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Video: Drone Firm Raises Millions via Kickstarter, Then Rage Quits

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Kickstarter projects and their woes are the subject of more than one website. While most focus on Kickstarter projects that fail to launch, there is another aspect of Kickstarter which doesn’t get enough attention and probably should: the projects which get funded and then never deliver a product. In this instance, the product is a drone.

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Kickstarter backers never go into these things with the idea that they won’t get their promised reward. They’re not there to make a donation. They’re there to be the first to have a cool new piece of tech that’s being built out or a game that’s being developed.

A British firm called Torquing Group promised backers a new palm-sized drone called Zano, which would be:

an ultra-portable, personal aerial photography and HD video capture platform, Small enough to fit in the palm of your hand and intelligent enough to fly all by itself! ZANO connects directly to your smart device (iOS or Android) via onboard WiFi and enables you to instantly begin capturing and sharing moments like never before.

https://youtu.be/hgkbhjXTbOE

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The idea proved quite popular, and the company found itself raising $3.4 million. You read that right: more than three million dollars for a product which did not demonstrably yet exist, although a prototype drone had been built. But one must surely understand there is a difference between prototyping and mass production. There were a variety of rewards, the top one being for around $800:

You will receive 4 x First Edition ZANOs. Your choice of Black/White and 4 x Charging Cables. You will also receive FREE capability software updates for 12 months after public launch.

97 people funded at this level. Interest in consumer drone technology is at an all-time high. It seems the hobby is fast replacing remote control airplanes and cars for nerdy outdoorsmen, and several firms are vying for a wide open market. It’s growing at such a pace that US-based firms recently saw fit to get ahead of regulators and install certain pseudo-optional airspace controls to keep drone operators out of trouble.

Also read: Consumer Drones Outfitted With Geofences Around Restricted Air Space

The funding campaign ended in January. In May, the company said they’d be shipping their first drones by July. This never happened at the scale promised, though as of November, they’ve shipped 600 out of 15,000 orders. However, that’s not all, folks. A few weeks back, the CEO suddenly left the company, reportedly citing “personal health issues and irreconcilable differences.”

Now, the company is not shipping anything and has instead decided to utilize a British law which allows them to pay back little, if anything, in cases like this.

Having explored all options known to us, and after seeking professional advice, we have made the difficult decision to pursue a creditors’ voluntary liquidation. All creditors will be contacted by an insolvency practitioner next week. […] We are greatly disappointed with the outcome of the Zano project and we would like to take this opportunity to thank everyone who has supported us during this difficult period, especially our loyal employees whose commitment has exceeded all expectations.

Ultimately, Kickstarter is by design not liable for defaults such as this. In the case of the Zano, they say they knew as little as anybody and apologized profusely. They had previously told Ars Technica:

The short version is that Kickstarter is a home for creative projects and a new way for people to work together to make things. It’s not a store. Creating something new can of course involve unexpected obstacles. We encourage project creators to be transparent with backers about any problems they run into on the way to completing their projects.

In a statement to backers of the project, Kickstarter reportedly said:

We learned the news of the Zano bankruptcy the same way that you did. […] We e-mailed the creators as recently as two weeks ago to encourage them to be more communicative with their backers, but received only a cursory response. […] [W]e sent an e-mail to the Zano team informing them of their obligations to backers and asking them to share an open and transparent update on what happened with the project. […] If they do not adequately brief backers by that time, Kickstarter will independently pursue an inquiry into the Zano project. Should this occur, we will share those findings with you, the backers, once completed.

Featured image from Kickstarter/Zano.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 1 rated postsP. H. Madore has covered the cryptocurrency beat over the course of hundreds of articles for Hacked's sister site, CryptoCoinsNews, as well as some of her competitors. He is a major contributing developer to the Woodcoin project, and has made technical contributions on a number of other cryptocurrency projects. In spare time, he recently began a more personalized, weekly newsletter at http://ico.phm.link




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4 Comments

4 Comments

  1. pmj1979

    November 25, 2015 at 10:41 pm

    “…Kickstarter is a home for creative projects… It’s not a store.”
    Kickstarter is a store in every way except the in the description given by kickstarter themselves.
    Many projects are created by established businesses on their 4th or 5th project. To kickstart another project is fine but if you offer it as a pre-order service as many seem to do, that makes it a store. You are ordering something from the seller, they just haven’t made it yet.

    Kickstarter need to take responsibility for the millions that people have lost on thousands of failed projects or at least make the project owner responsible They would be less likely to create unachievable goals for themselves if they had to plan for failure.

    I have backed projects with no want of a reward, I have backed projects expecting the reward offered and it has never shown up. Kickstarter should realise they are making a bad name for themselves and people are losing money because of them and their irresponsible project creators.

  2. P. H. Madore

    November 30, 2015 at 9:16 pm

    You don’t think it dis-incentivizes other companies to perform? There’s no repercussions for taking in $3 million and not delivering — shoot, we have nothing to fear if we just want $1 million. We’ll make something up. Someone will fall for it. You see where I’m going with this? I think that’s why Kickstarter went out of their way to address the community, they fear this, that I’m describing. Too many articles like this one and the backers will trickle away to a platform that looks after them.

    • John Scott-Harley

      December 18, 2015 at 6:47 pm

      Quite where’s the money gone? Zano may think they’re off the hook but they ain’t. If its proven that they have used those funds for anything else they’ll be in deep do do

  3. Optimist911

    December 2, 2015 at 12:07 pm

    So what was the source of the fail? A few technical details would seem to be in order.

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Artificial Intelligence

YEXT: An Invisible Force In Artificial Intelligence

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YEXT, Inc. (NYSE: YEXT) is one of those behind the scenes companies involved in Intelligence Search that plays an important role in Artificial Intelligence. What does that mean? Remember the Amazon commercial? “Eco, order a 12” Pizza with pepperoni from Stromboli’s and have it delivered”.

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Today the vast majority of online searches go through third-party sources such as data aggregators, governmental agencies and consumers. The net result of this third party sourcing has been to produce “best guess” data that can often miss or misstate the target data field.

YEXT developed a better way to source critical digital knowledge.  For example business clients use YEXT to update public facts about their brands. They are building their based on the rapid and ever changing nature of data.  So far the YEXT Knowledge Network offers over 100 services to more than 110 corporate clients and has over $150 million in annual revenue.  So could YEXT play a key role in AI,  the next big thing?

How YEXT Works

Most of us are familiar with big time search engines like Google, Google Maps, Facebook, Instagram, Bing, Cortana, Apple Maps, Siri and Yelp.  These pioneering companies are the major drivers in information search today.  However, we also know, their accuracy is not exactly ideal.  

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This is where YEXT steps in.  Their knowledge engine platform lets business manage their digital knowledge in the cloud and sync it to over 100 services including the kingpins of search noted above.

Intelligent Search is the structured information that a business wants to make publicly accessible. In food service it could be the address, phone number or menu details of a restaurant; in healthcare, the health insurances accepted by a physician or the precise drop-off point of the emergency room at a hospital campus; or in finance, the ATM locations, retail bank holiday hours or insurance agent biographies.

Artificial Intelligence Offers a Potential $10 Billion Market

Improving search results in general is nice but not very sexy.  It doesn’t make you want to beg for more information.  However, when you consider the role of Artificial Intelligence (AI) in our evermore data intense world, the importance of Intelligent Search and the opportunities for YEXT becomes a compelling story.  

The AI trend is already underway as YEXT is increasingly using the structured data on their platform to expand or add new integrations with vertically specialized applications, voice-based search and AI engines.

Just Right For Big Data Applications

YEXT customers use their platform to manage their digital knowledge covering over 17 million attributes and nearly one million locations. These customers include leading businesses in a diverse set of industries, such as healthcare and pharmaceuticals, retail, financial services, manufacturing and technology.

Major customers include: AutoZone, Ben & Jerry’s, Best Buy, Citibank, Denny’s, Farmers Insurance Group, H&R Block, HCA, Infiniti, Marriott, Michael’s, McDonald’s, Rite Aid, Steward Health Care and others. The list is growing.

Management believes the market for digital knowledge management is large and mostly untapped with over 100 million potential business locations and points of interest in the world equaling over $10 billion.  

Shooting For Acquisitions and Broad AI Penetration

Founded in 2006 by serial entrepreneurs Howard Lerman (CEO) and Brian Distelburger, President these two are typical software guys whose vision appears much more broad based the their current focus with YEXT.  Here is where the prospectus from their April 2017 IPO offers some mystery and excitement to the story.

Unlike most rapid growth tech companies YEXT had no urgent need to go public.  They generated almost $60 million in gross profit in 2016 before heavy marketing costs resulted in a loss of $26.5 million.  Even so, they still ended the year with $20 million in cash. That’s a fair distance from being destitute.

The company’s real need for the IPO was to establish a liquid public market for the stock. They raised about $123.5 million, all of which will go into the bank.  The company is debt free and there are no insiders selling stock.  Very interesting.

Strong  Financial Results

For the latest reported nine months ended October 31, 2017 revenues grew 38% reaching $122 million.  The good news is the gross profits reached a record 75% or $90 million.  All of this was spent on sales and marketing to expand the business.  When all the beans were counted, YEXT lost $50 million producing a $30 million negative cash flow.  The balance sheet remains liquid with $120+ million in cash and securities.

FYI: In spite of some top notch bankers underwriting its IPO and analysts from those same five firms covering the company, the stock has done almost nothing for investors.  This $1.1 billion market cap was recently hanging out around $12 about the same as the IPO price.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 24 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Business

MoneyOnMobile: Aiming Big in South Asia

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Bitcoin and other cryptocurrencies maybe destine to take over the world of payments but that is not stopping other ambitious entrepreneurs.  In the past we have written about QPAGOS the nascent Mexico City based payments company and covered M-Pesa the name for payments in Kenya.

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Now comes MoneyOnMobile (MOMT:OTC) looking to create a payments business in South Asia where 95% of the population has no bank account.  Let’s take a look but before doing so, caveat emptor. MoneyOnMobile is a microcap that went public about a year ago. Its size and limited liquidity will not be suitable for everyone.

Going For The Gold Indian Style

Here is what the company does that makes MoneyOnMobile interesting. MoneyOnMobile is a mobile money service provider allowing Indian consumers, through its  to use mobile phones to pay for goods and services, or transfer funds from one person to another using simple SMS text functionality. Their vision is to connect the cash based Indian society of over 1.3 billion to the digital world.

They have established relationships with 350,000 retailers throughout 700 cities in the country. They serve over 200 million Indian customers, based on unique phone numbers, who have conducted a transaction with MoneyOnMobile.

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In India, only a small portion of the population use bank accounts and credit cards. Consumers typically prepay for these utilities with cash, either directly to utility providers or through distributors. MoneyOnMobile offers electronic wallet services (“M-wallet”), similar to carrying a prepaid debit card, using the consumer’s mobile phone.

MoneyOnMobile is not a rogue company operating outside the system. It holds a license to operate issued by the Reserve Bank of India and maintains custody of customer funds in accordance with India’s regulations. MoneyOnMobile claims it is ranked as one of India’s top mobile money providers based on the number of unregistered users who on their mobile money service.

How They Make Money

MoneyOnMobile charges a small fee for transactions and is developing several add on services.  For example, MoneyOnMobile purchases utility units, such as mobile phone minutes, at wholesale rates and resells these units to distributors.  Additionally, they process utility bill payments made by consumers and supply a range of services that are being tested on retailers intended to become a major player in the electronic payments processing business similar in the US to First Data or Fiserv.

Management Surprises

There is a natural bias when you come upon MoneyOnMobile to expect the founders to be one or more brilliant graduates of India’s Institute of Technology.  Wrong: the company is actually based in Dallas Texas and managed be some pretty savvy American guys.  Here are two key abbreviated bios.

Harold H. Montgomery, Chairman & CEO

Mr. Montgomery, age 57, has served in this position since April 2010.  Mr. Montgomery brings to the Board of Directors extensive experience in the payment processing industry.

Mr. Montgomery has served as an industry expert for the Federal Reserve Bank of Philadelphia Payment Card Center and the U.S. Congress as an expert witness for credit card reform legislation. He is a widely known industry authority, a speaker at regional and national trade shows and has written over 120 articles for Transaction World Magazine. Mr. Montgomery graduated from Stanford University where he received a BA (International Relations)

Will Dawson, Executive Vice President

Mr. Dawson has over 20 years of experience in the technology industry. Prior to MoneyOnMobile, Mr. Dawson was the Chief Operating Officer at a MasterCard and Smart Communication in Asia, the Middle East, Africa, and Latin America.

Brief History But Substantial Progress

The MoneyOnMobile service was launched just a few years ago in April 2011. Like many young companies MoneyOnMobile has yet to earn a profit and is operating with a substantial deficit net worth.  On the other side however, consumers seem to be taking to the service very rapidly and recent moves have strengthen the balance sheet.

The company released nine months results on February 22nd showing a 75% revenue gain to $6 million.  In the analyst conference call that followed, management pointed out how monthly revenues from January to December 2017 increased 210%: pretty impressive.

They also announced several financial moves to boost capital to finance daily operations and build the company for the future.  Among others, management raised $12.6 million in new equity capital, restructured $6.1 million in debt.

A Word About The Stock

MOMT is a microcap stock whose total value is just under $40 million.  The price has spent the last year below $0.75.  It currently trades around $0.50 having been as low as $0.20.  The fun fact is how there is literally no analyst coverage of the company.  So there should be little worry of Wall Street over hyping the MOMT name.

FYI: I bring this company to your attention for its interesting business model.  I do not own the stock and not compensated by them for this article.  Hope you enjoy reading about MOMT.

Featured image courtesy of Shutterstock. 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 24 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Business

USA Technologies: Thinking Small To Grow Fast

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Malvern Pennsylvania is the home of USA Technologies, a town of just 3,000 people. In Malvern it pays to think small.  USA Technologies (USAT: NASDGM) is trying to make it big by thinking small.

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The word small ticket comes up frequently in USAT’s self-description. Here is why they want to be a big fish in a small pond.

What They Do For A Living

USAT provides wireless networking, cashless transactions, asset monitoring, and other value-added services to the small ticket, unattended Point of Sale (“POS”) market.  This sounds super cool, but what does it mean?

USAT developed something they call ePort technology.  When it is installed into things like vending machines, commercial laundries, amusement games, or stand alone kiosks so you no longer have to carry cash.  It is another application of network technology and it is spreading rapidly.

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While thinking small, USAT also developed ePort Connect, which amounts to a Payment Card Industry Data Security Standard (PCI DSS)-compliant, comprehensive service that includes simplified credit card processing and support, consumer engagement services as well as telemetry, Internet of Things (“IoT”) and machine-to-machine (“M2M”) services, including the ability to remotely monitor, control, and report on the results of distributed assets containing electronic payment solutions.

Competitive Position

Company CEO Stephen Herbert claims the company is a leading provider in the small ticket, beverage and food vending industry.  They are expanding solutions and services to other unattended market segments, such as amusement, commercial laundry, kiosk and others.

Historically, these businesses have relied on cash for payment in the form of coins or bills, whereas, USAT systems allow the acceptance of cashless payments through the use of credit or debit cards or other emerging contactless forms, such as mobile payment.

How Does USAT Make Money

Revenues are generated from the sale of equipment and from license and transaction fees.  It is this last source that helps make USAT most interesting.

During the fiscal year 2017, 73.0% of revenues came from recurring license and transaction fees related to ePort Connect service and just 27.0% from equipment sales.

CEO Herbert believes that a service based business model, will create a high-margin stream of recurring revenues as a foundation for long-term value and continued growth.

Financials: Small Is Getting Big Quickly

USAT strategy seems to be paying off handsomely.  Revenues over the past five years have been growing a better than a 25% pace going from $29 million in 2012 to $104 million in the year ended June 2017.

For the six months ending December 2017 the company surpassed last years total ringing up about $43 million in revenues, a 30% increase.

In their February 8th earnings release, the company raised guidance for fiscal 2018 revenues to $140-$145 million and for adjusted EBITDA to between $13.5 and $14.5 million.

At this time four Wall Street firms cover the company and these folks expect USAT to earn $0.06 per share this year before tripling in fiscal 2019 to $0.18.

Cantaloupe Acquisition

Back in November USAT signed an $85 million deal to acquire Cantaloupe Systems, Inc based in San Francisco.  Just like USAT, Cantaloupe is a provider of cloud and mobile solutions for vending, micro markets and office coffee service.  The two companies tout the deal as bringing together complementary portfolios for the purpose of creating the industry’s top solutions platform.

The acquisition had only minor benefits to reported USAT first half results.  On a pro-forma basis, if the acquisition had occurred on July 1, 2016, first half consolidated revenue would have increased 26% year-over-year.

Management With Beverage Industry Background

CEO Stephen Herbert has considerable history in the beverage industry and has been CEO at USAT for over 5 years. In other words, he needs no on the job training.

For the 10 years prior to joining USAT in 1996, Herbert had been with Pepsi-Cola in their beverage division vending area.

The company believes Herbert’s intimate knowledge and experience with all aspects of USAT for over 20 years and his extensive vending experience at PepsiCo before joining USAT provide the requisite qualifications, skills, perspectives, and experiences to serve.  We would tend to agree.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 24 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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