NTIT Solutions, LLC: “Go Locker” · Business Plan NTIT Solutions, LLC: “Go Locker” Nigel...
Transcript of NTIT Solutions, LLC: “Go Locker” · Business Plan NTIT Solutions, LLC: “Go Locker” Nigel...
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Business Plan
NTIT Solutions, LLC: “Go Locker”
Nigel Thomas Founder, CEO NTIT Solutions, LLC [email protected] Strictly Confidential
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Table of Contents
I. Executive Summary ................................................................................................................................ 4
A. Overview .......................................................................................................................................... 5
B. Background and Mission .................................................................................................................. 5
C. Market Problem ............................................................................................................................... 6
D. NTIT Go Locker Solution ................................................................................................................... 7
E. NTIT Competitive Advantage ........................................................................................................... 8
F. NTIT Economic Model ...................................................................................................................... 8
G. Timeline and Milestones ................................................................................................................ 10
H. Exit Strategy ................................................................................................................................... 10
II. Market Opportunity Sizing Analysis ..................................................................................................... 12
III. Market Opportunity ............................................................................................................................. 13
A. Package Delivery Industry .............................................................................................................. 13
B. E-Commerce ................................................................................................................................... 13
C. Package Locker Industry ................................................................................................................ 14
IV. Business Development Strategy ........................................................................................................... 15
A. Overview ........................................................................................................................................ 16
B. Promotions ..................................................................................................................................... 16
C. Web Marketing .............................................................................................................................. 16
D. Partnerships ................................................................................................................................... 17
E. Shipping and Package Delivery Industry Trade .............................................................................. 17
V. Daily Operations ................................................................................................................................... 18
A. Organizational Chart ...................................................................................................................... 19
B. Management .................................................................................................................................. 19
C. Workflows ...................................................................................................................................... 20
D. Administration ............................................................................................................................... 20
VI. Competitive Landscape ........................................................................................................................ 21
VII. Financial Highlights ............................................................................................................................... 23
A. Management’s Discussion & Analysis ............................................................................................ 24
VIII. Management Summary ........................................................................................................................ 29
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IX. Potential Risks and Suggested Mitigants .............................................................................................. 31
I. Appendix ............................................................................................................................................... 33
Income Statement : Pro Forma Annual ...................................................................................................... 38
Operating Metrics: Pro Forma Annual ........................................................................................................ 39
Balance Sheet: Pro Forma Annual............................................................................................................... 40
Statement of Cash Flows & Debt: Pro Forma Annual ................................................................................. 41
Preliminary Discounted Cash Flow Model: $20M - $25M .......................................................................... 43
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I. Executive Summary
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Use Cases: *Urban dwellers want to protect their valuable e-commerce package deliveries against theft, damage or weather *Urban dwellers who desire more convenience, predictability and privacy for locker delivery vs. home delivery *College students who move every year and sometimes find themselves in between mailing addresses *College students who value privacy and the security of locker delivery vs. to their dorm room or fraternity house
Snapshot:
First independent Parcel Locker delivery company in New York City - - focused on “last mile” delivery logistics
10 parcel locker locations in New York City within the first 10 months of operations
Value added services / functionality
Management team with experience and credibility in shipping and logistics
Seeking $550k to help fund the purchase of 10 indoor parcel lockers, marketing initiatives and working capital
A. Overview
NTIT Solutions, LLC (or “NTIT” or “the Company”) is the developer and marketer of “Go
Locker” parcel lockers, the first independent parcel locker service in New York City. Go
Lockers, with its smaller compartments and indoor form factor, will be available at
indoor locations in urban cities and on / near college campuses. At initial launch, there
will be five Go Locker banks at various partner retail locations near major subway
stations for the convenience of pick up for commuters on the way back home.
Management expects to activate an additional five locker banks within the next 10
months for a total of 10 in the first year.
NTIT was founded in 2012 by Nigel Thomas, an experienced software engineer and
analyst for FedEx, who is setting up the Company and will manage the go forward day-to-
day operations. NTIT and the Go Locker operations will initially be run out of dedicated
office and warehouse space located at Nigel’s home in New York City.
B. Background and Mission
In Europe, particularly in Germany, parcel lockers have been well-established for over 10
years, populated with 2,500 of DHL’s packstations. It was on a business trip to Dusseldorf
six months ago, that Nigel discovered the popularity and utility of parcel lockers and
when he identified its applicability to the New York City way of life. The next six months
have been spent by Nigel on identifying the best suited parcel locker supplier and
preliminary business model planning.
Aided by the Internet, wireless connectivity and smartphones, we live in an “on demand”
world in which consumers have the ability to control and customize delivery of
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Parcel Lockers is
Still a Nascent,
Yet Growing
Industry
everything from digital video and audio content to package delivery. NTIT’s mission is to
mitigate the waste of time, uncertainty and frustration inherent in package delivery.
While 7.6% of all retail sales in 2012 (or $231 Billion) originated through the e-commerce
channel, package delivery options in the U.S. remain limited, stuck in the traditional
model.
The parcel locker industry is a nascent, yet growing industry in the U.S. with large e-
tailers like Amazon and large delivery companies like the U.S. Postal Service testing
through pilot programs. Independent providers have sprung up in Toronto and San
Francisco but to date, nobody has addressed the most urban geography in the United
States - - New York City.
Company Merits:
The first and only independent parcel locker delivery and management company in New York
Rapidly growing industry with huge market opportunity size
Differentiated value proposition - - plans for functionality beyond parcel deposit / withdrawal
Growth strategies: diversification of target market, location, form factors and P2P logistics
Branding and name brand awareness is key - - familiarity breeds trust
Parcel locker surface area prime for advertising
Experienced Management Team experienced in shipping and logistics
The Company is seeking approximately $550K to help fund the purchase of 10 indoor parcel lockers,
marketing initiatives and working capital Sources and Uses table is illustrated below:
C. Market Problem
There are three major factors that are causing a large and growing problem for package delivery. (1) The
United States is a nation that is increasingly shifting its shopping habits from in store to online.
According to the U.S. Commerce Department, by 2017 10% of all retail sales will be e-commerce. (2)
Sources & Uses of Capital
SOURCES Total
Paid-in Capial $0 Equipment HW & SW Costs:
Bank Loan Funding $0 Service & Support Costs $356,070
Equity Funding $542,959 Lease 1-Time Cost $26,400
Transportation + Installation $45,530
Subtotal Equipment & SW $428,000
Operating Capital:
Payroll $68,400
Marketing $46,559
Subtotal Operating Capital $114,959
TOTAL SOURCES $542,959 TOTAL USES $542,959
USES
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The U.S. is also a working nation, with approximately 150 million employees (66% of the population). (3)
As a nation, we are also working longer hours. Taking into aggregate consideration the factors 1 – 3, the
probability to receive a package delivery in person at one’s home is becoming infinitesimally small. What
are the alternatives? Receiving personal packages at work is generally frowned upon and there are
numerous obvious issues with packages left at one’s doorstep including theft, physical damage and
inclement weather. The other alternative, to advise the shipping company to hold for pick up at one of
their retail locations, is inconvenient due to distance of location and limited hours of operation; and
adds to the overall delivery time.
Parcel lockers seem to be the logical solution and have proven to be successful and ubiquitous in
Europe, Australia and New Zealand. However, outside of a few pilot programs in limited locations in
Virginia, San Francisco and Seattle, independent parcel lockers are largely non-existent in the U.S.
D. NTIT Go Locker Solution
Go Locker provides three things to its customers: (1) convenience, (2) peace of mind and (3) ease of use.
Future growth areas for Go Lockers will be in diversification of functionality and expansion of locations.
One significant development that the Company is working on is the person-to-person (P2P) exchange
business model, whereby Go Locker customer’s can exchange products and payment with each other.
The Company seeks to find creative solutions for everyday consumer needs and create a brand through
value proposition.
Go Locker’s initial and near term solution set is illustrated in the table below:
Features Location Pricing Future
Functionality
Center control console
Alpha-numeric keypad
Small, medium, large
boxes
10 -20 boxes
Style / Appearance
Bright colors
Eye-catching
Modern
Advertising
Urban
New York City
Boston (Future)
Philadelphia (Future)
Colleges
NYU
Columbia
Boston / Cambridge
(Future)
Berkeley (Future)
Small
$2.00 for 1st 24 hrs
$1.00 for Subsequent 24
hrs
Large
$5.00 for 1st 24 hrs
$2.50 for Subsequent 24
hrs
Refrigerated
compartment for delivery
of perishables
Forwarding or redirecting
Expansion of locations
Person to Person
exchanges (P2P)
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E. NTIT Competitive Advantage
For more detail on NTIT’s Go Locker competitive advantages as benchmarked against competitors,
please refer to Section VII.
NTIT’s Go Locker is the first independent provider and manager of parcel lockers in New York City. Go
Lockers are agnostic to e-tailer and shipper, whereas Amazon’s lockers are dedicated to Amazon sales
only. The US Postal Service’s Go Post, services US Postal deliveries only. The other independent parcel
locker service providers such as Bufferbox and Swapbox have operations limited to Toronto and San
Francisco, respectively.
While NTIT plans to initially launch Go Locker in New York City, expansion plans include other
geographical areas that are dense in colleges and students such as Boston and Chicago. Go Locker’s long
term competitive advantage is comprised of both strategic location as well as increased functionality at
the box itself.
F. NTIT Economic Model
Excel Financial Model detail provided upon request. See Appendix for additional detail.
NTIT features an attractive business model driven by number of locker box bookings. The Company’s
long term strategy is to (a) continue to increase the capacity of overall number of locker boxes and (b)
continue to add functionality at each locker bank / console box. Additional functionality will not only
help differentiate the Company’s products / services vs. those of the others but also will help diversify
the revenue stream.
The table below is a summary of the Company’s financial forecast in terms of Net Revenues, EBITDA
(Earnings Before Interest, Taxes, Depreciation & Amortization; and adjusted for stock based
compensation, if any) and Net Income for the forecast period. Note, for conservatism, the Company’s
forecast model excludes price increases during the forecast period but it does assume a moderate
level of utilization percentage increase, as is logical given the Company’s expected ad campaigns and
viral growth through effective web marketing. Also note that while P2P (peer-to-peer) deliveries to
the Go Locker will be an important future line of business, it is excluded from the forecast model.
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NTIT Financial Summary Forecast
Management has built a bottom up financial forecast model that incorporates assumptions from market
precedent business models and Management’s expectations. It is currently contemplated that in the
first year, there will be 10 Go Lockers deployed.
Forecasted Number of Go Locker Deployments (Years 1 – 5)
Revenue
Management projects revenue for years 1 – 5 to be: $728K, $2.8M, $5.7M, $9.5M and $13.9M
respectively. Assumes constant prices during the forecast period. The Company will have a solid level of
Gross Profits, driven by a relatively low level of Cost of Revenue, consisting mostly of retail location
rental expenses. Management forecasts Gross Margin to be in the high 80 percentile of overall revenue
for most of the forecast period. The majority of the Company’s operating expenses will be salaries for
$728,544
$2,824,308
$5,771,412
$9,516,690
$13,937,346
$510,129
$2,103,143
$4,197,559
$6,294,545
$9,705,988
$307,472
$1,344,063
$2,707,942
$4,075,351
$6,300,025
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue EBITDA Net Income
0
20
40
60
80
100
120
140
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
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the couriers to deliver the last mile and stock the lockers; and marketing, sales and advertising.
Management projects to become profitable in year 1 and operating income for years 1 – 5 to be: $471K,
$2.1M, $4.2M, $6.3M and $9.7M, respectively. Corresponding operating margins are from 65% to 70%.
Management expects that the remaining 50% of excess cash (after debt service and principle paydown
(if any), reinvestments and other), will be distributed to the equity holders on a pro rata basis.
Reinvestment will be for new product development costs. The Company’s cash balance will grow to
reach $6.3M in year 5. The Company may use cash to make acquisitions of more lockers than forecasted
in the model or make acquisitions of existing locker companies - -perhaps even verticalize the supply
chain by acquiring a locker manufacturer.
G. Timeline and Milestones
As of business plan date, Management has accomplished the following milestones:
Incorporation of NTIT Solutions, LLC
Negotiating parcel locker supply
Assembled advisory board
Business model planning
Management’s strategic plan is to secure the seed financing required to procure the initial set of 5 parcel lockers and deploy the required capital to fund strategic marketing campaigns.
Specifically, the following represents the execution timeline:
T - 6 Months: Close on equity funding
T - 5 Months: Finalize parcel locker supply contracts with manufacturer
T - 3 Months: Finalize partnerships / contracts with retail location owner
T - 2 Months: Customization of user front end and back end software
T - 1 Months: Hire and train part time courier / delivery staff
T - 1 Months: Pre-marketing, advertising, social media campaigns and publicity
T – 0 Months: Launch initial set of 5 parcel lockers
H. Exit Strategy
A seed round investment in NTIT has the potential to generate multiples of return on investment from
the initial set of 5 parcel lockers and an additional set of 5 within the first 10 months. The Company’s
growth strategy includes increased technology and functionality of each machine, geographical
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expansion and other high growth and value added services. Management will be focused on driving top
line growth as well as bottom line profitability.
Liquidity or exit scenarios include strategic sale or accessing the public markets. Management may also
consider a leveraged recapitalization in the private bank markets as well. NTIT may be an attractive
acquisition target to other large e-commerce sites such as eBay, Craigslist or Walmart.com.
Management may consider an Initial Public Offering.
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II. Market Opportunity Sizing Analysis
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III. Market Opportunity
A. Package Delivery Industry
The Package
Delivery
Industry is
Large and
Growing
According to the respective websites of each of FedEx, UPS and USPS, there were over 11
billion packages delivered just amongst these three companies in 2012. Combined, these
three companies totaled $142 Billion in revenue in 2012.
Global Package Delivery Volume in 2012 (units in Billions) Global Revenues in 2012 ($ in Billions)
Source: FedEx, UPS, USPS websites
The package delivery industry is a very competitive one that has grown exponentially in the
last few years. With greater numbers of businesses operating globally and with the increase
of e-commerce, parcel shipping has become an important element of the economy.
B. E-Commerce
E-commerce
will reach
$370 Billion in
sales by 2017
10% of all
Retail Sales
will be
Transacted
over the
Internet
According to the U.S. Commerce Department, e-commerce sales revenue was $231 Billion in
2012 and is expected to grow 13.4% to reach $262 Billion in 2013. By 2017, e-commerce
sales in the U.S. is expected to reach $370 Billion or 11.3% Compounded annual growth rate
(CAGR) from $195 Billion in 2011. In 2012, 7.6% of all retail sales were executed over the
Internet. By 2017, e-commerce sales are expected to constitute 10% of all U.S. retail sales.
U.S. E-Commerce Market Size and Forecast
Source: U.S. Commerce Department, Forrester, comScore, Internet Retaiker
3.6
4.1
3.3
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
FedEx UPS USPS
$42.0 $45.0
$65.0
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
FedEx UPS USPS
$195
$231
$262
$370
6.8%7.6%
8.0%
10.0%
0.0%
5.0%
10.0%
15.0%
$-
$50
$100
$150
$200
$250
$300
$350
$400
2011 2012 2013 2017
E-c
om
merc
e S
ale
s a
s a
Perc
enta
ge o
f To
tal R
eta
il S
ale
s
E-C
om
merc
e S
ale
s in $
Bill
ions
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C. Package Locker Industry
Europe and
Australia are
Parcel Locker
Leaders
Parcel Lockers
is Still a
Nascent, Yet
Growing
Industry
North
American
Parcel Locker
Coverage is
Concentrated
Market research conducted by Irish parcel carrier, Nightline (“Parcel Motel”),
has shown that consumers like the idea of being able to collect deliveries at a
time and place of their choosing rather than having to organize their day in
order to wait at home for a knock on the door from a courier or arranging to
pick up a carded delivery from the post office.
Although no comprehensive research coverage yet exists for this industry,
below is a list of selected players and their statistics.
Parcel Motel: 400 terminals, 20% growth
Amazon Parcel Locker: Testing in 7-11 stores in Seattle; 8,100 7-11
locations worldwide
USPS “Go Post”: 31 Terminals in pilot program in Virginia
Swapbox: 8 terminal locations all in the San Francisco Bay Area
Bufferbox (acquired by Google for approx $20 Million): approximately
20 locations in Canada
DHL Packstation: 2,500 located in Germany
Europe and Australia lead this industry have had a head start; parcel lockers
have just recently gained penetration in the U.S. and currently coverage is
concentrated in a few select areas and limited nationally.
North America Parcel Locker Coverage
Source: PlanIt Business research
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IV. Business Development Strategy
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A. Overview
Access to Go Locker is exclusively through the Internet from its website and forthcoming smartphone
app. Users will be able to find the closest and most convenient Go Lockers for them and select the
corresponding mailing address for the shipment of their product. Therefore, Go Locker’s visibility and
accessibility through the search engines, Google, Bing and Ask, is critical for NTIT’s success. NTIT will
devote the necessary resources to search engine optimization and search engine marketing. Social
marketing and media will also play a huge role in Go Locker’s promotion, publicity, advertising and viral
marketing.
Management realizes that customer education will play an important role in its marketing and sales
strategy. Confused customers are usually non-buyers. Management will produce intuitive and
compelling "how to” videos in order to educate its customers and also benefit from the enhanced
search engine marketing that web videos provide for key word searches.
B. Promotions
Management may consider limited time and/or permanent promotions that encourage viral word-of-mouth marketing by satisfied customers. For example, a referring customer may receive a limited number of package deliveries for free as an incentive.
C. Web Marketing
Management expects to dedicate significant time and effort into web marketing of Go Locker. Web
marketing includes SEO and SEM (search engine optimization and marketing, respectively). Some
specific examples of web marketing includes:
Pay Per Click (“PPC”) o Google Ad Words o Bing o Ask o Network content pages
Direct User acquisition from partner sites o Establishing cross-listing relationships with other industry leaders o Reciprocal advertising for corporate sponsorship / online advertising
Organic Growth Initiatives
Search Engine Optimization o Key word tagging o Use of video o Back links to other partner websites
Invitations / Referrals from existing registered users
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Blogs
Posts on social networking and media sites (Facebook, Twitter)
D. Partnerships
E-tailer Partnerships
Management will pitch synergistic relationships with the leading e-commerce market leaders such as
eBay, Walmart.com and others whereby Go Lockers are offered as the shipping destination in a pull
down menu for their customers as they go through the checkout process for their purchases. In return,
NTIT can either offer (a) to subsidize a part of the shipping cost for their customer, (b) advertise on the
Go Locker and/or (c) offer a discount coupon code for their customers. For Go Locker such a deal(s) will
not only increase its visibility to the massive installed base of ebay and Walmart.com customers but also
will save on “last mile” costs. For the e-commerce leaders they get advertising space on each Go Locker
bank and an opportunity for their customers to get discounts on shipping and/or the actual end product.
Branded Products Partnerships
Management will also pitch the same synergistic relationships offered to the leading e-commerce
market leaders as it will directly to branded retailers with an online presence such as Gap.com,
Officedepot.com, gilt.com, etc.
E. Shipping and Package Delivery Industry Trade
NTIT will devote resources into the various package shipping and delivery industry trade associations,
conventions and print and web media. Management will be an active participant in selected package
delivery conventions, trade shows and seminars.
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V. Daily Operations
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A. Organizational Chart
Management expects that a lean organizational chart ought to be sufficient to support the first set of 10
Go Lockers. Nigel will do the sorting and grouping of the day’s packages received at the NTIT warehouse
and allocate them for the two NTIT couriers for “last mile” delivery and population of the Go Lockers.
B. Management
Nigel is the principal owner and CEO of NTIT. His day to day responsibilities will be package receiving,
sorting and allocation to each of the couriers, which will occupy his late afternoon hours. Earlier in each
day, Nigel will focus on software management and monitoring of orders, customer service and
marketing / business development initiatives. Nigel will likely add additional management team
members at the time the Company expands beyond its initial set of 10 Go Lockers.
Nigel Thomas
(Owner, CEO)
Courier / Delivery #1
Go Lockers
(x5 locations)
Courier / Delivery #2
Go Lockers
(x5 locations)
Advisory Board
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C. Workflows
User Experience
Backend Management / Operations
D. Administration
NTIT will implement a disciplined and organized approach to the books and records and administrative
management. Certain of the administrative tasks are outlined below:
Customer enters Go Locker shipping address
Package is routed to NTIT
warehouse
Packages are sorted, affixed a QR code and
allocated to couriers
Courier places package into
locker and sets code
Customer receives email
notice with access code
Recieve packages and "check them in"
A specific locker assigned
with new access code
Packages are sorted, affixed a QR code and
allocated to couriers
Courier places package into
locker and sets code
Resolve any issues with customer service,
returns, etc
•Quickbooks
•Management
•Outsourced CPA firmAccounting, Payroll, Taxes
•Outsourced engagements
• Web and Social Media MarketingLegal, Technical and Other
Professional
•Management
•ACH and in-person banking
Reporting , Banking and Logistical
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VI. Competitive Landscape
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Benchmarking Against Other Parcel Locker and Management Companies
NTIT Go Locker
SwapBox
BufferBox
Amazon Locker
USPS Go Post
DHL PackStation
Location New York City San Francisco, CA Toronto, Canada
SF, CA
Seattle, WA; SF, CA Virginia Germany, Europe
Number of Terminal Units 5 – 10 in Yr 1 8 20 >50 31 2,500
Agnostic or Dedicated Agnostic Agnostic Agnostic Dedicated to amazon site sales
Dedicated to USPS delivery channel
Dedicated to USPS delivery
channel
Indoor / Outdoor Indoor Indoor Indoor Indoor Indoor / Outdoor Outdoor
Venue Partners TBD (Targeting CVS)
Random proprietors
7-11, Sobeys 7-11, Staples, Radio Shack
N/A N/A
Value Added Services Future: refrigerated
boxes; redelivery; forwarding
N/A N/A N/A N/A N/A
Pricing Small: $2 / $5 (1st 24 hrs /
Subsequent 24 hrs)
Large: $5 / $2.50 (1st 24
hrs / Subsequent 24
hrs)
1st package Free
$1.99 subsequent packages
Currently Free $0 $0 $0
Funding TBD N/A $20 Million N/A N/A N/A
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VII. Financial Highlights
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A. Management’s Discussion & Analysis
Excel Financial Model detail provided upon request. See Appendix for additional detail.
NTIT features an attractive business model driven by number of locker box bookings. The Company’s
long term strategy is to (a) continue to increase the capacity of overall number of locker boxes and (b)
continue to add functionality at each locker bank / console box. Additional functionality will not only
help differentiate the Company’s products / services vs. those of the others but also will help diversify
the revenue stream.
The table below is a summary of the Company’s financial forecast in terms of Net Revenues, EBITDA
(Earnings Before Interest, Taxes, Depreciation & Amortization; and adjusted for stock based
compensation, if any) and Net Income for the forecast period. Note, for conservatism, the Company’s
forecast model excludes price increases during the forecast period but it does assume a moderate
level of utilization percentage increase, as is logical given the Company’s expected ad campaigns and
viral growth through effective web marketing. Also note that while P2P (peer-to-peer) deliveries to
the Go Locker will be an important future line of business, it is excluded from the forecast model.
NTIT Financial Summary Forecast
$728,544
$2,824,308
$5,771,412
$9,516,690
$13,937,346
$510,129
$2,103,143
$4,197,559
$6,294,545
$9,705,988
$307,472
$1,344,063
$2,707,942
$4,075,351
$6,300,025
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue EBITDA Net Income
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Forecast
Management has built a bottom up financial forecast model that incorporates assumptions from market
precedent business models and Management’s expectations. It is currently contemplated that in the
first year, there will be 10 Go Lockers deployed.
The financial forecast model is driven from the following projections for Go Locker:
1. Number of Cumulative Go Lockers at any given month
2. multiplied by, penetration % for utilization rate
= Number of Go Lockers utilized
3. multiplied by, average price per individual locker by size
= Sales Revenue from Locker Booking
4. plus, Probability to Specialty functions, multiplied by average price for specialty function
= Sales Revenue from Specialty Lockers / Functionality
5. plus, Number of advertising spaces available on locker, multiplied by average price per month
= Sales Revenue from Advertising
Forecasted Number of Go Locker Deployments (Years 1 – 5)
0
20
40
60
80
100
120
140
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
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Revenue
Management projects revenue for years 1 – 5 to be: $728K, $2.8M, $5.7M, $9.5M and $13.9M
respectively. Assumes constant prices during the forecast period.
NTIT Revenue Forecast Annualized
Gross Profit
The Company will have a solid level of Gross Profits, driven by a relatively low level of Cost of Revenue,
consisting mostly of retail location rental expenses. Management forecasts Gross Margin to be in the
high 80 percentile of overall revenue for most of the forecast period.
Forecasted Gross Income and Margin
$728,544
$2,824,308
$5,771,412
$9,516,690
$13,937,346
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
78.0%
79.0%
80.0%
81.0%
82.0%
83.0%
84.0%
85.0%
86.0%
87.0%
88.0%
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
Gro
ss P
rofi
t M
arg
in %
Gro
ss P
rofi
t $
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Operating Income
The majority of the Company’s operating expenses will be salaries for the couriers to deliver the last
mile and stock the lockers; and marketing, sales and advertising. Management expects the model to
scale with volume. It is expected that the Company will be run efficiently with a relatively light level of
human resources. Initially, the warehousing, sorting and allocation of deliveries will occur at the office
space located at Nigel’s personal residence. Management has modeled a standalone office space and
warehouse in year 3 of the projections.
The CEO will draw a full time salary soon after the second year and it is contemplated that the customer
support staff will be added to the payroll in the second and third years. Management projects to
become profitable in year 1 and operating income for years 1 – 5 to be: $471K, $2.1M, $4.2M, $6.3M
and $9.7M, respectively. Corresponding operating margins are from 65% to 70%.
Forecasted Operating Income and Margin
Dividends
Management expects that the remaining 50% of excess cash (after debt service and principle paydown
(if any), reinvestments and other), will be distributed to the equity holders on a pro rata basis.
Reinvestment will be for new product development costs.
Cash Balance
The Company’s cash balance will grow to reach $6.3M in year 5. The Company may use cash to make
acquisitions of more lockers than forecasted in the model or make acquisitions of existing locker
companies - -perhaps even verticalize the supply chain by acquiring a locker manufacturer. Excess free
cash flow (after income taxes, interest payment on any debt) will be dedicated in the following
priorities: first, to debt paydown (if any), second to reinvestments, third to dividend distributions and
the remaining will go to cash.
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
72.0%
74.0%
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
Op
era
ting
Inco
me M
arg
in %
Op
era
ting
Inco
me $
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Forecasted Cash Balance
Sources & Uses
The Company is seeking approximately $550K in equity capital to fund the start up costs and working
capital expenses of the Company.
Sources & Uses of Capital
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
Year 1 Year 2 Year 3 Year 4 Year 5
SOURCES Total
Paid-in Capial $0 Equipment HW & SW Costs:
Bank Loan Funding $0 Service & Support Costs $356,070
Equity Funding $542,959 Lease 1-Time Cost $26,400
Transportation + Installation $45,530
Subtotal Equipment & SW $428,000
Operating Capital:
Payroll $68,400
Marketing $46,559
Subtotal Operating Capital $114,959
TOTAL SOURCES $542,959 TOTAL USES $542,959
USES
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VIII. Management Summary
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Name Position
NTIT Solutions, LLC Management
Nigel Thomas Founder, CEO
James J. Parker Advisor
Selected Biographies
Nigel Thomas, Founder and CEO
Nigel is the Founder and CEO of NTIT Solutions, LLC. Nigel will be chiefly focused on operations, business
development and overall strategy. Nigel has more than thirteen years of software development
experience in the area of parcel delivery and logistic. Nigel was recruited by FedEx services immediately
after completing undergraduate studies at Northeastern University located in Boston Massachusetts. He
also completed a Masters in Industrial Engineering with a concentration on information technology from
the University of Central Florida.
At FedEx, Nigel quickly moved through the ranks from junior software developer to senior software
developer to business application advisor. His body of work included developing revenue systems to
comply with changes resulting from the North American Free Trade Agreement (NAFTA), designing an
imaging system to store and retrieve customs documents for all countries served by FedEx, manage
multinational projects related to FedEx Billing online, Implement digital signature technology for FedEx
customers in Asia, Europe, and Latin America.
James J. Parker, Advisor
James is a tax partner and national leader of Cherry Bekaert’s Specialty Tax Group. James has more than
20 years of experience serving the tax planning and compliance needs of public and private companies
as well as high net worth individuals. Prior to joining Cherry Bekaert, James served in the tax service
practices of several large accounting firms, the last 14 years with McGladrey & Pullen and Grant
Thornton.
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IX. Potential Risks and Suggested Mitigants
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Market Demand Risk E-commerce is expected to make up 10% of all retail sales by 2017
Market Demand Risk (cont’d) DHL’s Packstation serves as a precedent in Europe; Success of independents in the U.S.
Maintenance Risk Indoor locations protects from weather, vandalism; software is centrally managed
Execution Risk Couriers to populate lockers are trained NTIT Solutions employees
Financing Risk Significant portion of uses of cash to come from paid-in capital
Competition Risk First mover advantage in location (New York); first mover advantage in functionality
Potential Risks Mitigants
Key Man loss Key Management “skin” in the “game”
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I. Appendix
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NTIT Solutions, LLC
Financial Model
Summer 2013
TABLE OF CONTENTS
Sources & Uses
Model Rationale
Pro Forma Model (60 Month / 5 Yr Projected Financials)
Control Panel
P&L Forecast Build Detail
Capital Budget
Illustrative Charts and Graphs
Valuation
Backup Worksheets
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NTIT Solutions, LLC MODEL RATIONALE
INSTRUCTIONS: This model contains circular references, therefore the user must turn on manual calculations and press [F9] to recalculate.
--> Tool / Options / Calculation / Manual
Press [F9] to recalculate
P&L Inputs: Forecast Methodology Description
User Metrics:
Number of Locker Banks
Forecast Methodology Based on initial set of number of locker banks per Management's estimates
Util ization Management's estimates
Number of Lockers per Bank per Size Small, Med, Large Based on manufacturer's specifications: 1st 24 hour price + probability of subsequent 24 hrs times late fee
Other Services Special Functionality Value added services / functionality at the machine demands a premium pricing: probability of usage times util ization rate
Advertising Ad space available on exterior of machine: Number of spots times fixed price per month per spot
Cost of Revenue:
1-time and recurring fees, per locker bank and flat Based on Pricing Schedule of Potential Manufacturer
Based on industry standards
Operating Expenses
Facil ities
Office Rent Operations and warehouse run out of home office initially; transition to leased location with growth
Telecom / Mobile / Internet Operations and warehouse run out of home office initially
Util ities Operations and warehouse run out of home office initially; transition to leased location with growth
Facilities Insurance Operations and warehouse run out of home office initially; transition to leased location with growth
Sales and Marketing
Print & Display Adverstising Management Expectations
Pay Per Click Advertising Management Expectations
Sales / Trade Shows / Travel & Entertainment Management Expectations
Event Coverage & Travel Management Expectations
Marketing / Advertising / Promotion / PR Management Expectations
Payroll
Salaries No payroll in pre-funding phase until product launch in month 1. Base salaries are stepped up by an increase each year in years 3 - 5
Un-named Head Based on industry average metric of $600k in revenue per employee.
Payroll tax Industry standard
Benefits Assumption based on total payroll
Stock Based Compensation Non-cash stock based compensation expense for stock awards and options
Outsourced Consultants / Counsel
Law Firm Forecast assumption
Audit Firm Forecast assumption
Environmental Consulting Forecast assumption
Media Consulting Forecast assumption
SEO, Marketing, PPC Consulting Forecast assumption
Model Inputs:
Income Statement:
- Assumes company starts recording financials on month 1.
- Dividends payments to equity holders commence in year 2 .
- Assumes a tax rate when profitable
Balance Sheet Inputs:
- Assumes for working capital accounts
- Assumes debt paydown with excess cash flow according to a modest % of cash flow (see assumption below) and then cash build when debt serviced. No dividends in year 1.
Statement of Cash Flows Inputs:
- Dividends paid after any debt service from cash flows in years 2 - 5 when profitable
OTHER MODEL INPUTS
Tax Rate 35.0%
Interest Rate on Debt 6.0%
Interest Rate on Cash 0.5%
Rate of Debt Paydown from Excess Cash 33.3%
Philanthropic 0.0%
Dividend Payout 50.0%
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Source /
Mo 1 - 3 Mo 4 - 10 Growth (Yr 2 - 3) Growth (Yr 4 - 5) Rationale
Number of Locker Banks 3.0 7.0 24.0 36.0
Utilization 75.00% 80.00% 80.00% 80.00%
Stat Mix % Price Late Penalty Prob Late Avg Days Late
Number of small lockers per bank 20.0 50.0% 2.00$ 1.00$ 2.50% 1.0
Number of medium lockers per bank 15.0 25.0% 3.50$ 1.75$ 5.00% 2.0
Number of large lockers per bank 10.0 25.0% 5.00$ 2.50$ 7.50% 3.0
Specialty Functions 5.0% 5.00$
Advertising Space per Bank 5.0 1,500.00$
Cost of Revenue Source / Rationale
Stat
Credit Card & Processing Fee 3.00%
Retail Space Rental per Locker Bank 1,000.00$ Per Locker Bank, per Month
Depreciation & Amortization per year 38,247$ Calculation
Revenue Assumptions
Cost of Revenue Assumptions
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Operating Expenses Starting Put into
Monthly Base Service Basis
Facilities
Office / Warehouse 5,000$ 37 per head Management's Estimate
Telecom / Mobile / Internet 1,000$ 37 per head Management's Estimate
Utilities 500$ 37 per head Management's Estimate
Facilities Insurance 5.0% 37 per rent Management's Estimate
Sales & Marketing
Print & Display Adverstising 20,000$ 25 Per mo Management's Estimate
Pay Per Click Advertising 1,000$ 1 Per mo Management's Estimate
Sales / Trade Shows / Travel & Entertainment 3.3% % of GP Management's Estimate
Event Coverage & Travel 3.3% % of GP Management's Estimate
Marketing / Advertising / Promotion / PR 3.3% % of GP Management's Estimate
Payroll Starting Annual Base
Business Development Management's Estimate
CEO $100,000 13 per head Management's Estimate
Operations Management's Estimate
Courier 1 $30,000 1 per head Management's Estimate
Courier 2 $30,000 1 per head Management's Estimate
Courier 3 $30,000 25 per head Management's Estimate
Courier 4 $30,000 37 per head Management's Estimate
Courier 5 $30,000 49 per head Management's Estimate
Customer Support Management's Estimate
Representative 1 $24,000 13 per head Management's Estimate
Representative 2 $24,000 25 per head Management's Estimate
Sales & Marketing Management's Estimate
Director Sales, Marketing $75,000 37 per head Management's Estimate
Administrative Management's Estimate
Office Manager / HR Manager $36,000 37 per head Management's Estimate
Executive Assistant $24,000 25 per head Management's Estimate
Receptionist $24,000 49 per head Management's Estimate
Un-named Head $24,000 49 Rev per head $1,000,000 Management's Estimate
Payroll Tax 4.0% per salary Management's Estimate
Benefits 10.0% per salary Management's Estimate
Stock Based Compensation Expense 0.0% per salary Management's Estimate
Outsourced Consultants / Counsel Management's Estimate
Law Firm $3,600 1 per year Management's Estimate
Auditors / Tax $5,000 37 per year Management's Estimate
Consulting $10,000 37 per year Management's Estimate
Operating Expense Assumptions
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Income Statement : Pro Forma Annual
Year 1 Year 2 Year 3 Year 4 Year 5
Gross Revenues:
Small Box Bookings $71,078 $268,272 $548,208 $903,960 $1,323,864
Medium Box Bookings $101,351 $382,536 $781,704 $1,288,980 $1,887,732
Large Box Bookings $117,366 $442,980 $905,220 $1,492,650 $2,186,010
Specialty Function Bookings $0 $74,520 $152,280 $251,100 $367,740
Advertising $438,750 $1,656,000 $3,384,000 $5,580,000 $8,172,000
Total Gross Revenue $728,544 $2,824,308 $5,771,412 $9,516,690 $13,937,346
Cost of Revenues:
Credit Card & Processing Fee $21,856 $84,729 $173,142 $285,501 $418,120
Retail Space Rental per Locker Bank $78,000 $276,000 $564,000 $930,000 $1,362,000
Depreciation & Amortization $38,247 $38,247 $38,247 $38,247 $38,247
Total Cost of Revenues $138,103 $398,976 $775,389 $1,253,748 $1,818,367
Gross Profit $590,441 $2,425,332 $4,996,023 $8,262,942 $12,118,979
Operating Expenses:
Sales, Marketing and General & Administrative $46,559 $147,076 $534,431 $1,528,625 $1,911,658
Payroll (ex stock based comp) $68,400 $209,760 $298,680 $459,420 $520,980
Stock Based Compensation Expense $0 $0 $0 $0 $0
Outsourced Consultants / Counsel $3,600 $3,600 $3,600 $18,600 $18,600
Total Operating Expenses $118,559 $360,436 $836,711 $2,006,645 $2,451,238
Operating Income (EBIT) $471,882 $2,064,896 $4,159,312 $6,256,298 $9,667,741
Interest Income $1,152 $2,892 $6,752 $13,474 $24,605
Interest Expense $0 $0 $0 $0 $0
Pre-Tax Income $473,034 $2,067,789 $4,166,064 $6,269,771 $9,692,346
Income Tax Expense $165,562 $723,726 $1,458,122 $2,194,420 $3,392,321
GAAP Net Income $307,472 $1,344,063 $2,707,942 $4,075,351 $6,300,025
Dividend Paid ($144,530) ($403,437) ($1,077,065) ($1,621,335) ($2,720,707)
GAAP Net Income Post Dividends $162,942 $940,625 $1,630,877 $2,454,016 $3,579,318
EBITDA $510,129 $2,103,143 $4,197,559 $6,294,545 $9,705,988
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Operating Metrics: Pro Forma Annual
Year 1 Year 2 Year 3 Year 4 Year 5
Operating Exp. % of Total Revenue
Sales, Marketing and General & Administrative 6.4% 5.2% 9.3% 16.1% 13.7%
Payroll (ex stock based comp) 9.4% 7.4% 5.2% 4.8% 3.7%
Stock Based Compensation Expense 0.0% 0.0% 0.0% 0.0% 0.0%
Outsourced Consultants / Counsel 0.5% 0.1% 0.1% 0.2% 0.1%
Total 16.3% 12.8% 14.5% 21.1% 17.6%
Gross Margin 81.0% 85.9% 86.6% 86.8% 87.0%
Adjusted EBITDA Margin 70.0% 74.5% 72.7% 66.1% 69.6%
EBITDA Margin 70.0% 74.5% 72.7% 66.1% 69.6%
EBIT Margin 64.8% 73.1% 72.1% 65.7% 69.4%
GAAP Net Income Margin 42.2% 47.6% 46.9% 42.8% 45.2%
Effective Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0%
Ratio Analyses
Working Capital Ratios
Accounts Receivable DSO 7.0 7.0 7.0 7.0 7.0
Other Current Assets / Sales % 1.0% 1.0% 1.0% 1.0% 1.0%
Accounts Payable DSO 3.0 3.0 3.0 3.0 3.0
Other Current Liabilities / Sales % 0.0% 0.0% 0.0% 0.0% 0.0%
Net Working Capital $22,670 $84,505 $162,963 $263,492 $389,950
Credit and Leverage Ratios
Debt / EBITDA Ratio 0.00x 0.00x 0.00x 0.00x 0.00x
Debt / Assets Ratio 0.00x 0.00x 0.00x 0.00x 0.00x
Cash / Assets Ratio 0.36x 0.39x 0.51x 0.57x 0.64x
Interest Coverage Ratio N/A N/A N/A N/A N/A
Assets to Sales Ratio 1.65x 0.76x 0.65x 0.66x 0.70x
Performance Ratios
Current Ratio N/A N/A N/A N/A N/A
Quick Ratio N/A N/A N/A N/A N/A
Return on Equity 0.26x 0.63x 0.72x 0.65x 0.64x
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Balance Sheet: Pro Forma Annual
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Cash $427,516 $830,953 $1,908,018 $3,529,353 $6,250,060
Accounts Receivable $21,794 $81,182 $112,222 $185,047 $271,004
Other Current Assets $934 $3,479 $57,714 $95,167 $139,373
Total Current Assets $450,244 $915,615 $2,077,954 $3,809,567 $6,660,437
Tangible Assets and Net PP&E $347,410 $822,763 $1,298,116 $2,030,269 $2,762,422
Other Assets $401,600 $401,600 $401,600 $401,600 $401,600
Total Assets $1,199,254 $2,139,978 $3,777,671 $6,241,436 $9,824,460
Liabilities & Equity
Accounts Payable $58 $157 $6,973 $16,722 $20,427
Other Current Liabilities $0 $0 $0 $0 $0
Total Current Liabilities $58 $157 $6,973 $16,722 $20,427
Total Debt $0 $0 $0 $0 $0
Other Long-Term Liabilities $0 $0 $0 $0 $0
Total Liabilities $58 $157 $6,973 $16,722 $20,427
Shareholders' Equity $1,199,196 $2,139,821 $3,770,698 $6,224,714 $9,804,033
Total Liabilities & Shareholders' Equity $1,199,254 $2,139,978 $3,777,671 $6,241,436 $9,824,460
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Statement of Cash Flows & Debt: Pro Forma Annual
Year 1 Year 2 Year 3 Year 4 Year 5
Operations
Net Income $307,472 $1,344,063 $2,707,942 $4,075,351 $6,300,025
(+) Depreciation & Amortization $38,247 $38,247 $38,247 $38,247 $38,247
(+) Stock Based Compensation $0 $0 $0 $0 $0
(+) Change in Net Working Capital ($56,660) ($61,835) ($78,459) ($100,528) ($126,459)
Total Cash Flow from Operations $289,060 $1,320,475 $2,667,730 $4,013,070 $6,211,813
Cash Flow Available for Debt Repayment $289,060 $1,320,475 $2,667,730 $4,013,070 $6,211,813
Investing
(-) Capital Expenditures $0 ($513,600) ($513,600) ($770,400) ($770,400)
Total Cash Flow from Investing ($513,600) ($770,400) ($770,400)
Financing
(-) Repayment of Debt $0 $0 $0 $0 $0
(+) Investment of Equity $0 $0 $0 $0 $0
(+) Investment of Debt $0 $0 $0 $0 $0
Total Cash Flow from Financing $0 $0 $0 $0 $0
Sub-Total Net Increase / (Decrease) in Cash $289,060 $806,875 $2,154,130 $3,242,670 $5,441,413
(-) Dividend Payment ($144,530) ($403,437) ($1,077,065) ($1,621,335) ($2,720,707)
Total Net Increase / (Decrease) in Cash $862,821 $403,437 $1,077,065 $1,621,335 $2,720,707
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NTIT Solutions, LLC Debt Paydown & Cash Schedule
Year 1 Year 2 Year 3 Year 4 Year 5
Debt Paydown Schedule
Beginning Balance Debt $0 $0 $0 $0 $0 $0
Actual Debt Paydown $0 $0 $0 $0 $0 $0
Ending Balance Debt $0 $0 $0 $0 $0 $0
Interest Expense $0 $0 $0 $0 $0
Cash Schedule
Beginning Balance $708,789 $761,781 $830,953 $1,908,018 $3,529,353
Cash Flow Increase / (Decr) Cash $862,821 $403,437 $1,077,065 $1,621,335 $2,720,707
Ending Balance $1,571,610 $1,165,218 $1,908,018 $3,529,353 $6,250,060
Interest Income $1,152 $2,892 $795 $1,471 $2,604
NTIT Solutions, LLC Assets and Property, Plant & Equipment Schedule
Year 1 Year 2 Year 3 Year 4 Year 5
Assets & PPE Beginning Balance $743,538 $783,151 $822,763 $1,298,116 $2,030,269
Less D&A ($35,060) ($38,247) ($38,247) ($38,247) ($38,247)
Plus Cap Ex $0 $513,600 $513,600 $770,400 $770,400
Assets & PPE Ending Balance $708,478 $1,258,504 $1,298,116 $2,030,269 $2,762,422
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Preliminary Discounted Cash Flow Model: $20M - $25M
($ in Millions only)
Projected (a)
CAGR
Fiscal Year Ending June 30, Year 1 Year 2 Year 3 Year 4 Year 5 Yr 3-'Yr 5
Net Revenues $0.7 $2.8 $5.8 $9.5 $13.9 34.2%
% Growth 287.7% 104.3% 64.9% 46.5%
Adjusted EBIT $0.5 $2.1 $4.2 $6.3 $9.7 32.5%
% of Net Revenues 65.7% 69.4%
Less: Cash Taxes @ 35.0% (0) (1) (1) (2) (3)
Tax-adjusted EBIT $0.3 $1.3 $2.7 $4.1 $6.3 32.5%
Plus: Depreciation & Amortization 16.9 0.0 0.0 0.0 0.0 0.0
Less: Capital Expenditures (10.4) 0.0 0.5 0.5 0.8 0.8
Less: Change in Net Working Capital (32.6) ($0.1) ($0.1) ($0.1) ($0.1) ($0.1)
Unlevered Free Cash Flow $0.3 $1.8 $3.2 $4.8 $7.0 29.8%
% Growth 50.1% 45.8%
Discount Rate(b)
20.0% 25.0% 30.0%
EBITDA Multiple(c)
5.0x 6.0x 7.0x 5.0x 6.0x 7.0x 5.0x 6.0x 7.0x
Year 5 Adj. EBITDA $10 $10 $10 $10 $10 $10 $10 $10 $10
Terminal Value $49 $58 $68 $49 $58 $68 $49 $58 $68
PV of Terminal Value $16 $20 $23 $13 $15 $18 $10 $12 $14
PV of Free Cash Flows $9 $9 $9 $7 $7 $7 $6 $6 $6
Implied Enterprise Value $24.77 $28.02 $31.27 $20.05 $22.59 $25.14 $16.41 $18.42 $20.43
Plus: Cash & Equivalents $0 $0 $0 $0 $0 $0 $0 $0 $0
Less: Debt $0 $0 $0 $0 $0 $0 $0 $0 $0
Implied Value of Equity $24.77 $28.02 $31.27 $20.05 $22.59 $25.14 $16.41 $18.42 $20.43
(a) Based on Management's likely case projections.
(b) Based on Wall Street research for median discount rate of publicly traded comparable companies plus a premium for private company illiquidity as well as uncertainty.
(c) Based on Wall Street research for median forward EBITDA multiples of publicly traded comparable companies in comparable industries or business models.
Key
Operating
Assumptions
DCF
Summary