Raffi Garnighian, CEO

Pinion Pins

4/19/2014

2014Business Overview

1. EXECUTIVE SUMMARY

1.1 Product

Pinion Pins are a multi-use, industrial strength product that binds various fabrics or flexible materials together for storage, solutions, and security. This product was awarded a patent early in December 2013. This new innovation has three main categorical functions: Solutions, Security, and Storage. Solutions include using the product for securing duvet covers, pillow covers, bedding, car covers, tent covers, or curtains in a safe and aesthetically pleasing manner. In addition, the product is highly customizable with printed designs and can be used by crafters for various applications. Security includes the locking jewelry, drawers, or items onto bags/backpacks as the pins cannot be opened by any conventional magnet. Storage includes pinning clothing or covers together to provide more closet space, or pinning items together to be able to quickly find them in a purse or cluttered drawer.

Initially the product will be focused towards the household goods industry with the intent to test possible market penetration in the Beauty and Cosmetic, Hotel, Medical, Outdoor Sports, and Camping industries.

The application possibilities of this product are truly unlimited and we have just begun to scratch the surface.

1.2 Technology

Pinion Pins utilizes the same technology that similar magnetic devices such as security tags use to create a strong, protective hold while not damaging the fabric. Our product is much smaller, less intrusive, safer on the hands (can be handled by children), and made from higher quality materials. In addition, our magnetic remover is specialized to interact only with this product. At a specialized Tesla level, the magnet is able to open the pin (normal magnets cannot), while at the same time, it cannot be used to open store security tags and other such things. Finally, our suppliers use the very best in manufacturing to make sure each pin is secure, functional, and beautifully designed.

1.3 Customers

The target customers are consumers that have a need to safely secure fabrics in place at home, at work or on the go. Pinion has multiple uses and can have a diverse consumer base, ranging from young adults using the Pinions for decorating their rooms or dorms, to the hotel industry using Pinions to secure bedding sheets and Duvet covers, and small business owners can use Pinion in several different applications targeted to their own business profile.

1.4 Driving Factors

Creative solutions to problems new and old, all while transforming the world around you in novel and inventive ways- this message is written on the spirit of every Pinion Pin. We hope to be able to offer a product that, rather than responding to existing demand, creates demand in itself, and allows its user base to reinvent home solutions. To do this, we hope to make this product available in many retail and online locations, as well as through our own simple, easy-to-use website.

2. COMPANY DESCRIPTION

2.1 Mission Statement

Our Company’s mission is to offer a new innovative product that is versatile, easy to use and highly customizable to everyone who wants to keep fabrics together. From the homemaker to the outdoorsman we are sure the product will make things easier. We want to be the next ''Velcro'', an innovative product that people turn to for countless applications and solutions.

2.2 Principal Members

Pinion Pins operates under a team of diverse and skilled members:

Raffi Garnighian- Duke University 2016, Economics. Is acting CEO, holds the Patent for the product, operates management of Marketing and Financial teams, actively seeks new markets for product expansion. Board Member.

Sachin Gupta- Duke University 2014, Masters in Engineering Management . Is acting CMO, manages hiring and expansion of teams, travels to events in representation of the company. Board Member.

Tawnja Peterson- Talk show host (Tawnja Show) and personality. Provides animations and commercials for use online and on television. Promotes product through social media and through live appearances.

2.3 Legal Structure

At this time, the company structure is sole proprietor.

3. MARKET RESEARCH

3.1 Industry

The primary industry that Pinion Pins operates in is that of small household goods and home/garden products. The largest potential retailer in this category is Bed Bath and Beyond

Inc (BBBY), which has had significant growth in the past 5 years to a market cap of 13 billion, and has had increasingly profitable years with a higher EPS of 4.79 and a share price expected to increase by 13% in the next year. Comparables have also grown similarly. One notable example is Pier 1 Imports, an industry leader in growth with a target increase in share price of 23% in the next year, and a market cap of 2 billion.

Next, this market has experienced tremendous growth in comparison to the benchmark S/P 500, with every company acting as leaders in this industry having high Beta notable excess returns (Alpha) in portfolios and funds comprised of consumer goods resellers.

Finally, the macro elements that propel sales in this industry also indicate an excellent opportunity to enter the home goods market. Reports by the U.S Census and CPI data indicate that the sales of furniture have risen by 2.8% in 2013. Alongside, IBM data noted that sales of home-goods rose 2% in the same year. In addition, housing data suggests not only a recovery in the median-priced home sales, but also more expensive homes, in which the product would most likely thrive. Bloomberg analysts noted in 2014 that housing prices climbed 7.9% due to large increases in demand, and slowed sales estimates are primarily due spikes and demand and shortages of supply, especially in desirable (and expensive) areas in California, Florida, and New England.

Because Pinion is by nature a versatile and evolving product, many other industries are of course possible to target. From the bedding industry securing your comforter inside a duvet cover, a pillow in a pillowcase, to the design industry where a wedding planner secures table cloths and decorations to a table, to the small business industry where a hairstylist secures their apron around the client before a haircut, to even the outdoors industry where a hunter secures their favorite accessory to the tent or hunting blind, Pinion will have its hands in many places. However, in our first year, we will focus on targeting solely the home and garden industries, as to not overly confuse our product’s image and to emphasize a high-quality product first and foremost.

3.2 Competitors

A table listing the 4 major competitors can be seen below:

Similar items to "Pinion" Duvet Donuts Sheet Grippers Hold On! Sheet Clips Duvet GripsCompanies that sell these items Walmart, Amazon BBBY BBBY, Walmart BBBYPrice $12.95/4 $3.99/4 $5.99/4 $6

3.3 Comparative Advantage

See Technology section 1.2 for specific product advantages, and see Product section 1.1 for benefit of uniqueness (many uses).

One major concern one might have is the price difference. Currently, Pinion Pins is significantly more expensive than the other brands. However, this is justified for a few reasons. First, Pinion Pins include more pins than competitors, and a separate remover device, which provides value to the consumer. In addition, adding additional Pinion Pins (set of 6) costs less per pin than the unit costs of all competitors. In addition, Pinion holds the dual aspect of industrial strength hold and safety for your bed/duvet/sheets. The competitors fall short in one or both of these categories:

Duvet Donuts have been proven in testing, and through customer review (average 2.5/5) to not hold if any amount of force is applied to the cover or bed. In addition, the product requires the folding or compressing of the sheet, which could cause permanent wrinkling, folding, or damage over time.

Duvet Grips is a product that holds a Duvet cover with adhesive, rather than a physical hold. In addition to having poor reviews from consumers, the product has great potential to damage whatever surface it is applied to over time, and in all cases will leave some unwanted residue.

Sheet Grippers can be used to secure a thin sheet to the bed, but they cannot be used for a duvet or any thicker fabric (the grips have a specific thickness that they can hold). This product does not operate in the same market or set of uses as Pinion, but could cause confusion if customers were unable to properly understand Pinion’s primary purpose (Duvet, not sheet).

Hold On! is identical to the previous, but with a different brand name.

4. Product Technical Information

4.1 Product Purpose

Pinion Pins refers to the invention that relates to fabric fasteners such as those used to secure draperies, furniture covers, cushion covers, towels, bedding and the like. More specifically, the present invention provides fasteners which are aesthetically acceptable, do not damage fabrics with which the fasteners are employed, and which are highly effective to secure fabric items in place. Various attempts have been made to address this problem. For example, ribbons have been sewn to the inside of the duvet covers at the corners. These ribbons may be used to tie the corresponding corners of the comforter and duvet cover together. This is not an easy task because it often requires turning the duvet cover inside out to perform the task of tying the ribbons.

Over a relatively short period of time the ribbons tend to become untied requiring the laborious tying process to be repeated. To launder the duvet cover or comforter, the ribbons must, of course, be untied to decouple the duvet cover from the comforter. The tying operation must be repeated once laundering is completed. Other fasteners have been developed to address this problem in other ways, but these tend to be unacceptable from an aesthetic standpoint or difficult to use without damage to the fabric.

To address problems discussed above and others associated with securing fabric items to each other or in place, a unique and novel coupling kit is provided. Each coupling kit includes at least one pin assembly which cooperates with a catch assembly. The kit also includes a release member.

4.2 Patent Product Description

The pin assembly comprises a tack having a head and a shaft projecting from the head. The head may be decorated in any number of ways such as to match accent the fabric with which the coupling kit is used. Further, and for additional security, the pin assembly may also include a flange member through which the shaft passes. The flange is intended to engage the head of the tack and the fabric with which the kit is employed to provide a larger area of contact with the fabric than the tack’s head could provide on its own. The flange member may be decorated as desired or made transparent so the pattern and color of the fabric are visible through the flange.

The catch assembly comprises a first outer housing surrounding a chamber. The housing includes an engagement member having an engagement surface and a collar surrounding an opening to the chamber. The outer housing also includes a cover. A hole adapted to receive the shaft of the tack is centered in the cover and provides a path through the cover into the chamber.

The engagement member is formed by a wall having an inside surface and an outside surface which are each tapered from the collar to a point. Located inside the chamber of the outer housing of the catch assembly is a catch. The catch includes an inner housing comprising a base having a bottom, tapered side walls and an open top. The inner housing also includes a cover having a tapered side wall and a top. A hole is provided through the top of the cover for receiving the shaft of the tack. The base and cover form an inner chamber.

Positioned inside the inner chamber does a pinching element comprised of a frame. The frame includes opposing end walls and a longitudinal opening for receiving the shaft of the tack through each of the end walls. The frame also includes a side wall providing a spring collar at one end and including three side openings. The pinching element further includes three ball bearings. The ball bearings are positioned within the three side openings and are able to move

back and forth as discussed further below. The pinching element further comprises a spring having one end receiving within the spring collar. The other end of the spring engages the bottom of the base of the inner housing when the catch assembly is assembled. More specifically, the spring biases the pinching element away from the base and toward the top of the cover of the catch. The tapered side wall of the cover of the catch imparts an inward pinching motion against the ball bearings forcing each toward the center of the frame. This pinching force is sufficient to grip and hold the shaft of the tack when mated with the catch assembly and, more precisely, the frame of the pinching element.

As such, the pin assembly is quickly and easily coupled and secured to the catch assembly by passing the free end of the shaft of the tack through the opening extending through the cover of the outer housing of the catch assembly; through the opening extending through the cover of the catch; through the spring of the pinching element; through the spring collar of the frame of the pinching element; and through the longitudinal opening of the frame of the pinching element and between the three ball bearings. The spring, the frame and the tapered inner wall of the cover of the inner housing cooperate to press the ball bearings against the shaft of the tack with sufficient force to prevent retraction of the tack relative to the catch assembly.

From time to time, it will become necessary to separate the pin assembly from the catch assembly. Thus, a release member is also provided. The release member includes a cylindrical tube having at least one open end. The diameter of the open end of the tube is such that the tapered end of the engagement member just fits within the open end of the cylindrical tube. Recessed within the tube is one or more magnets. A single 3500 Tesla neodymium magnet is suitable for use. Such a magnet creates a magnetic force which, when properly aligned with the frame, is sufficient to overcome the force of the spring and retract the frame from the top of the cover of the catch. Specifically, when the tapered end of the engagement member is mated with the open end of the tube, the frame of the engagement member is properly oriented with the magnetic field supplied by the magnet(s) and the sufficient magnetic force is applied to the frame of the catch assembly to overcome the force of the spring and move the frame toward the magnet(s).

The taper of the cover of the catch no longer pushes the ball bearings tight against the shaft of the pin assembly as the frame is moved by the magnetic force. The pin assembly may therefore be pulled free of the catch assembly. The fact that the release assembly has a recessed magnet and mates in only one way with the catch assembly ensures the magnetic force is applied along the correct axis to permit quick and easy decoupling. Those skilled in the art will recognize that in many situations, multiple pin assemblies and catch assemblies may be employed to retain fabric items in place. Only one release member is required to quickly and easily decouple the pin assemblies.

4.3 Pricing Structure

To date, the COGS of the product including packaging and shipping is $5.50, with an additional .35 in cost for packaging and transportation. We sell sets in two configurations: Starter Pack and Family Pack. The former contains 6 Pins and one magnetic remover, and is priced at $19.99 with a wholesale discount of 25%. The latter contains 40 pins and 2 removers for a price of $59.99, with identical wholesale discount. Finally, Pins are sold as a $4.99 pack for 6 through our site, and additional removers are sold for $14.99.

4.4 Intellectual Property Rights

Raffi Garnighian holds a provisional patent.

PTO/AIA/14

US Patent and Trademark Office, Us Department of Commerce

Application Data Sheet 37 CFR 1.76

Attorney Docket Number 20130353.PRO

Application number 61/322,143

“Clips for duvet cover”

5. Marketing and Sales

5.1 Growth Strategy

We plan to use a multifaceted array of techniques to approach and engage with our consumers, with the creation of a Marketing Team that operates these strategies daily. These include:

Promotion of or web page through Facebook ads, Google AdWords, and other online forms of advertising

Commercials on HGTV and other networks at prime time and when women/older consumers watch

Collaborations with organizations that group together homeowners with different interests and offer incentives for promotion of product

Sponsorship of outdoors/boating/car events for promotion of product in these areas

Creation of events on college campuses to promote sales through commission for interested candidates as well as build brand awareness

Creation of an “Ambassador Program” in which individuals receive commission at our wholesale rate

Creation of a summer sales program in which applications are trained to sell the product in targeted neighborhoods for a duration of the summer through commission structure

Each of these strategies will ultimately allow us to generate sales and greater brand awareness. After some time, we hope to reach out to larger companies like Bed Bath and Beyond, Kirkland, Pier 1, Walmart, and Sears to carry our product and allow us to greatly increase sales at wholesale rates. In addition, we hope to sell through consumer-specific alternative venues like Skymall and QVC, allowing us to attract consumers looking for products of innovative and useful nature.

5.2 Communication

Our communications to our customers will primarily be through social media, through our Facebook and Twitter pages. In addition, we will operate a company telephone number and email for ordering and product inquiry. Finally, we plan on participating in trade shows and sponsoring events to better engage with consumers.

6. Financials

6.1 Valuation

Using a 10 year Discount Cash Flow (DCF) model, accounting for current COGS and estimated sales off commercial advertising, we proposed a valuation of $904,789.

6.2 Assumptions

Our valuations stem from our initial investment of $35,000, in addition to a proposed $50,000 in additional investment and expenses. Of this, $20,000 total is capital investment, while the rest is advertising and other expenses. A proposed $15,000 will go towards the future purchasing of a printing machine to offer Pinion Pins in a customized format. In addition, new technology needs to be built into the website in order to customize Pinion online. Depreciation is taken account into the model.

The model is quite conservative. The projected volume of boxes sold is based on a .05% purchase rate of the two rounds of advertising through prime time television. No sales were projected off the other proposed methods from our Marketing Team in order to focus on numbers stemming from non-risky methods. Overall, the model is quite bearish, and we still see a high return on investment (IRR) even with sales projections which we believe to be low.

7. Appendix

7.1 DCF Table

0.5 1 2 3 4 5 6 7 8 9 10

Volume, in boxes 3000 9437 18874 20761 22838 25121 27633 30397 33436 36780 40458Price 19.99 Gross Sales 59970 188646 377291 415020 456522 502175 552392 607631 668394 735234 808757

Reported Net Sales 59970 188646 377291 415020 456522 502175 552392 607631 668394 735234 808757

COGS / case 5.85 -23550 -74080 -110413 -121454 -133600 -146960 -161656 -177821 -195603 -215164 -236680Manufacturing 5.50Packaging 0.10Transportation 0.25Depreciation 0 -700 -700 -700 -700 -700 -700 -700 -700 -700 -700

Gross Margin 36420 113865 266178 292866 322223 354515 390037 429110 472091 519370 571377

Travel/Trade Shows -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000Product Dev/Insurance/Legal -10000 -10000 -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000 -5000Advertising/Marketing 0 -40000 -50000 -55000 -60500 -66550 -73205 -80526 -88578 -97436 -107179Salary Costs 0 0 -25000 -25000 -25000 -25000 -25000 -25000 -25000 -25000 -25000Earnings before Taxes 21420 58865 181178 202866 226723 252965 281832 313585 348513 386935 429198Taxes 38%Earnings after Taxes 13280 36496 112331 125777 140568 156838 174736 194423 216078 239899 266103

OutflowsCapital Investment and Salvage 20000 15000 -8000Change in Working Capital - (Incr)/Decr 0 0 0 0 0 0 0 0 0 0

InflowsEarnings 13280 36496 112331 125777 140568 156838 174736 194423 216078 239899 266103Add back Depreciation 700 700 700 700 700 700 700 700 700 700

Total Free Cash Flow -6720 22196 113031 126477 141268 157538 175436 195123 216778 240599 274803

Discount Rate (WACC) 10% -6407 20179 93414 95024 96488 97819 99029 100129 101129 102038 105948

NPV 904,789IRR 546%

7.2 Product Images