Ormita Commerce NetworkWorking together to transform under-utilised capacity into tangible assets

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Company SnapshotOur HistoryBusiness GrowthInternational PresenceMedia Recognition

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General StatisticsExportersMedia OutletsTravel and TourismManufacturersOther BusinessesGovernment

Direct Barter vs OrmitaThe Role of a Barter ExchangeThird Party Record KeepingTax IssuesBusiness Structure

OUR PROCESS

THE ROLE OF ORMITA

WHY BARTER?

COMPANY OVERVIEW

Approaching BusinessesMarket Entry ProceduresStandard Order of Target MarketsLaunch Planning

REVENUE STREAMS 5Revenue StreamsRevenue ShareTypical Startup Year 1Example of New Licensee Growth 5 Year Period Growth

> Multilateral Barter

> Tolling

> Counter-purchase

> Offsets

> Switch Trading

> Compensation / Buyback

> Venture Capital

COMPANY SNAPSHOT• Founded in 2001 as a financial services software

provider• Currently the world's largest non-cash (barter) trade

house in based on annualised figures as of Dec, 31 2011

• Operations across 17 countries (2011)• Expanding to 22 countries (2012) – Four more under

discussion

• Customers in 54 countries Government32%

Manufacturing41%

Media8%

Mining6%

Hospitality4%

Other9%

MARKET ACTIVITY

MARKET SEGMENTS BY VOLUME

Jun 1998

Jul 2001

Feb 2002

Oct 2009

Jun 2007

Sept 2008 Dec 2011

OUR HISTORY

Business Internet Services Ltd partners

with ITEX barter exchange in New

Zealand

ITEX quits New Zealand. BIS directors

start developing financia lservices

application software

Incorporated as “XO Limited”, the company

begins to take on customers

Owners sell assets of XO Limited and begin

to acquire independent barter exchanges

Owners sell assets of XO Limited and begin

to acquire independent barter exchanges for rebranding under the

name “Ormita”

Ormita brand now operating in 6

countriesUK Government

publishes report on alternative financial

instruments and barter, citing Ormita as the

world’s largest global exchange network

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3500

2007 2008 2009 2010 2011

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2007 2008 2009 2010 2011 2012 2013

BUSINESS GROWTH

GLOBAL TRADE VOLUME(millions of U.S. dollars)

NATIONAL OFFICES

> AUSTRALIA > HONG KONG > MEXICO > SWEDEN

> CANADA > INDIA > NEW ZEALAND > TURKEY

> CHINA > INDONESIA > PAKISTAN > UNITED KINGDOM

> EGYPT > IRAN > POLAND > UNITED STATES

> ESTONIA > ITALY > ROMANIA > ZAMBIA

> FINLAND > MACAU > SOUTH AFRICA

> GERMANY > MALTA > SOUTH KOREA

• Existing Office (retail)

• Government Trade)

• Launching 2012

• Under Negotiation

INTERNATIONAL PRESENCE

SOME OF OUR CUSTOMERS

EXAMPLES OF MEDIA RECOGNITION

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General StatisticsExportersMedia OutletsTravel and TourismManufacturersOther BusinessesGovernment

WHY BARTER?

70% of all fortune 500 companies 2

Eight out of ten media companies 3

65% of all New York Stock Exchange listed firms 4

More than 129 governments 5

Nearly 400,000 businesses in the USA 6

1.8 billion Swiss Francs each year in Switzerland 7

18% of the Argentina economy in 1995 8

Most start-ups boot-strap themselves with barter Frequent-flyer points

1. (2004)., Department of Commerce Fact Sheet. USA DOC.

2. Schmiddgall, R.S., Damitio, J.W. (1999)., Bartering activities of the Fortune 500 and hospitality lodging firms., International Journal of Hospitality Management

3. American Association of Advertising Agencies. (2003).

4. (2004)., Annual Report, National Association of Trade Exchanges. Fact Sheet, International Reciprocal Trade Association.

5. United Nations Commission on International Trade Law. Vol XIX. (Yearbook). A/CN.9/302

6. Stodder, J. (2007)., Residual Barter Networks and Macro-Economic Stability. Renselaer Polytechnic Institute at Hartford, Hartford CT.

7. Studer, T (1998)., WIR and the Swiss National Economy

8. Pearson, R. (2003)., Argentina's Barter Network: New Currency for New Times., Bulletin of Latin American Research

MORE THAN 30% OF THE WORLDS TRADE IS NON-CASH BASED1

Robert A. ZoellickPresident

WORLD BANK

When banks are under pressure, the capital needed for trade finance may be allocated elsewhere on balance sheets. With no secondary market to offload loans, balance sheets have been constrained. In addition, global currency volatility and more rigorous counterparty risk assessment contribute to higher cost of trade finance for importers, exporters and financial intermediaries.

“

”

"Trade Finance in Crisis: Market Adjustment or Market Failures?", Policy Research Working Paper 5003, World Bank, July 2009

Low Risk / Inexpensive Market Entry

• Allows a business to swap / exchange their own product or service for things they need

• Reduces the cash outlay of the business

• Every purchase is matched with a new sale

• Purchase of international advertising, trade shows, translation, legal and accounting services etc

• More sales result in more customer feedback and less cost for “give-away” samples

Enables Market Entry in Restrictive Markets

• A method of repatriating profits frozen in a foreign subsidiary operation’s blocked accounts. If unable to repatriate its earnings, the firm will scout the local market for products it can successfully export to world markets.

• When the alternative is no trade at all firms may want to

consider barter.

BARTER FOR EXPORTERS

May Be Mandatory When Selling to Certain Countries• Various countries place restrictions on currency exchange for

the protection of the currency and to balance requirements between imports and exports

Strengthens International Relationships• Business relationships can be created by the willingness to

accept the purchaser's domestically produced goods as payment.

Lower Opportunity Cost• During difficult economic times a seller may face high finance

costs and slow movement of product - leading to surpluses and/or the need to reduce staff numbers and/or inventory holdings.

• There may be a lack of immediate opportunities to sell for cash.

• Finding a new cash-paying customer for goods involves a new investment in marketing, versus a low cost for countertrade (especially where marketing and entry costs are offset against new sales via bartering)

BARTER FOR EXPORTERS

Eric L. HirschhornUnder Secretary U.S. DEPARTMENT OF COMMERCEBUREAU OF INDUSTRY & SECURITY

U.S. prime contractors generally see barter as a reality of the marketplace for companies competing for international sales. Several U.S. prime contractors have informed BIS that offsets are usually necessary in order to make these sales - sales which help support the U.S. industrial base.

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”"Offsets in Defense Trade", U.S. Department

of Industry, December 2009

Attracts New Customers• Businesses who would otherwise be unable, or unwilling, to

purchase for cash may be willing to undertake a barter deal Low Cost For High Returns• Sometimes it is hard to attract new cash paying customers• Once a media company’s initial operating costs are covered

every new sale comes at a very low cost• People paying on barter are still offering something of value –

barter credits and/or direct barter trades – meaning the media company is turning something lost into something potentially valuable.

Get more cash referrals• Successful clients can be used as case studies to attract new

cash paying customers• Word of mouth referrals are the best form of signing new

clients

BARTER FOR MEDIA OUTLETS

International tourism is part of the international trade in goods and services that occurs daily. Most international trade is facilitated by international payment mechanisms and acceptable hard currency mediums of exchange. However a considerable amount of trade is facilitated without such international mediums of exchange. These alternative trade mechanisms come under the heading of barter.

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”Martin Ferguson

Minister of TourismAUSTRALIA

GOVERNMENT

"Countertrade and Tourism Development". The Journal of Tourism Studies, Vol. 7, No. 1,

Every unsold room represents lost revenue• Turns previously unsold rooms into needed products and

services• Takes customers away from competing brands or locations

Discounting rooms is not the answer• If everyone discounts then the overall perception of the market

price will go down• Once a business becomes known for discounting it is very

difficult to increase the price later• Competitors with bigger pockets could win a discount war

Turns empty rooms into needed products or services• Allows a business owner to “bank” previously unsold room

space for later use. • Helps maintain advertising budgets regardless of cash sales

Turns unsold rooms into a source of referrals for new cash sales

• Referrals create more credibility than advertising alone• Travellers often view referral information online• Builds consumer trust and may lead to additional cash business

BARTER FOR TRAVEL AND TOURISM

Ahmad Mohamed Ali Al-MadaniPresidentISLAMIC DEVELOPMENT BANK

Barter is viewed as a potential means of enhancing trade and promoting economic cooperation.

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"Countertrade: Policies and Practices in OIC Member Countries", Islamic Development Bank, Seminar Proceedings No. 24, 2002

Recieve the highest rate of return • By bypassing importers and wholesalers a manufacturer can

recieve a higher profit margin for each item sold

Provides an outlet to sell problem stock• Returned stock• Surplus items• Improperly packaged stock / incorrectly branded stock

Seasonal stock can be sold at retail market prices• Opens new channels for direct sales

Recieve immediate payment rather than 90 days credit

Use barter to acquire needed goods and services• Advertising• Customer and/or staff rewards• Uniforms, stationery, printing• Equipment / equipment maintenance and repairs• Lifestyle enhancing products or services

BARTER FOR MANUFACTURERS

Manufacturer

Importer

Wholesaler / Distributor

Retailer

Consumer

Manufacturer Consumer

STANDARD CASH MARKET SALES

ORMITA MARKET SALES

Manufacture Cost $70 Buy Price $120

MANUACTURERS PROFIT $50

Manufacture Cost $70

Buy Price $80

Buy Price $90

Buy Price $100

Buy Price $130

MANUACTURERS PROFIT $10

Businesses often have excess capacity in their own goods, services or infrastructure, even more so when the financial cycle slows and credit tightens. Business people find that using capacity to source needed goods and services is an attractive alternative proposition to conventional sales and credit if it can increase sales, ease cash flow or reduce reliance on conventional credit.

Excerpt from "Capacity Trade and Credit: Emerging Architectures for Commerce and Money". UKTI, BIS, City of London Corporation & ESRC Joint Report. Published December 2011. Launched by Lord Sassoon.

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Lord SassoonCommercial Secretary

UK TREASURY

BARTER FOR OTHER BUSINESSES

Reduces existing cash outlay

• Buying using your own goods or services as payment is a lower-cost option than purchasing using cash

• Every purchase is offset against a new sale

Attract new cash-paying customers

• Barter for advertising

• Have more people use your product or service

• Get more referrals

Creates efficiencies in business

• Earn full value for overstocked, last season or end-of-line items

• Reduce storage costs

• No need to discount

Helps expand (or maintain) market share

• Goods acquired using barter are still counted as an increase in the assets of the business.

• Bank capital guarantees reduce available lines of credit - barter capital does not.

• Allows the organisation to meet assets and/or equity ratios for other (cash) subsidies and loans.

• Lets a business obtain future international lines of credit guaranteed by countertrading operations.

BARTER CAN HELP TO IMPROVE THE BALANCE SHEET

Raymond O. EstiokoCENTRAL BANK OF THE PHILIPPINES

Reciprocal trade has allowed the country not only to recoup and preserve its foreign exchange but also enabled key industry sectors to develop and expand new markets and products for export, acquire sophisticated technology, obtain foreign direct investments, and avail of specialized technical/specialized training.

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”"Countertrade Program of the Philippines", Philippine Government, 2002

BARTER FOR GOVERNMENTS

Financially sound practice• Preserves scarce hard currency • Improves the balance of trade in the importing country• Channel back of recoup foreign exchange spent on imported

goods or services• Reduces foreign currency exchange risks

Expands international appetite for developing countries products

• Lesser developed countries can take advantage of the distribution and marketing networks of the companies they countertrade with to distribute their products.

Technology transfer between buyer and seller• Gain access to advanced technology and training, new foreign

investments, research and development and related support for national development and modernization programs

• Promote mutually beneficial collaborative business ventures between local industry sectors and their foreign counterparts through joint ventures and industrial cooperation

• Promote export products and markets

3Direct Barter vs OrmitaThe Role of a Barter ExchangeThird Party Record KeepingTax IssuesBusiness Structure

THE ROLE OF ORMITA

DIRECT BARTER IS DIFFICULT

• You may want something from someone but they do not want anything from you

• You want more from the other business than they want from you

• It is sometimes difficult to value the goods or services

• You want a product now but you can only repay in exchange later

• You do not have a direct relationship with the seller

• Agreements are difficult to document and enforce

• Hard to find sellers who will agree to exchange

DIRECT BARTER ORMITA BARTER

ROLE OF THE BARTER EXCHANGE

The Ormita platform serves several functions: • Provides a multi-lateral matching system of wants and needs• Helps source new customers• Promotes existing participants (nationally and globally)• Acts as a third-party to mediate between delivery of goods

and services for the best price• Finds alternative (non-cash) suppliers for you to make

purchases from• Records the values of transactions• Issues account statements to show the transactions

Ormita provides each member with an account which:• Offers access to interest-free lines of credit• Records the value of every purchase or sale• Issues account statements

Ormita brings new customers• These customers do not replace existing cash customers• Customers come from competing businesses that are not

members of the Ormita network• These customers generate new revenue

Ormita will never devalue your current cash market• Ormita does not resell products for cash• We do not discount products against the prevailing cash market

price• Ormita will only offer your service for exchange into markets

where it does not currently exist and/or where there is low brand awareness

Ormita does not resell products for cash• We do not discount products against the prevailing cash market

price• Customers who acquire a product or service through barter are

more likely to give positive feedback• The cost to service an additional customer may be nominal

versus what is gained in return

BARTERING CREATES NEW OPPORTUNITIES

THIRD PARTY RECORD KEEPING

• Transactions are recorded in a centralized “ledger” which records the value of the items purchased (debit) and sold (credit) - much like a clearinghouse does for stocks, or a commercial bank does for checks.

• This ledger system utilises a “trade credit” as a method of accounting with 1 Trade Credit = $1. (NB. Trade credits are also referred to as Barter Dollars).

• Just like any brokerage firm, Ormita charges a cash commission on each transaction.

$0

$1,000

$2,000

$3,000

-$3,000

-$2,000

-$1,000

When a member sells, their Ormita barter account is credited for the value of the sale – just as if it had been sold for cash

When a member buys their Ormita barter account account is debited

Barter is not a “tax dodge”• Most countries have laws about barter• For barter to be legal the price must be the same as the

real cash market price. (This is why we account for barter transactions in the same way as cash and at the same price as the cash market price)

Used correctly, bartering creates no major tax liabilities

• Income tax is paid on profit• If you spend all the income that you earn you have no

profit (and therefore no income tax) • Sales tax / GST / VAT must be paid according to your

government regulations

TAX ISSUES

BUSINESS STRUCTURE

ORMITA INTERNATIONAL

NATIONAL LICENSEENATIONAL LICENSEE

REGIONAL LICENSEE

AFFILIATES

CLIENT DIRECTORS

CLIENT DIRECTOR MANAGER

BROKER TEAM LEADER

BROKERS

Media Buying Agencies• Media buying agents purchase media for cash (at a 10-15%

discount) and resell it for cash• Ormita already acts as a media buying agency and aggregator

of media for our customers (this is how we charge the customers a higher fee for media)

• Ormita benefits from bulk media buys (reduced cost per deal which can be turned into a barter dollar profit)

Importers• Unless an importer has excess stock, they offer no “value add”

to the Ormita business model and are simply seeking a mark-up which would reduce manufacturers and exporters benefits of being involved in barter.

Other• Typically anything with less than a 30% profit margin is

difficult to do on barter as the member must pay a commission when they buy of 7% cash.

BUSINESSES WE EXCLUDE AS MEMBERS

4Approaching BusinessesMarket Entry ProceduresStandard Order of Target MarketsLaunch Planning

OUR PROCESS

• We attempt to understand each businesses existing, ongoing, cash expenses.

• There is a focus on converting a minimum of $2,000 of existing monthly cash expenses into barter.

APPROACHING BUSINESSES

Example Business - Regular Fixed Outgoings Which Could Be Bartered

Monthly Quarterly

Annually

Once-Off

Advertising $2,000

Annual employee outing $5,000

Book-keeping & audit $500

Car maintenance & cleaning

$1,000

Client entertainment $500

Employee gifts & bonuses

$4,000

Equipment (new asset) purchase

$15,000

Legal services $3,000

Printing $50,0000

Toner, ink & copier supplies

$200

Water cooler supplies $100

Website hosting & internet

$100

Ongoing Savings $53,300 $5,500 $8,000 $15,000

Ormita works with customers to return full value for their excess capacity, unsold time or devaluing inventory within a defined time-period and as part of a buying schedule.

Build Market DatabaseBuild Market Database

• Target database acquisition for direct marketing activities• Import into Ormita CRM system

• Target database acquisition for direct marketing activities• Import into Ormita CRM system

Informational MarketingInformational Marketing

• Send 2-3 Email newsletters weekly with information about various aspects of barter• Receive inbound lead / queries• Draft press release(s)

• Send 2-3 Email newsletters weekly with information about various aspects of barter• Receive inbound lead / queries• Draft press release(s)

Direct SalesDirect Sales• Schedule networking event / launch event• Direct meetings with leads• Ascertain leads wants and offers

• Schedule networking event / launch event• Direct meetings with leads• Ascertain leads wants and offers

Trading ActivitiesTrading Activities• Enter wants / offers into Ormita system • Perform matching • Trade commences

• Enter wants / offers into Ormita system • Perform matching • Trade commences

MARKET ENTRY PROCEDURES

1. Exporters– Products– Tourism– Professional Services– Education

2. Media Companies– Broadcast– Interactive– Out of Home– Print

3. Companies Who Buy Local Media

4. SME Businesses– Product Providers– Service Providers

5. Start-up Businesses

STANDARD ORDER OF TARGET MARKETS

Typically purchase media and trade shows

May purchase other media on barter or goods from exporters

Revenue StreamsRevenue ShareTypical Startup Year 1Example of New Licensee Growth 5 Year Period Growth

REVENUE STREAMS 5

Transaction Fees

• Every time a member engaged in a barter sale they are billed a 7% cash transaction fee.

• The minimum a member should transact per month is €2,000 USD.

• The minimum a member should earn the exchange per month is €140 USD [cash].

Buying Schedule Fees

• A fee of between €200 to €495 [cash] is charged to most members once we have found them more than €2000 per month of ongoing cash savings.

Licensee Fees • National Licensees can choose to open own offices or “franchise / sub-license” the business in other cities across the country.

Remarketing Income

• Revenue earned from back-to-back bulk purchasing of media and reselling to customers in smaller quantities at a margin.

REVENUE STREAMS

Typical Licensee Break-up of Commissions

Transaction Share Actual

Ormita International 10% € 14.00

Sales Manager 3% € 4.20

Client Director (sales person) 7% € 9.80

Broker Team Leader (manager) 3% € 4.20

Broker 7% € 9.80

Affiliate 7% € 9.80

Total Distribution (Maximum) 37% 51.80 €

Remainder for National Licensee 63% 88.20 €

REVENUE SHARE

CONTACTING ORMITAAustralia T: +61 7 3149 3152 F: +61 7 3077 6896 E: info@ormita.com.au

Canada T: +1 647 931 6841 F: +1 647 694 1479 E: info@ormita.ca

China T: +86 755 3301 1789 F: +86 755 3301 1790 E: info@ormitachina.com

Finland T: +358 9 3158 2401 F: +358 93158 2188 E: info@ormitafinland.com

Germany T: +49 931 3069 99280 F: +49 931 3069 99289 E: info@ormitagermany.com

Greece T: +30 211 198 2720 F: +30 211 770 8575 E: info@ormita.gr

Hong Kong T: +852 5808 2722 F: +852 5808 1360 E: info@ormita.hk

India T: +91 98410 83082 F: +91 22 3916 7341 E: info@ormita.in

Indonesia T: +62 817 345 516 F: +883 5100 01192096 E: info@ormitaindonesia.com

Iran T: +98 218 850 2193 F: +98 218 851 2108 E: sadegh.yazdani@ormita.com

Italy T: +39 015 952 6193 F: +39 015 952 2007 E: info@ormita.it

Luxembourg T: +352 20 33 31 84 F: +352 20 33 32 43 E: info@ormita.com

New Zealand T: +64 9 974 9159 F: +64 9 974 9223 E: info@ormita.com.au

Pakistan T: +92 42 35754136 F: +92 42 35754135 E: info@ormita.com.pk

Poland T: +48 58 742 0353 F: +48 32 630 4123 E: info@ormita.pl

Romania T: +40 3 1710 6118 F: +40 3 1630 0225 E: info@ormita.ro

South Africa T: +27 10 500 9060 F: +27 86 243 3591 E: info@ormita.co.za

South Korea T: +82 2 2190 3725 F: +82 2 2190 3710 E: info@ormita.co.kr

Sweden T: +46 8 4083 9907 F: +46 8 5250 7076 E: info@ormita.se

Turkey T: +90 542 786 5969 F: +883 5100 01192096 E: info@ormitaturkey.com

United Kingdom T: +44 203 355 1381 F: +44 203 332 0787 E: info@ormita.co.uk

United States T: +1 412 346 6142 F: +1 412 475 8931 E: info@ormita.com

Zambia T: +260 97 789 5034 E: info@ormitazambia.com