EX-10.5 18 d96705ex10-5.txt EMPLOYMENT AGREEMENT - ALAN KURUS EXHIBIT 10.05 EMPLOYMENT CONTRACT By this Agreement, Natural Gas Services Group, Inc., doing business as Rotary Gas Systems, referred to in this Agreement as Employer, located at Midland, Texas, employs Alan Kurus, referred to in this Agreement as Employee, of Troy, Ohio, who accepts employment on the following terms and conditions: ARTICLE 1 TERM OF EMPLOYMENT 1.01 By this Agreement, the Employer employs the Employee, and the Employee accepts employment with the Employer, for a period of time beginning October 16, 2000, and ending on December 31, 2003; however, this Agreement may be terminated earlier, as provided in Article 7, below. Extension of this contract may be negotiated by the parties. ARTICLE 2 COMPENSATION 2.01 As compensation for all services rendered under this Agreement, the Employee shall be paid by the Employer an annual salary of $90,000.00 per year, payable in bi-weekly installments of $3,461.54, during the period of employment. The amount paid is to be prorated for any partial employment period. 2.02 In addition to the compensation set forth in Paragraph 2.01, the Employee shall be entitled to receive a percentage of pre-tax profits to be determined as follows. Attached to this Contract and marked as Exhibit A, is a budget for the calendar years of 2001, 2002, and 2003. After Employer has recovered all accrued operating losses, then at the end of each calendar year, that year's results of operations will be compared to the attached budget. If there is no pre-tax net profit, then no further compensation for that year shall be paid to Employee. If there is a pre- tax net profit that is less than the budget amount, the Employee shall receive as additional compensation, an amount equal to five (5%) percent of such pre-tax net profits. If the pre-tax net profit meets or exceeds the budget amount, then the Employee shall receive as additional compensation, an amount equal to ten per cent (10%) of such pre-tax profit. 2.03 The Employee shall be paid moving expenses by the Employer in an amount of $12,500.00. 2.04 After the completion of six (6) months of service in the employ of the Employer, the Employee shall be entitled to an annual paid vacation of fifteen (15) business days with full pay. Such vacation shall be taken at any time selected by the Employee and approved by the Employer. In addition, the Employee shall be entitled to six (6) days per year as sick leave with pay. Neither vacation time nor sick leave may be accumulated, and if not used during the year in which it is granted, it shall be deemed to have been waived by the Employee. Provided, however, up to five days of vacation time may be carried forward to the next year with Management approval. 2.05 The Employee shall be entitled to a holiday with full pay on New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and/or any other day designated as a holiday by the Employer. 2.06 The Employer agrees that during the term of employment the Employee shall be afforded the opportunity to participate in any profit sharing trust, pension plan, deferred compensation plan, hospitalization plan, medical or dental service plans, health insurance plan, or any other employee benefit plan that may be in effect at any time or from time to time during the term of employment hereof, which is generally available to other employees of the Employer, 2 other than any bonus plan or other plan measured by the income or performance of the Employer. Participating in any such plans shall be consistent with the Employee's rate of basic compensation to the extent that compensation is a determinant with respect to coverage or participation under any such plan; provided, however, that the Employee's participation shall not be limited by reason of income or basic compensation if such limitations are not necessary to obtain tax deductions or are not required by law. ARTICLE 3 DUTIES OF EMPLOYEE Duties 3.01 The Employee is employed as a Vice President - Sales and Marketing for the RGS Compressor Company division of Rotary Gas Systems, and shall work at Employer's location in Midland, Texas. The Employee shall provide all services required for the successful development, marketing, and operation of the production and sale of small air compressors in accordance with the budget prepared and attached hereto as Exhibit "A". Extent of Services 3.02 During the term of this Agreement, the Employee may engage in any other business or professional activity, provided that none of it is performed during normal working hours or at the place of business of the Employer. Changes in Required Duties 3.03 The duties to be performed by the Employee shall be determined from time to time by the President or Rotary Gas Systems. 3 ARTICLE 4 EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES Non-competition by Employee 4.01 During the term of this Agreement, the Employee shall not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any business that is in competition in any manner whatever with the business of the Employer. Furthermore, upon the termination of this Agreement, the Employee expressly agrees not to engage or participate, directly or indirectly, in any business located within 500 miles that is in competition with the business of the Employer for a period of one year. Liquidated Damages 4.02 In the event of a breach by the Employee of the obligation not to compete contained in Paragraph 4.01 of this Agreement, the Employee shall pay to the Employer the sum of $2,500.00 per month as liquidated damages for the period during which the Employee continues to be in breach of the obligation not to compete. The Employer and the Employee agree that the amount established by this Paragraph as liquidated damages is reasonable under the circumstances existing at the time of the execution of this Agreement. 4.03 The Employee shall indemnify and hold harmless the Employer from all liability from loss, damage, or injury to persons or property resulting from the negligence or misconduct of the Employee committed in the scope of the Employee's employment. 4 ARTICLE 5 PROPERTY RIGHTS OF PARTIES Trade Secrets 5.01 During the term of employment, the Employee will have access to and become familiar with various trade secrets, consisting of formulas, devices, secret inventions, processes, and compilations of information, records, and specifications, owned by the Employer and regularly used in the operation of the business of the Employer. The Employee shall not disclose any such trade secrets, directly or indirectly, not use them in any way, either during the term of this Agreement or at any time thereafter, except as required in the course of his employment. All files, records, documents, drawings, specifications, equipment, and similar items relating to the business of the Employer, whether or not prepared by the Employee, shall remain the exclusive property of the Employer and shall not be removed from the premises of the Employer under any circumstances without the prior written consent of the Employer. 5.02 On the termination of employment or whenever requested by the Employer, the Employee shall immediately deliver to the Employer all property in the Employee's possession or under the Employee's control belonging to the Employer, in good condition, ordinary wear and tear excepted. ARTICLE 6 OBLIGATIONS OF EMPLOYER Indemnification of Losses of Employee 6.01 The Employer shall indemnify the Employee for all losses sustained by the Employee, and asserted by others, but not the result of the negligence or misconduct of the Employee, as a direct result of the discharge of his duties required by this Agreement. 5 Examination of Books 6.02 The Employee shall have the right, either personally or by an accountant retained and paid by the Employee, to examine the books and accounts of the Employer at times mutually convenient to the Employee and the Employer at least once each year, to examine the books and accounts of the Employer to the extent that they relate to transactions affecting the amount of the Employee's compensation as set forth in Article 2. ARTICLE 7 TERMINATION Termination by Either Party 7.01 This Agreement may be terminated by either party for material breech by giving 60 days' written notice of termination to the other party. Such termination shall not prejudice any remedy that the terminating party may have at law or in equity. Effect of Termination on Compensation 7.02 In the event of the termination of this Agreement prior to the completion of the term of employment specified in Article 1, the Employee shall be entitled to the compensation earned by the Employee prior to the date of termination as provided for in this Agreement, computed pro rata up to and including that date. The Employee shall be entitled to no further compensation after the date of termination. ARTICLE 8 GENERAL PROVISIONS Notices 8.01 All notices or other communications required under this Agreement may be effected either by personal delivery in writing or by certified mail, return receipt requested. 6 Notice shall be deemed to have been given when delivered or mailed to the parties at their respective addresses as set forth above or when mailed to the last address provided in writing to the other party by the addressee. Entirety of Agreement 8.02 This Agreement supersedes all other agreements, either oral or in writing, between the parties to this Agreement, with respect to the employment of the Employee by the Employer. This Agreement contains the entire understanding of the parties and all of the covenants and agreements between the parties with respect to such employment. Modification 8.03 This Agreement shall not be amended, modified, or altered in any manner except in writing signed by both parties. Failure to Enforce Not Waiver 8.04 Any failure or delay on the part of either the Employer or the Employee to exercise any remedy or right under this Agreement shall not operate as a waiver. The failure of either party to require performance of any of the terms, covenants, or provisions of this Agreement by the other party shall not constitute a waiver of any of the rights under the Agreement. No forbearance by either party to exercise any rights or privileges under this Agreement shall be construed as a waiver, but all rights and privileges shall continue in effect as if no forbearance had occurred. No covenant or condition of this Agreement may be waived except by the written consent of the waiving party. Any such written waiver of any term of this Agreement shall be effective only in the specific instance and for the specific purpose given. 7 Law Governing Agreement 8.05 This agreement shall be exclusively governed by and construed in accordance with the laws of the State of Texas. Partial Invalidity 8.06 If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall remain in full force and effect, as if this Agreement had been executed without any such invalid provisions having been included. Executed at Midland, Texas, on this 31st day of August, 2000. EMPLOYER WITNESS WITH APPROVAL: NATURAL GAS SERVICES GROUP, INC. ROTARY GAS SYSTEMS /s/ Wayne Vinson By: /s/ Wallace Sparkman --------------------------------- ----------------------------------- Wayne Vinson, President Wallace Sparkman, President EMPLOYEE /s/ Alan Kurus --------------------------------------- Alan Kurus 8 RGS COMPRESSOR COMPANY 4 YEAR PROJECTION EXHIBIT A TO Employment Contract and Incentive Stock Option by Earl Wait cover 8/10/004:19 PM
MIDLAND COMPRESSOR COMPANY Projections 2000 prototypes prototype ------------------------------------------------------------------------- Eight Nine Ten Eleven Twelve YTD ------------------------------------------------------------------------- REVENUE: $ 0 SALES - COMPRESSOR UNITS/30 $ 0 SALES - COMPRESSOR UNITS/50 $ 0 SALES - COMPRESSOR UNITS/100 $ 0 SALES - COMPRESSOR UNITS ------------------------------------------------------------------------- SALES - PARTS -- -- -- -- -- -- ------------------------------------------------------------------------- DIRECT COST: DIRECT LABOR 1,056 1,056 1,056 3,168 DIRECT MATERIAL - UNITS/15 1,190 1,190 1,190 3,570 DIRECT MATERIAL - UNITS/30 2,930 2,930 2,930 8,790 DIRECT MATERIAL - UNITS/50 3,757 3,757 3,757 11,271 DIRECT MATERIAL - UNITS/100 6,521 6,521 6,521 19,563 DIRECT MATERIAL - PARTS -- -- -- -- FREIGHT-in 990 990 990 2,970 WARRANTY -- -- -- ------------------------------------------------------------------------- -- -- 16,444 16,444 16,444 49,332 ------------------------------------------------------------------------- INDIRECT COSTS: SALARIES -- -- -- -- -- -- SHOP SUPPLIES & SMALL TOOLS -- 1,500 1,500 1,500 4,500 DRAFTING - CONTRACT 3,500 3,500 3,500 10,500 SHIPPING & RECEIVING -- -- -- -- -- -- ------------------------------------------------------------------------- -- -- 5,000 5,000 5,000 15,000 ------------------------------------------------------------------------- TOTAL COST OF SALE -- -- 21,444 21,444 21,444 64,332 ------------------------------------------------------------------------- GROSS MARGIN -- -- (21,444) (21,444) (21,444) (64,332) ------------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES 7,500 7,500 7,500 7,500 30,000 ADVERTISING 4,500 5,800 5,800 16,100 EMPLOYEE TRAVEL 2,000 2,000 2,000 2,000 8,000 TELEPHONE 250 500 500 500 1,750 AUTO OPERATING EXPENSES 500 500 500 500 2,000 ------------------------------------------------------------------------- -- 10,250 15,000 16,300 16,300 57,850 ------------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE 7,500 7,500 7,500 7,500 7,500 37,500 PAYROLL TAXES 750 1,500 18,500 1,850 1,850 7,800 RELOCATION EXPENSES 12,500 12,500 25,000 INSURANCE/GROUP HEALTH 500 750 750 750 750 3,500 INSURANCE 1,000 1,000 1,000 1,000 1,000 5,000 ------------------------------------------------------------------------- 22,250 23,250 11,100 11,100 11,100 78,800 ------------------------------------------------------------------------- OTHER INCOME & EXPENSE DEPRECIATION EXPENSE (250) (250) (250) (250) (250) (1,250) INTEREST EXPENSE -- -- -- -- -- -- ------------------------------------------------------------------------- NET INCOME (22,500) (33,750) (47,794) (49,094) (49,094) (202,232) ========================================================================= CONVERT TO CASH: add back depreciation 250 250 250 250 250 1,250 purchase inventory (82,383) (82,383) (164,766) Office addition $(30,000) (30,000) ------------------------------------------------------------------------- net cash flow (52,250) (33,500) (47,544) (131,227) (131,227) $(395,748) ------------------------------------------------------------------------- accumulated cash (52,250) (85,750) (133,294) (264,521) (395,748) ============================================================ PAYOUT ON NET PROFITS (22,500) (56,250) (104,044) (153,138) (202,232) manufacturing cost to build prototypes -- -- 32,544 32,544 32,544 97,632 ------------------------------------------------------------------------- ADJUSTED NET INCOME (22,500) (33,750) (15,250) (16,550) (16,550) (104,600) -------------------------------------------------------------------------
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MIDLAND COMPRESSOR COMPANY -------------------------------------------------------------------------------------------------- 2001 projections One Two Three Four Five Six Seven Eight -------------------------------------------------------------------------------------------------- REVENUE: SALES - COMPRESSOR UNITS/10 $ 0 $ 0 $ 0 $ 0 $ 3,982 $ 3,982 $ 3,982 $ 7,964 SALES - COMPRESSOR UNITS/15 $ 0 $ 0 $ 0 $ 0 $ 5,219 $ 10,438 $ 10,438 $ 10,438 SALES - COMPRESSOR UNITS/20 $ 0 $ 0 $ 0 $ 6,079 $ 6,079 $ 6,079 $ 6,079 $ 12,158 SALES - COMPRESSOR UNITS/25 $ 0 $ 0 $ 0 $ 12,796 $ 19,194 $ 19,194 $ 25,592 $ 25,592 SALES - COMPRESSOR UNITS/30 $ 0 $ 13,540 $ 6,770 $ 6,770 $ 20,310 $ 20,310 $ 27,080 $ 27,080 SALES - COMPRESSOR UNITS/40 $ 0 $ 0 $ 0 $ 0 $ 8,897 $ 8,897 $ 17,794 $ 17,794 SALES - COMPRESSOR UNITS/50 $ 18,990 $ 9,495 $ 9,495 $ 18,990 $ 23,485 $ 28,485 $ 37,980 $ 37,980 SALES - COMPRESSOR UNITS/60 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 13,407 $ 26,814 SALES - COMPRESSOR UNITS/75 $ 0 $ 0 $ 0 $ 15,605 $ 15,605 $ 31,210 $ 31,210 $ 62,420 SALES - COMPRESSOR UNITS/100 $ 0 $ 0 $ 0 $ 37,600 $ 37,600 $ 37,600 $ 56,400 $ 75,200 SALES -- PARTS -------------------------------------------------------------------------------------------------- 18,990 23,035 16,265 97,840 136,474 166,195 229,962 303,440 -------------------------------------------------------------------------------------------------- DIRECT COST: DIRECT LABOR 2,860 $ 2,860 2,860 2,860 2,860 2,860 2,860 2,860 DIRECT MATERIAL - UNITS/10 $ 0 $ 0 $ 0 $ 0 $ 2,750 $ 2,750 $ 2,750 $ 5,500 DIRECT MATERIAL - UNITS/15 $ 0 $ 0 $ 0 $ 0 $ 2,852 $ 5,704 $ 5,704 $ 5,704 DIRECT MATERIAL - UNITS/20 $ 0 $ 0 $ 0 $ 3,250 $ 3,250 $ 3,250 $ 3,250 $ 6,500 DIRECT MATERIAL - UNITS/25 $ 0 $ 0 $ 0 $ 6,654 $ 9,981 $ 9,981 $ 13,308 $ 13,308 DIRECT MATERIAL - UNITS/30 $ 0 $ 7,439 $ 3,719 $ 3,719 $ 11,158 $ 11,158 $ 14,877 $ 14,877 DIRECT MATERIAL - UNITS/40 $ 0 $ 0 $ 0 $ 0 $ 0 $ 5,735 $ 11,470 $ 11,470 DIRECT MATERIAL - UNITS/50 $ 9,622 $ 4,811 $ 4,811 $ 9,622 $ 14,433 $ 15,433 $ 19,244 $ 19,244 DIRECT MATERIAL - UNITS/60 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,085 $ 18,170 DIRECT MATERIAL - UNITS/75 $ 0 $ 0 $ 0 $ 8,505 $ 8,505 $ 17,010 $ 17,010 $ 34,020 DIRECT MATERIAL - UNITS/100 $ 0 $ 0 $ 0 $ 18,854 $ 18,854 $ 18,854 $ 28,281 $ 37,708 DIRECT MATERIAL - PARTS -- -- -- -- -- -- -- -- FREIGHT - in 481 612 427 2,530 3,589 4,444 6,249 8,325 WARRANTY 289 367 256 1,518 2,153 2,656 3,749 4,995 -------------------------------------------------------------------------------------------------- 13,252 16,090 12,073 57,513 80,386 98,845 137,838 182,682 -------------------------------------------------------------------------------------------------- INDIRECT COSTS: SALARIES SHOP SUPPLIES & SMALL TOOLS 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 DRAFTING -- CONTRACT -- -- -- -- -- -- -- -- SHIPPING & RECEIVING 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 CONTINGENCIES 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 -------------------------------------------------------------------------------------------------- 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 -------------------------------------------------------------------------------------------------- TOTAL COST OF SALE 18,752 21,590 17,573 63,013 85,886 104,345 143,338 188,182 -------------------------------------------------------------------------------------------------- GROSS MARGIN 238 1,445 (1,308) 34,827 50,588 61,850 86,624 115,258 -------------------------------------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 ADVERTISING 5,800 5,800 5,800 5,800 5,800 5,800 5,800 5,800 EMPLOYEE TRAVEL 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 TELEPHONE 500 500 500 500 500 500 500 500 AUTO OPERATING EXPENSES 500 500 500 500 500 500 500 500 -------------------------------------------------------------------------------------------------- 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 -------------------------------------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 PAYROLL TAXES 2,086 2,086 2,086 2,086 2,086 2,086 2,086 2,086 BONUS INSURANCE/GROUP HEALTH 750 750 750 750 750 750 750 750 INSURANCE 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 -------------------------------------------------------------------------------------------------- 11,336 11,336 11,336 11,336 11,336 11,336 11,336 11,336 -------------------------------------------------------------------------------------------------- OTHER INCOME & EXPENSE DEPRECIATION EXPENSE (250) (250) (250) (250) (250) (250) (250) (250) INTEREST EXPENSE -- -- -- -- -- -- -- -- -------------------------------------------------------------------------------------------------- NET INCOME (27,648) (26,191) (29,194) 6,941 22,702 33,964 58,738 87,372 ================================================================================================== Convert to cash: add back depreciation 250 250 250 250 250 250 250 250 inventory purchases (56,336) -------------------------------------------------------------------------------------------------- net cash flow (27,398) (26,191) (28,944) 7,191 22,952 (22,122) 58,988 87,622 -------------------------------------------------------------------------------------------------- accumulated cash (423,146) (449,337) (478,281) (471,090) (448,137) (470,260) (411,272) (323,650) ================================================================================================== Payout on net profits (229,880) (256,321) (285,515) (278,574) (255,871) (221,908) (163,170) (75,798)
MIDLAND COMPRESSOR COMPANY ------------------------------------------------------------- SALE 2001 projections Nine Ten Eleven Twelve Ytd PRICE ------------------------------------------------------------- REVENUE: SALES - COMPRESSOR UNITS/10 $ 7,974 $ 7,964 $ 3,982 $ 3,982 $ 43,802 2% $ 3,982 SALES - COMPRESSOR UNITS/15 $ 15,857 $ 10,438 $ 10,438 $ 5,219 $ 78,285 4% $ 5,219 SALES - COMPRESSOR UNITS/20 $ 12,158 $ 12,158 $ 12,158 $ 12,158 $ 85,106 4% $ 6,079 SALES - COMPRESSOR UNITS/25 $ 25,592 $ 31,990 $ 25,592 $ 19,194 $ 204,736 10% $ 6,398 SALES - COMPRESSOR UNITS/30 $ 27,080 $ 33,850 $ 33,850 $ 20,310 $ 236,950 12% $ 6,770 SALES - COMPRESSOR UNITS/40 $ 26,691 $ 17,794 $ 8,897 $ 8,897 $ 106,764 5% $ 8,897 SALES - COMPRESSOR UNITS/50 $ 37,980 $ 47,475 $ 47,475 $ 37,980 $ 360,810 18% $ 9,495 SALES - COMPRESSOR UNITS/60 $ 40,221 $ 26,814 $ 13,407 $ 13,407 $ 134,070 7% $13,407 SALES - COMPRESSOR UNITS/75 $ 62,420 $ 46,815 $ 31,210 $ 31,210 $ 327,705 16% $15,605 SALES - COMPRESSOR UNITS/100 $ 75,200 $ 56,400 $ 56,400 $ 37,600 $ 470,000 23% $18,800 SALES -- PARTS $ 0 0% ---------------------------------------------------------------------- 330,963 291,698 243,409 189,957 2,048,228 100% ---------------------------------------------------------------------- DIRECT COST: DIRECT LABOR 2,860 2,860 2,860 2,860 34,320 2% DIRECT MATERIAL - UNITS/10 $ 5,500 $ 5,500 $ 2,750 $ 2,750 30,250 1% DIRECT MATERIAL - UNITS/15 $ 8,556 $ 5,704 $ 5,704 $ 2,852 $ 42,780 2% DIRECT MATERIAL - UNITS/20 $ 6,500 $ 6,500 $ 6,500 $ 6,500 $ 45,500 2% DIRECT MATERIAL - UNITS/25 $ 13,308 $ 16,635 $ 13,308 $ 9,981 $ 106,464 5% DIRECT MATERIAL - UNITS/30 $ 14,877 $ 18,597 $ 18,597 $ 11,158 $ 130,178 6% DIRECT MATERIAL - UNITS/40 $ 17,205 $ 11,470 $ 5,735 $ 5,735 $ 68,821 3% DIRECT MATERIAL - UNITS/50 $ 19,244 $ 24,055 $ 24,055 $ 19,244 $ 182,818 9% DIRECT MATERIAL - UNITS/60 $ 27,255 $ 18,170 $ 9,085 $ 9,085 $ 90,848 4% DIRECT MATERIAL - UNITS/75 $ 34,020 $ 25,515 $ 17,010 $ 17,010 $ 178,604 9% DIRECT MATERIAL - UNITS/100 $ 37,708 $ 28,281 $ 28,281 $ 18,854 $ 235,678 12% DIRECT MATERIAL - PARTS -- -- -- -- -- 0% FREIGHT - in 9,209 8,021 6,551 5,158 $ 55,597 3% WARRANTY 5,525 4,813 3,931 3,095 $ 33,358 2% ---------------------------------------------------------------------- 201,767 176,121 144,367 114,283 1,235,216 50% ---------------------------------------------------------------------- INDIRECT COSTS: SALARIES SHOP SUPPLIES & SMALL TOOLS 1,500 1,500 1,500 1,500 18,000 1% DRAFTING -- CONTRACT -- -- -- -- -- 0% SHIPPING & RECEIVING 3,000 3,000 3,000 3,000 36,000 2% CONTINGENCIES 1,000 1,000 1,000 1,000 12,000 1% ---------------------------------------------------------------------- 5,500 5,500 5,500 5,500 66,000 3% ---------------------------------------------------------------------- TOTAL COST OF SALE 207,267 181,621 149,867 119,783 1,301,216 64% ---------------------------------------------------------------------- GROSS MARGIN 123,696 110,077 93,542 70,174 747,012 36% ---------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES 7,500 7,500 7,500 7,500 90,000 4% ADVERTISING 5,800 5,800 5,800 5,800 69,600 3% EMPLOYEE TRAVEL 2,000 2,000 2,000 2,000 24,000 1% TELEPHONE 500 500 500 500 6,000 0% AUTO OPERATING EXPENSES 500 500 500 500 6,000 0% ---------------------------------------------------------------------- 16,300 16,300 16,300 16,300 195,600 10% ---------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE 7,500 7,500 7,500 7,500 90,000 4% PAYROLL TAXES 2,086 2,086 2,086 2,086 25,032 1% BONUS 3,335 13,698 10,943 7,048 25,025 2% INSURANCE/GROUP HEALTH 750 750 750 750 9,000 0% INSURANCE 1,000 1,000 1,000 1,000 12,000 1% ---------------------------------------------------------------------- 14,671 25,034 22,279 18,384 171,057 8% ---------------------------------------------------------------------- OTHER INCOME & EXPENSE DEPRECIATION EXPENSE (250) (250) (250) (250) (3,000) 0% INTEREST EXPENSE -- -- -- -- -- 0% ---------------------------------------------------------------------- NET INCOME 92,474 68,492 54,713 35,240 377,355 18% ====================================================================== Convert to cash: add back depreciation 250 250 250 250 3,000 inventory purchases -------------------------------------------------------------- net cash flow 92,724 68,742 54,963 35,490 324,019 -------------------------------------------------------------- accumulated cash (230,925) (162,183) (107,219) (71,729) ============================================================== Payout on net profits 16,677
(1) because of increase volume standing inventory also increase beginning inventory is $164,766 and ending inventory would need to be $221,102 Page 2
MIDLAND COMPRESSOR COMPANY ------------------------------------------------------------------------------------------------- 2002 projections One Two Three Four Five Six Seven Eight ------------------------------------------------------------------------------------------------- REVENUE: SALES - COMPRESSOR UNITS/10 $ 3,982 $ 3,982 $ 0 $ 0 $ 3,982 $ 7,964 $ 11,946 $ 11,946 SALES - COMPRESSOR UNITS/15 $ 5,219 $ 5,219 $ 5,219 $ 0 $ 10,438 $ 15,657 $ 20,876 $ 26,095 SALES - COMPRESSOR UNITS/20 $ 6,079 $ 6,079 $ 0 $ 0 $ 6,079 $ 12,158 $ 18,237 $ 18,237 SALES - COMPRESSOR UNITS/25 $ 12,796 $ 12,796 $ 6,398 $ 6,398 $ 12,796 $ 31,990 $ 31,990 $ 38,388 SALES - COMPRESSOR UNITS/30 $ 13,540 $ 13,540 $ 6,770 $ 6,770 $ 13,540 $ 27,080 $ 33,850 $ 40,620 SALES - COMPRESSOR UNITS/40 $ 8,897 $ 8,897 $ 8,897 $ 0 $ 8,897 $ 8,897 $ 17,794 $ 17,794 SALES - COMPRESSOR UNITS/50 $ 28,485 $ 28,485 $ 9,495 $ 9,495 $ 18,990 $ 37,980 $ 56,970 $ 56,970 SALES - COMPRESSOR UNITS/60 $ 13,407 $ 13,407 $ 0 $ 0 $ 26,814 $ 13,407 $ 26,814 $ 26,814 SALES - COMPRESSOR UNITS/75 $ 31,210 $ 15,605 $ 15,605 $ 15,605 $ 31,210 $ 46,815 $ 62,420 $ 78,025 SALES - COMPRESSOR UNITS/100 $ 37,600 $ 37,600 $ 18,800 $ 18,800 $ 37,600 $ 56,500 $ 94,000 $ 94,000 SALES - PARTS $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------------------------------- $ 161,215 145,610 71,184 57,068 170,346 258,348 374,897 408,889 ------------------------------------------------------------------------------------------------- DIRECT COST: DIRECT LABOR 2,860 2,860 2,860 2,860 2,860 2,860 2,860 2,860 DIRECT MATERIAL - UNITS/10 $ 2,750 $ 2,750 $ 0 $ 0 $ 2,750 $ 5,500 $ 8,250 $ 8,250 DIRECT MATERIAL - UNITS/15 $ 2,852 $ 2,852 $ 2,852 $ 0 $ 5,704 $ 8,556 $ 11,408 $ 14,260 DIRECT MATERIAL - UNITS/20 $ 3,250 $ 3,250 $ 0 $ 0 $ 3,250 $ 6,500 $ 9,750 $ 9,750 DIRECT MATERIAL - UNITS/25 $ 6,654 $ 6,654 $ 3,327 $ 3,327 $ 6,654 $ 16,635 $ 16,635 $ 19,962 DIRECT MATERIAL - UNITS/30 $ 7,439 $ 7,439 $ 3,719 $ 3,719 $ 7,439 $ 14,877 $ 18,597 $ 22,316 DIRECT MATERIAL - UNITS/40 $ 5,735 $ 5,735 $ 5,735 $ 0 $ 5,735 $ 5,735 $ 11,470 $ 11,470 DIRECT MATERIAL - UNITS/50 $ 14,433 $ 14,433 $ 4,811 $ 4,811 $ 9,622 $ 19,244 $ 28,866 $ 28,866 DIRECT MATERIAL - UNITS/60 $ 9,085 $ 9,985 $ 0 $ 0 $ 18,170 $ 9,085 $ 18,170 $ 18,170 DIRECT MATERIAL - UNITS/75 $ 17,010 $ 8,505 $ 8,505 $ 8,505 $ 17,010 $ 25,515 $ 34,020 $ 42,525 DIRECT MATERIAL - UNITS/100 $ 18,854 $ 18,854 $ 9,427 $ 9,427 $ 18,854 $ 28,281 $ 47,136 $ 47,136 DIRECT MATERIAL - PARTS -- -- -- -- -- -- -- -- FREIGHT - in 4,403 3,978 1,919 1,489 4,759 6,996 10,215 11,135 WARRANTY 2,642 2,387 1,151 894 2,856 4,198 6,129 6,681 ------------------------------------------------------------------------------------------------- 97,967 88,781 44,307 35,033 105,663 153,983 223,505 243,381 ------------------------------------------------------------------------------------------------- INDIRECT COSTS: SALARIES 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 SHOP SUPPLIES & SMALL TOOLS 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 DRAFTING - CONTRACT -- -- -- -- -- -- SHIPPING & RECEIVING 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 CONTINGENCIES 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 ------------------------------------------------------------------------------------------------- 9,250 9,250 9,250 9,250 9,250 9,250 9,250 9,250 ------------------------------------------------------------------------------------------------- TOTAL COST OF SALE 107,217 98,031 53,557 44,283 114,913 163,233 232,755 252,631 ------------------------------------------------------------------------------------------------- GROSS MARGIN 53,998 47,579 17,627 12,785 55,433 95,115 142,142 156,258 ------------------------------------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 ADVERTISING 5,800 5,800 5,800 5,800 5,800 5,800 5,800 5,800 EMPLOYEE TRAVEL 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 TELEPHONE 500 500 500 500 500 500 500 500 AUTO OPERATING EXPENSES 500 500 500 500 500 500 500 500 ------------------------------------------------------------------------------------------------- 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 ------------------------------------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 PAYROLL TAXES 2,461 2,461 2,461 2,461 2,461 2,461 2,461 2,461 BONUS 4,206 3,136 (1,856) (2,663) 4,445 11,059 18,897 21,250 INSURANCE/GROUP HEALTH 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 INSURANCE 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 16,417 15,347 10,355 9,548 16,656 23,270 31,108 33,461 OTHER INCOME & EXPENSE DEPRECIATION EXPENSE (250) (250) (250) (250) (250) (250) (250) (250) INTEREST EXPENSE -- -- -- -- -- -- -- -- ------------------------------------------------------------------------------------------------- NET INCOME 21,031 15,681 (9,278) (13,313) 22,227 55,295 94,484 106,248 ================================================================================================= Convert to cash: add back depreciation 250 250 250 250 250 250 250 250 inventory purchases ------------------------------------------------------------------------------------------------- net cash flow 21,281 15,931 (9,028) (13,063) 22,477 55,545 94,734 106,498 ------------------------------------------------------------------------------------------------- accumulated cash (50,448) (34,517) (43,545) (56,608) (34,131) 21,414 116,149 222,646 =================================================================================================
MIDLAND COMPRESSOR COMPANY ------------------------------------------------------------- SALE 2002 projections Nine Ten Eleven Twelve Ytd PRICE ------------------------------------------------------------- REVENUE: SALES - COMPRESSOR UNITS/10 $ 7,964 $ 3,982 $ 3,982 $ 3,982 $ 43,802 2% $ 3,982 SALES - COMPRESSOR UNITS/15 $ 20,876 $ 15,657 $ 10,438 $ 10,438 $ 78,285 3% $ 5,219 SALES - COMPRESSOR UNITS/20 $ 18,237 $ 12,158 $ 6,079 $ 6,079 $ 85,106 3% $ 6,079 SALES - COMPRESSOR UNITS/25 $ 38,388 $ 38,388 $ 31,990 $ 25,592 $ 204,736 7% $ 6,398 SALES - COMPRESSOR UNITS/30 $ 40,620 $ 40,620 $ 33,850 $ 27,080 $ 216,640 7% $ 6,770 SALES - COMPRESSOR UNITS/40 $ 17,794 $ 8,897 $ 8,897 $ 8,897 $ 106,764 4% $ 8,897 SALES - COMPRESSOR UNITS/50 $ 56,970 $ 47,475 $ 37,980 $ 37,980 $ 322,830 11% $ 9,495 SALES - COMPRESSOR UNITS/60 $ 26,814 $ 26,814 $ 13,407 $ 13,407 $ 134,070 5% $13,407 SALES - COMPRESSOR UNITS/75 $ 62,420 $ 62,420 $ 46,815 $ 31,210 $ 327,705 11% $15,605 SALES - COMPRESSOR UNITS/100 $ 94,000 $ 94,000 $ 94,000 $ 56,400 $ 470,000 16% $18,800 SALES - PARTS $ 0 $ 0 $ 0 $ 0 $ 0 0% --------------------------------------------------------------------- 384,083 350,411 287,438 221,065 2,890,554 100% --------------------------------------------------------------------- DIRECT COST: DIRECT LABOR 2,860 2,860 2,860 2,860 34,320 1% DIRECT MATERIAL - UNITS/10 $ 5,500 $ 2,750 $ 2,750 $ 2,750 44,000 2% DIRECT MATERIAL - UNITS/15 $ 11,408 $ 8,556 $ 5,704 $ 5,704 $ 79,856 3% DIRECT MATERIAL - UNITS/20 $ 9,750 $ 6,500 $ 3,250 $ 3,250 $ 58,500 2% DIRECT MATERIAL - UNITS/25 $ 19,962 $ 19,962 $ 16,635 $ 13,250 $ 149,715 5% DIRECT MATERIAL - UNITS/30 $ 22,316 $ 22,316 $ 18,597 $ 14,877 $ 163,652 6% DIRECT MATERIAL - UNITS/40 $ 11,470 $ 5,735 $ 5,735 $ 5,735 $ 80,291 3% DIRECT MATERIAL - UNITS/50 $ 28,866 $ 24,055 $ 19,244 $ 19,244 $ 216,495 7% DIRECT MATERIAL - UNITS/60 $ 18,170 $ 18,170 $ 9,085 $ 9,085 $ 136,273 5% DIRECT MATERIAL - UNITS/75 $ 34,020 $ 34,020 $ 25,515 $ 17,010 $ 272,158 9% DIRECT MATERIAL - UNITS/100 $ 47,136 $ 47,136 $ 47,136 $ 28,281 $ 267,657 13% DIRECT MATERIAL - PARTS -- -- -- -- $ 0 0% FREIGHT - in 10,430 9,460 7,683 5,962 $ 78,430 3% WARRANTY 6,258 5,676 4,610 3,577 $ 47,058 2% --------------------------------------------------------------------- 228,145 207,195 168,802 131,644 1,728,405 60% --------------------------------------------------------------------- INDIRECT COSTS: SALARIES 3,750 3,750 3,750 3,750 45,000 2% SHOP SUPPLIES & SMALL TOOLS 1,500 1,500 1,500 1,500 18,000 1% DRAFTING - CONTRACT -- 0% SHIPPING & RECEIVING 3,000 3,000 3,000 3,000 36,000 1% CONTINGENCIES 1,000 1,000 1,000 1,000 12,000 0% --------------------------------------------------------------------- 9,250 9,250 9,250 9,250 111,000 4% --------------------------------------------------------------------- TOTAL COST OF SALE 237,395 216,445 178,052 140,894 1,839,405 64% --------------------------------------------------------------------- GROSS MARGIN 146,688 133,966 109,386 80,171 1,051,149 36% --------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES 7,500 7,500 7,500 7,500 90,000 3% ADVERTISING 5,800 5,800 5,800 5,800 69,600 2% EMPLOYEE TRAVEL 2,000 2,000 2,000 2,000 24,000 1% TELEPHONE 500 500 500 500 6,000 0% AUTO OPERATING EXPENSES 500 500 500 500 6,000 0% --------------------------------------------------------------------- 16,300 16,300 16,300 16,300 195,600 7% --------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE 7,500 7,500 7,500 7,500 90,000 3% PAYROLL TAXES 2,461 2,461 2,461 2,461 29,532 1% BONUS 19,654 17,534 13,437 8,568 117,669 4% INSURANCE/GROUP HEALTH 1,250 1,250 1,250 1,250 15,000 1% INSURANCE 1,000 1,000 1,000 1,000 12,000 0% 31,865 29,745 25,648 20,779 264,201 9% OTHER INCOME & EXPENSE DEPRECIATION EXPENSE (250) (250) (250) (250) (3,000) 0% INTEREST EXPENSE -- -- -- -- -- 0% --------------------------------------------------------------------- NET INCOME 98,272 87,671 67,187 42,842 588,347 20% ===================================================================== Convert to cash: add back depreciation 250 250 250 250 inventory purchases ------------------------------------------------------------- net cash flow 98,522 87,921 67,437 43,092 ------------------------------------------------------------- accumulated cash 321,169 409,089 476,527 519,618 =============================================================
Page 3
MIDLAND COMPRESSOR COMPANY ------------------------------------------------------------------------------------------------ 2003 projections One Two Three Four Five Six Seven Eight ------------------------------------------------------------------------------------------------ REVENUE: SALES - COMPRESSOR UNITS/10 $ 3,982 $ 3,982 $ 3,982 $ 3,982 $ 7,964 $ 7,964 $ 11,946 $ 11,946 SALES - COMPRESSOR UNITS/15 $ 5,219 $ 5,219 $ 5,219 $ 5,219 $ 10,438 $ 15,657 $ 20,876 $ 26,095 SALES - COMPRESSOR UNITS/20 $ 6,079 $ 6,079 $ 6,079 $ 6,079 $ 6,079 $ 12,158 $ 18,237 $ 24,316 SALES - COMPRESSOR UNITS/25 $ 12,796 $ 12,796 $ 6,398 $ 12,796 $ 25,592 $ 31,990 $ 38,388 $ 44,786 SALES - COMPRESSOR UNITS/30 $ 13,540 $ 13,540 $ 6,770 $ 20,310 $ 27,080 $ 40,620 $ 47,390 $ 54,160 SALES - COMPRESSOR UNITS/40 $ 8,897 $ 8,897 $ 8,897 $ 8,897 $ 8,897 $ 17,794 $ 26,691 $ 17,794 SALES - COMPRESSOR UNITS/50 $ 28,485 $ 18,990 $ 9,495 $ 28,485 $ 28,485 $ 47,475 $ 66,465 $ 75,960 SALES - COMPRESSOR UNITS/60 $ 13,407 $ 13,407 $ 13,407 $ 13,407 $ 13,407 $ 13,407 $ 26,814 $ 26,814 SALES - COMPRESSOR UNITS/75 $ 31,210 $ 15,605 $ 15,605 $ 31,210 $ 46,815 $ 62,420 $ 78,025 $ 93,630 SALES - COMPRESSOR UNITS/100 $ 37,600 $ 18.,800 $ 18,800 $ 37,600 $ 56,400 $ 75,200 $ 112,800 $ 131,600 SALES -- PARTS -- -- -- -- -- -- -- -- ------------------------------------------------------------------------------------------------ 161,215 117,315 94,652 167,985 231,157 324,685 447,632 507,101 ------------------------------------------------------------------------------------------------ DIRECT COST: DIRECT LABOR $ 2,860 $ 2,860 $ 2,860 $ 2,860 $ 2,860 $ 2,860 $ 2,860 $ 2,860 DIRECT MATERIAL - UNITS/10 $ 2,750 $ 2,750 $ 2,750 $ 2,750 $ 5,500 $ 5,500 $ 8,250 $ 8,250 DIRECT MATERIAL - UNITS/15 $ 2,852 $ 2,852 $ 2,852 $ 2,852 $ 5,704 $ 8,556 $ 11,408 $ 14,260 DIRECT MATERIAL - UNITS/20 $ 3,250 $ 3,250 $ 3,250 $ 3,250 $ 3,250 $ 6,500 $ 9,750 $ 13,000 DIRECT MATERIAL - UNITS/25 $ 6,654 $ 6,654 $ 3,327 $ 6,654 $ 13,308 $ 16,635 $ 19,962 $ 23,289 DIRECT MATERIAL - UNITS/30 $ 7,439 $ 7,439 $ 3,719 $ 11,158 $ 14,877 $ 22,316 $ 26,036 $ 29,755 DIRECT MATERIAL - UNITS/40 $ 5,735 $ 5,735 $ 5,735 $ 5,735 $ 5,735 $ 11,470 $ 17,205 $ 11,470 DIRECT MATERIAL - UNITS/50 $ 14,433 $ 9,622 $ 4,811 $ 14,433 $ 14,433 $ 24,055 $ 33,677 $ 38,488 DIRECT MATERIAL - UNITS/60 $ 9,085 $ 9,085 $ 9,085 $ 9,085 $ 9,085 $ 9,085 $ 18,170 $ 18,170 DIRECT MATERIAL - UNITS/75 $ 17,010 $ 8,505 $ 8,505 $ 17,010 $ 25,515 $ 34,020 $ 42,525 $ 51,030 DIRECT MATERIAL - UNITS/100 $ 18,654 $ 9,427 $ 9,427 $ 18,854 $ 28,281 $ 37,708 $ 56,563 $ 65,990 DIRECT MATERIAL - PARTS -- -- -- -- -- -- -- -- FREIGHT - in $ 4,403 $ 3,266 $ 2,673 $ 4,589 $ 6,284 $ 8,792 $ 12,177 $ 13,685 WARRANTY $ 2,642 $ 1,960 $ 1,604 $ 2,753 $ 3,771 $ 5,275 $ 7,306 $ 8,211 ------------------------------------------------------------------------------------------------ 97,967 73,404 60,598 101,984 136,604 192,773 265,888 298,457 ------------------------------------------------------------------------------------------------ INDIRECT COSTS: SALARIES $ 3,750 $ 3,750 $ 3,750 $ 3,750 $ 3,750 $ 3,750 $ 3,750 $ 3,750 SHOP SUPPLIES & SMALL TOOLS $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 DRAFTING -- CONTRACT -- -- -- -- -- -- -- -- SHIPPING & RECEIVING $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 CONTINGENCIES $ 1,000 $ 1,960 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 ------------------------------------------------------------------------------------------------ 9,250 9,250 9,250 9,250 9,250 9,250 9,250 9,250 ------------------------------------------------------------------------------------------------ TOTAL COST OF SALE 107,217 82,654 58,848 111,234 147,854 202,023 275,138 307,707 ------------------------------------------------------------------------------------------------ GROSS MARGIN 53,998 34,661 24,804 56,751 83,303 122,662 172,494 199,394 ------------------------------------------------------------------------------------------------ SELLING EXPENSES: SALES - SALARIES $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 ADVERTISING $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800 EMPLOYEE TRAVEL $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 TELEPHONE $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 AUTO OPERATING EXPENSES $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 ------------------------------------------------------------------------------------------------ 16,300 16,300 16,300 16,300 16,300 16,300 16,300 16,300 ------------------------------------------------------------------------------------------------ ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,.500 PAYROLL TAXES $ 2,461 $ 5,800 $ 2,461 $ 2,461 $ 2,461 $ 2,461 $ 2,461 $ 2,461 BONUS $ 4,123 $ 2,000 $ (743) $ 4,582 $ 9,007 $ 15,567 $ 23,872 $ 28,355 INSURANCE/GROUP HEALTH $ 1,250 500 $ 1,250 $ 1,250 $ 1,250 $ 1,250 $ 1,250 $ 1,250 INSURANCE $ 1,500 500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 ------------------------------------------------------------------------------------------------ 16,834 13,611 11,968 17,293 21,718 28,278 36,583 41,066 ------------------------------------------------------------------------------------------------ OTHER INCOME & EXPENSE DEPRECIATION EXPENSE $ (250) $ (250) $ (250) $ (250) $ (250) $ (250) $ (250) $ (250) INTEREST EXPENSE -- -- -- -- -- -- -- -- ------------------------------------------------------------------------------------------------ NET INCOME 20,614 4,500 (3,714) 22,909 45,035 77,834 119,360 141,777 ================================================================================================ Convert to cash: add back depreciation $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 $ 250 inventory purchases ------------------------------------------------------------------------------------------------ net cash flow 20,864 4,750 (3,464) 23,159 564,927 78,084 119,610 142,027 ------------------------------------------------------------------------------------------------ accumulated cash 540,483 545,232 541,768 564,927 610,212 688,296 807,906 949,934 ================================================================================================
MIDLAND COMPRESSOR COMPANY -------------------------------------------------------------------- SALE 2003 projections Nine Ten Eleven Twelve Ytd PRICE -------------------------------------------------------------------- REVENUE: SALES - COMPRESSOR UNITS/10 $ 7,964 $ 7,964 $ 7,964 $ 7,964 $ 83,622 2% $ 3,982 SALES - COMPRESSOR UNITS/15 $ 20,876 $ 20,876 $ 10,438 $ 10,438 $ 156,570 4% $ 5,219 SALES - COMPRESSOR UNITS/20 $ 18,237 $ 12,158 $ 12,158 $ 12,158 $ 139,817 4% $ 6,079 SALES - COMPRESSOR UNITS/25 $ 51,184 $ 47,786 $ 38,388 $ 31,990 $ 351,890 10% $ 6,398 SALES - COMPRESSOR UNITS/30 $ 54,160 $ 47,390 $ 40,620 $ 40,620 $ 406,200 11% $ 6,770 SALES - COMPRESSOR UNITS/40 $ 17,794 $ 17,794 $ 17,794 $ 8,897 $ 169,043 5% $ 8,897 SALES - COMPRESSOR UNITS/50 $ 75,960 $ 75,960 $ 66,465 $ 56,970 $ 579,195 16% $ 9,495 SALES - COMPRESSOR UNITS/60 $ 28,814 $ 26,814 $ 13,407 $ 13,407 $ 214,512 6% $13,407 SALES - COMPRESSOR UNITS/75 $ 78,025 $ 78,025 $ 62,400 $ 46,815 $ 639,805 17% $15,605 SALES - COMPRESSOR UNITS/100 $ 131,600 $ 131,600 $ 112,800 $ 94,000 $ 958,800 26% $18,800 SALES -- PARTS -- -- -- -- -- 0% ---------------------------------------------------------------------------- 482,614 483,367 382,454 319,277 3,699,454 100% ---------------------------------------------------------------------------- DIRECT COST: DIRECT LABOR $ 2,860 $ 2,860 $ 2,860 $ 2,860 $ 34,320 1% DIRECT MATERIAL - UNITS/10 $ 5,500 $ 5,500 $ 5,500 $ 2,750 $ 57,750 2% DIRECT MATERIAL - UNITS/15 $ 11,408 $ 11,408 $ 5,704 $ 5,704 $ 85,560 2% DIRECT MATERIAL - UNITS/20 $ 9,750 $ 6,500 $ 6,500 $ 6,500 $ 74,750 2% DIRECT MATERIAL - UNITS/25 $ 26,616 $ 23,289 $ 19,962 $ 16,635 $ 182,985 5% DIRECT MATERIAL - UNITS/30 $ 29,755 $ 26,036 $ 22,316 $ 22,316 $ 223,162 6% DIRECT MATERIAL - UNITS/40 $ 11,470 $ 11,470 $ 11,470 $ 5,735 $ 108,967 3% DIRECT MATERIAL - UNITS/50 $ 38,488 $ 38,488 $ 33,677 $ 28,866 $ 293,471 8% DIRECT MATERIAL - UNITS/60 $ 18,170 $ 18,170 $ 9,085 $ 9,085 $ 145,358 4% DIRECT MATERIAL - UNITS/75 $ 42,525 $ 42,525 $ 34,020 $ 25,515 $ 348,703 9% DIRECT MATERIAL - UNITS/100 $ 65,990 $ 65,990 $ 56,563 $ 47,136 $ 480,782 13% DIRECT MATERIAL - PARTS -- -- -- -- -- 0% FREIGHT - in $ 12,984 $ 12,469 $ 10,240 $ 8,512 $ 100,074 3% WARRANTY $ 7,790 $ 7,481 $ 6,144 $ 5,107 $ 60,045 2% ---------------------------------------------------------------------------- 283,305 272,185 224,040 186,721 2,195,926 59% ---------------------------------------------------------------------------- INDIRECT COSTS: SALARIES $ 3,750 $ 3,750 $ 3,750 $ 3,750 $ 45,000 1% SHOP SUPPLIES & SMALL TOOLS $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 18,000 0% DRAFTING -- CONTRACT -- -- -- -- -- 0% SHIPPING & RECEIVING $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 36,000 1% CONTINGENCIES $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 12,000 0% ---------------------------------------------------------------------------- 9,250 9,250 9,250 9,250 111,000 3% ---------------------------------------------------------------------------- TOTAL COST OF SALE 292,555 281,435 233,290 195,971 2,306,926 62% ---------------------------------------------------------------------------- GROSS MARGIN 190,059 181,932 149,164 123,306 1,392,528 38% ---------------------------------------------------------------------------- SELLING EXPENSES: SALES - SALARIES $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 90,000 2% ADVERTISING $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 69,600 2% EMPLOYEE TRAVEL $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 24,000 1% TELEPHONE $ 500 $ 500 $ 500 $ 500 $ 6,000 0% AUTO OPERATING EXPENSES $ 500 $ 500 $ 500 $ 500 $ 6,000 0% ---------------------------------------------------------------------------- 16,300 16,300 16,300 16,300 195,600 5% ---------------------------------------------------------------------------- ADMINISTRATIVE EXPENSES: SALARIES - ADMINISTRATIVE $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 90,000 2% PAYROLL TAXES $ 2,461 $ 2,461 $ 2,461 $ 2,461 $ 29,532 1% BONUS $ 26,800 $ 25,445 $ 19,984 $ 15,674 $ 173,566 5% INSURANCE/GROUP HEALTH $ 1,250 $ 1,250 $ 1,250 $ 1,250 $ 15,000 0% INSURANCE $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 18,000 0% ---------------------------------------------------------------------------- 39,511 38,156 32,695 28,385 326,098 9% ---------------------------------------------------------------------------- OTHER INCOME & EXPENSE DEPRECIATION EXPENSE $ (250) $ (250) $ (250) $ (250) $ (3,000) 0% INTEREST EXPENSE -- -- -- -- 0% ---------------------------------------------------------------------------- NET INCOME 133,998 127,226 99,919 78,371 867,830 23% ============================================================================ Convert to cash: add back depreciation $ 250 $ 250 $ 250 $ 250 inventory purchases -------------------------------------------------------------------- net cash flow 132,248 127,476 100,169 78,621 -------------------------------------------------------------------- accumulated cash 1,084,182 1,211,658 1,311,827 1,390,448 ====================================================================
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SALES IN UNITS year 2001 ----- ONE TWO THREE FOUR FIVE SIX SEVEN EIGHT NINE TEN ELEVEN TWELVE YTD ----- SALES - COMPRESSOR UNITS\10 0 1 1 1 2 2 2 1 1 11 SALES - COMPRESSOR UNITS\15 0 1 2 2 2 3 2 2 1 15 SALES - COMPRESSOR UNITS\20 1 1 1 1 2 2 2 2 2 14 SALES - COMPRESSOR UNITS\25 2 3 3 4 4 4 5 4 3 32 SALES - COMPRESSOR UNITS\30 2 1 1 3 3 4 4 4 5 5 3 32 SALES - COMPRESSOR UNITS\40 0 1 2 2 3 2 1 1 12 SALES - COMPRESSOR UNITS\50 2 1 1 2 3 3 4 4 4 5 5 4 34 SALES - COMPRESSOR UNITS\60 0 1 2 3 2 1 1 10 SALES - COMPRESSOR UNITS\75 1 1 2 2 4 4 3 2 2 21 SALES - COMPRESSOR UNITS\100 2 2 2 3 4 4 3 3 2 25 SALES - PARTS 0 --------------------------------------------------------------------------------------------------- 2 3 2 9 15 18 24 30 33 31 26 20 213 ---------------------------------------------------------------------------------------------------
SALES IN UNITS year 2002 ----- ONE TWO THREE FOUR FIVE SIX SEVEN EIGHT NINE TEN ELEVEN TWELVE YTD ----- SALES - COMPRESSOR UNITS\10 1 1 0 0 1 2 3 3 2 1 1 1 14 SALES - COMPRESSOR UNITS\15 2 2 2 0 2 3 4 5 4 3 2 2 25 SALES - COMPRESSOR UNITS\20 1 1 0 0 1 2 3 3 3 2 1 1 16 SALES - COMPRESSOR UNITS\25 2 2 1 1 2 5 5 6 6 6 5 4 40 SALES - COMPRESSOR UNITS\30 2 2 1 1 2 4 5 6 6 6 5 4 39 SALES - COMPRESSOR UNITS\40 1 1 1 0 1 1 2 2 2 1 1 1 11 SALES - COMPRESSOR UNITS\50 3 3 1 1 2 4 6 6 6 5 4 4 38 SALES - COMPRESSOR UNITS\60 1 1 0 0 2 1 2 2 2 2 1 1 13 SALES - COMPRESSOR UNITS\75 2 1 1 1 2 3 4 5 4 4 3 2 28 SALES - COMPRESSOR UNITS\100 2 2 1 1 2 3 5 5 5 5 5 3 34 SALES - PARTS 0 --------------------------------------------------------------------------------------------------- 16 15 7 5 17 28 39 43 40 35 28 23 296 ---------------------------------------------------------------------------------------------------
SALES IN UNITS year 2003 ----- ONE TWO THREE FOUR FIVE SIX SEVEN EIGHT NINE TEN ELEVEN TWELVE YTD ----- SALES - COMPRESSOR UNITS\10 1 1 1 1 2 2 3 3 2 2 2 1 18 SALES - COMPRESSOR UNITS\15 1 1 1 1 2 3 4 5 4 4 2 2 27 SALES - COMPRESSOR UNITS\20 1 1 1 1 1 2 3 4 3 2 2 2 20 SALES - COMPRESSOR UNITS\25 2 2 1 2 4 5 6 7 8 7 6 5 50 SALES - COMPRESSOR UNITS\30 2 2 1 3 4 6 7 8 8 7 6 6 55 SALES - COMPRESSOR UNITS\40 1 1 1 1 1 2 3 2 2 2 2 1 16 SALES - COMPRESSOR UNITS\50 3 2 1 3 3 5 7 8 8 8 7 6 55 SALES - COMPRESSOR UNITS\60 1 1 1 1 1 1 2 2 2 2 1 1 13 SALES - COMPRESSOR UNITS\75 2 1 1 2 3 4 5 6 5 5 4 3 37 SALES - COMPRESSOR UNITS\100 2 1 1 2 3 4 6 7 7 7 6 5 47 SALES - PARTS 0 --------------------------------------------------------------------------------------------------- 16 13 10 17 24 34 46 52 49 46 38 32 377 --------------------------------------------------------------------------------------------------- 866
Page 5 DIRECT MATERIAL COST AS A PERCENTAGE OF SALES DIRECT MATERIAL-UNITS\10 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% 69.06% DIRECT MATERIAL-UNITS\15 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% 54.65% DIRECT MATERIAL-UNITS\20 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% 53.46% DIRECT MATERIAL-UNITS\25 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% 52.00% DIRECT MATERIAL-UNITS\30 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% 54.94% DIRECT MATERIAL-UNITS\40 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% 61.23% DIRECT MATERIAL-UNITS\50 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% 50.67% DIRECT MATERIAL-UNITS\60 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% 63.88% DIRECT MATERIAL-UNITS\75 54.50% 54.50% 54.50% 54.50% 54.50% 54.50% 54.50% 54.50% 54-50% 54.50% 54.50% 54.50% DIRECT MATERIAL-UNITS\100 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14% 50.14%
Page 6 MIDLAND COMPRESSOR COMPANY BASIC ASSUMPTIONS 1. Sales are tied to the quantity table on page 5. 2. Direct material cost have a range from 69.6% for the 10 HP unit to 50.14% of rhte 100 HP unit. See table on page 4. 3. At the beginning of project personnel will consist of: one salesman, one design engineer and one shop hand. Beginning in January 2001 we will add a shipping and receiving clerk and in January 2002 we will add a second shop hand. 4. An addition for office space will be a part of initial startup cost. We have included $30,000 dollar for this expenditure. 5. A bonus amount has been included which is calculated and accrued based upon the agreements with Mark Clardy and Alan Kurus. The Bonus calculated in the attached spreadsheet represents 20% of the net income. This excludes expenditures for inventory and office addition. In this scenario payout occurs in Sept 2001. 6. The initial inventory expenditure is $164,766. Inventory Levels will fluctuate in relation to production, therefore the amount of inventory on hand will increase over time. We have added an additional amount in June 2001 to compensate for this increase. A substantial line of credit will be needed to fund this fluctuation in inventory. For instance inventory level for the year 2001 will range from $600,616 in Sept 20 $22,1102 by year end. 7. Total capital outlay for this project is $480,281 as outlined below. But payout is based upon recovery of operating losses only of $285,515. operating loss thru March 2001 $285,515 inventory expenditure $164,766 property improvements $ 30,000 -------- capital outlay $480,281 ========
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