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Table of Contents
1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4 Potential Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Potential Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Product Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Competitive Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Target Market Segment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.2 Competition and Buying Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.3 Main Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Management Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Important Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 Long-term Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 Replay's Exit Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 2 2 3 4 4 4 5 7 7 7 7 8 8 10 11 11 12 12 13 13 13 14 14 14 15 17 18 18 18 19 20 21 22 22 26 27 28 30 30 31
2.0
3.0
4.0
5.0
6.0
7.0
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Replay Plastics
1.0 Executive Summary
The growing utilization of plastics in industrial and consumer applications, combined with increased consumer awareness surrounding solid waste recycling, has led to an increased demand for recycled plastic resins and products. One of the fastest growing types of collected plastic materials for recycling is polyethylene terephthalate ("PET") from post-consumer beverage and water bottles. Replay Plastics will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division. The Company will create a PET cleaning and refining plant located in the western United States (all 16 major North American PET recycling plants are currently located in the eastern United States or Canada). Its initial capacity will be 46 million pounds, and it will utilize postconsumer bottle feed stock presently collected in California, Oregon and Washington States, which collect over 200 million pounds per year. The Company will be vertically integrated, and use almost all of its recycled material in its Packaging Division. Any surplus materials (clean flake) produced will be sold to outside companies. The extruded sheet may then be sold to manufacturers, who will thermoform it into high-visibility packaging or use it in other high value added manufacturing operations. The strapping will be sold to companies who ship large packages or pallets, such as the lumber milling industry. The Company currently has commitments available from customers to purchase all of the product produced. MANAGEMENT Ben Braddock, President, has a 30-year history of experience encompassing all aspects of Polymer Raw Material, Plastic Conversion Methods, and Venture Development. He has founded successful ventures in the plastic converting industry, and assisted in the launch of five plastic converting manufacturing plants. Sam McGuire, Executive VP and COO, is a graduate Engineer with over 20 years experience in the post-consumer plastics recycling industry and is the inventor of the primary cleaning & refining technology used in the process for this project. He has received a patent for his technology and has been directly involved in over twenty-five major post consumer plastics recycling projects. Carl R. Smith, CFO, has over 30 years investment and merchant banking and management experience. He has assisted in raising over $500 million and served as board member and/or officer in over 40 public and private companies. FINANCIAL SUMMARY After a four month start-up period to build the recycling and packaging facilities, buy equipment, and incorporate the business, Replay Pastics will begin a quick turnaround of product. Sales will begin in May, and with over $15 Million in sales the first year, we will see a first year net profit of $2.3 Million. The owners are investing $500,000 each, for a total of $1.5 Million, and are securing an $800K long-term loan. The Company is also seeking an investment of $2,700,000 in order to begin operations. These funds will be used for the purchase of one recycling line and one manufacturing line, for the set up of the plant facilities and for working capital. An outside investor providing this amount would receive 48% equity in Replay, and receive an IRR of 69% from simple dividends alone over the next 5 years. At the end of that period, we will consider a public offering of stock or a buy-out by a related business. Recent information on private sales of similar industry companies has indicated that transactions under $25 million have averaged 5.3 times EBITDA, while transactions in the range of $25-250 million have averaged over 7 times EBITDA. Further details can be found in the Financial Plan, below.
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1.1 Objectives
1. 2. 3. Sales passing $14 million in first year, $30 million in year 2, growing to $40 million. Gross margin of 35% or more in first year, 45% in second year then 50% or more. Net profit of 13% in year one, then exceeding 20% annually starting in year two.
1.2 Mission
Replay Plastics is a manufacturing company dedicated to converting waste plastic materials into commercially viable products, utilizing environmentally friendly recycling and manufacturing methods. We intend to make enough profit to generate a significant return for our investors and to finance continued growth and continued development in quality products. We will also maintain a friendly, fair, and creative work environment, which respects diversity, new ideas and hard work.
Highlights
$45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2005 2006 2007 2008 2009
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Replay Plastics
1.4 Potential Risks
Unavailable or scarce raw material feed stock for production Replay is confident that it has secured good availability of low cost post-consumer PET bottles (feed stock) derived from post-consumer beverage bottles from California based recycling collectors, and has back up sources identified. Technology employed may be unreliable or unproven Replay will use a proven, patented technology that was developed by one of its principals for the cleaning and recycling phase. The extrusion division will employ commercially proven technology - the industry is employing unique recycled PET technology which is used by prominent eastern U.S. manufacturers of PET extrusions. There may not be a market for the Company's products The Industry-wide experience of the Management Team has allowed them to identify markets for the Company's products. Their expertise and reputations have allowed them to obtain commitments for virtually all of the planned initial production. The location may not be near enough to markets The markets that have been identified are primarily in the western U.S., which will provide a distinct advantage to the Company because of freight costs and delivery timing. The Company may not be able to attract top management The Company has assembled a world class management team with proven ability and direct experience in the Company's market segments. Company may not meet environmental standards This environmentally-favorable venture provides for the development of technically feasible and economically viable solutions to PET plastic beverage bottle recycling, as well as environmentally aware in-house re-use practices which filter and return nearly all of the process water to the production lines. The Company may not be able to sell all of its production capability Through the Senior Management's industry-wide contacts, the Company has identified potential customers and received commitments for all of the production potential of the initial facility.
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Replay Plastics
2.0 Company Summary
The Company will capitalize on the opportunities in the recycled resin and packaging markets through two main divisions: a Recycling Division and a Packaging Division. Recycling Division Using a patented process, the Company will create a PET cleaning and refining plant located in the western United States; we have chosen this region because all 16 major North American PET recycling plants are currently located in the eastern United States or Canada, despite western states' favorable recycling attitudes among consumers. Its initial annual capacity will be 46 million pounds and it will utilize bottle feed stock from California, Oregon and Washington States, which collect over 200,000,000 pounds per year. The Company will become totally vertically integrated, and use all or almost all of its recycled material in its Packaging Division. Any surplus material produced will be sold to outside companies. Packaging Division We will create a plant (actual facilities to be shared with the Recycling Division) to manufacture extruded plastic roll stock sheet or high-strength strapping, employing state-of-the-art technology developed to utilize recycled PET resin. The extruded sheet will be primarily sold to thermoformers who will convert it into high visibility packaging, as well as laminators and fabricators. The strapping will be sold to commercial users for use as package or pallet strapping. The Company currently has commitments from customers to purchase all of the initial production capacity. Excess flake will be sold to outside customers.
Replay Plastics
2.2 Start-up Summary
Our start-up expenses are budgeted at $210,000, which is mostly for on-site contractor services during facility preparation. $50,000 has been set aside for legal and accounting, $25,000 for special consulting that may be required during start up and $50,000 each for local engineering and lab equipment and supplies. $30,000 has been set aside as a contingency for the start up period. Our largest Start-up Requirement is the building of the recycling and extrusion facility. Its final value at completion is listed below as a long-term asset of $3,620,000 (excluding expensed items like consultants and engineering listed above). Aside from the building itself, we need $25,000 in machinery and fixtures, $500,000 of inventory (plastic bottle feed stock) and cash to cover us through the initial year.
Table: Start-up Start-up Requirements Start-up Expenses Legal & Accounting Stationery etc. Consultants Lab Equipment Local Engineering Misc Start up Other Total Start-up Expenses Start-up Assets Cash Required Cash Required Cash Required Start-up Inventory Other Current Assets Long-term Assets Total Assets Total Requirements
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Replay Plastics
Table: Start-up Funding Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities Total Liabilities Capital Planned Investment Founders Investor Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital
$0 $800,000 $0 $0 $800,000
$4,790,000 $5,000,000
Start-up
$5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Expenses Assets Investment Loans
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Replay Plastics
3.0 Products
Replay Plastics will utilize two processes in the same facility to produce: Cleaned and recycled plastic PET flake (RPET), recovered from post-consumer beverage bottles and manufacturing waste produced by its sheet customers Extruded roll stock sheet PET. Extruded PET high-strength strapping for securing large packages or pallet loads; each using 100% RPET produced in-house
3.3 Sourcing
In excess of 200,000,000 pounds of post-consumer PET beverage bottles are collected and available as feed stock for manufacturers who can re-process this material into commercial products. The Company has excellent relations with the firms and associations that collect and distribute these materials and has been assured that its requirements will be available for the foreseeable future. The Company has entered negotiations with a California based source of post-consumer bottles and is confident that sufficient volumes are available on a contract basis from this source to satisfy its requirements. In addition, the Company intends to purchase production Page 7
Replay Plastics
waste from its sheet customers and blend it into its feed stock. Currently, the majority of the post-consumer PET bottles collected in California, Oregon and Washington are exported to China. The Chinese have absorbed the amounts surplus to the use in North America. Their interest has kept the industry in the position of being able to maintain a steady price range for this bottle stock. A significant percentage of all sales of such bottle stock are managed by Plastics Recycling Corporation of California (PRCC), an industry funded marketing agency which operates similarly to a co-operative. They accept bids from potential buyers on behalf of the firms which act as "consolidators," which accumulate stocks from the smaller, individual bottle-recycling depots. Some amount of the available stocks are regularly bought by recyclers in eastern North America who focus on the carpet manufacturers who use RPET resin in their process, but the high cost of transport from the western U.S. makes eastern sources more desirable. Replay has a good relationship with Company B, one of the larger consolidators in California. Company B has indicated a desire to contract to supply Replay with all of its raw material needs. They prefer to deal with a local consumer such as Replay, rather than the uncertainty and extra preparation requirements of the export market. There are other sources of post-consumer feed stock known to Replay, and we are confident that we will have sufficient materials available for our production needs.
3.4 Technology
Sam McGuire, a key member of our Management team, is one of the original innovators of cleaning and refining technology for post-consumer PET, and we will be utilizing his patented process in our recycling facility. Sam has worked in the establishment and operation of facilities employing similar technologies over the last several years. On the manufacturing side, Management has been an integral part of the advancement of industry practices over the last twenty years or so, and includes in their knowledge base most, if not all, of the state-of-the-art available equipment and manufacturing techniques.
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Replay Plastics
Markets and uses for recycled plastics are rapidly expanding. Plastic containers are being collected at the curb for recycling in nearly 500 communities, representing more than 4 million households. U.S. demand for recycled plastic will continue to expand and new markets will develop as technologies permit the efficient segregation and reprocessing of high-purity resins. Improved quality of resins, environmental issues and higher prices for virgin resin will contribute to growth. Packaging is expected to be the largest market segment for recycled plastics, with sheet and lumber following. Surveys indicate that Americans are increasingly willing to collect and separate discarded packages, foregoing a degree of convenience to make products more disposable, and even paying a premium for a recycled item. Increasingly, communities are refusing to consider incineration until every effort is made first to recycle; public sentiment is strongly in favor of products that can be recycled or are made of recycled materials. In recent years, the household recycling rate of PET bottles has more than doubled to 30% of all PET soft drink bottles sold. In fact, PET's recycling rate is the fastest growing among all beverage containers. The future of PET recycling is even brighter than it has been in the past. PET intrinsic scrap value is second only to aluminium among container materials. The plastics industry has launched a research and development program aimed at increasing PET recycling. According to the U.S. Environmental Protection Agency (EPA), plastic soft drink bottles account for approximately 2% of the solid waste discarded in America. The EPA has set a national goal to recycle 25% of the municipal solid waste stream and the industry is committed to achieving its share of that important goal. The recycling industry intends to accelerate the rate of plastic recycling as part of its commitment to develop solutions to the solid waste problem. Industry analysts have projected that 50% of all PET containers will be recycled by the year 2007. More plastics will be recycled annually than any other recyclable material. Replay believes a significant answer to America's waste problem lies in creating high value, recycled thermoformable sheet and other extruded products for the packaging market. Although more than 200 million pounds of PET post-consumer materials are collected in the western United States each year, there is presently no local cleaning and refining facility converting the bottles into resins suitable for re-manufacturing. Originally, recycled PET (RPET) was used primarily in the carpet fiber industry, which is located along the eastern seaboard. The early development of the RPET industry was therefore focused in the eastern USA, with eastern states adopting the first bottle deposit laws that resulted in collection of postconsumer bottles that can be recycled. Recently, California, Oregon and Washington have adopted bottle deposit programs, and accumulation of recyclable materials in those states has begun. With all of the cleaning and recycling plants and the majority of consumers traditionally located in the eastern part of the country, development of consumers of recycled flake and down-line products, such as film and sheet, has been slow to develop in the West. A strong demand for post-consumer bottles from Asia has prevented the buildup of inventories and reduced the pressure for the collection industry to find or develop western markets. There is currently no independent extrusion plant of recycled polyterephthalate (PET) sheet in the western United States or Canada that services the roll stock requirements of major custom and proprietary formers. With the development of the recycling industry for PET starting in the eastern part of the country, and the preponderance of consumers of sheet there as well, development of independent extrusion facilities using RPET has been slow to develop. It appears that in order to attract such companies, local sources of RPET would have to available. While there are customers in the West for the products, contracting a supply and shipping it from the East makes the venture unattractive. Our founders recognize that an opportunity exists and propose a vertically integrated conversion facility that will employ state-of-the-art technologies to produce extruded sheet and high strength strapping from 100% recycled PET post-consumer bottle stock, cleaned and refined in our own facility. Page 9
Replay Plastics
4.1 Market Segmentation
The primary market can be broken down as follows. Consumers of PET in: California: 62 Oregon: 8 Washington: 9 Consumers of HDPE in: California: 73 Oregon: 10 Washington: 12 All information is based on industry research,and data provided by the American Plastics Council.
Table: Market Analysis Market Analysis 2005 Potential Customers Western PET Buyers Western HDPE Buyers Total Growth 1% 1% 0.57% 79 95 174 2006 80 95 175 2007 81 95 176 2008 82 95 177 2009 83 95 178 CAGR 1.24% 0.00% 0.57%
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Replay Plastics
4.2 Target Market Segment Strategy
The Company has chosen its target markets because recycled PET (RPET) is in high demand as flake resin by converters, as roll stock sheet used to produce high visibility packaging and as high strength strapping for the lumber industry. Sales are price-sensitive, so that proximity to markets and feed stock source provide a competitive edge. Replay Plastics identified an opportunity to take advantage of both circumstances in the western United States. RPET Flake Total market demand is reported as 1.2 billion pounds per year. Since only 800 million pounds are processed in the USA, consumers are forced to look at wide spec virgin PET (virgin resin that is outside of spec but still usable) which is normally sold at a discount to virgin prices, but still higher than recycled (RPET) pricing. Some manufacturers are also forced to import materials from Mexico, India and South America. Some converters are being forced to use more expensive virgin resin. The current pricing for virgin resin is $0.65-0.73 per lb. and $0.42-.53 for RPET flake. The spread between the two has traditionally been maintained at approximately $0.20 per lb. PET Film & Sheet The total reported market of extruded film and sheet is 872 million pounds, of which identified industry usage of RPET is 160 million pounds. The reported market demand (to replace virgin PS, PVC and PET) if RPET was available is estimated at 1 billion pounds. Current pricing for RPET sheet is $0.70-0.79 per lb. RPET Strapping The total reported domestic plastic strapping market is 240 million pounds. Of this market, industry usage of virgin polypropylene is 132 million pounds and of PET is 108 million pounds. It is generally accepted in the industry that less expensive strapping made from RPET could not only take over the polypropylene strapping market, but convert as much of the much larger and more expensive steel strapping market as RPET strapping was available. Current pricing for RPET strapping is $0.90 -1.08 per lb.
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Replay Plastics
4.3.1 Barriers to Entry
Limited Supply of raw material Recycled PET (RPET) resins are in high demand, and demand is currently under-supplied. Many manufacturers are delaying expansion because of uncertainty of supply. Entrants would have to consider sourcing post-consumer or post-industrial waste and clean and refine it rather than attempting to purchase flake on the open market. Even at that, there is not an over-abundance of post-consumer or post industrial material in the marketplace. Equipment costs are high and industry specific, resulting in a high exit cost. Because of the scarcity of RPET flake, entrants may be forced to establish cleaning and refining facilities for post-consumer bottles. The equipment required is costly and very industry specific. It would not easily be resold as a system. There is a market for used extrusion equipment, which normally sees 60-70% of new value being realized. Vertical integration is an important consideration and difficult to accomplish successfully. Because of the scarcity of RPET resin, and to maximize profit potential, entrants must consider a two-stage production facility. Cleaning and refining post-consumer bottles and extruding the resulting flake into commercial products requires a management team such as Replay has, with a broad range of expertise, experience, industry contacts and knowledge in both areas. Firm contracts for supply and sales. Replay Management's industry contacts will allow us to secure contracts for both supply of feed stock and sale of finished goods. Freight is a major cost of operations; proximity to source of supply and markets is crucial. Hauling plastic materials is expensive so entrants will have to consider establishing facilities close to materials and markets. Entrants with existing operations would have to consider new separate facilities in many cases, reducing economies of scale and making management more difficult.
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Replay Plastics
4.3.3 Main Competitors
Currently in the western United States, there is no direct competition for cleaning and refining post-consumer or post-industrial PET. Nor is there any non-captive extrusion of roll stock sheet. The extruded sheet required by thermoformers is currently supplied by: Advance Extrusion, Becker, MN Kama, Pittsburgh, PA Plasti-Shell Packaging, Gonzales, LA Petco, Montreal, Canada Klockner, VA
In a news release dated September 10, 2004, Itec Environmental Group, Inc. announced their intention to open a PET and High Density Polyethelene (HDPE) recycling operation in Riverbank, CA (east of San Francisco). The news release states that the Company's new and yet unproven technology lets it work with bottle streams that others have to reject as too dirty. This Company is familiar to our Management, and is not considered a significant factor in any of our markets.
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Replay Plastics
5.2 Competitive Edge
Replay Plastics' competitive edge rests with its proximity to its target markets, as well as the industry knowledge, reputation and contacts of its senior management. Their many years of direct experience have led them to identify this unique opportunity and put together the technology and sources to take advantage of it. Their reputation in the specific market segment will result in the achievement of long-term commitments for our production.
As stated, Ben Braddock, himself, is a strong marketing individual. Over his 30 years of experience in the packaging and converting industry he has developed relationships with a Page 14
Replay Plastics
number of clients that are buyers of packaging materials. He has consulted to many and has been personally responsible for sourcing raw materials and converted sheet for customers in this industry. Custom formers, extruders, laminators, and end user markets will be called upon by Ben and the sales agent team to promote and generate demand from those that buy and use RPET packaging materials.
Table: Sales Forecast Sales Forecast 2005 Unit Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Total Unit Sales Unit Prices Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Total Sales Direct Unit Costs Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Direct Cost of Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Subtotal Direct Cost of Sales 20,533,600 8,341,400 0 28,875,000 2005 $0.45 $0.70 $0.00 2006 12,833,900 28,874,600 4,491,500 46,200,000 2006 $0.47 $0.74 $0.95 2007 0 30,800,000 15,400,000 46,200,000 2007 $0.50 $0.77 $1.00 2008 0 30,800,000 15,400,000 46,200,000 2008 $0.52 $0.81 $1.05 2009 0 30,800,000 15,400,000 46,200,000 2009 $0.55 $0.85 $1.10
$9,240,120 $6,064,018 $0 $0 $0 $5,838,980 $21,222,831 $23,769,900 $24,958,395 $26,206,315 $0 $4,266,925 $15,400,000 $16,170,000 $16,940,000 $15,079,100 $31,553,774 $39,169,900 $41,128,395 $43,146,315 2005 $0.27 $0.27 $0.00 2006 $0.28 $0.28 $0.28 2007 $0.29 $0.29 $0.30 2008 $0.31 $0.31 $0.31 2009 $0.32 $0.32 $0.33
2008 2009 $5,441,404 $3,571,033 $0 $0 $0 $2,210,471 $8,034,357 $8,998,605 $9,448,535 $9,920,962 $0 $1,257,620 $4,620,000 $4,774,000 $5,082,000 $7,651,875 $12,863,010 $13,618,605 $14,222,535 $15,002,962
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Replay Plastics
Sales Monthly
$2,500,000
$2,000,000
$1,500,000
$1,000,000
Extruded Strapping
$500,000
$0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales by Year
$45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2005 2006 2007 2008 2009
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5.5 Milestones
Because the Company is a start-up, our milestones will surround the establishment of continuing facilities, confirmation of sourcing and sales contracts, equipment acquisition and installation, staffing and training, and initiating production.
Table: Milestones Milestones Milestone Order Equipment Secure Location Secure Orders/Contracts Site Preparation Hire Plant Manager Receive Equipment Hire & Train Skilled Labor Begin Production Hire & Train Unskilled Labor Install Equipment Totals Start Date 1/2/2005 1/2/2005 1/2/2005 2/1/2005 2/28/2005 2/28/2005 4/15/2005 5/1/2005 4/30/2005 4/1/2005 End Date 1/31/2005 1/31/2005 1/31/2005 2/25/2005 3/15/2005 3/31/2005 4/30/2005 5/1/2005 5/15/2005 4/30/2005 Manager Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt Senior Mgmnt
Milestones
Order Equipment Secure Location Secure Orders/Contracts Site Preparation Hire Plant Manager Receive Equipment Hire & Train Skilled Labor Begin Production Hire & Train Unskilled Labor Install Equipment Feb Mar Apr May
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6.0 Management Summary
The three founders form the senior management group. Several qualified candidates have been identified for the position of plant manager. The balance of the employees will be hired and trained during the equipment purchase and installation phase (first five months after funding). Because the sales management function will be the responsibility of Ben Braddock, with projected use of familiar sales agents, there are no plans for additional inside sales people or managers.
Ben Braddock and Sam McGuire have agreed to remain with the Company for the foreseeable future. In addition to their respective duties, they will each become totally familiar with all aspects of Senior Management, and be in a position to take over for each other should the need arise. Carl Smith has agreed to remain with the Company for a minimum of two years, and will assume the responsibility of locating and training a replacement before the end of his employment.
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companies; managing the design and construction of medical waste treatment and plastics recycling facilities and continuing business and technical support to the resulting joint venture businesses throughout the world. In the past five years, Sam has successfully completed projects in Brazil, Argentina, South Africa, Japan and Australia totaling over $100 Million in investment. Carl R. Smith, CFO, has over 30 years of investment, merchant banking and management experience. He has assisted in raising over $500 million and served as board member and/or officer in over 40 public and private companies.
Carl is the former CEO of E Corporation, Ltd., a company manufacturing plastic injection molded products. Prior to 1993 he was a partner in two independent investment banking firms, Company F and Company G. During his time at Company G, more than $450 million was raised for client companies, and the assets grew to $50 million. Prior to forming Company G, Carl was a principal and manager of several operating companies in industries such as plastics, mining and oil and gas exploration.
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Table: Personnel Personnel Plan 2005 Production Personnel Shift Supervisor Maintainence Techs Skilled Recycle Plant Labor Unskilled Recycle Plant Labor Extruder Operator (full time) Extruder Operator (part time) Production Assistant (full time) Production Assistant (part time) Subtotal Sales and Marketing Personnel commission-basis - see P&L Subtotal General and Administrative Personnel President Vice Pres COO CFO Plant Manager Accountant Clerk Clerk Clerk Shipper Receiver Subtotal Total People Total Payroll $129,169 $116,664 $350,000 $164,066 $87,504 $25,522 $62,504 $18,228 $0 $953,657 2006 $210,000 $183,750 $551,250 $295,513 $206,719 $68,906 $147,656 $49,219 $0 $1,713,013 2007 $220,500 $192,938 $578,813 $310,078 $289,406 $96,469 $206,719 $68,906 $0 $1,963,829 2008 $231,525 $202,585 $607,754 $325,582 $303,876 $101,292 $217,055 $72,351 $0 $2,062,020 2009 $243,101 $212,714 $638,141 $341,861 $319,070 $106,357 $227,908 $75,969 $0 $2,165,121
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$72,000 $67,200 $67,200 $63,000 $29,200 $20,800 $15,600 $0 $27,200 $362,200 51 $1,315,857
$110,000 $100,000 $100,000 $88,200 $45,938 $32,813 $32,813 $32,813 $42,840 $585,417 57 $2,298,430
$121,000 $110,000 $110,000 $92,610 $48,235 $34,454 $34,454 $34,454 $44,982 $630,189 69 $2,594,018
$133,100 $121,000 $121,000 $97,241 $50,647 $36,176 $36,176 $36,176 $47,231 $678,747 69 $2,740,767
$146,410 $133,100 $133,100 $102,103 $53,179 $37,985 $37,985 $37,985 $49,593 $731,440 69 $2,896,561
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Table: Investment Analysis Investment Analysis Start Initial Investment Investment Dividends Ending Valuation Combination as Income Stream Percent Equity Acquired Net Present Value (NPV) Internal Rate of Return (IRR) Assumptions Discount Rate Valuation Earnings Multiple Valuation Sales Multiple Investment (calculated) Dividends Calculated Earnings-based Valuation Calculated Sales-based Valuation Calculated Average Valuation $2,700,000 $0 $0 ($2,700,000) 48% $5,263,507 69% 10.00% 10 2 $4,200,000 $0 $0 $23,230,000 $30,160,000 $26,695,000 10 2 $0 $3,000,000 $79,080,000 $63,110,000 $71,095,000 10 2 $0 $8,000,000 $116,890,00 0 $78,340,000 $97,615,000 10 2 $0 $10,000,000 $122,930,00 0 $82,260,000 $102,595,00 0 10 2 $0 $10,000,000 $127,980,00 0 $86,290,000 $107,135,00 0 2005 $0 $0 $0 $0 2006 $0 $3,000,000 $0 $3,000,000 2007 $0 $8,000,000 $0 $8,000,000 2008 $0 $10,000,000 $0 $10,000,000 2009 $0 $10,000,000 $61,430,400 $71,430,400
Table: General Assumptions General Assumptions Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other 2005 1 12.00% 8.00% 30.00% 0 2006 2 12.00% 8.00% 30.00% 0 2007 3 12.00% 8.00% 30.00% 0 2008 4 12.00% 8.00% 30.00% 0 2009 5 12.00% 8.00% 30.00% 0
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7.2 Break-even Analysis
With fixed costs of about $184,000 per month in the first year, and variable unit costs at roughly 52% of prices, we need to produce and sell 715,963 units per month to break even. We will far exceed the break-even point in our first full month of sales.
Table: Break-even Analysis Break-even Analysis Monthly Units Break-even Monthly Revenue Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost 715,963 $373,890
Break-even Analysis
$100,000 $50,000 $0 ($50,000) ($100,000) ($150,000) ($200,000) 0 200000 400000 600000 800000 1000000
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Table: Profit and Loss Pro Forma Profit and Loss Sales Direct Costs of Goods Production Payroll Packaging Sales Commission Cost of Goods Sold Gross Margin Gross Margin % Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll Advertising/Promotion Travel Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses General and Administrative Payroll Sales and Marketing and Other Expenses Depreciation Payroll Burden Office Equipment Rent Office Supplies/Expense Travel & Entertainment Leased Vehicles Utilities Insurance Misc Plant & Maintainence Supplies Other Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll Misc (contingency) Prof Fees ( Includ legal & accounting) Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred Net Profit Net Profit/Sales 2005 2006 2007 2008 2009 $15,079,100 $31,553,774 $39,169,900 $41,128,395 $43,146,315 $7,651,875 $12,863,010 $13,618,605 $14,222,535 $15,002,962 $953,657 $1,713,013 $1,963,829 $2,062,020 $2,165,121 $150,791 $315,538 $391,699 $411,284 $431,463 $733,102 $1,501,893 $1,871,678 $1,965,261 $2,063,524 -------------------------------------------------------$9,489,425 $16,393,454 $17,845,811 $18,661,100 $19,663,071 $5,589,676 $15,160,320 $21,324,090 $22,467,295 $23,483,244 37.07% 48.05% 54.44% 54.63% 54.43%
$362,200 $0 $241,740 $394,757 $6,000 $12,000 $16,000 $18,000 $678,560 $24,000 $60,000 $0 -----------$1,813,257 12.02% $0 $90,663 $300,000 -----------$390,663 2.59% -----------$2,209,919
$585,417 $0 $405,922 $689,529 $6,000 $15,000 $30,000 $25,000 $1,419,920 $25,000 $63,000 $0 -----------$3,264,788 10.35% $0 $163,239 $330,000 -----------$493,239 1.56% -----------$3,808,027
$630,189 $0 $562,908 $778,205 $8,000 $20,000 $35,000 $30,000 $1,762,646 $25,000 $66,150 $0 -----------$3,918,098 10.00% $0 $195,905 $363,000 -----------$558,905 1.43% -----------$4,577,003
$678,747 $0 $562,908 $822,230 $8,000 $22,500 $40,000 $30,000 $1,850,778 $25,000 $69,458 $0 -----------$4,109,621 9.99% $0 $205,481 $399,300 -----------$604,781 1.47% -----------$4,864,402
$731,440 $0 $562,908 $868,968 $8,000 $25,000 $45,000 $30,000 $1,941,584 $25,000 $72,930 $0 -----------$4,310,831 9.99% $0 $215,542 $439,230 -----------$654,772 1.52% -----------$5,165,602
$3,379,756 $11,352,293 $16,747,087 $17,602,893 $18,317,642 $60,568 $54,464 $48,064 $41,664 $35,264 $995,756 $3,389,349 $5,009,707 $5,268,369 $5,484,713 $2,323,432 15.41% $7,908,480 $11,689,316 $12,292,860 $12,797,664 25.06% 29.84% 29.89% 29.66%
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Profit Monthly
$400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 ($50,000) ($100,000) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Profit Yearly
$14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 2005 2006 2007 2008 2009
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$20,000,000
$15,000,000
$10,000,000
$5,000,000
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7.4 Projected Cash Flow
Cash flow is predicted to turn positive in the sixth month of operations, which is the tenth month after funding. The Cash Flow table shows our planned repayment of the long-term loan, as well as the purchase of new extrusion equipment in the first two year of the plan. Dividends to founders and the outside investor are shown near the bottom of the table.
Table: Cash Flow Pro Forma Cash Flow 2005 Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance 2006 2007 2008 2009
$0
$0
$0
$0
$0
$2,594,018 $2,740,767 $2,896,561 $30,479,616 $27,164,111 $26,688,326 $33,073,634 $29,904,878 $29,584,887 $0 $0 $0 $80,000 $0 $0 $0 $80,000 $0 $0 $0 $80,000
$0 $0 $0 $0 $0 $0 $8,000,000 $10,000,000 $10,000,000 $41,153,634 $39,984,878 $39,664,887 $885,718 $7,847,619 $3,215,806 $11,063,425
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Cash
$2,000,000 $1,500,000 $1,000,000 $500,000 $0 ($500,000) ($1,000,000) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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Table: Balance Sheet Pro Forma Balance Sheet 2005 Assets Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth $990,212 $1,984,881 $510,125 $25,000 $3,510,217 $5,211,000 $241,740 $4,969,260 $8,479,477 2005 $9,948,155 $4,153,463 $857,534 $25,000 $14,984,152 $8,440,000 $647,662 $7,792,338 $22,776,490 2006 $6,961,901 $5,155,983 $907,907 $25,000 $13,050,791 $8,440,000 $1,210,570 $7,229,430 $20,280,221 2007 $7,847,619 $5,413,782 $953,302 $25,000 $14,239,704 $8,440,000 $1,773,478 $6,666,522 $20,906,226 2008 $11,063,425 $5,679,403 $1,000,075 $25,000 $17,767,904 $8,440,000 $2,336,386 $6,103,614 $23,871,518 2009 2006 2007 2008 2009
$1,445,246 $0 $0 $1,445,246 $720,800 $2,166,046 $4,200,000 ($210,000) $2,323,432 $6,313,432 $8,479,477 $6,313,432
$10,913,778 $0 $0 $10,913,778 $640,800 $11,554,578 $4,200,000 ($886,568) $7,908,480 $11,221,912 $22,776,490 $11,221,912
$4,808,194 $0 $0 $4,808,194 $560,800 $5,368,994 $4,200,000 ($978,088) $11,689,316 $14,911,228 $20,280,221 $14,911,228
$3,221,338 $0 $0 $3,221,338 $480,800 $3,702,138 $4,200,000 $711,228 $12,292,860 $17,204,088 $20,906,226 $17,204,088
$3,468,966 $0 $0 $3,468,966 $400,800 $3,869,766 $4,200,000 $3,004,088 $12,797,664 $20,001,752 $23,871,518 $20,001,752
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Table: Ratios Ratio Analysis 2005 Sales Growth Percent of Total Assets Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Percent of Sales Sales Gross Margin Selling, General & Administrative Expenses Advertising Expenses Profit Before Interest and Taxes Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets Additional Ratios Net Profit Margin Return on Equity Activity Ratios Accounts Receivable Turnover Collection Days Inventory Turnover Accounts Payable Turnover Payment Days Total Asset Turnover Debt Ratios Debt to Net Worth Current Liab. to Liab. Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth Dividend Payout 0.00% 2006 109.26% 2007 24.14% 2008 5.00% 2009 4.91% Industry Profile 9.27%
23.41% 6.02% 0.29% 41.40% 58.60% 100.00% 17.04% 8.50% 25.54% 74.46%
18.24% 3.76% 0.11% 65.79% 34.21% 100.00% 47.92% 2.81% 50.73% 49.27%
25.42% 4.48% 0.12% 64.35% 35.65% 100.00% 23.71% 2.77% 26.47% 73.53%
25.90% 4.56% 0.12% 68.11% 31.89% 100.00% 15.41% 2.30% 17.71% 82.29%
23.79% 4.19% 0.10% 74.43% 25.57% 100.00% 14.53% 1.68% 16.21% 83.79%
24.83% 11.53% 32.03% 68.39% 31.61% 100.00% 26.62% 25.26% 51.88% 48.12%
n.a n.a
0.36 0.90
0.22 0.87
0.19 0.90
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7.7 Long-term Plan
The plan calls for maximum production rate for flake in the sixth month from funding. Approximately one third of that production will be converted into extruded sheet beginning approximately at the same time. A second sheet extruder, which will also consume one third of the flake produced, is planned to be added at the end of year one, coming on line mid year two. A third extruder, which is planned to produce high-strength strapping, is expected to come on line late in year two. By the beginning of year three, it is expected that all of the 46,200,000 lbs. of RPET cleaned & recycled annually will be converted into extruded products. Up until this time, excess flake produced will be sold to other extruder companies. The plan assumes a 5% increase in the sales price of all products and a 5% increase in the cost of raw materials and labor in each of years 2 through 5. The result of the above is rapid growth in revenue and profit through year three, and moderate growth in years four and five, assuming no expansion of capacity during that time.
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Appendix
Appendix Table: Sales Forecast Sales Forecast Jan Unit Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Total Unit Sales Unit Prices Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Total Sales Direct Unit Costs Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Direct Cost of Sales Recycled Flake PET Extruded Roll Stock Sheet Extruded Strapping Subtotal Direct Cost of Sales 0% 0% 0% 0 0 0 0 Jan $0.45 $0.70 $0.95 Feb 0 0 0 0 Feb $0.00 $0.70 $0.95 Mar 0 0 0 0 Mar $0.00 $0.70 $0.95 Apr 0 0 0 0 Apr $0.00 $0.70 $0.95 May 1,925,000 0 0 1,925,000 May $0.45 $0.70 $0.95 Jun 3,208,400 641,600 0 3,850,000 Jun $0.45 $0.70 $0.95 Jul 2,566,700 1,283,300 0 3,850,000 Jul $0.45 $0.70 $0.95 Aug 2,566,700 1,283,300 0 3,850,000 Aug $0.45 $0.70 $0.95 Sep 2,566,700 1,283,300 0 3,850,000 Sep $0.45 $0.70 $0.95 Oct 2,566,700 1,283,300 0 3,850,000 Oct $0.45 $0.70 $0.95 Nov 2,566,700 1,283,300 0 3,850,000 Nov $0.45 $0.70 $0.95 Dec 2,566,700 1,283,300 0 3,850,000 Dec $0.45 $0.70 $0.95
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$0 $0 $0 $0
$510,125 $0 $0 $510,125
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Appendix
Appendix Table: Personnel Personnel Plan Jan Production Personnel Shift Supervisor Maintainence Techs Skilled Recycle Plant Labor Unskilled Recycle Plant Labor Extruder Operator (full time) Extruder Operator (part time) Production Assistant (full time) Production Assistant (part time) Subtotal Sales and Marketing Personnel commission-basis - see P&L Subtotal General and Administrative Personnel President Vice Pres COO CFO Plant Manager Accountant Clerk Clerk Clerk Shipper Receiver Subtotal Total People Total Payroll $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Feb $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Mar $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Apr $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 May $12,500 $14,583 $43,750 $0 $10,938 $0 $7,813 $0 $0 $89,584 Jun $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Jul $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Aug $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Sep $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Oct $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Nov $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439 Dec $16,667 $14,583 $43,750 $23,438 $10,938 $3,646 $7,813 $2,604 $0 $123,439
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
$8,000 $7,500 $7,500 $7,000 $3,650 $2,600 $2,600 $0 $3,400 $42,250 51 $165,689
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Appendix
Appendix Table: General Assumptions General Assumptions Plan Month Current Interest Rate Long-term Interest Rate Tax Rate Other Jan 1 12.00% 8.00% 30.00% 0 Feb 2 12.00% 8.00% 30.00% 0 Mar 3 12.00% 8.00% 30.00% 0 Apr 4 12.00% 8.00% 30.00% 0 May 5 12.00% 8.00% 30.00% 0 Jun 6 12.00% 8.00% 30.00% 0 Jul 7 12.00% 8.00% 30.00% 0 Aug 8 12.00% 8.00% 30.00% 0 Sep 9 12.00% 8.00% 30.00% 0 Oct 10 12.00% 8.00% 30.00% 0 Nov 11 12.00% 8.00% 30.00% 0 Dec 12 12.00% 8.00% 30.00% 0
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Appendix
Appendix Table: Profit and Loss Pro Forma Profit and Loss Sales Direct Costs of Goods Production Payroll Packaging Sales Commission Cost of Goods Sold Gross Margin Gross Margin % Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll Advertising/Promotion Travel Total Sales and Marketing Expenses Sales and Marketing % General and Administrative Expenses General and Administrative Payroll Sales and Marketing and Other Expenses Depreciation Payroll Burden Office Equipment Rent Office Supplies/Expense Travel & Entertainment Leased Vehicles Utilities Insurance Misc Plant & Maintainence Supplies Other Total General and Administrative Expenses General and Administrative % Other Expenses: Other Payroll Misc (contingency) Prof Fees ( Includ legal & accounting) Total Other Expenses Other % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Jan $0 $0 $0 $0 $0 -----------$0 $0 0.00% Feb $0 $0 $0 $0 $0 -----------$0 $0 0.00% Mar $0 $0 $0 $0 $0 -----------$0 $0 0.00% Apr $0 $0 $0 $0 $0 -----------$0 $0 0.00% May $866,250 $510,125 $89,584 $8,663 $43,313 -----------$651,684 $214,566 24.77% Jun $1,892,900 $1,020,250 $123,439 $18,929 $93,041 -----------$1,255,659 $637,241 33.66% Jul $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46% Aug $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46% Sep $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46% Oct $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46% Nov $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46% Dec $2,053,325 $1,020,250 $123,439 $20,533 $99,458 -----------$1,263,680 $789,645 38.46%
$5,600 $0 30% $20,145 $1,680 $500 $1,000 $0 $1,500 $0 $2,000 $5,000 $0 -----------$37,425 0.00%
$5,600 $0 $20,145 $1,680 $500 $1,000 $0 $1,500 $0 $2,000 $5,000 $0 -----------$37,425 0.00%
$5,600 $0 $20,145 $1,680 $500 $1,000 $0 $1,500 $0 $2,000 $5,000 $0 -----------$37,425 0.00%
$12,600 $0 $20,145 $3,780 $500 $1,000 $0 $1,500 $0 $2,000 $5,000 $0 -----------$46,525 0.00%
$39,650 $0 $20,145 $38,770 $500 $1,000 $2,000 $1,500 $38,981 $2,000 $5,000 $0 -----------$149,546 17.26%
$39,650 $0 $20,145 $48,927 $500 $1,000 $2,000 $1,500 $85,181 $2,000 $5,000 $0 -----------$205,902 10.88%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
$42,250 $0 $20,145 $49,707 $500 $1,000 $2,000 $1,500 $92,400 $2,000 $5,000 $0 -----------$216,501 10.54%
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Appendix
Taxes Incurred Net Profit Net Profit/Sales ($21,026) ($49,060) 0.00% ($21,012) ($49,029) 0.00% ($20,999) ($48,998) 0.00% ($23,853) ($55,656) 0.00% $8,079 $18,850 2.18% $117,142 $273,332 14.44% $159,538 $372,255 18.13% $159,551 $372,286 18.13% $159,564 $372,317 18.13% $159,578 $372,348 18.13% $159,591 $372,378 18.14% $159,604 $372,409 18.14%
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Appendix
Appendix Table: Cash Flow Pro Forma Cash Flow Jan Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $0 $0
$0 $28,875 $28,875
$0 $900,472 $900,472
$0 $1,898,248 $1,898,248
$0 $2,053,325 $2,053,325
$0 $2,053,325 $2,053,325
$0 $2,053,325 $2,053,325
$0 $2,053,325 $2,053,325
$0 $2,053,325 $2,053,325
0.00%
$0 $0 $0 $0 $0 $0 $0 $0 Jan
$0 $0 $0 $0 $0 $0 $0 $0 Feb
$0 $0 $0 $0 $0 $0 $0 $0 Mar
$0 $0 $0 $0 $0 $0 $0 $0 Apr
$0 $0 $0 $0 $0 $0 $0 $28,875 May
$0 $0 $0 $0 $0 $0 $0 $900,472 Jun
$0 $0 $0 $0 $0 $0 $0 $1,898,248 Jul
$0 $0 $0 $0 $0 $0 $0 $2,053,325 Aug
$0 $0 $0 $0 $0 $0 $0 $2,053,325 Sep
$0 $0 $0 $0 $0 $0 $0 $2,053,325 Oct
$0 $0 $0 $0 $0 $0 $0 $2,053,325 Nov
$0 $0 $0 $0 $0 $0 $0 $2,053,325 Dec
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Appendix
Appendix Table: Balance Sheet Pro Forma Balance Sheet Jan Assets Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Starting Balances Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$22,538 $0 $0 $22,538 $793,400 $815,938 $4,200,000 ($210,000) ($49,060) $3,940,940 $4,756,878 $3,940,940
$22,508 $0 $0 $22,508 $786,800 $809,308 $4,200,000 ($210,000) ($98,089) $3,891,911 $4,701,219 $3,891,911
$22,478 $0 $0 $22,478 $780,200 $802,678 $4,200,000 ($210,000) ($147,087) $3,842,913 $4,645,591 $3,842,913
$22,147 $0 $0 $22,147 $773,600 $795,747 $4,200,000 ($210,000) ($202,743) $3,787,257 $4,583,004 $3,787,257
$437,980 $0 $0 $437,980 $767,000 $1,204,980 $4,200,000 ($210,000) ($183,893) $3,806,107 $5,011,087 $3,806,107
$1,635,017 $0 $0 $1,635,017 $760,400 $2,395,417 $4,200,000 ($210,000) $89,439 $4,079,439 $6,474,856 $4,079,439
$1,445,395 $0 $0 $1,445,395 $753,800 $2,199,195 $4,200,000 ($210,000) $461,694 $4,451,694 $6,650,889 $4,451,694
$1,445,365 $0 $0 $1,445,365 $747,200 $2,192,565 $4,200,000 ($210,000) $833,980 $4,823,980 $7,016,545 $4,823,980
$1,445,335 $0 $0 $1,445,335 $740,600 $2,185,935 $4,200,000 ($210,000) $1,206,297 $5,196,297 $7,382,232 $5,196,297
$1,445,305 $0 $0 $1,445,305 $734,000 $2,179,305 $4,200,000 ($210,000) $1,578,644 $5,568,644 $7,747,950 $5,568,644
$1,445,276 $0 $0 $1,445,276 $727,400 $2,172,676 $4,200,000 ($210,000) $1,951,023 $5,941,023 $8,113,698 $5,941,023
$1,445,246 $0 $0 $1,445,246 $720,800 $2,166,046 $4,200,000 ($210,000) $2,323,432 $6,313,432 $8,479,477 $6,313,432
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