Business Plan sent to interested investors (2011 - 09 - 20)

[neko]

It's no stock. You cannot sell anything here.


Basically, you give me a loan and will get xx% of the profit share back. And after a set amount of time, you can reclaim your money.


This is the standard contract we're currently preparing.

It depends on how the agreement is worded.  If it's a loan, then the payments would be treated as interest instead of dividends, and these are taxed at different rates.


It's not a matter of seeking a special deal, just trying to make sure that the terms of the deal are clear, and determine how the payments would be taxed in the investor's country.

Maybe US government has information about double tax agreements for investments into foreign countries somewhere?

There is a double-tax agreement between the USA and Germany, as well as an agreement that dividends paid by German corporations are treated as 'qualified dividends' (subject to the 15% tax rate) in the USA.

 

[EvilDragon]

It's no stock. You cannot sell anything here.


Basically, you give me a loan and will get xx% of the profit share back. And after a set amount of time, you can reclaim your money.


This is the standard contract we're currently preparing.

It depends on how the agreement is worded. If it's a loan, then the payments would be treated as interest instead of dividends, and these are taxed at different rates.


It's not a matter of seeking a special deal, just trying to make sure that the terms of the deal are clear, and determine how the payments would be taxed in the investor's country.

The English translation of the contract is not done by me (while my english is good, these things should be handled with care) but by a certified lawyer specialized in translating contracts to english.


Therefore, I don't know the exact wording, it's still being worked on

Maybe US government has information about double tax agreements for investments into foreign countries somewhere?

There is a double-tax agreement between the USA and Germany, as well as an agreement that dividends paid by German corporations are treated as 'qualified dividends' (subject to the 15% tax rate) in the USA.

Do you know which one is used when?


Does that have something to do with the exact wording in the contract as well?

 

[neko]

Correct.


You will first get your profit, but 25 + 5.5% (Soli, that's a special tax here) from that will be kept here.


Then you'll fill out one form and send it to the German authorities (I can help you with that) and then you'll get it back.

Is the money returned to the investor or to OpenPandora GmbH, and how long does this take?  To minimize bank fees, it would be preferable not to receive two separate payments.

It will be returned to the investor. I don't know how long this takes, but normally, tax returns happen within 1 - 2 months.


I will check if it's possible to minimize the bank fees.

How is this payment made if the investor does not have a bank account in the EU?  I'd hate to get into a situation where I would be due a refund, but have difficulty actually getting the money.

Maybe US government has information about double tax agreements for investments into foreign countries somewhere?

There is a double-tax agreement between the USA and Germany, as well as an agreement that dividends paid by German corporations are treated as 'qualified dividends' (subject to the 15% tax rate) in the USA.

Do you know which one is used when?


Does that have something to do with the exact wording in the contract as well?

The rules regarding what counts as 'qualified dividends' subject to the 15% tax rate, including the list of eligible foreign countries, are described beginning on page 20 of Publication 550, which can be found at www.irs.gov.


Some of this may change, as the 15% tax rate is scheduled to increase after 2012.  Expect a political fight over this in the coming year.


There is a double-taxation treaty between the USA and Germany, whereby US investors could get a credit on their taxes for any taxes paid in Germany, however this would not apply if all the withheld money was refunded.

 

[Shadowfox]

Around 20% iirc.

I think even 25 - 30%...


Now they're fixing all the remaining PCBs. But oh well, the failure rate often is stated BEFORE trying to fix the boards.

*chuckles* I guess they survive by having a "we can do anything" attitude and snaring people looking to make a new product that hasn't been manufactured before.

 

[BeefJerky]

This is all pretty interesting stuff. Has me curious to see the plan itself! I hope you get what you need, ED, and all goes smoothly. On the surface (of course, without having seen the plan, which could be dynamite), it sounds like a bit of a tough sell. Seems to be more a loan to your company rather than an actual investment (not the same thing) and, given the history of the product, well-publicised money problems (leading to this too) and the fact that the initial orders still haven't been fulfilled after all these years, how an evaluation arrived at €1.6mil is something I would love to see. An evaluation is something many serious investors would need to see justified in not just projections, but real figures up to this point.


Still, that negativity aside (which may well be unjustified given I haven't seen the plan), I hope it works out for you so that a) the Pandora moves to a far stronger position and grows from here and, more selfishly, b ) I finally, eventually, some day far into the future, get mine.

 

[MasterP]

Okay Ed....my dad brought up a question i'd like to be answered.


why in the world do you need investors if we already paid $400 for our pandoras ahead of time?


doesn't the price of the pandora pre-order cover the production cost?


if not, then what the heck is that money for?

 

[Darkknight512]

That $400 (did you already include shipping becasue the Pandora was $350 i think), was a price that was set too low (I think at a loss of $100 per Pandora), they lost money on each one. They also need the investments to do the next round of preorders that will not be prepaid.


This was probably due to problems with CC or something I don't know about.

 

[MasterP]

i guess, i'm just losing hope.


i've been waiting almost a year now, for what?


a device that's already completely and totally outdated?


hearing that this could take 3 months more, plus time to get investors.....it's killing every last bit of hope i have.


so please, can anyone give me 1 reason to keep waiting?


what about the pandora, aside from it's control scheme, is worth it, that the other handhelds devices(including phones) don't have?


that's all i need to be able to keep waiting.


(EDIT)


i'm not trying to sound mean or anything either....i'm getting desperate...i really am.


so please, don't take any of that the wrong way....

 

[Blue Protoman]

If you get a phone, enjoy your inferior, slower emulators. And your phone will be outdated in a year, anyway. Planned obsolescence; it's the 1950's all over again.

 

[EvilDragon]

Okay Ed....my dad brought up a question i'd like to be answered.


why in the world do you need investors if we already paid $400 for our pandoras ahead of time?


doesn't the price of the pandora pre-order cover the production cost?


if not, then what the heck is that money for?

Yes, it was supposed to cover the production costs (and it mostly did).


Some stuff happened (like the nub company that went bust, which made us lose 30.000 USD), but that wasn't the major problem, we had some money aside.


Production costs were higher than what you all paid for as well.


However, the main issue right now is the board production company in Texas:


They still owe us about 1000 boards, but they are terribly unreliable and we have no idea when they will send how many boards (and how many they manage to send us alltogether...).


1000 boards = 400.000 USD.


So the reason for the investment is:


1. To be able to produce the remaining boards as fast as possible - with a reliable company, while we're trying to either get the remaining PCBs from CC in Texas or get the money loss they caused us from them.


2. To ensure Pandoras future. It won't help if we get the remaining 1000 PCBs within the next 3 months. We want to get a reliable Pandora production running, with 1000 per month if possible, and not just with preordering and waiting a few months. Some parts have a leadtime of 14 weeks - so we need to be able to buy these upfront, and that all does cost money.

hearing that this could take 3 months more, plus time to get investors.....it's killing every last bit of hope i have.


so please, can anyone give me 1 reason to keep waiting?


what about the pandora, aside from it's control scheme, is worth it, that the other handhelds devices(including phones) don't have?

It depends what you like.


I would rather have and support an open, hackable unlocked device instead of giving in to the lock-downs that big companies give you.


Also, phones are not really meant to be used for games. I haven't seen a phone that didn't have stuttering games (maybe the xperia play, but the games I tried on the iphone stuttered... even worse with emulators).

 

[EvilDragon]

This is all pretty interesting stuff. Has me curious to see the plan itself! I hope you get what you need, ED, and all goes smoothly. On the surface (of course, without having seen the plan, which could be dynamite), it sounds like a bit of a tough sell. Seems to be more a loan to your company rather than an actual investment (not the same thing) and, given the history of the product, well-publicised money problems (leading to this too) and the fact that the initial orders still haven't been fulfilled after all these years, how an evaluation arrived at €1.6mil is something I would love to see. An evaluation is something many serious investors would need to see justified in not just projections, but real figures up to this point.

It's basically the same risk you'd have with any startup company.


If a startup company has a finished product and offers from companies they'd like to have their stuff produced, it could also happen that one of the companies could turn out to be as unreliable as the one we choose for PCB production first.


However, it would be very bad luck if that happened again - and the company I've chosen has a very good reputation amongst customers, so it's unlikely the same would happen again.


The evaluation is being done by a qualified tax consultant who takes a look at the business plan and determines the possible profit the company can make within the next few years.


As the still undelivered orders are also included in the business plan, so this has all been taken into account when creating the evaluation.

 

[diligentcircle]

so please, can anyone give me 1 reason to keep waiting?


what about the pandora, aside from it's control scheme, is worth it, that the other handhelds devices(including phones) don't have?

You said "it's" (contraction for "it is") when you clearly meant "its" (possessive for "it"). By opening Pandora's box, this mistake will be rendered insignificant by the evil that pours out.

 

[gunni]

sorry if it's already been mentioned somewhere (I haven't read through all the posts here) but I'm seeing this talk of 3 months, is this when you roughly expect batch 1 to be finished?

 

[MasterP]

Some stuff happened (like the nub company that went bust, which made us lose 30.000 USD), but that wasn't the major problem, we had some money aside....


.....However, the main issue right now is the board production company in Texas:


They still owe us about 1000 boards, but they are terribly unreliable and we have no idea when they will send how many boards (and how many they manage to send us alltogether...).


1000 boards = 400.000 USD.....

with any luck, last 2 questions.....


#1, Why are you so unlucky with companies? XD


(more of a joke question)

Also, phones are not really meant to be used for games. I haven't seen a phone that didn't have stuttering games (maybe the xperia play, but the games I tried on the iphone stuttered... even worse with emulators).

#2, So you've never used a Droid then?


with my droid 1, i've NEVER experienced ANY stuttering of any kind, with any of the MANY games and emulators i've used.


sure, the touch screen is annoying to use, and the keyboard sucks for gaming, but then again, that's why there's apps that connect a wii-mote to the phone.

 

[EvilDragon]

Some stuff happened (like the nub company that went bust, which made us lose 30.000 USD), but that wasn't the major problem, we had some money aside....


.....However, the main issue right now is the board production company in Texas:


They still owe us about 1000 boards, but they are terribly unreliable and we have no idea when they will send how many boards (and how many they manage to send us alltogether...).


1000 boards = 400.000 USD.....

with any luck, last 2 questions.....


#1, Why are you so unlucky with companies? XD


(more of a joke question)

Well, there only were two companies we were really unlucky with: The PCB production one and the one designing the nubs that went out of business.


Last one probably happened because of the financial crisis (many companies went down the dumps at that time).


The PCB production one was the real bad luck.


I wouldn't say the chinese company was bad luck, they did a job worth the price.


And the problems with the new nubs.. well, we thought they tested them, they probably thought we will test them and tell them to go into production once we're happy with them.


They produced the new ones that didn't fail on their own costs though - so it's hard to tell whether this was our or their fault.


But they worked TOGETHER with us to improve the result and were constantly communicating with us.


When they improved the nubs, they had new results every two weeks.


CC doesn't even answer to our questions, so I think they are the only real bad luck company.

Also, phones are not really meant to be used for games. I haven't seen a phone that didn't have stuttering games (maybe the xperia play, but the games I tried on the iphone stuttered... even worse with emulators).

#2, So you've never used a Droid then?


with my droid 1, i've NEVER experienced ANY stuttering of any kind, with any of the MANY games and emulators i've used.

I only tried the iPhone 3 and 4 as well as the N900 (the N900 is terrible for gaming.. I love the phone, but not even the NES emulators runs well... and it has the same SoC as the Pandora!).


And I tried some Android phone (forgot which), and there still was a stuttering every now and then (not constantly, but probably each 5 - 10 seconds there was a short stutter, maybe the OS did something then).


Haven't tried the Droid yet, no.

 

[kyuu]

[...] a device that's already completely and totally outdated?

I don't think it's outdated. It's still more powerful than most of the other handhelds on the market and (IMO) will do well the next few years.


Not to mention the big and growing community and an impressive support.

 

[EvilDragon]

[...] a device that's already completely and totally outdated?

I don't think it's outdated. It's still more powerful than most of the other handhelds on the market and (IMO) will do well the next few years.


Not to mention the big and growing community and an impressive support.

That's also what I think.


All we need is to get things rolling. If it's easily available for everyone, the amount of devs and community members will grow - leading to more and better software.

 

[Caine]

I wouldn't say the chinese company was bad luck, they did a job worth the price.

I mostly agree with this. The delays caused by the case production are completely blamable on you guys. It was an unrealistic estimate to begin with and the feedback cycle was way too long and inefficient. I didn't know this in advance either, it's mostly learning as you go.


I'm still a bit worried that producing additional cases will be cause for another delay. None of the existing customers has anything to fear here, but several batches down the road it might become an issue. Well, you guys are more experienced know, I'm sure you have a better grasp on the lead time of case production.


I'm still not entirely happy with the case quality, there are some very minor issues which could be better, especially the shoulder buttons. Though probably that's just the switches on my unit.

 

[EvilDragon]

I wouldn't say the chinese company was bad luck, they did a job worth the price.

I mostly agree with this. The delays caused by the case production are completely blamable on you guys. It was an unrealistic estimate to begin with and the feedback cycle was way too long and inefficient. I didn't know this in advance either, it's mostly learning as you go.

Well, it was a mixture. Most of that was probably due to our inexperience, however, if I learnt something during the last years, it is that chinese companies take their time.


Compared to German companies (which are what I've been mostly dealing with so far), they are slow with some things.


It took us over one month to fix the issue we had with the iCP keymats... and it was an easy fix that could be done within an hour.


Once you got everything setup and just need to reorder though, it works out fine.

I'm still a bit worried that producing additional cases will be cause for another delay. None of the existing customers has anything to fear here, but several batches down the road it might become an issue. Well, you guys are more experienced know, I'm sure you have a better grasp on the lead time of case production.

Yeah, I want to order the cases in October as well. It shouldn't take longer than 1 month, so I guess we should estimate two months

I'm still not entirely happy with the case quality, there are some very minor issues which could be better, especially the shoulder buttons. Though probably that's just the switches on my unit.

I'd also love to improve the case in the future, but that's not really possible right now - except for maybe using a different plastic.


As I get all units for repair, I could check for the weak spots. Most of the cracks seem to happen because of the type of plastic that is used.


We asked the company that is doing the iCP what kind of plastic they would use to make the Pandora case more sturdy, and I've asked the same question to the chinese case company, showing them pictures about what the most common cracks are.


Maybe a different plastic will solve all these cracks.


The shoulder buttons shouldn't be an issue anymore. If the switch is properly placed on the PCB, the buttons work right away.


When I showed the current PCB to Global Components, they told me the pads for the switches are WAY too big. With machine population, you make them nearly the same size as the button pins and then they will sit exactly where they should.


Otherwise, the buttons will swim around a bit when the solder becomes fluid - and therefore won't be placed correctly.

 

[Caine]

if I learnt something during the last years, it is that chinese companies take their time.

Oh yes, you can say that again. Setting a deadline well before the actual one is a must.

we should estimate two months

Oh man, don't phrase it like that

I'd also love to improve the case in the future, but that's not really possible right now - except for maybe using a different plastic.

I know. It is more than sufficient and way better than I expected it to be based on all the reports about the Chinese factory.

The shoulder buttons shouldn't be an issue anymore. If the switch is properly placed on the PCB, the buttons work right away.

Yeah I know, I haven't heard many complaints about them lately. On that note, how is your RMA workload at the moment? I still have to return my unit because of its PTOD. I had delayed doing so since you mentioned being really busy at the time and I'm having a very hard time parting with my unit