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J.H. Reid – Offering

J H Reid Corporation is proposing to offer 15% of the common stock of the corporation to one or more investors for $275,000. Mr. Albecker has already invested approximately $30,000 and will further contribute the patents related to the Chicago Lounge™ in exchange for common stock. Presently, JHR has a limited exclusive license with Mr. Albecker, which requires payment of approximately 3% of net factory sales of The Chicago Lounge™. With the contribution of the patents, JHR would not have to pay any royalties. Presently Mr. Albecker owns 100% of the stock, and after the sale, would own 85%. It is the intent of JHR, that in 3 years, the investor(s) would have the option to sell the stock back to JHR for $750,000. The investor could retain the stock at this point, or sell for a negotiated amount. The capital will be used to provide sufficient working capital to successfully launch three models of chairs, to finance product improvements, new product development, and marketing efforts, to improve operating efficiency, and to provide a safety margin if demand for the product substantially outpaces sales projections.

ValuationThe valuation for JHR is based on a calculation of the Net Present Value of the patents related to The Chicago Lounge™. In the NPV calculation, the royalty rate used was 2.5%, the interest rate was 10%, the amount of time was 15 years, and following a steady rise, the sales volume in year 15 accounted for 4.7% of the recliner market. According to this calculation, the total royalties paid would be $13.6 million and the NPV is $4.8 million. To take into account the risks associated with not achieving the sales projections, and to make the offer more attractive, the valuation was reduced by more than 60%. Accordingly, JHR is being valued at $1.8 million for this offering.

J.H. Reid Corporation
Table of Contents Appendices
1. Executive Summary
2. Business Overview
3. Marketing Plan
4. Risks
5. Operations Plan
6. Management
7. Financial Plan
8. Offering
Cost of Manufacturing
United States Patent
Manufacturing Process
Income Statement
Cash Flow Statement
Balance Sheet
Break Even Point
All information herein is confidential and belongs to J.H. Reid Corporation

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