[More Transitus Photos]
| Student Takes on What Went Wrong |
Transitus Wind Down-
Q1. What went wrong? Was it management, ownership, business model, the product or the industry?
Q2. Could it have worked and if so how*?
Q3. Who should be interviewed**?
The Transitus MediaDome (Circa 1996)
[More Transitus Photos]
A Competitor's Product (Circa 2001)
More Competitors' Products
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2,300 of Houston's Yellow Cabs Agree to Take Medallion Taxi Top Signs |
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A. Overview- Innovative Advertising and Marketing Product- New Out-of-Home Billboard Product
Request for Proposal and Bid: Backlit Billboards for the Taxi Industry
MediaDome Design, Patent and Ancillary Assets For Sale
Proposal Due: January 28, 1999
T.C. Transitus Communications Inc. (Transitus) designed and developed innovative backlit billboard advertising units for use with the taxi industry. The billboards (called MediaDomes) are protected under US Patent no. D386,209, issued November 11, 1997 which is valid until November 11, 2011. Transitus invested in and developed a full service advertising company using these units (see web site www.transitus.com). Transitus has appointed Hickling Capital Corporation (HCC) as agent to sell these assets.
Assets for Sale
• Designs and design patent for MediaDome Classic, MediaDome Super (SE) and MediaDome LX
• Commercial production vacuum mold for MediaDome Classic and limited production mold for MediaDome SE
• Agreements in place authorizing use of MediaDomes with taxi commissions and authorities in six cities
• Information and contacts on existing sales leads
• Inventory of MediaDome shells, assemblies and parts
• Three production molds: half-size model; 1:12 size North American taxi with MediaDome Classic and 1:12 size European/Asian taxi with MediaDome SE (sales tools)
• Various documentation on MediaDomes
• All rights to manufacture and distribute
• All rights to place and sell advertising and Public Service Announcements on MediaDomes
• All rights to produce and sell vinyl graphics and artwork for MediaDomes
• All rights to franchise or otherwise extend into markets both domestic and foreign
• Transitus and its principals agree not to compete for five years
Terms and Conditions
• Transitus and its principals agree not to compete for five years
• Proposals must be complete such that they may be evaluated as submitted and any proposal may be accepted without negotiation or provision of further information
• Highest bid or any particular bid may not necessarily be accepted
• All proposals may be rejected
• HCC reserves the right to negotiate with any bidder it may choose or to call for rebids from one or more bidders
• Preferred bids will incorporate a fixed amount (possibly with payment terms) plus a royalty or commission based on sales volume
Process
• Questions should be directed to Dr. Verne G. Chant at HCC
Telephone: 613-237-2220 x210
Fax: 613-237-7347
E-mail: vgchant@hickling.ca
• Additional product and related information is available from HCC on request on receipt of a payment of US$200.00. One MediaDome Classic unit plus this information is available for a total payment of US$500.00.
• Proposals are to be submitted to arrive at HCC offices in Ottawa, Canada on or before 3:00 pm EST Thursday, January 28, 1999. Proposals may be sent by Fax, courier, mail or e-mail as long as they arrive on or before the deadline.
• Address: Hickling Capital Corporation
150 Isabella Street
Penthouse Floor
Ottawa, Ontario, Canada K1S 1V7
(Please note that this is a new address effective December 18, 1998.)
Invitation to Bid
This Request for Proposal and Bid has been sent to companies in North America, identified from our sources, in the following three industry sectors:
1. Out-of-home advertising companies and billboard companies: knowledgeable about and experienced in the outdoor advertising business and interested in augmenting and diversifying advertising space inventory.
2. Advertising agencies: knowledgeable about and experienced in all advertising media and interested in vertical integration in emerging market niche.
3. Sign manufacturers: knowledgeable about and experienced in this and related product lines and interested in augmenting existing lines of business.
Innovative Uses of the MediaDome
The nine-sided MediaDome is suited to campaigns for world brands. The sleek unit profile and 360-degree viewing angle, combined with full color, vinyl graphics and true color representation from using translucent white polycarbonate and halogen bulbs provide the advertiser with a significantly improved billboard product. Visibility after dark and the 24-hour, 365-day operation together with the above features make the MediaDome a world brand advertiser type of vehicle. These major potential clients are likely candidates for regional or national arrangements which will provide them with exclusivity within their product group. The ease with which the images can be replaced and their relative low cost are additional considerations in keeping the message fresh.
The business model includes tying together a national and international network of cities using one or more of the MediaDome models. A web enabled system will allow advertisers to e-mail their artwork to the company and receive final design for final approval the same way. Further, the company can control the production quality of the vinyl images in a few centers and deliver them by overnight service to the installation people in each locale. In this way, Transitus was able to turn around orders for a taxi billboard campaign in a matter of a few days. It should be possible to roll out a national campaign in a two-week period or less.
Taxi backlit billboards can be used in other ways. The MediaDome is well suited to uses such as sponsored Public Service Announcements (PSAs). Since taxis travel extensively in city centers, Transitus believes the MediaDome can and should be used to build a national Missing Kids Network. Each taxi cab equipped with a MediaDome showing a missing child's color picture, age and last known location together with a contact telephone number and a sponsors name would be seen up close and personal by thousands of persons each day. Even when parked at a taxi rank, the billboard is doing its work. In this way, the MediaDome network can be seen as an information network providing information and news at the lowest cost per thousand (CPM) of any major medium. The number of persons who see a taxi cab per day varies depending largely on the size and density of the city; it ranges from a low of around 13,000 per day in cities with 1,000,000 persons to over 70,000 persons per day in very large metropolises. Starting as low as 25 MediaDomes in a city provides significant market coverage whether the message is about missing children or a new product or service.
Suggested Value
To estimate a fair and reasonable market value for these assets, one can look at their costs of development or discounted future value in a successful business venture.
Development costs were approximately US$400K over a three-year period. Although redeveloping a "replacement" product is not a viable alternative to acquiring these existing assets because these designs are protected by patent, the development cost and time period involved is relevant for consideration.
A reasonable market assessment of the potential for a high-quality, cost-effective taxi billboard product in North America is US$5M to US$10M in annual sales within five years. A discounted present value of such a business using typical gross margins suggests a business value of several million dollars. The related advertising business delivered on the MediaDomes presents substantially higher, and virtually perpetual, stream of revenues and margins. Market penetration of some 30,000 to 35,000 taxis produces potential annual advertising revenues of more than $100M with excellent margins. Again, a discounted present value of such a business using typical gross margins suggests a business value of tens of millions of dollars.
These considerations have led to the suggested value of these assets (through a third-party valuation--see attached letter) of US$300K to US$450K.
The Transitus MediaDome
B. Most-Often-Asked Questions and Answers
Q. What is Transitus?
A. Transitus is short for T.C. Transitus Communications Inc., a company incorporated under the Ontario Business Corporations Act. It was set up to be in the advertising business, especially with new and innovative advertising media. Its first product and service is an innovative plastic taxi-top unit that carries advertising, day and night. See Section 2, especially sub-section 2.1: Market Overview in the binder.
Q. How long has Transitus been in business?
A. Transitus was incorporated July 31, 1996. The owners and principals of Transitus had been working on the development of the taxi-top unit for about a year prior to the incorporation. See Section 2 in the binder.
Q. Who owns most of Transitus?
A. The owners and principals of Transitus are M.H. Milford Holdings Inc. which is controlled by Dr. Bruce Firestone, and Mr. Scott Brazeau. Dr. Firestone started the design and development work and Mr. Brazeau, owner and CEO of Nu-Tek Signs Inc., an innovative signage company, joined with Dr. Firestone to perfect the design. Together they own approximately 90% of Transitus before accounting for the shares to be sold as part of this current issue. About eight percent additional shares are expected to be issued as part of this issue. See the Term Sheet in sub-section 1.2 and Section 7 for more detail.
Q. How much would I own if I invested $20,000?
A. Shares are being offered at ten cents each. For a $20,000 investment, 200,000 shares would be issued. This amount would be approximately 0.5% of the issued shares.
Q. What is the minimum amount I can invest at this time?
$10,000 for 100,000 shares.
Q. What would the money be used for?
A. Transitus has been primarily in the development mode up to March of this year. The first production units went out into Denver, Colorado in March. The next units will be in Toronto in May. This activity including all the development work, has been funded by the principals and owners and a few other early shareholders. The capital raised from this issue will be used for manufacturing additional units for Toronto and the next few cities, for marketing and sales of advertising and for working capital. See the Term Sheet in sub-section 1.2.
Q. When could I expect to get a return on my investment?
A. Investing in a private company is different from buying shares on the stock market. Transitus shares will not be listed or traded on any market or exchange in the foreseeable future (at least two years but probably longer). There are severe restrictions on the sale of these shares as defined by the Ontario Securities Act. Therefore, investment in these shares must be thought of for the long term (three to five years).
Typically what happens to companies that are successful and grow to be a reasonable size in sales, income and assets, is that they become listed for trade on a stock exchange or they are taken over by another usually larger company that seeks to expand through acquisition. When that happens, the early investors can then choose to sell their shares.
If the company is not successful, then, of course, there is no buyer or market for its shares.
Q. Is Transitus RRSP-eligible?
A. Yes, some Transitus shareholders already hold their shares in a self-directed RRSP. Each RRSP trustee has its own procedure for assuring that shares of private companies are eligible before the trustee will accept these shares. If you are interested in this option, it is best to ask your RRSP trustee representative about its procedures.
Q. Is it a good RRSP investment?
A. The answer to this question depends on the investment objectives of the individual, his or her portfolio of investments in the RRSP and in non-registered investments, and his or her retirement plan, among several others factors. It would be best to discuss this matter with an investment professional.
For further information please contact Dr. Verne G. Chant, Chief Financial Officer, T.C. Transitus Communications Inc., c/o Hickling Capital Corporation, 6th Floor, 350 Sparks Street, Ottawa ON K1R 7S8, Tel: (613) 237-2220, FAX: (613) 237-7347.
* Investigate the implications and advantages of e-paper: 1. sale of time instead of space, 2. no need for cabs to come in for changeover of ad campaigns using wireless modems, 3. e-paper is bright even in full daylight, 4. low power consumption, 5. can still be backlit, 6. ad campaigns can be very au courant, 6. less of a stigma for this industry, 7. high technology component- more attractive to VC industry, advertising clients and cab drivers, owners and operators.
E Ink by Lucent.
E Paper Here Sooner Than You Think.
Xerox Parc's GYRICON.
** Interview of President, Vice President, ownership, cab company, investor, advertiser.