Introduction to the Financial Plan
For The Maple Syrup Company

Management built the financial plan and related financial information based upon:

A)  extensive discussions with a number of maple syrup producers in other parts of Canada;
B)  extensive research from available sources and publications.

Quotations for applicable equipment were also secured based upon the growth factors incorporated into our plan.

Please note that additional variable financial information and assumptions have been included as appendices in order to demonstrate flexibility should additional resources become available sooner and as a result our growth rate could be accelerated. See Appendix # 7

Our projected financial plan is considered conservative in nature but one that can be accomplished with the resources currently available to The Maple Syrup Company.

Criteria used in the makeup of the Financial Statements:
The initial year has the Company starting with 2,000 taps. This will be expanded to 5,000 taps in the second year and then to 10,000 taps in year 3. The Maple Syrup Company will continue to expand to 20,000 taps during year 4 and will remain at that level throughout all of year 5.

It is conservatively estimated that each tap has a capacity of approximately 5 gallons of sap. However during the initial year in which the trees are tapped, it has been suggested that the capacity be restricted to 75% of its ultimate production. It takes approximately 40 gallons of sap to produce 1 gallon of maple syrup. Therefore based on such an estimate, it will require 8 taps to produce one gallon of maple syrup. This anticipated rate is below the national average.

It is forecasted that we will sell 50% of our syrup into the bulk market and the remaining 50% will be sold at the retail level. Additionally, in the initial year, it is estimated that 50% of finished product would be classified as Grade "A" and 50% would be classified as Grade "B".

Grade "A" will increase to 60 % for all taps 2 years and older while Grade "B" will decrease to 40 %. The selling prices are based upon a per gallon basis and range from $22.50 for Grade "B" bulk to $60.00 for Grade "A" at the retail level. Details to follow under "Review of Income Statement".

In order to demonstrate an extremely optimistic scenario, we assumed that all syrup produced would be Grade "A" and all would be sold into the retail market. We also prepared a very pessimistic scenario whereby all syrup would be classified as Grade "B" and sold into the bulk market. These projected Statement of Income (Loss) and related Balance Sheets are illustrated in Appendix # 8. Although one can readily conclude that both scenarios are unrealistic, it is interesting to use each as a basis to ascertain what product mix and quality of product results in the better profit margin.

A review of the Grade "B" bulk scenario suggests that even after 5 years of operation, little if any income can be realized if all syrup is sold bulk and classified as Grade "B". Alternately, a review of the Grade "A" retail scenario highlights income as early as year 2 and continues to show favourable results throughout the remaining periods. One can conclude: Although there are more capital requirements and added costs associated with the retail market, there are better profit margins in the retail segment. With this in mind, management will be anxious to develop additional retail markets as soon as possible. It is also important, however, at the outset to have readily available markets for our products. We have established contacts within the maple syrup industry that have already agreed to acquire finished bulk syrup from us, provided we have such syrup available. Based upon our discussions, we have determined the 50/50 bulk to retail used in our business plan is reasonable in the present circumstances.

The financial information that accompanies this plan is somewhat unique in the fact that The Maple Syrup Company will be auxiliary to the operations of the two partners. Both partners will have available to the partnership additional assets that are used in other farming operations. Also costs such as property taxes will be incurred regardless if the maple business is started or not. For a listing of additional assets that will be available to this operation, please refer to Appendix #2.

We are aware that additional costs will also be incurred over time in order to silviculture the sugar bush, however, if done so over a five year period, most labour will be handled by the partners. The sale of the wood will more than offset any other costs associated with the upgrading and management of the sugar bush. Therefore, neither silviculture costs nor revenue from the sale of wood has been included in this plan.

From a review of the balance sheet and the related quotes (see Appendix # 4) one can conclude that it requires a substantial amount of capital equipment for a maple syrup operation. This industry has made technological advances to enhance the collecting and processing of the sap. This results in a greater amount of available sap, higher quality end products and a reduction of labour requirements. There is a greater likelihood that a higher grade syrup will result if the sap is processed on a more timely basis. The introduction of advanced equipment such as the Reverse Osmosis system can enable a producer to expand the number of taps substantially without having to expand the evaporator process or incur additional labour costs.

During year one, management intends to make a cash injection of $20,000. They will provide the additional equipment as previously discussed and will provide the required sweat equity. During our discussions with equipment suppliers we were advised that it would cost anywhere between $2.00 and $3.50 per tap to install the pipeline.

Management intends to hire an experienced consultant in year 1 to advise them on the placement of the pipelines, the method of installation and proper tapping procedures. Management then intends to complete this work themselves. We have capitalized and identified this cost separately on the balance sheet as Equipment- Labour and have an offsetting Labour contributions in the Equity section.

Year one is a test year for management. It will be the most critical year. It will be a learning process into a very exciting industry. Management has already spent an abundance of time attending information seminars, visiting existing maple facilities throughout the Maritime Provinces and reading supporting publications.