A subsidiary of Kotzebue IRA

BUSINESS PLAN
March 31, 2003

Prepared By: The AFM Group, Inc.

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2003 Business Plan Page 2

Nunavik LLC
Table Of Contents

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

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2. Nunavik LLC...........................................................5
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3. Ownership & Management......................................5
4. Business Location....................................................6
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5. Personnel..................................................................6
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6. Business Concept and Product.................................7
7. Industry....................................................................8
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8. Market......................................................................9
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9. Competition............................................................11
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10. Suppliers & Dealership..........................................13
11. Risks & Mitigates..................................................13
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12. Financials...............................................................15
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13. Grant Funds and Loan Request .............................16
14. Loan Collateral.......................................................16
15. Disclaimer..............................................................17
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16. Appendix................................................................18
a. Resume of key management
b. FY2003 Pro Forma
c. Financial Statements for Nunavik LLC
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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.
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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:

Earnings
Nunavik 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.

Grants
Income 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
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2003 Business Plan Page 6
$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.
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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.
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2003 Business Plan Page 8
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.
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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.
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2003 Business Plan Page 10

• 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.
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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.

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
1
Alaska Economic Trends, December 2000.
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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 $15,076,873
North Slope $13,371,613
Bethel $43,091,979
Dillingham $ 8,577,379
Nome $18,867,687
TOTAL $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.

2
Data taken from http://www.dced.state.ak.us/cbd/AEIS/AEIS_Home.htm
Nunavik, LLC
2003 Business Plan Page 13
• 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, LLC

191 E. Swanson, #101
Wasilla, AK 99654
Phone. 907.357.4270
Fax: 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
Authority
and 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
Nunavik, LLC
2003 Business Plan Page 14
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 Supply

840 K Steet, #200
MS230A
Anchorage, AK 99501
SBS 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: fife@pbspanels.com
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: porterpanl@aol.com
Web site: www.portersips.com
Porter 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
Nunavik, LLC
2003 Business Plan Page 15
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
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
Nunavik, LLC
2003 Business Plan Page 16
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.
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2003 Business Plan Page 17

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 $867,000

COGS (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
Nunavik, LLC
2003 Business Plan Page 18
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 $2,034,598
Total Liabilities (34,790)
Nunavik, LLC
2003 Business Plan Page 19
Net Worth $1,999,808
Receivable from members $1,115,380
Property, Plant & Equipment 781,216
Inventory 79,462
Cash 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.
Nunavik, LLC
2003 Business Plan Page 20
16. Appendix
a. Resume of key management
b. Nunavik Financial Statement
i. FY 2000, FY2001
ii. FY 2003 ProForma
Nunavik, LLC
2003 Business Plan Page 21

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