Coinaid earth pilot

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Coinaid earth pilot

  1. 1. Academic Version Coinaid Earth Project Germán Rimoldi
  2. 2. Academic Version
  3. 3. Academic Version 1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Business Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Purpose of Being . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.5 Facts that may affect our business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.6 Options plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1 Company Locations and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.0 Service Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.2 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.3 Doing well by doing good . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.4 Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.5 Future Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.6 Coinaid Station Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.7 Business Model Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.8 The Travelex experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.2.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.2.3 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 5.0 Service Business Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.1 Distribution Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.2 Business Model Return on Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 6.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.1 Strategy Pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.2 Business Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.3 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.4 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 6.5 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.6 Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.7 Strategic Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.2 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 7.3 Management Team Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 7.4 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 8.1 Original Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table of Contents
  4. 4. Academic Version 8.2 The Investment Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 8.3 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 8.4 Key Financial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 8.5 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.6 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.7 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.8 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 8.9 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 8.10 Payback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 8.11 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Table of Contents
  5. 5. Academic Version 1.0 Executive Summary ¿How many foreign coins and notes do you have stored in your drawers as a result of your business or tourist international trips? Million of international passengers carry millions of euros in loose change every year, and little is the value and use that they end up giving to this money, once they have returned from these trips. Here at CoinAID we have designed a touchscreen kiosk device to deal with this loose change and perform currency exchange transactions or process donations at airports. We have a simple idea: we can access the 0 to 30 euro market, currently unattended by airport bureaux de change, by placing our small and highly effective devices in convenient locations inside the airport, and get users to find our proposition valuable and aligned with their own values. When we started to design our business model, we begun to outline a set of processes that would allow us to reach the coins-only exchange market at a profit, by avoiding to immobilize capital in every possible level. Throughout this stage we found and nurtured a set of process which have now become the cornerstone of our model, because it allows us to offers great exchange rates and a convenient experience (placing our devices in boarding rooms, steps away from the customer) to the customer, for our different notes and coin transactions propositions. We will implement our prototype at the London Luton Airport (10.100.000 annual passengers) and work hard to improve our processes and transform all the virtues of our business model and technology into great prices and convenience to end user form day one. Our proposition is more convenient and it has better prices than those offered by the standard airport bureaux de change and for that reason our model has an edge. Because of this we believe that in the mid-term we will be able to compete against the "big guys" of the airport currency exchange market, sustaining income expectation for our airport partners and investors. Our financial model relies on high volumes, low margins and small investment which results on high returns on the investment from the very beginning of activities. This is a very profitable business: we charge a fix fee for coin and notes counting and processing, for both donations rechanneling and exchange services, and we rely on highly experienced suppliers to manufacture our hardware (OEMs), develop our kiosk software, supply currencies at wholesaler prices, assemble the device and to delivery, collect and deposit currencies and donations, using secure logistics third party suppliers. This model can be replicated in every major airport in the world. We aim to access 771.000.000 passengers in three years time, by providing our services in 15 international airports: we believe this is one honest and straight forward objective that can be accomplished. Coinaid Earth Inc. Page 1
  6. 6. Academic Version 1.1 Business Mission Our business mission is to become the number one provider of low denomination currency exchange services, on each and every market we operate at. 1.2 Objectives • To find and nurture the set of processes on which to base our early expansion. • To become the single most profitable business undertaking on every airport manager's portfolio we operate at (measuring this achievement per square meter) and to become the most admired brand in the air traveling support industry, for our humanitarian efforts. • To launch activities in London and amplify this experience to expand our proposal to 2 different mid-size airports throughout 2010/2011. • To evaluate 6 different mixes of equipment during the pilot and chose the final mix on which to base our CoinAid Station expansion device model. • To develop a set of analytics to measure new locations' feasibility and to set our managerial standards. • To include three mayor high impact global foundations in our prototype, and further expand this list as we enter new locations. Coinaid Earth Inc. Page 2
  7. 7. Academic Version 1.3 Keys to Success • To charge better prices: our set of processes translate into great value for our customer. We are able to perform currency exchange services at great prices and to access the 0 to 30 euro currency exchange market, at a profit. • Convenience: to place our devices in boarding rooms and hallways, which is more convenient than the existing locations where airport bureaux de change are currently at. • To design a high end experience which redefines our customers' expectations and sets the standards for the low denomination currency exchange industry for the present and the times to come. • To enter into long term contracts with airport managers. • To design an attractive i-pod like looking device to trigger curious customer to try out our services for the first time. • To avoid capital immobilization on every level possible, by leveraging our suppliers capabilities on hardware manufacturing, software development and secure logistics. 1.4 Purpose of Being The purpose of being of our company is to create a unified global network of Coinaid Stations, which aggregately contribute the gross of all of our customers' donations to the most influential non profit organizations in the world. Passengers will decide to which foundation to rechannel their loose change, choosing form a wide variety of options. Besides those foundations and causes we aim to support, we are committed to develop a structured selection process to evaluate one or more regional foundations in each airport we operate at and to include in our menu, those foundations to which the airports may be already contributing to. OLPC Foundation (advertising example). Coinaid Earth Inc. Page 3
  8. 8. Academic Version 1.5 Facts that may affect our business These are the facts we want our potential investors to consider when evaluating our venture: Price pressure form airports: in order to gain access to new profitable locations we might give different concessions to different airports, contractually. There are no standards regarding the access to placement at the airports and the important concessions subjected to negotiation may vary. Contract renewal: we cannot assure you that we will be able to maintain current sites once our pilot or initial contractual period has been completed. Competitive pressures could seriously harm our business: our coin conversion business could face competition form well established currency exchange offices already operating in airports. The Coinaid Earth Inc. Page 4
  9. 9. Academic Version lack of global currency exchange franchises is a positive aspect at this stage. We may be unable to adequately generate, protect and enforce patents and other proprietary rights for our Coinaid Stations: a core technology pending patent may not be held valid if challenged, patent applications may not be issued and other parties may claim rights in or ownership of our patents and other proprietary rights. Trademarks, copyrights, trade secrets and other proprietary intellectual property may be protected by confidentiality agreements: our employees, consultants, vendors or corporate partners might breach this agreements. We may not be able to remedy this breach or, at the same time, these trade secrets may be discovered by our competitors independently. Certain parties may assert claims of patent infringement or misappropriation against us based on current or pending United States and/or foreign patents, copyrights or trade secrets or contracts. If such claims were successful our business could be harmed. We depend upon third party manufacturers, suppliers and service providers: we currently depend on third party manufacturing operations to sustain our international expansion. New markets and locations may require the leverage of new OEMs networks, new to our demands and working standards. Our mid term expansion beyond the European Union will require the development of a new logistics architecture. Our business is subject to foreign laws and government regulation: our currency exchange, charitable fund raising, transfer of money, consumer protection and the access to machines in public places is normally subject are sensible matters that may be approach differently by the different law systems we make business at. Accessing the right legal assistance to interpret these matters correctly may be important to sustain our international expansion. We may be subject to product liability claims if people or property are harmed by our products and services: operating a vending machine on third party property may expose us to product liability claims arising form injury or property damage. Even if we successfully defend ourselves form this type of claim, we could be forced to spend a considerable amount of money in litigation expenses and our management could spend a considerable amount of time in defending against this claims. Our global expansion may not be accurately predicable: our international expansion plans depend on negotiation with every single airport, one at the time. Each management team may have different approach to value and approve our operations at their airport. Coinaid Earth Inc. Page 5
  10. 10. Academic Version 1.6 Options plan Our growth is driven by the number of passengers we serve. We estimate to reach up to 771.000.000 passenger in a three to four year time frame (distributed in 15 airports). Since we expect to work with our investors in the long term, we believe that to work on a purely option based shares plan for the founders could be possible. We will not display the milestones based stock distribution plan in this document. We believe that the processes we have design will redefine the way passengers perform spot exchange transactions and donations, and for that reason we believe that the best possible scenario is to plan for the long term. Our long term option plan has the following outline: • The founders start up activities with only 15% equity share. • The founders gain a larger proportion of the shares (up to 40%) gradually, as they access a +600 million passenger market. • An additional share of the shares are distributed among the founders if an exit strategy is implemented successfully (to the EasyGroup or Travelex for example) or if other similar milestones are accomplished. 2.0 Company Summary Here at CoinAid Earth we're all about making a sustainable, scalable and commercially viable product that people would love to use. We love solving problems, and want to be known as value driven business people who create great technology and treat our partners and users with respect. We believe that it's worth working extra hard to make complicated things simple and delightful to use. We have developed a technological solution to solve one valuable and simple problem. We use our company as a platform to express our founders, investors and partners values and to try to make the world a better place. Beyond our business scope, high growth prospects and remarkable high profitability we have developed this company to ultimately bring to our customer's fingertips the possibility of channeling their resources (in this case, loose change) to those humanitarian causes that align best with their own core values. We are a young group of entrepreneurs, working to make CoinAid Earth one globally known brand recognized for its commitment to create real value for our customers and to improve high impact non for profit organizations real access to resources. Coinaid Earth Inc. Page 6
  11. 11. Academic Version 2.1 Company Locations and Facilities The London City pilot will allow to asses the impact of our technology, test and improve our core processes and to understand how to conduct a feasibility study inside the airport, to locate the equipment in the most profitable possible locations (boarding rooms or hallways) increasing the return for our investors. The reason why we have decided to focus exclusively on airports is because in these locations passengers carry millions of dollars in loose change which they will find of little or no use once they have departed. Since the existing bureaux de change do not perform currency exchange transactions below one given value, this allows us to position our proposal in a non conflicting way with the existent currency exchange offices and by this present our proposal to the airport managers, portraying a win-win situation. Airports are secure and monitored constantly. It is safe to place currency exchange device over there. International airports receive millions of passengers every year, and most of this airport passenger are our potential customers. To focus on airports, to place our equipment conveniently and to perform currency exchange transactions at great prices allow us to target this new market at a profit. Our early expansion will be based in the United Kingdom, Scandinavia and Eastern Europe. Most of the international passengers that depart form these airport do so heading to the european continent which has only one of currency: the euro. By this we are able to develop one single currency exchange device, thing that simplifies our process structure and lowers our costs of development. Our short term expansion perspectives are the following: + London City (130.000.000 million passengers); + Northern Britain (37.000.000 million passengers); + Scandinavia (43.000.000 million passengers); In the mid term we expect to launch our activities in the American continent and Asia. We further explain our expansion outline in section 9. The one great thing of working with airports is that if we were to access to 15 mayor international airports, we would be operating on a +771.000.000 passengers market. Coinaid Earth Inc. Page 7
  12. 12. Academic Version 2.2 Company Ownership The company's equity ownership is divided into the founders, one angel investor and one South American venture capital fund. We expect to include one northern hemisphere based institutional investor, in the mid term. 3.0 Service Description We have categorized our value proposition into three different levels: • Loose change exchange transactions: we apply a net 5% fee on transactions below 15 pounds. We expect 1,25% form the total annual passengers to perform this sort of transactions, with an average input value of 8 pounds per transaction. • Donation rechanneling and processing: we charge a net 9,25% fee for this transactions. We expect 1,25% from the annual passengers to perform this sort of transactions, with an average input value of 8 pounds per transaction. • Small exchange transactions: we apply a net 2% fee over transaction form 15 to 30 pounds, and we expect the average passenger to utilize this proposal 1,5 times. We expect 0,75% of the total annual passengers to perform this sort of transactions, with an average value of 45 pounds per transaction. Millions of international passengers have been keeping millions of dollars in foreign loose change for years. We have one simple proposition: if we develop the appropriate technology, develop a beautiful interface and place the devices steps away form our customers, our simple and profitable business model will be embraced by both the passengers and airport managers. We will invest time and resources to educate our customers about their own needs and about the value of our services. We are certain, that as times goes by, a straight forward proposition as ours will create great value for our customers and constituents and our brand will become admired for our values. As we explained above, we charge a fix fee for coin counting and processing over donations and when it comes to currency exchange, both for "loose change" and "small" transactions, we charge different rates, which are implicit on the final exchange rate offered to the customer. For that reason, the coin counting and processing fee is only exposed in the donation rechanneling services, both on the software application and the invoices printed. This fee is 12.5% and we estimate a 3.25% cost distributed into collection, safe logistics and processing, arriving to the 9.25% net fee. When it comes to currency exchange the final net fee (after deducting wholesale purchase of currencies delivery and collection) is 2% form "small" transactions and 5% for loose change currency exchange transactions. We utilize this net fee to account our sales projected on this plan, and in the account "Direct costs of sales" we include the airport fee which Coinaid Earth Inc. Page 8
  13. 13. Academic Version rages form 5% to 25% from our sales. We have designed our business model relying on the experience and knowledge of our suppliers, and all of the costs that we save by leveraging third parties capabilities, are translated into the final currency exchange rate we charge to our customers. We believe that great prices and unprecedented convenience in location are the two fundamental levels of our proposition, and that a great future awaits if we improve processes continuously and if we start to create brand awareness and one improved device customer experience. 3.1 Competitive Comparison We have designed a very specific set of processes to access the 0 to 30 pounds currency exchange market, currently unattended by the traditional airport bureaux de change. This level of the value proposition does not compete with any other company. Because we have originally designed this set of processes aiming to create the "loose change" exchange market and to monetize it at a profit, we have found that when performing larger transactions we can create exceptional value for passengers, transforming all our cost savings into one better final end currency exchange rate. We explain our processes further in point 3.3: Fulfillment, but we do not include the names or location of our third party suppliers of third party secure logistics suppliers. When it comes to currency exchange services we have the following competitive edge: • Convenient location in boarding rooms and hallways to perform our services steps away form the departing passenger. • Great currency exchange rates (for example, on our prototype, we have better prices compared to other currency exchange companies operating at the Luton Airport, but this does not apply when comparing to other bureaux de change located in London city). We expect 1/3 of our revenues to come from our donation rechanneling services. On this field, we do not compete with others, because our objective is to raise funds in the name of a wide list of high impact foundations, as an option for those passenger how would prefer to give their loose change another use. The passenger may have the possibility of Coinaid Earth Inc. Page 9
  14. 14. Academic Version 3.2 Technology We do not manufacture our own hardware, develop software nor process coins and notes ourselves. It is a key success factor to reach arrangements with each constituent to avoid capital immobilization and leverage their capabilities. Our device is similar to existent coins and notes deposit systems, already well know for companies like Coinstar and other. The most common hardware solutions available in the marker aims the gambling, vending, ATM and kiosk markets and only a limited number of OEMs manufacture original equipment to build these coin and notes deposit systems, as we require (the difference is that this equipment, although more costly, it processes larger sums notes and coins accurately and avoiding jams, at high speed). During our prototype implementation we will use 6 different original equipment mixes, form different equipment manufacturers. By this we will experiencing technology first hand so as to understand which mix will actually outperform the rest, so as to use this equipment when designing and development of our final expansion device model. Developing the software required to manage our equipment is no challenge. We have to register small transactions without the requirement of working online with ATM networks or payment platforms. For that reason our system does not have to comply with the money laundering regulations applied to electronic money transactions and we can focus exclusively on developing a user friendly interface and great software touch-screen based experience. Having clarified this, the software development is fairly simple and it will have two purposes: • To perform and register loose change, small exchange and donation transactions guiding the end user through the whole process. • To register transactions, generate business analytics and upload information in real time for our constituents (foundations and airport managers) and ourselves. The software development has the following characteristics: • C+ o Java running on different protocols to support the different equipment mix we will tryout during the prototype; • Daily online currency exchange rate update; • Donations and currency exchange menu and screen flows; • Wireless internet connection; End user interaction summary: • Presentation inviting the user to touch the screen in order to begin using our service; • First screen displaying two possibilities: donations or loose change/small exchange; • If the passenger has selected the donation option, the menu will have two possibilities: the global development foundations menu and the global health foundations menu; • If the passenger has selected the currency exchange option, she will have to options among which she will have to chose: loose change exchange or small exchange Coinaid Earth Inc. Page 10
  15. 15. Academic Version services (the first option allows her to perform transactions from 0 to 15 pounds, and the last form 15 to 30 pounds); • When performing loose change or small exchange transactions the screen will display the currency exchange rate applied to each particular type of transaction; • In both cases the user will introduce notes and coins. Coins can be escrowed at any time, but when introducing notes, this will be done one note at the time to allow the user to escrow or cancel the transaction when she decides (since most of the note acceptors can escrow one note at the time only). • Values input and the expected exchange sum to be received are displayed on the screen, as the transaction is being completed; • Once the user is ready to perform the transaction she presses the enter button (on the screen) and the transaction is preformed; • Two receipts are printed, one internally (control process) and one externally (invoice). The second purpose of our software is to register transactions and to generate business analytics to create business insights. By registering transactions online we raise the bar on our internal control procedures by allowing our airport partners or foundations to monitor our transactions in real time. This works the in following way: • Every transaction is uploaded, accounted and stored. Both the operator and ourselves know how many transactions have been performed, which is the total amount of coins and notes stored in the device and its final value. Every time the equipment is to be loaded up, the operator has to compare this to the internal receipts printed. • End users decide to which foundation they'd want to contribute their loose change. Foundations' managers can register online (we provide each manager with one user name and password) and monitor the donation received, in real time on a device level. • Airport managers may have access to all of those transactions registered and stored by using their user name and password. Because they will receive a share of our end results, this will prove valuable both for them and ourselves. • This system improves our operational effectiveness because each time one piece of equipment registers problems the operator will be emailed in real time to fix it. If one user were to have any trouble when using our device, she may require assistance in real time and the operator will assist her in minutes. 3.3 Doing well by doing good Once we have generated a global network of Coinaid Stations, the aggregated sum of money donated to humanitarian causes will be significant. We expect to channel and focus million Euros loose change market into causes that reflect our customers' values. On our early expansion plan we will include the following high impact NGOs, on the following fields: • Malaria: Program for Appropriate Technology in Health (PATH) World Health Organization Institute for One World Health • Tuberculosis: Global Alliance for TB Drug Development Coinaid Earth Inc. Page 11
  16. 16. Academic Version • Maternal, Newborn, & Child Health: Save the Children Federation • Nutrition: International: Bank for Reconstruction and Development World Health Organization • Diarrhea: Institute for One World Health • Vaccines: International Bank for Reconstruction and Development • Neglected diseases: The Carter Center • Agricultural development International: Food Policy Research Institute • Animal Life Preservation: Wild Life Foundation 3.4 Fulfillment Our business model has a unique structure. As we have mentioned before, the fact that we had been focused on developing a set of processes that would allow us to access the 0 to 30 pound market at a profit has now become the reason why we may be able to perform currency exchange services at great prices. The business model has the following core processes: • Device design, assembly and deployment; • Software development including multi protocol configuration to manage in a standard way the different equipment mixes we will try out during the prototype; • Purchasing currencies from two different wholesalers; • Collecting coins and notes hiring a secure logistics company; • Processing donations, airport managers' fees and our currency inventories after collection. 3.5 Future Services In the future we will add one variable to our currency exchange proposition, which is to allow passengers to input their loose change into the device and to deposit it in their credit card account online, through an ATM network. This is a novel service which may have potential on its own, but we will not focus on it at this stage. As our airport network increases in size and we learn more about the air traveling support industry, we may be able to offer to the airport managers different kiosk device solutions, besides our currency exchange and donations rechanneling services. For now, we are not studying new device solutions to target new possible customer problems, probably already existing in the industry. Still, we believe that our Skycycle kiosk design company will gain considerable recognition as an innovative technological brand, as we continue to grow: we may be able to use this asset to pursuit further opportunities in the future. For the time being we will focus on these two objectives: Coinaid Earth Inc. Page 12
  17. 17. Academic Version 1. To improve the operational effectiveness of our kiosk device (user friendliness, speed and reliability) and to include a second currency as a currency exchange possibility (Dollars in most cases) when expanding to new locations; 2. To extend the list of global foundation we aim to include in our giving menu. This is aligned with our humanitarian mission: "To create unified global network of Coinaid Stations to contribute the gross of all of our clients' donations to the most influential non profit organizations in the world " As we gradually increase the number of foundations included on our menu, we will try to include those that comply with the following standards: • +100 million dollars of annual budget and one truly global mission; • Processes to guarantee the accountability of the pounds passengers have decided to donate; • If existing airports were to be already contributing with local foundations, we will include this on our donation menu. 3.6 Coinaid Station Design We are looking to deliver a functional and intuitive software experience and one fast and reliable coin and note processing system. We believe our value mix will redefine travelers' spot currency exchange transactions expectations, but still the single most important factor to drive our growth will be to transform this end customers value into value for our airport partners. We can create value for the airport in two ways: • Economically (revenue on sales and land lease - we cover this topic in the financial plan section); • Creating brand awareness and triggering need recognition. In the short term, the best way to trigger need recognition is by placing our attractive devices close to passengers, in boarding rooms or hallways. By this we increase profitability, by driving more customers to tryout or use our device. To this end we will develop business set of analytics to perform feasibility studies in each location we operate at. In the long term, we will invest our resources and time to educate the passenger about the value of our services in two ways: • Displaying the humanitarian causes we support on our device (graphical advertising); • Displaying cartoon video to educate the passengers about the value of our services and about how to use the device; As we improve our processes with time, we will become an increasingly profitable business partner to the airport managers and at the same time, passengers will start to be aware of the value of our services. As our customers and constituents begun to consider our services as important for the overall airport experience, our expansion process will gain momentum. Coinaid Earth Inc. Page 13
  18. 18. Academic Version In this section we will share with the reader the cabinet model we will use in the future. 1 Prototype device: a. 2. Other cabinet options for out prototype and early expansion: a. Coinaid Earth Inc. Page 14
  19. 19. Academic Version b. 3. Long term design and architecture at the airport. Coinaid Earth Inc. Page 15
  20. 20. Academic Version 3.7 Business Model Innovation To scale up this business model globally we have developed a number of innovative processes and practices on the following levels: Functionality: our innovative value proposition allows passengers returning to their original destination the possibility of exchanging the foreign coins they will find of little or no use once they returned to their original destination. Low denomination currency exchange is currently not being targeted by this industry's incumbents. Pricing: demand is to be encouraged by charging a low service fee. Volume: we have developed low tech solution that allows us to perform up to 1440 transactions a day, per machine. We can supply any airports demand and install a larger number of Coinaid Stations as the markets broadens. Education: this field of innovation has two levels. First, users have to be educated about how to use the Coinaid Station. Second, they have to be educated about the benefits of using our services either to get value back from their foreign loose change or just to give something back on a high impact humanitarian cause. Interface: we focus our efforts on designing simple and intuitive interface with multi-lingual (English, Spanish, French and Scandinavian languages) possibilities. Coinaid Earth Inc. Page 16
  21. 21. Academic Version Design: our final Coinaid Station design is attractive (trigger curious first time users) and small enough to be placed at any place inside the airport. Distribution: We work exclusively with third party logistics suppliers to delivery, collect and process donations and currencies. Technology: we leverage existing OEMs and assemblers experience to manufacture a novel device. Broad architecture: we could include new functions to our device as we further understand the industries needs. 3.8 The Travelex experience We have studied in depth one similar solution provided by one currency exchange company five years ago for a five year period. This company was Travelex, form our research we now know: • They piloted the concept first. • They've build 60 devices and place these in 3 London based Airports (Stansted, Gatwick, Heathrow); • The business was highly profitable (they charged a 5% to 45% commission depending on the size of the transaction); The difference between their proposition and our is: • They did not place their equipment exclusively on boarding rooms or hallways; • We use different technology (they used one low end vending manufacturer to produce their devices); • No attention was paid to the devices' interface: it operated as vending machine with out touchscreen end user software interface; • Operators customers could not know whan one device was out service or when passenger had trouble using the device. We have developed our software application having operational effectiveness in mind. • Airport managers could not monitor the activity on a device level nor have access to the transactions registered. The reason why they decided to shut the project down were: • "They couldn't cope with the equipments' maintenance" (this means that their existing set of processes couldn't cope with this effectively, not that it is not possible to design a set of processes to deal effectively with maintenance and customer complaints). • They decided to focus on other areas of growth. Their device looked like this: Coinaid Earth Inc. Page 17
  22. 22. Academic Version 4.0 Market Analysis Summary We expect that 3,25% of the total annual passengers (PAX) will demand our services. About 3/5 will utilize our device to perform exchange transactions and the rest will demand our donation rechanneling services. Our primary research study conducted in one major international airport has displayed that 88% of the departing passengers arrive to the terminal carrying coins and notes that will not be of any use once they have arrived to their next destination. Only 27% has displayed not to care about this loose change and from the rest of the passengers, we expect that up to 12% does not have enough time to do something about their loose change. It will prove hard to create customer profiles, so as to segment each airport we operate at and to try to estimate demand on those basis. Our hypothesis is that all of our potential users are equally value conscious and value driven, no matter where they come from, for that reason we have developed two common sales forecast approaches to estimate revenues: 1. Attributing the probability of usage per passenger to their spear time before boarding. We start by assuming that the "spare amount of time per passenger" is uniformally distributed in four groups with equal probability, this function considers the elapsed time that departing passengers spend between they check in and board their plain. We further Coinaid Earth Inc. Page 18
  23. 23. Academic Version explain this reasoning in point 9.3. 2. We apply the standard 3,25% to the annual PAX, which represents 6,5%, of the departing passengers (slightly higher than the percentage of usage estimated on average ATM machines, which is 5%). We will build our financial projections taking the second approach. First, this 3,25% is the lower estimated usage ratio from the two of these and it seems to be a practical approach we could apply as a rule of thumb because it is simple and straight forward. The other variables that we will consider when estimating revenues: • Average value of the loose change carried by passengers (8 pounds in loose change and 45 pounds when performing exchange transactions); • Percentage of departing passengers (50% of PAX); • Percentage of departing international passengers (we consider all of the departing passengers international, because at this stage we are focusing on international airports); The important thing is that when we combine these variables with the weighted usage ratio (1/5 perform small currency exchange transactions, 2/5 perform loose change exchange transactions and 2/5 perform donation rechanneling transactions) we can estimate revenues, rapidly. 4.1 Market Segmentation The market analysis table explains how we picture and prioritize our expansion possibilities. We are launching activities in a 10.100.000 annual PAX airport (which we've placed in the "small" category). Since we are aware that each and every airport account requires plenty of time invested, we have decided to focus exclusively on large accounts during our first four years of operations. These are more profitable and more time-effective to manage (that is the reason why mid size and large airport are the largest category in the market analysis table). We have segmented our market on purely managerial bases, having in mind that this particular version of our business plan may be read by investors and airport managers exclusively. The "expansion focus" to our market analysis is straight forward and most appropriate at this stage, the annual PAX represents the size of the market, but our actual market is the departing passengers market, which would be that number, divided by two. Still, when managing the day to day operations of our business, a behavioral segmentation will be best, to design new processes and get the most out of the market. We know travelers recognize one need: that the existence of foreign loose change, in notes and coins, has little or no value, before departure. Although the need recognition may be the triggered by the same reason, usage could be categorized into two groups: • Value conscious (or rational) customers: who values our services and appreciate getting value back from their coin and notes, hence they willing to exchange them. • Cause driven customers: who prefer to donate their loose change (or larger quantities of Coinaid Earth Inc. Page 19
  24. 24. Academic Version cash) just because they perceive our menu of high impact foundations to be one great idea and because of this the customer may be willing to pay our coin counting and processing fee, for the rechanneling services. Table: Market Analysis Market Analysis 2010 2011 2012 2013 2014 Potential Customers Growth CAGR London Luton airport 3% 10.100.000 10.403.000 10.715.090 11.036.543 11.367.639 3,00% Mid size airports 1% 20.000.000 40.000.000 80.000.000 400.000.00 0 404.000.00 0 112,00% Large size airports 2% 30.000.000 60.000.000 120.000.00 0 350.000.00 0 353.500.00 0 85,28% Total 89,12% 60.100.000 110.403.00 0 210.715.09 0 761.036.54 3 768.867.63 9 89,12% 4.2 Target Market Segment Strategy As stated before, we have not based our market segmentation or sales forecast on customer profiles. The fact that we are launching activities in the London, has nothing to do with a local expected customers' set of preferences for that city or anything similar. Northern Europe happens to be the single most attractive market (high average value of loose change carried by passenger and because we offer single currency exchange transaction for Pounds or other currencies, always to euros) to place our technology at first, and that it is why we have decided to launch our activities over there. To launch activities in London city happens to be appropriate because: 1. London is the busiest airport hub in the world, with +130 million annual passengers. Coinaid Earth Inc. Page 20
  25. 25. Academic Version 2. It sets the standards of our technology for the short term: both in Scandinavia or Britain, the great majority of passengers will carry Crowns or Pounds and will probably want to exchange these for Euros. By this we can design one single currency exchange kiosk device during our prototype, improve it and work on a similar version to expand two our second airport. 4.2.1 Market Needs How many time have you found yourself putting away in jars or drawers those foreign coins and notes which have little value for you at that point? Passengers traveling internationally have always carried this foreign "loose change" with them. The reasons why passenger can't do anything about it are the following: • Currency exchange bureaux do not target the 0 to 30 euro market. • Although passengers may have the possibility of exchanging larger sums and with them, their loose change, traditional bureaux de change are located next to customs and check-in spots, where people has less spear time and tend to feel more stressed, hence the probability of currency exchange engagement, diminishes. We have designed a business proposition that is conveniently located (in boarding rooms and hallways) while still offering great currency exchange rates. This, combined with the fact that foreign coins won´t be of any use once the passenger has returned back to her original destination, may trigger need recognition and increase the probability of usage per passenger. Since passengers have this need but they may not be aware of it so far, to educate them about it is our responsibility. For that reason, each device will display educational video as long as passengers are not interacting with the touchscreen. We have designed the device to make it look attractive to attract curious users and we will communicate our donation rechanneling services to communicate our values and attract first time users. Once passengers have recognized that they actually have the need to do something about their loose change, our technology will be right to offer a solution conveniently and at a great price. We will work hard to redefine the passengers' expectations and to become the number one provider of low denomination currency exchange services on every market we operate at. Coinaid Earth Inc. Page 21
  26. 26. Academic Version 4.2.2 Market Trends Our customers are value oriented and socially responsible. At the same time, they are technologically savvy and will probably find our services enhancing and entertaining. We have designed an attractive device, with a simple interface to guide the user through the giving or exchange experience. Passengers have been carrying foreign loose change for a long time now, and we do not see how that could change in next couple of years. 4.2.3 Market Growth We can asses how fast the air traveling industry is growing by estimating the increase in the number international passengers. This access to this information is transparent and available for research. When it comes to try to understand how one particular airport will behave it becomes difficult because some variable are not predictable in the long term, in particular how the different airlines will organize their air plains fleets, which ultimately determines how one particular city air flux is defined. Our company's growth is not driven by market growth per se but by our ultimately in accessing new locations as fast and efficiently as we can. As a general rule of thumb, we expect that the volume of annual passengers, in those airport we already begin to operate, will grow at a annual compound 1% rate. The list of northern european airports we may aim to do business at follows. When outlining our early expansion sequence we will order our preferences in following this order: 1. Number of international annual passengers (right after our pilot implementation in London we may prefer to expand our activities to Stockholm before Birmingham); 2. Proximity to other projects (right after our London Pilot, we may prefer to expand our activities to Manchester before Moscow); 3. Airport managers' support, trial period and long term contractual attractiveness (we may prefer to pursuit the most profitable contractual agreements first). The list of potential airports on which to base our early expansion plans is organized presenting the name of the city were these are located, the airport's code, the annual number of passengers who flew form there in 2008 and their 2008-2007 growth rate: Pilot: 0. London Luton London London LTN/EGGW 10180734 +2.6% Early expansion: 1. London Heathrow Airport - London LHR/EGLL 68066028 +1.5% London Gatwick Airport - London LGW/EGKK 35216113 +2.9% Coinaid Earth Inc. Page 22
  27. 27. Academic Version London Stansted Airport - London STN/EGSS 23779697 +6.0% 2. Stockholm-Arlanda Airport - Stockholm ARN/ESSA 18136080 +1.2% 3. Copenhagen Airport - Copenhagen CPH/EKCH 21530016 +0.6% 4. Manchester Airport - Manchester MAN/EGCC 22112625 +4.0% Birmingham International Airport - Birmingham BHX/EGBB 9226340 +4.3% Glasgow International Airport - Glasgow GLA/EGPF 8795653 +7.0% Edinburgh Airport - Edinburgh EDI/EGPH 9047558 +0.5% 5. Oslo Airport, Gardermoen - Oslo OSL/ENGM 19344459 +1.6% Bergen Airport, Flesland - Bergen BGO/ENBR 5037451 +3.8% 6. Bristol International Airport - Bristol BRS/EGGD 6267114 +5.7% East Midlands Airport Derby/Leicester/Nottingham EMA/EGNX 5620673 +3.8% Liverpool John Lennon Airport - Liverpool LPL/EGGP 5334152 +2.5% Belfast International Airport - Belfast BFS/EGAA 5262354 +0.2% Newcastle Airport - Newcastle upon Tyne NCL/EGNT 5039993 +10.8% 7. Domodedovo International Airport - Moscow DME/UUDD 20437516 +0.5 Once we have launched activities at each airport we will create need recognition and increase sales by spending time and resources to educate our customer about: • The benefits and value of our services; • The way to use our technology in simple steps; When it comes to first time users, expect to pitch this audience by rapidly communicating the message with our screen display and simply written content and our attractive devices will attract curious customers. About the ways to educate our customers in the long term, we will find and nurture the right processes along with time, among this we expect the following: • A tailored made cabinet design displaying our donations rechanneling proposition; • Email follow up, once the transaction has been completed and to hand a detailed invoice of the transaction; • Educational video, explaining how to use the device and about the value of our services (convenience, good rates and variety of options when it comes to donation rechanneling). Coinaid Earth Inc. Page 23
  28. 28. Academic Version 5.0 Service Business Analysis We perform automated currency exchange spot transactions and donation rechanneling services in the air traveling support industry. Airports are fantastic places to perform our services because of their safety and the large number of passengers carrying loose change. At the same time airports allow us to amplify the unique benefits of our business model (convenience and and value for money): • Because our devices are small in size we can place them in boarding rooms and hallways (presence which would otherwise be constrained for building regulation matters). At this stage passenger perceive no value for the already foreign loose change that they carry, they have plenty of time to do this, bureaux de change are far away form that spot and the probability of usage is at its peak. • Because of the business processes we have designed we are able to charge great currency exchange rates and to include a long list of high impact global foundations. We perceive airport bureaux de change to be our competitors, although we do not target the exact same market. The novel thing about our business model, is that we can target the 0 to 30 pounds market, most of the time unattended by airport bureaux de change, profitably. Once we have achieved this, we will start to think about including higher currency exchange transactions in our proposition and to extend the list of foundations, even further so as to democratize the on the spot giving proposition. As our value proposition is redefined or extended, after the prototype implementation in London Luton, we will be able to identify clearly the new competitive landscape for each new location we intend to access. 5.1 Distribution Patterns Our business model has an edge. We are able to charge great prices because we have simplified the distribution processes to have the currencies purchased from the wholesalers delivered to the airport on demand, eliminating stock requirements (that other currency exchange offices may have) by operating exclusively with the currency inventory we have inside the devices. We have developed our software to monitor each device, calculate our foreign currency requirement and to deliver and purchase it, on the spot using. Coinaid Earth Inc. Page 24
  29. 29. Academic Version 5.2 Business Model Return on Investment As we have stated before, we are working to create a new market: the 0 to 30 pound currency exchange market at airports. While not every airport bureaux de change has "minimum transaction limits" (this would mean that these companies wouldn't perform exchange transactions below one given value, say 30 pounds), we believe passengers en up carrying this loose change for the following reasons: • They find the airport processes to be time consuming and stressful and they would not spend extra time to engage in such transaction for the value this loose change represents; • They forget about their loose change; • They would have exchanged their loose change along with their currencies, but the airport's bureaux the change were out of the way, or at least, far away form the boarding rooms where they would have had more time to perform this transaction; • They are local passengers departing for a business trip or tourism and they do not perceive the need to do something about this loose change, because they will be back in the short term; Our device innovation and business model result on: • Exceptional convenience (in boarding rooms and hallways, where the probability of usage is higher); • Great prices (we have nurtured a set of simple processes which simplifies currency distribution in one step, to deliver our currency inventory directly to airport). If we evaluate both levels of our proposition, our competitors may be the following: • Airport bureaux de change (if passengers decide to use our device repeatedly to perform higher transactions); • Already existing piggy-boxes for donations (if the airport managers would not decide for us to include this foundations on our giving software menu, consolidating every giving activity in the airport on our devices); • Other commercial and retail operators placed inside the airport (where passengers could donate their loose change). It every case it is arguable if we compete with each them because our model relies on the fact that our devices are placed right before the boarding process takes place, when these companies have been left behind. Coinaid Earth Inc. Page 25
  30. 30. Academic Version 6.0 Strategy and Implementation Summary We will launch activities in London. This city is the busiest airport hub in the world with more than 130.000.000 annual passengers. At the same time, this city alone represents the single most profitable market in Europe both because the number of passenger and the sterling pounds loose change currency values we estimate passengers carry. Our prototype will be implemented in the Luton Airport, a small size international airport which handles mostly UK to continental Europe flights. We consider this to be a great opportunity to test first hand the different pieces of equipment we have purchased form different OEMs. At the same time, we will evaluate the processes we have designed and apply all the experience we have accumulated when negotiating with third party suppliers, third party secure logistics suppliers and airports, on our early expansion implementation stage. By experiencing our technology and business model first hand, we will also understand how to build up work force to cope with our early expansion plans operational requirements. In the mid term and because our single most important growth driver is the number of airport we enter, we expect our management team to focus their time and efforts exclusively in earning new accounts or renewing the existing. 6.1 Strategy Pyramid Our strategic sequences are: 1. Launch operations at the Luton Airport in London, in a three month time frame; 2. Early expansion in Northern Europe; 3. International expansion in the Americas and Asia. Our prototype implementation is important because we will evaluate and redesign our processes as we operate. During this period, we will place three different sets of equipment in 6 devices and by this we will be able to evaluate each piece of equipment first hand, and to use the best performing mix to develop of our expansion device model. Our expansion plans are outlined on city bases (which usually means one single airport per city, but not always). For each new location we have to access the appropriate coins and notes currency suppliers locally and the same may apply for all our core processes performed by third party business participants (as we have outlined previously) because we will have to find solutions, locally. It is this part of our business model the one that represent the bigger challenge. The expansion device model will have two currencies dispensing capabilities. The number of currencies dispensed drive the final cost of the device (because for each, a new set of hoppers and note dispensers have to be included). For this device we intend to use the equipment mix that we have described before, but to assemble it locally so as to try to minimize shipment costs and gain post-sale services, form the assemblers, if that was possible in each case. Coinaid Earth Inc. Page 26
  31. 31. Academic Version When it comes to our global donation rechanneling network: we think big. We believe that the millions of dollars in loose change that passengers carry will create long lasting impact on different causes. For that reason, we will build a long list of high impact foundations, in compliance to our requirements and we will allow passengers to find and donate to those causes they feel their values to be best aligned with, driving up demand, probably building a long lasting relationship with each customer and helping foundations to raise their funds. 6.2 Business Participants Airport managers are our most important constituents. We invest a great deal of our time on finding and nurturing the right processes to fulfill their expectations. In opposition to other companies already operating inside airports, we have designed our value of chain thinking exclusively in the airport traveling support industry and for that reason will be prepared to respond to their demands timely and to enter into agreements that reflect clearly they requirements and ours. The other participants in our value of chain are: • Original equipment manufacturers (OEMs); • Kiosk assemblers; • Foreign currency exchange wholesalers; • Safe logistics delivery (third party logistics supplier); • Collection and processing (one different third party logistics suppliers); • Third party kiosk maintenance (during our early implementation stage); • Software developers; • Foundations. 6.3 Milestones Our approach to funding is to work exclusively with those funds and angel investors we look up to. For that reason we are willing to make concessions we wouldn't normally do under different circumstances and we will spend all the time necessary to take the funding negotiation forward with them. Our approach is long term. This is important because we expect to build an option plan for ourselves, the founders, which relies exclusively on the size of the markets we gain access to in the future. For that reason it is important to define our milestones following that line of reasoning (million annual passengers based): The completion of the following milestones will result in the distribution of stocks to the founders: Coinaid Earth Inc. Page 27
  32. 32. Academic Version 0. Luton Airport pilot approval and contractual renewal after 6 moths of operations ..............02/06/2010 This milestone includes the accomplishment of the following objectives: • Seed stage funding (form one angel investor and one institutional investors); • The first 3 different prototype devices assembled and deployed, properly evaluated (with this results in mind we will design our early expansion device, with only one set of different equipment pieces); • Positive economic outcome of our activities; • Properly tested and improved processes, on which to base our early expansion. 1 and 2. Second and third stock related milestones.....................................................................02/06/2012 We expect to reach 50 million passengers (milestone number 2) and 150 new million passengers (milestone number 3) in 19 months time. The list of airports that follows, includes all the possible locations we may be able to expand into (presented by name of the airport, city, code, and million annual passenger on 2007-2008 values) in northern Europe. We do not have regional focus, which means that if we would find a more profitable market someplace else in the world, we would pursuit that opportunity instead: 1. London Heathrow Airport London LHR/EGLL 68066028 +1.5% London Gatwick Airport London LGW/EGKK 35216113 +2.9% London Stansted Airport London STN/EGSS 23779697 +6.0% 2. Stockholm-Arlanda Airport Stockholm ARN/ESSA 18136080 +1.2% 3. Copenhagen Airport Copenhagen CPH/EKCH 21530016 +0.6% 4. Manchester Airport Manchester MAN/EGCC 22112625 +4.0% Glasgow International Airport Glasgow GLA/EGPF 8795653 +7.0% Edinburgh Airport Edinburgh EDI/EGPH 9047558 +0.5% 5. Oslo Airport, Gardermoen Oslo OSL/ENGM 19344459 +1.6% Bergen Airport, Flesland Bergen BGO/ENBR 5037451 +3.8% 6. Bristol International Airport Bristol BRS/EGGD 6267114 +5.7% East Midlands Airport Derby/Leicester/Nottingham EMA/EGNX 5620673 +3.8% Liverpool John Lennon Airport Liverpool LPL/EGGP 5334152 +2.5% Belfast International Airport Belfast BFS/EGAA 5262354 +0.2% Newcastle Airport Newcastle upon Tyne NCL/EGNT 5039993 +10.8% 7. Domodedovo International Airport Moscow DME/UUDD 20437516 +0.5 3. Long term expansion................................................................................................01/01/2015 To reach 400 new million passengers we will study the following airports (and the ones listed Coinaid Earth Inc. Page 28
  33. 33. Academic Version above): 1. Hartsfield-Jackson Atlanta, Atlanta, ATL/KATL 90,039,280, 0.7% O'Hare International Airport , Chicago, ORD/KORD 69,353,654, 8.9% London Heathrow Airport, London LHR/EGLL 67,056,228 1.5% Tokyo International Airport, Tokyo, HND/RJTT 66,735,587 1.0% Paris Charles de Gaulle Airport , Paris, CDG/LFPG 60,851,998 , 1.6% Los Angeles International Airport, Los Angeles, LAX/KLAX 59,542,151 4.8% Dallas-Fort Worth International Airport, Dallas DFW/KDFW 57,069,331, 4.6% Beijing Capital International Airport Beijing PEK/ZBAA, 55,662,256, 3.9% Frankfurt Airport, Frankfurt FRA/EDDF 53,467,450 1.3% Denver International Airport Denver, DEN/KDEN 51,435,575 3.0% Madrid Barajas International Airport, Madrid MAD/LEMD 50,823,105 1% Hong Kong International Airport, Hong Kong, HKG/VHHH, 47,898,000, %2 John F. Kennedy International Airport , New York JFK/KJFK 47,790,485, 0.2% Amsterdam Airport Schiphol Haarlemmermeer, AMS/EHAM 47,429,741, 0.8% McCarran International Airport , Las Vegas, LAS/KLAS 44,074,707 7.7% 4. Other milestones (exit strategy and others).............................................................02/05/2015 Table: Milestones Milestones Milestone Start Date End Date Budget Manager Department Initial trip to meet London Luton management team 21/9/2009 3/10/2009 $4.798 Germán Rimoldi Founder Seed stage fund raising 4/10/2009 4/11/2009 $0 Germán Rimoldi Founder Prototype implementation in Lunton Airport 1/1/2010 1/6/2010 $67.387 Germán Rimoldi Founder First airport besides Luton 2/6/2010 1/12/2010 $0 Germán Rimoldi Founder Early expansion in northen Europe (50 million new passengers) 2/12/2010 30/12/2011 $96.661 Germán Rimoldi Founder Early expansion (150 new passengers) 31/12/2011 1/6/2013 $0 Managemen t Team Fransico Heffesse Long term expansion (to reach up to 400 million new passengers) 2/6/2013 1/1/2015 $1.233.919 Managemen t Team Fransico Heffesse Other objectives 2/1/2015 2/5/2015 $0 Germán Rimoldi Founder Totals $1.402.765 Coinaid Earth Inc. Page 29
  34. 34. Academic Version 6.4 Sales Forecast We have developed two methods to estimate our sales. 1. The first method consist on applying one standard ratio on the annual PAX. To build this ratio we will first have estimate the probability of usage for every level of our proposition: 1. 0,75% of the PAX performs small currency exchange transactions; 2. 1,25% of the PAX performs loose change currency exchange transactions; 3. 1,25% of the PAX perform donations rechanneling. The second step is to estimate revenues for each group and apply our estimated spread or margin fee on each: 1. Small currency exchange transactions are performed on an average value of 45 pounds and we estimate a 2% gross income for each transaction; 2. Loose currency exchange transactions are performed on an average of 8 pounds and we estimate a 5% gross income for each transaction; 3. Donation rechanneling services are performed on an average of 8 pounds and we estimate a 9,25% gross income for each transaction; To come up with a ratio to estimate revenues per passenger we can build a weighted average with both the probability of usage and the expected revenue per transaction. In this case we Coinaid Earth Inc. Page 30
  35. 35. Academic Version have decided to build our forecast presenting information divided into each level of our proposition . The wholesale currencies purchase prices that we have used and the estimated percentages we have discounted (for currencies delivery and collection) form the sales price, correspond to the third week of August, 2009 in London city. If those prices were applied, we would purchase euros directly form a wholesaler at a final price of 1,149 euros per pound (1,159 euros less 0,8% for delivery to the airport) and offer the end customer 1,0989 euros on >15 pounds transactions, and 1,0462 on loose change exchange (that is 3% and 8% charge) calculating our gross income percentage to be 2% and 5% on each case. Besides having a convenient service located a few steps away form the departing passenger, we offer better prices than the currency exchange offices already operating at London Luton Airport. During that same week, passengers could purchase 1,041 euros with 1 pound in the traditional currency exchange offices operating over there. None of these currency exchange offices are to be found next boarding rooms, where loose change already has little value for the international passenger, and usage probability is at its peak: for that reason we charge better prices and our devices are conveniently located, in comparison to the traditional currency exchange prices. In sales forecast we do not "Direct costs of sales" because the Abertis company has agreed not charge a fee on sales nor the land lease, while we implement our prototype. 2. We have also worked on a different approach to estimate sales but we have NOT taken this reasoning to build the sales forecast that follows: First, we try to estimate the size of the market: The number of potential estimated customers on an average U.K. airport is around 40% of the total number of passengers and 44% for other airports. Around 94% of the departing passengers (UK or other) depart to a Euro currency destination, and for that reason they could demand our services. Total Potential Customers = total number of annual passengers (UK PAX + Others PAX); 'Other' potential customers= total yearly passengers * 0.44 * 0.94 = = TYP * 0.44; U.K. potential customers= total yearly passengers * 0.4 * 0.94 = UKTYP * 0.40; Total Potential Customers = ('Others' PAX * 0,44 + U.K. PAX * 0,44)*0,94; We expect passengers to carry an average of 3 Euros Pounds or other currencies. Size of the maket= 'Total Potential Customers' * 'Average value of loose change' carried by passenger = ('Others' PAX* 0,44 + UK PAX * 0,44)*0,94 * 3; Second, we try to estimate the probability of usage per passenger. We apply the following mathematical reasoning: the probability of usage depends on the spare Coinaid Earth Inc. Page 31
  36. 36. Academic Version time a passenger has between she has checked-in and the flight departs. We call this variable "elapsed time". Elapsed time = Boarding time - Check-in time (result in minutes); We will say that the variable "elapsed time" has a Uniform distribution divided in four groups with .25 probability of success on each case. U [0,25;4] ~ x1,x2,x3,x4 (x being the group of passengers ordered by their 'elapsed time'); • The first group represents passenger that have arrived with 02:00-01:30 hours before departure, • the second group represent those passenger who have arrived with 01:30-01:00, • the third group with 01:00-00:30 and, • the last goup has just half an hour of time left to board the plain after checked in. Our hypothesis is that the usage probability depends on the spare time passengers have once at the airport, and that the this distribution is uniform (therefore, we are assuming that prior to use our currency exchange services or to use our donation rechanneling services, users will - only - take into consideration the correct timing of their own flight schedule). The probability of success or probability of usage, for each group (x1....x4) can be expressed by this the function f(xi) = 1/3^xi "Elapsed time" f(xi) 02:00-01:30................................... 1/3 01:30-01:00................................... 1/9 01:00-00:30................................... 1/27 00:30-00:00................................... = 1/81 f(xi) represents the probability of usage per group, and since each 'elapsed time' group of passengers is uniformally distributed into 4 groups, the probability for each group is 0,25. Hence, when we are trying to estimate our total transactions in relation to the size market, we multiply the probability of each group times its probability of usage and this times the 'total potential passengers' and the 'average value of loose change' that they carry ('size of the market'). Therefore, on an airport with 18 million passenger a year, about half, 9 million, depart form that destination to another. Hence the probability of usage could be expressed using the following mathematical equation: Probability of usage = .25*1/3+.25*1/9+.25*1/27+.25*1/81 Since the average loose change carried by passenger is 3 pounds, the total transactions we expect to perform are calculated the following way: Coinaid Earth Inc. Page 32
  37. 37. Academic Version = ( .25*1/3+.25*1/9+.25*1/27+.25*0 ) * 3 * (Total Potential Customers); To estimate our income, we would have to apply our service fee to the total number of transaction performed. If we would charge 12,5% fee for coins and notes counting and processing, the equation would look like this: = [ ( .25*1/3+.25*1/9+.25*1/27+.25*0 ) * 3 * Total Potential Customers ] * 0.125; When estimating our income on a particular region, northern Europe for example, the equation would be the following: = [ 3 * ( (0.0528902 * U.K.) + (0.05649635 * Scandinavian) ) ] * 0.125. Table: Sales Forecast Sales Forecast 2010 2011 2012 Sales Small exchange transactions (between 15 and 30 pounds) $50.496 $350.473 $3.849.695 Loose change exchange transactions (less than 15 pounds) $68.172 $473.155 $5.197.272 Donations rechanneling $101.004 $701.928 $7.700.306 Total Sales $219.672 $1.525.556 $16.747.273 Direct Cost of Sales 2010 2011 2012 Airport Fee (5% sales + rent) $0 $123.736 $1.187.837 Delivery, collection and processing costs of coins (subtracted from the sales spread) $0 $0 $0 Delivery, collection and processing costs of notes (subtracted form the sales spread) $0 $0 $0 Subtotal Direct Cost of Sales $0 $123.736 $1.187.837 Coinaid Earth Inc. Page 33
  38. 38. Academic Version 6.5 Competitive Edge • We offer better currency exchange rates than the existent bureaux de change operating at airports (this may not apply if you compare our currency exchange rates to those rates the bureaux located in the city have); • Our devices are conveniently placed inside the airport. Departing passengers will be steps away form our devices just before boarding the plain. This increases the probability of usage because at that stage foreign loose change has little no value and no other possible use. 6.6 Value Proposition We work closely with airport managers because ultimately, they are our single most important constituent. We are committed to become the single most profitable business venture in the managers' portfolio and the first single most admired brand in the air traveling support industry for our humanitarian efforts, contributing this way to the final airport value mix and experience. Coinaid Earth Inc. Page 34
  39. 39. Academic Version 6.7 Strategic Alliances Our most important constituents are the airport managers. We work hard to establish long lasting business relationships with them and we are willing to make important concessions regarding location, trial period time extension and fees over revenues arrangements (when this implies longer term space rentals), because by doing this we improve our long term relationships with them. When it comes to airport managers we have an open information policy: • They can access our database online and review or monitor the transactions registered on a device level, in real time. • We will hand to them critical business insights resulting from a set analytics, so as to work together in locating our devices in places where we could improve our profitability. • If the airport is already supporting one or more foundations by placing piggy-boxes or donation envelopes, we will include these in our giving software menu, if they require so. There are others strategic alliances which we will enforce as our business model expands. This alliances respond to the core processes we have designed and previously mentioned (currency exchange wholesale, delivery and secure logistics collection, kiosk assembly and deployment). We do not display the names of these suppliers in this business plan but will share this information with our investors, on demand. 7.0 Management Summary Founder: Germán Rimoldi - CPA and Business Administration graduate. Management team: Francisc Heffesse - CFA and Business Administration graduate. 7.1 Organizational Structure At this stage, our organizational structure is fairly simple because the founding management team performs every task. We do not think that operating our devices or that collecting notes and coins is beneath us, and for that reason we will manage the field operation hands on, for as long as our prototype lasts. After the first six months of operations, we would have performed each and every task required on our business model, ourselves. This is important because during our expansion, Coinaid Earth Inc. Page 35
  40. 40. Academic Version we will have to explain to our employees why processes are performed in such way and how does each process work, for that reason it is important for us, the founders, to perform "field operations" throughout out prototype implementation period. These are the processes that we perform ourselves (the company) in the long term: • Finding and gaining new airport contracts to perform our services; • Kiosk design; • Software design; • Business model design (process planning); • Managing relationships with our business' constituents or "participants"; • Field operations (loading up the devices with currencies, performing maintenance tasks, responding to customer complaints and coins and notes packaging and sorting before collection or delivery). These are the processes performed by third party suppliers and third party logistics suppliers: • Virtual offices placed on each location and virtual assistance; • Kiosk assembly and post-sale services; • Software development; • Currencies wholesale supply and delivery; • Collection and processing (to deposit coins in different bank accounts: airport, foundations and ours); • Hardware and cabinets manufacturing; Organizational Chart Founder and founding management team 7.2 Management Team Germán Rimoldi - entrepreneur, CPA and Business Administration graduate. Francisc Heffesse - CFA and Business Administration graduate. Coinaid Earth Inc. Page 36
  41. 41. Academic Version 7.3 Management Team Gaps We have designed and nurtured a number of processes to fully leverage our suppliers technologies and capabilities. Hardware manufacturers, kiosk assemblers and software developers can fully cover the task we have to perform. The same applies to third party secure logistics providers for currencies and donations delivery and pick-up. We have reviewed this when designing our business model and we believe that we are much better off working with these suppliers, than performing those activities ourselves. By following this approach, we may accomplish the following: • To avoid capital immobilization and reduce our investments requirements because we do not have to hire personal, rent offices or manufacturing space nor go through a costly learning cycle in hardware assembly or software development. • To allow the managers to focus on negotiating new airport contracts. Airport contracts drive our business' growth. To have designed a business model which allows our management team to focus on gaining new airport space is important in long term. When performing field activities during our prototype implementation in London, we will learn more about the technical and maintenance requirements of each different piece of equipment, by this we will begin to understand how the hardware technology works to fill our technical gap. Having experience the different pieces of equipment first hand, we will design our expansion device model. 7.4 Personnel Plan Operators: represent the single most numerous HR category on our payroll. We have structured this section to include technical personnel operating the supply, maintenance and the improvements to our devices. We require one operator per airport to cope with the daily loading and maintenance requirement of the equipment and this is how we estimate our operators requirements. Engineer: our device assembly is completely outsourced (and also its deployment), by this we fully our leverage the capabilities these manufacturers. As our management team increasingly focuses on the commercial side of the business we will evaluate to hire one chief engineer to manage our software and hardware improvements that we are now managing ourselves. Assistance: once we have launched activities we will open one office in Europe. For our expansion we will hire virtual offices services, virtual assistants and rented PO boxes, in every city we operate at. By doing this our savings will be enormous, if we were to compare this to hiring and training one assistant and secretary (and renting office space) in each and every city we operate at. Management: the management team is composed by the founding entrepreneur and one manager. Coinaid Earth Inc. Page 37
  42. 42. Academic Version In short term we will perform all of the operation activities ourselves to improve the business model and in the mid term our objective will be to focus on our expansion: this means that we will devote most of our time to get to know airport managers and to create long lasting relationships with them. Both ourselves, the founder and first employee, will earn the industry's minium wage. Table: Personnel Personnel Plan 2010 2011 2012 Production Personnel Other $0 $0 $0 One operator per airport $15.660 $46.980 $234.900 Maintenance in general $0 $9.360 $46.800 Subtotal $15.660 $56.340 $281.700 Sales and Marketing Personnel Brochure design (freelance) $0 $3.600 $3.600 Web design and promotion (freelance) $3.600 $900 $900 Subtotal $3.600 $4.500 $4.500 General and Administrative Personnel Virtual office (one on every city) $1.788 $5.350 $26.700 Virtual secretary $1.200 $3.599 $17.900 Virtual assistant $0 $6.199 $34.999 Subtotal $2.988 $15.148 $79.599 Other Personnel Management $16.140 $48.420 $242.100 Other $0 $0 $0 Subtotal $16.140 $48.420 $242.100 Total Payroll $38.388 $124.408 $607.899 8.0 Financial Plan September 2009: Initial investment ................................................................$4,234; We will require this first investment to travel to meet the Abertis management team, the Luton airport management team and our Europe based suppliers. December 2009: Prototype stage investment .................................................$67,387 (the 'initial investment is included in this amount); The prototype implementation last 6 months. As we have reviewed on our "start-up table", these funds will be destined to the purchase of assets (devices, cash to purchase foreign currencies) and to pay our projected expenditures for that period. January 2010: Pilot launch. Coinaid Earth Inc. Page 38
  43. 43. Academic Version June 2010: Pilot renewal (or not). January 2011 (to access 50 million new passengers). Early stage investment......................................................$96,661; This is our early stage investment. At this stage, we prefer to finance it from third party investors, so as to avoid compromising our financial situation, when this expansion takes place. June 2011 (to access 150 new passengers); We aim to finance this expansion stage with the company´s funds. December 2012 (to access a 400 million new passengers). Expansion stage investment.............................................$1,233,919; After two years of operations we will raise funds take our company global (or 'much more' global). If this stage was to be performed successfully we will provide our services in a 600 million passenger market. Although we could finance this stage of expansion with our the company's funds, we may again decide to avoid compromising our financial situation and to raise funds externally. 8.1 Original Funding Our immediate objective is to launch the first pilot trial in the U.K. For this stage of implementation investment: 0. 67,387 pounds to launch our prototype.................................................................. 04/12/2009 During this initial six month period we will evaluate our technology's impact, generate customer profiles, include 3 high impact foundations and find key metrics (demand per passengers/carrying amount per passenger/etc) on which to base our future forecast and location profitability analysis. For this stage our objectives are: • To try out three different sets of equipment form different OEMs and two different software applications; • To develop a set of metrics to evaluate our operational effectiveness and to perform feasibility studies inside the airport (future forecast and profitability analysis). • To learn how to enter into contractual agreements with the airport managers, currency wholesalers, third party suppliers and third party secure logistics suppliers. Coinaid Earth Inc. Page 39
  44. 44. Academic Version Table: Start-up Funding Start-up Funding Start-up Expenses to Fund $10.298 Start-up Assets to Fund $57.089 Total Funding Required $67.387 Assets Non-cash Assets from Start-up $34.332 Cash Requirements from Start-up $22.757 Additional Cash Raised $0 Cash Balance on Starting Date $22.757 Total Assets $57.089 Liabilities and Capital Liabilities Current Borrowing $0 Long-term Liabilities $0 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities $0 Capital Planned Investment Founder $0 Institutional Investor 2 (E.U.) $22.462 Institutional Investor 3 (S.A.) $22.462 Angel Investor $22.462 Additional Investment Requirement $0 Total Planned Investment $67.387 Loss at Start-up (Start-up Expenses) ($10.298) Total Capital $57.089 Total Capital and Liabilities $57.089 Total Funding $67.387 8.2 The Investment Offering As we have explained before, our business activities are highly profitable, specific and our growth perspectives are determined by the number of passengers we access. We investment little investments because we work closely with third party service providers and because the cost of production of our devices is small. Our income model has small margins, high volumes and because of the small investments required, the return on investment is curiously high. Our fund raising approach has changed along with time. We have switched from a multiple-small size investors plan to a lead investor approach, as we have gained better understanding on our funding requirements for the next couple of years. This perspective allows us to work on a milestones option based plan for the long term, thing that we expect will kindle our investors. We prefer to work with a few investors whom we trust and admire, rather than to proceed with those investors who may be willing grant to us more concessions. Since this is the final version of our business plan, if you are reading this you either are one of the investors we want to work with or you belong to their team; for that reason we would like to take this opportunity to say the Coinaid Earth Inc. Page 40
  45. 45. Academic Version following: At this stage, we will take all the time necessary to further explain to you how we have designed our business processes and why we have done it in such way. We will grant you access to all of the information that you consider important to evaluate our proposal and we will be happy to include all of your information requirements, for the long term on our term sheet. Having said this, to motivate our investors to share with us our passion for this project and our sense of urgency have become one of main objectives. One of the positive things of our project, is that our funding requirements are small. This allows our investors to participate in our investment plan from the very beginning with nominal investments, maintaining a right to invest further into the project, in the future - in comparison to other potential investors - with the exception of Abertis company, which we would want to include among our investors in the mid term. Our long term investment offering has the following outline (valuing the number of passengers with 2007 figures): 1. The founders starts up activities owning 0% of the company shares. 2. Once the prototype has been approved or renewed by the London Luton management team, 15% of the company shares will be granted to the founders. This airport has 10,100,000 annual passengers. 3. The founders will be granted up to 20% of the shares when having accessed a 50 million passengers market. 4. The founders will be granted up to 30% of the shares when having accessed a 200 million passengers market. 5. The founders will be granted up to 40% of the shares when having accessed a 600 million passengers market. 6. If the company was to be acquired or merged (exit strategy) by third party company or other objectives were accomplished, the founders will be granted up to 50% of the shares of the company. The original investors will fund the company as it growth, in three stages we have indicated in the 'original funding' section. Coinaid Earth Inc. Page 41
  46. 46. Academic Version Table: Investment Offering Investment Offering Seed Round 1 Round 2 Exit Proposed Year: 1 2 3 7 Valuation, Investment, Shares Investment Amount $67.837 $96.661 $1.233.919 Equity Share Offering Percentage 32,50% 40,00% 50,00% Valuation $208.729 $241.653 $2.467.838 $39.000.000 Investor Exit Payout $3.802.500 $7.800.000 $19.500.000 Investor Years Until Exit 6 5 4 Investor IRR 95,63% 140,64% 99,38% Share Ownership Year 1 Year 2 Year 3 Year 7 Founders' Shares 10.000 10.000 10.000 10.000 Stock Split Multiple 0 0 0 Stock Options Issued 0 0 0 0 Investor Shares Issued 4.815 9.877 24.691 Price per share $14,09 $9,79 $49,97 $789,75 Options Holders' Shares 0 0 0 0 Year 1 Investors' Shares 4.815 4.815 4.815 4.815 Year 2 Investors' Shares 9.877 9.877 9.877 Year 3 Investors' Shares 24.691 24.691 Total Shares Outstanding 14.815 24.691 49.383 49.383 Equity Ownership Percentage Year 1 Year 2 Year 3 Year 7 Founders' Equity 67,50% 40,50% 20,25% 20,25% Option Holders' Equity 0,00% 0,00% 0,00% 0,00% Year 1 Investors' Equity 32,50% 19,50% 9,75% 9,75% Year 2 Investors' Equity 40,00% 20,00% 20,00% Year 3 Investors' Equity 50,00% 50,00% Total Equity 100,00% 100,00% 100,00% 100,00% Investors' Equity 32,50% 59,50% 79,75% 79,75% Founders' & Employees' Equity 67,50% 40,50% 20,25% 20,25% 8.3 Important Assumptions With the following variables as given we will try to estimate the investors' investment key financial indicators for this project: When estimating our revenues we take into consideration the following: • 1,25% of the passengers demand our loose change exchange services. The average transaction is 8 pounds; • 0,75% of the passengers perform currency exchange transactions of <20 to >30 pounds, repeating this transaction, on the spot, 1.5 times. The average transaction is 45 pounds; • 1,25% of the passengers donate their loose change. The average transaction is 8 pounds) • Loose change exchange services: 5% (8 pounds exchanged on average); • Exchange services: 2% (45 pounds exchanged on average); • Donations: 9,25% (8 pounds donated on average); The annual expected transactions at the Luton Airport have the following distribution: • 125,250 donation transactions for 1,002,000 pounds; • 125,250 loose change transactions for 1,002,000 pounds; • 75,750 small exchange transactions for 3,408,755.5 pounds. Coinaid Earth Inc. Page 42
  47. 47. Academic Version The investment metrics are: • 40% of the assets from the start-up investment are either cash for floating or cash destined to purchase currency in euros (this provides the investor with a 'margin of safety' if the company were to liquidated. • With these currency inventory we can face only two days of activities. Operational metrics for the Luton Airport are: • 2728 euros in coins to cope with our daily demand, which represents 5925 pieces of coins per day, • 10,148.4 pounds in notes to cope with our daily demand, which represent 1122,2 notes per day. 8.4 Key Financial Indicators Our activities are curiously profitable and our model is financially healthy. This is due to the simplicity of our processes: values come in, values are output and our company charges a fix fee. The following are our key financial indicators for 2011: Sales: as a rule of thumb our annual sales represent 2,17% of the accumulated annual passengers we reach; The gross margin: 88,1%; Net income margin: 56,6%. Coinaid Earth Inc. Page 43
  48. 48. Academic Version 8.5 Break-even Analysis Table: Break-even Analysis Break-even Analysis Monthly Revenue Break-even $2.696 Assumptions: Average Percent Variable Cost 0% Estimated Monthly Fixed Cost $2.696 8.6 Projected Profit and Loss The currency exchange revenue projections were calculated applying the wholesale publicly available Pound Sterling to Euro exchange rate in the U.K. the week of August the 20th, 2009. With the processes we have designed we will be able to charge a better currency exchange rate than the existing London Luton airport bureaux de change, for both a loose change currency exchange rates and small sums currency exchange. The reader should have in mind that we have deducted the cost of secure logistics (0,8% form the purchase price) and the cost of collection and processing (1 to 3% for notes and coins respectively) from the first line of the income statement. After this deductions, sales result form applying these ratios: • 5% over loose change exchange transactions; • 2% over small currency exchange transactions; Coinaid Earth Inc. Page 44
  49. 49. Academic Version • 9,25% over donation rechanneling transactions. The only cost accounted in the account "Direct Cost of Sales" is the airport fee we are hypothetically paying for rented space inside the airport and as a percentage on our sales (2000 U$S per square feet per year plus a 5% fee over sales) to the airport. This mixed airport payment method is applied on our 2010-2014 forecast. Our sales and marketing expenses consist primarily on marketing, advertising and public relations efforts, to gain access to new locations or to increase the size of activities in existing locations. The largest investment on the payroll marketing account is made to develop our websites and the educational video that will be displayed on our devices continuously. This account also includes our projected website maintenance and the design and publishing of our commercial brochures. Our research and development expenses consist primarily on the adjustments made to our software platform and to the different pieces of equipment we will try out in our devices throughout our prototype. Finding the right equipment on which to base our expansion model is our priority, we will keep this costs down trying to negotiate original equipment trial periods, very common to the automated payment manufacturers industry. Our projected general and administrative expenses consist primarily of administrative support on field operations, customer service, systems engineering support, computer network operations, finance, human resources, occupancy expenses, legal expenses and insurance. We outsource all of this activities using virtual services, by this we reduce cost when expanding to a new city. The depreciation account consist primarily of depreciation charges on devices. We currently do not register amortization of intangible assets, such as airport contractual agreements, because do know know how to value these. The income tax applied during our first year of operations is 21% in compliance with the HM Customs and Revenues income tax rate for small companies. When projecting the income tax to be payed in other locations we apply a standard 30% rate (form 2011 to 2014 for all of our incomes). Coinaid Earth Inc. Page 45
  50. 50. Academic Version Table: Profit and Loss Pro Forma Profit and Loss 2010 2011 2012 Sales $219.6 72 $1.525.556 $16.747.2 73 Direct Cost of Sales $0 $123.736 $1.187.83 7 Production Payroll $15.66 0 $56.340 $281.700 Other Costs of Sales $0 $0 $0 ---------- -- ------------ ------------ Total Cost of Sales $15.66 0 $180.076 $1.469.53 7 Gross Margin $204.0 12 $1.345.480 $15.277.7 36 Gross Margin % 92,87% 88,20% 91,23% Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll $3.600 $4.500 $4.500 Advertising and promotion $0 $0 $0 Other Marketing Expenses (Website) $0 $0 $0 ---------- -- ------------ ------------ Total Sales and Marketing Expenses $3.600 $4.500 $4.500 Sales and Marketing % 1,64% 0,29% 0,03% General and Administrative Expenses General and Administrative Payroll $2.988 $15.148 $79.599 Marketing/Promotion $0 $0 $0 Depreciation $3.864 $23.799 $147.191 Rent $0 $0 $0 Legal $0 $0 $0 Insurance $0 $0 $0 Payroll Taxes $5.758 $18.661 $91.185 Research and Development $0 $0 $0 General Expenses $0 $0 $0 Administrative Expenses $0 $0 $0 ---------- -- ------------ ------------ Total General and Administrative Expenses $12.61 0 $57.608 $317.975 General and Administrative % 5,74% 3,78% 1,90% Other Expenses: Other Payroll $16.14 0 $48.420 $242.100 Consultants $0 $0 $0 Other Expenses $0 $0 $0 ---------- -- ------------ ------------ Total Other Expenses $16.14 0 $48.420 $242.100 Other % 7,35% 3,17% 1,45% ---------- -- ------------ ------------ Total Operating Expenses $32.35 0 $110.528 $564.575 Profit Before Interest and Taxes $171.6 62 $1.234.952 $14.713.1 61 EBITDA $175.5 26 $1.258.751 $14.860.3 52 Coinaid Earth Inc. Page 46

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