PayAid

Hi Andrew, thank you for your question. And thank you for taking the time to read our information memorandum. As you have noticed, we decided to introduce a budgeting tool as part of our services after implementing the automatic categorisation of transactions.

There are two main reasons for implementing a budgeting tool in our app. Our vision is not to exploit our users by trying to keep them in the debt cycle; instead, we are trying to create a solution that supports users in time when they need it the most. We believe that this approach will be favoured by users and lead to higher retention rates.

Furthermore, the budgeting tool has an additional benefit to our business. If a user is already using our budgeting tool, they are more likely to use PayAid next time they need credit. To use the budgeting tool, they need to be registered and once the user is registered, getting an advance is convenient and almost instant. Hence the implementation of a budgeting tool was strategic to our business model.

Answered on 18-07-2022 by Laurie Alec Chaplin

Hi Ben, thank you for your question.

We don't have any immediate plans to expand overseas, however, once we are well established in the New Zealand market, we will consider launching our App in Australia, Canada UK and Parts of Europe.

1. It will depend on how fast we can reach our market share in New Zealand. As you have mentioned above, it is a crucial step that could significantly increase the value of the company but needs to be done correctly and at the right time.
2. We have done some research, and the most challenging part will be local regulations. Once we are ready to expand, more work and research will need to be done.
3. Once we have achieved all our current goals in New Zealand and reached market capacity, we will be ready to expand overseas.

Answered on 18-07-2022 by Laurie Alec Chaplin

Hi Paul,

Thanks for the question; generating $1.3m in revenue in the first year is quite doable. Our profit model works like this:

We plan to have 30,000 users at the end of the first year and an average of 3.5 advances per user per year.

3.5 X 30,000 = 105,896 total advances per year.
105,896 X $250 = $26,473,980 pay advance amount per year
$26,473,980 X 0.05 = $1,323,699 revenue

This is a very simplified example of the conclusions gathered from our projections, as full projections are too complicated to display.

PayAid system is based on low amount, short-term pay advances that are generally paid off in 1 to 2 pay cycles, hence the higher returns. PayAid utilises a simple, transparent fee structure that is quick and easy to use; this model has shown to be successful and popular with users in the USA and Australia.

Regarding your second point, I am not sure what you mean by "arbitrage", as this is "exploiting a price difference across identical assets in different markets." As the last answer explains, this is simply not what we do. By investing, you benefit from owning part of the company. If we achieve our growth goals, the company will appreciate in value, and so will your shareholdings. Also, as it says in our IM, we plan on distributing dividends. But it will depend on how much we can raise, the amount of money we need for lending capital and the company's future growth. This is why we don't promise any firm figures or dates regarding dividends at this stage.

Answered on 08-07-2022 by Laurie Alec Chaplin

Hi Felix, thank you for your question.

We agree that there are multiple ways to approach finances, including credit cards. However, we position ourselves in a different category that is closer to Buy Now Pay Later (BNPL) and our research showed that more and more people are inclined to use BNPL services over credit cards. There is a number of differences between us and credit card companies, including fee structure, application time and eligibility. For instance, according to the ANZ website, if they already have an outstanding balance and take out a cash advance on your credit card, you will need to keep paying interest on it until the whole credit balance is paid off in full, which can be difficult for some people. In essence, we are trying to accommodate a specific market segment and that is why we use a fixed fee structure instead of being interest-based like Credit Cards.

PaySauce is an indirect competitor that fills the same market needs as PayAid but operates quite differently. We include PaySauce in our IM because PaySauce was listed on NZX in 2018 and got support from ASB, which really shows the demand and potential of their service in the NZ market. The main difference is that to get a pay advance from PaySauce, users' employers must be registered and using their platform. PayAid allows anybody who meets our lending criteria to get a pay advance; this enables us to reach a much larger market. Moreover, at the end of the last financial year, PaySauce's customer base is around 6,000 after its acquisition of SmoothPay. Compared to roughly 560,000 registered companies (StatNZ), we can see that the majority of the market is untapped.

There are other disadvantages to PaySauce in comparison to our service:
- Users can only access the funds they have earned up to the day they get the advance, there is no credit.
- Users can't pay off the advance over multiple cycles; all the funds are deducted from their next paycheck.

Answered on 03-07-2022 by Laurie Alec Chaplin

Hi Paul, and thank you for your question.

Firstly, our business model is not based on arbitrage; as mentioned in our IM, we plan to use part of the funds raised through this crowdfunding as lending capital. With a reinvestment of profit over the next 2-3 years, we plant to be able to meet the demand. However, if we get to the point where the demand is so big that we do not have enough lending capital ourselves, we might approach NZ banks and get lending capital from them. Because the turnaround period for our pay advances is relatively short, any interest rate of the loan will be easily covered.

Lastly, our pay advances have a fixed fee and can be repaid in 1-4 weeks. Within the repayment period, the user cannot take out another advance. In your example, if the individual is taking out a $200 advance every month, that would be $2,400 over a year, so he/she still only pays back a fixed 5% fee, while we earn $120. Under no circumstances will our customers have to pay back $120 on a $200 advance. Essentially, with the rotation of money, we will earn revenue but not at the expense of our customers. Our research of similar companies operating overseas (based on publicly available data) shows that, on average, the active user takes out 1.5 advances per month. We used publicly available data and adjusted for the NZ market in our projections.

Answered on 03-07-2022 by Laurie Alec Chaplin

Hi William,
Thank you for your feedback. Hopefully, this answers all your questions:

1. We retrieve the information of users' income and expenses using Illion bank statement retrieval. This allows us to get a live feed of users’ expenses and income. The expenses are sorted into categories, groceries, rent, utilities, travel, etc. We then use these categories to perform our affordability calculations and the budgeting tool.

2. At the moment, we are conducting live testing of the app. We can currently register and take out an advance. All planned features in our IM are working, although the app still needs a fair bit of polishing, particularly with the automated payments admin panel and the budgeting tool.

3. We envision finishing testing and finalising backend development in Q3 2022. We are planning on the commercial launch of the app in Q1 2023

Thank you for your questions. If you have any more, don’t hesitate to ask.

Answered on 29-06-2022 by Laurie Alec Chaplin

Hi Ralph,

Thank you for your question.

As mentioned in my previous answer, we have accounted for PledgeMe fee in our forecast and future cash flow. We agree that it could have been included in PnL 2022/2023

Answered on 28-06-2022 by Laurie Alec Chaplin

Thank you for another question Ralph

Our 6.5% success fee for PledgeMe has been accounted for in the forecast and future cash flow. However, because we do not know the exact amount that will be raised through PledgeMe that is not reflected on our 2022/2023 PnL.

Answered on 27-06-2022 by Laurie Alec Chaplin

Hi Ralph,

Thank you very much for your question.

We can not speculate on the performance of the financial markets or how it would affect our future operation, especially considering that we are still at an early stage.
Equidam utilises publicly available data from other companies to help startups get valued as accurately as possible, even at an early stage. From our side, we have spent a significant amount of time during the last six months working on projections that went into creating our valuation. This is why we believe that our valuation reflects future possibilities for our product.

Answered on 27-06-2022 by Laurie Alec Chaplin

Hi Marvin, thank you for your interest. We have answered the question below.

Answered on 27-06-2022 by Laurie Alec Chaplin

Hi Tim,

Thank you very much for taking the time to read through our information memorandum and putting together your questions.

1. For our early investors we offered a special share price based on an agreed valuation of $10,000,000. This was based on our early investors being either involved with PayAid from very early stages or bringing the expertise and experience necessary for us to get to the stage we are at today. Thanks to their expertise, we were able to plan our resources more efficiently and accelerate our development.

One other reason why we have a higher valuation now compared to the early/angel investment stage is that our app is now finished and available in Testflight for App Store and in Google Play Console for Android (undergoing testing). This has confirmed that we are able to develop the necessary technology.

We have taken your request into consideration and have added our full valuation to our PledgeMe page.

2. For the calculations, it looks like you are using our projected expenses in the net liability, which is not quite right. Below are our calculations for our net equity position.

Net Equity = Current assets - Total liability - Inventory

As stated, our current assets equal $122,963 and our total liabilities equal $78,219. As we don’t have any inventory, our net equity would be $44,474.

If you are interested in our equity position as well, we have calculated that below.

Equity = Total assets - Total liability

Our total assets are $274,301 which means our equity is $196,082

- There are a few reasons why the $250,000 expense you mentioned is not included in this calculations:
The balance sheet is produced on a specific date (in this case: 30/5/2022). Hence, the current asset is as of 30/5/2022, whereas the -$250,000 expenses you see are our projection for the full financial year 2022/2023. As these two numbers are from different points in time, they shouldn’t be used together to find the Net equity. Up to now, in the financial year 2022/2023, we have only spent $25,500 of this $250,000 estimation.

- Not all of these expenses would go into liabilities as we would pay them off using cash earned from our projected revenues. Moreover, some of these expenses will go into buying equipment for our office and app development and will become a part of our assets.

- If a portion of projected expenses were included in calculating potential Net equity, then estimated revenues should also be considered in such a calculation.

3. The company's net equity tells you how burdened it is with debt compared to the value of the assets. Evidently, our Net equity is positive, meaning we can well cover our debt with our cash holdings. Essentially, it reflects the financial health of the company and therefore, doesn’t show a complete picture of a company's value. This is because Net equity doesn’t take into account other factors such as our potential earnings and human capital.

To reflect our potential as a pre-revenue company, we used a projected financial forecast to generate a valuation using Equidam. We chose two different valuation methods, scorecards and venture capital. You can read more about these two methods in the valuation report we have now uploaded. Our financial forecast was based on numbers from comparable companies overseas and adjusted for the New Zealand market. (You can read more about this in our Profit & Loss Assumptions)

Reply to your note:

The figures in the Financial Summary on PledgeMe are current figures(so far into this financial year) for FY 2022/2023 while in our memorandum these are predicted figures to give the reader an understanding of our expected profit for the full financial year.

We agree that we could have added “est” on top of the columns in our memorandum to reflect this clearer.

Thanks again for taking the time to read our information memorandum and putting together these questions. If you have any more don’t hesitate to ask.

Answered on 27-06-2022 by Laurie Alec Chaplin