Sea Structures Inc. Business Plan
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For $600,000, the company is offering 30% of its stock, or 150,000 shares. Based on the projections of the company, after three years investors realize a 46% internal rate of return through dividends provided. These projections suggest the net present value of the investment is $244,882.
The second product the company is marketng under this plan is a much larger Seacell(R) 5000 unit made of polyethylene. The larger cell is some 8 feet across and can support 5,000 pounds of structure. These larger cells are based on a patent pending design. The company expects to bring the larger Seacell(R) units to market in late 1995.
The third product utilizes pre-stressed concrete in one monolithic pour. Any size cell can be made using this method. A starting size of half an acre is estimated to be a realistic and marketable product. The carrying capacity of the Mega Seacell(R) is 3,000 tons (6 million pounds). Its design is based on a patented concept. The company holds the patent rights.
All three flotation units utilize the same basic principle. Air trapped in a cylinder which is open at one end can be used to support a significant weight. By linking sets of the cylinders together, the system has sufficient stability to avoid tipping. The cellular arrangement is connected by a mechanism that permits flexure, thus preventing long baseline waves from breaking up the structure supported.
Sea Structures markets the design service necessary to modify existing flotation concepts for use with the Seacell(R) units, or to create entirely new concepts based on the companys technology. Together, these three products and this service represent a potentially multibillion dollar industry for the creation of new real estate.
Together, these officers and directors represent significant talent in a diverse array of specialties which have significant application to the companys success. Morris is an architect and designer. Klien is a software programmer and Internet publicity specialist. Davidson is an MBA business consultant and marketing analysis expert. Macray is a master of engineering science with broad experience in international engineering logistics and marketing. Anderson is a Merchant Marine Captain and mechanical engineer. Joffe is an MBA in finance, a software programmer with broad experience in banking and marketing who was Phi Beta Kappa in economics. The management and directors are supported by a Board of Advisors which includes Dr. Salem Faza, a doctor of civil engineering with unique expertise in composite reinforcing for concrete structures. Also advising the company is Courtney Smith, author of many well-known books on finance and active in New Yorks capital markets with an investment newsletter. This team represents the necessary skills and talents to rapidly accelerate the companys marketing efforts, move the companys new products from development to market, and capitalize on the unique opportunities afforded by the companys distinctive competencies.
For centuries, people have traveled over the surface of the water from one piece of land to another. Although many find ocean travel quite comfortable, they remain fixed on the idea that the ocean is a place you travel through rather than being a destination itself. Having settled most of the oceanfront property, people are left with two choices: either find a place suited to their needs and purchase if the price is right, or create new territory. Until recently, for most people the second choice was just a dream.
The dream is now a reality. Already, today, there are Seacell(R) structures floating on the ocean, new land where there was none before. Unlike traditional land, Sea Structures are versatile. They are:
In contrast, 9 miles off shore, the surface of the sea is largely untaxed and unregulated. Even further asea, at least 200 miles from US shores, one is even outside the exclusive police zone of the United States. But for those who wish to stay closer to home, the surface of any river or lake or the ocean just offshore may be a better place to build. Indeed, in Lee County, a swimming pool built on Seacell(R) brand flotation units and floating in the Gulf of Mexico does not come under the building permitting fees or regulatory infrastructure of either the state or the local government. Only laws governing watercraft are applicable.
In 1993, with the initial design complete, Morris filed for patents on his unique idea. He identified two versions of his basic concept. One uses plastic cylinders, the other uses concrete hexagons. Both designs are based on the same idea: When you turn a plastic cup over in water, it floats upside down. The air trapped inside the cup keeps it afloat. Of course, the cup may turn rightside up, get water into it and sink. Thus, the patented Seacell(R) includes a design feature that allows crossmembers to be easily attached to each cylinder. Attaching three or more cells together creates a stable platform. You might illustrate this stability for yourself by gluing popsicle sticks to the bottoms of three styrofoam cups so that each stick connects two cups. This structure is less easy to tip over. Seacell(R) structures are provided with a more practical hinge mechanism for mating the units that permits adjacent cells to move separately with wave action. Prior art did not account for long baseline waves, but kept a rigid connection between modules. Seacell(R) units overcome the problems caused by this oversight.
A drawing of the smaller, polyethylene Seacell(R) is shown at right. Additional information is available in Appendix C.
Seacell(R) brand flotation systems are sold to other companies and individuals who use them to build docks, marinas, piers, boat lifts, floating swimming pool and party decks, scuba diving platforms, boardwalks, and other types of desired floating structures. In addition, the company provides design services to clients who need to know how to effectively use Seacell(R) units. There are virtually unlimited applications.
With the additional capitalization sought, the company expects to bring its larger scale, concrete Mega Seacell(R) production on line. These larger cells are appropriate for building homes, industrial barges, and even floating island cities. Individual cell networks in the larger product line can carry up to 3,000 tons.
Sea Structures has already obtained customers in this market sector. For example, Appendix C includes an advertisement the company placed in Boating World magazine with a photograph showing a customers boat ramp based on Seacell(R) brand flotation technology.
One of the driving factors in the development of traditional waterfront property is the continuing growth in the tourism industry. The United Nations Economic and Social Council recently estimated that by the year 2000, over one billion people will travel for pleasure. Worldwide about 375 million people travel abroad for business and pleasure. In 1990, those tourists generated $230 billion in revenues. Waterfront properties are therefore in high demand as playgrounds, not only for the rich and famous, but for the wide range of vacationers from middle and lower incomes.
Potential customers include individuals building their own rafts and houseboats, manufacturers supplying houseboats for various markets, barge companies building transportation systems, any port or cargo handling company that wants an easily relocated crane, and companies that service the petrochemical industry with large floating structures.
Barges are increasingly responsible for coastal carriage in US waters. In 1993, of the 77 vessels operating under US flag for coastal cargo transport, 71 were tankers. The remaining six certainly did not handle the large volume of river borne and intracoastal waterway cargo that is carried in and around the United States. Barges were responsible for most of this carriage. Bringing a technology with low production cost and low operations costs (due to the lower drag) to this industrial sector should generate significant sales.
Large concrete structures have already been built for the transportation sector. A 65,000 ton capacity liquid petroleum gas tank facility was constructed recently using pre-stressed concrete. By comparison, Sea Structures is proposing to build a 3,000 ton capacity artificial island using pre-stressed concrete. In addition, a 70,000 square feet (almost two acres) dock structure has been constructed by another company for use in Alaska. Sea Structures is planning to build half-acre Mega Seacell(R) units. It should be noted that the other large concrete structures described were much more expensive to build since they had bottom surfaces. The company expects to have a significant competitive advantage over other concrete structure providers due to its use of the patented Seacell(R) design as well as due to proprietary manufacturin concepts.
Some people may dismiss the idea of building a lasting structure on the water. >From their perspective, the ocean is a difficult and dangerous place, with shifting waters, hurricanes, rogue waves, and other hazards. Of course, those individuals may also feel perfectly safe purchasing property in California or Japan. Recent earthquakes have demonstrated that dry land has its disadvantages. Most hazards on the ocean can be predicted with satellite meteorology and avoided by moving the structure. With very small engines, even a Mega Seacell(R) island can be moved 120 miles in 24 hours, outmaneuvering any hurricane on record.
However, the development of new and need not be the exclusive purview of national governments or ambitious libertarian venturists. There are many small-scale developments which are traditionally land-based but which have excellent implementations with Seacell(R) technology. Here are a few:
Although new land development has a long history and many current adherents, the company does not anticipate more than a third of its revenue coming from such applications. However, as waterfront space is always at a premium, the use of Seacell(R) technology to create structures on the surface of the water will be increasingly attractive.
For example, golf courses are enormously popular worldwide. In countries like Japan, they are incredibly expensive to locate. Local farm groups in Japan have been objecting recently to the conversion of fertile land into golf greens. Some 8 million Japanese golf, but only about 15% of them have every played on a course. The rest play at driving ranges like the stadium size affairs in Tokyo which allow thousands to practice driving simultaneously. Those who are members of golf clubs pay $400,000 initiation fees and annual dues of the same or greater amounts.
Sea Structures offers a solution. With golf tees, fairways, and greens located on Mega Seacell(R) platforms and board walks to get from one hole to another, a very large golf course can be created without using any land at all. Since Seacell(R) structures are light weight, the units can easily be towed into storage sheds for inclement weather.
Sea Structures has identified over 500 firms in the US and worldwide which may have applications for Seacell(R) technology. These include sporting event promoters, hotel and resort operators, golf course developers, government agencies, and many others.
The concrete product line is more conducive to special relationships between Sea Structures and supplier companies. One product of particular interest is reinforcing bars, or "rebar" for the concrete. For land-based applications, concrete is made with low-cost steel rebar. Unfortunately, steel rebar is easily corroded in seawater. Its presence often promotes corrosion of the concrete, as well.
Composite rebar is non-corrosive, has twice the tensile strength of steel, has a consistent modulus of elasticity, is one-fourth the weight of steel, and has a coefficient of thermal expansion closer to concrete than does steel. Each of these factors is important when considering the applications planned for the concrete Seacell(R) units. For example, the added tensile strength is useful when considering the effect of wave action on Seacell(R) units i the ocean. The lower weight provides more usable buoyancy.
One important supplier for composite rebar is an Ohio company, Marshall Industries Composites. Sea Structures has made initial contacts with Marshall Industries, and is hopeful that a close working relationship can be established. The successful development of Sea Structures patented concrete Seacell(R) technology using Marshall Industries patented C-Bar(R) reinforcing rods would be of obvious benefit to both companies.
Various concrete companies may also have an interest in the success of Sea Structures. By playing up the long-term opportunity, the company may be able to obtain lower cost concrete in the short term. Sea Structures has a unique concept for manufacturing our concrete Seacell(R) units which may be of great interest to other companies. Licensing this manufacturing technology may represent a large source of revenue.
The company currently takes the position that none of the major players in the various market sectors in which Sea Structures will participate must necessarily be considered competition. By preference, the company will market to these manufacturers of barges, houseboats, docks, piers, and other water structures in order to supply them with Seacell(R) units for use in their applications.
Using this strategy of making potential competitors into customers, Sea Structures can capitalize on their knowledge of their market sectors. Rather than try to become experts at every conceivable building and manufacturing process, the company can simply educate companies already involved in those processes about Seacell(R) technology. Ultimately, it may become necessary to have some in-house capability to assemble Seacell(R) units into various configurations. However, initially, the company benefits by selling Seacell(R) units rather than completed structures.
Of all the advantages of Seacell(R) technology that make it superior over other flotation approaches, the top of the list is clearly the lower cost. Seacell(R) concrete units can be produced at such a low cost that the company is able to sell them at a price of $113,000 per quarter acre. By comparison, waterfront property in Florida costs over $400,000 per quarter acre (and if youre lucky, the regulators will let you build once you buy). Building on the water with Seacell(R) units may be less expensive than building the equivalent structure on land.
The primary protection for Sea Structures against such competition is patent protection on the companys Seacell(R) concept. The patent on our concrete Seacell(R) system has been approved. Originally, the polyethylene Seacell(R) units were included as part of the overall patent application. Due to technicalities in patent law, this separate invention has been submitted separately for patent protection. This second patent application is pending.
Additional patent work is necessary to further protect the Seacell(R) technology. The manufacturing process for creating the large concrete Seacell(R) units has several unique and patentable features. The company intends to use part of the funds being raised presently to obtain additional patents on these concepts. Sea Structures has utilized a reputable patent law firm for previous patent applications. Beyond US patents, the companys attorneys recommend international patent applications in various countries. New capital is being sought to pursue these patents, as well.
Several secondary barriers to entry exist. The companys presence in the market, if properly publicized and advertised, will draw attention from customers that later entrants will not be able to obtain. Being first and offering something new is always an advantage over being second and offering something similar.
New technology research will be able to improve the companys products, allowing Seacell(R) units to always be superior in quality and lower in price. A technology lead is an excellent means to limit competitive pressure. Typically, research is somewhat capital intensive; lack of capital often bars potential competitors from entry.
Ultimately, other companies will be present in the market. Even though their technologies may never equal Sea Structures, they will be able to obtain some market share. Patent protection is of a limited duration in all countries where it is available. Seventeen years is the standard duration for US patents. The best protection from other entrants to the market is to establish an early commanding lead. As the market grows and develops, it will mature. By maintaining a technology edge and using that edge to support a price differential, the company will maintain a long-term presence, even in the face of future competition.
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