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Momentex LLC
Business Model and Operations

Business Model

Momentex has designed the Gulp & Go business model to enable rapid penetration of the currently untapped driver-interface retailing market with minimal capital investment and limited on-going personnel requirements. The real estate provider (toll road operator) provides the right to use existing space and systems in exchange for Gulp & Go service and a percentage of revenue. The toll road's proposed commission will be based upon similar fees paid by service plaza concessionaires18. While not crucial to the viability of the business model, Momentex plans to contract with a major beverage company to secure its beverage supply and refilling services.

In addition, Momentex anticipates that the beverage companies will offer a "rights fee" for exclusive distribution and the potential for advertising. Momentex owns the dispenser and ordering hardware while the beverage company owns the inventory. The diagram below outlines the basic structure.

Additional Revenue Opportunities. Momentex recognizes that the Gulp & Go platform provides advertising potential, both on the machines and possibly on the signage. Momentex plans to lease this advertising space to either the beverage supplier or other companies interested in targeted advertising to drivers. Momentex will also seek co-marketing opportunities with companies, such as service plaza concessionaires, offering complementary products or services. In addition, Momentex plans to explore revenue opportunities via the Internet.

Technology Opportunities. By the year 2000, virtually every major toll road and service stations in 20 major markets will be equipped to charge customers' accounts through a seamless, and virtually timeless, electronic transaction19. In the future, Momentex anticipates that Gulp & Go's retail transactions will piggyback off these transponder- receiver payment systems to enable ordering retail products through the driver's on-board communication transponder and have this order beamed to the retailing system as they pull into the transaction area. By developing additional applications for this evolving technology, Gulp & Go will become the backbone of a truly cutting-edge new distribution platform - - high-tech driver-interface retailing.

Operations Strategy

Among key Momentex functions, the Company (1) develops and designs the Gulp & Go service, (2) launches and manages pilot operations, (3) collects and analyzes operations data to refine the service process, (4) markets and communicates to customers, and (5) negotiates for and implements roll out of service. Momentex manages expert contractors who conduct actual mechanical drawings, equipment manufacture, service installation, software integration, beverage refilling, and inventory management. By leveraging the technical know-how, assets and organizational processes of partners, Momentex lowers its operating risk and reduces its capital investment.

Operational Activity and Resources. The following chart summarizes the key operational activities and the partners/contractors that the Company plans to work with. Momentex will outsource the activities which do not lead to a competitive advantage for the Company. Key criteria to identify prospective partners are: (1) strategic fit; (2) quality of service; (3) service level (response time to customer problems); (4) entrepreneurial management; (5) geographic market coverage; (6) price; and (7) technical proficiency.

Operational Activity Description Potential Contractors
In-house
Design machine Customer needs, concept design and testing (Momentex)
Service process design Design service process flow and maintenance (Momentex)
Pilot operation Design, launch and manage pilot operations (Momentex)
Data collection and analysis Analyze operations data. refine service process (Momentex)
Customer education market and communicate to customers (Momentex)
Roll-out service negotiate for and implement roll-out of service (Momentex)
Manage Contractors
Manufacture machine Mechanical engineering and manufacturing Technique, VendSource, Wittern
Microprocessor design Software and electrical engineering Versatile Control Systems
Install machine** Toll systems integration TransCore, TRMI, Lockheed Martin IMS
Maintain and service machine Electronics servicing Local contractor or toll system integrator
Inventory management** Beverage distribution and route management Coke or Pepsi bottling company
Billing Toll systems integration TransCore, Lockheed Martin IMS
Internet Web development, hosting, maintenance SawNet, Epic Cycle Interactive
Data collection, transmission Wireless data service Isochron, Motorola
Note - ** Reflects key activity where a more formal alliance may exist.

Plan for Service Roll Out

To launch and roll out the Gulp & Go service, Momentex will (1) win approval for a demonstration site, (2) strengthen established relationships with major toll road executives, (3) launch the pilot, (4) demonstrate working model, live, to prospective toll road executives in anticipation of roll out, (5) negotiate contracts and permission for demonstration sites at major toll roads, and (6) build-out operations on major roads.

Pilot Approval. The process to win approval for a pilot operation, outlined below, differs for the different toll road categories; localized public/privates, private roads, and major public turnpikes. With each of the three roads mentioned in the chart, Momentex is progressing through Stage 2.

Pilot Approval Process Localized Public/Private Private Road Major Public Road
Key Stages Trans. Corridor Agencies Dulles Greenway Mass Pike
Stage I
Political Goodwill CalTrans, Local Politicians Not applicable State Politicians
Senior Executive Interest CEO, Director or Operations CFO Chairman
Stage 2
Operational Concept Testing Traffic flow, site specifics Traffic flow, site specifics Traffic, concessionnaires
Systems Integrator Approval Lockheed Martin IMS TransCore TransCore
Labor Approval Not required Not required Labor Director & Teamsters
Driver Demand/Hit Rate Survey of local drivers Survey of local drivers Survey of local drivers
Stage 3
Senior Executive Approval CEO CFO Chairman
Contract Negotiation Negotiate terms Negotiate terms Negotiate terms

Strengthen Established Relationships. Momentex has met with the senior executives of eight major toll roads, representing 32% of our target market, to discuss the merit of Gulp & Go service on their roads. Each has expressed interest in the service and looks forward to a physical demonstration of the pilot. Before a pilot operation is implemented at a demonstration site, Momentex will refresh these relationships to emphasize the connection of d river- interface retailing with the Gulp & Go brand.

Launch Pilot. At a localized toll road, Momentex will launch a demonstration site as its first pilot operation. Momentex will collect and own the data from the pilot to further refine financial and operational assumptions.

Demonstrate Operations. With a working pilot operation, Momentex will have the opportunity to drive prospective toll road executives through the service so that they can experience Gulp & Go's Ultimate Convenience first-hand.

Negotiate with the Majors. Early in the pilot operation, Momentex will negotiate with the major toll roads (excess of 100 million annual transactions) to implement a pilot on their road with the option to roll the service out.

Build-out Operations on Major Roads. Roll out within a major toll road will involve a tailored pilot opefation, specific systems integration, demographic and traffic flow analyses, and an awareness marketing campaign.

Competitive Reaction. Momentex views the beverage companies as potential competitors, with the threat heightened if they are excluded from the Gulp & Go distribution channel. For this reason, Momentex has designed the business model to attract an alliance with the strongest of the beverage companies and turn them into an ally. By gaining exclusive rights to the toll roads, Momentex plans to pre-empt competitive threats.

Contingency Plans. Momentex will monitor the political climate around toll road negotiations to determine whether to develop and shift toward contingency plans. This could include a tighter relationship with a major beverage company, a strong alliance with a systems integrator, or other strategic options to facilitate implementation of the Gulp & Go business model.

Alliances. In the key areas listed below, Momentex formalizes relationships to leverage the existing infrastructure and expertise while minimizing Momentex's capital investment.

Operational Complexity

Gulp & Go integrates components of off-the-shelf technology to meet the demands or driver-interface retailing.

Process Flow. The Company has designed a process flow to accommodate Gulp & Go service in various toll system configurations. From the driver's perspective, the process flows as follows:

The chart below depicts the operations perspective. The front end of the Gulp & Go service involves the driver-interfacing at the order and delivery points, as well as integration into the toll systems for automated payment. The wireless data service monitors inventory levels and dispenser performance, relaying information at set periods throughout the day to the data service's central computer, which, in turn, posts the data to the Momentex Intranet via the Internet. Beverage management analyzes this inventory and monitoring data to optimize refilling routes and machine maintenance. In the chart below, potential outsource and development partners are indicated for driver-interface retailing at the tollbooth.

Hardware Design and Software Integration. Momentex, along with its contracted partners, will design and develop a customized casing and ordering interface to enable efficient product order and delivery to drivers. The casing will house an off-the-shelf beverage dispensing machine and the ordering interface will be linked to the central processing unit that controls the Gulp & Go system operations. Software process flow has been designed to limit change to the current toll systems. The Gulp & Go central processing units will package the transaction information and relay it to the toll lane computer for toll lane functionality and audit reporting. Refer to the appendices for detailed schematics of the hardware designs, capabilities, and software integration flow.

Pilot Development Cost Estimates

Service Component Development Source & Notes
Ordering Interface $6,000 Versatile, Technique Applied Sciences
Control Panel & Microprocessor $30,000 Versatile Control Systems
Product Dispenser (off-the-shelf base) $5,000 Wittern Group
Base Dispenser Modifications $7,500 Wada Metal of America, VendSource
Product Delivery arm $9,000 Technique Applied Sciences
Dispenser Casing & Artwork $15,000 Technique Applied Sciences
Wireless Data Service $4,000 Isochron, DEX
First & -Second Stage Internet Site $45,000 Epic Cycle Interactive
Hardware Installation $6,000 TRMI
Software Integration (Non-ETC) $60, 000 TRMI, Lockheed Martin IMS, TransCore
Software Integration (ETC) $150,000 TRMI, Lockheed Martin IMS, TransCore
Testing Operations $180,000 Lockheed Martin IMS
Total $457,500

Audit and Reconciliation. The retail operations are audited in two channels, through the current toll plaza computer software and via wireless data service inventory monitoring. Beverage sale revenue is recorded in tandem, with weekly reconciliation of toll revenue versus retail revenue. The toll road retains an agreed percentage of gross revenues.

Process Design. Beverage ordering and pick-up are de-coupled to minimize traffic impact, as the time to pick up a beverage is less than the time to order and pay. De-coupling occurs by locating the dispenser two car lengths beyond the tollbooth on the end of the tollbooth island. Momentex has conducted on-road, timed simulations to test this concept. In addition, toll collector training is geared toward increasing toll fare and beverage fee collection efficiency to maximize throughput.

Optimize Traffic Throughput. Momentex has used queuing theory, computer simulation, and animation to model the traffic flow with and without Gulp & Go service at the tollbooth. Computer simulation enables an understanding of the impact on the transaction processing time and the capacity/demand relationship at different periods throughout the day and week. Prior to roll out of Gulp & Go service, Momentex will model each toll plaza independently to account for distinct traffic patterns. The simulation model has been designed in a partnership with ProModel representatives, SimTech and Prism Quantitative Methods. Refer to the Traffic Flow appendix.

Inventory Management and Control. To ensure well stocked and high performing dispensers, wireless data service interfaces with the dispenser and the management software via the Internet, allowing dispensers to be monitored closely from the Momentex central office. Wireless data companies such as AES, Isochron, or Cellemetry are favored for their transmission capabilities, including broad geographic coverage and in some cases, a particular focus on the vending industry. Refer to the Internet Integration appendix for details.

Dispenser Refilling and Route Design. YLE="font-size: 10pt">Upon roll out, Momentex will outsource beverage dispenser refilling and maintenance and has incorporated the latest inventory and logistics technology into its operational plan to facilitate this process and provide an audit trail. The dispenser design will allow the route driver to drive into the lane during off-peak hours, close the lane temporarily, and refill the dispenser from the truck parked next to it. With the opportunity for daily maintenance and the absence of money acceptors (which contribute to 90% of malfunctions), Momentex anticipates infrequent machine breakdowns20 . Route design will center on maximizing efficiency and minimizing expense. Route drivers will be responsible for dispenser refilling and simple preventive maintenance, and their daily route will be determined by tracking the number of cans sold each day at each location through the wireless data system.

Quality Control. Momentex has designed its operations to ensure seamless integration into existing systems, efficient beverage delivery, and quick acceptance by drivers. In the unlikely event of a problem, Momentex has built the necessary infrastructure, processes, and feedback loops to address issues. Refer to the Quality Control and Trouble Shooting appendix for details.

18 10 - 15% based on MA, PA Turnpike Marriott contracts
19 Momentex interviews with management at MA. PA, NY, FL NJ, VA, DE toll roads 1998 the toll industry trade association (IBTTA) 1998: Wayne-Dresser website 1999
20 The Wittern Group 1998 and Canteen Vending 1999.

Momentex LLC
Table of ContentsAppendices
1. Executive Summary
2. Company Overview
3. Service Description
4. Market & Strategy
5. Business Model
6. Management
7. Financials
8. Capitalization
9. Risk Factors
Market Research Survey
Hardware Integration
Software Integration
Internet Integration
Traffic Flow Analysis
Financial Assumptions
Income Statement
Balance Sheet
Cash Flow Statement
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