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 Xxxx Xxxxx, 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/ Xxxxx Xxxxxx By: /s/ Xxxxxxx Xxxxxxxx
--------------------------------- -----------------------------------
Xxxxx Xxxxxx, President Xxxxxxx Xxxxxxxx, President
EMPLOYEE
/s/ Xxxx Xxxxx
---------------------------------------
Xxxx Xxxxx
8
RGS COMPRESSOR COMPANY
4 YEAR PROJECTION
EXHIBIT A
TO
Employment Contract
and
Incentive Stock Option
by Xxxx 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)
-------------------------------------------------------------------------
Page 1
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
====================================================================
Page 4
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 Xxxx Xxxxxx and Xxxx Xxxxx. 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
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capital outlay $480,281
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