ShockED LLC

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SHOCKED BUSINESS PLAN

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Akash Rudra Chattahoochee High School

GA FBLA 2017-2018

shocked.wix.com/water

If you have any questions or concerns, or simply want more information, please send an email to ShockED@gmail.com or call (678) 534 6978.

ShockED LLC

1.0 Executive Summary 4 2.0 Company Profile 5

2.1 LEGAL ENTITY/COMPANY OWNERSHIP 5 2.2 COMPANY VISION 5 2.3 MISSION STATEMENT 5 2.4 COMPANY GOVERNANCE AND OWNERSHIP 5 2.5 LOCATION 6 2.6 IMMEDIATE DEVELOPMENT GOALS 6 2.7 START-UP SUMMARY 6

3.0 Industry Analysis 7 4.0 Target Market 8 5.0 Competition 9

5.1 RESERVE OSMOSIS 9 5.2 COAGULATION TREATMENT/CHEMICAL TREATMENT 10 5.3 MULTI-STAGE FLASH DISTILLATION 10 5.4 FUTURE COMPETITORS 11

6.0 Sales Strategy 12 6.1 PRICING 12 6.2 STRATEGY AND IMPLEMENTATION 13

7.0 Marketing Plan 14 8.0 Operations 15

8.1 PRODUCTS 15 8.2 SUPPLIERS 17 8.3 MANUFACTURING 17 8.4 WORKFORCE AND PRODUCTION PLAN 17

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8.5 FACILITY 20 9.0 Management and Organization 20

9.1 DAY-TO-DAY OPERATIONS 20 10.0 Long-Term Development 21

10.1 STRENGTHS 21 10.2 WEAKNESSES 22 10.3 OPPORTUNITIES 22 10.4 THREATS 23 10.5 CHARITY 23 10.6 1ST YEAR GOALS 23 10.7 5TH YEAR GOALS 23 10.8 10TH YEAR GOALS 24

11.0 Financials 24 11.1 FINANCIAL ASSUMPTIONS 26 11.2 ACCOUNTING METHOD 26 11.3 MONTHLY CASH FLOW 27 11.3 MONTHLY INCOME STATEMENT 28

12.0 Supporting Documents 29 12.1 WORK CITED 30

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1.0 Executive Summary According to water.org, about 1.2 billion people worldwide are affected by a physical scarcity of water. This scarcity of clean water leads to dehydration, which can lead to deadly. While numerous attempts have been made to try and solve the shortage, they have all suffered from two major faults: being to expensive and/or inefficient. ShockED’s central goal is to address these flaws by integrating the latest scientific discoveries with our own research to form a product that could help reduce the dire water shortage.

ShockED’s product strives to provide both an affordable and efficient method to produce water. The product utilizes a process developed by MIT known as shock electrodialysis that can both desalinate and purify water. It also incorporates carbon nanotubes as the primary filter to further boost the efficiency of the product. The ability to complete both desalination and purification in one unit offers a major improvement over the current labyrinth of buildings needed to complete both processes, providing ShockED’s product with a distinct advantage over current technologies.

Furthermore, the water purification industry is in a period of stagnation, with a few technologies competing for the market and innovation at a relative standstill, allowing for ShockED’s innovative product to gain a sizable marketshare. Many major water utilities, namely American Water and Veolia Water, have expressed interest in exploring new purification techniques as well as the desire to implement desalination, underscoring the need for ShockED’s product. As ShockED is a business to business company, selling to these companies will provide ShockED with many clients, helping secure the company’s financial success.

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ShockED LLC

2.0 Company Profile 2.1 Legal Entity/Company Ownership ShockED is set up as a Limited Liability Company (LLC) for legal purposes and as an S-Corporation solely for taxation purposes as of November 27, 2017. The LLC format allows ShockED to perform without many corporate restrictions. ShockED chose to become an S-Corp for taxation purposes in order to save the owners money on self-employment tax.

2.2 Company Vision ShockED works to secure the future by providing an alternative source to purify water. This is done by providing a supplemental technology to water treatment plants, letting them purify water much more efficiently than the technology that is currently available. ShockED then plans to pivot from profits made by selling systems to water treatment plants to charitably install water treatment facilities in poorer countries that utilize the desalination aspect of ShockED’s product.

2.3 Mission Statement ShockED aspires to provide clean and drinkable water to the water utilities of the world, hence providing much more affordable water for people all around the world.

2.4 Company Governance and Ownership After bringing on investors, ShockED will have 2 founders that will have approximately 37.5% each. The remaining 25% will be allocated to those investors who wish to buy into the company at an approximate $2.8 M evaluation. The equity position of the CEOs will go down over time as the company brings on more shareholders. The board of directors will consist of the two CEO’s as well as any future major stockholders who are elected by the shareholders. Directors not employed directly by the company reserve the right to appoint other board members, whom are then confirmed by a vote of the shareholders.

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2.5 Location ShockED will have its factories located in Anaheim, California so that raw materials can be easily transported from Mexico. In the second year, we plan to expand our factories to the East Coast in Roanoke, Virginia for ease of transportation to nearby states. Mexico is the ideal area to get natural resources because it is rich in minerals such as graphite, copper, and steel, and due the NAFTA agreement, there will be no taxes for transnational exports. The company will lease the one 25,000 square foot facility the first year for prototyping, with a cost of $84K for the facility. After the first year, we will expand to two bigger, 40,000 square foot facilities before buying the warehouses on the third and fourth year respectively.

2.6 Immediate Development Goals ShockED will invest money in a laboratory as well as a research and development team that will work to make our product as cost efficient as possible. ShockED already has a patent filed that will prevent any competition from utilizing the same process to purify water. In the first year of research development, the main focus is finding a method of production for the ShockED unit that is optimized to keep the production cost low. Because ShockED integrates so many new technologies, this year is absolutely pivotal for a successful execution of our business. Therefore, in the first year, two experts will be hired to oversee the production of our first product. One engineer and one material scientist will fine tune the production plans to make costs as minimal as possible. The first year will mainly be trail and error to find the best method to integrate our technology into a plant. ShockED is a proven technology, but research and development is needed to implement the technology into a large scale plant at the lowest cost. It is ShockED's goal to finish research and development by the end of the first year and build a prototype. Once orders are secured in the second year, the model of production built from research and development will be used to build the rest of the products.

2.7 Start-Up Summary During the initial start of ShockED, we predict a loss of $833K due to the high-price expenditures such as facility rent, manufacturing, machinery, and materials. The

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manufacturing for the first year will be expensive, however, the main focus of the first year is building the product and conducting field testings so that the technology complies with government regulations. If the company does not spend time to do these tests, the product could stop working after it was installed. This could affect many people, and tarnish the reputation of the company. There are many other costs that are increasing throughout the years such as salaries, utilities, and transportation.

To acquire the approximate $833K needed to up-start ShockED, each founder will invest $30K of their own money. The company will obtain the remaining $773K from investors. We forecast that the ROI for investors will be at -98% at the end of year 2 and 16% at the end of year 3 (based on an approximate $2.8M evaluation).

3.0 Industry Analysis The worldwide water purification equipment industry is currently estimated to be valued at $38.3B dollars. In fact, a study published by the Feedonia group forecasts that this number will rise to $53.8B dollars by 2018 due to both the increased demand for water and ever-growing scarcity of fresh water (“Water Treatment Equipment…”). This trend of increase has been seen for the past 10 years and will most likely continue in conjunction with the growth of the human population. Major customer groups within this industry include water treatment plants, water packaging companies, and individual governments. At initial stages, ShockED will be targeting large scaled water treatment plants within the United States. These purification plants all have one major need: efficiency. Through current methods, the treatment process is very inefficient and a large amount of usable water is being wasted. In order to increase profits throughout the industry while maintaining the water output, a more efficient method is required, which ShockED offers. ShockED projects to obtain 5 percent of the US water purification equipment industry by the end of year five. ShockED believes this number to be reasonable because its product offers a significant improvement over current methods. Also, it serves as a complement to pre-existing treatment companies in that they can simply retrofit their equipment with our

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product. Therefore, due to ease of use as well as utilization of groundbreaking technology, 5 percent of the $11.6B dollar market (“Water Treatment Equipment…”) seems reasonable. In order to market our product to convince water treatment plants and packaging companies to go from their original water treatment technologies to ShockED's method, efficiency will be the main selling point. By explaining how our product is more efficient than the current chemical treatment plants and reverse osmosis, consumers will see how the original cost of buying and installing the ShockED system will eventually be overridden by the decrease in cost of maintaining the plant and higher yield of fresh water. In order to make sure that consumer demands can align with our initial production abilities, ShockED will target smaller water treatment plants in its first year after research and development. The strategy in marketing here, is that since ShockED sells to other businesses, the boost in profits of one company by using ShockED will force our competitor to buy the product.

4.0 Target Market ShockED plans to target the US water purification equipment market, which as of 2017, was valued at $13B dollars. America's water infrastructure is controlled by a variety of companies known as water utilities. Ranging from reverse osmosis plants to chemical treatment facilities, each company generates revenue by purifying then distributing water from bodies of water to people's homes. These companies generate the most revenue when they are able to distribute water both at a cheap price and high quality that meets EPA standards. However, the impending US water crisis, already seen hampering California, has led to many companies seeing their profits dwindle with some companies even losing money. This is largely attributed to the large amounts of water that is wasted during the purification process. Due to this, many companies are exploring new technologies that can more efficiently purify water and even desalination plants to offer an alternative source of water production. In its current state, the US market is ripe for significant growth as fresh water becomes even more scarce.

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ShockED would have massive appeal to these businesses. Businesses like American Water in New Jersey that spend millions to replace their pipes every year because of dirt and hard water buildup would be relieved of such costs with ShockED's nearly sterile water flowing through their pipes. In addition to this long term advantage, ShockED provides higher quality water more efficiently than any other current product. Therefore, any qualms about the initial cost needed to install the system will be overridden by the long term payoff of installing the system. Finally, these businesses will be more inclined to install the system since ShockED seamlessly integrates itself into current water treatment facilities. It does not require additional costs to deinstall parts of water treatment plants. It is simply an additional unit that helps maximizes production efficiency. ShockED not only appeals to current water treatment plants but also to any other market that sells water to consumers. For example, water packaging companies, and desalination plants on the West Cost would all benefit in the same way with an addition of a ShockED system. Therefore, these three types of companies will be our main target market. By emphasizing ShockED's efficiency and the guaranteed increase in profit made by installing ShockED, ShockED can surely sell its systems to these companies.

5.0 Competition

5.1 Reserve Osmosis Currently, the widely used method of water purification is reverse osmosis (RO). Many companies use reverse osmosis because of its ability to desalinate as well as purify water with any concentration of salt and bacteria, allowing them to build their plants in oceans, where there is an almost endless water supply. RO plants are also able to purify water decently well, leading to the often being used in conjunction with other processes. However, the main problems with this product are its inefficiency, its harm to the environment, the amount of power needed to run the plant, and exuberant costs to build the plants. Reverse osmosis uses multiple filters made of various fibers and pushes water through it at extremely high pressures. This leads to the plant creating about twice as

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many gallons of brine water-or water that is too salty to filter-than gallons of fresh water they produce. This brine water is usually dumped into ocean, harming the marine environment. To compound this issue, RO plants use 3 to 10 kilowatt-hours (kWh) of energy to produce one cubic meter of water (these plants average around 180,000 cubic meters of water a day), needing $10M dollars a year per unit to run. Put in perspective, the average US home uses 27 kWh per day! Last but not least, an average sized RO plant costs over $100 million dollars to build, an investment few companies can continually manage.

5.2 Coagulation Treatment/Chemical Treatment The combination of coagulation and chemical treatment is the another form of purification that is widely used by the water utilities. Coagulation uses a certain set of chemicals that bind to dirt and bacteria creating large pieces of sediment suspended in the water which will then be filtered out. The chemical treatment stage uses chlorine and ozone to remove harmful bacteria and viruses from the water. As of now, this is the most cost efficient way to purify water due to the abundance of the chemicals required for the treatment. Furthermore, the treatment is based on processes that are tried and well known, allowing for this to also be the most reliable water purification technique there is. The main problem with this system of treatment is that it does not completely sterilize water like the technology of ShockED. Some species of harmless bacteria, as well as minuscule particles of dirt or dust can still be found in the water. This means that water storage tanks, fire hydrants, and other storage vessels for water have to have their water replaced frequently due to bacterial and sediment buildup. In fact, New Jersey American Water spends $40 M dollars annually to maintain their pipes. If any of their pipes are damaged, the company has to spend ten times as much to replace them.

5.3 Multi-stage flash distillation Another method used by water filtration systems is multi-stage flash distillation. This technology heats water at extremely high levels at multiple stages to remove salt from the water. This treatment purifies produces nearly sterile water due to the flashes of heat as bacterial and viral enzymes denature at such extreme temperatures. However, multi-stage

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flash distillation is not able to remove inorganic particulates, such as dirt. Therefore, this technology is also usually assisted by a chemical treatment plant that removes the remaining particles in the water, running up the cost of the treatment facility even more. Moreover, the intensity of heat required for the process to be useful requires exuberant amounts of energy, further driving up the cost of multi-stage flash distillation facilities.

5.4 Future Competitors

There are two major future competitors for ShockED’s product: aluminum oxide based solar water purification and a large scaled implementation of graphene filters. Aluminum oxide based solar water purification uses a special aluminum oxide disk that is coated with minuscule aluminum particles. The disk then absorbs light which excites the aluminum particles and in turn leads to the evaporation of water without boiling. While this method is certainly promising, the fabrication of the test disks (2.5 centimeter in diameter) used in the experiment took over 3 months. The advanced techniques used in the fabrication of these disks are very intricate and the machines that perform these processes are not in abundance, meaning this method of purification still many years before it becomes viable. The other possible future competitor, graphene filters implemented on a large scale, also faces a similar predicament as that of the aluminum oxide method. Graphene sheets promise to purify water without the need for an external force, whether that comes through pressure or electricity. However, small amounts of graphene are both very hard and very expensive to produce with current technology, let alone large sheets. Due to this, filtration through graphene sheets will have a hard time entering the market for the foreseeable future.

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6.0 Sales Strategy 6.1 Pricing ShockED’s new and innovative technology has been priced in a similar manner as the many technologies of today's world: using the market-minus strategy. By definition, the strategy explains that when it comes to pricing, it does not matter how much it costs for a company to produce a new technology, because they can sell it for a much higher price in accordance to the current market price.

Therefore, as our finances show, ShockED’s price to produce a sub-unit is approximately $850K. According to data published by Feedonia (“Water Treatment Equipment…”), the water filtration/distribution facilities that make up the current industry (competition/consumers) are paying, on average, at least $50M for the purification that ShockED takes care of.

Therefore, as a proof of concept model, in the second and third operational year, ShockED plans to sell 20 sub-units (5 units) at a starting price of $600K with each additional sub-unit being $130K. This will allow us to validate our product in the early stages and thus, attract more potential customers. In the preceding two years, we plan to sell our technology at a higher rate keeping the base sub-unit for $600K while charging approximately $180K for every additional pumping station bought. This will allow us to further certify our product and the viability in the real world. These earlier units will also allow us to get statistical data that backs up our engineering and product efficiency.

These price points allow for ShockED to be competitive in the market, showcasing one of ShockED’s products strongest selling points: affordability. On the flip side, pricing our pumping stations as such allow for ShockED to make a profit and become a prosperous business.

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6.2 Strategy and Implementation ShockED’s strategy and implementation is separated into 5 stages that are distinguished by 5 operational years. The company believes that this strategy will maximize revenue and hence profits as shown in its finances.

The 1st year will be spent to build the product, purchase a warehouse and machinery, and hire workers and engineers. Once the product is built, it must be field tested to meet EPA water regulations as well as separate mechanical and electrical regulations. Since the functioning of this product could potentially affect the health of many people, it is important that the testing be conducted thoroughly as to not hurt the reputation of the company.

The 2nd year of operations is planned to be the 1st year that ShockED starts scaling its technology. The company plans to offer 20 pumping stations to water treatment plants for a proof of concept that our technology is feasible in the real world. It hopes to conduct a variety of tests as well as collect data to ensure the product is working as advertised. ShockED also plans to expand into a larger facility in this stage of business.

In the 3rd and 4th years, ShockED plans to scale our product on a large scale as the company will have an established proof-of-concept that verifies that the pumping stations are more affordable and efficient than the current technologies. ShockED will open up its product to the market and not restrict sales at this point in the process. Thus, ShockED estimates that it will sell 60 and 130 pumping stations respectively. This will in effect, allow ShockED to rapidly increase revenue, and in effect the ROI for investors.

In the final year of implementing its product (5th year), ShockED estimates selling at least 170 pumping stations because at this time, its product will have been accepted into the market and verified by multiple sources/companies. From this point on, ShockED’s sales will only increase and therefore it plans on expanding into a 3rd American location to keep up with demand.

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7.0 Marketing Plan There are numerous methods through which the company plans to promote its product. Firstly, it has set up an informational website as well as accounts on Twitter, Facebook, and other major social networking applications to get word out about our product. The website and other social media campaigns will have high quality educational videos that will clearly explain to consumers why ShockED is more effective than competition.

ShockED will also use branding to regulate information about the company to the public. Even though ShockED’s product will be sold to other businesses, keeping a good public image is essential to the success of the business. Its public relations firm will primarily be responsible for spreading the word about our product as well as painting ShockED’s global mission to help alleviate the water shortage. Another method of branding is to maintain a consistent message of what the company’s vision to the public. By making ShockED’s charity missions public, and spreading awareness of water problems around the world, a positive public image is destined to follow, adding legitimacy and value to our product. An example of this would be mobilizing the public to support ShockED’s cause by broadcasting public service announcements about water scarcity and emphasizing that using our technology is the best solution. This will pressure larger water treatment facilities to use our product to be able to produce more water. Furthermore, the adoption of ShockED’s product by the largest water utilities will force smaller utilities to adopt our product in order to be able to compete.

ShockED executives will also attend the FABTECH trade show at the end of the first year to pitch our product to many of the major water utilities that attend the show, namely American Water and Veiola Environment. Establishing relationships with these water utilities is essential for the success of ShockED’s product. By pitching to these companies, ShockED will be able to generate a buzz around its product that will serve as the foundation for the future success of the business.

The final way ShockED will advertise its product is by directly calling and scheduling appointments with executives of the companies. By explaining our technology, and

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through multiple meetings with executives, ShockED will be able to start trials of its product in low pressure water treatment plants. Once the efficiency of ShockED’s product is clear, it can expand to more plants under the ownership of the company.

8.0 Operations 8.1 Products ShockED will provide a 8x8x6 foot pumping unit that merges groundbreaking research from MIT with the latest discoveries in material sciences. The pumping unit will be connected to an intake system from a water treatment plant. The water will move through the system to a bundle of class D carbon nanotube fibers. Carbon nanotubes have pores that are about five nanometers in diameter, meaning that even the smallest virus in the world cannot get through this filter. Once the particles are trapped, an electric current will pass through the highly conductive carbon nanotubes. This “shock wave” created by the current will cause the nanotubes to move in a horizontal direction and will also open the pores.

At the same time, the current created will give all the particles in the system a certain charge, as proven in MIT professor Martin Bazant’s paper on shock electrodialysis (Deng et al). On either side of the bundle of carbon nanotubes, there will be a carbon electrode system that charges a conductive plate. In front of this plate will be a semipermeable membrane that can only be activated when an electric current is applied. Since one plate will have a positive charge and the other will have a negative charge, the charged particles will move to either side of the system because of the force of the current. As water will not be initially trapped inside the carbon nanotubes, it will pass through without any interference within the electric field, leaving only sterile water going through the outtake pipe. Based on the size of the intake and outtake systems of water treatment plants, and their projected goals for water production, a variable amount of pumping units will be installed in their intake systems.

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The real beauty of this product however, can be seen in its efficiency. By taking advantage of the capillary effects of the small carbon nanotubes, dissolved hydrogen gas in water can be stored at high densities without being condensed into a liquid. This hydrogen gas can be put back into the system and be converted into energy to run part of the pumping unit. At the same time, the nanotubes would be lowering the naturally high pH of sea or ocean water.

MIT Professor Martin Bazant commented on ShockED’s idea, stating “When we used shock electrodialysis in our experiment, we were unable to filter sea water and we were only able to filter brackish water. We also found the technology to be inefficient and expensive compared to reverse osmosis. The main reason for this was that we used fitted glass, which had pores that were too large. The recent use of carbon nanotubes in water filtration is a good idea by combining modern technology with them will sterilize water.”

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8.2 Suppliers ShockED’s main suppliers will be ABC Sheet Metal, Ace Steel Inc., and Sigma-Aldrich. ABC Sheet Metal and Ace Steel Inc. will provide ShockED with steel that will be required to build the pumping stations. The advantage of using these sources will be two-fold: ShockED will receive ample amounts of steel for manufacturing at a low price while also investing in recycled goods, helping the environment. Sigma-Aldrich will supply the chlorosulfonic acid that will be required in order to manufacture the carbon nanotubes.

8.3 Manufacturing Manufacturing of ShockED’s product will take place in a two-step process. As an order is confirmed, the company’s factories located in California will begin to process the order. Factories will consist of 5 main compartments: the chemical centrifuges, steel casing, laser cutting machines, hydraulic compressor, and the finishing line. As shipments of graphite, chlorosulfonic acid, and steel are received, they will be sent through each respective manufacturing process as the parts necessary to build the final product are produced. As the each pumping station is produced, they will be shipped to their respective water utility, where they will be set up in their designated field and calibrated to achieve maximum efficiency by ShockED engineers.

8.4 Workforce and Production Plan

In the first year of operations, ShockED plans to rent out a 25,000 sq. foot facility that will accommodate all of our prototyping and field testing needs. Along with renting out this facility, it plan to lease all of our equipment for the first year only. This will allow ShockED to lower its initial start-up expenditures. Furthermore, because the company is only

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Year Engineers Plant employees

Material Scientists

Office Workers

2018 1 3 1 12019 3 25 2 12020 4 40 2 22021 6 60 3 22022 8 85 3 3

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prototyping one pumping station in the first year, it needs one chemical centrifuge, laser cutting machine, hydraulic compressor, and steel casing mold. Due to this, ShockED’s machinery expenses to equal approximately $71K. Furthermore, the cost for materials is high because of the fact that it will take ShockED multiple attempts and lots of extra materials to master the production process. Finally, in year one, ShockED plans to employ one engineer, three employees, and one scientist, and 1 office worker. The three plant employees will be used for the prototyping process.

After initial prototyping has been proven and certified, ShockED plans to sell 4 units of our product (20 pumping stations) by the end of the second year. It will begin to accept pre-orders at the start of the second year in order to pay for the expenditures that we must incur as a company. After the prototype has been proven, ShockED will move into a larger 40,000 sq. foot facility in order to keep up with demand and production. This larger facility will also allow ShockED to house and thereby employ more employees. In this year, ShockED plans to employ 3 engineers, 25 plant employees, 2 scientists, and 1 office worker. The founders will not take a salary until the third year, which will allow ShockED to maximize profits in the second phase. Even though the cost of materials decreases because ShockED will have perfected the manufacturing process, ShockED has accounted for materials going to waste. Finally, we plan to return the leased equipment and buy three chemical centrifuges, two laser cutting machines, two hydraulic compressors, and one steel casing mold.

In the third year of operations, ShockED plans to expand into a second 40,000 sq. foot location in the United States. This will allow us to manufacture the projected 12 units with ease. Furthermore, in order to keep up with the demand, ShockED will add three more chemical centrifuges, two laser cutting machines, two hydraulic compressors, and one steel casing mold for the second plant. To continue, the company will employ 4 engineers, 40 plant employees, 2 scientists, and 2 office workers. ShockED plans to manufacture 12 full units and therefore allow for a 16% return on investment for investors. This year, the company will introduce its product to the market without any restraints and estimates selling 20 full units. The founders will take a salary starting in this year due to our high profits.

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In the fourth year of operations, ShockED plans to manufacture the projected 26 units. To keep up with this projected demand, ShockED will add two more chemical centrifuges, one laser cutting machine, one hydraulic compressor, and one steel casing mold. Finally, ShockED will employ 6 engineers, 60 plant employees, 3 scientists, and 2 office workers. The company plans to manufacture 26 full units and therefore allow for a 57% return on investment for investors.

In the fifth year of operations, ShockED plans to expand into a third 40,000 sq. foot location in the United States. This will allow the company to manufacture the projected 34 units with ease. Furthermore, in order to keep up with the demand, ShockED will add three more chemical centrifuges, two laser cutting machines, two hydraulic compressors, and one steel casing mold for the second plant. To continue, ShockED will employ 8 engineers, 85 plant employees, 3 scientists, and 3 office workers. The company plans to manufacture 34 full units and therefore allow for a 119% return on investment for investors.

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8.5 Facility

9.0 Management and Organization 9.1 Day-to-Day Operations In the initial stage of research and development, ShockED will hire two experts, and 3 plant employees. The experts will have the job of not only creating a production plan, but leading office workers in implementing the plan. Because of this, these experts should be recent college graduates, specifically from Stanford University and University of California Berkley, who have the energy and expertise to help run a startup company. ShockED will work with college officials to set up recruiting stations during the college's recruiting days to get a list of

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prospective employees. The list will then be whittled down to the two experts through interviews and observing level of expertise. The job of the experts (one material scientist and one engineer) is to finalize the method of production with the least cost and, by working with the board of directors, find distributors that can provide the desired materials for production. In this first year, the engineer and material scientist will do a lot of individual work in research. By the sixth month, after working with the board of directors, the method of production and mode of distribution should be finalized. Therefore, after this time, the engineer and material scientist will supervise three hired plant workers to begin production of the first prototype. After the first year, more engineers and material scientist will be hired to focus their expertise on installation of the product in consumers' systems. However, the initial batch of experts who now specialize in ShockED's method of production will continue to oversee the plant workers in their production of the system. They will also serve on an advisory committee that will find the best way to optimize production and achieve low operations cost, and will report to the board of directors. The board of directors will consist of the two CEO’s as well as any future major stockholders. Employees will receive one week of paid vacation and two weeks of regular vacation, with the opportunity to earn one more week of regular vacation if they are seen going above and beyond in the work environment. Employees will also be eligible for a comprehensive healthcare plan that will cover most ailments and dentistry.

10.0 Long-Term Development

10.1 STRENGTHS ShockED has three principal strengths. The foremost strength is the cost effectiveness of its product. One unit (average sale), which is composed of 5 pumping stations, is able to purify the same amount of water as a medium sized reverse osmosis plant in a more affordable and more efficient way. On average, a reverse osmosis plant is able to produce 1 gallon of water with an input of 3. ShockED’s product, meanwhile, can produce the same amount of water with a much reduced input of 1.2 gallons. Additionally, the manufacturing cost of ShockED’s product is drastically lower than reverse

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osmosis plants. In order to construct a reverse osmosis plant a minimum of $40M dollars must be invested into machinery. Our product does not have this vast initial investment, and only costs around $130k dollars to manufacture one unit. Another strength of ShockED is its originality. The process that ShockED’s product uses, shock electrodialysis, is relatively new, and is currently not used for the purification of water, meaning there are no companies offering a similar method. A final strength is that ShockED ventures into new sources of water that are quite untapped. ShockED is able to purify brackish and even salt water, which gives an alternate source of water now that Earth’s fresh water is rapidly diminishing.

10.2 WEAKNESSES ShockED has two major weaknesses. First, its product does not work alongside the current technologies of water treatment plants. A certain part of the treatment plant would have to be shut down and reconstructed to allow the ShockED pumping stations to filter the water. This can require a large use of manpower and technology, but considering that each state water utility in America spends an average of $150M dollars on renovations and improvements of technology, this should not be a major problem for consumers. The second weakness ShockED faces, like all new companies, is a lack of market presence. This is more prevalent in the water treatment industry because of the domination of a few businesses and technologies. However, through proper marketing, ShockED should be able to control a portion of the market since its technology will generate revenue for the plants and will not be directly competing against them. The only challenge is to bring legitimacy to our technology and product so that more companies are likely to invest.

10.3 OPPORTUNITIES As the company expands, many opportunities will emerge. ShockED has the opportunity for continuous cash flow if it charges a royalty on each gallon of water sold while using our product sales will be generated at all times. Also, ShockED plans to create a smaller version of our product that can purify water at a more portable level.

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10.4 THREATS One of the biggest threats ShockED faces is the US backing out of the NAFTA agreement. As ShockED relies heavily on raw materials from Mexico, the breakup of NAFTA would lead to a spike in the production costs of pumping stations. However, ShockED’s price point is so much lower than its competitors that this spike in production price should be able to be covered by this gap. Another threat we face is technological obsolescence. If a cheaper method of purification is developed then our product will become obsolete. However, the chance of this occurring is highly unlikely due to the adequate research and immense innovation of our product.

10.5 CHARITY ShockED would like to be a very philanthropic organization that focuses on helping the people who don’t have access to clean and drinkable water. The founders of this company whole-heartedly believe in helping the less fortunate. In fact, it plans on donating money starting from the third year itself because of its vision of “purifying today’s water to assist the people of tomorrow.” For instance, as seen in the financials, ShockED plans to donate approximately $9M in its first five years of operation. This money will be donated to charities such as Charity Water, Water.org, Waterislife, and other organizations similar to these.

10.6 1st Year Goals • Build a fully functioning prototype • Certify product • Patent the new technology

10.7 5th Year Goals • Have multiple facilities in the U.S • Have multiple water treatment plants from multiple companies using our product. • Expand facilities outside the country with treatment plants there using our product • Set up facilities in offshore locations outside of the US • Donate at least $8M to charities to aid developing countries

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ShockED LLC

10.8 10th Year Goals • Continue providing units to state governments which will distribute water to farmers • Become a S&P 500 Company

11.0 Financials Estimated Expenditures

Year 1 Year 2 Year 3 Year 4 Year 5

Category Cost Cost Cost Cost CostInsurance $8,500 $15,000 $25,600 $49,800 $62,900

Accounting/Auditing Fees $10,500 $20,700 $40,400 $75,300 $105,700

Facility Rent $84,000 $252,000 $386,000 $252,000 $0

Facility Buy-Out N/A N/A N/A $10,000,000 $10,450,000

Administrative/Sales $15,000 $35,000 $55,000 $100,000 $350,000

Security $4,000 $8,000 $10,000 $12,000 $22,000

Marketing $25,000 $55,600 $100,700 $120,800 $160,900

Utilities $15,500 $40,500 $55,500 $250,600 $490,700

Transportation $12,000 $35,000 $85,000 $205,000 $308,000

Water Quality Consultant $40,000 $100,000 $150,000 $260,000 $260,000

Taxes (25% of revenue) $0 $1,250,000 $3,750,000 $9,750,000 $12,750,000

Charity $0 $0 $1,160,800 $2,848,400 $4,926,000

SalariesEngineers $95,000 $300,000 $400,000 $800,000 $1,000,000

Plant Employees $120,000 $1,000,000 $2,000,000 $3,000,000 $4,250,000

Material Scientist $100,000 $220,000 $220,000 $360,000 $360,000

Office Workers $75,000 $75,000 $150,000 $150,000 $215,000

Owners' Salary $0 $0 $300,000 $600,000 $900,000

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ShockED LLC

Manufacturing $43,500 $435,000 $1,131,000 $2,305,500 $3,523,500

Materials Steel Casing $80,000 $720,000 $1,160,000 $2,680,000 $3,200,000

Chlorosulfonic Acid $6,000 $5,400 $16,200 $23,100 $61,000

Graphite $39,700 $35,730 $107,190 $232,245 $457,300

Semi-Permeable Membrane $26,000 $23,400 $70,200 $152,100 $289,000

Battery $10,300 $9,270 $27,810 $60,255 $105,700

Machinery per PlantChemical Centrifuge $5,875 $70,500 $70,500 $47,000 $94,000

Laser Cutting Machine $39,150 $113,200 $153,200 $156,600 $313,200

Hydraulic Compressor $2,550 $20,400 $20,400 $10,200 $20,400

Steel Casing Mold $23,750 $95,000 $95,000 $95,000 $190,000

Legal FeesLawyer Consultation $20,000 $12,000 $12,000 $12,000 $12,000

Patent Fees $7,000 $0 $0 $0 $0

Total $908,325 $4,946,700 $11,752,500 $34,607,900 $44,877,300

Number of Sub-Units Produced N/A 20 60 130 170

Number of Units Produced N/A 4 12 26 34

Cost of Goods per Sub-Unit N/A $158,815 $96,815 $81,391 $84,148

SG&A Cost per Sub-Unit N/A $11,065.00 $11,561.67 $8,614.62 $10,755.88

Total Cost per Unit N/A $849,400.00 $541,883.33 $450,026.92 $474,520.59Selling price per unit ($) N/A $1,250,000 $1,250,000 $1,500,000 $1,500,000

Annual Revenue ($) N/A $5,000,000 $15,000,000 $39,000,000 $51,000,000

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ShockED LLC

11.1 Financial Assumptions One of the main assumption made in determining ShockED’s finances is the continuation of the NAFTA agreement, which allows for raw materials to be bought at market price with no additional tariff on top of the materials. If this were to change, the production costs would be much higher as there would be tariffs on most of the materials ShockED needs. Another key assumption was the stability of the chlorosulfonic acid price. Cholorsulfonic acid is a relatively rare compound that has to be made and does not naturally occur in nature leading to its price fluctuating unpredictably. As such, the assumption of a stable price was made for ease of estimation. It was also assumed that the company would be taxed at a 25% rate.

11.2 Accounting Method The ShockED system is composed of many new and complex technologies. Because of this, the materials needed to produce the system are extremely valuable, and it is important that a structured accounting system is in place to ensure that goods are not wasted. Because our business model does not rely on mass manufacturing, but rather controlled production of a few ShockED units each year (ShockED plans on selling 4 units in year two), simple computerized accounting can be an effective method to ensure proper records of financial transactions. To make sure that all inventory is tracked, an inventory accounting system will be in place where office workers will place bar codes on all inventory. These codes can then be scanned when they are stored in certain departments of the warehouse, used on certain parts of the system, and sold.

Expected Profit ($) $833,325 $53,300 $3,247,500 $4,392,100 $6,122,700

Return on Investment for Investors -132% -98% 16% 57% 119%

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ShockED LLC

11.3 Monthly Cash Flow

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Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sept 17 Oct 17

Founder Investment 10,000 10,000 10,000 15,000 15,000 0 0 0 0 0 0 0

Investor Funding48000 71000 77,000 56,000 73,000 87,500 78,000 57,000 52000 46500 46000 41,000

Facility Rent -7000 -7000 -7000 -7000 -7000 -7000 -7000 -7000 -7000 -7000 -7000 -7000

Patent Fees 0 -7000 0 0 0 0 0 0 0 0 0 0

Lawyer Consultation -18000 -2000 0 0 0 0 0 0 0 0 0 0

Salaries -32500 -32500 -32500 -32500 -32500 -32500 -32500 -32500 -32500 -32500 -32500 -32500

Manufacturing 0 -1500 -4500 -5600 -7800 -6900 -9800 -1890 -2870 -900 -850 -890

Materials 0 -3500 -10900 -11100 -37600 -41000 -26,200 -15400 -7900 -3700 -4700 0

Machinery 0 -26785 -31560 -12980 0 0 0 0 0 0 0 0

Net Total 500 715 540 1820 3100 100 2500 210 1730 2400 950 610

ShockED LLC

11.3 Monthly Income Statement

*The expenses are covered by the start-up investment as well as the monetary contribution of the founders during the first year of business

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Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sept 17 Oct 17

Manufacturing0 1500 4500 5600 7800 6900 9800 1890 2870 900 850 890

Materials0 3500 10900 11100 37600 41000 26,200 15400 7900 3700 4700 0

Machinery 0 26785 31560 12980 0 0 0 0 0 0 0 0

Salaries 32500 32500 32500 32500 32500 32500 32500 32500 32500 32500 32500 32500

Administrative Fees 17875 18000 19781 16875 16784 19000 18900 17800 17400 17100 17200 17695

Revenue 0 0 0 0 0 0 0 0 0 0 0 0

Total Expenses* 50375 82285 99241 79055 94684 99400 87400 67590 60670 54200 55250 51085

Net Profit -50375 -82285 -99241 -79055 -94684 -99400 -87400 -67590 -60670 -54200 -55250 -51085

ShockED LLC

12.0 Supporting Documents

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ShockED LLC

12.1 Work Cited Deng, Daosheng, Wassim Aouad, William A. Braff, Sven Schlumpberger, Matthew E. Suss, and Martin Z. Bazant. "Water Purification by Shock Electrodialysis: Deionization, Filtration, Separation, and Disinfection." Desalination 357 (2015): 77-83. Web.

"Water Treatment Equipment - Demand and Sales Forecasts, Market Share, Market Size, Market Leaders." Feedonia. The Feedonia Group, May 2015. Web. 9 Nov. 2017.

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