CONFIDENTIAL INFORMATION MEMORANDUM
This summary is confidential and for the use of security brokers only. Under no circumstances
are its contents to be reproduced or distributed to the public or press. Securities legislation
prohibits such distribution of information. This document should be read in conjunction with
publicly available information. The information contained herein is based upon information we
believe to be reliable but we cannot represent that it is complete or accurate. These statements
are subject to change. This summary is for information only and does not constitute an offer to
sell or a solicitation to buy the securities referred to herein.
October 2004
BELUGA COMPOSITES CORPORATION
Initial Public Offering
Minimum US$400,000 – Maximum US$6,000,000 – in Shares
US$3.00 per Share
INVESTMENT HIGHLIGHTS
Beluga Composites Corporation is one of only two companies in the world to hold the
Underwriters Laboratories (UL) Certification for the quality of its fiberglass
reinforced plastic (FRP) tanks and related products and the only company to hold the
ULC Certification for Canada. As a result, Beluga is in an excellent position to fill the
substantial and growing demand from both developed and developing countries for
flammable-liquid handling products.
The Company is debt free.
The Company’s technology has been independently assessed at US$75 million.
The Company has entered into joint ventures with major industrial partners in the
Philippines and India to manufacture FRP tanks in each country. A first production
unit in the Philippines is currently producing 250 tanks annually for US$1,5 million
per year.
The Company has a license agreement for the next 25 years with ELM Development
Corporation. As a result, the Company will receive a 3% royalty on all FRP tanks
manufactured according to its technology and sold in Russia by ELM.
The Company has current requests for:
o 525 tanks per year each, from three major oil marketers in the Philippines
o 150 oil/water separators per year each, from the same clients
o 500 to 1000 water tanks demanded by a major distributor in the Philippines
o 8000 FRP tanks per year from oil marketers in India
The Company’s potential gross revenues from the Philippines and India alone could
reach over US$5 million in 2005.
FOR INFORMATION, PLEASE CONTACT
Rothschild Financial Corporation
Marcel Malo: (450) 963-0200
SUMMARY OF THE OFFERING
Issuer: Beluga Composites Corporation (the “Corporation”).
Offering: Initial Public Offering of shares (the “Offering”)
Size of the Offering: Up to US$6,000,000 in shares (the “Shares”)
Shares: Each share will consist of a tradable, voting share.
Issue Price: US$3.00
Capital Structure: The Company's capital structure is anticipated to be as follows
(upon completion of the Offering - figures are approximations):
Restricted Shares: 18,000,000
Free Trading Shares: 7,000,000
Issued and Outstanding: 25,000,000
Agent: Holladay Stock Transfer, Inc.
Use of proceeds: For six plants, to launch 15 production units by mid-2006:
A second production unit in the Philippines
Ten production units in India,
One production unit in Canada and
Three production units in the United States
Offering Jurisdiction: NASDAQ, Over the Counter Bulletin Board (the “OTC:BB”).
The listing of all shares of Beluga on any exchange is subject to
applicable laws and the approval of any and all state and federal
securities and regulatory authorities.
Prospectus: The Shares will be qualified for sale to the public in the qualified
jurisdiction by way of a prospectus and will be free trading on
Closing.
Exchange: NASDAQ, OTC:BB
USE OF PROCEEDS
Proceeds of the Offering will be used to further develop the Company’s network of plants
in the Philippines, India, Canada and the United States. The company will have 12
production units running in six plants by the end of 2005: six units to supply the Indian
market, two to serve North America, two in the Philippines, which is already producing
tanks and the last two operating in Russia under a license agreement. These production
units will generate the revenue needed to finance Beluga’s growth.
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THE COMPANY
Beluga Composites Corporation manufactures single-wall and double-wall FRP tanks
that are of higher quality and environmentally safer than the metal tanks used in many
gas stations. Moreover, Beluga’s tanks are products of second-generation technology,
meaning they are mechanically and structurally superior to the FRP tanks produced by
competitors using first-generation technology. Beluga’s key strengths are efficient,
computerized second-generation technology; high-quality products; competitive pricing
and technical know-how; a capacity to innovate; and international business management
experience.
MAJOR OIL COMPANIES
The Company’s revenue is derived mainly from sales to major oil companies that
represent the primary market for the Company’s products. The Company’s experience
with the major oil companies has revealed the purchasing process these powerful
companies use to select a supplier for underground storage products. Beluga Composites
Corporation has successfully passed all the qualification tests demanded by British
Petroleum and 7-Eleven and a very similar process is applied in India and in the
Philippines where the Company is operational.
Major oil companies begin by identifying suppliers that detain the UL Certification. They
contact the candidates and ask for a full presentation of their respective companies,
including annual reports and financial statements. Each oil company then sends a
technical team to the premises of all qualified candidates to evaluate the production
process and products. Suppliers that pass all the tests are asked for a quote and the
successful bidder receives a blanket order for two years.
With their impressive purchasing power, oil marketers can impose additional
requirements on suppliers. For example, the supplier must be able to produce tanks in
sufficient quantities to cover the region or country within the duration of the contract. In
addition, the supplier’s inventory should contain a large number of tanks. Aware of these
requirements, the Company’s production facilities and expansion plan confirm its
readiness to meet them and ensure its success in responding to oil companies demand.
In the Philippines and in India, the Company is the only one to hold the UL Certification.
Accordingly, the Company is well positioned to obtain and to fill orders from each of the
major oil marketers: Petron (Aramco), Caltex and Shell in the Philippines and Shell,
Essar, Reliance and Bharat Petroleum in India.
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THE COMPANY INTERNATIONAL EXPANSION
Objective: The Company’s objective is to become the leading provider of flammable-
liquid handling solutions by offering a broad range of high-quality products, components
and monitoring systems. The first phase of the Company’s expansion is to have six plants
to launch 15 production units by December 2005: a second unit in the Philippines, 10 in
India, one in Canada and three in the United States.
Technology: Owned by the Company, the second-generation technology uses
continuous fiberglass to produce filament-wound FRP tanks that are technically far
superior to competing products. The filament-winding process involves continuously
winding long strands of reinforcement and other materials around a suitably shaped
mandrel. The winding can be unidirectional, radial or helicoidal, depending on how the
computer is programmed. This type of construction produces higher quality FRP tanks
that are at least six times stronger than FRP tanks produced by the first-generation
technology. The Company is the only one in the world to hold the UL and ULC
Certification, which is the standard required by oil companies around the world. In
addition, Beluga FRP tanks comply with the American Petroleum Institute’s
recommendation for Secondary Containment Systems (SCS).
Products: The Company manufactures single-wall and double-wall FRP tanks of
various sizes and related products such as collars, risers, fittings, hold-down straps,
deadman anchors, flat-bottom risers and covers, as well as oil/water separators. All
Beluga products carry the UL or ULC Mark.
Market: Market research has identified several markets where the existing demand
for FRP tanks is substantial, either because of the construction of new gas stations or the
replacement of aging tanks. In both cases, Beluga’s market assessment takes into account
the primary market, i.e. the demand from oil marketers for FRP tanks.
In most developed countries, oil companies have rationalized their networks of gas
stations. This rationalization has created opportunities for Beluga’s FRP tanks and market
studies estimate the FRP tank market in developed countries is worth several billion
dollars, including US$3 billion in North America and US$2.8 billion in Western Europe.
As developing countries become more industrialized, an emerging middle class demands
new vehicles to satisfy their transportation needs and the number of gas stations is
expanding. In addition, the privatization of downstream activities encourages oil
companies to invest in new gasoline outlets and current or pending environmental
legislation strongly promotes the use of FRP tanks. As a result, the market for FRP tanks
in selected developing countries is huge. For example, in the Philippines and in India -
where the Company is established - the market represents US$8 million and US$45
million respectively for 2005 only.
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PRODUCTION
Production unit: A production unit consists of a rotating mandrel and an adjacent rolling resin
and fiber application apparatus. Beluga’s computerized technology controls the resin and fiber
application; it precisely determines when and where the fiber application will be radial or
helicoidal; the quantity used and the tension under which the filaments will be wound around the
mandrel, in accordance with the tank model specifications. Calling on its network of eight
contractors, Beluga can manufacture, ship and install up to four production units and train a
partner’s employees within three months.
Production plants: A production factory requires 12,000 square feet to house two production
units. If additional units are installed at the same location an additional 2,000 square feet is
needed per unit.
Beluga Tanks India Private Limited is purchasing a plant in Baroda. The purchase
includes an area measuring 75,000 square feet, of which 50,000 square feet are available
for storing tanks. The facilities are being developed in three phases. An initial 12,000
square feet is currently available for manufacturing 1,000 tanks per year with two
production units. Phase Two involves constructing an additional 13,000 square feet of
production space. The Municipality of Baroda has approved the plan and granted the
construction permit. This additional space will house three more production units by
September 2005. In Phase Three, Beluga will build another factory with 30,000 square
feet next to the first plant to accommodate additional production units.
In the Philippines, Beluga Composites Inc. has rented a plant in Taguig, Manila’s
industrial park, where the company has installed its first production unit in September
2004. The 20,000-square-foot storing area provides storage space and the 15,000-square-
foot premises can accommodate a second unit by March 2006. An understanding with the
owner of the plant allows Beluga to take over an adjacent 15,000 square feet, doubling
the area to ensure that additional units can be set up when needed. For further expansion,
there are several 30,000-square-foot plants currently available next to Beluga’s factory.
In North America, Beluga is currently renting a plant in Montreal that can accommodate
the production unit planned for the end of 2004. In Florida, the plant selection process
will start in November and all options are still open with respect to renting or buying the
premises.
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NET REVENUE AND PROFIT PER SHARE
Net revenue and profit per share tabulation supplies a conservative appreciation of the
Company’s equity; production costs take neither economies of scale nor experience curve
into consideration and revenues are based on the minimum production level.
Net revenue & profit per share
2005 2006 2007 2008 2009
Total gross revenue: sales and royalties $14,478,105 $27,791,506 $43,999,607 $66,390,808 $80,624,009
Production cost $6,882,764 $13,789,064 $17,071,264 $20,634,864 $25,394,464
Operating cost $2,570,612 $4,516,192 $5,481,712 $6,553,272 $7,984,632
Total cost $9,453,376 $18,305,256 $22,552,976 $27,188,136 $33,379,096
Net profit before taxes $5,024,729 $9,486,250 $21,446,631 $39,202,672 $47,244,913
Taxes (20 %) $1,004,946 $1,897,250 $4,289,326 $7,840,534 $9,448,983
Net profit (loss) $4,019,783 $7,589,000 $17,157,305 $31,362,138 $37,795,930
Profit per share (25 million share) $0.16 $0.30 $0.69 $1.25 $1.51
Share value at 15 times the profit $2.41 $4.55 $10.29 $18.82 $22.68
Share value at 20 times the profit $3.22 $6.07 $13.73 $25.09 $30.24
SALES FORECAST
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
2004 2005 2006 2007 2008 2009 2010
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