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“ELAS”

Green Container Business Plan iUtility

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Table of Content

1. Executive Summary------------------------------------------------------------------------3 2. Business Description-----------------------------------------------------------------------4

2.1.Industry Overview 2.2.Company Summary 2.3.Products or Services 2.4.Positioning 2.5.Pricing Strategy

3. Market Analysis ----------------------------------------------------------------------------9 3.1.Customer Analysis 3.2.Market Size and Trends 3.3.Competition 3.4.Sales Forecast

4. Start-up Summary-------------------------------------------------------------------------11 4.1.Start-up Process 4.2.Start-up Cost 4.3 Company Location 4.4Operating Requirements

5. Marketing Plan ----------------------------------------------------------------------------13 5.1.Marketing Strategy 5.2.Distribution Plan 5.3.Advertising and Promotion

6. The Management Plan--------------------------------------------------------------------14 6.1.Ownership Structure 6.2.Internal Management Team 6.3.External Management Team

7. Financial Plan------------------------------------------------------------------------------15 7.1.Risks 7.2.Profit and Loss Statement 7.3.Cash Flow Statement 7.4.Balance Sheet 7.5.Funding Request and Return

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1. Executive Summary

"ELAS” is more than just a shampoo container. Not only does it provide an innovative way of using shampoo, it also offers a brand new opportunity of contributing to the environment. Using air pressure and a piston mechanism, “ELAS” squeezes shampoo out of the bottle unconventionally, allowing consumers to use 100% of the content. The label for the product was obtained from “elasticity,” due to its special composition and the ability to elongate three-folds for use. ELAS Co. is a limited liability company that aims to cover its start up cost of 4 million RMB via the shareholders’ capital of the business entrepreneurs with company profit. Application of finance ranges from product manufacture, staff wages, factory rents, machinery purchase, raw materials, and other elements required for bottle production. The main internal management is comprised of a general manager, a factory manager and a sales department manager. Holding an immense advantage over the commonly used conventional shampoo bottles, “ELAS” targets on mid-brand hair care companies, and provides great opportunity for customers to attract end users’ attention with the original design and curtail their budgets at the same time. The production of “ELAS” needs to be under the machines capacity but at the same time, meet the demands of the market. South China, our main marketplace, builds steady increase in the number of production necessary for the satisfaction of market demand. A successful marketing strategy for “ELAS” such as direct e-mails will be highly required.

The level of mastery in both the marketing strategy and establishment of positive publicity for “ELAS” are also significant in prevalent distribution throughout the market. Once a successful long-term trade relationship is set up with multiple shampoo/conditioner manufacturers, a healthy profit can be expected progressively.

Objectives - The provision of an innovative, eco-friendly shampoo/conditioner container that with distinguishable advantageous features from the existing models. - The prevalent adaption of “ELAS” to multiple shower/beauty aid products and multiple products in different aspects of daily life.

- The modification of plastic materials to plant-based decomposable material after enough market share and awareness.

Mission - Curing the unnecessary waste of bottle products’ contents, providing the solution for efficient, convenient use of shower products.

Risks - Inability to successfully supplant existing container models in a short-medium

period of time.

“ELAS,” with its fashionable appearance, innovative functionality, and remarkably low price compared to the quality, grant consumers an entirely new lifestyle in the shower.

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2. Business Description 2.1 Industry Overview

The plastic molding and bottle-manufacturing industry that we will set foot in is the main supplier for shampoo and conditioner companies that are daily-required products for customers’ well-being and health. However, many of the current shampoo and other hair-care products have container models that make 100% use of shampoo difficult, hence our product containing shampoo in an eco-friendly and economical way has an advantage over the less efficient models.

When considering the heavy involvement of hair care supplies in our lives, it is not hard to see that the scale of the hair care industry is dispersed globally in a remarkable where with constant demands have to be. With the industry’s large size, we can expect stable sales of our bottle over durable periods of time, even longer terms of sales when an order is made with popular hair care brands. Our product will be primarily targeting largely populated Asian-Pacific nations, especially China, at the moment. Based on the inelastic demand for hair care goods, a constant and long-term demand for our designed bottle can be expected.

There are approximately 20 main brands that are dominating hair care markets in China; P&G has the most control of market, with Dove, Lux, VS, Shiseido, Rejoice, Pantene, Bawang, and L’Oreal on the rest of the list. So our industry mainly focuses on supplying these main brands. The market of hair care bottles’ suppliers in Guangdong, China consists of a large number of small or average bottle manufacturers, whose models of production are all common shampoo models such as pump-action or cap-opened bottles. The long-term perspective of the hair care packaging industry will be lucrative because of the recent boom in the hair care markets in Asia. China especially has been enjoying a stable growth rate of hair care marketers. Accompanying the boom is approximately a demand for 700 million bottles each year, which proves that our industry is an enormous one.

One of the largest barriers for us to enter the market is to replace the existing models of the hair conditioner industry. The commonly used models – the cap-opened models, the pump-action models, the open-and-pour models, are already prevalent in global hair conditioner markets, and a period of time is expected to elapse before our container can adapt to the market products and replace the old models present. By publicizing ELAS’ unique features, ELAS will be distinguished from common models. Another barrier is to win over the preferences of the hair care marketers with our design features. Even though our bottle costs less, requires less material and components to build and is more eco-friendly by fully using all the content, the actual market response of whether to accept the new design of the bottle or not is dependent on the companies’ needs for increasing popularity of their own brands.

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2.2 Company Summary In Changping, Dongguan City, a region densely populated by thousands of different factories, “ELAS” will be produced in the rising new factory of ELAS Co. Ltd. that will export the manufactured containers to multiple hair care goods businesses within a far-reaching radius. The manufacturing factory will be limited to company crews and invited personnel only. In comparison with a service-providing facility that possesses multiple interactive features, our business holds the position of a manufacturer, and the factory portion of the business has limited functionality of producing and selling only containers. Rather, a separate office will be established for customer service, comments and complaints, and any troubleshooting services.   2.3 Products This innovative new design of shampoo container allows users to use 100% of the contents of any container of shampoo. According to our survey, while using the old design of containers where consumers press the cap and squeeze shampoo out, a lot of them encounter the problem of not being able to use all the content. Trying to solve this problem and save as much as we can, our company completes a structural advancement, allowing consumers push the whole bottle downwards rather than just the cap. “ELAS” is comprised of six parts: a completely sealed mouth, bottle body containing shampoo, pushing sealed area, an elastic angular piece of silica gel on the sealed plane, a supportive cylindrical structure that is composed of three segments. The total product will weigh 50g each. Here are the functions for all those components. The mouth will be sealed if no one is pushing the bottle. The bottle body will be made of plastic and it will hold all the shampoo. The pushing area will be made of plastic and silica gel that will make the bottle body a sealed space. The elastic angular piece of silica gel will be laid on the pushing plane. The farthest point from the mouth will be 0.2 mm thick and will make the whole plane a slope. Because the plane of this silica gel is a slope and its elastic, when the tip of it touches the top of the container, it will squeeze all the shampoo and push it to the mouth. The supportive cylindrical structure will hold all the shampoo, so that when the consumers push the bottle body down, the space within the bottle will be smaller and therefore squeezing the shampoo out. Also, in order to shorten the cylindrical body, we divided the bottom part into three segments. The three segments are another highlight of our design. All three pieces are initially locked to each other, and the third one is attached to the pushing plane. The first layer has a gap matching to a protruding point at the bottom of bottle body. The second layer has a down-sloping groove pointing to the left. And the last layer has the same groove but points to the right. So if we rotate the first layer in the same direction as the groove of the second layer, the second layer will come out, while the third layer remains the same because its groove points to the opposite direction. Consumer can choose to rotate either way first. Also, the purpose of the gap on the first layer and the protruding part is to prevent consumers from pressing all three layers in after the first rotation. How

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this work is that after the first rotation either left or right, the gap on the first layer no longer matches the protruding point at the bottom of the bottle body, thus the first layer can not be pushed in until the second rotation is finished (the groove matches the protruding point again). The end consumers of this product are households, which can effectively show the responses to our innovative new item. Considering shampoo as a daily requirement, wasting 1% of each bottle will result in a huge amount. “ELAS” overwhelms the conventional models with distinguished features.    Design Outline of “ELAS”  

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2.4 Positioning

The general position of our industry lies in the bottle manufacturing, in other words, suppliers of hair care product-packaging. Our role as a producer of the bottles means our designed product will compete against the models currently produced by other local bottle manufacturers.

Specialties that separate our product from others are: - Allows 100% complete use of contained product. - Uses less material to build in comparison with conventional bottles.

- Prevents waste of chemicals contained inside, thus reducing unnecessary pollution of environment. - Calls attention with an innovative new design that gives our product an advantage.

Beginning from Year 3, our bottle will possibly use plant-based decomposable material for container production instead of plastic, achieving a further step towards an eco-friendly business.

In most cases, an end user purchases a shampoo/conditioner that meets his/her satisfaction, which may differ with the gender, age, preference or conditions of that customer (different flavors, dandruff, curly or straight hair, etc.), and in comparison, a customer finds satisfaction in a bottle by means of its functionality and visual appearance; hence, our product is designed to possess features that provide satisfactions for end users that traditional bottles cannot achieve. To satisfy our main customers who are the shampoo companies, our product provides lower price that will lower the cost for shampoo companies, while at the same time adding a label of “eco-friendliness”.

Sharing a common label as a shampoo bottle, our product aims especially to give the impression of an efficient, non-wasteful, and interesting way to use hair-conditioning products. Yet, our production cost is much lower than the current pump-action bottles.

Bottle manufacturers in this packaging industry compete by trying to win over fixed partnerships with dominant shampoo/conditioner marketers. Once a manufacturer is able to produce containers that qualify for the shampoo producers’ demands, the two businesses are likely to establish a long-term contract to ensure both sides’ profits. Businesses coming after the first manufacturers may have a difficult time trying to find a company needing containers, and this inability to find a customer may bring grave financial stress to the bottle manufacturers. Bottle manufacturers may try to win over a contract by using business strategies like lowering the price of bottle, free samples, etc.

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2.5 Pricing Strategy Fixed Costs Costs of Variables

TOTAL: 1041500 RMB Break Even Point: 1041500/1440000(Total Output) = 0.72 RMB

Because the cost for each bottle is 0.72 RMB, earning 0.08 by selling each bottle, our price will be set at 0.8 RMB that is 0.1 RMB lower than the price of traditional designs.

By setting the price as 0.8 each, our starting cost can be covered in three years. However, because our product possesses distinguishing qualities, 0.8 RMB will be the lowest reasonable price. According to the demand in market, our price can be adjusted between 0.8 and 1 RMB. And our profit range will be from 115,200 to 403,200 per month depending on the preference and condition of the market.

Due to the market research, our competitor’s lowest price for bottle with pumps is 0.9 RMB each. In order to be competitive and profitable, our lowest price will be 0.8, so that our shareholder investment can be at least covered in 3 years. Profit earn after 3 years: ;

However, if we increase our price considering the market demand to 1 RMB, because our product is environmental friendly and unique, all costs can be covered in 10 months.

Also, because our machines can allow us to produce 1440000 bottles every month, the total amount of bottle we can produce in one year is 17280000. Due to our research, 700 million-shampoo bottles are produced each year in China; with this given, our company’s production will share about 2.47% of the whole market production.

Company Owned Market Percentage:

0.08*1440000*12*3 = 4147200

17280000700000000

*100 = 2.47%

Objects Amount RMB / Month

PP Plastic 72 tons 720,000

Silica Gel 1 tons 30,000

Electricity and water 1 60,000

Machine Maintenance 8 30,000

Total: 840,000

Objects Amount RMB/ Month Factory 1 25,000 Factory workers 32 80,000 Officers 8 34,000 Patent Fee 1 400 Business Insurance 1 2,000 Molding Machine 6 7,000 Assembly Machine 2 17,000 Legal Fee 1 4,100 Emergency Deposit

1 10,000

Sales Cost 1 20,000 Financial Cost 1 1,000 Telephone 1 1,000

Total: 201,500

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3. Market Analysis 3.1 Customer Analysis

The hair care customers of “ELAS” will be more sensitive to price than the quality. This is because the shampoo companies care about the cost of production, as one of the most important requirements, price will be significantly important. The location of “ELAS” industry business will only be in Guangdong province for the first three years to gain enough profit to pay rent for new buildings and machines in other provinces throughout the whole of China. Our main customer will be mid-brand shampoo company such as Lux and Eclairol, because they are more eager to search for innovative bottle design in order to promote their brands.

The end consumers will be all age ranges and both genders, although would be used more often by female and younger generations. All citizens in the Guangdong province will be able to buy the product through another shampoo company, by all kinds of family structures and both low-income and high-income workers due to the low price. Although shampoos are generally used by everyone, there are some types of people that might use them more often than others: those have an active lifestyle such as people who plays sports in their spare time, and those who live in urban areas. 3.2 Market Size and Trend

As our container is a sub-product of the product contained and only promotes the

contained product, a focused analysis on the shampoo/conditioner hair care goods market is necessary. With a notable growth rate of 15.5% in Asia Pacific while holding a whopping 80% share of the merged corporate market, this enormous market is predicted to have a great ascend in its overall sales and profits, further increasing its growth rate. Bottle manufacturers within China have used internet as a convenient medium to advertise and create sales opportunities for their containers, particularly in well-known internet trade services or containers-specialized markets, such as ‘Taobao’ or ‘Chinabzp’. About 700 million bottles of shampoo are produced in China each year, which shows that the size of the shampoo bottle market is also enormous. However, almost the whole market is already bought into one traditional bottle. As our company has the capacity of producing 17,280,000 or more bottles per year, the target market will consumer at least 90% of our production since the price is cheaper and the function is environmental appealing. When a new deal between the hair product manufacturers and the container producers is made, it is generally expected for the trade to be mid-long-term or long-term. This is because the specific features of one container is not common, and the hair product manufacturers need to check the details of each type of model in order to find which is the most suitable for each shampoo/conditioner; the providing and purchasing of the bottle becomes habitual, and is difficult to change until the stage when the hair care goods producer considers other types of containers.

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With events of devastating market declines, the damage comes directly to container manufacturers like us as well as directly to the hair care product manufacturers. Consumers’ derailment from one hair care good to another and ceasing to purchase the shampoo/conditioner that uses our container will cause a direct downslope in the sales of our containers, forcing the container production to be reduced, come to a minimum, or even a production halt. During these cases, an advisable revival plan would be an approach to other standing hair care product corporation, or aiming a sale with the current contractor for a sale that doesn’t necessarily produce profit but helps the two businesses survive until the end of the market crisis. With events of government interventions of the market, it can generally be expected that the stress on container manufacturers like us would be rather smaller in scale compared to the burdens on the hair care product manufacturers. Imposed tax is an example of government intervention, which has a negative effect; it will force hair care goods businesses to raise the price of their products, simultaneously demanding decrease of container price, which results in bottle manufacturers’ profit loss. Another predicted form of government intervention is limitation of pollution right of businesses; a fine (or the expense of pollution rights) imposed on the shampoo/conditioner making manufacturer will result in the company’s lowering of its budget, which will affect the price of our containers, decreasing our profit. Subsidies received from the government is a positive example; the eco-friendly approach our bottle takes increases the possibility for our container to receive government acknowledgement and even subsidies, which will directly increase our production and immensely raise the profit received. 3.3 Competition Our customers, instead of buying the shampoo product that will be joined with “ELAS”, could choose to buy a product with a bigger bottle, prettier design, or one of a brand name. Some substitute products may also be conditioner rinse, since many women like their hair soft. Here are some analyses of our competitors: Competitor Traditional Bottler Manufacturer Market Share Currently share all of the bottle-making market. Annual Sales 700 million (All manufacturer produced per year in China) Strengths Widely accepted by consumers and shampoo companies Weaknesses Waste shampoo, cause pollution and cost more to make.

Because the bottle-manufacturing market in China is much of a general market involving different small manufacturers producing the same kind of bottle, therefore, there is no distinct bottle making company that stands out. Our sole competitors are all of these small bottle-making manufacturers that produce traditional bottles. Annual sale of bottles in China is about 700 million. If we produce 17,280,000 annually, we will be able to share at least 2% of the market during the first year. And this percentage will grow each year. We can obtain a share from the market because environment protection is a vastly appealing idea. But at the same time, the fashionable appearance along with lower price will be more attractive to our customers.

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3.4 Sales Forecast

As shampoo is used on a daily basis, the industry of shampoo companies can be

relatively big in China. The demand for shampoo is inelastic because people have to wash their hair every day especially in the southern region in China, and so is the demand for shampoo bottle. As our product is environmentally friendly and can cut down costs for the producers at the same time, our sales will increase by approximately 23% each year at the beginning while more customers and end users accept this new packaging. 2013 2014 2015 Unit: RMB RMB RMB Unit Sales: Shampoo Bottle 17,280,000 21,539,000 26,440,700 Total Unit Sales: 17,280,000 21,539,000 26,440,700 Unit Price: Shampoo Bottle 0.8 0.8 0.8 Total Sales Shampoo Bottle 13,824,000 17,231,200 21,152,560 Direct Cost: Direct Material 9,000,000 11,700,000 14,400,000 Direct Labor 960,000 1,248,000 1,622,400 Total Direct Cost: 9,960,000 12,948,000 16,022,400

4. Start-Up Summary

4.1 Start-up Process:

In China, it normally takes 8 to 12 months to apply for a patent. So before we rent and purchase any factories and machines, we need to spent at least 10 months to design and polish our product and finally submit it to the Patent Department. This will cost us about 370RMB.

Once the patent is received, factory, company locations, machines and workers can now be determined. Finding and renting factory and office will take 2 months. After these locations are set, it will take another 4 weeks to hire 32 workers and 8 officers. As the factory is quite new, the renovation of factory and company will take about two and a half months including purchasing furniture and machineries. 4.2 Start-up Cost:

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Objects Amount Cost (RMB) Molding Machine 6 840,000 Assembling Machine 2 2,000,000 Patent Fee 1 400 Legal Fee 1 49,200 Business Insurance 1 24,000 Renovation 1 100,000 Miscellaneous 20,000 Total Start-up Cost: 3,033,600RMB

4.3 Company Location:

Our first factory will be located in Changping town, Dongguan City. Because

Dongguan City is located between Guangzhou and Shenzhen and it hosts lots of manufacturing industries. So transportation of raw materials and purchasing of machines will be more convenient and efficient. Also, it will be less costly for us to transport our products to shampoo producers and other markets. Considering the initial size of our company, the size of the factory will be approximately 6500-meter square, which will satisfy our supply mission. 4.4 Operating Requirements:

Operation Cost per Month:

Factory 1 25,000 Factory Workers 32 80,000 Officers 8 34,000 PP Plastic 72 tons 720,000 Silica Gel 1 tons 30,000 Electricity and Water 1 60,000 Telephone 1 1,000 Total 950,000

As our factory heavily depends on machines, so workers should be trained for at

least 2 weeks for machine regulation and safety. The plastic we will use as raw material will be Polypropylene (PP) and Polyethylene (PE) plastic, so other industrial plastics will be firmly prohibited.

There will be two main suppliers for our companies, machines producers and PP plastic producers. Since Dongguan is a well-developed hotpot for different manufacture companies, we can easily associate with PP plastic and plastic molding machine companies within the city. Also, since shampoo companies such as B&G and Lux have their sub-companies in Dongguan, too, so our products can be transported to our buyers quickly.

2000m2

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5. Marketing Plan

5.1 Marketing Strategy

The targeted customers of our product are shampoo producers especially the ones that are not in the top range such as Eclairol. Considering that large shampoo companies such as B&G may not be willing to shift their traditional design, relatively small companies such as Lux may use our products to catch consumers’ eyes and promote their brands. To get customers notice the unique selling points of our product which are environmentally friendly, have bottle structural variability and cost less, we need to send sales to advertise and promote our design to these targeted companies. Face to face negotiation will be the most effective way to let more people know about our unique selling points.

In addition to having salesmen do promotion, we may also send direct emails to customers about our product and establish an online selling system for easier purchasing. Also, because our targeted customers are shampoo producers, massive TV advertisements will not be needed for our promotion. However, we can use online video platforms such as YouTube to spread information. We can create short video clips showing how our products are made and how this simple design can squeeze all shampoo out of the bottle. By introducing our process of making products to both end users and shampoo producers, it will capture lots of end users’ attention and therefore give incentive to customers to buy.

5.2 Distribution Plan Four salesmen are assigned to promote our product. Our targeted users are

companies that provide showering utensils such as body lotions and shampoos. Our targeted users are mostly Chinese brands like Bawang and Lafang because

our product’s targeted users are domestic brands. However, international brands are more than welcome to use our products if they are interested in it.

Our first factory is constructed in Dongguan City, Guangdong Province, because it is heavily industrialized by company factories. Once a company orders our product, we will hire truck drivers from a transport company to help us transport our products to the expected destinations.

5.3 Advertising And Promotion Our targeted users are shampoo producers instead of end consumers, thus

television advertisement is not necessary. The main advertising strategy we will use is telemarketing. We will start to promote our product after we obtained the phone numbers from different targeted companies and we will introduce our product to them.

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Not only will we advertise our product through telephone, we will also assign our salesmen to go to different companies and promote our product to them face to face, because by doing so the companies will acknowledge of the mechanism of our product.

We will also give them free products; however, it will not be a huge amount. After we give them free trials, they will fully understand the benefits of using our products and thus make a more preferable judgment.

6. Management Plan

6.1 Ownership Structure

The legal structure of our company is corporation with three main shareholders raising fund as shareholder capital, and each person owning part of the share of the company. Also, these three owners of the company will contribute the start up fund of is 4 million RMB. However, the fraction of share each of them owns will depend on their contribution of the fund raising.

6.2 Internal Management Team

At the beginning of this business, our company will hire 9 officers and 32 workers. These 9 officers include a general manager, who will help organize both market and factory sections; a cashier and an accountant, who will control and document our company’s expenses and income; an administrator, in charge of hiring, planning and reporting; four sales representatives who will communicate with our targeted customers and promote our product; a sales department manager, who will take charge of the promotion sector; a factory manager, who will control the daily operation of factory. These employees’ salaries are listed below: Position Salary/Month

(RMB) Position Salary/Month

(RMB) General Manager 10,000 Sales (2) 2,500 Cashier 2,500 Sales Department

Manager 3,500

Accountant 4,000 Factory Manager 6,000 Administrator 3,000 Factory Workers (32) 2,500 Total Payroll per Month (RMB) 114000

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6.3 External Management Team The external management team will include counselor attorneys and professional trainers for machine usage. Lawyers will be required if our ideas are plagiarized, workers are injured and when contracts are signed. Trainers are needed specifically for machine usage and safety guidance. Other trainers for management may possibly be needed for our internal management team. However, since lawsuits or conflict may not happen and training may be only needed seasonally, this external help may be needed temporarily instead of constantly.

7. Financial Plan

7.1 Risks

Since in the bottle-making industry, there are lots of small companies that produce the same product and there is no one single leading company, our company’s biggest risk is that the old design is too wide-spread, and some consumers may not capable to accept a completely new design. In order to solve this risk, our company will target mid-brand companies such as Lux, because they are well known by consumers but are not the most famous brands. Wanting to use attractive containers to promote their product, those relatively small shampoo companies may want to buy our product. Also, we may need to use fashionable surface and structural designs such as frosting surface and cuboid bottle body to be attractive to teenaged end consumers.

Since China is a huge shampoo consuming country, each year, citizens use 700 million bottles of shampoo. And since a lot of plagiarism happening in China without being punished by law, if our design is creative and profitable, lots of other factories may copy and produce similar products as ours. Furthermore, their cost will be lower than ours because they don’t need to spend money on developing the product. So facing this risk, our solution is purchasing patent and hiring lawyers if necessary to protect our intellectual asset.

As economy is China is boosting, it is harder and harder to employ qualified workers. Because our factory is a highly machine-dependent factory, the machine regulation and safety will be extremely important. The last risk is hiring qualified workers. To solve this risk, we will need to hire professional trainers in the future when more workers are hired. Factory manager will also have the responsibility to make sure workers are operating machines in the right way.

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7.2 Profit and Loss Statement 2013 2014 2015 Unit: RMB RMB RMB Revenue: Revenue from Product sales

13,824,000 17,231,200 21,152,560

Total Revenue: 13,824,000 17,231,200 21,152,560 Revenue Miscellaneous

Bank Interest 150,000 200,000 250,000 Total Revenue 13,974,000 17,431,200 21,402,560 Cost of Sale: Direct Cost: Direct Material 9,000,000 11,700,000 14,400,000 Direct Labor 960,000 1,248,000 1,622,400 Water and Electricity

720,000 760,000 800,000

Total Direct Cost: 10,680,000 13,708,000 16,822,400 General And Administration:

Legal Fee 49,200 49,200 49,200 Depreciation 284,000 284,000 284,000 Insurance 24,000 24,000 24,000 Office Rent 300,000 300,000 300,000 Salary 408,000 530,400 689,520 Telephone 24,000 28,000 37,000 Total General: 1,089,200 1,215,600 1,383,720 Total Cost: 11,769,200 14,923,600 18,206,120 Gross Profit: 2,204,800 2,507,600 3,196,440 Profit Tax 25% 25% 25% Net Profit: 1,653,600 1,880,700 2,397,300 Note: 1. Because our machines are not operated at full capacity during the first few years, there will be no requirement for new machines. Therefore, deprecation of capitals will be constant through out the first 3 years.

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7.3 Cash Flow Statement (All numbers are RMB)

2013 2014 2015 Unit: RMB RMB RMB Cash Revenue: Revenue from Product sales

13,824,000 17,231,200 21,152,560

Total Cash Revenue:

13,824,000 17,231,200 21,152,560

Additional Cash Received

4,000,000 0 0

Total Cash Received

17,824,000 17,231,200 21,152,560

Cash Disbursement

Material Cost 9,000,000 11,700,000 14,400,000 Salaries 1,368,000 1,778,400 2,311,920 Legal Fee 49,200 49,200 49,200 Office Rent 300,000 300,000 300,000 Telephone 24,000 28,000 37,000 Water and Electricity

720,000 760,000 800,000

Insurance 24,000 24,000 24,000 Total Disbursement

11,478,000 14,639,600 17,922,120

Opening Cash 0 634,600 3,226,200 Add Cash 17,824,000 17,231,200 21,152,560 Deduct Cash 11,478,000 14,639,600 17,922,120 Net Cash Flow 6,346,000 3,226,200 6,456,640

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7.4 Balance Sheet 2013 2014 2015 Unit RMB RMB RMB Assets: Long Term Assets: Machine (Net Of Depreciation)

2,556,000 2,202,003 1,767,649

Miscellaneous: 108,000 96,000 84,000 Total Long Term Asset:

2,664,000 2,298,003 1,851,649

Current Assets: Cash 1,584,800 1,834,297.75 2,419,032.5 Account Receivable

3,456,000 4,307,800 5,288,140

Inventory 750,000 975,000 1,200,000 Total Current: 5,790,800 7,117,097.75 8,907,172.5 Total Assets: 8,454,800 9,415,100.75 10,758,821.5 Liability Current Liability Account Payable 2,250,000 2,925,000 3,600,000 Tax Payable 551,200 609,400.75 761,521.5 Total Current Liability

2,801,200 3,534,400.75 4,361,521.5

Total Liability 2,801,200 5,354,400.75 4,361,521.5 Owner’s Equity Share Capital 4,000,000 4,000,000 4,000,000 Retain Earning 1,653,600 1,880,700 2,397,300 Total Owner’s Equity

5,653,600 5,880,700 6,397,300

Liability and Owner’s Equity

8,454,800 9,415,100.75 10,758,821.5

Note:

1. The expected life of all machines and miscellaneous (Renovation) is 10 years. 2. The credit for our customers is 3 months. 3. Inventory refers to raw material for one month. 4. The credit of account payable is 3 months.

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7.5 Funding Request and Return

Overall, our business will require 4 million RMB funds. All money will be raised by share capital. Each shareholder will contribute to these funds and will be paid back within 3 years. Since according to the projected profit and loss statement, the net profit will be able to cover the fund at the end of 2015. Funds will be used in machine purchasing, factory rending, material inventory, renovation and other miscellaneous costs. All funds will be paid back to shareholders by cash-out option.