|1||10+ bank prospects in the sales pipeline. Banks pay for CVVKey.|
|2||Offered in Collaboration with Visa, integrated dynamic CVV2 validation on VisaNet.|
|3||A+ Team of payment industry experts on dynamic CVV2.|
|4||Meets European PSD2 requirements for Strong Customer Authentication.|
|5||15% of (Card-Not-Present) CNP transactions make up 55% of Total Fraud.|
|6||Only 3 easy steps for banks to enroll in Keyno's service. No integration required.|
|7||Independent Research on 1,000 card holders shows that 3 out 4 consumers would feel safer with dynamic CVV2.|
|8||Online Fraud is growing by double digits, every week is another data breach effecting millions of cardholders.|
"KEYNO solves a problem I have today - online credit card fraud. And that problem just quadrupled as a result of the current crisis as people get used to sourcing everything from Amazon, Google, and other eCommerce sites. The world needs a safe and easy solution--now." - Dave Bruno, Longtime Financial Technology Expert, Venture Builder, & Former Head of Innovation at UBS Wealth Management
December 19, 2013, changed everything for me. Target Corp. confirmed the theft of 43 million credit and debit card numbers. It was later revealed that a single employee of one of Target’s HVAC vendors opened one email and started it all. The virus in that message weaved its way through the HVAC vendor’s computers, onto Target’s computers, and eventually reached Target's point-of-sale terminals. Then every time a consumer used their card at Target, all of the card data was exposed and sent to the thief.
That’s crazy! It’s no longer about trusting the store; now, it’s about trusting every point in the entire supply chain—tens of thousands of people every time I use my card. If just one of the thousands of individuals, at any time visits the wrong site, opens the wrong email, or installs the wrong software, the whole system can become compromised. Can card data ever be safe?
I set out to find a better way. What we needed was dynamic data. Information, that when stolen would be of no value to the thief. I began thinking more about the 3-digit security code printed on the card, the CVV2. I wondered: could the CVV2 be made dynamic like the 2FA codes on Google Authenticator?
After six long years, Keyno is a reality and our proprietary technology, CVVkeyTM, is available to protect credit, debit, and prepaid cards. What I like most about our solution is the security it gives me; I feel safer knowing my code is continually changing. Keyno is integrated with VisaNet, so banks that issue Visa cards can quickly onboard Keyno in 6-8 weeks.
-Robert Steinman, Founder & CEO
The Dark Web and Your Data
Credit, Debit, & Prepaid card details are sold on the Dark Web for as little as $5 a card. That includes name, payment card number, expiration dates, and CVV2, all available to a criminal. The amount of credit card data available on the dark web has increased by 153% in 2019.
In the United States, we are particularly vulnerable as a majority of online fraud attacks are directed towards us. However, online fraud is quickly becoming a worldwide problem.
Card-not-present fraud is 4 times more likely to occur than in-store, or card-present, fraud. There is little the average person can do to protect themselves online, until now.
CVVkey replaces the static 3-digit security codes on credit and debit cards with a 3 digit number that changes multiple times a day. Keyno's CVVkey is integrated with Visa enabling banks to enroll their cards using a single form.
Individual cardholders enable the CVVkey service in the Keyno App or on their Banks App. Keyno is available everywhere VisaNet is. Now banks around the world can offer CVVkey.
At its core, Keyno eliminates the hassle associated with CNP fraud. Our customers don’t worry about having to check their card and bank account statements constantly, or the hassle of constantly replacing their cards. Keyno reduces cardholder anxiety allowing them to take charge of their own security and shop fearlessly.
Keyno is an app-based solution. The app provides a 3-digit, dynamic CVV2 (dCVV2) that replaces the static CVV2 on your card. This dynamic 3-digit code is called a CVVkey. The code rotates multiple times a day, making it virtually impossible to steal.
When checking out from a merchant site online, a cardholder just enters the CVVkey in the Security Code box instead of the static CVV2. In-store purchases are the same as before. For Recurring payments, the cardholder provides the CVVkey at the time of entry instead of the static CVV2. CVVkey is compatible with all phone wallets like Apple Pay or Google Wallet, and it's used in all cases instead of the static CVV2.
Our marketing concept video:
The current timeline is for pilots of Keyno's CVVkey with participating banks around the world in the spring/summer of 2020.
We Take Security Seriously
Keyno has Service Provider Level-1 PCI Compliance certification, the most rigorous compliance for payment networks. We use strong cryptography and data protection methodologies, scalable cloud architecture, and best practices to guarantee security to our clients.
Our Projected Growth
Our growth curve is steady yet steep. One enrolled medium-sized bank generates millions of dollars in potential revenue. Our business model makes Keyno free for cardholders while charging the banks monthly for the service that we provide with Visa. Banks are incentivized as the monthly fee is smaller than the considerable cost savings from the reduction in fraud, customer service, and re-issuance of cards.
The service pays for itself within months, so it is a revenue boost to the bottom line for the year. Keyno requires minimal configuration to pilot and a light integration for full deployment. Keyno's sales cycle includes high-level meetings with the world’s top Banks and Card Networks.
PSD2 is the second Payment Services Directive, designed by the countries of the European Union. PSD2 introduces security requirements for the initiation and processing of electronic payments, as well as for the protection of consumers' financial data. One of the requirements is that financial institutions that operate in Europe will need to challenge online payments, such as card transactions, with Strong Customer Authentication; a minimum of 2 methods of authentication (2FA). Keyno's CVVkey is a good way to achieve compliance. See (paragraph #28, #33): EBA Opinion on dCVV2. Available at this link:
PSD2 is an excellent opportunity for Keyno to provide a seamless and secure cardholder experience in Europe. Finextra reported in March 2019 that 41% of the 442 European banks' survey failed to meet PSD2 requirements, and of those that did meet the requirements, the solutions that they came up with are anything but consumer-friendly. Keyno can meet PSD2 with a solution that is easy for Banks to implement and consumers to use. European national governments have announced new deadlines for banks to meet PSD2, and many are by December 2020.
Keyno has financial statements ending December 31 2019. Our cash in hand is $30,000, as of February 2020. Over the three months prior, revenues averaged $0/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $20,000/month.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Keyno provides online fraud prevention for Credit, Debit, & Prepaid cards worldwide. We replace the static CVV2 code on your card with a dynamic CVV2 (CVVKey) code that is on your phone. Think of us as google authenticator for payment cards.
Keyno is currently integrated with Visa’s Network (VisaNet), allowing Visa card issuing banks to easily adopt the solution. Other networks are in the pipeline. Worldwide, there are over 15 billion credit, debit, & prepaid cards (total addressable market).
Given the Company’s limited operating history, the Company cannot reliably estimate how much revenue it will receive in the future, if any.
Keyno, Inc was incorporated in the State of California in March 2019.
Since then, we have:
Our company was organized in March 2019 and has limited operations upon which prospective investors may base an evaluation of its performance.
Related Party Transaction
Refer to Question 26 of this Form C for disclosure of all related party transactions.
Liquidity & Capital Resources
To-date, the company has been financed with $247,397 in debt.
After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 3 months before we need to raise further capital.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 3 months. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
Keyno, Inc cash in hand is $30,000, as of February 2020. Over the last three months, revenues have averaged $0/month, cost of goods sold has averaged $0/month, and operational expenses have averaged $20,000/month, for an average burn rate of $20,000 per month. Our intent is to be profitable in 24 months.
Our financials have just been prepared for year end 2019, and there have been no material changes.
The main source of capital is currently friends and family. We are talking with a number of angel investors. If need be, we can cut spend spend by ~50% by limiting travel and part-time employee hours. The founders can also contribute capital if necessarily.
We have over 50 companies in our sales pipeline and expect to need a minimum of $50,000 to convert a significant number of those prospects into paying customers. We hope (but not guarantee) to generate $20,000 in revenue by August 2020 and $500,000 by the end of 2020. We also hope to spend approximately $600,000 by end of 2020.
Reliance on Payment Card Networks and Acquiring Processors. The Company’s business depends on its ability, its client’s ability and its client’s service providers ability to accept credit and debit cards, which ability is provided by the payment card networks, including Visa, MasterCard, American Express, and Discover. The Company may need access to parts of the payment card networks that enable acceptance of payment cards, and process API calls. As a result, the Company must rely on banks, acquiring processors, and the networks to process & validate transactions and process API calls on its behalf. These banks, acquiring processors, and networks may fail or refuse to integrate with Keyno, or process transactions adequately, or they may breach their agreements with the Company, or may refuse to renew these agreements on commercially reasonable terms. They might also take actions that degrade the functionality of the Company’s products and services, impose additional costs or requirements on the Company, or give preferential treatment to competitive products or services, including their own products and services. If the Company is unsuccessful in establishing or maintaining mutually beneficial relationships with these payment card networks, banks, and acquiring processors, the Company business may be harmed.
Risks of Third Party Fraud. The Company, its clients and its client’s service providers may be subject to potential liability for fraudulent electronic payment transactions or credits initiated by merchants or others. Examples of merchant fraud include when a merchant or other party knowingly uses a stolen or counterfeit credit, debit or prepaid card, card number, or other credentials to record a false sales transaction, processes an invalid card, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the future. Failure to effectively manage risk and prevent fraud would increase the Company’s the Company’s clients and its client’s service provider’s chargeback liability or other liability. Increases in chargebacks or other liability could have a material adverse effect on the Company’s clients business, financial condition, and results of operations, and this may have a material adverse effect on the Company
Intellectual Property. The Company’s trade secrets, trademarks, copyrights, patents, and other intellectual property rights are critical to its success. The Company relies on, and expects to continue to rely on, a combination of confidentiality, invention assignment, and license agreements with its employees, consultants, and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret, and patent rights, to protect its brand and other intellectual property rights. However, various events outside of the Company’s control may pose a threat to its intellectual property rights, as well as to its products and services. Effective protection of trademarks, copyrights, domain names, patent rights, and other intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts the Company has taken to protect its intellectual property rights may not be sufficient or effective. The Company’s intellectual property rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Similarly, the Company’s reliance on proprietary information and technology, such as trade secrets and confidential information, depends in part on agreements the Company has in place with employees and third parties that place restrictions on the use and disclosure of this intellectual property. These agreements may be insufficient or may be breached, or the Company may not enter into sufficient agreements with such individuals in the first instance, in either case potentially resulting in the unauthorized use or disclosure of its trade secrets and other intellectual property, including to our competitors, which could cause us to lose any competitive advantage resulting from this intellectual property. Individuals not subject to invention assignment agreements may make adverse ownership claims to the Company’s current and future intellectual property. There can be no assurance that the Company’s intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to the Company and that compete with its business.
Reliance on Technology. The Company may experience software defects, computer viruses, problems with cloud service providers or their systems, development delays, or breakdowns in its processing systems that could damage client relations and expose it to liability. The Company’s core business depends heavily on sophisticated software and computing systems and the reliability of its processing systems. A defect, virus, error or system outage could have a material adverse effect on the Company’s business, financial condition, and results of operations. Not only would the Company suffer damage to its reputation in the event of a defect, virus, error or system outage, but it may also be liable to third parties. Although the Company has taken steps to protect against defects, viruses, data loss and system failures, there is still risk that it may lose critical data or experience system failures, which could result in liability by the Company.
Highly Competitive Environment. Financial services, payments, and technology industries are highly competitive and the Company’s payment security solutions compete against all forms of financial services and payment system security solutions, including those that work with cash and checks, and electronic, mobile, and eCommerce payment platforms. If the Company is unable to differentiate itself from its competitors, drive value for its clients and/or effectively align its resources with its goals and objectives, it may not be able to compete effectively. The Company’s competitors may introduce their own value-added or other payment security services or solutions more effectively than the Company, which could adversely impact the Company’s growth. The Company also competes against new entrants that have developed alternative payment security systems, eCommerce payment systems, and payment systems for mobile devices. Failure to compete effectively against any of these competitive threats could have a material adverse effect on the Company. In addition, the highly competitive nature of our industry could lead to increased pricing pressure which could have a material impact on the Company’s overall business and results of operations.
Rapidly Changing Environment. Financial services, payments, and technology industries are subject to rapid technological advancements, new products and services, including mobile payment applications, evolving competitive landscape, developing industry standards, and changing client and consumer needs and preferences. New services and technologies applicable to the security needs of financial services, payments, and technology industries will continue to emerge. These changes in technology may limit the competitiveness of and demand for the Company’s products and services. Also, the Company’s client, its client’s service providers and their customers continue to adopt new technology for business and personal uses. The Company must anticipate and respond to these changes in order to remain competitive within its relative markets. In addition, failure to develop value-added services that meet the needs and preferences of our clients could have an adverse effect on the Company’s ability to compete effectively in its industry. Furthermore, clients’ and their customers’ potential negative reaction to the Company’s products and services can spread quickly through social media and damage its reputation before it has the opportunity to respond. If the Company is unable to anticipate or respond to technological changes or evolving industry standards on a timely basis, its ability to remain competitive could be materially adversely affected.
Risks of Security Breaches. Security breaches or attacks on the Company, its clients or its client’s service providers' systems may have a significant effect on the Company’s business. In order to provide its services, the Company’s clients and its client’s service providers , store, and transmit sensitive business information and personal consumer information, including, but not limited to, names, bankcard numbers, dCVV2/dCVC2, phone numbers, email addresses, home or business addresses, Social Security numbers, driver’s license numbers, and bank account numbers. Under the card network rules and various federal and state laws, the Company’s clients and its client’s service providers are responsible for information provided to them by merchants, ISOs, third-party service providers, and other agents. The confidentiality of such sensitive business information and personal consumer information that resides on the Company’s client’s and its client’s service providers’ systems is critical to their business and the Company relies on their ability to use such information to approve merchant accounts, process transactions, and protect against fraud. The Company cannot be certain that the security measures and procedures its clients or its client’s service providers it has in place to protect this sensitive data will be successful or sufficient to counter all current and emerging technology threats designed to breach its systems in order to gain access to confidential information. The increasing sophistication of cyber criminals may increase the risk of a security breach of the Company, its clients and its client’s service provider’s systems. A breach of these systems processing or storing sensitive business information or personal consumer information could lead to claims against the Company, its clients or its clients service providers, reputational damage, loss of its financial institution sponsorship, loss of clients’ and their customers’ confidence, as well as imposition of fines and damages, or potential restrictions imposed by card networks on the Company, its clients and its clients service providers ability to process transactions, all of which could have a material adverse effect on our revenues, profitability, financial condition, and future growth. In addition, as security threats continue to evolve the Company, its clients and its client’s service providers may be required to invest additional resources to modify the security of its systems, which could have a material adverse effect on the Company’s results of operations.
Dependence on Key Personnel. The Company’s success depends to a significant extent upon a limited number of members of senior management and other key employees. The loss of the service of one or more key managers or other employees could have a material adverse effect upon the Company’s business, operating results and financial condition. The Company’s success will also depend, among other factors, on the successful recruitment and retention of qualified technical and other personnel.
Control by the Company’s Majority Equity holder. SF Trust Holdings, LLC initially owned 70% of the Company’s equity interests and, together with LVOLUTION, LLC, which initially owned 30% of the Company’s equity interests, can effectively control the business and affairs of the Company, including the election of individuals to the Company’s Board of Directors, and to otherwise affect the outcome of certain actions that require equity holder approval, including the adoption of amendments to the Company’s Certificate of Formation and Operating Agreement
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
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