Final Internship Report

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ICS, LLC B u s i n e s s P l a n

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Vision and Mission Statements .......................................................................................................... 3

Executive Summary ................................................................................................................................. 4

U.S. Company Details ............................................................................................................................... 6

Company Ownership ............................................................................................................................................. 6 Company Location .................................................................................................................................................. 6

Foreign Company Details ................................................................................................................... 10

Foreign Company Ownership ........................................................................................................................ 10 Foreign Company Location ............................................................................................................................. 10 Description of Business Activity ................................................................................................................... 12 Organizational Chart .......................................................................................................................................... 14

Applicant’s Role & Company Management ................................................................................. 15

Applicant Information and Job Title ........................................................................................................... 15 Applicant Qualifications ................................................................................................................................... 15 Applicant Biography ........................................................................................................................................... 15 Applicant Job Description ................................................................................................................................ 17 Company Management Team ........................................................................................................................ 18 Organizational Chart .......................................................................................................................................... 19

Business Description ............................................................................................................................ 20

Products & Services ............................................................................................................................................ 20 MBK Machine Contract...................................................................................................................................... 21 Expansion Plans.................................................................................................................................................... 21

Market Analysis Summary ................................................................................................................. 22

Market Segmentation ......................................................................................................................................... 24 Industry Analysis ................................................................................................................................................. 25 Competitors ............................................................................................................................................................ 26 Competitive Edge ................................................................................................................................................. 26

Marketing Summary ............................................................................................................................. 28

Objectives ................................................................................................................................................................ 28 Marketing Channels ............................................................................................................................................ 28

Financial Projections ............................................................................................................................ 31

Appendix: Year 1 Financial Projections by Month ................................................................... 44

Appendix II: Letter of Intent ............................................................................................................. 49

TABLE OF CONTENTS

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Vision: • To be the first choice of customers for machined parts within

our range of offerings. Mission:

• To deliver the best quality at the best value to all customers. • To deliver parts on or before the requested time. • To expand capacity based on customer needs and new growth

opportunities. • To continue being innovative on improving machining

techniques to provide the best quality at the best cost.

VISION AND MISSION

STATEMENTS

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China, one of the greatest modern economic success stories in all the world, is currently the United States’ second-largest trading partner and its third-largest export market. Total trade between the two countries exceeded $599 billion in 2015. Now, China is taking initiative to improve its industry and pursue a more innovative economy through these developments. Made In China 2025 is encouraging multiple industries to upgrade systems and replace foreign smart manufacturing technology with Chinese innovations. There is good opportunity to invest in the U.S. manufacturing industry and sell to China. Due to rising labor costs in China, the technology and management advantage now in the U.S. is more competitively priced. Despite rising labor costs, productivity has not increased. This represents an excellent opportunity for ICS, LLC (also referred to as “the Company”) which is to take significant advantage thanks to its affiliation with XingGems Material Science (Shanghai) Co., Ltd. ICS makes parts for machines out of steel, stainless steel, copper alloy, aluminum, and more. The Company intends to establish a factory in the U.S. through a strategic alliance with MBK Machine, a successful machine shop firm in Frederick, Colorado. MBK has grown significantly since the current owners took over in 2014 and is over capacity. ICS has been contracted to produce overage work on behalf of MBK, sublease a workshop and offices from MBK, and utilize its highly developed intellectual property. Through this the Company aims to grow its own customer base to serve domestic clients in the rocky mountain region as well as export goods to Chinese and other international clients. As business and staff counts grow, ICS also plans to expand service by adding a third shift and 24/7 operations to support international customers and add significant value for domestic clientele. Mr. Wei Chen will lead ICS in this endeavor. Mr. Chen has rich experience in the machinery field in China. Notably, Mr. Chen travelled to Germany to receive training for a computer numerical control (CNC) mill and was the first Engineer to use the advanced technology in China. Mr. Chen is self-motivated, responsible, hardworking, organized and efficient, strong analytical ability, as well as strong multilingual communication and networking skills. He has served the Foreign Company as General Manager since joining it in 2011. He is uniquely suited to propel ICS to meet its goals and rise to profitable success. In addition to Mr. Chen’s strong background, two members of the operation team graduated from major educational institutions for mechanics and automation. The Machine Shops industry is valued at $41.4 billion in the U.S. alone with experts predicting continued growth at an average annual rate of 1.6% to reach $44.7 billion

EXECUTIVE SUMMARY

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by 2021. Growth has been attributed to the rebound of automotive and aerospace industries, and is projected to continue with medical device manufacturing now bolstering sales. This is a highly decentralized industry with the four largest firms only representing two percent of the market share. The Company will face some competition from machine shops in Colorado, but will easily differentiate itself with branding, leadership, and the strategic advantages presented by MBK Machine. The Company will use a smart combination of digital marketing tactics, as well as traditional ones such as attendance at trade shows and other events. ICS will continue to maintain its website for search engine optimization, utilize email marketing techniques, and more to reach new customers and clients. Through these efforts ICS aims to triple the number of machinists in its Colorado office within five years. ICS, LLC will be funded by $300,000 in direct investment from Yinchun Luo, the primary shareholder of the affiliated Foreign Company. Funding from Mrs. Luo and revenue from ICS, LLC’s operations will support Wei Chen’s position with one year of his visa approval.

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ICS, LLC is a Limited Liability Company registered in the state of Colorado. The Company was formed on June 20, 2017.

Company Ownership The Company is owned by Yinchun Luo (100%). The relationship between ICS and Xinggems Material Science (Shanghai) Co., Ltd is established by the shareholder Yinchun Luo’s investment not Xinggems Material Science (Shanghai) Co., Ltd’s investment directly as the Foreign Company.

Company Location The Company will maintain a physical office and machine shop at the following location: 7450 Johnson Drive Suite A Frederick, CO 80504

The following images depict the Company’s U.S. office:

U.S. COMPANY DETAILS

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Sublease Building at 7450 Johnson Drive.

Subleasing Two of Six units on right side.

7450 Johnson Drive: Main Entrance.

7450 Johnson Drive: Main Lobby.

ICS Office is located left of main lobby.

ICS Workshop, including red machinery.

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ICS Office – Floor to be tiled soon.

Shared Conference Room.

Shared Kitchen & Break Room.

Shared Restroom.

Shared Shower Facilities.

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The following floorplan illustrates the space ICS is subleasing from MBK:

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Foreign Company Ownership

The Foreign Company, Xinggems Material Science Co., Ltd., is owned by Yinchun Luo (80%) and Wei Chen (20%).

Foreign Company Location

The Foreign Company is headquartered at the following location: No.600 Zhujiang Road Chengdu, Sichuan, China, 610223

FOREIGN COMPANY DETAILS

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No. 600 Zhujuang Road

Office Building

Office Building No. 3 and Unit No. 2

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Lobby and Mail Boxes

Work Area One

Work Area Two

Work Area Three

Work Area Four

Work Area with Partial XingGems Staff

Description of Business Activity XingGems Material Science (Shanghai) Co., Ltd. was established in 2011, registered in Shanghai Pilot Free Trade Zone and engaged in the global industrial products trade and technical consultant services.

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XingGems takes advantage of its international background to continuously integrate the global carbon industry supply chain, develop new products and projects through research and development. XingGems creates products such as graphite electrodes, carbon electrodes, carbon oxidation products, petroleum coke, carbon agents, pitch, graphite materials, and more for the following industries and sectors: steel, metallurgy, petroleum, electronics, chemical, ceramics, machinery, environmental protection, and so on. An overview of some of the Company’s products is below:

• Graphite electrodes are made of high-quality low ash materials, such as petroleum coke, needle coke, and coal pitch. It features low resistivity, good electrical conductivity, low ash, compact structure, good antioxidation, and high mechanical strength, so it is the best conductive material for electric arc furnace and submerged furnace.

• Carbon electrodes as a submerged furnace conductive electrode can be

widely used in metal silicon, ferroalloy, calcium carbide, yellow phosphorus, and other metal and non-metallic smelting process. Carbon electrode is an energy-saving, environmentally friendly product, known for its reducing power consumption and pollution.

• The cathode carbon block is mainly used as the cathode of the aluminum

electrolytic cell. It features high temperature resistance, resistance to salt corrosion and conduction, good thermal conductivity, high mechanical strength, good thermal shock resistance, and strong resistance to sodium corrosion.

• Waterborne inorganic paint is made by evenly dispersing a mixture

containing nanoscale superfine ceramic powder into aqueous solution. It features superior adhesion to the surface of high-temperature graphite base materials, short application duration, and easy construction. The major ingredients of the product include SiO2, Al2O3, Cr2O3, ZrO2 and the major elements include Si, Zr, Cr(III), Al, and O. The binder is the modified sodium silicate.

• Carbon additives can be used in the steel casting for promoting the steel

quality in steel-melting. This product is widely used in foundry plants, brake pads, and other various products where rubbing material is in scope.

XingGems has strong partners throughout the world, such as in U.S., Russia, Europe, Southeast Asia, New Zealand, and other countries and regions. The Foreign Company is based in the Christian faith and takes active part in various social activities, including the International Marriage & Family Festival (IMFF) and other cultural and educational activities, like GLU International Limited for the “3C study

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abroad” program for Chinese students (“3C” stands for Christian school, Christian homestay and Christian church.) GLU International, established in 2015, is a consultant company in culture, education, and marriage based on Christian faith.

Organizational Chart The following organizational chart depicts the hierarchical structure of the Foreign Company:

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Applicant Information and Job Title The business activities described in the following sections of this Business Plan will be overseen by Wei Chen, who will serve as the Company’s CEO. Wei Chen was employed at XingGems Material Science Co., Ltd. from 2011 to present. As the executive in charge ICS, LLC the Applicant will oversee a U.S. based staff and guide the vision and growth strategy of the Company to increase revenue and guide expansion into new U.S. markets.

Applicant Qualifications • The L-1 applicant, Wei Chen, has been guiding the Foreign Company for six years

since joining it in 2011. • Wei Chen will serve ICS, LLC in the vital role of CEO. Wei Chen will direct the

management of the organization and will exercise all decision-making powers as it relates to developing the policies and strategies of the Company.

• Wei Chen not only brings his nearly 30 years of metal materials and machining sector and Managerial experience to the Company, he also brings unique and invaluable insight into the executive, management, production, and sales functions of the Foreign Company

• Wei Chen will be able to perform essential functions as liaison between ICS, LLC and the Foreign Company as well as lead the growth and development of the Company in the United States.

A more detailed accounting of Wei Chen professional history, job description for the Company, and organizational chart follow.

Applicant Biography Mr. Wei Chen graduated from the major of Metal Material and Heat Treatment of Chengdu University of Science & Technology in 1988. He had been employed as an

Engineer in the most advanced special steel factory for eight years. During that time, he was engaged in computer software development for three years where he successfully developed “Computer Aided Formulating Steel Tube Production Plan System” which earned him an award. Mr. Chen spent the other five years in charge of technology of new projects of the steel factory. In 1992, Mr. Chen was dispatched to Mannesmann, Germany to receive technical training for a computer numerical control (CNC) grinding machine, subsequently Mr. Chen was the first Engineer to use the advanced grinding machine in China.

From 1996 through 1999, Mr. Chen acted as a Cutting Tool Engineer with Kennametal, and from 1999 till 2002, Mr. Chen acted as Metal Working Fluid

APPLICANT’S ROLE & COMPANY MANAGEMENT

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Engineer at Caltex in the U.S. As one of the earliest technical and marketing professionals to study international technology and sales in the field of numerical control machining in China, Mr. Chen has experience in machining for six years, having received professional training in America. He cooperated with technical experts in America, used advanced carbide tools by Kennametal, as well as the metal cutting fluid and management equipment of Master Chemical and Caltex from America to the large-scale machining enterprises and steel enterprises in the southwest region of China and achieved outstanding sales performance. He was once he was awarded “No. 3 in Sales Performance of Kennametal Shanghai Office in China” and “No. 2 in Sales Performance of Metal Cutting Fluid of Caltex in China.” Mr. Chen enjoys quite wide network in China. He successfully developed key clients like Chengdu Aircraft Group, Dujiangyan Lafarge, China Academy of Engineering Physics, China Jialing, Chongqing Jianshe Group, Zongshen Technology, Chang’an Motors, Jianshe Yamaha, and Art-Tech R/C Aeration, and more. From 2000 to 2003, Mr. Chen studied in Sichuan University and obtained his MBA degree. From 2003 until 2011, Mr. Chen served as Vice Chairman of Guanghan Shida Carbon Co., Ltd. where he was responsible for Marketing, Technology, Finance, Administration, and Human Resources, as well as carrying out the work of sales, marketing, finance, technology, personnel, administration, and informatization. During the eight years Mr. Chen worked for that firm, the annual sales volume of the company rose a dozen times, increasing more than RMB 400 million; sales volume of import and export trade exceeded USD $25,000,000; goods were sold to more than 20 countries and regions; the assets of the company rose from RMB 0.1 billion to RMB 1 billion. Mr. Chen also served as Managing Director of Sichuan Province Marketing Association as well as a member of the Chinese Society of Optimization, Overall Planning, and Economic Mathematics concurrently. Since November 2011, Mr. Chen has served as General Manager of XingGems Material Science (Shanghai) Co., Ltd. In this role, he is responsible the trade of industrial products of the company from the setup; the sales volume grew from nothing to USD $3 million, and personnel from 3 to 14. Mr. Chen has visited America ten times since 2008, to be more specific, he visited America in 2008, 2009, 2010, 2011, 2014, 2015, 2016 and 2017 respectively for the purposes of visiting American clients and partners, as well as researching suitable locations for factories, offices, and other operations. Mr. Chen is very familiar with American business acumen and markets as a result. Mr. Chen has many cooperative partners and friends in the Denver area, of which, including Mr. Cook whom Mr. Chen has known for ten years, having exchanged about industrial products since 2007. MBK, a company Mr. Cook purchased in 2013,

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has developed quite well and will outsource work to ICS as the Company is becoming established in the U.S. Mr. Chen has a deep technical understanding and sales experience in machining, as well as management experience in the production and trade of industrial products. There is no doubt he is the best candidate to be dispatched to overseas to establish the new factory and develop business in the U.S.

Applicant Job Description As CEO, Wei Chen will be responsible for the following duties:

• Formulate business policies, business goals, and business plans of the Company according to the resolution of the Board of Directors, divide them among all departments and put them into practice

• Draw up rules, regulations, reform schemes, and reform measures of the Company and have them implemented

• Adjudicate and put forward the organization structuring schemes of the Company

• Guide the basic direction of the enterprise cultural construction, create a good working and living environment, cultivate the sense of belonging of employees, and enhance the company’s centripetal force, cohesion and combat effectiveness.

• Exercise ultimate executive duties of planning, developing, and establishing policies and objectives of the company in accordance with its board directives and corporation charter

• Review the expenditure of operating costs of the Company; review activity reports and financial statements to determine progress and status in attaining objectives; revises objectives and plans with current conditions; be responsible for the economic benefit of the Company, and have the right to command the operation, allocate resources, and select investment projects.

• Decide the appointment and dismissal of employees of all departments • Evaluate performance of executive and managerial personnel for compliance

with established policies and objectives of the companies and contributions in attaining objectives

• Mediate and alleviate conflicts and issues which may arise between departments

• Develop long-range goals and objectives of the Company • Review and analyze activities, costs, operations, and forecast data to

determine progress toward stated goals and objectives • Stay abreast of demands in the Machine Shop industry sector: anticipating

the ever-changing needs of potential clients will be key to company growth • Perform any other functions required to foster and promote business

operations

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The applicant’s time will be devoted to the following: Function Allocation

of Time Year 1 Formulate strategy, business culture, operating

policies, business goals and business plan for the company.

25%

Establish and manage corporate structure, monitor Human Resources procedures, rules and regulations.

15%

Direct the implementation of the business strategy and plan including liaison work with the foreign company.

30%

Monitor, review, assess, forecast, and adjust team settings in order to accomplish business goals.

20%

Direct the resolution of Internal and external company's emergency matters ad hoc.

10%

Year 2 Formulate strategy, business culture, operating policies, business goals and business plan for the company.

20%

Establish and manage corporate structure, monitor Human Resources procedures, rules and regulations.

10%

Direct the implementation of the business strategy and plan including liaison work with the foreign company.

40%

Monitor, review, assess, forecast, and adjust team settings in order to accomplish business goals.

20%

Direct the resolution of Internal and external company's emergency matters ad hoc.

10%

Company Management Team The Applicant will oversee the management team of the U.S. Company, which will include:

General Manager Key Functional Areas Covered: All aspects of production (machining) and assisting CEO with Administration, Customer Service, and any other items assigned by CEO. Past positions, successes and/or unique qualities required: 10 to 20 years of experience of leading Programmer/Machinist.

Lead Machinist Key Functional Areas Covered: Set-up of machines, training of operators and in process quality inspection.

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Past positions, successes and/or unique qualities required: 10 or more years of machining experience and knowledgeable about all outsourced parts from Machine. Would prefer bilingual candidates able to communicate in both written and spoken English and Mandarin. Lead Programmer Key Functional Areas Covered: Programming of new parts Past positions, successes and/or unique qualities: Several years of programming and setting up production runs for parts. Educational background: Mechanical Engineering Degree. Would prefer bilingual candidates able to communicate in both written and spoken English and Mandarin. Machinist Key Functional Areas Covered: Set-up and operate machines. Past positions, successes and/or unique qualities: 5 to 10 years of machining experience.

Organizational Chart The following organizational chart depicts the proposed hierarchical structure at ICS, LLC’s U.S. office:

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ICS will be a high-tech manufacturer of precision machined parts based in Colorado. The Company is establishing a Precision Machine Shop to supply parts to several U.S. industries including automotive, medical, aerospace, oil and gas, instrumentation, and more, as well facilitate sales to Asia. ICS’ ability to communicate in both English and Mandarin will distinguish it in the market and provide competitive differentiation. Importantly, ICS will have immediate revenue thanks to a contract with a key strategic partner outlined in further detail below. The Company will leverage unique processing techniques already developed by this strategic partner with the commanding position of affiliated XingGems Material Science Co., Ltd. in the Chinese market. XingGems will act as an agent to develop the Chinese market for ICS exports.

Products & Services ICS will offer the following types of products manufactured in its new Colorado facility: • Stainless Steel Parts • Steel Parts • Electromechanical Microwave Parts

• Medical Biochemical Precision Parts • Aluminum Alloy Parts • Copper Alloy Parts

Domestic Sales The development of new sales in Colorado and neighboring mid-western states will provide ICS with additional sales with improved margins. Products and services will be priced higher than the average order obtained from MBK Machine spill over. The Company expects slow development in the initial three months while establishing the brand, reputation, and networks, but will see increased monthly sales.

International Sales Meanwhile, ICS will also continue to develop new sales in Asian and other global markets. This will provide the Company with additional sales with good margins at pricing similar to the average order obtained from MBK Machine spill over, and is expected to grow higher over time due to the superior quality of imported U.S. parts in the Asian market. ICS will encourage sales with discounts and other perks while establishing its reputation in the international marketplace. XingGems will serve as an agent to develop this business.

BUSINESS DESCRIPTION

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MBK Machine Contract ICS has entered into a contractual agreement with S&DC Corp. (d.b.a. MBK Machine), a Denver-based firm which was established in 2013. MBK Machine has been recognized by the city of Longmont as the Best Machine Shop in the Longmont area for the last two years. MBK has grown significantly since inception and now employs more than 20 personnel on staff and is operating at maximum capacity. The firm has grown from 6 employees when the new owners took over in 2014 to more than 25 employees in 2017. Annual sales grew from $900,000 in 2014 to $1,600,000 in 2016, and are projected to exceed $2,000,000 in 2017 based on first half analysis. MBK has immediate need to outsource orders for production and will be a smart, strategic partner of ICS for this reason. Additionally, MBK has agreed to enter into a sublease agreement with ICS to have dedicated offices and workspace in its Frederick, Colorado facility, as well as provide ICS with top-tier, immediate technical support. This access to MBK’s intellectual property and operational systems enable ICS to immediately provide high quality products and services at a lower cost. These systems include customized work holding systems, advanced usage of Renishaw probes to increase accuracy and repeatability of machining parts, and an integrated manufacturing resource planning (MRP) system. This contractual commitment to serve the spill over production needs of MBK Machine creates an immediate stream of revenue for operations. Pricing will be fixed at 92% of price obtained by MBK Machine, after the cost of raw material. MBK will provide the raw material and inspection. The Company expects to receive monthly purchases of between 70 to 100% of capacity, depending on the need to service other contractual commitments in the first year of operations providing dependable sales and revenue.

This business relationship will allow both companies to continue to grow with their customers. MBK by outsourcing some production to ICS while ICS develops its own customer base domestically and in Asia. Likewise, ICS will help MBK attract new customers with machines the Company is purchasing which can produce much larger parts than they currently have equipment to manufacture. The partnership provides ICS with immediate access to a stream of customers. This agreement with S&DC Corp. (d.b.a. MBK Machine), appears in Appendix Two.

Expansion Plans As the Company grows in size it will develop services 24 hours a day, 7 days a week with increased expert personnel on third shift. Round the clock operations will be necessary as ICS ramps up export trade with China and other clients based in Asia. This expansion will add significant value for domestic customers while serving the emerging specialty global market.

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The cost of the machining industry in China has continuously risen over the past decade, while the manufacturing industry in America has grown stronger and become a revived and competitive marketplace. Meanwhile, the manufacturing industry in China is also growing to meet the demands of high-end superior parts for precision machining. ICS is ready to help meet these needs.

According to recent analysis by the Congressional Research Service, the rapid rise of China as a major economic power within a time span of about three decades is arguably the greatest modern economic success story with China’s real gross domestic product (GDP) growing at an annualized 10% from when economic reforms began in 1979 through 2016.1 “China has emerged as a major global economic power and the world’s largest economy (on a purchasing power parity basis) manufacturer, merchandise exporter and importer, and holder of foreign exchange reserves… According to U.S. trade data, total trade between the two countries exceeded $599 billion in 2015. China is currently the United States’ second-largest trading partner, its third-largest export market, and its largest source of imports.”2

The following chart provided by the Congressional Research service illustrates Chinese and U.S. GDP as a percentage of the global total GDP from 1980 to 2016:

1 Morrison, Wayne. Congressional Research Service. “China’s Economic Rise: History, Trends, Challenges, Implications

for the United States” August 6, 217. Source: https://fas.org/sgp/crs/row/RL33534.pdf 2 Ibid.

MARKET ANALYSIS SUMMARY

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The U.S. Chamber of Commerce has been tracking and analyzing China's state-led economic development policies for more than a decade. “As the Chinese economy matures the Chamber acknowledges that it is natural for China to pursue a more innovative economy through significant investments in research and development as well as policies aimed at improving innovation capacity and economic efficiency.”3 Made in China 2025 (MIC2025) is one of those efforts. “MIC2025 extends China's innovation focus to 10 strategic sectors of its economy. The MIC2025 plan is a high- level industrial policy aimed at transforming China into a global manufacturing leader through promoting indigenous innovation, domestic brands, secure and controllable standards, as well as localization of production and data.”4 The following chart provided by the Chamber illustrates the semi-official targets for the domestic market share of Chinese products in 2020 and 2025.

Over the next decade intelligent factories, digital workshops, intelligent enterprises, and remote enterprises will become more prevalent in China. ICS has the opportunity to provide high end machinery parts and services for these Chinese enterprises upgrading their systems and production lines to smart manufacturing technology. The following chart illustrates the specific niche industries where the Chinese are replacing foreign smart manufacturing technology.

3 U.S. Chamber of Commerce. Made in China 2025: Global Ambitions Build on Local Protections. 2017. Accessed August

21, 2017. Source: https://www.uschamber.com/sites/default/files/final_made_in_china_2025_report_full.pdf 4 U.S. Chamber of Commerce. Made in China 2025: Global Ambitions Build on Local Protections. 2017. Accessed August

21, 2017. Source: https://www.uschamber.com/sites/default/files/final_made_in_china_2025_report_full.pdf

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Market Segmentation In addition to MBK clients, ICS has broad opportunities to serve a wide range of customers. Customers can be in a wide variety of manufacturing industries, as well as the aerospace, automotive, chemical, electronics, medical, oil and gas, industrial machinery, as well as general prototype and mold services. The Company has divided these into two target segments: Domestic Midwest and International Asian. Domestic Midwest customers are located throughout the western U.S: Colorado, Arizona, Utah, New Mexico, Wyoming, Kansas, Texas, and California. There are more than 103,900 manufacturing businesses located within these eight states. The following table includes data provided by market analysis experts ESRI for registered businesses by SIC code.5

Business Summary - Data for all businesses in area

Colorado, New Mexico, Wyoming, Utah Arizona, Kansas, California, Texas

Total Businesses: 2,984,617

by SIC Codes Number Percent Agriculture & Mining 68,995 2.3% Construction 193,811 6.5%

Manufacturing 103,960 3.5%

Transportation 84,381 2.8%

Communication 29,773 1.0%

Utility 11,791 0.4%

Wholesale Trade 122,411 4.1%

The International Asian customers will speak Mandarin and hail from Shanghai, Sichuan, Chongqing, Sanxi, Hubei, and/or Hunan in China, as well as other Asian, Mandarin-speaking countries, like Singapore and Taiwan. All target market segments still have the same needs:

• Speed: Products must be delivered on time or early with short lead times.

5 Business Analyst Online. Source: http://bao.arcgis.com/

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• Quality: Parts must meet customers’ requests as advised in their prints and instructions; and verified with modern inspection equipment.

• Price: Must be competitive but customers value quality and expedience • Comfort: Asian customers need to be able to provide drawings, instruction

and have dialog in their native language while receiving the items above.

Industry Analysis The Company will operate in the $41.4 billion Machine Shops industry which has enjoyed stable growth over the past five years driven by rebounds in commercial aerospace and transportation manufacturing. Industry analysis experts at IBISWorld expect the industry to grow at an annualized 1.6% to reach $44.7 billion by 2021. The following visual aids provided by IBISWorld illustrate key statistics:

IBISWorld reports that over the next five years, operators will devote further resources to satisfying growing demand from manufacturers in markets like

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automobile manufacturing, commercial aircraft manufacturing, and metal forging, as well as medical device manufacturers as demand is expected to increase due to a progressively aging U.S. population with an increasing need for medical care.

Competitors The Machine Shop Services industry is highly fragmented with the largest four firms controlling less than 2% of the market. As such, the Company will face varied competition from a number of players both on the Asian continent and in the Midwestern United States. The two most notable competitors in the area are highlighted below: Industrial Screen & Maintenance, Inc. http://industrialscreen.com/ Overview: Founded in 1969, Industrial Screen and Maintenance located in Grand Junction, Colorado and Casper, Wyoming, is the largest machine shop company in the rocky mountain region. ISM is fully tooled for large and small production runs, custom manufacturing, and cost saving repairs. Their modern facilities include over 20 CNC turning and milling centers capable of simultaneous production of a single part to within .0002 tolerances, as well as numerous drill presses, lathes, mills, and a variety of additional finishing equipment. ISM adheres to all ISO 9001 and API standards and employ a rigorous Quality Control Program. Advanced Precision Machining, LLC http://advancedprecisionmachine.com/ Overview: Advanced Precision Machining (APM) provides comprehensive manufacturing services from blueprint to completion and inspection. Certified CNC machinists provide milling, turning, grinding, plating, prototyping, surface finishing applications, and more. APM was founded in 2005 and is located in Longmont.

Competitive Edge Success in the precision machining industry is driven by access to the latest a nd most efficient technology and techniques, skilled labor, marketing expertise, key contacts within targeted industries, optimum capacity utilization, production of premium goods, consistent work, the ability to vary services to suit different needs, having a diverse range of customers, effective quality control, and having a good reputation. ICS is positioned to outperform competitors for the following reasons: Products and Services: ICS products will be superior to competitors because the Company will use equipment of the highest precision which only a few shops do with highly paid skilled machinist running them. On-time delivery will also a key

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focus for the Company as this sets ICS apart from the many shops that are willing to deliver a few days to weeks late. Expansion plans for ICS as it grows will include offering unique 24/7 quick turnaround service which is awarded with higher margins when accomplished. Less than 10% of the machine shops in Colorado are managed at this level. Expert Leadership: The ICS management team has unique experience in much larger international organizations in the industry including previous experience with cutting tool from one of the leading tool manufactures Kennametal as well as over 20 years of experience in marketing and sales. Management expertise is very important in properly pricing a bid as the workability of materials, the complexity of machine setup, and the capabilities of individual pieces of machinery can vary substantially. Operational Systems: The Company will have access to developed systems that enable ICS to provide high quality products/services at a lower cost. These systems include an integrated MRP (Manufacturing Resource Planning) system, advanced usage of Renishaw probes to increase accuracy through several years of writing of advanced macros for the repeatability of machining parts, and customized work holding systems. Marketing: The Company has unique marketing skill sets that enable it to attract new customers at a low cost. These skill sets include Wei Chen’s over twenty years of marketing and sales experience throughout the world in different industries like the synthetic graphite market, machining tools sales, and precision machined parts. Mr. Chen brings a key advantage marketing the Company in Asia due to the language barrier.

Strategic Alliance: The Company has developed a strategic alliance with MBK Machines, an already successful machine shop that has turned a losing business into a successful and profitable one. This alliance includes access to highly efficient operational organization in turn for supporting their growth, and will allow partners to continue to grow with their customers by outsourcing some production to ICS while the Company develops its own sales and customer base both domestically as well as in Asia. Intellectual Property (IP): The Company will have access to IP from strategic partner MBK that gives ICS an advantage over competitors. This IP includes advance macros that have been developed to improve the efficiency of equipment as well as allow the equipment to perform advanced machining operations beyond what they were originally set-up to perform.

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ICS will develop a brand that communicates its core values of providing high quality machine industry services to a range of clients in various business sectors. A cohesive brand identity, including a memorable logo and all necessary marketing collateral, will transmit a clear message of these values to the Company’s customers and clients and guide the development of marketing campaigns. ICS plans to utilize a hybrid marketing approach leveraging digital tactics like email marketing with traditional methods like trade show attendance, referral networking, and more. This strategy is specifically designed to reach new customers and clients in a variety of industries.

Objectives ICS has established the following key business milestones that it expects to accomplish as it establishes business operations in the U.S.:

Short Term

2017 • Launch operations. • Generate revenue from MBK contract. • Process first sales with two new clients. • Hire first new additional Machinist with

increased demand.

2018 • Increase sales by 69% over 2017 • Increase staff count by 4 and payroll by

55% over 2017 • Increase profit margin from 0.7% in 2017

to 1.6% in 2018 Long Term 2019

• Increase sales by 58% over 2018 • Increase staff count by 3 and payroll by

27% over 2018 • Increase profit margin from 1.6% in 2018

to 5.5% in 2019

2020 • Increase sales by 42% over 2019 • Increase staff count by 2 and payroll by

17% over 2019 • Increase profit margin from 5.5% in 2019

to 7.8% in 2020

Marketing Channels Marketing for machine shops consists largely of direct contacts with manufacturers. Because of the need for close technical consultation between machine shops and customers, the work of most machine shops is usually confined to a very local area but ICS has the advantage of international leadership. New business may also come through requests for proposals (RFPs) from internet contact or acquired through job bidding. While pricing is always a consideration for new business, product quality and the ability to meet production timetables are often of greater concern. Management expertise is very

MARKETING SUMMARY

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important in properly pricing a bid, since the workability of materials, the complexity of machine setup, and the capabilities of individual pieces of machinery can vary substantially so the engineering (three degreed engineers) will set the Company apart from most machine shops. ICS will use the following channels to attract new customers:

Website: The Company will continue to maintain its website to generate interest in its machine industry products and services. This website will be search engine optimized and mobile compatible, and will include a shopping cart, product and service information, regularly updated blog, media links, client testimony, photo gallery, company profile, location, and contact information. Internet advertising: ICS will use a combination of internet advertising methods including Pay-per-Click, Google AdWords, Tags, and banner ads as well as search engine optimization of its website. This effort will help generate interest in the Company from the online community and general public. The Company will also have its products placed on marketplace aggregators including Amazon and Alibaba. Industry events: The Company will attend conferences, summits, and trade shows throughout the United States to increase brand awareness and establish valuable business partnerships. Some of these will include trade shows in Asia such as the Chengdu International Modern Industrial Technology expo. Blogging: The Company will operate a regularly updated blog on its website that features information about current Company initiatives, corporate culture, current events, and industry trends. ICS will place special emphasis on creating search engine optimized, sharable, and engaging content that spurs engagement from readers while also communicating the ICS core values. Podcast Content: The Company will produce a podcast for listeners who want to consume content on the go. The podcast will feature interviews and stories with experts in business and industry. This tactic engenders the mutual interest of interviewees to share podcast content with their customers, followers, and community at large. Approximately 60% of podcast listeners’ frequent social media platforms several times a day, higher than the national average, and 47% are more likely to follow companies and brands than the average American (28%).6 Podcasting is an excellent way to build brand loyalty, name recognition, and trust within niche communities, including business and manufacturing audience. Networking: As with any relationship-based business, the Company will benefit from participating in a number of networking opportunities that have the potential to yield new business contacts as well as nourish existing ones. The Company will 6 Edison Research. The Infinite Dial 2016. Accessed March 2017. Source: http://www.edisonresearch.com/wp-

content/uploads/2016/05/The-Podcast-Consumer-2016.pdf

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attend a variety of events that draw substantial numbers of prospective clients, including seminars, networking events, and conferences which provide opportunities to speak to and associate with larger audiences in the machine tools industry. Referral marketing: Perhaps more effective than any other marketing tool, referrals will become an essential component in expanding brand recognition. Current clients will highlight the Company’s proven expertise and customer service abilities to their own personal and professional contacts. This will generate priceless leads as well as a strong base of prospective new clients. According to research conducted by Nielsen’s Harris Online Poll, word of mouth remains among the most influential forms of advertising, with 82% of consumers stating that they trust earned media, such as word of mouth recommendations from friends and family, above all other forms of advertising.7 Email marketing: Current and prospective clients will benefit from receiving strategic email updates and newsletters on a regular basis. This will provide the Company’s database of clients and opt-in members with information regarding promotional specials, upcoming events, and relevant business news. All emails will be optimized for desktop and mobile viewing. Email marketing delivers the highest ROI of any digital marketing tactic: an average of $44 per dollar spent.8 Social networking: The Company will develop a distinctive and authentic presence on social networking sites including Facebook, Instagram, and Twitter, and may also place advertisements on these sites. Customers can “like” The Company on Facebook or “follow” the Company’s Twitter or Instagram feed in order to gain access to special discounts or promotions. The Company will regularly monitor and interact with consumers through social networking sites, and facilitate organic engagement through catchy, indexable hashtags. About 68% of all internet users in the U.S. are active on social networks, with 79% of adults use Facebook.9 Meanwhile, 89% of all Millennial consumers are active social network users, and 63% of Millennials report using social media to stay updated on the activity of their favorite brands.10

7 Ambassador. How Are Consumers Influenced by Referral Marketing. March 9, 2016. Source: https://www.getambassador.com/blog/how-are-consumers-influenced-by-referral-marketing 8 Pick, Tom. “104 fascinating social media and marketing statistics for 2014 (and 2015).” B2C. 2014. Source:

http://www.business2community.com/social-media/104-fascinating-social-media-marketing-statistics-2014-2015- 01084935 9 Pew Research Center. “Social Media Update 2016” November 11, 2016. Source:

http://www.pewinternet.org/2016/11/11/social-media-update-2016/ 10

Pick, Tom. “104 fascinating social media and marketing statistics for 2014 (and 2015).” B2C. 2014. Source: http://www.business2community.com/social-media/104-fascinating-social-media-marketing-statistics-2014-2015- 01084935

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The following table and graph illustrate the financial goals of the Company during the next five years:

Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenue $948,176 $1,603,281 $2,533,628 $3,609,062 $4,780,692

Gross Margin $396,297 $623,526 $908,444 $1,179,016 $1,401,524

Operating Expenses $389,886 $597,765 $768,246 $895,810 $1,030,199

EBITDA* $20,697 $57,190 $193,055 $347,491 $444,182

Net Profit $6,411 $25,761 $140,198 $283,205 $371,324

Profitability Ratios

Gross Margin/Revenue 42% 39% 36% 33% 29%

EBITDA/Revenue 2% 4% 8% 10% 9%

Net Profit % 1% 2% 6% 8% 8%

Debt Ratios

Debt Ratio (Total Debt/Total Assets) 15.57% 21.97% 23.56% 22.22% 20.94%

Interest Coverage Ratio N/A N/A N/A N/A N/A

Debt Service Coverage Ratio N/A N/A N/A N/A N/A

Days on Hand

Receivables 0 0 0 0 0

Inventory 0 0 0 0 0

Payables 30 30 30 30 30

Net Cash Flow $77,215 ($25,779) $95,119 $337,737 $466,794

Cash Balance - Ending $277,215 $251,435 $346,554 $684,292 $1,151,086

FINANCIAL HIGHLIGHTS

*Earnings before interest, taxes, depreciation

& amortization

FINANCIAL PROJECTIONS

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$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Year 1 Year 2 Year 3 Year 4 Year 5

Financial Highlights

Revenue

Direct Costs

Operating Expenses

Net Profit

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The table below outlines the sources and uses of funding:

Foreign Company Investment $300,000

Total Sources $300,000

Start-up Assets

Working Capital $200,000

Equipment $100,000

Total Start-up Assets $300,000

Total Uses $300,000

Sources Of Funds

Uses Of Funds

SOURCES & USES

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Financial Assumptions Financial projections were developed with consideration of the market research included in this business plan and comparable industry analysis. The table below shows The Company’s projected cost and profits in Year 3 compared to IBISWorld’s Machine Shop Services Industry. As shown, the Company expects to rapidly increase revenue by offering a lower markup on Direct Costs compared to industry average.

Company (Year 3) Machine Shop Services

Direct Costs 64.1% 32.2%

Wages 26% 27.9%

Marketing 0.2% 0.8%

Rent & Utilities 1.7% 4.4%

Other 2.4% 28.6%

Net Profit 5.5% 6.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

P e

rc e

n t

o f

R e

v e

n u

Industry Comparison

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The following is a five-year revenue forecast. Direct costs include all costs which can be directly tied to revenue and include “cost of goods.”

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue

Machine Shop Servcies $948,176 $1,603,281 $2,533,628 $3,609,062 $4,780,692

Total Revenue $948,176 $1,603,281 $2,533,628 $3,609,062 $4,780,692

Direct Cost of Revenue

Machine Shop Servcies $551,880 $979,755 $1,625,184 $2,430,047 $3,379,168

Subtotal Cost of Revenue $551,880 $979,755 $1,625,184 $2,430,047 $3,379,168

Other Direct Cost $0 $0 $0 $0 $0

Total Direct Costs $551,880 $979,755 $1,625,184 $2,430,047 $3,379,168

Gross Margin $396,297 $623,526 $908,444 $1,179,016 $1,401,524

Gross Margin/Revenue 42% 39% 36% 33% 29%

REVENUE FORECAST

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The table below shows the units and pricing assumptions underlying the revenue forecast:

Year 1 Year 2 Year 3 Year 4 Year 5

Units

Machine Shop Servcies 32,617 49,962 71,531 92,327 110,792

Total Units 32,617 49,962 71,531 92,327 110,792

Unit Price

Machine Shop Servcies $29.07 $32.09 $35.42 $39.09 $43.15

Direct Unit Cost

Machine Shop Servcies $16.92 $19.61 $22.72 $26.32 $30.50

UNIT ASSUMPTIONS

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$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

M o

n th

1 0

M o

n th

1 1

M o

n th

1 2

Year 1 Revenue Monthly

Machine Shop Servcies

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Year 1 Year 2 Year 3 Year 4 Year 5

Annual Revenue

Machine Shop Servcies

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The Company’s personnel forecast is outlined below.

Year 1 Year 2 Year 3 Year 4 Year 5

Staff Count Per Position

CEO (Applicant) 1 1 1 1 1

General Manager 1 1 1 1 1

Lead Machinist 1 1 1 1 1

Lead Programmer 1 1 1 1 1

Machinist 3 5 7 9 10

Programmer 0 1 2 2 3

HR/ Accounting 0 1 1 1 1

Total Personnel 7 11 14 16 18

Salary Per Position

CEO (Applicant) $81,000 $85,050 $89,303 $93,768 $98,456

General Manager $70,800 $74,340 $78,057 $81,960 $86,058

Lead Machinist $54,000 $56,700 $59,535 $62,512 $65,637

Lead Programmer $36,000 $37,800 $39,690 $41,675 $43,758

Machinist $30,000 $31,500 $33,075 $34,729 $36,465

Programmer $0 $34,650 $36,383 $38,202 $40,112

HR/ Accounting $28,800 $30,240 $31,752 $33,340 $35,007

Payroll Per Position (Count x Salary)

CEO (Applicant) $81,000 $85,050 $89,303 $93,768 $98,456

General Manager $70,800 $74,340 $78,057 $81,960 $86,058

Lead Machinist $54,000 $56,700 $59,535 $62,512 $65,637

Lead Programmer $36,000 $37,800 $39,690 $41,675 $43,758

Machinist $55,000 $141,750 $214,988 $295,194 $364,652

Programmer $0 $34,650 $72,765 $76,403 $100,279

HR/ Accounting $0 $30,240 $31,752 $33,340 $35,007

Total Payroll $296,800 $460,530 $586,089 $684,851 $793,847

Payroll/Revenue 31.30% 28.72% 23.13% 18.98% 16.61%

PERSONNEL FORECAST

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The Company intends to deploy its funding to maximize growth and profitability. In the Profit and Loss table below, gross margin equals revenue minus direct costs. The “bottom line” or profit (as measured before and after interest, taxes, depreciation, and amortization) equals gross margin minus operating expenses.

Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenue $948,176 $1,603,281 $2,533,628 $3,609,062 $4,780,692

Total Direct Cost of Revenue $551,880 $979,755 $1,625,184 $2,430,047 $3,379,168

Gross Margin $396,297 $623,526 $908,444 $1,179,016 $1,401,524

Gross Margin/Revenue 42% 39% 36% 33% 29%

Expenses

Rent/Utilities $29,700 $35,640 $42,768 $47,045 $49,397

Marketing $6,000 $6,060 $6,121 $6,182 $6,244

Insurance $1,800 $1,854 $1,910 $1,967 $2,026

Office Supplies $3,000 $3,450 $3,968 $4,563 $5,247

Other $1,200 $1,236 $1,273 $1,311 $1,351

Payroll Taxes & Benefits $37,100 $57,566 $73,261 $85,606 $99,231

Total Personnel $296,800 $460,530 $586,089 $684,851 $793,847

Total Op. Expenses $389,886 $597,765 $768,246 $895,810 $1,030,199

Profit Before Int. & Tax $6,411 $25,761 $140,198 $283,205 $371,324

EBITDA $20,697 $57,190 $193,055 $347,491 $444,182

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

Taxes Incurred $0 $0 $0 $0 $0

Net Profit $6,411 $25,761 $140,198 $283,205 $371,324

Net Profit % 0.7% 1.6% 5.5% 7.8% 7.8%

PRO FORMA PROFIT & LOSS

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The table and chart below demonstrate when the Company is expected to become profitable. Break-even occurs when accumulated revenue equals accumulated expenses. According to the forecasted financials, month 7 will be the point at which break-even will occur.

Break-Even Month 7

Accumulated Gross Revenue $511,933

BREAK-EVEN ANALYSIS

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58

Accumulated Revenue

Accumulated Expenses

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The following depictions of the Company’s projected cash flow show that the Company expects to maintain sufficient cash balances over the five years of this plan. The “pro forma cash flow” table differs from the “pro forma profit and loss” (P&L) table. Pro forma cash flow is intended to represent the actual flow of cash in and out of the Company. In comparison, the revenue and expense projections on the P&L table include “non-cash” items and exclude funding and investment illustrations.

-$200,000

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Year 1 Year 2 Year 3 Year 4 Year 5

Cash Flow

Net Cash Flow

Cash Balance

Year 1 Year 2 Year 3 Year 4 Year 5

OPERATING

Net Profit $6,411 $25,761 $140,198 $283,205 $371,324

Adjustments to Net Profit

Depreciation & Amortization $14,286 $31,429 $52,857 $64,286 $72,857

(Increases)/Decreases in Accounts Receivable $0 $0 $0 $0 $0

(Additions)/Depletions of Inventory $0 $0 $0 $0 $0

Increases/(Decreases) in Accounts Payable $56,518 $37,031 $52,064 $70,246 $82,612

Net Cash From Operating Activities $77,215 $94,221 $245,119 $417,737 $526,794

INVESTING

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

Sale of Other Current Assets $0 $0 $0 $0 $0

Purchase of Land $0 $0 $0 $0 $0

Sale of Land $0 $0 $0 $0 $0

Purchase Long-term Assets $0 ($120,000) ($150,000) ($80,000) ($60,000)

Sale of Long-term Assets $0 $0 $0 $0 $0

Net Cash From Investing Activities $0 ($120,000) ($150,000) ($80,000) ($60,000)

FINANCING

Investment $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0

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

Current Borrowing Repay. $0 $0 $0 $0 $0

New Long Term Liabilities $0 $0 $0 $0 $0

Long Term Liability Repay $0 $0 $0 $0 $0

Net Cash From Financing Activities $0 $0 $0 $0 $0

NET CASH FLOW $77,215 ($25,779) $95,119 $337,737 $466,794

Beginning Cash $200,000 $277,215 $251,435 $346,554 $684,292

Ending Cash $277,215 $251,435 $346,554 $684,292 $1,151,086

CASH FLOW

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The balance sheet below highlights the Company’s projected assets, liabilities, and capital:

Year 1 Year 2 Year 3 Year 4 Year 5

Assets

Current Assets

Cash $277,215 $251,435 $346,554 $684,292 $1,151,086

Accounts Receivable $0 $0 $0 $0 $0

Inventory $0 $0 $0 $0 $0

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

Total Current Assets $277,215 $251,435 $346,554 $684,292 $1,151,086

Fixed Assets

Long-term Assets $100,000 $220,000 $370,000 $450,000 $510,000

Accum. Depreciation $14,286 $45,714 $98,571 $162,857 $235,714

Land $0 $0 $0 $0 $0

Total Fixed Assets $85,714 $174,286 $271,429 $287,143 $274,286

Total Assets $362,929 $425,721 $617,983 $971,435 $1,425,372

Liabilities and Capital

Current Liabilities

Accounts Payable $56,518 $93,549 $145,613 $215,860 $298,472

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

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

Subtotal Current Liabilities $56,518 $93,549 $145,613 $215,860 $298,472

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

Total Liabilities $56,518 $93,549 $145,613 $215,860 $298,472

Paid-in Capital $300,000 $300,000 $300,000 $300,000 $300,000

Retained Earnings $0 $6,411 $32,172 $172,369 $455,575

Earnings $6,411 $25,761 $140,198 $283,205 $371,324

Total Capital $306,411 $332,172 $472,369 $755,575 $1,126,899

Total Liabilities and Capital $362,929 $425,721 $617,983 $971,435 $1,425,372

BALANCE SHEET

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The sensitivity analysis below assumes that revenues are 15% higher or lower than figures projected earlier in this business plan:

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $1,090,403 $1,843,773 $2,913,672 $4,150,422 $5,497,796

Cost of Goods $634,662 $1,126,718 $1,868,962 $2,794,554 $3,886,043

Gross Margin $455,741 $717,055 $1,044,710 $1,355,868 $1,611,752

Gross Margin/Revenue 42% 39% 36% 33% 29%

Operating Expenses $389,886 $597,765 $768,246 $895,810 $1,030,199

Net Profit $65,855 $119,290 $276,464 $460,058 $581,553

Net Profit/Revenue 6% 6% 9% 11% 11%

Cash Flow $136,659 $67,750 $231,385 $514,590 $677,023

Cash Balance $336,659 $404,409 $635,794 $1,150,384 $1,827,407

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $805,950 $1,362,788 $2,153,584 $3,067,703 $4,063,588

Cost of Goods $469,098 $832,792 $1,381,407 $2,065,540 $2,872,293

Gross Margin $336,852 $529,997 $772,177 $1,002,163 $1,191,295

Gross Margin/Revenue 42% 39% 36% 33% 29%

Operating Expenses $389,886 $597,765 $768,246 $895,810 $1,030,199

Net Profit ($53,034) ($67,768) $3,931 $106,353 $161,096

Net Profit/Revenue -7% -5% 0% 3% 4%

Cash Flow $17,770 ($119,308) ($41,148) $160,885 $256,565

Cash Balance $217,770 $98,462 $57,314 $218,200 $474,765

WORST CASE SCENARIO

BEST CASE SCENARIO REVENUE IS 15% GREATER THAN PROJECTED

REVENUE IS 15% LESS THAN PROJECTED

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

Revenue

Machine Shop Servcies $66,810 $68,815 $70,879 $73,006 $75,196 $77,452 $79,775 $82,168 $84,634 $87,173 $89,788 $92,481

Total Revenue $66,810 $68,815 $70,879 $73,006 $75,196 $77,452 $79,775 $82,168 $84,634 $87,173 $89,788 $92,481

Direct Cost of Revenue

Machine Shop Servcies $38,887 $40,053 $41,255 $42,492 $43,767 $45,080 $46,433 $47,826 $49,260 $50,738 $52,260 $53,828

Subtotal Cost of Revenue $38,887 $40,053 $41,255 $42,492 $43,767 $45,080 $46,433 $47,826 $49,260 $50,738 $52,260 $53,828

Other Direct Cost $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Direct Costs $38,887 $40,053 $41,255 $42,492 $43,767 $45,080 $46,433 $47,826 $49,260 $50,738 $52,260 $53,828

Gross Margin $27,924 $28,762 $29,624 $30,513 $31,429 $32,371 $33,343 $34,343 $35,373 $36,434 $37,527 $38,653

Gross Margin/Revenue 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% 42%

REVENUE FORECAST

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

Units

Machine Shop Servcies 2,298 2,367 2,438 2,511 2,587 2,664 2,744 2,827 2,911 2,999 3,089 3,181

Total Units 2,298 2,367 2,438 2,511 2,587 2,664 2,744 2,827 2,911 2,999 3,089 3,181

Unit Price

Machine Shop Servcies $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07 $29.07

Direct Unit Cost

Machine Shop Servcies $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92 $16.92

UNIT ASSUMPTIONS

APPENDIX: YEAR 1 FINANCIAL PROJECTIONS BY MONTH

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

Staff Count Per Position

CEO (Applicant) 1 1 1 1 1 1 1 1 1 1 1 1

General Manager 1 1 1 1 1 1 1 1 1 1 1 1

Lead Machinist 1 1 1 1 1 1 1 1 1 1 1 1

Lead Programmer 1 1 1 1 1 1 1 1 1 1 1 1

Machinist 1 1 1 2 2 2 2 2 2 2 2 3

Programmer 0 0 0 0 0 0 0 0 0 0 0 0

HR/ Accounting 0 0 0 0 0 0 0 0 0 0 0 0

Total Personnel 5 5 5 6 6 6 6 6 6 6 6 7

Salary Per Position

CEO (Applicant) $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750

General Manager $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900

Lead Machinist $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500

Lead Programmer $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Machinist $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500

Programmer $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750 $2,750

HR/ Accounting $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400

Payroll Per Position (Count x Salary)

CEO (Applicant) $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750 $6,750

General Manager $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900 $5,900

Lead Machinist $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 $4,500

Lead Programmer $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Machinist $2,500 $2,500 $2,500 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $7,500

Programmer $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

HR/ Accounting $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Payroll $22,650 $22,650 $22,650 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $27,650

Payroll/Revenue 33.90% 32.91% 31.96% 34.45% 33.45% 32.47% 31.53% 30.61% 29.72% 28.85% 28.01% 29.90%

PERSONNEL FORECAST

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

Total Revenue $66,810 $68,815 $70,879 $73,006 $75,196 $77,452 $79,775 $82,168 $84,634 $87,173 $89,788 $92,481

Total Direct Cost of Revenue $38,887 $40,053 $41,255 $42,492 $43,767 $45,080 $46,433 $47,826 $49,260 $50,738 $52,260 $53,828

Gross Margin $27,924 $28,762 $29,624 $30,513 $31,429 $32,371 $33,343 $34,343 $35,373 $36,434 $37,527 $38,653

Gross Margin/Revenue 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% 42%

Expenses

Rent/Utilities $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475 $2,475

Marketing $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Insurance $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150 $150

Office Supplies $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250

Other $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100

Payroll Taxes & Benefits $2,831 $2,831 $2,831 $3,144 $3,144 $3,144 $3,144 $3,144 $3,144 $3,144 $3,144 $3,456

Total Personnel $22,650 $22,650 $22,650 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $25,150 $27,650

Total Op. Expenses $30,147 $30,147 $30,147 $32,959 $32,959 $32,959 $32,959 $32,959 $32,959 $32,959 $32,959 $35,772

Profit Before Int. & Tax ($2,223) ($1,385) ($522) ($2,446) ($1,531) ($588) $383 $1,384 $2,414 $3,475 $4,568 $2,881

EBITDA ($1,032) ($195) $668 ($1,256) ($340) $603 $1,574 $2,574 $3,604 $4,666 $5,759 $4,072

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

Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($2,223) ($1,385) ($522) ($2,446) ($1,531) ($588) $383 $1,384 $2,414 $3,475 $4,568 $2,881

Net Profit % -3.3% -2.0% -0.7% -3.4% -2.0% -0.8% 0.5% 1.7% 2.9% 4.0% 5.1% 3.1%

PRO FORMA PROFIT & LOSS

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

OPERATING

Net Profit ($2,223) ($1,385) ($522) ($2,446) ($1,531) ($588) $383 $1,384 $2,414 $3,475 $4,568 $2,881

Adjustments to Net Profit

Depreciation & Amortization $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190 $1,190

(Increases)/Decreases in Accounts Receivable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

(Additions)/Depletions of Inventory $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Increases/(Decreases) in Accounts Payable $41,781 $1,151 $1,185 $1,221 $1,257 $1,295 $1,334 $1,374 $1,415 $1,458 $1,501 $1,546

Net Cash From Operating Activities $40,749 $956 $1,853 ($35) $917 $1,898 $2,908 $3,948 $5,020 $6,123 $7,260 $5,618

INVESTING

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

Sale of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase of Land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sale of Land $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

Sale of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Cash From Investing Activities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

FINANCING

Investment $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

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

Current Borrowing Repay. $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

Long Term Liability Repay $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Cash From Financing Activities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH FLOW $40,749 $956 $1,853 ($35) $917 $1,898 $2,908 $3,948 $5,020 $6,123 $7,260 $5,618

Beginning Cash $200,000 $240,749 $241,705 $243,558 $243,523 $244,440 $246,338 $249,246 $253,194 $258,213 $264,337 $271,596

Ending Cash $240,749 $241,705 $243,558 $243,523 $244,440 $246,338 $249,246 $253,194 $258,213 $264,337 $271,596 $277,215

CASH FLOW

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

Assets

Current Assets

Cash $240,749 $241,705 $243,558 $243,523 $244,440 $246,338 $249,246 $253,194 $258,213 $264,337 $271,596 $277,215

Accounts Receivable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Inventory $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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

Total Current Assets $240,749 $241,705 $243,558 $243,523 $244,440 $246,338 $249,246 $253,194 $258,213 $264,337 $271,596 $277,215

Fixed Assets

Long-term Assets $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Accum. Depreciation $1,190 $2,381 $3,571 $4,762 $5,952 $7,143 $8,333 $9,524 $10,714 $11,905 $13,095 $14,286

Land $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Fixed Assets $98,810 $97,619 $96,429 $95,238 $94,048 $92,857 $91,667 $90,476 $89,286 $88,095 $86,905 $85,714

Total Assets $339,558 $339,324 $339,987 $338,761 $338,488 $339,195 $340,913 $343,670 $347,499 $352,432 $358,501 $362,929

Liabilities and Capital

Current Liabilities

Accounts Payable $41,781 $42,932 $44,117 $45,338 $46,595 $47,890 $49,224 $50,598 $52,013 $53,471 $54,972 $56,518

Current Borrowing $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

Subtotal Current Liabilities $41,781 $42,932 $44,117 $45,338 $46,595 $47,890 $49,224 $50,598 $52,013 $53,471 $54,972 $56,518

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

Total Liabilities $41,781 $42,932 $44,117 $45,338 $46,595 $47,890 $49,224 $50,598 $52,013 $53,471 $54,972 $56,518

Paid-in Capital $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000

Retained Earnings $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Earnings ($2,223) ($3,608) ($4,130) ($6,576) ($8,107) ($8,695) ($8,311) ($6,928) ($4,514) ($1,039) $3,529 $6,411

Total Capital $297,777 $296,392 $295,870 $293,424 $291,893 $291,305 $291,689 $293,072 $295,486 $298,961 $303,529 $306,411

Total Liabilities and Capital $339,558 $339,324 $339,987 $338,761 $338,488 $339,195 $340,913 $343,670 $347,499 $352,432 $358,501 $362,929

BALANCE SHEET

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APPENDIX II: LETTER OF INTENT

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