Cunningham Electronics Corporation (CEC) has developed patented business processes, hardware, software and know-how for the management, registration, redemption, validation, destruction, and clearing of paper coupon offers in grocery, drug and mass merchandise retail outlets as integrated at the point of sale in conjunction with utilization of a central and standards-based data facility operated by Cunningham Electronics Corporation (“System”). The System and its operations are described as follows:

Our coupon redemption System is a comprehensive solution to the myriad of problems that plague the redemption of coupons today in the retail market place. The two major problems associated with coupon redemption are mal/mis-redemptions and coupon fraud. Our System solves both of these problems. The CEC System is comprised of two major components; the CEC Data Center and the CEC Coupon Station Kiosk. These components in conjunction with the ability to converse with the retailer’s point of sale system to determine the items purchased and to post coupon transactions provide a major breakthrough in the handling of coupons.

The System utilizes the latest and most sophisticated means of software and data transmission security. Application software in the Data Center and the Coupon Station Kiosk is secured by CodeArmor™ a software protection technology developed by V.i. Laboratories, Inc. CodeArmor technology protects against intellectual property theft and malicious tampering. See their website (wwwvilabs.com) for details. All data transmissions between the components of the CEC System are transmitted utilizing a National Institute of Standards and Technology (NIST) Advanced Security Standard (AES), using a block size of 128 bits and a key size of 128 bits. This is an approved cryptographic algorithm used to protect electronic data. The defining document for this algorithm is U.S. FIPS PUB 197 (FIPS 197). These controls provide end to end System security.
 
An additional security feature of the System is the Audit Trail it provides. Each coupon transaction includes data identifying the source of the transaction. The source data includes the date, retailer, store and the store’s transaction number.

A semi-annual SAS 70 Audit of the CEC System and Operations is provided both Manufacturers and Retailers. The Audit complies with the AICPA standards SAS No. 70, as amended, and is based on the COSO and CoBIT methodologies and therefore can be incorporated for Sarbanes-Oxley compliance of third-party service providers.

The centerpiece of the System is the “Registry”. This is a comprehensive database of all coupon offers processed by the System. This database is generated in the Data Center and downloaded to each store. It provides a positive file for coupon verification and validation. The records within the Registry database contain all of the necessary information required to ensure that each coupon redeemed at a participating Retailer’s store has been verified as authentic and that all of the offer’s requirements have been met.

The Retailer’s store operation centers on the CEC Coupon Station Kiosk. The Coupon Station Kiosk is custom hardware designed to take coupon handling out of the checkout lane.
 
The Coupon Station Kiosk is designed to read, and decode barcode information printed on Manufacturer coupons, verify that the coupon is on file in the Registry, destroy the accepted coupons using a custom paper shredder, and generate a “Coupon Receipt” listing the surrendered coupons that were shredded. A barcoded number identifying the customer’s Coupon Receipt is printed on the receipt.
 
Upon submitting the Coupon Receipt at checkout (or use at a self checkout) the cashier will scan the barcoded Coupon Receipt number and give the coupon receipt back to the customer. The receipt number along with items purchased are transmitted to the Coupon Station Kiosk where the customer’s list of coupons are validated using the Coupon Registry and the items purchased. Validated coupon transactions are posted to the customer’s Sales Slip and in turn transmitted to the Data Center for reporting and clearing. Coupons that could not be validated along with the reason why they were not validated are also printed on the customer’s Sales Slip. All customer inquiries concerning coupon redemption are referred to the store’s service desk where the Coupon Receipt and the Sales Slip can be compared. Any Coupon Receipt not submitted at checkout within four hours of printing is deleted from the files and cannot be redeemed.

The primary functions of the CEC Data Center are to maintain the master copy of the Registry, acquire the Retailer’s store coupon redemption transaction data, update and maintain all coupon redemption databases and generate all reports. Participating Manufacturers are granted access to a personal password protected website that allows them internal control of their website access, to enter and edit the data for coupons they are offering.

A Clearing Account is maintained by CEC for the exchange and clearing of funds. Clearing and settlement is on a weekly cycle for coupons redeemed Sunday through Saturday. Each Monday, CEC provides a Summary Statement to Manufacturers and Retailers of the amount due for the previous week’s coupon transactions and Redemption Fees. The Manufacturer’s payment into the Clearing Account is due the following Wednesday and on Friday an ACH disbursement is released to each Retailer for their amount due. Manufacturers are required to maintain a Letter of Credit to cover payments due.

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