Revolutionizing the way the Northwest Florida and the World thinks about waste disposal
Contact Information:
310 Case Rd. Slocomb AL 36375 (334) 651-0814 This document contains confidential information. It is disclosed to you for informational purposes only. Its contents shall remain the property of Diamond Grow Organics LLC., and shall be returned to Diamond Grow Organics LLC., when requested. This is a business plan and does not imply an offering of securities.
Non-Disclosure and Confidentiality Agreement The undersigned _________________________________hereby agrees that all financial and other information Business Plan that it has and will receive concerning Diamond Grow Organics LLC is confidential and will not be disclosed to any individual or entity without prior written consent. The Information shall remain the property of Diamond Grow Organics LLC and shall be returned Diamond Grow Organics LLC promptly at its request together with all copies made thereof. Recipient acknowledges that no remedy of law may be adequate to compensate Diamond Grow Organics LLC for a violation of this Agreement and Recipient hereby agrees that in addition to any legal or other rights that may be available in the event of a breach hereunder, Diamond Grow Organics LLC may seek equitable relief to enforce this Agreement in any Court of competent jurisdiction.
_______________ Date
________________________________ Signature
_______________ Date
________________________________ Witness
This is a business plan and does not imply an offering of securities.
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Table of Contents
Diamond Grow LLC, Non-Disclosure and Confidentiality Agreement Executive Summary Business Opportunity Products The Offer Organization Overview Organizational Plan Strategic Analysis Key Strategic Issues Marketing Plan Competitive Market Analysis Customer Profile Financial Assumptions Sensitivity Analysis Critical Risks Analysis Internal Environment Analysis Critical Risks and Problems SWOT Analysis Cover 2 4-16
12-14 15-16 17-19 20 21-23 24-25 26 27-29 30 31 32 33-34 35-36
Attachments Auburn University Analysis Report Industry Referral Letter
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Diamond Grow Organics LLC Executive Summary
Introduction
The purpose of this business plan is to raise $US7 million from public and/or private investors in order to construct a centralized waste water treatment coop. This system innovative in its design will provide Waste Water Treatment Services for municipalities as well as commercial entities that elect to be members of this coop. In addition to its waste water treatment services this facility will produce an array of organic fertilizer products from the nutrient rich residual produced by this process. Diamond Grow Organics LLC., is confident in their systems innovative design and the products this system will produce. The technology currently utilized by Diamond Grow Organics significantly increases the capture of this nutrient rich material increasing the amount of base required for the production of our organically based line of products. Waste treatment, clearly, is an issue the general public does not think about on a daily basis. However, with our nation’s increasing population (fig 1), it is certainly an item our local, state and federal government officials are often debating.
fig.1 At present, a staggering number of our nation’s waste treatment systems have reached or gone beyond rated capacities. Government officials are now turning to privatized innovative research for the answers to these environmentally threatening problems.
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Diamond Grow Organics LLC., presents a plan that will place us as the leader amongst a handful of privately owned operations able to provide substantial relief to any Publicly Owned waste treatment facility. In addition to our already tested and approved filtration system, there now exists a very profitable plan that will recycle the residual waste produced by the Diamond Grow process. All wastewater treatment processes produce residual waste known as Biosolids as a by-product of the treatment process. Biosolids are a nutrient rich organic material that is generated as a result of the waste waster treatment process. In the United States, approximately 10.5 million tons (dry weight basis) of biosolids are produced each year. At the national level, the management of biosolids is regulated by the U.S. Environmental Protection Agency (EPA). The EPA's official "Policy on Municipal Sewage Sludge (Biosolids) Management" is given below. The EPA will actively promote (biosolids) management practices that provide for the beneficial use of (biosolids) while maintaining or improving environmental quality and protecting public health. (Volume 49, Federal Register, p 24358) The majority of biosolids produced in the United States are recycled as soil amendments and conditioners in the following way
54% - Biosolids Recycled 19% - Incinerated 18% - Disposed in a Landfill 9% - Other
In the region which we are establishing our operation there is an unusually high rate un recycled and land filled disposed biosolids. It is within this market base that Diamond Grow Organics will establish a strong presence and become the preferred method of disposal.
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Public/Private Partnership
In addition to the establishment of our commercial customer base we have entered into a tentative agreement with the town of Campbellton, Florida to form a public/private venture in the form of a waste water treatment coop/partnership. At the core of this agreement is the commitment of 10 acres of property for our facility in return for waste treatment services. This agreement also includes the recapturing of all waste treatment grant funds that the city of Campbellton will receive during the life of this agreement.
Jobs
It is projected that Diamond Grow Organics will be a major employer in the Campbellton area, which is located in an area of critical concern. Employment will increase from 25 employees the first year to 75 – 100 in the fifth year of operation. It is important to point out that the type of jobs that will be created can be supported by the education level currently offered in this region. Because of Diamond Grow’s innovative process employees will require training designed by Diamond Grow.
Balance of Payment Impact
Due to Diamond Grow’s “water retention technology” the exported fertilizer will have a positive impact on the US Balance of Payments, with exports expanding as sales to foreign countries increase and similar processing is extended to other areas of the country
The Team
The Management team is highly motivated, experienced and well qualified. Diamond Grow Organics, LLC, will be lead by a committed manager with proven experience in start-up of this type facility. Dallas and Pamela Ledington will hold 60% of the equity and two board positions. Support will be provided by a shareholder to be named upon completion of the funding portion of this plan. That Shareholder will hold 10% equity and one seat on the board. The investor/investors will receive two seats on the board and an independent chairman will be appointed.
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Diamond Grow Organics Business Opportunity
Waste Treatment being the last fully Government controlled industry, we now stand in the shadow of Privatization. Presently, there are very few companies that could even consider taking on the tasks that will be presented by Privatization. Not only does our plan offer wide spread effective service, but it is expandable on a state, regional, and national level as well. With a municipal partnership in hand, the town of Campbellton is just one of several communities that are potential customers in what will be the formation of a centralized waste water treatment coop. In the same region there are four additional communities that are prime candidates for privatized waste treatment services. In addition to the municipal customer base, there also exists a broad commercial customer base which we will be able to effectively service. In our area of operation there are 5 food processing facilities that produce biosolids and at present are seeking alternative methods of disposal. In addition there are 15 publicly owned waste treatment operations that are open to alternative methods of biosolids disposal. We are confident that with implementation of our aggressive marketing plan we can capture the majority share of this virgin market. In doing so we will establish a balanced customer base that will generate substantial income at a profit margin of 35% or greater in our waste collection and treatment efforts alone. Revenue generated by waste collection and disposal will be further boosted by the production of an A-Class Biosolids. As mentioned earlier in this plan, Diamond Grow Organics LLC., intends to capitalize on the recycling this residual, bringing it to a marketable form and distributing through available retail market channels both home and abroad. Current projections indicate that the Diamond Grow Process can produce upwards of 1000 tons of A-Class Biosolids monthly, and at current market rates would yield revenue of up to and exceeding $220 per ton in bulk; $10-12 per 50 pound bag; or $400-480 per ton. The product volumes will increase to 6600 tons monthly once our state of art facility is in full operation. Keep in mind the above mentioned tonnage amounts is what will be produced by our waste treatment process. Tonnage amounts shipped to us via truck and rail will most likely exceed these amounts by 35 to 50 percent. In addition to the attractive profit margin, I would like to point out the value of the protection the Diamond Grow Organics plan offers to the environment in this region. Illegal dumping and land application of improperly treated waste impact not only the regions water supply, but the regions water sheds as well. Our systems ability to produce a higher solids capture rate ensures a decrease on area watersheds. Furthermore our concept of un-manned automated and networked dumping station ensures 24/7 access by commercial wastewater haulers, increasing the level of protection against illegal dumping in this area.
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Diamond Grow Organics LLC The Products
Municipal Waste Water Treatment and Collection System Management
Diamond Grow Organics LLC has entered into a tentative public private partnership with the Town of Campbellton Florida, located in Jackson County. We are presently working with local a engineering firm where our goal is to establish a Waste Water Treatment Coop. Once established we fully expect additional communities in this region to enter this Coop.
Diamond Grow Compost
What is compost? Compost is the product resulting from the controlled biological decomposition of organic material, which is sanitized through the generation of heat, and stabilized to the point at which it is beneficial to plant growth. Diamond Grow Compost™ is comprised of nutrientrich wastewater biosolids, yard trimmings and other organic recyclables. What are the benefits?
Weed free! Improves soil structure, porosity and density, creating a better plant root environment Increases infiltration and permeability of heavy soils, reducing erosion and runoff Improves water holding capacity, reducing water loss and leaching in sandy soils Supplies a variety of slow-release macro and micronutrients May control or suppress certain soil-borne plant pathogens Supplies significant quantities of organic matter Improves cation exchange capacity (CEC), improving ability to retain nutrients Supplies beneficial microorganisms to soils Improves and stabilizes soil pH Can bind and degrade specific pollutants
Diamond Grow Organics will produce the finest quality biosolids-based compost available today in strict accordance with all state and federal regulations. That's technology.
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Diamond Mix plus Pellets
Diamond Mix Plus™ pellets are marketed by Diamond Mix Inc., under the management of Diamond Grow Organics LLC. Diamond Mix Plus™ Fertilizer pellets are produced by our Diamond Grow Fertilizer Company and will meet the USEPA’s most stringent "Exceptional Quality Standards" for biosolids-based soil amendments. An organic fertilizer, Diamond Mix Plus™ is comprised of 65% organic matter and provides plants with a slow release of essential micronutrients.
Diamond Grow Topsoil
Nutrient rich pH Adjusted Screened Lab Certified
Diamond Grow Roofmix
With its slow release of micro and macronutrients, Diamond Grow Roofmix™ is a lightweight soil media perfectly suited for rooftop gardens and is comprised of 10-25% (by volume) Diamond Grow Compost™ blended with lightweight aggregate and coarse sand.
Diamause Water
Profitable environmental protection is an emerging trend that ensures more effective protection for our children’s future. Environmental concern at the forefront of everything we do; Diamond Grow Organics LLC, is very proud of our reclaimed water and beneficial use programs. These programs will be established with natural resource conservation in mind. Reclaimed water at the forefront of our efforts will be collected and stored then re-sold through our “municipal green pipe” systems. While homeowners will enjoy drastically reduced rates in water used for watering lawns, commercial customers such as concrete producers and construction companies will be able to take advantage of these savings as well. This conservation effort will produce increasing profits thus adding additional profit to our bottom line and bottom line of commercial and private customers as well.
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Diamond Grow Organics LLC The Offer
We seek up toUS$6 million from an investor with experience in the waste treatment, solid waste disposal and recycling or fertilizer production industry. While this amount represents the entire project cost it will be offset to a degree by available grants. For this investment the returns are:
30% equity in Diamond Grow Organics LLC. 7 times the original investment by year 6 An internal rate of return of 93% over 6 years.
The Proposed Business Opportunities may be accomplished simultaneously or in two stages of operation:
Stage One:
This stage consists of planning, development and construction of our proposed facility in Campbellton Florida. Included in this first stage would be equipment purchases necessary for the, drying, pelletizing, and bagging of our organic fertilizer as well as operation start-up.
Total Stage one Request = $4.5 Million USD Stage Two:
The construction of three automated un-manned dumping stations. Our research to-date has identified three market areas where these stations can be successfully operated: Mobile Al, Pensacola FL and Panama City FL. Diamond Grow has received very positive indications from local officials that the areas listed, all coastal areas, would benefit greatly from the construction of these stations, which provides a fair assessment of the expected success of our owners, who would represent “The Gulf Coastal Anti-Illegal Dumping Defense System”. This subject system will ultimately be presented as an entrant for the small business innovation design award sponsored by EPA.
Total Stage two Request = $1.5Million USD
An investment in Diamond Grow Organics, LLC, offers balance to an investment portfolio.
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The Future
Diamond Grow Organics, LLC product offerings will be positioned as cost-effective, reliable, alternative solutions to the current and future needs of the regions waste water treatment needs. While our organically produced fertilizer and soil conditioners provide a product that will off-set the current sky rocketing chemically produced fertilizers cost that farmers on both national and international markets are now paying. Our initial product offerings are Municipal Wastewater Treatment and the Organic fertilizer and soil conditioners. Diamond Grow Organics, LLC. Residual waste engineers are researching three other innovative products by year 3, ready to market by year 6.
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Diamond Grow Organics LLC Overview of the Organization
Registered Name:
Diamond Grow Organics LLC
Commencement of Operations:
Operations will commence upon achievement of funding
History
This venture has grown out of an environmental protection need. A feasibility study completed by Poly environmental in 2001 determined that privately owned and operated waste treatment operation that would be accessible by both municipal and commercial customers would greatly reduce illegal dumping, and relieve current POWTP’s that are currently beyond their capacity. Upon the publication of this study, Dallas Ledington invested a great deal of time and resources researching and developing a system that could meet the demands of his local community. Working with both local and state authorities, Mr. Ledington introduced his plan and was subsequently green lighted to build Alabama’s first privately owned pre-treatment operation. From 2002-2008 this system performed above and beyond expectations, proving there was significant profit to be made in waste treatment; Mr. Ledington began efforts to establish a centralized waste water treatment coop seeking a public/private partnership venture. While it was his desire to accomplish this task in Alabama, lack of regulatory support, and support from the governing body that issued the discharge permit his company operated under, Mr. Ledington set out to find other communities in the region that would. It was through this process that a relationship was developed with counsel president Wanda Moore of the Town of Campbellton. Achieving approval of the town counsel, planning and development of this project moved forward.
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Mission
Our mission stated simply is to: apply our innovative process execute our strategic and aggressive marketing plan accomplish IPO in 6 years
Mission Statement
Diamond Grow Organics, LLC, will challenge benchmarks in the current waste water treatment sector. The innovative design of our process and system prove, “we find ways to do what the others don't". Anticipate and meet opportunities presented by evolving retailer and consumer attitudes towards the environment. Work with local, regional, national and international legislators and regulators, as well as the industry, to help create and comply with laws and regulations aimed at protecting the environment. Encourage manufacturers to implement design packages and disposal systems to minimize the impact on the environment, such as reducing total suspended solids discharged into municipal wastewater treatment systems. Encourage manufacturers to design products to utilize more recycled materials and/or make them more recyclable. Encourage manufacturers to review and consider effective disposal methods designed by Diamond Grow Organics, LLC. Initiate educational programs and activities designed to promote environmental responsibility. Anticipate and meet opportunities presented by evolving retailer and consumer attitudes towards the environment
Vision Statement
Through our diverse professional skills and clarity of purpose and values, we aim to achieve an IPO (or Trade Sale) by 2016.
Organizational Objectives
1. Finalize the public/private partnership with the town Campbellton Fla. 2. Achieve recurring profits of a minimum $3 million by Year 5. 3. Research and establish three other innovative products by Year 3, ready to market by year six.
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Organizational Values
Transparency in all dealings with key stakeholders Commitment to our environment and our customers Innovative approach to waste water treatment and biosolids recycling.
Founders and Management Team
The Management team is comprised of Dallas Ledington, and Pamela Ledington,. The Management team is complimented by two advisors: Michael Antoneli (Strategy and Marketing advisor) and Reb Bludsworth (Technical advisor). The Management team is highly motivated, experienced and well qualified. The team is strongly positioned to take advantage of this opportunity. The team has:
Proven business start-up skills, with bottom line responsibility Experience in business start up (finance, marketing, operations and legal aspects) Personality profiles that reflect the synergies of cohesive group dynamics
Dallas has significant skills and experience in planning, designing, construction and Start-up of projects of this nature. Establishing first All-Pro Maintenance and More Inc. in 1996 he then went on to establish Environmental Filtration Service Inc. in Dothan Alabama in 2001. Both operations were successful start-up operations with 99% accuracy of forecasted numbers. Michael has extensive experience in finance, and was an award winning finance director for the Marriott Hotel chain. Michael Antonelli was also the CEO of the Mandalinbay hotel and casino in Las Vegas Nevada, as well as additional posts in the US and Canada.
Major Milestones Achieved to Date
Identification of unsatisfied market in need to centralized waste treatment In principle agreement with town of Campbellton to Provide waste treatment services and collection system management over the next 15 years Constructed and tested prototype system in Dothan AL from 2001 to 2008 Blanket approval for our system by Campbellton City Council Competitor analysis undertaken to establish uniqueness of Diamond Grows’ product benefits Commitment of management team through investment of hurt money Development of Business Plan
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Diamond Grow Organics LLC Organizational Plan
Organization Structure Chart:
The Organizational Structure charts appearing below show how the organization's staffing needs change over the five years. Year 1 Board CEO Admin Staff 3 Marketing Staff 2 Production Staff 10 Year 5 Board CEO Admin Staff 12 Marketing Staff 4 Production and Transportation Staff 60 Finance Staff 8 Sales Staff 8 R and D Staff 4
Organizational Budget:
Specific line budget items appear below:
Organizational Expense Details Administration Management Qtr 1 $ Qtr 2 $ Qtr 3 $ Qtr 4 $ Year 1 $ Year 2 $ Year 3 $ Year 4 $ Year 5 $
17,500 17,500 17,500 17,500
70,000 150,000 250,000 300,000 350,000
35,000 35,000 35,000 35,000 140,000 290,000 320,000 350,000 380,000
Training Marketing
40,000 20,000
60,000 120,000 120,000 120,000 120,000
30,000 30,000 30,000 30,000 120,000 600,000 480,000 480,000 480,000
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Business Structure:
The proposed business structure is:
Shareholder 10% Ledington’s 60% Investor 30 %
DGO LLC Operating Entity
Board Structure:
The Investor, in addition to the capital introduced to the venture, will also have experience in dealing with and/or contacts in customer large organizations that are active in our markets. Such organizations would include food processing plants that are required to pre-treat their own discharge. An independent non-executive Chairperson will be appointed. This person will be able to introduce the Management team to owners of major corporations as well as municipal leaders, and will have developed a reputation for integrity in all business dealings. This Chairperson will be familiar with what is involved in preparing companies for an IPO and preferably have successfully taken a company to this stage.
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Diamond Grow Organics LLC Strategic Analysis
External Environment Analysis Technological Developments:
Current developments in the industry have focused on the building of more POWTO, ignoring the encouragement by the EPA to centralize and privatize. Old ideology such as “dilution of pollution is the solution” is now giving way to new waste water treatment technology and innovative process designs. The waste water industry has primarily been made up of individuals without extended education or continued education in the field which they work. This is not the case with DGO LLC; we believe that we offer to some of the nations greatest minds to this industry.
Uniquely designed Polymer Injection system:
By our proven digital matching waste to polymer formula, we have exceeded solids extraction rates world wide. While the current industry average stands at 17.5 DGO’s average exceeds that with a record setting 27.5 System Automation will be under constant monitoring by trained and certified operators, this alleviates poor quality discharges
Un-manned networked dumping stations
Studies of human behavior indicate that a waste hauler with a questionable waste cargo is more likely to improperly dispose of that waste if his disposal options require human contact. That being the case, our un-manned dumping stations accessed with a pre-paid card, will give waste haulers a permitted environmentally safe dumping option. DGO LLC., challenges contemporary thinking in the waste water industry at large and does so with state of the art equipment technologies.
Social and Attitudinal Trends
The environment is now at the forefront of our nation’s attention and concern. The current presidential administration shares the attitude. The EPA estimates over 10.5 million tons of biosolids are produced by POWTO each year. Of that number 45% was disposed of in land fills or land application processes indicating that available recycling technology is not being applied. Current presidential administration is now promoting and supporting companies that can produce an exportable product.
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Economic Trends
At present Green projects are acquiring funding when others are being shelved. Urban populations are growing increasing disposal demands. Research suggests that our population is increasing faster than our ability to treat the waste they generate, insuring a constant and growing demand for our service.
These findings, coupled with today's more demanding tax payer, suggest that DGO LLC., will be able to capitalize on the demands of the increasing populations need for waste water disposal. Privatized waste water treatment and recycling facilities will be a key solution to meeting this demand while increasing water conservation and diminishing the loads on any watershed that they will serve.
Market Description
Waste Produced by Jackson County Florida ******** on a monthly basis Un-recycled biosolids produced *****tons Public private partnerships are a growing sub sector in the waste treatment industry with increases of 2.4% and 5.6% respectively from 1999 to 2008. With an overwhelming number of POWTO at or beyond their rated capacity as well as municipal budget constraints on smaller disadvantaged community. We will be able to seize large portions of this market Waste water and the residuals produced by it treatment will continue to increase with the growing population continuing to expand the market base from which we will operate.
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Threat of Emerging Competition
Power of Buyers
No alternatives offering combination of features
Supplier Bargaining Power
Extensive
Existing relationship with Keystone Foods and Perdue Municipal and Large corporate buyers
industry networks via key board member Less critical components are generic and can be outsourced Multiple suppliers for each component and part Expertise in-house to construct complex components
Medium Risk
Low Risk
Implications of Analysis Due to the market segment targeted and the nature of the industry, it is possible to earn above normal profits in this industry.
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Diamond Grow Organics LLC Key Strategic Issues
Sustainable Competitive Advantage DGO, LLC. will "succeed" because of the following:
A strategic alliance with the world's largest food processing company providing it with credibility and well established waste treatment experience to establish the business in its formative stages. Unique and innovative process design Strong team of committed people
Basis for Growth
The basis for growing the venture is reflected in the following two strategies: Priority 1: continue research and development of new and innovative products to meet the current and future needs of privatized waste treatment. Priority 2: Enter new geographic markets (Europe, Africa, Middle East, Russia, Canada, South America and Mexico).
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Diamond Grow Organics LLC The Marketing Plan
Marketing Objectives
Establish a strong presence in the US market Use the Keystone Food and Campbellton Florida association as a conduit for entry into the US market provide guaranteed demand, market penetration, nationally and internationally wide distribution, and an opportunity to gauge market acceptance Diamond Grow Organics at a reduced business and financial risk. Utilize acquired market knowledge and presence to establish new customers both through current affiliations and through the efforts of DGO, LLC.’s own sales force. Establish significant high-margin sales.
Sales Forecasts Based on the market research undertaken, strategies developed and existing customer relationships, the following sales forecasts were developed (in units): Product Details Waste Treatment Organic Fertilizer Non-Waste Treatment Grand Total Waste Treatment Organic Fertilizers Year 1 Year 2 Year 3 Year 4 Year 5 380 480 480 320 480 480 1,520 480 480 2,720 480 480 3,920
380
480 800
480 2,000
480 3,200
480 4,400
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Sales Assumptions
Assumptions underlying the development of the sales forecasts are as follows: Year 1
80% of processing will be on the KSF contract and the Campbellton Florida public/private partnership $120,000 will be spent on developing the relationship with Perdue. Acquiring and training a sales force, producing brochures, and seeking out the key decision-makers in Public waste treatment and Commercial organization required to Pretreat their own discharges.
Year 2
KSF contract continues with a projected increase to 48 units. Receiving of additional entrants into the established coop. 3 more established Dump stations reached through our municipal affiliation with the Town of Campbellton and as a result of our extensive marketing effort. $600,000 will be spent creating excitement for Diamond Grow Organic products, achieved through a strong trade show presence and developing trade show materials, a nation-wide personal selling campaign, and mailings of our direct marketing brochures. The commencement of the Perdue Farms contract
Year 3
KFS, Perdue contract continues Public/Private Partnership with Campbellton and additional coop entrants continues $480,000 will be spent continuing the marketing effort commenced in Year 2.
Years 4 & 5
KFS, Perdue contract continues Public/Private Partnership with Campbellton and additional coop entrants continues Private waste hauler revenue stabilizes 5 additional public/private partnerships in negotiation $480,000 will be spent in each year continuing the search for further customers and developing the relationships with current customers.
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Marketing Strategies The key to the marketing strategy is to identify individuals in municipal waste treatment operations as well commercial operations that that are required to pre-treat their own discharge, who have decision-making authority to outsource Biosolids management. These individuals can be reached through personal selling, direct mailings, trade shows, and business calls. The marketing approach will demonstrate the benefits of allowing DGO, LLC. to manage their residual waste or their waste collection and treatment facilities.. Emphasis will be placed on how DGO, LLC superior management of facilities and recycling of biosolids will reduce the commercial customers overall waste treatment cost and tax payer burden. Products DGO, LLC. Product offerings will be positioned as cost-effective, reliable, operational solutions to the current and future needs of any municipality that is currently considering waste treatment options or currently run their own facilities. In addition our line of organic fertilizers will provide an offset to farmers currently dependent upon chemically produced fertilizers that are impacted by sky rocketing nitrate and phosphorus prices. Price
DGO,LLC Products will be priced competitively This pricing strategy will be high enough to convince customers that they are purchasing an effective high-quality product. Primary research indicates that the target market is not price sensitive. The sales price will return an estimated 39% gross margin on sales.
Distribution
Product distribution will be facilitated by utilizing the distribution channels of the large corporations with whom we secure strategic alliances. Such corporations will typically have nation wide coverage. This strategy will ensure a presence in the market that increases awareness and builds demand.
Promotion DGO, LLC.’s entry into the US fertilizer market will be supported by a campaign to establish its profile in the fertilizer industry. This will include the following:
Seek out the decision-makers in large commercial operations required to pre-treat their own discharge and municipal entities seeking waste treatment and residual solutions Direct mail corporate material to the above Undertake a campaign of personal selling, targeting decision-makers Advertise in industry journals, on the Internet, and on our website Attend/sponsor exhibitions and trade shows
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Continual PR: press write-ups; personal interviews; testimonials; product trials
Diamond Grow Organics LLC Competitive Environment Analysis
Intensity of Competitor Rivalry
Targeting an under serviced sector of the market Resistance from established competitors Unique combination of products catering to niche corporate needs Not price competitive in organic fertilizer segment Low Risk
Competitor Analysis
DGO LLC Financial backing Customer exclusivity System Technology Product Public/Private Partnership Exp. Position in life cycle Commitment to technology Cost structure Selling force Totals Legend 5=excellent; 1=poor 3 5 5 5 2 5 5 5 3 40 TRS 3 5 3 2 1 1 2 3 4 31 GEO 5 5 3 2 4 1 3 2 4 32
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TRS:
This Company based in Arkansas is a disposal only company. They rely heavily on the state of Alabama for this due to the lack of land application restriction. They have no experience to date in managing a POWTO, and are currently under heavy scrutiny in Alabama by local environmental groups due to questionable practices of land applying un-treated waste. Last year this company underwent a complete management change and is now struggling as a result.
GEO:
This
is a services management company. While they are active in the management of prisons, their recent push to enter the waste water and water treatment so far has proven unsuccessful. They provide management services but do nothing else. This means that they cannot carry our proven methods to reduce tax payer cost for services.
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Diamond Grow Organics LLC Customer Profile
DGO LLC., has two customer categories: Private and Municipal customers.
Key Stone Foods Inc.
In spite of the current economy, KSF Inc. continues to expand its Bakerhill AL. poultry processing operations. At Present 150.000 gallons per week, this amount will increase with the addition a second and third clarifier. My previous experience with KSF Inc. and the Georgia Equity Group is what has earned DGO, LLC their confidence, as well as their letter of intent.
Perdue Farms
Perdue Farms is another major Poultry Processing facility that presently is being serviced by TRS. However recent transportation cost increases that has not been adjusted since the lowering of fuel cost. This has Perdue management looking for alternatives options for their biosolids disposal needs. Again a previous history with the management of this facility ensures a completive edge when the TRS contract expires next year.
Commercial Waste Haulers
We will provide for our commercial waste haulers 24/7 access to our main site in Campbellton Florida as well as to any of our automated networked dump sites. There are over 250 restaurants in the region requiring grease trap maintenance and disposal. As a result of this maintenance, we expect an estimated $168.750.00 monthly from this revenue source. In addition to an estimated 30,000 septic tanks and other onsite waste disposal systems that will be serviced by these local waste haulers.
Internal Environment Analysis
See Appendix A for summary of Bell Mason Diagnostic. Major strengths and weaknesses that were identified during the Diagnostic process appear in the SWOT analysis in Appendix C.
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Diamond Grow Organics LLC Financial Plan
Underlying Assumptions
Keystone Foods and Perdue Farms will enter into a contract agreement with DGO LLC, for management of all residual waste produced at both facilities under a contract allowing price fluctuations in-line with materials and labor costs Town of Campbellton Florida will enter into a Public Private Partnership with DGO LLC thus establishing the waste water disposal coop. Sales invoices to be paid according to those contracts Creditors to be paid on a 30 day net basis Each month's organic fertilizer production is sold in the following month Process operations will be set up in Campbellton Florida Pay as you go has been assumed for income taxes
Financial Highlights (Best Case Scenario)
Cash positive in each year of operation $1 million committed to R&D DGO LLC., cash surplus reinvested into future automated networked dump stations
Financial Ratios
Ratios Gross Margin NPAT % Total Assets Quick Ratio Inventory Turnover Year 1 30% 39% 120% 9.50 Year 2 37% 20% 209% 9.62 Year 3 40% 29% 227% 10.05 Year 4 41% 35% 324% 10.28 Year 5 42% 34% 449% 10.42
Breakeven Point
Waste Treatment Services Fertilizer Products
80 units per week 13 units per week
$3,000,000 annual sales $4,400,000 annual sales
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DGO, LLC Annual Sales($million)
DGO, LLC. Profits ($million)
Financial Performa’s Cash Flow
Opening cash balance Cash Inflows Capital funds Sales Total Cash Inflows Cash Outflows Purchase of equipment Waste Treatment Services Fertilizer Products Facility rent Maintenance Research & Development Training Marketing Budget Facility/Office wages Federal Income Tax State Income Tax License Fees Dividends Paid Total Cash Outflows Net cash flow Closing Cash balance 150,000 4,678,149 84,000 91,200 240,000 60,000 120,000 411,200 20,893 6,139 304,000 6,165,581 535,819 535,819 500,000 5,560,314 3,550,950 174,720 197,808 439,680 120,000 600,000 640,000 378,885 111,325 659,360 8,933,043 1,254,157 1,789,976 500,000 5,782,727 8,616,972 272,563 327,400 1,559,667 120,000 480,000 770,000 875,848 257,345 1,091,334 10,653,857 1,172,831 2,962,807 500,000 6,014,036 14,082,594 374,320 467,044 1,556,812 120,000 480,000 850,000 1,803,570 529,931 1,556,812 12,335,119 2,801,117 5,763,924 500,000 6,014,036 19,971,679 385,659 617,334 2,057,781 120,000 480,000 930,000 2,751,060 808,326 2,057,781 18,693,657 4,461,967 10,225,891 621,400 1,080,000 1,701,400 1,000,000 2,187,200 4,187,200 3,826,688 4,826,688 4,136,236 4,136,236 5,155,624 5,155,624
Year 1
-
Year 2
535,819
Year 3
1,789,976
Year 4
2,962,807
Year 5
5,763,924
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Inventory Management
Start up Inventory Unit Sales Processing Closing inventory
Year 1
0 380 420 40
Year 2
40 1280 1380 140
Year 3
140 2480 2580 240
Year 4
240 3680 3780 340
Year 5
340 4880 4980 440
Tax Reconciliation
Year 1
Year 2
Year 3
Year 4
Year 5
Net cash flow Less Equity Injection Less Depreciation Add: Capital Expenditure Add Tax Paid Add: Add: Dividends Paid Taxable Income Federal Tax Liability State Tax Liability
535,819 (621,400) (30,000) 150,000 27,032 61,451 20,893 6,139 27,032
1,254,157 (1,000,000) (130,000) 500,000 49,210 1,114,368 378,885 111,325 490,210
1,172,831 (230,000) 500,000 51,193 2,576,024 875,848 257,345 1,133,193
2,801,117 (330,000) 500,000 86,501 5,304,618 1,803,570 529,931 2,333,501
4,461,967 (430,000) 500,000 130,387 8,091,354 2,751,060 808,326 3,559,387
Refer Appendix I for Financial Analysis Worksheets
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Diamond Grow Organics LLC Sensitivity Analysis
The first scenario to consider is that the KSF contract does not materialize, in which case the investor will not be required to provide any funds. Should KSF’s requirements not meet expectations this would be compensated for by increasing the aggressive marketing of our grease trap waste and septic tank waste disposal. Of course this would impact on DGO, LLC.’s ability to provide funding for the subsequent dump station facilities. For example, if the residual waste treatment was reduced to 30 units per month and there was no other external funding than that contemplated in the Offer, DGO, LLC would not be able to fund the fourth and fifth dump stations until Year 5. Under the above eventuality the investor would be entitled to claw back the Management Team's equity to 40%, thereby increasing their own equity to 50%. The investors IRR would then calculate to 72% (refer DGO, LLC. sensitivity analysis Appendix I). The majority of cash expenditure is related to production and sales volumes and allowances have been made in the KFS contract for raw material and labor cost increases to be reflected in the cost per unit of disposal.
Source and Application of Funds Source Share holder Equity $121,400 Investor Equity $500,000 Application Project Planning and Development $150,000 Raw materials (2 months) $250,000 Working Capital $250,000 Investor Equity $1,000,000 DGO, LLC. Processing Equipment $500,000 Raw Materials (4 months) $250,000 Working Capital $250,000
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Diamond Grow Organics LLC Critical Risks Analysis
Risk Dimension Perceived Risk Development Management Marketing Financial Valuation Financing Exit Zero Low/Moderate Low/Moderate Low/Moderate Low Low/Moderate Low/Moderate
See Appendix B for further explanation of Risks and Problems.
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Diamond Grow Organics LLC
Appendix A
Internal Environment Analysis
Bell Mason Dimension Technology/Engineering Analysis There is a commitment to innovation and technology in all areas. Production is driven by technology and research and development initiatives and budgets are in place. Diamond Grow Organics has well-defined and unique features and functions. Future products. Diamond Grow Organics has well defined organization and processes to produce its products at the cost, quality, and schedules required by customers. Raw materials and finished goods are managed in an optimal fashion according to just-in-time principles. The venture's 5-year business plan is workable and realistic and spells out in particular detail the first year of operation. The plan identifies the corporate vision and mission, product strategy, market segmentation and competitive market position. A strategic and tactical marketing plan, together with a competent leader and organization to implement it, is in place. The inclusion of an independent Chairman and venture partners who have experience in, and affiliation with, the waste disposal and management industry will strengthen this plan. At this point, a driven sales group is not in place. The CEO is proven. Dallas Ledington has experience in retail, waste treatment and leading an organization with annual turnover in excess of 1 million US$. With a record for fast growth due to Dallas's leadership, intelligence, energy and ethical business practices. The top-level team is composed of high-quality individuals who have measurable experience and expertise in a variety of areas. They are capable of filling several positions within their teams and adopt a `can-do' attitude. The management team has not worked together for very long as a unit, but have considerable experience in working within a team environment. The Board is still to be finalized with the independent Chairman and venture partner positions still to fill. The venture is dependent on an injection of funds to establish. The venture is attractive to multiple investors as it is `real business' opportunity. Corporate governance issues have been addressed at all levels of the organization.
Product
Manufacturing
Business plan and vision
Marketing
Sales
CEO
Team
Board of Directors Cash Financeability Control
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Diamond Grow Organics
Appendix B
Critical Risks and Problems
Development Risk- Zero
Currently assessed as zero due to the commercialization of existing working prototypes.
Manufacturing Risk- Low/Moderate
The two main issues that need to be addressed in the processing of wastewater and its residuals are the price of the major commodity, emulsion polymer, and the quality and supply of the componentry. As this venture will be located near two significantly sized hubs, costs will be kept to a minimum due to the lower transport costs. Strong relationships will be developed with suppliers of emulsion polymer which will ensure favorable trading terms. Quality control checks have been introduced at all stages of process and production. To ensure only the best supplies are sourced, two or three suppliers will be sought in the early stages of the venture. There is a reliance on the technical expertise provided by Mr. Reb Bludsworth. Bludsworth however has committed to the venture for twelve months. He has expertise and a wide network of contacts in skilled labor industry. Our research shows that trainable labor will be readily available in the district in which we have chosen to establish. This is a `fast growth' venture and the supply of skilled labor to meet demand is paramount. Financing Risk- Low/Moderate As no traditional funds are required, this venture is not susceptible to fluctuating interest rates. However, the venture partner requires being confident that their expected (or promised) returns are assured at all stages of the venture. In addition, the venture is self funding and it is not envisaged that further injections of venture capital will be required in the future. Marketing Risk- Low/Moderate The initial marketing risk is minimized because of the Public/Private Partnership with the town of Campbellton Florida and the Keystone Food Inc. alliance. However, as the concept of a centralized waste treatment coop is new to the market, the broader market needs to be educated in the features and benefits of this concept. This will involve time and effort but will be assisted greatly with Campbellton and Keystone Foods Inc. involvement. Management Risk- Low/Moderate This project falls under "a new and unique product or products" Although there is a strong team in place, there is always a risk of human relationships souring over time. The team are familiar with all facets of the project and are confident that, should one member be replaced, the skills required to fill that void can be found within the team. This would be a short term solution and a professional person would be recruited to permanently replace the team member who may decide to vacate his or her position. In addition, all management team members have had bottom line responsibility and have successful track records in developing profitable business ventures.
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Valuation Risk- Low The risk that the investor pays too much for the venture is offset as
Investor funds are in two Phases The public/private partnership along with Keystone Foods contract will be in place and will provides a stable base from which to work.
Exit Risk- Low/Moderate Given the forecast sales, the solid returns, and the planned IPO or Trade Sale strategy, the exit risk for the investor is assessed to be moderate to low.
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Diamond Grow Organics LLC
Appendix C
SWOT Analysis
Strengths 1. Alliance with Keystone Foods 2. Public/Private Partnership 3. Quality products 4. Successfully prototype in Alabama 5. Offer alternative to ecommerce ventures 6. Skilled and committed team 7. High margins in the waste management industry 8. Outsourcing 9. Low set up costs for future dump stations Threats 1. Imitation products 2. Window of opportunity may be limited 3. Adverse reaction to Privatized waste treatment 4. Municipal Waste Treatment ideology Capitalize on Strengths Market entry and to gain market knowledge Favorable customer perception Offers investor opportunity to balance portfolio Management has skills and experience in a variety of areas 5. Ability to negotiate on bulk purchases 6. Reduces capital costs 7. Reduces investor's risk and exposure 1. 2. 3. 4.
Minimize Threats 1. Venture turn-key and ready to be actioned 2. Guaranteed demand through Public/Private Partnership and KSF contract 3. Backing of Environmental Protection Agency as well as the Florida Department of Environmental Protection 4. Trend towards environmental conscious nation
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Opportunities 1. Expanding Privatized Waste Treatment Market 2. Multiple repeat purchases of products 3. Unrestricted operating hours 4. Increasing awareness of environmental issues 5. Other markets (internationally) 6. Scope for innovation in existing market
Maximize Opportunities 1. Sell benefits 2. Target wide range of users 3. Education environmental issues pertaining to poorly operated and managed municipal waste treatment plant emphasizing the efficiency of privately owned and operated facilities. 4. Ease, quality and consistency of produce ideal for introduction to privatized waste management market 5. Commitment to relentless innovation ensures market bench marks challenged
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