Indonesia Eec

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Table of Contents

Page 1

1.0 Executive Summary.............................................................................................................................1Chart: Highlights ......................................................................................................................2

1.1 Objectives ...................................................................................................................................21.2 Mission ........................................................................................................................................31.3 Keys to Success ........................................................................................................................3

2.0 Company Summary.............................................................................................................................42.1 Company Ownership .................................................................................................................42.2 Company History........................................................................................................................4

Chart: Past Performance .......................................................................................................5Table: Past Performance .......................................................................................................6

2.3 Company Locations and Facilities ..........................................................................................63.0 Services................................................................................................................................................7

3.1 Service Description ...................................................................................................................73.2 Competitive Comparison ..........................................................................................................73.3 Sales Literature ..........................................................................................................................73.4 Sourcing ......................................................................................................................................83.5 Technology..................................................................................................................................83.6 Future Services ..........................................................................................................................8

4.0 Market Analysis Summary ..................................................................................................................84.1 Market Segmentation ................................................................................................................9

Table: Market Analysis .........................................................................................................10Chart: Market Analysis (Pie)................................................................................................10

4.2 Target Market Segment Strategy...........................................................................................104.3 Service Business Analysis .....................................................................................................11

4.3.1 Major Local Players ....................................................................................................114.3.2 Major Foreign Players ................................................................................................124.3.3 Competition and Buying Patterns .............................................................................12

5.0 Strategy and Implementation Summary ..........................................................................................125.1 Competitive Edge....................................................................................................................135.2 Sales Strategy..........................................................................................................................13

5.2.1 Sales Forecast ............................................................................................................14Chart: Sales Monthly ...................................................................................................14Chart: Sales by Year ...................................................................................................15Table: Sales Forecast.................................................................................................15

6.0 Management Summary ....................................................................................................................156.1 Personnel Plan .........................................................................................................................16

Table: Personnel ...................................................................................................................166.2 Legal, Financial and Accounting Status ................................................................................16

7.0 Financial Plan ....................................................................................................................................177.1 Important Assumptions............................................................................................................17

Table: General Assumptions ...............................................................................................177.2 Break-even Analysis................................................................................................................18

Chart: Break-even Analysis .................................................................................................18Table: Break-even Analysis .................................................................................................18

7.3 Projected Profit and Loss .......................................................................................................19Chart: Gross Margin Yearly..................................................................................................19Table: Profit and Loss ..........................................................................................................20

Table of Contents

Page 2

Chart: Profit Monthly .............................................................................................................20Chart: Profit Yearly ................................................................................................................21Chart: Gross Margin Monthly ...............................................................................................21

7.4 Projected Cash Flow ...............................................................................................................21Chart: Cash ...........................................................................................................................22Table: Cash Flow ..................................................................................................................23

7.5 Projected Balance Sheet ........................................................................................................24Table: Balance Sheet ...........................................................................................................24

7.6 Business Ratios .......................................................................................................................25Table: Ratios .........................................................................................................................26

Table: Sales Forecast ...............................................................................................................................1Table: Personnel ........................................................................................................................................2Table: General Assumptions ....................................................................................................................3Table: Profit and Loss ...............................................................................................................................4Table: Cash Flow .......................................................................................................................................5Table: Balance Sheet ................................................................................................................................6

Indonesia Energy Engineering & Construction

Page 1

1.0 Executive Summary

Introduction

This business plan seeks to generate a significant increase in company sales and profits from theservices of engineering, procurement and construction (EPC) of power generation and powerdelivery projects over the preceding year. This plan highlights a sales-revenue target for thenext five years. This target is seen as attainable through a proactive approach, by teaming upwith a project financing provider, partnering with reputable local and regional engineers,suppliers, and construction firms to reduce competition, and improving pricing while reducingrisks. The required marketing budget for the duration of this plan will grow somewhat eachyear. Based on the company's cash flow and previous profits, the company's expansion can becarried out without any further increase in financial leverage.

The Company

Indonesia EEC was founded in 1996 and is based in Jakarta, Indonesia. The company is asubsidiary of United States Energy Engineering & Construction (U.S. EEC). Indonesia EEC offersgood quality and cost effective service in engineering, design, procurement, projectmanagement, construction and construction management, environmental consulting, and otherconsulting services in relation to the design, building and management of electrical power plants.

In the near future, Indonesia EEC will establish a joint venture company with a reputable localcompany who has experience and capability in performing EPC works of power projects, as wellas financial capability, and will broaden the coverage by expanding into additional service areas.

Indonesia EEC currently has an admin staff of seventeen individuals that cover sales,marketing, accounting etc. Once projects have been secured, then project offices will beestablished and project personnel and staff will be recruited. Project office organization and staffwill encompass the engineering, procurement, and construction divisions.

The Market

At the moment there is a real opportunity to increase Indonesia's power infrastructure as thegovernment owned power utility (PLN) has not been able to deliver a reliable and costeffective power system. However, the current situation in Indonesia is characterized by acontinuing downward economic drift. It seems reasonable, however, that the company'starget market sectors have strength to be credible buyers in the Indonesian power business,since their business orientation is focused in the export market. The company faces significantrivalry from a variety of direct and indirect competitors.

In Indonesia, there are twelve market sectors of power generation business in which IndonesiaEEC will be seeking prospects on a focused and proactive approach.


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1.1 Objectives

The financial and marketing objectives of Indonesia EEC follow.

Financial Objectives

1. Sales starting at $XXXX, and growing each year to $XXXX, $XXXX, $XXXX, and $XXXX byYear 5.

2. High average gross margin precent of sales revenue for EPC jobs. When the jointventure company has been established and has been in operation for four years, it willalso produce excellent IRR for 25 years, which will create different types of jobs: build,own, operate (BOO), build, operate, transfer (BOT), build, lease, transfer (BLT), build andrent (B&R), and energy conversion contract (ECC).

3. Net income of more than XX% of sales by the fifth year.

Marketing Objectives

The financial objectives are converted into marketing objectives. If the company wants to earnits targets for gross margin and sales revenue from the EPC works then it must set an averageprofit margin on sales from the EPC works of average XX%. When the joint venture company hasbeen established and has been in operation for four years, then the joint venture company willalso produce an average XX% IRR for 25 years BOO, BOT, BLT, B&R, and ECC jobs. To achievethese targets, the company will have to set certain goals for customer awareness, suchas proactively approaching the prospective clients including project financing providers,establishing a joint venture with a reputable local company who has experience and capabilityin performing EPC works of power projects, as well as the financial capability to be equal


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partners with Indonesia EEC.

Thus the marketing objective might read:

Achieve a targeted sales revenue of $XXXX in Year 1, $XXXX in Year 2, $XXXX in Year3, $XXXX in Year 4, and $XXXX in Year 5 from the EPC works.

Expand customer awareness over the planning period.

Reduce competition, reduce risks, and lower price levels by establishing a joint venturewith a reputable local company who has experience in performing EPC works of powerprojects, as well as the financial capability to be equal partners with Indonesia EEC .

Pursuing not only EPC prospects, but also BOO, BOT, BLT, B&R, and ECC prospects.

Utilizing the joint venture company as the main entity of Indonesia EEC to conductbusiness in Indonesia.

1.2 Mission

The mission of the Indonesia EEC is to establish a strong presence in Indonesia to implement allprovisions of the Energy Engineering & Construction (EEC) mission statement with the specificmission of becoming the leading full service EPC in Indonesia. Also, Indonesia EEC's role to be theleader in the business of BOO, BOT, BLT, B&R, and ECC in the Indonesian captive powersector, will be built through a joint venture approach.

The broad mission requires the following objectives within Indonesia:

1. To obtain projects in all areas of EEC services.

2. Reduce the costs of performing work to the point that the Indonesian operation canprovide engineering, procurement, and support services at a lower cost thanthose provided by the U.S. office.

1.3 Keys to Success

1. Marketing power. Indonesia EEC needs to have its services on the shelves as the mostreliable, high-quality, cost effective services in the industry, with enough marketingpower to maintain an eight percent market share of EPC services in the Indonesiancaptive power sector.

2. Excellence in fulfilling the promise. To realize a benefit, a claim must be made and proofpresented.

3. Providing clients with both solutions and value creations. Helping the clients to increasetheir own profit potential.

4. Quality service and customer satisfaction. Everything we sell is guaranteed, so theservices have to do what the customers want. Long-term customer satisfaction is criticalto our survival.


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5. Leveraging from a single pool of expertise into multiple revenue-generatingopportunities: Engineering & Architect (E&A), project consulting, project management,Engineering & Procurement (E&P), and Engineering & Construction (E&C).

6. The right management team, with strong foundations in marketing, management, finance,and services development.

2.0 Company Summary

Indonesia EEC is a subsidiary company of United States Energy Engineering & Construction (U.S. EEC) that provides services including engineering, design, procurement, projectmanagement, construction and construction management, environmental consulting,management consulting, quality assurance and quality control, information management,operations and maintenance, and process technology development.

U.S. EEC's management wants Indonesia EEC to deliver a good financial performance. As asubsidiary company of U.S. EEC, Indonesia EEC sets the following objectives for the productsand services lines of EPC power generation and power delivery projects:

1. Expand customer awareness over the planning period.

2. Reduce competition and risks while lowering price levels by establishing a joint venturewith a reputable local company who also has experience in performing EPC powerprojects.

3. Pursuing not only EPC prospects, but also BOO, BOT, BLT, B&R, and ECC prospects.

4. Utilizing the joint venture company as the main entity of EEC to conduct business inIndonesia, and to provide all aspects of energy engineering services.

2.1 Company Ownership

Indonesia EEC was created as an Indonesian "Perseroan Terbatas" (PT.) corporation based inJakarta, Indonesia, under the Foreign Investment Laws of Republic of Indonesia. The companyis owned entirely by the Energy Engineering & Construction company of U.S (U.S. EEC).

2.2 Company History

EEC has been establishing its presence in the Indonesian market since the 1980s by openingand operating a representative office in Jakarta. It recognized the need for establishing apresence as a local company who meets the specific needs of its prospective customers, as wellas its larger, long-term U.S. customers who invested in both Indonesia and the Southeast AsiaRegion.

Indonesia EEC was founded in 1996. Shares in the company are owned entirely by U.S. EEC.


Page 5


Page 6

Table: Past Performance

Past Performance

1996 1997 1998

Sales $50,000,000 $65,000,000 $87,500,000

Gross Margin $23,000,000 $29,900,000 $40,250,000

Gross Margin % 46.00% 46.00% 46.00%

Operating Expenses $4,800,000 $4,850,000 $4,645,000

Collection Period (days) 72 63 63

Balance Sheet

1996 1997 1998

Current Assets

Cash $15,000,000 $19,500,000 $26,250,000

Accounts Receivable $6,112,981 $7,946,875 $10,697,716

Other Current Assets $525,931 $683,710 $920,380

Total Current Assets $21,638,912 $28,130,585 $37,868,096

Long-term Assets

Long-term Assets $710,837 $924,089 $1,243,965

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $710,837 $924,089 $1,243,965

Total Assets $22,349,749 $29,054,674 $39,112,061

Current Liabil ities

Accounts Payable $2,478,188 $3,221,644 $4,336,828

Current Borrowing $0 $0 $0

Other Current Liabil ities (interest free) $0 $0 $0

Total Current Liabil ities $2,478,188 $3,221,644 $4,336,828

Long-term Liabil ities $0 $0 $0

Total Liabil ities $2,478,188 $3,221,644 $4,336,828

Paid-in Capital $1,996,500 $3,295,460 $4,743,900

Retained Earnings $116,967 $952,048 $1,781,333

Earnings $17,758,094 $21,585,522 $28,250,000

Total Capital $19,871,561 $25,833,030 $34,775,233

Total Capital and Liabil ities $22,349,749 $29,054,674 $39,112,061

Other Inputs

Payment Days 30 30 30

Sales on Credit $31,098,365 $40,427,875 $54,422,140

Receivables Turnover 5.09 5.09 5.09

2.3 Company Locations and Facilities

The office is located in downton Jakarta, Indonesia. This location provides convenience, beingnear the airport, but also allows the company room to grow. Currently, Indonesia EEC occupiesan 800-square meter space, with offices for each department.


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3.0 Services

Indonesia EEC offers good quality and cost effective service in engineering, design, procurement,project management, construction and construction management, environmental consulting,management consulting, quality assurance and quality control, information management,operations and maintenance and process technology development.

3.1 Service Description

Indonesia EEC offers expertise in the services it offers. With its variety of services, the companysells them so as to allow clients to choose their preferred benefit(s). These include:

1. Engineering & Architect (E&A).2. Engineering & Procurement (E&P).3. Engineering & Construction (E&C).4. Project Management (PM).

3.2 Competitive Comparison

The approach Indonesia EEC will take to differentiate itself is to convert its features into theclient's benefits; the company needs to offer real benefits rather than only define the featuresto its clients.

The benefits it sells shall include many intangibles: reliability, optimizing the client's profitpotential, confidentiality, guaranteed quality, continuous improvements, technology transfer, andcost effectiveness. Long-term customer satisfaction is the most critical component of theservices offered by the company.

It is vital to establish presence in the market and to start making sales on the growingsegment. Personal relationships are important and memories are long. It is also vital to keep inmind that it is wrong to wait for recovery before establishing market presence. Project andmarket development timeframes in Indonesia are lengthy: three to four years or more;however, this timeframe can be compressed by a strong local partner. This implies the need forestablishing a joint venture company rather than going it alone. Even under normalcircumstances, the company needs to enter the market on the basis of a long-term strategiccalculus, with commitment and resources. To every firm which is interested in participating in theIndonesian market, now is the time to enter.

3.3 Sales Literature

The business begins with a general corporate and technical brochure establishing the positioning.This brochure will be provided by U.S. EEC.


Page 8

3.4 Sourcing

Indonesia EEC works with all the major power plants and power transmission equipmentsuppliers on a project-by-project basis and will not represent any of them under an exclusiveagreement.

It also works with a number of reputable and experienced local engineering and constructioncompanies under either a project-by-project or consortium basis. This is done to reducecompetition and risks and to provide clients with competitive pricing without cutting profits, aswell as maximizing the local contents, and shifting the responsibility to provide bid bonds,performance bonds, and credit lines to the local partner.

3.5 Technology

As a subsidiary company of U.S. EEC, Indonesia EEC will utilize its parent company'scapabilities, experience, resources, and technologies as follows:

1. The world-class leaders in the design and construction of power generation and powertransmission facilities.

2. Full Engineering, Procurement, and Construction (EPC) capabilities.

3. Fossil-fueled power plants EPC, hydropower plants EPC, geothermal power plants EPC,nuclear power plants EPC, and plant services.

4. Power plant engineering software and power transmission system engineering softwareboth help ensure lowest cost and design of power generation and transmission facilities.

3.6 Future Services

In the near future, Indonesia EEC will establish a joint venture company with a reputable localcompany who has experience and capability in performing EPC works of power projects, as wellas financial capability, and will broaden the coverage by expanding into additional serviceareas, e.g., captive power project development and operation.

4.0 Market Analysis Summary

In Indonesia, there are twelve market sectors of power generation business in which IndonesiaEEC will be seeking prospects on a focused and proactive approach.

The Market Analysis table shows the estimated captive power project values in the dollar peryear, within the period of 1999-2003, based on the present circumstances. This table is a liveand dynamic table. The numbers of dollars each year could increase as the economy correctsitself.


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4.1 Market Segmentation

The potential clients/customers during the five-year implementation of this plan for powergeneration EPC services are composed of twelve groups:

1. Captive power developers (this type of client could be any industrial facilities ownerwho needs power supply for its own facilities or their subsidiaries in the form of IPPdevelopers)

2. Pulp and paper producers

3. Textile producers

4. Cement mills

5. Mining industries

6. Shrimp farming

7. Sugar producers

8. Palm oil producers

9. Fertilizer manufacturing

10. Petrochemicals

11. Oil & Gas Exploration & Production Companies

12. Oil Refinery Complexes

It seems reasonable, based on strong fundamentals, that the above twelve sectors havestrength to be credible buyers in the Indonesian power business, since their businessorientation is focused in the export market leads acceptable development risks.


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Table: Market Analysis

Market Analysis

1999 2000 2001 2002 2003

Potential Customers Growth CAGR

Captive Plant Developer 3% 54,000,000 55,620,000 57,288,600 59,007,258 60,777,476 3.00%

Pulp & Paper Mills 15% 272,000,000 312,800,000 359,720,000 413,678,000 475,729,700 15.00%

Textile Manufacturers 11% 218,000,000 241,980,000 268,597,800 298,143,558 330,939,349 11.00%

Cement Mills 5% 22,000,000 23,100,000 24,255,000 25,467,750 26,741,138 5.00%

Mining 18% 41,000,000 48,380,000 57,088,400 67,364,312 79,489,888 18.00%

Shrimp Farms 20% 191,000,000 229,200,000 275,040,000 330,048,000 396,057,600 20.00%

Sugar Mills 4% 14,000,000 14,560,000 15,142,400 15,748,096 16,378,020 4.00%

Palm Oil Processing 5% 16,000,000 16,800,000 17,640,000 18,522,000 19,448,100 5.00%

Ferti l izer Manufacturers 7% 136,000,000 145,520,000 155,706,400 166,605,848 178,268,257 7.00%

Petrochemical Processing 5% 27,000,000 28,350,000 29,767,500 31,255,875 32,818,669 5.00%

Oil & Gas Fields 5% 22,000,000 23,100,000 24,255,000 25,467,750 26,741,138 5.00%

Oil Refineries 5% 109,000,000 114,450,000 120,172,500 126,181,125 132,490,181 5.00%

Total 12.16% 1,122,000,00

0

1,253,860,00

0

1,404,673,60

0

1,577,489,57

2

1,775,879,51

6

12.16%

4.2 Target Market Segment Strategy

Indonesia EEC will focus on major electricity consumers in Indonesia who are very demandingregarding reliability of their power supply systems.

The current situation in Indonesia can be characterized by commercial paralysis, policy paralysis,and for the moment, a continuing downward economic drift. But it seems reasonable that thepreviously listed twelve sectors have strength to be credible buyers in the Indonesian powerbusiness, since their business orientation is focused in the export market leads acceptabledevelopment risks. The uncertainty lies in how long the country's economic recovery will takeand with what twists and turns in the political and economic structure will offer tremendous


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opportunities for the the company in developing badly needed, inside-the-fence captive powerprojects to satisfy the demand. This requirement has not diminished because of the crisis. Iteven increases due to the government owned power utility (PLN) absence to deliver a reliableand cost effective power system.

For the short term, the company needs to be flexible and creative in pricing and financing itsservices. Indonesian buyers are likely to be more dependent than ever on supplier financing,and looking for bargains; unfortunately, the current economic erosion situation has put them ina compromising position for bargaining. The company needs to be proactive in assisting itscustomers in finding sources of financing, inventing creative payment terms or offering a morelenient repayment period, if possible, and looking for ways to cut the price of supplies andservices. Barter trade has often been a required element of major government projects, but itwould be no surprise to see more emphasis on barter trade in the coming period.

4.3 Service Business Analysis

EPC Contractors in power business range from major global Original Equipment Manufacturers(OEM) of the power generation and transmission plants to the local engineering and constructionfirms.

4.3.1 Major Local Players

Some major domestic players who are estimated as Indonesia EEC's potential competitors inthe power EPC business are listed below. They are politically well-connected at this time andseem to be aggressively pursuing expansion into other infrastructure markets in Indonesia,most notably in power and industrial plants.

1. PT. ABB Energy System Indonesia (PT. ABB-ESI), a joint venture of ABB-CE and PT.PAL, a member of BPIS.

2. PT. Rekayasa Industry (PT. RI), a government-owned EPC contractor company underthe management of the Directorate of Machineries and Base Metals Industries, Ministry ofIndustry and Trade. PT. RI is well established in the fertilizer processing field.

3. PT. Inti Karya Persada Tehnik (PT. IKPT), a local EPC contractor company. PT. IKPT iswell established in the petroleum, petrochemical, and geothermal fields.

4. Indonesia Power (previously "PT. PLN (Persero) Pembangkitan Tenaga Listrik Jawa Bali-I), a subsidiary operating company of PT. PLN (Persero) for the western part ofthe Java-Bali power system.

5. PT. PLN (Persero) Pembangkitan Tenaga Listrik Jawa Bali-II (PLN PJB-II), a subsidiaryoperating company of PT. PLN (Persero) for the eastern part of the Java-Bali powersystem.

6. PT. Tripatra.

7. PT. Gunanusa.

8. PT. Truba Jurong.


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9. PT. Pertafenikki.

10. PT. Aalborg Sunrod Indonesia.

4.3.2 Major Foreign Players

The following companies are major foreign players in Indonesian power business:

1. Original Equipment Manufacturers. They are not fully recognized as competitors;however, these companies are seen to be the strongest competitors in Indonesia: ABB,GE, Westinghouse, Siemens, Rolls-Royce, Ansaldo, Mitsubishi, Fuji, Toshiba, Babcock &Wilcox, GEC Alsthom, Foster Wheeler, Austrian Energy, Cockerill Mechanical Industries(CMI), John Brown Ltd., Kvaerner, Lurgi, Ishikawajima Harima (IHI), Wartsila, Caterpillar,Pielstick, MAN, and Niigata.

2. Foreign Engineering/EPC companies: Duke Fluor/Daniels, Stone & Webster, Bechtel,Black & Veatch, Sargent & Lundy, Raytheon (EBASCO), Daelim, Hyundai, SsangYong,Balfour Beatty, Jaako Poyry, BE&K Bechtel, Pekka Hemmi, Simons, JGC Corporation, KajimaCorp., SNC Lavallin, and Chiyoda.

3. Trading Companies : Sumitomo Corporation, Marubeni, Mitsubishi Heavy Industries,Kanematsu Corporation, and Mitsui.

4.3.3 Competition and Buying Patterns

Recent analysis indicate that total design cost of power plants in Indonesia has decreased by12%, while total construction cost of power plants in Indonesia has decreased by 23.59% duringthis economic turmoil, compared to data recorded in 1996. This analysis is based on theassumptions that the local engineers and laborers salary was increased by 25% at the averageexchange rate of US$1 = Rp 7,200. By having a local production capability in Indonesia,Indonesia EEC will be able to take advantage of this situation.

When the joint venture company between Indonesia EEC and its local partner has beenestablished, it will be able to reduce costs and increase profits by having a full-serviceproduction office in Indonesia.

The critical issue for establishing a local production capability is the ability of Indonesia EEC tohire, train, and retain highly qualified and motivated Indonesian engineers.

5.0 Strategy and Implementation Summary

One of the reasons why captive power has become the most important sector in theIndonesian power market is that the customers need the most reliable and efficient powersystem to reduce the costs. The PLN subsidized electricity tariff is approximately 40% moreexpensive, and its disturbance rate is high and getting worse.

Furthermore, PLN's inability to pay power and natural gas at the prevailing exchange rate has put


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both PLN and independent power producer (IPP) developers into a very difficult position tomove forward with their project implementation between 1999 and 2003. Meanwhile, in linewith the government's export increasing program to strengthen the national reserve funds, manybig electricity consumers will face their fast growing demand. This situation will compel manyelectricity consumers (especially large industrial facilities) to set up their own captive powerplants.

As a result of this need, Indonesia EEC will focus its marketing directive on those large, export-oriented, industrial companies.

5.1 Competitive Edge

Indonesia EEC's overall competitive edge in Indonesia is that it brings its parent company'sname recognition as a "one-stop" services provider encompassing engineering, procurement,construction, and trade financing services. The parent company is seen as having more thanone hundred years' experience in the global industry.

One of the most important key factors in Indonesia EEC's competitive edge is its expertise inproviding access to the trade financing, as follows:

1. Obtaining low-cost financing specific to the buyer's country.

2. Obtaining commercial and political risk insurance for non-guaranteed loans.

3. Furnishing and processing loan documentation for export credit agencies.

4. Preparing grant proposals and feasibility studies required by the funding institution when acompany moves into new markets.

5. Conducting studies to establish project feasibility.

6. Applying for and obtaining final commitment of funds based on feasibility studies.

7. Arranging for the best available financing through private national and internationalbanking institutions.

The establishment of a joint venture company between Indonesia EEC and a strong, experiencedlocal engineering and construction company is the most strategic step to overcome thecompetition by reduced production costs as well as to improve flexibility in penetrating themarkets in developing countries, especially the Asia Region.

5.2 Sales Strategy

The captive power market in Indonesia will be focused and integrated with the private customersoutside the multilateral/bilateral aid programs. To sell to this type of market, Indonesia EECneeds to have these seven important propositions:

1. Proven expertise in project financing arrangements, especially under the barter tradearrangements.


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2. Direct negotiation approaches with the clients.

3. Strategic alliances with a reputable local company who has experience as either an EPCcompany or developer in Indonesian power sector, capability, and the in-house facilitiesto perform the detailed engineering, procurement, and construction of power projects.

4. Competitiveness in pricing.

5. Creative payment terms.

6. Contributions in enhancing the local manufacturing sector by making it more efficientand competitive.

7. Proven expertise in the EPC of reliable and efficient power system.

5.2.1 Sales Forecast

We are planning to increase sales substantially in 2001. This is considered reasonable due tothe opportunities available in the industry.

January through March 2001 will offer the highest sales, as many clients will begin theimplementation of their projects.


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Table: Sales Forecast

Sales Forecast

1999 2000 2001 2002 2003

Sales

Engineering & Architect (E&A) $25,000,000 $26,250,000 $29,000,000 $31,250,000 $33,750,000

Engineering & Procurement $40,000,000 $42,000,000 $46,400,000 $50,000,000 $54,000,000

Engineering & Construction $15,000,000 $15,750,000 $17,400,000 $18,750,000 $20,250,000

Project management (PM) $20,000,000 $21,000,000 $23,200,000 $25,000,000 $27,000,000

Total Sales $100,000,000 $105,000,000 $116,000,000 $125,000,000 $135,000,000

Direct Cost of Sales 1999 2000 2001 2002 2003

Engineering & Architect (E&A) $13,500,000 $14,175,000 $15,660,000 $16,875,000 $18,225,000

Engineering & Procurement $21,600,000 $22,680,000 $25,056,000 $27,000,000 $29,160,000

Engineering & Construction $8,100,000 $8,505,000 $9,396,000 $10,125,000 $10,935,000

Project management (PM) $10,800,000 $11,340,000 $12,528,000 $13,500,000 $14,580,000

Subtotal Direct Cost of Sales $54,000,000 $56,700,000 $62,640,000 $67,500,000 $72,900,000

6.0 Management Summary

Prior to the revenue, Indonesia EEC is led by one president director and two vice presidents(vice president of sales and marketing and vice president of internal business management(IBM)). They will be assisted by one sales manager (who is primarily responsible for sales andmarket development in power sector), one marketing and business development manager (who isprimarily responsible for business development, services development, and research anddesign), one finance manager, one human resources manager, one accountant, two sharedsecretaries, one legal officer, one administrative officer, one bookkeeper, and four clerks.

When projects have been secured, then project offices will be established and projectpersonnel and staff will be recruited. Project office organization and staff will encompass the


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engineering, procurement, and construction divisions.

The administrative section obtains outside services from Indonesian professional firms for taxreporting, legal and contract consulting, and immigration "consultants." It is expected that theseservices will continue to be contracted out as the cost of full-time staff positions in thesespecialists will be large.

6.1 Personnel Plan

Prior to the revenue, the team includes 17 employees, under a president and two vicepresidents.

Indonesia EEC's main management divisions are Sales & Marketing (the marketing, sales, servicesresearch and development, and public relations operations will be managed by this division) andInternal Business Management (the legal, accounting, administration, and human resourcesdevelopment sections will be managed by this division).

The following table summarizes our personnel plan for the five years of this business plan.

Table: Personnel

Personnel Plan

1999 2000 2001 2002 2003

President Director/Chief Representative $54,000 $59,400 $65,340 $71,874 $79,061

Executive Secretary $6,480 $7,150 $7,865 $8,651 $9,516

VP Sales & Marketing $25,992 $28,600 $31,460 $34,606 $38,066

Sales Manager $15,600 $17,160 $18,876 $20,764 $22,840

Marketing & Business Dev. Manager $15,600 $17,160 $18,876 $20,764 $22,840

Secretary $3,900 $4,290 $4,719 $5,191 $5,710

VP Internal Business Management (IBM) $25,992 $28,600 $31,460 $34,606 $38,066

Finance Manager/Senior Accountant $15,600 $17,160 $18,876 $20,764 $22,840

Accountant $12,000 $13,200 $14,520 $15,972 $17,569

Human Resources Manager $15,600 $17,160 $18,876 $20,764 $22,840

Administrative Officer $12,000 $13,200 $14,520 $15,972 $17,569

Legal Officer $12,000 $13,200 $14,520 $15,972 $17,569

Bookkeeper $3,900 $4,290 $4,719 $5,191 $5,710

Clerical $1,296 $1,430 $1,573 $1,730 $1,903

Clerical $1,296 $1,430 $1,573 $1,730 $1,903

Clerical $1,296 $1,430 $1,573 $1,730 $1,903

Clerical $1,296 $1,430 $1,573 $1,730 $1,903

Total People 0 0 0 0 0

Total Payroll $223,848 $246,290 $270,919 $298,011 $327,808

6.2 Legal, Financial and Accounting Status

1. Legal Structure: Indonesia EEC is a limited liability Indonesian-registered corporationunder Foreign Investment Laws of the Republic of Indonesia.

2. Financial and Accounting Status: Operations in Indonesia are not kept in a separateaccounting system and the current system does not allow any discrete or accurate


Page 17

information about total costs for local operations.

7.0 Financial Plan

The following sections present the financial analysis for Indonesia EEC.

7.1 Important Assumptions

The accompanying table lists Indonesia EEC's main assumptions for developing its financialprojections. The most sensitive assumption is collection days. Indonesia EEC would like toimprove collection days to take pressure off of its working capital.

Table: General Assumptions

General Assumptions

1999 2000 2001 2002 2003

Plan Month 1 2 3 4 5

Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%

Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00%

Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%

Other 0 0 0 0 0


Page 18

7.2 Break-even Analysis

The following table and chart summarize the Break-even Analysis, including monthly units andsales break-even points.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $905,693

Assumptions:

Average Percent Variable Cost 54%

Estimated Monthly Fixed Cost $416,619


Page 19

7.3 Projected Profit and Loss

The detailed monthly pro-forma income statement for the first year is included in the appendix.The annual estimates are included below.


Page 20

Table: Profit and Loss

Pro Forma Profit and Loss

1999 2000 2001 2002 2003

Sales $100,000,000 $105,000,000 $116,000,000 $125,000,000 $135,000,000

Direct Cost of Sales $54,000,000 $56,700,000 $62,640,000 $67,500,000 $72,900,000

Power System Studies $58,000 $60,900 $63,945 $67,142 $70,499

Total Cost of Sales $54,058,000 $56,760,900 $62,703,945 $67,567,142 $72,970,499

Gross Margin $45,942,000 $48,239,100 $53,296,055 $57,432,858 $62,029,501

Gross Margin % 45.94% 45.94% 45.94% 45.95% 45.95%

Expenses

Payroll $223,848 $246,290 $270,919 $298,011 $327,808

Sales and Marketing and Other Expenses $4,610,000 $4,875,000 $5,430,000 $5,850,000 $6,310,000

Depreciation $0 $0 $0 $0 $0

Leased Equipment $6,000 $6,500 $7,000 $7,500 $8,000

Util ities $72,000 $72,000 $72,000 $84,000 $84,000

Insurance $6,000 $6,000 $7,000 $7,000 $8,000

Rent $48,000 $48,000 $48,000 $48,000 $48,000

Payroll Taxes $33,577 $36,944 $40,638 $44,702 $49,171

Other $0 $0 $0 $0 $0

Total Operating Expenses $4,999,425 $5,290,734 $5,875,557 $6,339,213 $6,834,979

Profit Before Interest and Taxes $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521

EBITDA $40,942,575 $42,948,367 $47,420,498 $51,093,645 $55,194,521

Interest Expense $0 $0 $0 $0 $0

Taxes Incurred $10,235,644 $10,737,092 $11,855,125 $12,773,411 $13,798,630

Net Profit $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891

Net Profit/Sales 30.71% 30.68% 30.66% 30.66% 30.66%


Page 21

7.4 Projected Cash Flow

Cash flow projections are critical to the company's success. The monthly cash flow is shown inthe chart, with one bar representing the cash flow per month and the other representing themonthly balance. The annual cash flow figures are included here in the following table.


Page 22

Detailed monthly numbers are included in the appendix.


Page 23

Table: Cash Flow

Pro Forma Cash Flow

1999 2000 2001 2002 2003

Cash Received

Cash from Operations

Cash Sales $50,000,000 $52,500,000 $58,000,000 $62,500,000 $67,500,000

Cash from Receivables $53,281,049 $52,129,167 $57,184,167 $61,832,500 $66,758,333

Subtotal Cash from Operations $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0

New Current Borrowing $0 $0 $0 $0 $0

New Other Liabil ities (interest-free) $0 $0 $0 $0 $0

New Long-term Liabil ities $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0

New Investment Received $0 $0 $0 $0 $0

Subtotal Cash Received $103,281,049 $104,629,167 $115,184,167 $124,332,500 $134,258,333

Expenditures 1999 2000 2001 2002 2003

Expenditures from Operations

Cash Spending $223,848 $246,290 $270,919 $298,011 $327,808

Bill Payments $66,791,937 $73,194,155 $79,537,301 $85,870,683 $92,709,626

Subtotal Spent on Operations $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0 $0 $0

Other Liabil ities Principal Repayment $0 $0 $0 $0 $0

Long-term Liabil ities Principal Repayment $0 $0 $0 $0 $0

Purchase Other Current Assets $0 $0 $0 $0 $0

Purchase Long-term Assets $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0

Subtotal Cash Spent $67,015,785 $73,440,445 $79,808,220 $86,168,694 $93,037,434

Net Cash Flow $36,265,265 $31,188,721 $35,375,946 $38,163,806 $41,220,899

Cash Balance $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638


Page 24

7.5 Projected Balance Sheet

The following Balance Sheet table shows healthy growth of net worth and a strong financialposition. The monthly estimates are included in the appendix.

Table: Balance Sheet

Pro Forma Balance Sheet

1999 2000 2001 2002 2003

Assets

Current Assets

Cash $62,515,265 $93,703,986 $129,079,932 $167,243,738 $208,464,638

Accounts Receivable $7,416,667 $7,787,500 $8,603,333 $9,270,833 $10,012,500

Other Current Assets $920,380 $920,380 $920,380 $920,380 $920,380

Total Current Assets $70,852,311 $102,411,866 $138,603,645 $177,434,952 $219,397,518

Long-term Assets

Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965

Accumulated Depreciation $0 $0 $0 $0 $0

Total Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965

Total Assets $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483

Liabil ities and Capital 1999 2000 2001 2002 2003

Current Liabil ities

Accounts Payable $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545

Current Borrowing $0 $0 $0 $0 $0

Other Current Liabil ities $0 $0 $0 $0 $0

Subtotal Current Liabil ities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545

Long-term Liabil ities $0 $0 $0 $0 $0

Total Liabil ities $6,614,112 $5,962,392 $6,588,798 $7,099,870 $7,666,545

Paid-in Capital $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900

Retained Earnings $30,031,333 $60,738,264 $92,949,539 $128,514,913 $166,835,146

Earnings $30,706,931 $32,211,275 $35,565,374 $38,320,234 $41,395,891

Total Capital $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937

Total Liabil ities and Capital $72,096,276 $103,655,831 $139,847,610 $178,678,917 $220,641,483

Net Worth $65,482,164 $97,693,439 $133,258,813 $171,579,046 $212,974,937


Page 25

7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on theStandard Industrial Classification (SIC) code 8711, Engineering Services, are shown forcomparison.


Page 26

Table: Ratios

Ratio Analysis

1999 2000 2001 2002 2003 Industry Profi le

Sales Growth 14.29% 5.00% 10.48% 7.76% 8.00% 7.10%

Percent of Total Assets

Accounts Receivable 10.29% 7.51% 6.15% 5.19% 4.54% 35.40%

Other Current Assets 1.28% 0.89% 0.66% 0.52% 0.42% 38.30%

Total Current Assets 98.27% 98.80% 99.11% 99.30% 99.44% 77.40%

Long-term Assets 1.73% 1.20% 0.89% 0.70% 0.56% 22.60%

Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Current Liabil ities 9.17% 5.75% 4.71% 3.97% 3.47% 44.50%

Long-term Liabil ities 0.00% 0.00% 0.00% 0.00% 0.00% 11.70%

Total Liabil ities 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%

Net Worth 90.83% 94.25% 95.29% 96.03% 96.53% 43.80%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Gross Margin 45.94% 45.94% 45.94% 45.95% 45.95% 0.00%

Selling, General & Administrative Expenses 15.24% 15.26% 15.29% 15.29% 15.28% 81.80%

Advertising Expenses 0.03% 0.04% 0.04% 0.04% 0.04% 0.20%

Profit Before Interest and Taxes 40.94% 40.90% 40.88% 40.87% 40.88% 2.50%

Main Ratios

Current 10.71 17.18 21.04 24.99 28.62 1.69

Quick 10.71 17.18 21.04 24.99 28.62 1.37

Total Debt to Total Assets 9.17% 5.75% 4.71% 3.97% 3.47% 56.20%

Pre-tax Return on Net Worth 62.52% 43.96% 35.59% 29.78% 25.92% 6.00%

Pre-tax Return on Assets 56.79% 41.43% 33.91% 28.60% 25.02% 13.60%

Additional Ratios 1999 2000 2001 2002 2003

Net Profit Margin 30.71% 30.68% 30.66% 30.66% 30.66% n.a

Return on Equity 46.89% 32.97% 26.69% 22.33% 19.44% n.a

Activity Ratios

Accounts Receivable Turnover 6.74 6.74 6.74 6.74 6.74 n.a

Collection Days 60 53 52 52 52 n.a

Accounts Payable Turnover 10.44 12.17 12.17 12.17 12.17 n.a

Payment Days 29 32 29 29 29 n.a

Total Asset Turnover 1.39 1.01 0.83 0.70 0.61 n.a

Debt Ratios

Debt to Net Worth 0.10 0.06 0.05 0.04 0.04 n.a

Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $64,238,199 $96,449,474 $132,014,848 $170,335,081 $211,730,972 n.a

Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.72 0.99 1.21 1.43 1.63 n.a

Current Debt/Total Assets 9% 6% 5% 4% 3% n.a

Acid Test 9.59 15.87 19.73 23.69 27.31 n.a

Sales/Net Worth 1.53 1.07 0.87 0.73 0.63 n.a

Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

Appendix

Page 1

Table: Sales Forecast

Sales Forecast

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales

Engineering & Architect (E&A) 0% $6,250,000 $3,750,000 $2,500,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $1,250,000 $2,500,000

Engineering & Procurement 0% $10,000,000 $6,000,000 $4,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $4,000,000

Engineering & Construction 0% $3,750,000 $2,250,000 $1,500,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $750,000 $1,500,000

Project management (PM) 0% $5,000,000 $3,000,000 $2,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $2,000,000

Total Sales $25,000,000 $15,000,000 $10,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $10,000,000

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Engineering & Architect (E&A) $3,375,000 $2,025,000 $1,350,000 $675,000 $675,000 $675,000 $675,000 $675,000 $675,000 $675,000 $675,000 $1,350,000

Engineering & Procurement $5,400,000 $3,240,000 $2,160,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000 $2,160,000

Engineering & Construction $2,025,000 $1,215,000 $810,000 $405,000 $405,000 $405,000 $405,000 $405,000 $405,000 $405,000 $405,000 $810,000

Project management (PM) $2,700,000 $1,620,000 $1,080,000 $540,000 $540,000 $540,000 $540,000 $540,000 $540,000 $540,000 $540,000 $1,080,000

Subtotal Direct Cost of Sales $13,500,000 $8,100,000 $5,400,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $5,400,000

Appendix

Page 2

Table: Personnel

Personnel Plan


President Director/Chief Representative 0% $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500

Executive Secretary 0% $540 $540 $540 $540 $540 $540 $540 $540 $540 $540 $540 $540

VP Sales & Marketing 0% $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166

Sales Manager 0% $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300

Marketing & Business Dev. Manager 0% $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300

Secretary 0% $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325

VP Internal Business Management (IBM) 0% $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166 $2,166

Finance Manager/Senior Accountant 0% $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300

Accountant 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Human Resources Manager 0% $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 $1,300

Administrative Officer 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Legal Officer 0% $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Bookkeeper 0% $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325 $325

Clerical 0% $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108

Clerical 0% $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108

Clerical 0% $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108

Clerical 0% $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108 $108

Total People 0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654

Appendix

Page 3

Table: General Assumptions

General Assumptions


Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%

Long-term Interest Rate 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%

Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

Appendix

Page 4

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $25,000,000 $15,000,000 $10,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $10,000,000

Direct Cost of Sales $13,500,000 $8,100,000 $5,400,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $5,400,000

Power System Studies $5,000 $5,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0 $0

Total Cost of Sales $13,505,000 $8,105,000 $5,406,000 $2,706,000 $2,706,000 $2,706,000 $2,706,000 $2,706,000 $2,706,000 $2,706,000 $2,700,000 $5,400,000

Gross Margin $11,495,000 $6,895,000 $4,594,000 $2,294,000 $2,294,000 $2,294,000 $2,294,000 $2,294,000 $2,294,000 $2,294,000 $2,300,000 $4,600,000

Gross Margin % 45.98% 45.97% 45.94% 45.88% 45.88% 45.88% 45.88% 45.88% 45.88% 45.88% 46.00% 46.00%

Expenses

Payroll $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654

Sales and Marketing and Other

Expenses

$388,500 $382,000 $382,000 $388,500 $382,000 $382,000 $388,500 $382,000 $382,000 $388,500 $382,000 $382,000

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Leased Equipment $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Utilities $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000

Insurance $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Rent $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000

Payroll Taxes 15% $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798 $2,798

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $420,952 $414,452 $414,452 $420,952 $414,452 $414,452 $420,952 $414,452 $414,452 $420,952 $414,452 $414,452

Profit Before Interest and Taxes $11,074,048 $6,480,548 $4,179,548 $1,873,048 $1,879,548 $1,879,548 $1,873,048 $1,879,548 $1,879,548 $1,873,048 $1,885,548 $4,185,548

EBITDA $11,074,048 $6,480,548 $4,179,548 $1,873,048 $1,879,548 $1,879,548 $1,873,048 $1,879,548 $1,879,548 $1,873,048 $1,885,548 $4,185,548

Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Taxes Incurred $2,768,512 $1,620,137 $1,044,887 $468,262 $469,887 $469,887 $468,262 $469,887 $469,887 $468,262 $471,387 $1,046,387

Net Profit $8,305,536 $4,860,411 $3,134,661 $1,404,786 $1,409,661 $1,409,661 $1,404,786 $1,409,661 $1,409,661 $1,404,786 $1,414,161 $3,139,161

Net Profit/Sales 33.22% 32.40% 31.35% 28.10% 28.19% 28.19% 28.10% 28.19% 28.19% 28.10% 28.28% 31.39%

Appendix

Page 5

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $12,500,000 $7,500,000 $5,000,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $5,000,000

Cash from Receivables $5,348,858 $5,765,525 $12,333,333 $7,416,667 $4,916,667 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000 $2,500,000

Subtotal Cash from Operations $17,848,858 $13,265,525 $17,333,333 $9,916,667 $7,416,667 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $7,500,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received $17,848,858 $13,265,525 $17,333,333 $9,916,667 $7,416,667 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $7,500,000

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Expenditures from Operations

Cash Spending $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654 $18,654

Bill Payments $4,892,688 $16,457,314 $10,011,793 $6,737,681 $3,576,398 $3,571,685 $3,571,848 $3,576,398 $3,571,685 $3,571,848 $3,576,248 $3,676,352

Subtotal Spent on Operations $4,911,342 $16,475,968 $10,030,447 $6,756,335 $3,595,052 $3,590,339 $3,590,502 $3,595,052 $3,590,339 $3,590,502 $3,594,902 $3,695,006

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Spent $4,911,342 $16,475,968 $10,030,447 $6,756,335 $3,595,052 $3,590,339 $3,590,502 $3,595,052 $3,590,339 $3,590,502 $3,594,902 $3,695,006

Net Cash Flow $12,937,516 ($3,210,444) $7,302,886 $3,160,332 $3,821,615 $1,409,661 $1,409,498 $1,404,948 $1,409,661 $1,409,498 $1,405,098 $3,804,994

Cash Balance $39,187,516 $35,977,072 $43,279,958 $46,440,290 $50,261,905 $51,671,566 $53,081,064 $54,486,013 $55,895,674 $57,305,172 $58,710,270 $62,515,265

Appendix

Page 6

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $26,250,000 $39,187,516 $35,977,072 $43,279,958 $46,440,290 $50,261,905 $51,671,566 $53,081,064 $54,486,013 $55,895,674 $57,305,172 $58,710,270 $62,515,265

Accounts Receivable $10,697,716 $17,848,858 $19,583,333 $12,250,000 $7,333,333 $4,916,667 $4,916,667 $4,916,667 $4,916,667 $4,916,667 $4,916,667 $4,916,667 $7,416,667

Other Current Assets $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380 $920,380

Total Current Assets $37,868,096 $57,956,754 $56,480,785 $56,450,338 $54,694,003 $56,098,952 $57,508,612 $58,918,111 $60,323,059 $61,732,720 $63,142,219 $64,547,317 $70,852,311

Long-term Assets

Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Long-term Assets $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965 $1,243,965

Total Assets $39,112,061 $59,200,719 $57,724,750 $57,694,303 $55,937,968 $57,342,917 $58,752,577 $60,162,076 $61,567,024 $62,976,685 $64,386,184 $65,791,282 $72,096,276

Liabilities and Capital Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Current Liabilities

Accounts Payable $4,336,828 $16,119,950 $9,783,571 $6,618,462 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,448,279 $6,614,112

Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Current Liabilities $4,336,828 $16,119,950 $9,783,571 $6,618,462 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,448,279 $6,614,112

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Liabilities $4,336,828 $16,119,950 $9,783,571 $6,618,462 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,452,629 $3,452,629 $3,457,341 $3,448,279 $6,614,112

Paid-in Capital $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900 $4,743,900

Retained Earnings $1,781,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333 $30,031,333

Earnings $28,250,000 $8,305,536 $13,165,947 $16,300,608 $17,705,394 $19,115,055 $20,524,716 $21,929,501 $23,339,162 $24,748,823 $26,153,609 $27,567,770 $30,706,931

Total Capital $34,775,233 $43,080,769 $47,941,180 $51,075,841 $52,480,627 $53,890,288 $55,299,949 $56,704,734 $58,114,395 $59,524,056 $60,928,842 $62,343,003 $65,482,164

Total Liabilities and Capital $39,112,061 $59,200,719 $57,724,750 $57,694,303 $55,937,968 $57,342,917 $58,752,577 $60,162,076 $61,567,024 $62,976,685 $64,386,184 $65,791,282 $72,096,276

Net Worth $34,775,233 $43,080,769 $47,941,180 $51,075,841 $52,480,627 $53,890,288 $55,299,949 $56,704,734 $58,114,395 $59,524,056 $60,928,842 $62,343,003 $65,482,164

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