Sea Dwelling Creatures
RPA has signed a memorandum of understanding with Los Angeles-based Sea
Dwelling Creatures (SDC), providing SDC first right of refusal, as the primary U.S.-
based importer entity, in participating in the implementation of this business plan.
With estimated 2001 gross revenues of $9.2 million, SDC is one of the largest tropical
fish importers in the US. This privately held company has recently moved into a new,
state-of -the art facility next to Los Angeles Airport, which allows for seamless tracking
of each fish by supplier, state of health, etc. – an essential prerequisite for MAC chainof-
custody certification.
SDC has grown dramatically in the past two years; 1999 SDC had gross revenues of
$4.2 million and gross profits of $1.1 million, the company grew by 53% in 2000 to
yield gross revenues of $6.7 million. SDC revenues have continued to grow in 2001 at
a rate of 37%. This growth, and the preparation of the move to the new facility, has
increased SDC’s operating expenses by 55% this year, from $1.9 million to $2.9
million. The company has a stable cash position, with total current assets at $701,736,
and total current liabilities at $550,137. At $52,000, SDC’s net profits for 2000 have
been very low. However, operating margins will improve significantly in the next year
due to:
To that end, SDC proposes to use an RPA investment of $1.5 million. This
investment would allow SDC to:
1. Facilitate the conversion of a Philippine exporter to fully sustainable
practices by providing loan financing, harvesting/handling/husbandry
technical assistance, and a guaranteed US market;
2. Aggressively build a brand of certified fish in the US. Eventually, the
company hopes to shift its entire import business to a fully certified basis,
putting strong pressures on other importers to follow suit; and
Each of these activities is discussed in greater detail, below.
1. Convert a Philippine exporter to sustainable practices. Currently, aquarium fish
exporters in the Philippines do not operate at standards that are MAC certifiable – fish
are bought from independent contractors, tracking is spotty if available at all, cyanide is
still used in at least 40% of the harvest.9 SDC and RPA are currently in negotiations
with a number of exporters who wish to convert to fully certifiable operations. The
conversion would be loan financed by SDC – the company would, in return, receive
12% interest on the dollar-denominated note, as well as a forward contract on the fish
locking in a 15% discount for the life of the loan (since the Philippines do not allow
foreign majority ownership, and equity investments in this volatile political and
currency environment are difficult to control from the US, debt financing is
9 Based on results from 2000 labor
atory tests on random sample of aquarium fish, International Marinelife
Alliance.
P O T E N T I A L I N V E S T M E N T S
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preferable). SDC would direct the entire conversion process with full-time project
directors “on loan” to the exporter. SDC’s debt financing would be used to:
§ Build a central collection and shipping facility in Manila, set up to fully complement
SDC’s Los Angeles facility in terms of tracking procedures and handling protocol.
§ Build two regional collection stations with a salaried staff of 20 collectors each,
fully trained in non-destructive fishing practices. (See Table 7: for Possible
Implementation Sites).
§ Develop the required fishery management plans and monitoring protocols.
§ Provide sufficient working capital to allow the exporter to reach cash flow positive
operations.
A full, bottom-up financial proforma for this investment, including Income Statement,
Balance Sheet, Sources and Uses of Funds, Valuations/DCF analysis and Investment
Returns is available upon request.
2. Building a certified brand in the US. SDC will develop and implement a branding
strategy for certified reef products in the U.S. This will require intensive education of
key, large-volume retail customers, advertising to the retail trade channels, and broad
marketing to the end consumer. SDC will work closely with industry associations as
well as non-profit organizations such as MAC to coordinate the consumer education
effort.
A number of additional export-oriented investment opportunities exist, which RPA
may pursue, preferably with the active participation of SDC.