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Application Technologies Inc.
Deal Structure

In order to attract sufficient venture capital as well as the best management team available, Application Technologies Inc. have structured the ownership of the technology as follows:

INVESTMENT AND RETURN

We are seeking equity capital of $2,200,000 to fund the next phase in our business in exchange for 40% equity. The funds will be divided equally between the development of manufacturing capability and operational expenses incurred in the first 18 months of operation.

By 2003 Application Technologies expect to generate sales of about $36.6 million, profits of $11.6 million, and have $20.8 million in cash in the bank.

$ in thousands 1999 2000 2001 2002 2003

Sales

375 3,184 15,287 26,264 36,553

Variable Costs

64 541 2,332 3,935 5,592

Gross Margin

251 2,154 11,565 20,213 27,998

Fixed Costs

777 2,087 4,298 6,470 8,643

Net Income

(526) 40 4,360 8,245 11,613

ROE

- - 164% 311% 437%
Table 2 - Financial Highlights

Based on a price/earnings ratio of 10 (industry range: 11 to 40), the initial investment will be worth approximately $46.5 million in 2003. The five-year internal rate of return is 84% with a net present value of $18.2 million, assuming a 15% risk adjusted discount rate.

EXIT STRATEGY

The pouch has the ability to become one of the leading brands in several categories. At the same time we are only entering into a limited number of the potential huge variety of applications for the pouch. We therefore consider our company to be well positioned as a premier buy-out for a larger packaging company within three to five years from incorporation.

Within this time frame we will have all the critical elements in place to make a buy-out very attractive:


Application Technologies Inc.
Table of ContentsAppendices
1. Executive Summary
2. Business Description
3. Management Team
4. Market Analysis
5. Marketing Strategy
6. Operations Strategy
7. Critical Risks
8. Deal Structure
Notes on Financials
Financials
All information herein is confidential and belongs to Application Technologies Inc.