Background1

Actual and Future Situation2

Joint Venture: Proposal3

Investment4

Proforma5

Agreement Issues6

Conclusion7

a. Expomex has been doing business with Lingtong since 2003.

Sales Revenue History

1 BACKGROUND

ii. Accumulate Sales Revenue

2,698.10

b. PERFILEX Sales from 2011 to 2014

1 BACKGROUND

PRODUCTIVIDAD INTEGRAL, S.A. DE C.V.INCOME STATEMENT OF PERFILEX

USD         

CONCEPTS 2011 2012 2013 2014

                  GROSS SALES 626,479 899,524 793,265 577,370 RETURNS AND DESC 34,087 40,983 94,681 75,900 NET SALES 592,392 858,541 698,584 501,470         COST OF SALES 284,763 449,762 377,745 274,938 IMPORT AND FREIGHT COSTS 28,476 49,474 35,886 28,044TOTAL COST OF SALES 313,239 499,236 413,631 302,982  53% 58% 59% 60%EXPENSES            ADMINISTATIVE EXPENSES 53,750 68,683 55,887 40,118    SELLING EXPENSES 78,684 90,147 73,351 52,654    OPERATING EXPENSES 10,670 12,878 10,479 7,522TOTAL EXPENSES 143,104 171,708 139,717 100,294 24% 20% 20% 20%PROFIT OR (LOSS) 136,048 187,597 145,236 98,194 23% 22% 21% 20%

c. Our sales is not increased as much as we must do, due to different factors:

i. Price competition. See details in Actual Situation.

ii. Dealers Buying only Rental material and does not increased aluminum profiles purchase. Big volume dealers are buying direct to extruder suppliers in Mexico.

iii. Standard products are selling via extruder companies at international aluminum price.

iv. Several dealers see EXPOMEX as competitor.

v. Cost reduction in dealers due to recession in Mexico.

1 BACKGROUND

d. American companies have to paid higher duties to import the aluminum profiles from China. Some are from 30% to 300%.

e. Lingtong Group wanted to increased sales volume in America.

f. Logistic and US Custom objections for aluminum profiles from China going to Mexico.

2 ACTUAL AND FUTURE SITUATION

a. Actual Cost from China.

2009 Mar - New special Discount for Competitive Products

Discount from LINGTONG (begin) + Profiles 40% + Accesories 30% + Tension Lock 20%

  Discount

S108 48%

Z460 48%

M302A 48%

Z991F 41%

ZS321 45%

DG632 30%

2 ACTUAL AND FUTURE SITUATION

b. Actual Cost for Transportation and Broker fee.

Cost of Products (Lingtong Invoice = LTZX140325A) + Value of Invoice from Lingtong   $ 62,635

+ Value of Invoice from Lintel   $ 10,260

Value of the Container 40 HQ   $ 72,895

Transportation and Broker Fee     + Ocean Freight     $ 5,096

+ Broker Expenses     $ 1,177

+ Other Tax Duties     $ 882

+ Freight (Laredo - Monterrey)   $ 300

        $ 7,455 10.23%

2 ACTUAL AND FUTURE SITUATION

c. Actual Prices, Cost and Margin for Main Products.

Cost from Lingtong Competitor Distributor Margin by Product Mark Up

Lingtong FOB Mex Prices Prices Competitor Lingtong MEXICO

S108 4.42 4.87 5.57 9.80 1.14 2.01 101.2%

Z460 3.24 3.57 3.95 7.18 1.11 2.01 101.1%

M302A 8.57 9.44 10.17 18.99 1.08 2.01 101.1%

Z991F 0.69 0.76 1.47 1.53 1.93 2.01 101.2%

ZS321 14.00 15.43 25.70 34.99 1.67 2.27 126.8%

DG632 12.42 13.69 18.70 23.48 1.37 1.72 71.6%

2 ACTUAL AND FUTURE SITUATION

d. Proposal Prices, Cost and Margin on Rest of Products.

Mark Up Proposal Lingtong Freight & Cost fromPrecio China

Precio USD % Discount

MEXICO Dist Prices FOB Mex Custom Lingtong Lingtong Lingtong Lingtong

S108 70% 6.98 4.11 0.38 3.73 ¥52.69 8.50 56.1%

Z460 70% 5.06 2.98 0.28 2.70 ¥38.68 6.24 56.7%

M302A 70% 13.26 7.80 0.72 7.08 ¥102.17 16.48 57.1%

Z991F 105% 1.50 0.73 0.07 0.66 ¥7.20 1.16 42.8%

ZS321 105% 30.35 14.80 1.37 13.43 ¥158.00 25.48 47.3%

DG632 90% 21.09 11.10 1.03 10.07 ¥110.00 17.74 43.2%

i. Reduce Prices in México to be almost same price as Competitor on Main Products.

ii. Reduce the mark up in México for competitive products to 70-60%.

iii. Reduce the mark up in México for the rest of products to 80%.

iv. Adjust Prices from Lingtong China to get the above results.

a. Strengths and Opportunities

3 JOINT VENTURE: PROPOSAL

1. Lower importation tariffs to USA, Central and South America market. 2. Lower price to dealers getting better cost.3. Growth the market of North America, Central and South America.4. Introduce products to new segments (car dealers, shopping centers, etc).5. Specialized focus in exhibit.6. Growth the sales for America.7. Better state of art in American vs. competitors.

STRENGHTS

OPPORTUNITIES

1. Increasing Asian investment in Mexico (China, Korea, Japan).2. Reach in other markets in America.3. Market growth in the next years for Mexico, Colombia, Chile, Peru, Costa

Rica, Panama, USA and Canada.

b. Weakness and Threats

3 JOINT VENTURE: PROPOSAL

1. Lower margin due to price reduction.2. Higher freight cost from Mexico to other regions. To be determinate.3. Higher fiscal control in Mexico and China.4. Review the way to pay shareholders.

WEAKNESS

THREATS

1. Some competitors want to do the same strategy.2. More potential competitors in our market. 3. Increase the inflation in Mexico or China.4. Higher shipping cost in the future. 5. The aluminum international price will increase too much in the future.

c. Proposal.

3 JOINT VENTURE: PROPOSAL

• Start a joint venture company between Lingtong Exhibition System from China and Expomex from Mexico to operate a new company that will sell all the Lingtong products to America market.

• This market include: USA, Mexico, Canada, Alaska, Centro america countries, Caribean Countries and South America countries.

• Expomex will sell this products to end users and can do all the rental business.

• Sharing investment will be as Lingtong 49% and Expomex 51%

• Lingtong send a person to working as Vice-General Manager and some technical people to support operation.

• Proposal company name: Lingtong America, S.A. de C.V.

• Location: Monterrey, MEXICO (see picture next slide) FIRST 2-3 yrs

3 PROPOSAL WAREHOUSE

a. Operational Equipment.

4 INVESTMENT

OPERATIONAL EQUIPMENT      

Cutting Machine Table Cut   4,000

Punching Machine     3,000

Rolled Machine     4,500

Drilling Machine     850

Pneumatic System Tubes, Compressor 2,000

Neumatic Guns & Screws 4 pieces   300

Racks - Profiles & Accessories Racks     45,000

Warehouse Aconditionate     6,000

Lift Truck (Electric)     15,500

Patin (manual Lift)     1,200

Tools     2,500

Tables For Cutting   1,150

Tables For Assembly 3 pieces 2,500

Tables For Racks Accessories 2,750

Wood WorkShop Machines   3,500

94,750

b. Management Equipment

4 INVESTMENT

MANAGEMENT EQUIPMENT      

Computer and Printers 3-PC + 2 Printers 3,500

Auto (leasing) Downpaym 30% value   2,900

Communication System & InternetPhone, Extensions, Router 2,450

Desks and Chairs 4 Desks, 12 Chairs, 1,540

Files Storages 4 Files with 4 Drawers 440

Camaras and Monitor System 6 Camaras & 1 VCR 1,300

Signage and Boards Control kit / 2 Control Borads 1,000

Outdoor Signage Channel Letter / Vinyl 1,540

Computer Software SAI / Labor / CRM 2,500

Security System (sensors) Kit / 4 Sensors 1,500

Recruiting and Training 1 month / travel 4,500

Other   5,000

28,170

TOTAL INITIAL INVESTMENT 122,920

c. Inventory.

4 INVESTMENT

INVENTORY      

First Container Order in Dec, 2014 80,000

Second Container Order in Jan 5, 2015 80,000

Third Container Oredr in Feb 1, 2015 80,000

TOTAL INVENTORY TO START BUSINESS 240,000

GRAN TOTAL INVESTMENT 362,920

a. Administrative and Operational Expenses.

5 PROFORMA

USD 2,015   2016   2017   2018   2019  

ADMINISTRATIVE & OPERATION EXPENSES                      

      Per Month                    

  SALARIES                        

  Manager 1 2,500 30,000 1 32,100 1 34,347 1 36,751 1 39,324 1

  Sub-Manager 1 1,750 21,000 1 22,470 1 24,043 1 25,726 1 27,527 1

  Assistant-Logistic 1 600 7,200 1 7,704 1 8,243 1 8,820 1 9,438 1

  Production Supervisor 1 1,000 10,000 1 12,840 1 13,739 1 14,701 1 15,730 1

  Warehouse Head 1 800 9,600 1 10,272 1 10,991 1 11,760 1 12,584 1

  Production Operators 2 600 14,400 2 30,816 4 41,216 5 53,911 6 76,913 8

  Driver 1 700 8,400 1 8,988 1 9,617 1 10,290 1 11,011 1

  Administrative People 8 7,950   8   10   11   12   14

  SOCIAL BENEFITS 30%   30,180 30% 37,557 30% 42,659 30% 48,588 30% 57,758 30%

                           

  Warehouse Rent / 2000m2   4,800 57,600   59,904   93,450   97,188   151,614  

  Security warehouse   350 4,200   4,493   7,009   7,289   11,371  

  Insurance Warehouse   120 1,440   1,498   2,336   2,430   3,790  

  Services (Light, Water, Gas)   550 6,600   7,260   9,345   9,719   15,161  

  Maintanance   100 1,200   1,258   1,962   2,041   3,184  

  Small Car (Leasing Plan)   230 2,760   2,760   2,760   2,760   2,760  

  Sub/Manager Housing   600 7,200   7,560   7,938   8,335   8,752  

  Travel for Operation & Sub Manager 4 4,200 16,800 4 25,200 6 33,600 8 42,000 10 42,000 10

  Gas   180 2,160   2,268   2,381   2,500   2,625  

  Local Freights   120 1,440   1,541   1,649   1,764   1,888  

  Accounting & Goverm report   250 3,000   3,150   3,308   3,473   3,647  

        235,180   279,638   350,594   390,047   497,074  

b. Sales Expenses.

5 PROFORMA

USD 2,015   2016   2017   2018   2019  

SALES EXPENSES                        

                           

  SALARIES                          SOCIAL BENEFITS 30% 4,248   6,818   9,727   13,010   13,921                               Salesman 2 590 14,160 2 22,727 3 32,424 4 43,367 5 46,402 5                           

 Comisions-Manager/SubManager 1% /sales                    

  Comisions-Salesman 1.5 to 2 % / Sales                    Travel Expenses 16 x $3,500 56,000   64,400   80,500   100,625   125,781    Mailing and Packing   450 5,400   8,505   9,823   11,346   13,104    Brochures and Catalog     3,800   4,370   5,026   5,779   6,646    Advertising     5,000   5,750   6,900   8,280   9,936    Telephone and Internet   185 3,200   3,840   4,608   5,530   6,636  

  TradeShow Participation

4 shows 7,500 30,000   37,500   46,875   58,594   73,242  

        121,808   153,910   195,882   246,530   295,669  

c. Sales and Profit Forcast.

5 PROFORMA

LINGTONG AMERICA, S.A. DE C.V.

PROJECTION OF SALES LINGTONG

USD

             CONCEPTS 2015 2016 2017 2018 2,019 Total

             

             GROSS SALES 1,444,500 2,889,000 4,815,000 6,741,000 8,667,000 24,556,500

RETURNS AND DESC 94,500 189,000 315,000 441,000 567,000 1,606,500

NET SALES 1,350,000 2,700,000 4,500,000 6,300,000 8,100,000 22,950,000

             COST OF SALES (Lingtong) 750,000 1,500,000 2,500,000 3,500,000 4,500,000 12,750,000

IMPORT AND FREIGHT COSTS 82,500 165,000 275,000 385,000 495,000 1,402,500

TOTAL COST OF SALES 832,500 1,665,000 2,775,000 3,885,000 4,995,000 14,152,500

  62% 62% 62% 62% 62%  

CONTRIBUTION MARGIN 517,500 1,035,000 1,725,000 2,415,000 3,105,000 8,797,500

  38% 38% 38% 38% 38% 38%

EXPENSES             ADMIN & OPERATION EXPENSES 235,180 279,638 350,594 390,047 497,074 1,752,533

    SALES EXPENSES 121,808 153,910 195,882 246,530 295,669 1,013,799

COMISSIONS ( 2.5% to 3% ) 33,750 81,000 135,000 189,000 243,000 681,750

TOTAL EXPENSES 390,738 514,548 681,476 825,577 1,035,743 3,448,082

29% 19% 15% 13% 13% 15%

PROFIT OR (LOSS) 126,762 520,452 1,043,524 1,589,423 2,069,257 5,349,418 9% 19% 23% 25% 26% 23%

PROFIT OR (LOSS) - CHINA 49% 62,113 255,021 511,327 778,817 1,013,936 2,621,215

PROFIT OR (LOSS) - MEXICO 51% 64,649 265,431 532,197 810,606 1,055,321 2,728,203

Thank you.