Cariluxe Executive Summary

Prepared for the 2011 WCNY Alumni Business Showcase, April 2011

Purpose and Vision In the past ten years a high-growth segment of the building materials industry has emerged based on new manufacturing processes. Recent technological advances have enabled manufacturers to extrude different kinds of plastic together with organic material to form exterior trim, siding and decking. This technology provides superior building products along two important dimensions: (1) weather resistant over periods of decades versus years and (2) mitigates environmental destruction and atmospheric problems associated with deforestation and greenhouse gas emissions. This material is natural looking and easy to install. Its higher cost relative to wood is paid back on average within two years due to lower maintenance and deferred replacement. When exported to the Caribbean, however, shipping costs, high import tariffs, and a culture of highly fragmented distribution have made market penetration challenging. Our vision is to overcome these obstacles and make the new category of eco-friendly construction products we call sustainable building materials widely used in the Caribbean (target market) and Central / South America (phase two target market). Phase two of our business model includes the expansion of manufacturing and distribution into Central and South America, but the scope of this business plan is focused on the Caribbean. With environments consisting of high moisture, aggressive termites, marine salt and strong UV sunlight, our target markets are ideally suited for widespread adoption of sustainable building materials. Almost every islander in the Caribbean has a story of the devastating affect their environment has had on their homes, office buildings, marinas, and local commercial establishments. Additionally, rotted wood ends up in island landfills, contributing to greenhouse gasses and deforestation. Sustainable building materials consist of a wide range of products, but for the purposes of our business model the term relates to solid-core cellular PVC for exterior trim applications, and HDPE composite wood for exterior decking. Exterior trim applications include fascia, baseboards, corner board, soffits, decking, railing, siding, storm shutters, trellises, pergolas, fences, as well as land and marine-scapes. Almost all of the manufacturers of these types of products are in the United States. There is no production capacity currently in the Caribbean or South America. Market penetration of sustainable building material is under 1% in these markets. Opportunity In the United States annual sales of cellular PVC totals approximately $250 million, although the market for traditional wood trim/molding is $1.5 billion. By contrast, sales of HDPE composites for decking, railings and trim total $1 billion annually against a traditional wood market totaling $3.5 billion. The market leader, CPG International, (brand name Azek), has sales of $267 million and reported a 2009 EBITDA margin of 23%. We believe that with the right strategy, similar market penetration rates are achievable in our target market as compared with the evolution of the industry in the United States. The target market is $300 million in annual sales ($60 million relating to cellular PVC and $160 million HDPE composite wood). Of the $300 million, 60% or $180 million relates to the Repairs and Renovations (R&R) industry, and the remaining 40% or $120 million is in new construction within the residential, commercial and government segments. Broken down by customer segment, $100 million is residential, $175 million relates to commercial developments, and $25 million consists of government-funded projects. Cariluxe has engineered a unique low-cost manufacturing environment in the Caribbean. Raw materials make up 80% of the cost of production with 20% attributable to electricity and labor. Based on an exclusive arrangement with a local government (see section on Business Model), 50% of the raw materials are available at substantial discounts. We have combined exclusive access to local fuel sources with eco-friendly generators to achieve a cost per kilowatt hour of electricity well below existing rates. Local labor rates are half of those in the United States. With a cost structure equal to or less than the U.S, an extremely attractive business model emerges. Not only would stiff import and stamp duties on polymer-based materials be avoided as a Caricom manufacturer, but a network of island distribution centers would offer highly customized and quick delivery options. By controlling production and distribution from within the Caricom, a vertically integrated manufacturer with an exceptionally low-cost product would realize significant market advantages over foreign importers. To create a sustainable competitive advantage, however, low-cost manufacturing within the Caricom needs to be unique to Cariluxe. With long-term, exclusive access to low-cost raw material and electrical costs in the region (described in a later section), we currently enjoy a proprietary cost structure out of reach of the competition. Page | 1 Cariluxe Executive Summary Prepared for the 2011 WCNY Alumni Business Showcase, April 20 2011

Target Customer Cariluxe is currently the only dedicated importer of cellular PVC and HDPE composite decking in the Caribbean. Our customers include price-insensitive developers, general contractors, and architects. By offering a 50% reduction in price as a vertically integrated manufacturer Cariluxe will be able to dramatically expand its customer base into the mid market. In 2010 Cariluxe commissioned a market research firm to interview potential customers including developers, architects and Contractors across the Caribbean. 133 telephone surveys were completed and analyzed. 89% of all respondents were receptive to using the material and the same percentage would be willing to pay a 40% premium over wood. Our wholesale customer base will primarily include builders of residential housing, government sponsored developments, and developers of commercial projects that include resort hotels, restaurants, malls, and other business establishments. As an example, we are currently supplying the Lynden Pindling International Airport in Nassau N.P. with a large quantity of cellular PVC trellis and column wraps. Builders and architects are generally attracted to the materials low maintenance characteristics, natural-looking attributes, eco-friendliness, and ease of installation. Since continued use of replacement wood contributes to greenhouse gasses and deforestation, the eco-friendly aspect of sustainable building materials is becoming increasingly important to builders. In the Caribbean many government projects rate suppliers by how green they are. In the bidding process, commercial developers often have to demonstrate that their materials meet certain fire and hazardous material codes. Since the oxygen content of cellular PVC and composite material is lower than that of wood, it is considered self-extinguishing. When burned, the gaseous output is rated as less toxic that that of its wood cousin. Competitive Landscape Although direct competition from other sustainable building material suppliers is almost nonexistent south of the border, competition is in the form of similar and/or inferior product offerings. Large importers of #2 yellow pine from the U.S., Canada, Guyana or other South American countries represent the default source for exterior and interior trim applications. Pressure treated lumber (an environmental liability) is the next most widely used material for exterior applications including decks, railings and docks. There is some use of a recycled plastic product called Trex, the first engineered wood product in the decking category. Trex is made from recycled material using outdated technology and is therefore inconsistent in quality; and tends to be plastic looking. Although some U.S. based manufacturers of sustainable building materials export to the Caribbean, the total amount is negligible. Nevertheless, these U.S. based companies represents a potential threat and are, as such, considered competition. These companies include Azek, Trex, Versatex, KleerLumber and Koma. These larger players export to the Caribbean small amounts of product, typically through Miami based consolidators who provide sourcing to island based contractors. Other than Azec (debt is publicly traded) Koma, Versatex and KleerLumber, Trex is the only publicly traded company in the U.S. None of these companies have established distribution networks in the Caribbean. Business Model Our manufacturing facility for HDPE composite decking and cellular PVC will be located on a four-acre lot in one of the Caribbean countries. Initial operations will produce HDPE composites with PVC capacity added in year two. An exclusive arrangement with the government enables Cariluxe to use raw wood bi-product at no cost to satisfy the needs of the extrusion process and generate electricity. Specific details available with an NDA. 50% of the raw material of composite decking is wood pulp or flour. The other 50% is high-density polyethylene (HDPE) and other trace ingredients. By producing our own wood flour from the low-cost local wood source, the cost per pound will drop significantly. The facilitys power plant will consist of twin automated biomass generators (Talbotts BG TCH 25) providing up to 50 Kilowatts per hour of electricity using local wood product. The generators are fuel efficient, automated, and dramatically cut down on CO2 emissions. One of the units alone saves an estimated 212 tons of CO2 per annum versus petrol or coal generated power. The residue from the combustion is ash, which can be used by local farmers as fertilizer. By using biomass generators, recycled heat, and excess wood to produce power, Cariluxe will be positioned as the most ecologically-friendly, recycling facility for plastic extrusion in the world. Cariluxe will establish local distribution and millworks services on three or four of the larger islands. We currently operate local distribution centers in the Bahamas and Barbados and have been selectively granted duty-free import status under the Industries Encouragement Act in the Bahamas. The ability to stock and provide product locally promotes the fulfillment of small, custom orders, and this capability represents mid-market demand on remote islands. Developing sales, marketing, and distribution is a challenge in the Caribbean given the fragmented nature of business cultures, banking regulations, exchange rates, import duty schemes, and local competitors with significant local market Page | 2 Cariluxe Executive Summary Prepared for the 2011 WCNY Alumni Business Showcase, April 20 2011

influence. With six years of import experience, Cariluxe has built a proprietary database of over 4,000 architects, builders and various stakeholders. Each island must be approached differently in terms of distribution. In general, an initial channel mix of 70% direct selling versus 30% indirect selling will be targeted. By year three, the channel mix will reverse with 70% of sales derived from indirect sales and 30% direct. Utilizing its expertise in business to business sales and marketing, Cariluxe management will develop an integrated marketing approach to build awareness, educate stakeholders, and offer timely and relevant calls-to-action. A web site with architect, builder and residential consumer portals will offer content relevant to each audience. Marketing automation will drive prospects to the web site, provide content, and offer newsletter registration. Response management call centers currently exist in Barbados and Guyana with a centralized phone number. A login portal for each channel partner will provide for on-line ordering, change orders, billing statement information, delivery schedules and other pricing guidelines. In addition to the companys digital presence, trade show participation will be critical to introduce the product. Cariluxe will participate in a number of annual events and will selectively sponsor certain trade shows. Other forms of marketing will include print advertisements targeting the high-end homeowner and architect. Management Team The management team includes Johan Rostad, Fred Ewald, and John Strehle, plus an Advisory Board including a cellular PVC industry founder, an original technology innovator of composite decking, a former logging expert with an advanced degree in forestry, and a principal at an international mergers & acquisition firm located in Europe (Wharton graduate). Johan Rostad holds a B.S. degree and has successfully imported sustainable building material to the Caribbean's highend market for several years and has sold to architects and contractors building multi-million dollar homes. Fred Ewald holds a B.A., an M.S. in Accounting, and an MBA in Marketing. In 1998 Ewald and Strehle founded a $20 million international sales and marketing company with 400 employees, 150 of which work in offices in the Caribbean. They understand the legal, tax, and local business practices of the region. With an Advisory Board filled with industry pioneers and financing consultants, Ewald and Rostad have solid managerial backing. Rostad brings a deep understanding of selling sustainable building products to the Caribbean. Ewald has a proven track history of successful development of international business involving sales and marketing outsourced services, with an emphasis on Caribbean business operations. Taken as a whole, the Cariluxe team represents a winning combination of sales, marketing, finance, technology, innovation, and execution.
Profit & Loss 000's in USD Sales COGS Gross Margin Admin Costs EBITDA EBITDA (%) Balance Sheet Cash A/R Current Assets Inventory Machinery Total Assets 2011 1,000 650 350 200 150 15.0%
12/31/11

2012 5,000 3,000 2,000 750 1,250 25.0%

12/31/12

2013 14,500 8,700 5,800 2,175 3,625 25.0%

12/31/13

2014 25,000 15,000 10,000 3,750 6,250 25.0%

12/31/14

2015 45,000 27,000 18,000 6,750 11,250 25.0%

12/31/15

Source of Funds (000s) Cash on Hand Investor funds Total Source of Funds Use of Funds Extrusion machinery Equipment & vehicles Tech consulting fees 20,000 sf facility Working capital Administration Leasehold Sales, Mktg & Promos Total Use of Funds

225 2,000 2,225

750 495 225 210 180 210 75 80 2,225

250 167 417 313 1,500 2,229

1,250 833 2,083 1,563 2,975 6,621

3,625 2,417 6,042 4,531 3,990 14,563

6,250 4,167 10,417 7,813 3,990 22,219

11,250 7,500 18,750 14,063 4,998 37,811

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Cariluxe Executive Summary Prepared for the 2011 WCNY Alumni Business Showcase, April 20 2011