $ 922 T 578 $ 23,167 $ 3,713 S 205,220 $ 3,947 S 23,603 f 3,605 $ 25,974 $ 115 S 12,0W S 424 $ 50 S 50 $ 2,652 S 5,250 f ISO $ 3,000 S 61000 S 1,250 $ IW S 7,285 S 328,%3 OPERATINGINCOME(LOSS) - S 7,658j55 S - S 341,263 S 541,304 $ 535,149 S 607,220 $ 607,263 $ 601,108 $ 673,191 $ 673,125 S 667,071 $ 739,145 S 739,190 $ 733,037 ��®®©m®��fl®®o�©ici•iiei•�a ....... .... i®E�mEiEv��fe��[iE�[i�me�r�[iE�E�7E��f[��E�7 M:■�������i�i e:r-nnMEMO*= ��©�1©m©�E�L•70��^e�*a��©ice©��^elf w��©�©���c�©�.�©m©■�r.��m�r:�©�©mom ���c��m�m©■�©�r�vt�fl©�®e�.m©ear MOM II ��o■�r.,.��®®cs � ®®mac i nM���t����©o���c� ++�Jr ENNN= Exhibit B McConnell Revenue Cycle Solutions, Inc. Projected Wage Expense Management Employees Monthly Annually Director: Cleo McConnell (1) $ 5,000 $ 60,000 Director- 1 per every 4 clients (2) $ 8,333 $ 100,000 Fixed Employees Monthly Annually Training Trainer/ Manager (3) $ 3,333 $ 40,000 $ 769 Receptionist ($10/hr, 40 hr. weeks) (3) $ 1,733 $ 20,800 $ 400 Customer Service Rep ($12/hr, 40 hr. weeks) (3) $ 2,080 $ 24,960 $ 480 Customer Service Re ($12/hr, 40 hr. weeks) (3) $ 2,080 $ 24,960 $ 480 Administrative Assitant ($12/hr., 40 hr. weeks) (3) $ 2,080 $ 24,960 $ 480 $ 11,307 $ 135,680 $ 2,609 Full-time Variable Employees added per client/hospital Monthly Annually Training Biller ($15/hr, 40 hr. weeks) (4) $ 2,600 $ 31,200 $ 600 Biller ($15/hr, 40 hr. weeks) (4) $ 2,606 $ 31,200 $ 600 Biller ($15/hr, 40 hr. weeks) (4) $ 2,600 $ 31,200 $ 600 Insurance Rep. ($12/hr, 40 hr. weeks) (4) $ 2,080 $ 24,960 $ 480 Insurance Rep. ($12/hr, 40 hr. weeks) (4) $ 2,080 $ 24,960 $ 480 Insurance Rep. ($12/hr, 40 hr. weeks) (4) $ 2,080 $ 24,960 $ 480 Customer Service Rep ($121hr, 40 hr. weeks) (4) $ 2,080 $ 24,960 $ 480 $ 16,120 $ 193,440 $ 3,720 (1) Each fiscal year, Cleo's Director salary will increase by $500 (ap roximately a 10% increase per year). (2) One Director will be added per every four clients acquired, and will receive a 3% increase per year. (3) Fixed employees will be hired to begin operations, and will receive a 3% increase per year. (4) For each new client added, seven full-time employees will be trained in the month prior to beginning the workload for the client, and will receive a 3% increase per year. * All employees will receive $250 of health and dental coverage per month, increasing at 3% per year. 19