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Proyecto Tercer Dia S. de R. L

Business Plan
2009

Ecologically Sustainable Forestry Development

Project Catacamas Olancho,
Honduras, C.A.
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I. Table of Contents
I.Table of Contents.................................................................................2

II.Executive Summary............................................................................3

III.General Company Description............................................................4

IV.Products and Services........................................................................6

V.Marketing Plan....................................................................................9

VI.Operational Plan...............................................................................22

VII.Management and Organization.......................................................25

VIII. Startup Expenses and Capitalization.............................................26

IX.Financial Plan...................................................................................27

X.Appendices........................................................................................28
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II. Executive Summary

Projecto Tercer Dia S.D.R.L is a private company with a twofold objective: its
primary function is to promote the conservation of the Honduran forests and
wildlife through the reforestation of a diverse variety of hardwoods,
especially Mahogany, while at the same time making it economically
profitable in the next 10-25 years by managing its forest plantations in an
environmentally friendly and sustainable way.

Projecto Tercer Dia will be based in the city of Catacamas, State of Olancho,
Honduras. Its operations will be in the village of Santa Cruz, located near the
Patuca Forest National Reserve. This village is approximately 35 miles from
the City of Catacamas.

Projecto Tercer Dia S. de R.L. is already established as a legal entity with the
Honduran government, and is also registered with the Chamber of
Commerce of the city of Catacamas.

The objective is to plant 22,500 mahogany trees per year in an organic and
environmentally friendly way, good for the community, economy, and the
environment. A variety of other trees will also be planted in order to protect
the water sources.

With a Plantation Certificate granted by COHDEFOR (Honduran Corporation

of Forestry Development) and with a proper operational forestry plan to be
prepared by a forest engineer, we expect to manage the plantation in an
ecologically friendly and sustainable manner in order to be able to export the
lumber out of the Port of Honduras to international markets, in particular the
United States. All of the lumber for exportation will be Certified by the FSC
(Forest Stewardship Council).

The total start-up budget for the first year is approximately $50,000. This
includes the purchase of land for the first year, labor, company car,
personnel, and supplies. The land to be purchased is expected to cost
approximately $50-$120 per hectare (2.4 acres). The more land purchased
and the more trees planted, the greater the benefit is for the environment
and the greater profit to be earned in the long run.
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III. General Company Description

The goal of this company is to enter into the international lumber industry.
Special focus will be given to the plantation of Mahogany trees. Twenty-two
thousand, five hundred trees will be planted every year. The trees will begin
selective harvest after their 10th year of growth.

Mission Statement: To develop sustainable reforestation of tropical

rainforests in Honduras using organic, ecologically conscious methods, that
will serve as a natural protective buffer zone for the existing National Park
and will also serve to benefit the surrounding community, educating them in
the importance of their unique ecosystem and giving a portion of profits
earned to a nonprofit medical work (PREDISAN) that provides holistic
healthcare to the region.

Vision: That in 15 years, a sustainable forestry resource is in place that will

benefit the environment by preserving the ecosystem through reforestation
of degraded farmland and is economically profitable by providing lumber to
the international market.

Company Objectives:
Environmental:
-To incorporate a range of commercial forest species as an important
component in helping to rehabilitate degraded farmland and contributing to
surrounding forest reserves by conserving biodiversity
- To improve wildlife habitat
- To recycle carbon dioxide into
oxygen to help reduce the greenhouse effect

Economic:
-To earn at least $100,000 annually, after the 9th year and to earn at least $1
Million after the 11th year from harvesting the hardwood trees.
- To help finance the tree farm for the first 7 years from the harvesting and
sale of cocoa, coffee, vanilla, or any other fast cash generating project.
-To increase and spread employment income to
the community. -Provide jobs for unskilled workers,
skilled workers, and also to professionals -Profitable to Predisan
Mission work in Catacamas. -
Create a Family legacy.

Social:
- Provide ecology education for local school children and farmers.
- Provide an avenue for science research for local agriculture schools as well
as universities from the United States, providing more scientific information
about rainforest hardwoods to be available to the public.

Target Market
The target markets for our Mahogany will the United States and the
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European Union. The lumber of lesser quality will be sold in national and
local markets in Honduras.

Opportunity

Mahogany has been included in the CITES Appendix II as an endangered

species. It is now illegal to harvest mahogany from natural forests of
Honduras.

Brasil, Bolvia and Peru are the major suppliers of mahogany to the biggest
demander, the USA. Brasil’s and Bolivias mahogany from natural forests is
also under very strict control.

In Honduras, a new forestry law was just approved and published in February
2008, where it provides incentives for individuals and legal entities to start
their own plantations for two reasons, one, to preserve the forests and two,
to satisfy the international demand for mahogany.

The increasing deficit of wood is created by strict forest regulations and

pressures from environmentalists creates an opportunity for us to succeed in
this business.
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IV. Products and Services

The main product to be commercialized is Mahogany (Swietenia Macrophylla)

teak, but special focus will be given to Mahogany.

Description of Mahogany
One Mahogany tree produces an average of 1.8 cubic meters of wood.
Common Name: Honduras Mahogany
Botanical Name: Swietenia macrophylla
Other Names: Big-Leaf mahogany
Species Distribution: Scattered areas throughout central and South America
including some Caribbean islands.
Honduras mahogany trees once had a distribution covering most of South
America.

Tree Characteristics: Height of 150' with trunk diameters as large as 6'.

Honduras mahogany prefers dry forests and can also be found in high
elevation stands.
Wood Characteristics: Straight grain with a fine even texture. Honduras
Mahogany is relatively free of voids and pockets.
Color: Reddish brown to medium red which darkens to a deep reddish-brown
with time.
Workability: Excellent! Honduras mahogany is one of the best woods for
machining, cutting, and plaining. Honduras Mahogany can be sanded very
easily and efficiently.
Finishing Qualities: Excellent! Honduras Mahogany readily accepts a wide
range of common stains and finish.
Durability: Very Good! The wood is strong and dense. Slightly less durability
than Red Oak. For outdoor applications such as patio furniture and wooden
boats this wood is an excellent choice for its combination of strength and rot
resistant properties.
Drying: Honduras Mahogany can be air-seasoned and kiln-dried without
appreciable warping or checking. Movement after manufacture is rated as
small.
Weight: Air-Dried: 30-52 pounds per cubic foot.
Stability: Excellent in kiln dried lumber.

Uses: Fine furniture, cabinet making, plywood, turning, boat building,

outdoor furniture.

Comments: Honduras Mahogany has become a valuable cash crop for many
South American countries.
Plantation farming is working to supply the demand for this versatile lumber.
Many other species, such as Lauan, are marketed as "Mahogany"; however
they often come from other wood families.
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Natural Distribution of Mahogany: The species is found in the humid and sub-
humid zones, from the south of Mexico (Oaxaca, Veracruz, Tabasco and to
the south of the Yucatan Peninsula); in the slopes of the Atlantic of Central
America, from Belize to Panama; in Venezuela, Colombia and in part of the
High Region of the Amazon, in Peru, Bolivia and Brazil.

Mahogany distribution in Honduras:

In Honduras the mahogany is found in almost all the humid and sub-humid
mountainous regions; it is frequently abundant in the humid tropical forests
of the Departments of Atlántida, Colon, Gracias a Dios and Olancho).
In the Atlantic Region of Honduras, mahogany is found from 600-800m above
sea level; it grows in deep to semi deep grounds, stony deep grounds to,
aired well, of good drainage, moderate slopes to steep, rainy climates with
rainy winters.
For more detail, see the natural distribution of this species on Appendix D
(Map 1).
(Diagnostico de la Caoba en Honduras, pg. 3)

Competitive Advantage:

The factors giving an advantage for the success of this business is the
increasing demand of Mahogany and Teak in international markets. Less of
these woods are being supplied by countries due to environmental concerns
and regulations by governments and organizations. Most of the hardwood
supplied is illegal but governments are controlling that, so now only
approved and well managed forest will be commercialized.

Another important factor that will give us competitive advantage is

geographic location where the Mahogany will be planted. The world demand
is for Swietenia Macrophylla Mahogany or Honduras Mahogany. This kind of
mahogany is native to Honduras specially to the State of Olancho and this
company’s operations is located in such state. These means that it is the
best place to grow Swietenia Macrophylla also known as Honduras
mahogany.

The following factors will contribute to making the business projections

highly profitable. A previous research study done by Eco-forest, a company
with its base in Spain, states that due to the high-increase of world
population and the ever-growing restrictions on harvesting natural forests,
the market for timber has great potential. The FAO (Food and Agriculture
Organization) assures that by 2010, even with all the forestry plantations
taking place at this very moment, there will be a deficit of wood of almost
500 Million cubic meters. From a world-wide perspective, the timber deficit
according to experts will be major difficulty, hence in all of our daily activities
we make use of wood products or wood derived products. As main cause for
the deficit we can consider the following:
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- Exponential increase of world population
-Pressure from Environmentalists to continue to regulate the harvest of
Natural Forests -The increasing rate of world deforestation, which accounts
to 1.8% compounded annually. Historically, the supply and demand of wood
was based on the active deforestation of the world’s forests, and never
through sustainable forestry plantations. -India and China emerging as new
world economic super-powers. -All of the above are
common facts that contribute to the increasing deficit of wood.

Mahogany and Teak are generally sold by board foot or cubic meter. The
board foot of mahogany is valued at: $ 6.25 and the cubic meter: $1300-
1650.

Demand for teak in Asia has increased considerably in recent years.

Currently, most
Asian countries rely on plantation teak logs imported from Africa and Latin
America.
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V. Marketing Plan
ECONOMIC
The Mahogany and Teak timber industry is a fast growing industry outside of
Latin America. The United States is the world’s leading consumer of the
mahogany (Swietenia spp.) harvested in Latin America, and imports an
estimated US$56 million of mahogany annually. Big-leafed mahogany
(Swietenia Macrophylla)—also known as genuine mahogany, caoba, mara (in
Bolivia), or mogno (in Brazil)— is the most traded and coveted of the three
American mahogany species. Conservationists are concerned that current
harvest rates and practices may be pushing big-leafed mahogany in the
same direction as Caribbean mahogany (Swietenia mahagoni), which was
once heavily traded but is now endangered and commercially exhausted
because of past over-harvest (Mahogany and CITES). In fact, the Convention
on International Trade of Endangered Species (CITES) recently classified S.
Macrophylla (Honduras Mahogany) as an endangered species.

Approximately 60 U.S. companies in some 17 U.S. states are involved in the

importation and distribution of big-leafed mahogany from Latin America, with
the greatest amount imported by firms based in states east of the Mississippi
River. In 1997 and 1998, North Carolina, the furniture manufacturing center
of North America, accounted for most U.S. imports, absorbing 39 per cent of
all U.S.-bound shipments. Mississippi is the second largest importing state at
24 percent, followed by Florida (11 percent), Pennsylvania (9 percent), and
Louisiana (6 percent). The U.S. furniture industry absorbs about 90 percent
of the top grade mahogany lumber imported into the United States, while
lower grade mahogany goes into the production of doors and architectural
millwork (Mahogany and CITES)

Location of forestry industries that process Mahogany in Honduras are

mainly dedicated to the furniture exportation. Most of these industries are
located in San Pedro Sula (Wellington Hall, Caobas de Honduras, MOBINSA),
Tegucigalpa (DERIMASA), La Ceiba (Muebles Alí), HondurasVeneer (Bonito
Oriental) and Trujillo (Honduras Mahogany).

Mahogany (Swietenia Macrophylla) was added in the CITES list of protected

woods. This action has caused the price to increase due to its harvesting
restrictions set due to the environmental concerns. Big-leafed mahogany
matters not only to U.S. consumers with expensive taste in furniture, but also
to mahogany-producing areas (range states) where the resource is critical to
local economies yet increasingly threatened by intensive and illegal harvest
that is driven, in part, by U.S. demand. Lately, the list of South American
countries supplying mahogany to the United States may be changing as their
inventories decrease or access to the forests is restricted because of
environmental concerns. (Mahogany and CITES
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Also of note, timber is also seen as a hedge against inflation and the
fluctuations of most
financial securities; analysts say it has a low correlation with stocks and
bonds,
meaning that its returns may well be rising when securities prices are falling.
(New York Times)

The growth potential and opportunity for this business has a high
percentage rate for the following reasons:

- S. Macrophylla grows naturally in the area where this business is to

plant the trees.

- The climate and elevation are ideal for the trees to grow fast and
healthy.

- The expansion of the plantation will be cost effective due to low labor
cost and land purchase.

- Mahogany has an increasing demand and decreasing supply.

Barriers to entry:

The main barrier for this company will be the sustainability of the
plantation during the first 10 years. The trees will be selectively
harvested after 10 years of growth. Enough capital needs to be
budgeted in order to give proper care and maintenance to the
plantation during this time.

The second barrier is the transportation of the product to the port. The
plantation at the moment does not have good roads and during the
rainy season it becomes almost inaccessible for cars to get to the
location. The nearest port is approx. 190 miles away.

The first barrier is to be overcome by the implementation of a small

business to generate enough cash to make the project self-sustainable.
The small business considered are the plantation of coffee trees which
generate cash after the third year, or cocoa trees which generate cash
after the 4th to 5th year.

The second barrier is to be overcome by working along with the

community to keep the roads accessible during the rainy season. At
this moment the accessibility is a concern but hopefully in ten years
the roads will be improved with government intervention. The distance
to the port is a long way but finding the right truck to transport the
wood will not be hard since this area provides with a competitive
transportation business. A lot of trucks available will lower the cost. Of
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note, prior precedence for harvesting mahogany timber from these
mountains exists.

RISKS:
There several risk involved in the forestry business in Honduras such as:

- Hurricanes

- Changes in government regulations

- Land not having legal ownership/Problems with land titles

- Fires

- And the major enemy for Mahogany trees, Hypsipyla grandella.

Solutions for these risks:

- The past Hurricane Mitch, Felix, and Humberto have not caused much
damage in this zone, except for flooding of homes. But it is still a
natural phenomenon to be prepared for. Too much wind will bend the
young trees, but by planting cocoa and coffee trees in between will
lower the risk of this problem.

- Changes in government regulations might affect much of this business

since the land we plan to own is public municipal land, meaning that it
has a owner but still belongs to the state. No more private titles are
given to people in this zone since it is on the buffer zones of the Patuca
Reserve. According to the Honduran Forestry Law, it allows for
investment of private forestry plantations in these lands with a proper
Plantation Certificate.

- Fires are to be avoided by cleaning around the perimeter of the

plantations.

- H. grandella, whose common name is shoot borer, is the natural

predator of young mahogany trees. There are practical options to
avoid damages caused by this insect. The plants will be checked
consistently for this pest in order to treat it immediately before it
causes too much damage. Treatment options which have been studied
and shown to be successful include: 1) an organic extract from the
Neem tree; 2) leave other plants or bushes between trees to protect
them; and 3) intensive pruning in the event of an infestation (Crop
Protection. Sept 2005.).
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CUSTOMERS
Our main customers for Mahogany will be the United States but the
European Union will also be considered.

COMPETITION
Given the fact that Mahogany and teak demand is increasing worldwide and
there is a shortage in supply, there is no direct competition. As demand for
mahogany increases every year, prices will also increase.

Our competitive advantages are the low labor costs for production and
processing as well as central geographic location to the U.S., European, and
Asian markets.

Our competitive disadvantage in comparison to other forestry plantations is

the lack of access to good roads year round.

INDUSTRY AND MARKET ANALYSIS

Honduras has a very well developed furniture industry, which exports about
$45 million annually, of which 80% is to export to the US Market (Molinos y
Membreno, 1999). Most of the lumber produced in Honduras ends up in
these exportation industries which are mostly located around the city of San
Pedro Sula (Filipo del Gatto pg 8).

Status: Mahogany is perhaps the most valuable timber tree in the whole of
Latin America and has been heavily exploited for most of this century.
Mahogany is becoming increasingly rare, and is already extinct in parts of its
original range. It is listed as threatened in "Arboles Maderables en Peligro de
Extinción en Costa Rica" and is listed in CITES Appendix III.

The United States accounts for 60 percent of the global mahogany trade,
says the report. In 1998, the equivalent of about 57,000 mahogany trees,
known as 'big-leafed mahogany'' was harvested and shipped to the United
States to supply growing furniture industries in the states of North Carolina,
Mississippi, Florida, Pennsylvania, Louisiana and California

European colonists beginning in the late 15th century once harvested a type
of mahogany wood in Caribbean and Central America, but now that type has
been virtually cleared from those regions. A similar mahogany species, the
big-leafed variety, is currently being harvested mostly from the denser,
tropical forests in Bolivia, Brazil and Peru, with some being harvested in
Guatemala, Nicaragua and Belize.
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Mahogany in Latin America is harvested predominantly through the practice
known as selective logging, in which only mahogany and other valuable
timber species are extracted.

Biologists have long argued that this practice typically does not create
conditions that foster regeneration and it results in removal of nearly all
mature mahogany trees within a population, drastically reducing its ability to
reproduce successfully.

In order to maintain production levels, loggers are continually moving into

increasingly remote unlogged old-growth forests, rather than harvesting
within set areas from regenerating stands of trees, said a letter sent to the
US government last year by the Center for International Environmental Law
and other ecological advocacy organizations.

Because of such logging methods and levels of logging, scientists say the
populations of mahogany are in decline.

Demand has exhausted Caribbean mahogany, which is now considered

endangered, and supplies in Central America are dwindling. As the tree
disappears from these areas, so harvesting has increased in the tropical
forests of Peru and Brazil, some of the most ecologically diverse areas in the
World (Mahogany Trees Survival in doubt due to US demand)
http://forests.org/archive/samerica/matrsurv.htm

Transportation route

Even though the accessibility to the village of Santa Cruz (where our
plantations are intended to take place) has improved substantially over the
last years, the acces to this zone is still difficult. This will have a strong
implication in the methods and transportation costs of the lumber to the city.
Commonly, the transportation is based on three phases:

1) In mules from the forest to the roadside (1/2-2 miles)

2) In small 4X4 pickup trucks to the city of Catacamas (30 miles)

3) From Catacamas to the Port in San Pedro Sula or La Ceiba ,190 and 140
miles respectively.

Most of the Mahogany being extracted by local sawmills, cooperatives and

associations is sold to Companies in San Pedro Sula who then process it and
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then export it as semi finished or finished products in the form of furniture,
furniture parts or doors mainly to the US and Caribbean Market.

Total logging, milling, and transportation costs for 1 cubic meter in

US $

US $

- Taxes 40 COHDEFOR & Municipial

- Logging and milling 150

- Transportation 130 From mountains to Port

Total 320

Mahogany commercilization chain to San Pedro Sula:

Individual sawmiller: are local people with chainsaws who are paid $.40 cts
per board foot to cut down the trees and cut in boards.

Local Cooperative or Association partners: are associations created in the

villages in order to be able to extract mahogany trees, but they have very
limited capital and are forced to sell sell it to local lumber retailers who later
sell it for higher prices to the big lumberr and furniture companies in San
Pedro Sula.

Lumber retailer: lumber retailers buy logs and lumber and are able to afford
to transport it to the transformers and exporters in San Pedro Sula.

Transformer and exporter: are the big lumber and furniture companies in
San Pedro Sula who buy the mahogany lumber at a very low price from
national providers who in return have alot of money and make even more
money by being able to ship it internationally or give the lumber aggregate
value (furniture or furniture parts) and ship it mostly to the US.
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The goal of our Company, Projecto Tercer Dia S. de R. L., is to sell the lumber
directly to US and European markets , avoiding all the intermediaries and
thus being able to obtain higher revenues.

Extraction and Exportation companies in Honduras:

Jose Lamas S. de R. L.: Owned by Jose Lamas. He has the biggest sawmill
of the country in San Pedro Sula. He buys the lumber and timber at a very
low price from different sawmills and local cooperatives around the country
and then exports the processed lumber.He is considered the biggest of the
timber industry in Honduras and also the richest man of the country.

Comercial Maderera Noriega:Owned by Guillermo and Gilma Noriega. He

is the second biggest logger of the country, he owns 6 sawmills around the
country and exports all of the lumber to the U.S.

Caoba de Honduras: They are mahogany furniture manufacturing

Business. They are located in San Pedro Sula. They buy mahogany lumber
from different cooperatives at low prices and converts it into fine furniture
for exportation.

Milwork International: also Mahogany furniture exporter located in San

Pedro Sula.

Yodeco: They are also one of the largest lumber exporters in Honduras.

Aserradero Sansone S. de R.L: They are also a large logger in Honduras.

SERMA S.A. DE C.V : It is not a honduran company but they have logging
operations in Honduras for lumber exportation.

Derivados De Madera S.A. de C.V. (Derimasa): An International Private

company who manufacture wood household furniture. There lumber is
provided to them by individul loggers who do not have capital to process the
timber in any way.

Tracoma e Industrial Forestal Abigail: They have their own sawmills and
export lumber to U.S.

Exportadora de Maderas Procesadas S. de R. L, EXMAPRO: another

large lumber exporting company, with its own sawmills to process logs.

The previous companies process mostly pine trees but also mahogany trees.
It has been more difficult for them to process mahogany due to all the more
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strict international regulations for cutting mahogany from natural forests.
Processing and selling mahogany is a profitable business so three of the
strongest companies from the previous list have already started planting
their own mahogany trees.

Summary of Swietenia macrophylla exports for 2000.

COMPANY AMOUNT EXPORTED (board feet)

Wellington Hall 2,959.3

Caoba de Honduras 163,873.01

Madera Nacional 14,775.0

Internacional Mahogany 90,256

EXMAPRO 45,312

Muebles de Honduras 1871

MADEX 10,356

IMAPRO 2,070

DRACOSA 16,890

Maderas Subirana 25,907

Total (board feet) 372,393.84 p.t.

Soource: Department of Protected Areas and Wildlife

The following is a list of some of the small companies and associations who
extract mahogany trees and are providers for the big companies listed
above.

Maderera Sipres S. de R. L: located in San Pedro Sula with their own

sawmills but do not export only provide lumber nationally.

Industrias Josue: owned by Fredy Najera in San Esteban, Olancho. He has

his own sawmill but is only a provider to the large exporting companies.

Local Cooperatives and Associations: compose only a small fraction of

the forestry extraction and they only sell it nationally since they lack the
capital to provide their own sawmills and also lack the capital to export it
internationally, so they are forced to sell it to the big companies in San Pedro
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Sula for a much lower price. These companies export internationally for big
bucks.

U. S Main Importers

U.S. main importers of Hoduran lumber and their providers:

Base in the
Company U.S Provider U.S. Distributor

ALJOMA LUMBER, INC Medley, FL José Lamas S.

http://www.aljoma.com/ (305) 556-8003 de R.L

Yodeco,
INTERGRO, INC. Clearwater, FL SERMA,

Lamas,
http://www.intergro.com/ (800) 783-0416 Tracoma

Macy's Furniture
MARBLE & WOOD PRODUCTS Miami, FL Derimasa Gallery,

CORP (305) 805-0200 Robb & Stucky, others

http://www.hamiltonheritage.com
/

KINDERKRAFT INC Hialeah, FL Babies “R” Us

http://kinderkraft.com/main.htm

Noriega,
WOOD PRODUCTS Savannah, GA Tracoma Home Depot, Orvis

INTERNATIONAL, INC. (912) 231-0909 ,Sutton Place Gourmet,

http://www.fatwood.com/ LL Bean, Brookstone,

http://www.caribbean Plow,and Hearth

heartpine.com

New Orleans, LA Yodeco

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ROBINSON LUMBER CO

www.robinsonlumber (800) 874-1165

andflooring.com

HERITAGE DOOR LLC Jupiter, FL International

http://www.heritagedoorusa.com/ (877) 414-7400 Mahogany Millwork

HOOKER FURNITURE CORP. Martinsville, VA Derimasa Dillards,

http://www.hookerfurniture.com/ (276) 656-3335 Colony House Furniture

The Furniture Store

Source: La crisis de la Tala Ilegal en Honduras, pg 38

List of some of the US mahogany importers from Peru, Bolivia and

Brasil:

Alan Mcilvain Co.

Banks Hardwoods Florida

Dan K. Moore Lumber Co.

Downes & Reader Hardwood

Fine Woods Products

Inter-Continental Hardwoods

J. Gibson Mcilvain Co.

Lane Stanton Vance Lumber

Medley Hardwoods

Overseas Tropical Lumber

Patriot Timber Products

Precious Tropical Hardwoods

Rex Lumber Co.

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South Florida Lumber Co.

Specialty Woods Inc., and

Thompson Mahogany Co.

Stickley

Furniture Brands International (maker of Broyhill, Drexel Heritage, Henredon

and Thomasville), Henkel-Harris, and Hekman.

STRATEGY

Our Company, Projecto Tercer Dia S. de R. L. will be a vertically integrated

company with 100% Rainforest Alliance/FSC certification of our mahogany
plantations and 100% organic.

We will have a farm-to-market approach; hence, there would be no “middle

man” or intermediaries. Our goal is to sell our wood to high-end furniture
and cabinet makers in the US and EU.

We will market our wood to companies who are willing to pay top-dollar for
high quality wood which was harvested in an organic and environmentally
friendly way.

Our Mahogany trees will be harvested with a responsable operational plan

authorized by COHDEFOR. (Honduran Corporation of Forest Development) and
exported with a certification of “Forest Management” and “Chain of Custody”
granted by the Rainforest Alliance SmartWood Program.

Forest Stewardship Council Certification

Based in Bonn, Germany, the Forest Stewardship Council (FSC) sets the
global standard for responsible forestry. Established in 1993 by a
collaboration of businesses and environmental groups, including the
Rainforest Alliance, which is now the world's leading FSC certifier of
forestlands.

The Rainforest Alliance's SmartWood program awards Forest Stewardship

Council (FSC) certification based on audit results and issues certificates for
five-year periods (Rainforest-allegiance).

Forest Management Certification

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Available to all operations involved in growing and harvesting trees,
including forest companies, government forestry agencies, mid-sized forest
managers, indigenous peoples and groups of small landowners.

Chain of Custody Certification

Chain-of-Custody (CoC) certification assures consumers and forest product
companies that the wood they buy comes from certified forests. If your
business is involved in the production or delivery of certified products, you
must hold a Forest Stewardship Council (FSC) CoC certificate in order to
make claims about the FSC content in your products.

CoC certification is available for any operation that processes cut wood, such
as sawmills, secondary manufacturers, broker/distributors, wholesalers,
retailers, printers, paper merchants and other points in the forest products
supply chain. (Rainforest-allegiance).

A certified Chain of Custody up to the final point of sale enables end

customers to identify and choose FSC certified products knowing there is a
system in place to verify the sources of the wood used to manufacture the
products. The FSC label thus provides the link between responsible
production and consumption (Forest Stewardship Council website)

These certifications, will assure consumers that the wood products they
purchase come from responsibly managed forests, where biodiversity is
conserved and local communities are supported.

ORGANIC:

Our Company, Projecto Tercer Dia S. de R. L., will aim at becoming 100%
organic in the timber industry, we will not use chemical fertilizers or
pesticides to treat infected trees, and instead we will recur to the use of
natural pest treatments for infected trees. This treatment will be in the form
of either or a combination of the following:

1. Leaving some natural weeds between the trees. We will also plant cocoa
and coffee

trees among the mahogany trees to make it more difficult for the
mahogany trees

biggest enemy, “Hypsyfila grandella,” to find the trees.

2. Using extract from neem trees to combat hypsyfila grandella. Neem tree

extract is considered organic and we will also grow our own neem trees
on our
 Page 21 of 32
plantation for this purpose.

3. Pruning the affected trees in case of an infestation.

PROMOTION

We will create a website in which we will promote our plantation to companies

around the world. We will additionally offer our lumber directly to companies
in the US.

PRICING

Pricing will be by board foot and they will be determined by the…

LOCATION

Location for this product is not so important to the customers but highly
important to the business. Higher yields depend a lot on the business
location. Transportation plays a major role in this industry so an accessible
location is essential.
 Page 22 of 32

VI. Operational Plan

Production
Mahogany and Teak trees are to be grown at Santa Cruz de Capapan a
village 38 miles away from the city of Catacamas and 190 miles away from
the nearest port.

Production techniques and costs:

- 400 Mahogany trees will be planted per hectare

The cost of planting 400 trees /hectare is approx. $300. The cost was
obtained in the following way:

Seeds $12.00
Bags for seedling $7.00
Seed treatment $14.00
Seedling preparation, $28.00
(filling bags with mixed
soil)
Planting labor $70.00
Fertilizers (manure) $21.00
Leafcutter ant treatment $7.00
1 Yr. Maintenance $140.00

Total Cost/hectare $300.00

The total cost per hectare of $300 neglects cost of:

- Accounting
– Basic equipment for pruning and planting
seedling – Land
– Administrative
expenses.

Thinning

Thinning consists of cutting have of the trees planted in a hectare so that the
remaining ones can have a greater and faster growth in diameter and height.
The trees cut during the thinning process also mean revenue.

- The first thinning of the plantation will be at age 7 years. These logs
will be intended for the Honduran market. The purpose of the thinning
is to allow the best quality trees to develop in the best way. The
thinning will produce our first revenue which will help to give the
project some sustainability.
 Page 23 of 32
- A Mahogany tree at age 10-12 years can produce an average of .8
cubic meters. A cubic meter cost approx. $1,600. After thinning, each
hectare will have the best 80-100 quality trees of the original 400
planted. Each hectare is estimated to produce 80 cubic meters which
is the equivalent of $104,000 per hectare. Taxes, transportation, and
milling costs are not included.

• Quality control: Every tree will be closely supervised in order to make

sure that each tree survives and growths well in order to produce the
best quality timber. SmartWood Certification will be pursued to further
insure quality and establish chain of custody from seedling to timber.

Location
Physical requirements:

• 100 hectares of land for the first year

• A storage facility

• As close as possible to the city

Access:

It is very important that this location be convenient for transportation. These

product will be exported to the US, so transportation plays a major role in
earning higher yields.

The land to be purchased also needs to be accessible for planting the

seedlings in order to lower losses in the transportation of the seedling to its
place of plantation. Flat land is ideal but not necessary.

Cost:

A small place for storage is required. It will either need to be built or rented
from a local.

*The cost of building an adequate place for storage and sleeping is

approximately $1,300.

Legal Environment
• Licensing requirements: and operation permit is required before the
company begins its operation. These permit is to be obtained from the
Munipality of Catacamas
 Page 24 of 32
• An environmental license is also necessary which is to be obtained at
the municipality of Catacamas.

• Permits: a Plantation Certificate will be necessary in order to be able to

harvest these trees in the future. It has to be requested at COHDEFOR.

• Environmental regulations: The trees are to be harvested according to

the forestry operational plan and supervised by COHDEFOR.

Personnel
• Employees are categorized in the following way:

• General Manager (1)

• General labor employees (6)

• Forestry engineer (1)

• Accountant (1)

• Lawyer (1)

• The labor to be employed for the proper operation consists of both

unskilled and professional labor.

• The right employees are to be hired locally, by their recommendation

and reputation.

• The pay structure will be on a monthly basis for the manager. The
accountant and forestry engineer will be paid on a fee they charge for
their consultancies.

• The general labor employees will be paid weekly.

They will be trained and educated in the proper way for producing the
seedling and also trained on the proper way of planting the seedlings.

• The general manager will be responsible for hiring the right

employees. He will supervise the entire operational process and will be
the person responsible to make the business successful.
 Page 25 of 32

VII. Management and Organization

The business will be managed on a daily basis by Marcos Madrid. Marcos
Madrid holds a BBA in Finance from the School of Business Administration at
Oklahoma Christian University. Marcos will use his knowledge in the areas of
financing in order to budget operations in the most efficient way. He will be
responsible for allocating capital resources where necessary and required.
Marcos will also be responsible for writing proposals to different
organizations and investors if financing is needed. Marcos has knowledge on
both areas, the financial area as well as experience on the field. He has
previously started his own mahogany tree plantation and has purchased land
in the same area of the proposed location for this company.

Professional and Advisory Support

• Board of directors: Robert Clark, Kristie Clark and Marcos Madrid

• Our forestry engineer will be Efrain Sinclair. He will be responsible for

preparing the forestry operation plan. He will also supervise the plants
and recommend the proper treatment for any pest and will also
recommend when fertilizing is necessary.

• The accountant will be responsible for keeping our accounting system

in accordance with Honduran accounting system. The person in mind
for this purpose is Fredy Lopez he is currently the Sub-Director of
Mission Predisan and he also has a Pawn Shop. He will not be full time,
he will only provide us with advice and consultancies.

• The general labor employees are one of the most important since they
will be the ones who will actually doing the manual labor of planting
the trees, maintaining the land, and caring for the trees.

• The lawyer we used to incorporate the business was Attorney Isauro

Aguilar. He will also be our lawyer to provide us with advice when
needed.

• Other Forestry engineers and people who already have experience in

forestry will serve as mentors and advisors.
 Page 26 of 32

VIII. Startup Expenses and Capitalization

Startup Expenses: Projecto Tercer Dia

This expense forecast was calculated based on the current price of materials
in the city of Catacamas. It represents the startup cost and operations for
one year, given the land purchased belongs to the state and not private
property.
 Page 27 of 32

IX. Financial Plan

Start-up Expenses:
See Appendix A

10-Year Revenue and Expense Projection:

See Appendix B

12-Month Projected Cash Flow Statement:

The cash flow will show whether the working capital is adequate. Clearly, if
the projected cash balance ever goes negative, more start-up capital will be
required. This plan will also predict just when and how much needs to be
borrowed.

See Appendix C
 Page 28 of 32

X. Appendices
A. Start-up Expenses

B. 10-Year Revenue and Expense Projection

C. 12-Month Projected Cash Flow Statement

D. Maps and photos of location

E. Articles & Market research studies

References:
 Page 29 of 32
Ecoforests. Guarantee: Forestry Market Situation. 25 Sep. 2007

http://ecoforests.eu/guarantee/market-analysis/

Diagnostico de la Caoba en Honduras, 1999. 3Sep. 2007

http://www.ccad.ws/documentos/varios/caoba/3Por_pais/4Honduras/Diagnost
ico.pdf

Mahogany and CITES. US Market. Sept 7.

http://www.traffic.org/mahogany/us.html

International Teak Market Report.

New York Times. Real Estate. For Some Investors, Money Grows on Trees,
2007. Sept.

1 2007
http://www.nytimes.com/2007/05/27/realestate/commercial/27sqft.html

Appendix D

Map 1. Natural Distribution of Mahogany in Honduras

 Page 30 of 32

Healthy 1 year old Mahogany tree planted in the same area where
Projecto Tercer Dia S. DE R. L is planning to take forth its plantation.
 Page 31 of 32

Appendix E

Articles & Market research studies

Reforestacion Kosñipata. http://www.bidnetwork.org/artefact-59262-

es.html

Stipendium. http://stipendium.blogspot.com/

Teak in CR Economic Aspects.

http://www.fao.org/DOCREP/005/Y7205E/y7205e09.htm
 Page 32 of 32
Big-Leaf Mahogany: Genetics, Ecology, and Management.
http://books.google.com/books?
id=aFF_Q7l_bR8C&pg=PA276&ots=xduJmNMENY&dq=M
ahogany+(Swietenia+Macrophylla)
+in+Central+America&sig=edrFQGcyAMFtIG3GcM2IDRrJ
e0w#PPP1,M1
Ecoforest. http://www.ecoforests.eu/

Fondebosque. http://www.fondebosque.org.pe/principal.html

El Semillero. http://www.elsemillero.net/

Tropical American Tree Farms.

http://tropicalhardwoods.com/projections.htm

Pacific Teak. http://pacificteak.com/aboutteak/teakmarketvalue.htm

Municipial Forest Mngt. http://www.idrc.ca/en/ev-43421-201-1-

DO_TOPIC.html

Teak Plantation program. http://theamericas.org/forestry.htm

Forest Management Bureau. http://forestry.denr.gov.ph/index.html

Friendly Forest Products.

http://www.exotichardwood.com/pricelinks.html

Bali International Consulting group.

http://www.bicgbusiness.blogspot.com/

Empress Trees.
http://www.wonderearthpartners.com/info/empresstrees.html

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