foam panels, '03 business plan

A subsidiary of Kotzebue IRA

BUSINESS PLANMarch 31, 2003

Prepared By: The AFM Group, Inc.

Nunavik, LLC2003 Business Plan Page 1

Nunavik LLC

Table Of Contents

1. Executive Summary: ...............................................2....................................................................................

2. Nunavik LLC...........................................................5....................................................................................

3. Ownership & Management......................................54. Business Location....................................................6

....................................................................................5. Personnel..................................................................6

....................................................................................6. Business Concept and Product.................................77. Industry....................................................................8

....................................................................................8. Market......................................................................9

....................................................................................9. Competition............................................................11

....................................................................................10. Suppliers & Dealership..........................................1311. Risks & Mitigates..................................................13

....................................................................................12. Financials...............................................................15

....................................................................................13. Grant Funds and Loan Request .............................1614. Loan Collateral.......................................................1615. Disclaimer..............................................................17

....................................................................................16. Appendix................................................................18

a. Resume of key managementb. FY2003 Pro Formac. Financial Statements for Nunavik LLC


1. Executive Summary

Where We Have Been

Nunavik, LLC started business in June of 2001. During the 2001 construction season, Nunavik provided products for one project in Kotzebue, the Enoch Kenworthy home, and in the 2002 construction season we provided products for two projects, the Spud Farm outside of Kiana, and a project in Noorvik. As a result of these three projects, Nunavik earned almost $100,000 in revenues. .

However, the company has also encountered some challenges during its brief history, and has not met all of the goals set forth in our initial business plan. Our profit margin was achieved only by operating the plant on a seasonal basis, and providing year round employment was an important goal of this project. Also, our profit margin is not yet sufficient to begin using a portion of the plant’s income as a source of funds for social services to tribal members.

This revised business plan is intended to address some of the changes and challenges Nunavik has undergone, and to chart the course for turning this fledgling business into a mature, stable company.

Where We’re Going

Short-term Goals: To be completed by September, 2003 Obtain ICBO certification for Nunavik’s Thermasteel panels. Develop a three year marketing plan. Design a website, brochure, and conference display materials which promote the

Nunavik plant and the Thermasteel product.

Medium-term Goals: To be completed by September, 2006 Arrange the physical facility and business operations of the plant in such a way

that Nunavik stays busy throughout the year, and is able to offer a minimum of seven (7) year-round jobs, rather than seasonal employment only.

Increase the profit margin by up to ten percent (10%). Increase gross revenues to $2,000,000 or more so that total profit generated will

be at least $200,000. Become known statewide for the quality of our products and our customer

service.

Long-term Goals: To be completed by September, 2013 Obtain a General Contractor’s License and become a ‘one-stop-shop’ able to

provide everything a homebuyer needs for a turnkey construction project. Become a retail distributor for a variety of home-building products such as pre-

hung windows; pre-hung exterior doors; interior doors and trim; cabinetry and exterior trim materials.


Summary of Business Plan Key Elements

Marketing:Nunavik only needs to acquire a very small percentage of a billion dollar market in order to be successful. However, a strong marketing strategy backed up by professional marketing materials and experienced marketing personnel will be a crucial part of getting a market foothold.

Management:Nunavik needs to continue its strategy of using outside management with experience in running this type of business for at least one more year. It should be possible to make use of local management at some point in the future. However, right now experienced management is needed to build confidence in the plant and it’s products. The plant needs both a local manager who stays in Kotzebue most of the time to oversee day-to-day operations and an executive manager who travels extensively to promote the plant, secure contracts, and negotiate smooth business relationships throughout the process of fulfilling contracts.

Financial Prospects:

EarningsNunavik had two prospective contracts for 2003 when the 2003 financials were developed, the KIRA multi-family housing project, for total sales of $187,000, and the Maniilaq 40 unit worker housing project, for total sales of $680,000. At present, the KIRA multi-family housing project will not go forward, and it will only be possible to bid on the Maniilaq project if Nunavik obtains their ICBO Certification (described further herein) by June of 2003. Based on the assumption that Nunavik would have both of these projects, a profit of $106,950 was project for 2003. Currently, it is necessary to re-calculate labor costs and other expenses based on the assumption that the plant will only have the Maniilaq project to see whether it is still possible to maintain a small profit margin with reduced labor costs.

Participating in the Maniilaq 40 unit project would provide a larger sales volume for the third year of business than Nunavik had in the first two years combined. It would also provide the opportunity to participate in a higher-profile project. These two advantages may be reason enough to participate in the project even if the numbers show a break-even analysis or a slight loss for 2003, as this project would give Nunavik a major accomplishment to point to as part of the marketing strategy for 2004.

GrantsIncome from grants is never certain and has not been shown in the financial projections in order to keep the numbers conservative. However, the Administration for Native Americans, which supported Nunavik with over $700,000 during the startup phase, has indicated that they are extremely interested in seeing this project become a long-term success. In May of this year, Fund Gathering, Inc. will submit a proposal for over


$500,000 to support Nunavik’s marketing and management efforts over the next three years, and prospects are good for receiving these funds beginning in October of this year.

The possibility of getting funds from the Economic Development Administration will also be explored, as well as the USDA Rural Services program, but these options are less reliable and if they do provide funds for Nunavik, the income is not expected to arrive during FY2003.


2. Nunavik LLC

In 1997, a Kotzebue IRA (KIRA) affiliate, Tupiq Services, Inc., using grant funds received from the HUD Indian Housing Block Grant commissioned the NANA/DOWL Engineers to conduct a Feasibility Study (Study) to determine whether or not an Expanded Polystyrene manufacturing plant (Plant) would be viable in Kotzebue. The Study was completed in November 1999, and revealed that an EPS manufacturing plant in Kotzebue would be viable due to the number of construction projects of residential and commercial buildings in Kotzebue and the surrounding villages. The KIRA planned to utilize the profits derived from the Plant to increase services offered to the KIRA membership, especially since federal dollars used to pay for the same services have been decreasing each year.

Subsequent to the Study, Tupiq commissioned The Bobbitt Group to procure a Business Plan (Plan) so they could use the Plan to raise the cash required to construct and operate the new EPS manufacturing plant. On October 2001, a copy of the Plan & Study were given to Maniilaq Association (Maniilaq), and Kikiktagruk Inupiat Corporation (KIC) who decided to enter into a joint venture with the KIRA and form a Limited Liability Company (LLC); with the KIRA designated as the General Partner and KIC & Maniilaq as Limited Partners. Everyone agreed that this new project offered an excellent opportunity for everyone to work together, especially since membership of the KIRA, are also shareholders of the corporations. Nunavik opened for business in Kotzebue, Alaska on June 27, 2001.

3. Ownership & Management

On February 14th, 2000, an Operating Agreement Of The Nunavik, LLC (Agreement) was signed by the Kotzebue Indian Re-Organization Act (Kotzebue IRA), Kikiktagruk Inupiat Corporation (KIC) and Maniilaq Association (Maniilaq). The Agreement set forth the manner in which the Nunavik LLC (Nunavik) would be governed to include the Capital Contribution to be made by each Partner. In exchange for 33.33% interest in Nunavik it was agreed that the Capital Contribution for the KIRA would be in the form of $1,198,002 in cash, for Maniilaq in the form of $1,000,000 in cash and KIC would be in the form of a building & land (Lot 5, USS#2083) valued at $750,000.

The Kotzebue IRA, organized pursuant to the Indian Reorganization Act of 1934, provides social services, education, housing and with the creation of Nunavik, LLC economic development opportunities to approximately 2,500 of its members who reside in Kotzebue.

The Kikiktagruk Inupiat Corporation (KIC), organized pursuant to the Alaska Native Claims Settlement Act (ANCSA) is the village corporation comprised of about 5,000 shareholders, whose principle lines of business consist of construction, commercial & residential rental properties, retail sales and investments.


The Maniilaq Association, was formed in 1966 as Northwest Alaska Native Association, in 1971 changed its name to Mauneluk Association and now uses the more traditional spelling of its name. With about 500 employees, Maniilaq is a non-profit, which provides health, social and tribal services to about 6,500 residents representing 12 federally recognized tribes comprising the Northwest Arctic Borough and Pt. Hope.

4. Business Location

Nunavik, LLC is housed in the 8,800 SF High Bay Building, commonly described as Lot 5 USS #2083.

Located in Kotzebue, which is situated on the northern tip of the Baldwin Peninsula in Kotzebue Sound, and is 549 air miles northwest of Anchorage and 26 miles above the Arctic Circle. A population of approximately 3,000, Kotzebue is considered the economic and transportation hub for eleven surrounding communities that comprise the Northwest Arctic Borough; the communities are, Ambler, Buckland, Deering, Kiana, Kivalina, Kobuk, Noatak, Noorvik, Shungnak, and Selawik.

5. Personnel

Nunavik hired Charles Ward, owner of WARDCO as a senior consultant to set up the EPS Plant by acquiring & installing all of the necessary equipment. Prior to completion of the Plant set-up, Nunavik went on to hire Donald Dickens as the General Manager, who in turn hired 8 other staff. With the Plant set-up complete and all key management hired, on July 27, 2001, the Nunavik, LLC held its grand opening.

At the moment, the Plant has been put in dormant status without any employees.


6. Business Concept and Product

Nunavik, LLC is a business based in Kotzebue, Alaska, which manufactures ThermaSteel panels for civil and commercial construction uses. The company’s products are discussed further in the following section, but there are essentially two products at this point in time both based on foam panels made from expanded polystyrene beads. Panels of polystyrene alone can be used for insulation purposes, useful in protecting utility pipes from permafrost for example. Panels of polystyrene reinforced with steel cladding can be used for construction purposes, providing the insulation and framing in one step – the panels can be used for walls, floors, and roofs and can be covered with any exterior and interior surfaces desired, creating a structure that looks the same as stick-built construction, but is far more weatherproof.

The "4 in 1" ThermaSteel™ Panel

Frames Insulates

Eliminates the need for sheathing

Provides vapor barrier

Manufactured housing built with Expanded Polystyrene (EPS) panels is already popular in Northern Alaska due to the following advantages over traditional wood-frame construction:

Panels provide the structural framing, insulation, and vapor barrier all in one step.

Faster framing in allows work to continue indoors even in inclement weather.

Lower materials cost allows for a lower overall cost/sq. ft. and makes it feasible to have larger commercial buildings or more residential units.


Foam panel buildings are more weatherproof and energy-efficient, helping to reduce the high cost of utilities during the arctic winter.

Building with foam panels takes only 3 to 5 days of training to learn and means that workers do not need to be members of the Carpenter’s Union, allowing for more local hire.

Because panels are produced in the exact sizes and shapes needed ahead of time in the manufacturing plant, there is less waste associated with building projects.

The advantages listed above are available with several kinds of foam panels, some of which are already available in Alaska. However, ThermaSteel panels have additional advantages over the other types of panels that have been used in the state.

The panels are lighter weight. The most common type of foam panel used for construction in Alaska is foam sandwiched between two panels of oriented strand board (OSB), a ThermaSteel panel of the same size weighs approximately half as much as an OSB panel, making ThermaSteel easier and faster to work with.

Because OSB panels still use wood in the structure, they are still susceptible to moisture damage from external causes such as high humidity or internal causes such as leaking pipes. This can cause the OSB to start pulling away from the foam, compromising the overall structure. This is not a danger with ThermaSteel.

ThermaSteel panels use a shiplap joint, providing an even more weather tight seal than that of other types of panels.

7. Industry

The housing industry in Northern and Western Alaska has become an increasingly complicated field since the 1998 passage of the Native American Housing and Self Determination Act. Nunavik’s primary and secondary markets are served by the following five Indian Regional Housing Authorities: AVCP Housing Authority, Bering Straits Regional Housing Authority, Bristol Bay Housing Authority, Northwest Inupiat Housing Authority and Tagiugmiullu Nunamiullu Housing Authority in Barrow.

These five housing authorities, and the architecture and engineering firms that most often work with them, have the greatest impact on the construction industry in the intended market area. In addition to these, there are various smaller housing authorities because of numerous villages that have pulled out of the Regional Housing Authority’s contract and contracted directly with the Department of Housing and Urban Development to receive funds instead.


The other entities, which have a large impact on housing and other construction projects in the region, are the statewide and regional health organizations. These include the Alaska Native Tribal Health Consortium, which is planning several water and sewer projects throughout the region, Maniilaq Health Association, which represents the Northwest Arctic Borough, the Yukon-Kuskokwim Health Association in Bethel, Bristol Bay Area Health Corporation in Dillingham, the Arctic Slope Native Association in Barrow and the Norton Sound Health Corporation in Nome.

The cost of supplying common building products to Barrow, Bethel and Nome ranges from 21% to 86% higher than in urban areas of the state.1 Although several other factors contribute to the higher building costs faced by rural Alaska, this is the primary factor, and it is a factor that Nunavik can address.

To give some idea how many capital improvement projects are taking place in Northern and Western Alaska where Nunavik products might be used, the following is taken from the Department of Labor and Economic Development’s Rural Alaska Project Identification and Delivery System (RAPIDS) database. There is a role for Nunavik products in nearly every type of capital improvement project, though that role is larger when the project involves construction or insulation for roadways and airstrips, and smaller when it involves insulation for utilities.

8. Market

The primary market area for NVK is the 11 communities within the Northwest Arctic Borough.

The secondary market includes the regional centers of Barrow, Bethel, Dillingham and Nome, as well as the villages surrounding them. These areas are a natural secondary market for Nunavik because they are served by the same supply barges which serve Kotzebue, making it possible to ship Nunavik’s products to these places on the oceans and rivers for a lower price than what it would cost to fly in comparable products from Anchorage or Fairbanks.

Like Kotzebue, the above communities are facing overcrowding due to both a higher birth rate that that of urban areas and a trend towards greater centralization as people move from the surrounding villages to the regional centers in search of work. Like Kotzebue, these regional centers have more jobs than they can fill because potential workers from the surrounding villages balk at the idea of moving into already overcrowded homes in order to take them. This creates a market for homes and residential complexes for lower to middle income buyers and renters, with a large percentage of the cost subsidized by various Federal programs intended to increase the housing stock in this range.

1 Alaska Economic Trends, December 2000.


Also, like Kotzebue, these regional centers are home to a new category of buyer, the growing number of Alaska Native professionals who have obtained the degrees and work experience necessary to hold a higher income job in or near the village where they grew up. When these buyers decide to build, they tend to want their ‘dream home’ with no compromises, and they are willing and able to pay for the degree of customization that it takes to achieve their vision. Nunavik will be the only company specializing in meeting the needs of this market, offering the rural Alaska homebuyer a level of choice that has only been found in urban areas of the state up to now.

Nunavik’s original business plan, completed in April of 2000, called for the primary market area to make up 75% of the overall business for the plant. Due to a general economic slowdown in the Northwest Arctic, it will now be necessary to expand into the secondary markets far more rapidly than originally anticipated.

The following table gives some indication of how much in Federal and State dollars will be spent on infrastructure projects in each of these areas over the next few years.

Census Area2 Planned funding for Capital Improvement Projects

Northwest Arctic $15,076,873North Slope $13,371,613Bethel $43,091,979Dillingham $ 8,577,379Nome $18,867,687TOTAL $98,985,531

This chart does not factor in capital improvement projects in areas of Northern and Western Alaska, which do not include a regional hub, such as the Wade Hampton and Bristol Bay census areas, so the total market value for Nunavik’s market region is easily over one billion dollars. This means Nunavik will only need to acquire a two percent (2%) market share in order to achieve the desired annual revenue of $2M or more.

Nunavik’s marketing strategy includes the following activities:

Develop a web-site, brochure, and display materials for conferences with shared ‘branding’ elements by June 30, 2003.

Have an aggressive presence at conferences related to the construction industry and to rural Alaskan issues from July 2003 through June 2004.

Work on getting articles in the Anchorage Daily News (read widely throughout Alaska), Alaska Business Monthly Magazine, First Alaskans Magazine (read widely in Alaska Native organizations), and the Arctic Sounder (a weekly paper serving the entire Inupiaq region of the state) which help educate the public about Nunavik and our products.

2Data taken from http://www.dced.state.ak.us/cbd/AEIS/AEIS_Home.htm


Travel extensively throughout Northern and Western Alaska and construction industry hubs such as Anchorage in order to form personal relationships with executives and construction management personnel at the various agencies named in this section.

9. Competition

Nunavik, LLC and WardCo, Inc. of Fairbanks, are the only two businesses that hold a license to sell ThermaSteel products in Alaska, and these two companies have signed an agreement that limits competition in a manner consistent with the logistics of product shipping in Alaska. WardCo, Inc. could not be an effective competitor in Northern and Western Alaska due to the vast distances involved.

WardCo is the only manufacturer of Structural Insulated Panels operating in Fairbanks, however there are other such manufacturers in Anchorage. The distances involved also allow Kotzebue to provide a more cost-effective product than these suppliers in our intended market area.

Our strongest competition will not come from other manufacturers of structural insulated panels, but from suppliers who provide other types of manufactured or ‘kit’ style housing. These include:

Alaska Manufacturing Contractors, LLC191 E. Swanson, #101Wasilla, AK 99654Phone. 907.357.4270Fax: 907.357.4272

In 2001, AMC sold over 50 houses in rural Alaska to clients including Emmonak Housing Authority, Bering Straits Regional Housing Authority, Nome Eskimo Community Housing Program, Mountain Village Tribal Council Housing Authorityand Unalakleet Housing Authority, all of which are in Nunavik’s intended secondary market area. The majority ownership in AMC is Afognak Corporation, meaning that it is also a Native-owned entity.

AMC has a different product in that they are producing an entire steel-framed house at their plant in Wasilla, then barging the house to its intended location, so they are not significant competition in the insulation business, in construction products for remodeling, or in commercial construction projects. However, they do have the potential to be our most significant competitor in the new housing market. One advantage Nunavik has over AMC which will be emphasized in our marketing materials is far greater flexibility for the individual homeowner or contractor to design a home exactly as they want it. AMC offers a limited number of designs due to their manufacturing technique. Another advantage which is very important in the rural Alaska market is that Nunavik can train local residents to work with our product, creating jobs in the village. AMC will hire local residents, but they must


leave home and come to the manufacturing location outside of Wasilla for training and manufacturing, which can take several weeks.

Spenard Builders Supply840 K Steet, #200MS230AAnchorage, AK 99501SBS is a major building supply center with store locations in various locations on the road systems of Interior and Southcentral Alaska. Their only store within our intended market area is located in Barrow. They claim to be able to ship building supplies and complete housing packages to any locale within the State. The complete housing packages have begun to grow in popularity on the road system, but have not acquired a substantial market in rural Alaska.

Premier Building Systems 4609 70th Avenue East Fife, WA 98424 USA Phone: (253) 926-2020 Phone: (800) 275-7086 Fax: (253) 926-3992 Email: [email protected] Web site: www.pbspanels.com Premier has shipped product into the Kotzebue market, and their panels have also been used on a duplex in Barrow and on the Yukon Kuskokwim Health Center in Bethel. However, it is our understanding there have been problems using their product and some of our potential customers have advised us they will not use that product again. Premier does not have an office in Alaska, but they do have a sales representative based in Anchorage.

W.H. Porter, Inc. 711 Airdustrial Way SW Tumwater, WA 98502 USA Phone: (360) 704-3359 Fax: (360) 704-3362 Email: [email protected] Web site: www.portersips.comPorter has also developed a small market in our primary market area. We were not able to determine the strength of his presence but are led to believe current users of their product would like to have a local manufacturer provide them with product.

The primary competition we face currently, though, is from stick-built construction, and the potential suppliers in this area are too numerous to list. The main reason stick-built construction maintains a hold on the arctic building industry is simply habit. The primary advantage for the designers and builders is to continue doing things using the same techniques and the same corporate relationships that have been used in the past. Nunavik’s marketing strategy is a crucial part of overcoming this

http://www.portersips.com/

mailto:[email protected]

http://www.pbspanels.com/

mailto:[email protected]


obstacle. Experience has shown that a superior product at a lower cost will win out over the force of habit if customers begin to demand it, so we must work on building demand at the customer level.

10. Suppliers & Dealership

In Fiscal Year (FY) 2000, Insulspan Corporation, (Insulspan) of Blissfield, MI was selected as the Dealer. Insulspan has more than 30 years' experience in the development and manufacture of high-quality construction materials.

In FY 2001, Nunavik decided to switch from Insulspan to the ThermaSteel panels described here. ThermaSteel began as ADVA Corporation and in 1985, RADVA sold substantially all of its rights to Atlantic Richfield (ARCO) and subsequently repurchased these rights in December 1987. The operations were extended via joint ventures or license agreements into Mexico, Australia, Russia, South Africa, Poland, Guam, Philippines, and Turkey. In May of 1998, RADVA sold 95% interest in the Thermastructure Building System to ThermaSteel Corporation. ThermaSteel is associated with the World Housing Technology Center located in Izmir, Turkey. ThermaSteel Corporation uses steel and Expanded Polystyrene (100% Recyclable). The panels have been produced since 1976 under various trademarks such as RADVA Panel, Thermastructure Panel, Wallframe, and Insulsteel. The main headquarters and manufacturing facility is in Radford, Virginia. Another manufacturing facility is located in Corona, CA. Panels have been used throughout the USA and in 27 other countries. Further information about this product is available at www.thermasteelcorp.com

11. Risk and Mitigates

Personnel, Listing(s) and Marketing are three primary risks Nunavik, LLC has to be mindful of.

Personnel: At the moment, the Plant is in dormant status, with no full time staff. Part of the re-activation plan for the Plant is hiring of key management and staff. Personnel costs can comprise a majority of overall operating expenses for most any enterprise and the Nunavik, LLC in particular. Overall staffing costs must be in proportion to sales; that is as sales increase, so does staffing and vice versa.

The risk of having inexperienced key management and staffing may result in higher than normal personnel costs and/or missed opportunities, which would result in losses.

Therefore, to mitigate these risks, Nunavik, LLC may consider working with an executive search firm to assist in identifying an individual to serve as the General Manager. The General Manager would have to possess the industry knowledge along with a proven track record of operating a similar plant at a profit. In addition to feeling at ease living in a rural community, the General Manager of the Nunavik plant would have to actively participate in plant operations and maintenance, develop and


implement marketing strategies, prepare bids for various projects to include negotiations for the same, staff training, and project construction oversight.

Listing(s): The risk of not having proper certifications, commonly referred to as Listings may prevent Nunavik’s from bidding on larger, more lucrative, commercial projects, because such large commercial projects are paid for by public money, which invariably require building contractors like Nunavik to have the proper Listing(s).

To mitigate this risk, Nunavik would need to work with Resources Applications Designs & Controls (RADCO), Inc., who is a nationally recognized testing laboratory, listing and quality control inspection agency head quartered in Long Beach, California to obtain a Listing for the International Conference of Building Officials (ICBO) mandated under the Uniform Building Code and/or the Building Offices & Code Administration (BOCA), which is mandated under the National Building Code.

To procure a Listing from RADCO can take several months, therefore Nunavik would want to begin the process now. Having a Listing is a prerequisite to marketing, since most prospective customers would ask whether or not Nunavik has the proper Listing(s).

Marketing: The risk of little or no marketing prevents Nunavik from building its market share. Nunavik has the license to sell the ThermaSteel product throughout Alaska and since inception has marketed only to businesses in Kotzebue and a few of the surrounding villages.

To mitigate, Nunavik must immediately begin developing a marketing plan that will improve overall market share. Once marketing strategies are formulated, Nunavik would begin marketing at the end of one building season in preparation for the next, up-coming season. For example, assuming the building season ends, say, in October, Nunavik would begin concerted marketing efforts in early November in order to begin lining up projects for the following building season which would start in, say, March; allowing sufficient time have the building material/supplies to be shipped by barge.

There are various risks inherent in every business, and the type of risk(s) will vary from one business to another. The aforementioned risks are not intended to be all-inclusive, although can be considered to be common in any business.

In summary, Nunavik will improve its chances of success by being mindful of timing when hiring qualified management, procuring proper Listing(s) and implementing the marketing plan.


12. Financials

The Plant operated for Fiscal Year (FY) 2001 and 2002. The following is a summary of earnings for FY 2001 & 2002, plus a ProForma (PF) for FY 2003.

FY 2001 FY 2002 PF FY 2003(000’s Omitted)Prepared By CPA In-House D. Dickens

Sales $ 50,642 $ 45,000 $867,000COGS (49,751) (69,001) (286,110)Direct Labor (146,893) (2,525) -Expenses (540,306) (205,002) (473,940)Profit (Loss) (686,308) (231,528) 106,950

Sales: FY 2001 consisted of a house package to Enoch Kenworthy in Kotzebue; FY 2002 consisted of a $8,000 project in Noorvik & a $37,000 Spud Farm panels in Kotzebue; projected sales for FY 2003 includes the Maniilaq 40 unit housing & the KIRA multifamily projects.

COGS & Direct Labor: The combined total for FY 2001 was $196,644; by comparison for FY 2002 the total dropped to $71,526, a 64% decrease; for FY 2003 the total is projected to be $286,110.

Expenses: For FY 2001 the total is $540,306; by comparison for FY 2002 the total dropped to $205,002 a 62% decrease; for FY 2003 the total is projected to be $473,940.

Net Profit (Loss): For FY 2001 the total Loss was ($686,308); by comparison for FY 2002 the total Loss was ($231,529) a 66% decrease; for FY 2003 the total is projected to be a $106,950 profit.

Summary: Sales for FY 2001 & 2002 consisted of projects that did not require an International Certification of Building Officials (ICBO) certification, while FY 2003 will require an ICBO certification in order to bid on the projects. An ICBO certification will enable Nunavik to bid on the same number of projects with the difference being that those projects will be of a higher dollar value. Note that the combined COGS, Direct Labor and Expenses projected for FY 2003 is almost the same as that of FY 2003 levels. The FY 2003 PF shows that an ICBO certification will enable Nunavik to bid on, fewer, larger projects and still have a chance to achieve profitability.


There is a need to actively market the Nunavik product. Marketing can be a function everyone can participate in, that is, partners and staff, on the basis that everyone has a stake in making Nunavik a success. Plus, there is a need to promptly secure the ICBO certification in order to bid on larger projects. Finally, the amount in the form of a LOC will directly correlate with Sales. For example, assume that Nunavik successfully bid on the Maniilaq project, however the project does not start until April instead of March. The result is that the LOC would increase to $148,114 from $104,671. Therefore, the longer it takes to achieve sales, the more the initial months losses would be and the larger LOC needed to cover the expenses.

13. Grant Funds and Loan Request

Sativa Quinn dba Fund Gathering, Inc. will be applying to the Administration for Native American (ANA) for $500,000.00, with the proceeds to be applied primarily to marketing costs, training costs, and partial coverage of the salaries for both managerial and line staff

Chuck Katasse dba Alaska Financial Management (AFM) Group, will be assisting Nunavik, LLC to secure short-term financing in the form of an Operating Line of Credit (LOC) in the amount of $110,000.00 with the proceeds to be used to pay for annual operating expenses.

14. Loan Collateral

The collateral a lender will require will directly correlate with Nunavik’s level of risk, along with the amount and allocation of money to be borrowed. For example, lets assume Nunavik is requesting a Line of Credit of $100,000 to be paid back within l operating year, and the lender considers Nunavik to be an acceptable risk. This being the case, there is a good chance most lenders will require as collateral a direct assignment on all Accounts Receivable (A/R), and as an abundance of caution execute a first lien interest on all inventory.

On the other hand, if Nunavik is considered a higher then normal risk, the lender may require a combination of a direct assignment of A/R, and/or a governmental loan guaranty and/or a first lien on the building and land. The following Composition of Net Worth reveals that the combined value of building & land plus inventory is $860,678.

Composition of Net Worth:FY 2001 Total Assets $2,034,598Total Liabilities (34,790)Net Worth $1,999,808Receivable from members $1,115,380Property, Plant & Equipment 781,216


Inventory 79,462Cash 23,750

15. Disclaimer:

The Alaska Financial Management (AFM) Group and the Fund Gathering, Inc. will work to ensure the best possible outcome for the Kotzebue IRA. However, success may depend upon third-party cooperation, the skills, experience and judgments of the Kotzebue IRA personnel, or other factors beyond the control of the AFM Group and Fund Gathering, Inc. The AFM Group and Fund Gathering, Inc. do not guarantee any particular outcome or that a favorable outcome will be achieved as a result of the AFM Group and Fund Gathering, Inc. services. The Kotzebue IRA understands that the AFM Group and the Fund Gathering, Inc. does not offer and is not qualified to offer legal or tax advice. The legal and tax implications of services provided by the AFM Group and the Fund Gathering, Inc. are the responsibility of the Kotzebue IRA.


16. Appendixa. Resume of key management b. Nunavik Financial Statement

i. FY 2000, FY2001ii. FY 2003 ProForma


RESUME – CHUCK SCHAEFFER FLOOR MANAGER

1972 – 1975 US ARMY 5th Engineers – Heavy Equipment Mechanic

1975 – 1976 Ramp Agent – Wein Air Alaska 1976 – 1979 Heavy Equipment Operator – Northwest Inupiaq

Housing Authority 1979 – 1981 Heavy Equipment Operator – NANA Regional

Corporation 1981 – 1991 Professional Dog Musher 1991 – 1993 Carpenter/Foreman – KIC Construction 1990 – 1995 KIC Board of Directors – Kikiktugruk Inupiaq

Corporation 1993 – 1996 Carpenter/Foreman UIC Construction 1996 – 1998 Maintenance Director – Northwest Inupiaq

Housing Authority 1998 – 1999 Construction Manager – Tupiq Services Inc. 2000 Manager in Training - Nunavik LLC 2001 – to date Plant Manager / General Manager – Nunavik LLC

foam panels, '03 business plan

Documents