Business Concept Paper

Solar Deck 24-7 By: Astral Infiniti, LLC

For more information about the CSUF Business Plan Competition: http://bizblogs.fullerton.edu/entrepreneurship/2013/02/04/csufbusiness-plan-competition-2013-supplement/

Daniel Decker Cal. St. Fullerton

EXECUTIVE SUMMARY THE OPPORTUNITY The use of unmanned aerial vehicles (UAVs) by the Pentagon has grown exponentially over the last decade. Astral Infiniti, LLC was founded in 2008 in response to this growing demand. Our product The Solar Deck 24-7 is a solar powered UAV. Its patented designed allows it to fly continuously for an indefinite period of time. The UAV market is projected to double over the next decade growing from $4.9 million to $11.5 billion annually (Tealgroup, 2011). THE INDUSTRY The aerospace industry is a $218 billion a year industry, UAVs currently account for $5.9 billion of that sum (PRI, 2012). Qinetiq, in England, has developed a solar UAV called Zephyr that uses lithium sulfur batteries. Zephyr recently set a world record by flying for a period of 2 weeks. Boeing announced their latest UAV Vulture in 2008. Astral Infiniti has a competitive advantage based on the patent that was issued for the design of the Solar Deck 24-7 in 2008. VIABILITY As a company, Astral Infinitis capabilities are in the area of engineering design. A joint venture with a larger aerospace company will provide us with the best avenue to successfully commercialize the Solar Deck 24-7. It will take Astral Infiniti 45 months to fully develop and test a prototype. Following a normal production schedule, the net income after taxes will reach $84,000,000 annually in year 7. The team consists of our Chief Executive Officer: Randy Hoffman, Chief Technology Officer: D. Kent Decker and Chief Marketing Officer: Daniel Decker CRITICAL ISSUES Moving forward, the critical issue to resolve is building the prototype. A major issue dealing with the prototype is obtaining high speed flywheels with the appropriate specific energy.

TABLE OF CONTENTS

The Opportunity..1 The Industry1 Viability...2 Critical Issues..4 Exhibit 1: Prototype Costs..5 Exhibit 2A: Pro Forma Income Statement..5 Exhibit 2B: Pro Forma Balance Sheet.6 Exhibit 2C: Pro Forma Statement of Cash Flows6 References7

THE OPPORTUNITY The use of unmanned aerial vehicles (UAVs) by the Pentagon has grown exponentially over the last decade. In the present environment of high tech global conflict, countries worldwide are seeking to improve their reconnaissance, communications and strike capabilities without endangering lives. Astral Infiniti, LLC was founded in 2008 in response to this growing demand. Our product The Solar Deck 24-7 is a solar powered UAV. Its patented designed allows it to fly continuously for an indefinite period of time. Operating at altitudes above commercial airliners, Solar Deck 24-7 can essentially act as a satellite without requiring a launch into orbit, like traditional satellites, at a fraction of the cost. Current UAV systems have high operating costs due to their complex infrastructures. The MQ-9 Reaper for example requires 43 mission control personnel, 59 launch & recovery personnel, and 66 intelligence & support personnel to operate (Wheeler, 2012). Because the Solar Deck 24-7 is designed to operate continuously it will require fewer Launch & recovery personnel. Also, because it flies above commercial airspace it will require fewer mission control and support personnel. The strategy of a high altitude, long endurance (HALE) UAV design is to utilize an energy storage device that provides a high specific energy (energy per unit of weight), but also converts stored energy efficiently to a usable form. The challenge then is to integrate these two characteristics in a way that will realize the optimum performance of the UAV. The Solar Deck 24-7 design does just that by incorporating flywheel technology. Flywheels were selected for the design because they are lighter than batteries and deliver energy to the propellers more efficiently. NASA predicts flywheel specific energy will reach 1000 watt-hours/kg in the near term using high strength materials such as graphene and carbon nanotubes. Comparable battery technology has specific energy of 200 watt-hours/kg. This provides a distinct competitive advantage over competitors that use fuel cells or batteries. Astral Infiniti has developed a conceptual design and performance model of the vehicle that shows feasibility. The approach can continuously carry a 300 watt, 40 pound payload over a wide range of latitudes between the U.S borders. The UAV market is projected to double over the next decade growing from $4.9 million to $11.5 billion annually (Tealgroup, 2011). With the Pentagon increasing its UAV fleet by an average of 700 planes per year over the last decade, the Solar Deck 24-7s superior and more efficient design will enable it to penetrate this growing market (New York Times, 2012). THE INDUSTRY The aerospace industry is a $200 billion a year industry, UAVs currently account for $5.9 billion of that sum. The larger, well known aerospace companies such as Boeing, Northrup Grumman, and General Atomics all have existing UAVs in the marketplace. Qinetiq, in England, has developed a solar UAV called Zephyr that uses lithium sulfur batteries. Zephyr recently set a world record by flying for a period of 2 weeks. Boeing announced their latest UAV Vulture in 2008. The demonstration vehicle is scheduled to fly for 32 days in 2014. The Vulture design uses solid oxide fuel cells (SOFC) as an energy storage device. Existing and potential competition is summarized in the following table:

Table 1: UAV Competition Company Plane Year Altitude Flight (ft) Duration (hrs) 1994 1998 2001 2002 2010 2010 2013 2014 25,000 65,000 50,000 16,000 65,000 40,000 30,000 60,000 24 36 30 20 168 336 150 768 Power Energy Storage N/A N/A N/A N/A N/A Batteries N/A Fuel Cells

General Atomics Northrup Grumman General Atomics Boeing AeroVironment Quinetiq Aurora Boeing

Predator Global Hawk Reaper Scan Eagle Global Observer Zephyr Orion Vulture

Fossil Fuel Fossil Fuel Fossil Fuel Fossil Fuel Hydrogen Solar Fossil Fuel Solar

Though the industry has many formidable competitors, Astral Infiniti has a competitive advantage based on the patent that was issued for the design of the Solar Deck 24-7 in 2008. US Patent number 8,002,216 B2 is for a Solar Powered Winged Vehicle Using Flywheels for Energy Storage. With the recent advancements in the efficiency of flywheels, Astral Infiniti can now make the lightest, most efficient UAVs in the marketplace. No other company can use solar power and flywheels on a winged vehicle without Astral Infinitis patent. The barrier to entry into the aerospace industry is the capital required to build a prototype and bring the UAV to market. To overcome this barrier we will seek a joint venture to infuse the necessary capital. VIABILITY We have evaluated licensing, a joint venture, and production of the plane internally as options for bringing the Solar Deck 24-7 to market. A joint venture with a larger aerospace company will provide us with the best avenue to successfully commercialize the Solar Deck 24-7. As a company, Astral Infinitis capabilities are in the area of engineering design. Our expertise is not manufacturing or production. This makes producing the plane ourselves a less attractive option. A licensing agreement is an avenue we would explore once we have a working prototype. By seeking a joint venture, it aligns our teams strengths with the best interest of investors. With the support of a larger aerospace company for production, we will focus on developing a prototype and marketing the Solar Deck 24-7 through direct sales. Our chief technology officer, Kent Decker has extensive experience in marketing technology to the NASA and military communities and has an established network of contacts within the target market.

The Prototype, Funding, & Financials It will take Astral Infiniti 45 months to fully develop and test a prototype. The design needs and costs have been summarized in the prototype schedule attached as exhibit 1. Over the last four years, we have consulted with design engineers and contract manufacturers in the appropriate fields. The costs represented in exhibit 1 are accurate quotes from these representatives. The total cost of $12,780,000 combined with operating costs in the first four years puts our required capital for the prototype at $20,000,000. Building the prototype will take place in four separate stages: The preliminary design, the detailed design & component development, vehicle integration, and flight demonstration. These four stages provide natural milestone goals for Astral Infiniti over the 48 month period. This allows investors to fund the prototype in stages. The funding needs are as follows. Table 2: Prototype Phases Phase Preliminary Design Detailed Design/Component Development Integration Flight Demonstration Total Months 0-12 13-30 31-42 43-45 Investment Required $4,000,000 $9,000,000 $3,500,000 $3,000,000 $19,500,000

Typical contracts in the UAV industry cover a 5-10 year period. Initially the pentagon will purchase 2-3 planes, then gradually increase the number of planes delivered each year. The number of planes purchased tops out between 25-50 planes a year. Our target price is $10,000,000 per plane, which is comparable to prices being paid for the Reaper and Predator. Based on our research, the cost to source the components from contract manufacturers will be $3,300,000. This will give Astral Infiniti a gross margin of $6,500,000 per plane. Following a normal production schedule, the net income after taxes will reach $84,000,000 annually in year 7. Please view the pro forma financials in exhibit 2. The Team Chief Executive Officer/President: Randy Hoffman Randy is a serial entrepreneur. He is co-founder & former president of Magellan GPS. He also served as President of the Bushnell Division of Bausch & Lomb. Randy currently serves as a member of the Board of Directors and Audit Committee Chairman of Surrex Solutions. He earned his MBA from Harvard University and his B.S. in Business Administration from USC. Chief Technology Officer: D. Kent Decker Kent is an accomplished aerospace engineer and consultant. He has worked extensively in the development of solar power systems for spacecraft applications. This work has given him an in depth knowledge of the challenges associated with creating renewable energy products. In the mid-nineties, D. Kent Decker worked closely with NASA in the development of high
3

performance flywheels for the International Space Station. His accomplishments include: 6 patents for advanced spacecraft power system architectures and 9 Independent Research and Development (IR&D) awards while working as the Principal Investigator. Chief Marketing Officer: Daniel Decker Daniel is an experienced marketing professional. As an executive recruiter and financial services representative, he has worked extensively in business development and direct sales. He is currently in his last year of the MBA program at Cal. St. Fullerton, with a concentration in management. With two classes left to finish, he currently has a 3.70 GPA at the graduate level. CRITICAL ISSUES Moving forward, the critical issue to resolve is building the prototype. A major issue dealing with the prototype is obtaining high speed flywheels with the appropriate specific energy. As mentioned before, NASA predicts flywheel specific energy will reach 1,000 watt-hours/kg in the near term based on flywheels that are currently in development. However, those flywheels are not yet commercially available. NASA feels it is not a matter of if, but when. Qinetiq has already demonstrated that a HALE UAV is feasible and can be done. The only issue is that the batteries they use only last for two weeks before they need to be replaced. By replacing the batteries with flywheels that have a specific energy of 350 watt-hours/kilogram, or more, we will be able to make Solar Deck 24-7 a commercially viable HALE UAV.

Exhibit 1: Prototype Costs

Cost Program Management System Engineering Wing Design Propeller Design Wing Mechanical Design Wing Mechanical Design Thermal Design Wing Manufacturing Propeller Manufacturing Wind Tunnel Tests Vehicle Control Vehicle Navigation Control Hardware Flywheel Development Power Train Electronics Propeller Motor Solar Array Software Vehicle Avionics Vehicle Integration Flight Demonstration Ground Station Year 1 $1,367,100 234,000 100,000 200,000 200,000 68,000 104,000 Year 2 $341,775 234,000 200,000 300,000 400,000 100,000 400,000 400,000 200,000 104,000 24,000 1,000,000 400,000 50,000 44,000 50,000 10,000 2,000,000 600,000 50,000 48,000 100,000 142,000 2,000,000 136,960 Year 3 $341,775 Year 4 $341,775 Total Cost $341,775 468,000 300,000 500,000 600,000 168,000 104,000 400,000 400,000 200,000 104,000 24,000 10,000 5,000,000 1,136,960 50,000 98,000 144,000 192,000 1,525,800 819,600 334,000 $12,578,360

1,525,800 819,600 334,000 $1,495,375

$3,945,100

$5,525,775

$4,004,535

Exhibit 2A: Pro Forma Income Statement

Year 1 Planes Sold Sales Revenue Cost Of Goods Sold Gross Profit Operating Expenses: Salaries & Wages General, Selling, & Admin R&D Total Operating Exp: Earnings Before Taxes Taxes Net income/Loss 0 $0 0 $0 Year 2 0 $0 0 $0 Year 3 Year 4 Year 5 Year 6 Year 7 0 2 10 20 25 $0 $20,000,000 $100,000,000 $200,000,000 $250,000,000 0 6,600,000 33,000,000 66,000,000 82,500,000 $0 $13,400,000 $67,000,000 $134,000,000 $167,500,000

$500,000 500,000 3,000,000 $4,000,000

$500,000 500,000 5,500,000 $6,500,000

$500,000 $500,000 $500,000 $500,000 $500,000 500,000 2,000,000 5,000,000 10,000,000 12,500,000 4,000,000 1,500,000 10,000,000 20,000,000 25,000,000 $5,000,000 $4,000,000 $15,500,000 $30,500,000 $38,000,000

($4,000,000) ($6,500,000) ($5,000,000) $9,400,000 $51,500,000 $103,500,000 $129,500,000 $0 $0 $0 $3,290,000 $18,025,000 $36,225,000 $45,325,000 ($4,000,000) ($6,500,000) ($5,000,000) $6,110,000 $33,475,000 $67,275,000 $84,175,000

Exhibit 2B: Pro Forma Balance Sheet

Year 1 Assets: Current Assets Cash Accounts Receivable Total Current Assets Long-term Assets Total Assets Year2 Year 3 Year 4 Year 5 Year 6 Year 7

$300,000 0 300,000 0 $300,000

$600,000 0 600,000 0 $600,000

$900,000 $6,210,000 $34,585,000 $82,860,000 $148,035,000 0 5,000,000 10,000,000 20,000,000 40,000,000 900,000 11,210,000 44,585,000 102,860,000 188,035,000 0 0 0 20,000,000 20,000,000 $900,000 $11,210,000 $44,585,000 $122,860,000 $208,035,000

Liabilities & Owner's Equity: Liabilities Current Liabilities Accounts Payable $100,000 $200,000 $300,000 $500,000 $1,000,000 $2,000,000 $3,000,000 Notes Payable 200,000 400,000 600,000 600,000 0 0 0 Total Current Liabilities 300,000 600,000 900,000 1,100,000 1,000,000 2,000,000 3,000,000 Long-term Liabilities 0 0 0 0 0 10,000,000 10,000,000 Total Liabilities 300,000 600,000 900,000 1,100,000 1,000,000 12,000,000 13,000,000 Owner's Equity: Capital Investment 4,000,000 10,500,000 15,500,000 19,500,000 19,500,000 19,500,000 19,500,000 Retained Earnings -4,000,000 -10,500,000 -15,500,000 -9,390,000 24,085,000 91,360,000 175,535,000 Total Owner's Equity 0 0 0 10,110,000 43,585,000 110,860,000 195,035,000 Total Owners Equity & Liabilities $300,000 $600,000 $900,000 $11,210,000 $44,585,000 $122,860,000 $208,035,000

Exhibit 2C: Pro Forma Statement of Cash Flows

Year 1 Operating Activities: Net Income/Loss Accounts Receivable Accounts Payable Net cash provided/used by operating activities Financing Activities: Capital Investment Note Net cash provided/used by financing activities Investing Activities: Property, Plant, & Equipment Net cash provided/used by investing activities Net Increase/Decrease in Cash Beginning Cash Balance Ending Cash Balance Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

-$4,000,000 -$6,500,000 -$5,000,000 $6,110,000 $33,475,000 $67,275,000 $84,175,000 0 0 0 -5,000,000 -5,000,000 -10,000,000 -20,000,000 1,000,000 100,000 100,000 100,000 200,000 500,000 1,000,000 -$3,900,000 -$6,400,000 -$4,900,000 $1,310,000 $28,975,000 $58,275,000 $65,175,000

$4,000,000 $6,500,000 $5,000,000 $4,000,000 200,000 200,000 0 200,000 $4,200,000 $6,700,000 $5,200,000 $4,000,000

$0 -600,000 -$600,000

$0 0 $0

$0 0 $0

0 $0 $300,000 0 $300,000

0 $0 $300,000 300,000 $600,000

0 $0

0 $0

0 -10,000,000 $0 -$10,000,000

0 $0

$300,000 $5,310,000 $28,375,000 $48,275,000 $65,175,000 600,000 900,000 6,210,000 34,585,000 82,860,000 $900,000 $6,210,000 $34,585,000 $82,860,000 $148,035,000

REFERENCES Predator Drones and UAVs (2012). New York Times. www.topics.nytimes.com. Retrieved: March 5th 2012. Teal Group (2011). UAV Market Profile and Forecast. www.tealgroupl.com. Retrieved: March 7th, 2012. Wheeler, Winslow (2012). The MQ-9s Cost and Performance. Time Battleland. www.battleland.blogs.time.com. Retrieved: March 5th, 2012.