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VMC

Business Plan

VMC

232-222-2322

123 Anywhere

New York, NY, 10019

Page | 1
Confidentiality Agreement

The undersigned reader of VMCS Business Plan hereby acknowledges that the information provided is
completely confidential and therefore the reader agrees not to disclose anything found in the business
plan without the express written consent of VMC.

It is also acknowledged by the reader that the information to be furnished in this business plan is in all
aspects confidential in nature, other than information that is in the public domain through other means
and that any disclosure or use of the same by the reader may cause serious harm and or damage to VMC..

Upon request this business plan document will be immediately returned to VMC.

This is a business plan. It does not imply an offer of any securities.

__________________________________________________

Signature

__________________________________________________

Printed Name

Page | 2
Overview

VMC will serve as a designer, manufacturer, and distributor of luxury hats and accessories. The
brand will be positioned with a high fashion, sophisticated image marketed through wholesale
and direct to consumer retail channels. The following business plan outlines the three-year
strategy of VMC and accompanying financial forecasts that it anticipates achieving.

Page | 3
Table of Contents

Executive Summary ............................................................................................................... 6


Product & Service Summary ...........................................................................................................6
Market Summary ...........................................................................................................................6
Vision ............................................................................................................................................7
Objectives ......................................................................................................................................7
Keys to Success ..............................................................................................................................7
Start-up Summary ..........................................................................................................................7

VMC Design Collection ........................................................................................................ 8


Collection Description ....................................................................................................................8

Industry Overview ................................................................................................................. 9


Market Trends ...............................................................................................................................9
Market Growth ..............................................................................................................................9
Market Segmentation................................................................................................................... 10

Strategy & Implementation Summary .................................................................................. 11


Management Team ...................................................................................................................... 12
Organizational Chart .................................................................................................................... 13
SWOT Analysis ............................................................................................................................. 14
Competitive Comparison .............................................................................................................. 15
Marketing Plan............................................................................................................................. 16
Promotion Strategy ...................................................................................................................... 16

Financial Forecasts .............................................................................................................. 17


Start-up Summary ........................................................................................................................ 17
Financial Highlights ...................................................................................................................... 18
Financial Indicators ...................................................................................................................... 19
Revenues Forecast ....................................................................................................................... 20
Wages & Payroll ........................................................................................................................... 21
Projected Profit and Loss .............................................................................................................. 22
Projected Cash Flow ..................................................................................................................... 23
Projected Balance Sheet ............................................................................................................... 24
Sensitivity Analysis ....................................................................................................................... 25

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Table of Figures

Figure 1: Organizational Chart .................................................................................................................... 12


Figure 2: Post-Financing Expenses .............................................................................................................. 16
Figure 3: Financial Highlights ...................................................................................................................... 17
Figure 4: Financial Indicators ...................................................................................................................... 18
Figure 5: Revenue Forecast ......................................................................................................................... 19
Figure 6: Profit & Loss ................................................................................................................................. 20
Figure 7: Cash Flow ..................................................................................................................................... 21
Figure 8: Wages & Payroll ........................................................................................................................... 22
Figure 9: Balance Sheet............................................................................................................................... 23
Figure 10: Scenario Analysis........................................................................................................................ 24
Figure 11: Break-Even Analysis ................................................................................................................... 25
Figure 12: 12 Month Profit & Loss .............................................................................................................. 26
Figure 13: 12 Month Cash Flow Statement ................................................................................................ 27

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EXECUTIVE SUMMARY

VMC is a new fashion brand that specializes in the design, production, distribution, and sales of luxury
hats and accessories. It will be positioned as a premium luxury provider with a sophisticated image that
appeals to middle to upper-class consumers. The company will have a two-fold strategy of distributing
through a wholesale model, placing the designs in mainstream boutiques, and a direct to consumer model
through an Ecommerce store. It expects to outperform the existing competitors by having superior
designs and higher quality by using New York city based manufactures to ensure reliable quality control.

PRODUCT & SERVICE SUMMARY

The product prices will range depending upon the materials and production cost. Overall, the prices will
range from $295 MSRP for straw hats to up to $1,000 MSRP for high-end natural felts. The brands
positioning will be comparable to Maison Michel, a premium luxury provider of mens and womens
accessories that reflects a sophisticated and modern image. While the company will draw thematic
elements from this brand, it will gain strategic positioning through its superior quality.

MARKET SUMMARY

The global hats, caps and millinery market is forecast to grow to a value of around $7.1 billion by the end
of 2018. The industry is expected to be driven by a number of key factors, including the rise in aesthetic
values, desire to keep pace with latest fashion trends and fads, and growing disposable incomes. The
United States represents the single largest market worldwide.

Improving economic conditions, rising levels of employment, and increasing discretionary spending on
accessories are helping spur sales in the market. Widespread easy access to the Internet and the ensuing
rising preference for online shopping is changing shopping patterns in the United States. Asia-Pacific is
forecast to spearhead growth with the fastest CAGR of 4.8% over the analysis period.

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VISION

The vision of VMC is to gain stable positioning as a premium and sophisticated fashion line of hats and
accessories. Through this positioning, it will outperform the existing market players for its product line
and establish a loyal customer base to the VMC brand.

OBJECTIVES

VMC has core objectives that it must fulfill in order to begin commercialization and scaling:

Raise a total of $1,000,000 to cover operating capital and start-up expenses.


Develop the first seasons design and begin selling direct-to-consumer.
Launch an Ecommerce website in order to sell the felt hats over the Internet.
Engage in public relations and branding to gain early stage traction.
Begin selling wholesale by year two in small to mainstream boutique stores.

KEYS TO SUCCESS

VMC must focus upon delivering the following points to achieve a successful business model.

Delivering a consistent and value-added customer experience on the website.


Having designers that are both trending and seasonally in fashion.
Manage inventory levels to not oversupply seasonal fashion items.
Scale operations internationally and use effective marketing targeting methods.
Consistently launch new product lines and brands for the inventory.

START-UP SUMMARY

The start-up period of VMC will consist of a large focus on market research, monitoring consumer trends
and working on designs during the R&D period. Once a design has been produced, the company will begin
setting up a manufacturing line and producing samples.

During this period, a website will be developed by a firm with a background in web design from the fashion
industry with e-commerce integration to properly convey the brand. Initial marketing will be focused on
getting the collection in the hands of key celebrities and awareness. This will be accomplished with the
help of high profile PR with leading fashion clientele and promoting directly on the site.

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VMC DESIGN COLLECTION
The success of the collection is contingent upon its ability to efficiently establish itself in the market as a
premium, luxury, and sophisticated brand that appears to high fashion consumers. This will primarily be
accomplished through a combination of public relations, mass advertising, the image/style of designs, and
the customer interaction procedures. Upon successful establishment of this brand image, the company
will scale its direct-to-consumer sales into the wholesale market.

COLLECTION DESCRIPTION

The collection is designed to have both a seasonal line and a stable line of products with a common theme
around luxury fashion and elegance. The company will focus around establishing this brand image in a
way that consumer fashion buyers identify with quality and sophistication. This will be done through
product level market, creating a fundamentally superior production through materials sourcing and
manufacturing, and public relations. Media channels will promote the brand using imagery and forming
associations that build the brand identity that VMC will establish. We have enclosed similar products and
brand images related to a company that VMC will be similar to, but outperform in the future.

The branding combines elegance, sophistication, and a slightly sensual image by using black and white
colors with some images that may convey sexually suggestive messages. For instance, the image on the
left shows casual wear, the middle image professional wear, and the right is moderately suggestive.

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INDUSTRY OVERVIEW
The fashion industry is extremely competitive in terms of market share and positioning, rather than
targeting different demographics. Fashion companies are successful not only because of their designs
inherently, but the lifestyle and image that they sell. Some brands sell the image of success and
demonstrate the wearers appreciation for luxury, or sophisticated preferences. Others sell the image and
lifestyle of professionalism and expertise. Without a brand that fundamentally reflects and promotes a
lifestyle, it will be very difficult for a fashion company to succeed in the long-term.

VMC will focus on upper-middle class and more affluent women in regions where designer clothing is
more of a staple and the brand is already established, these areas include the United States, Western
Europe and potentially the Asia-Pacific. The target users of VMC target two segments initially, affluent
women in key metropolitan areas of the United States and Middle-Upper class women that infrequently
purchase higher end items when the budget permits.

MARKET TRENDS

Mobile web usage is growing exponentially year over year and has been for the past eight years. This
growth is because of the increased capability of smartphones and relative decline of desktop PC sales.
According to Pew Research, 56% of adults own a smartphone in the United States. A 2015 article in
Business Insider forecasted that by the end of 2016, global smartphone penetration has exploded from
5% of the global population in 2009, to 22%. VMC may develop a mobile application in the future to fully
capitalize on all the channels of e-commerce growth.

MARKET GROWTH

The market for fashion is relatively stable in the United States, growing in-line with GDP. Many consumers
see fashion as a luxury, however we believe that the passionate followers reading the blog, and other
content view it as a necessity. Because of this, its performance increases in areas with wealth generation,
particularly in emerging markets.

In the United States specifically, the market is growing at a slower rate, however mobile usage and web
based purchases continue to grow rapidly as many clothing retailers shut down their traditional stores in
favor if more web based commerce. This environment enables for lower overhead and the company to
have more competitive margins and prices with big-name fashion designers who have stores in luxury
urban locations and household names in the fashion industry.

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The fashion industry is growing at 4% per year on average and is expected to sustain this growth level for
the next ten years, with main growth driven by developing economies. Recently, consumers are more
willing to purchase higher ticket items online and e-commerce is growing rapidly. The global online retail
sector had total revenues of $631.7bn in 2012, representing a compound annual growth rate (CAGR) of
18.6% between 2008 and 2012. The performance of the sector is forecasted to decelerate, with an
anticipated CAGR of 14.6% for the five-year period 2012 - 2017, which is expected to drive the sector to a
value of $1,248.7bn by the end of 2017.1

MARKET SEGMENTATION

VMC has segmented the market into three main categories that we will target and believe that it will hold
relatively stable within major cities internationally. The first consists of higher income individuals that
have a conservative style for their career and lifestyle, but have very high fashion budgets and purchase
high quality items. The second consists of a younger demographic that is more focused on self-expression
through clothing that closely follows fashion trends. The final demographic is less focused on fashion and
more on practicality and functionality. They have a smaller budget and spend less time searching, but we
believe that we may still target them with a reasonable price point, as outlined in the pricing strategy.

Conservative Big Spenders

This category includes groups ages 36-55 that have high income that may have children, generally ones
who are older. They contribute to the highest total spending category in the fashion market, generally buy
many items of higher quality and spend the most on shoes, jewelry and formal wear. This segment prefers
a classic and tailored or customized look something trendier. They dont want to spend an excessive time
shopping and are not averse to buying in the sales, although it is not a key feature in their buying decision.
They may shop on the Internet for fashion and are keen shoppers.

Urban Trends

This includes a slightly younger demographic of 18-35 that generally are located in urban areas and have
an interest in keeping up on fashion trends. They have above average shopping budgets and enjoy self-
expression through their clothes, considering their wardrobes an extension of their personality. While
they shop at mainstream fashion stores, they are also likely to shop at boutique outlets to help them stand
out from the crowd. Their Internet usage is above average with 32% surveyed having researched clothing
within the past four months online.

1
Source: http://www.marketresearch.com/MarketLine-v3883/Global-Online-Retail-7758963/

Page | 10
Big Spenders

The big spenders are focused on high fashion and trendy clothing featured on modern runways by top
designers. They often carry similar demographics of the conservative big spenders, but prefer more stylish
designs that stand-out and are trendy, as opposed to the higher end conservative formal wear. Brands
may include high end boutique fashion stores, tailored clothing and colorful fashion from top trending
designers internationally.

STRATEGY & IMPLEMENTATION SUMMARY


The first collection will be launched in the United States, namely New York and Los Angeles. This will signal
quality and high fashion for people in the US and drive interest while positioning the brand. It will also
enable a more concentrated release and focus on marketing efforts, as opposed to spreading it out over
a larger region which will enable VMC fill orders. VMC will also work on product positioning with a top PR
and marketing agency in Manhattan.

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MANAGEMENT TEAM

John Doe Chief Executive Officer

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Susan Miller Chief Operating Officer


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Kevin Jones -Chief Financial Officer


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Adrian Wilcourt Legal Compliance


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ORGANIZATIONAL CHART

Adrian
Board/Investors
Wilcourt/Legal

John Doe/CEO

Susan Kevin
Miller/COO Jones/CFO

Marketing
Sales Director Accounting
Director

Sales Reps Collections

Page | 13
SWOT ANALYSIS

Strengths

The management team has strong knowledge and experience within the fashion sector.
The market demand for premium fashion hats has already been demonstrated.
The owner has prior experience working with the manufacturer and has pre-vetted them.
The current competitor provides a product that is of inferior comparable quality.
The website design will deliver a compelling user experience and omni-channel retailing.
The website will heavily integrate social media into the sales, which will increase reach.
The brand awareness derived from the direct-to-consumer sales will increase wholesale orders.

Weaknesses

The site is not currently developed and will require third-party technical expertise.
The product assembly line must be set-up and logistics properly managed.
Outside assistance will be needed with sales & marketing and the e-commerce platform.
New fashion brands will lower the profit margin given that it will have retail mark-ups.
The brand must initially heavily invest in marketing to establish its identity early on.

Opportunities

The fashion market is of limitless size, especially for hats and accessories.
Potential exists to expand and develop new product lines leveraging the brand image.
With economies of scale, production price will decrease and margins will be more profitable.
There is sufficient budget to inject into the companys PR and marketing initiatives.
The company can hire and use interns initially rather than hiring more staff on a payroll.

Threats

The fashion industry is extremely competitive with both boutique and household name designers.
Some larger fashion companies have been noted for stealing the designs of smaller boutiques.
It is relatively easy for new competitors to enter the market and hard to win more share.
Many competitors have economies of scale in manufacturing with higher profit margins.
The fashion industry may be subject to high volatility with economic performance as a luxury item.

Page | 14
COMPETITIVE COMPARISON

Because of the considerable size of the market and many competitors, we have instead grouped
categories of competitors to focus on how VMC is uniquely positioned in the entire industry:

Fashion Designers

This market will be VMCs largest competitor. It includes well-positioned fashion designers such as
Burberry, Coach, Louis Vuitton and other designers that are located along high end shopping areas in
urban centers. These brands carry incredible clout in the market and their brands will be difficult to
compete with initially.

While the company will also sell competing brands, the difference in profit margin will also make them a
competitor. The company will make more money and have a higher valuation if its proprietary designs are
sold rather than mainstream products with only a retail mark-up. These brands have invested substantial
capital into developing their brands, which VMC will do over the next three years.

Loro Piana is an Italian designer and manufacturer of high-end fashion


products from cashmere and wool. They have a product line in the hat
market, which makes them a competitor for premium brand
positioning.

While this company does product high quality products, it does not
specialize in the accessories market, meaning it is very likely that
the brand will produce a lesser known and inferior quality hat. In
2012, turnover reached 700 million and net income represented
20% of sales.

Janessa Leone is a mainstream fashion hat brand. It targets a lower end price point to be accessible to the
high street fashion market with average prices ranging from $150 250. The lower end positioning of the
brand makes this a relatively poor competitor in terms of the high fashion market.

Maison Michel is a mainstream fashion hat and


accessories line for men and women, with an
emphasis on the womens line. The company has
strong roots in New York City with both a seasonal
and capsule collection.

Page | 15
MARKETING PLAN

Pricing Strategy

The pricing strategy of VMC is for the low to middle end of high fashion. Overall, the prices will range from
$295 MSRP for straw hats to up to $1,000 MSRP for high-end natural felts. The prices will range depending
upon the material used, season, and style. Accessories will later be launched and sell between $100 500
+ MSRP.

PROMOTION STRATEGY

Public relations

There will be very a heavy focus on public relations, with a firm covering the PR initiatives for each region
introduced. This will open channels for our brand to get coverage by Glamour, Cosmopolitan and other
top magazines regionally and nationally. It will also enable access to product placements, strategic
celebrity usage and access to runway shows. We believe that PR will play a key to a successful market
introduction, especially during the launch in the United States.

Advertising

The advertising will consist of web-based and mass media advertising. We will place advertisements to
target our consumer demographic in the WWD, New York Times, the New Yorker and top fashion
magazines. This advertising will resemble top fashion brands and VMC will hire a creative ad agency that
has experience developing advertisements for very high profile brands.

Website/E-commerce Strategy

The website will be designed with Magento checkout and Authorize.Net payment gateway, designed by
a company with experience in the fashion industry. It will tell the story behind the VMC line as created by
a creative branding expert, show models like a high end fashion websites for top-retailers and enable
shipping options with unit/language conversion.

The website will also provide the latest in Internet marketing with social media coverage from the fashion
shows, a video behind the design of VMC as well as a video advertisement that communicates the brand.
Search engine optimization will also be integrated into the website so that the companys umbrellas show
up when users search for related queries in a search engine and other online marketing methods.

Page | 16
FINANCIAL FORECASTS

START-UP SUMMARY

Startup Expenses Startup Liabilities


Web Development/Hosting 25,000 Liabilities and Capital
PR & Marketing 300,000 Current Borrowing -
Tradeshows 16,000 Long-Term Liabilities -
Payroll 170,000 Accounts Payable -
Misc. SG&A 25,000 Other Current Liabilities -
Total Startup Expenses $536,000

Startup Assets Startup Investments


Cash on Hand (Inventory) 525,000 Planned Investment
Total Startup Assets $525,000 Owner 100,000

Total Requirements Investor 961,000


Total Planned Investment $1,061,000
Total Startup Expenses $536,000
Total Startup Assets 525,000
Startup Funding
Total Requirements $1,061,000 Total Liabilities -
Total Planned Investment 1,061,000
Total Funding $1,061,000

Startup Expenses
350,000

300,000

250,000

200,000

150,000

100,000

50,000

-
Web PR & Marketing Tradeshows Payroll Misc. SG&A
Development/Hosting

Page | 17
FINANCIAL HIGHLIGHTS

The financial highlights are how the company is projected to perform over the course of the next twelve
months and three to five years. The projections are based on comparable facilities based on estimated
revenue range and size, along with geographic location. We have assumed that for at least the first six-
months of post-money financing that expenses may be greater than revenues while the company invests
into growth.

Financial Highlights ($000)


Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 Year 2 Year 3
Revenue 71 71 54 55 61 62 63 65 67 70 74 80 793 1523 2590
Gross Margin 54 54 41 41 46 47 47 49 50 53 55 60 595 1142 1942
Operating Expense 28 28 28 28 28 28 28 28 28 28 28 28 332 531 867
EBITDA 12 12 (1) (1) 4 5 5 7 8 11 13 18 92 390 787
Net Profit (3) (3) (16) (15) (11) (10) (9) (8) (6) (4) (1) 4 (81) 217 614

Gross Margin/Revenue 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75%
EBITDA/Revenue 16% 16% -3% -1% 6% 7% 9% 11% 12% 15% 18% 23% 12% 26% 30%
Net Profit/Revenue -4% -4% -29% -27% -17% -16% -14% -12% -9% -5% -2% 5% -10% 14% 24%

Net Cash Flow 12 12 (1) (1) 4 5 5 7 8 11 13 18 92 390 787


Cash Balance - Ending 537 548 547 546 550 555 560 567 575 586 599 617 617 1007 1795

Projected Operating Highlights By Year ($000) Projected Revenues By Year ($000)


3000 3000

2500 Revenue 2500

2000 2000
Gross Margin
1500 1500
1000 EBITDA 1000
500
500
Net Profit
0
Year 1 Year 2 Year 3 0
(500) Year 1 Year 2 Year 3

Projected Cash Flow By Year ($000) Projected Net Income By Year ($000)
2000 700
1800 600
1600
500
1400
1200 Net Cash Flow 400
1000 300
800 200
600 100
Cash Balance
400
0
200
(100) Year 1 Year 2 Year 3
0
Year 1 Year 2 Year 3 (200)

Page | 18
FINANCIAL INDICATORS

The company believes that it can reach an increasing net profit margin due to economies of scale. Through
investments in capital expenditures, it may decrease its general and administrative expenses. Financial
indicators are based upon the performance of comparable companies in the same asset class, revenue
range and age both from publicly available information and our internal database of research.

Financial Indicators
Year 1 Year 2 Year 3
Profitability %'s:
Gross Margin 75% 75% 75%
Net Profit Margin -10% 14% 24%
EBITDA to Revenue 12% 26% 30%
Return on Assets -8% 18% 34%
Return on Equity -8% 18% 34%

Financial Indicators
80%

70%

60%

50%

40%

30%

20%

10%

0%
Year 1 Year 2 Year 3
-10%
Gross Margin Net Profit Margin EBITDA to Revenue Return on Assets
-20%

Page | 19
REVENUES FORECAST

Revenue Forecast
Year 1 Year 2 Year 3
Revenue Forecast
Clothing 793,357 1,269,371 2,157,931
Other Accessories - 253,874 431,586
Total Revenue $ 793,357 $ 1,523,246 $ 2,589,518

Direct Cost of Revenue


General COGS 198,339 380,811 647,379
Other - - -
Subtotal Cost of Revenue $ 198,339 $ 380,811 $ 647,379

Revenue By Year
3000

2500

2000

1500

1000

500

0
Year 1 Year 2 Year 3

Year 1 Revenue Monthly


90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

Page | 20
WAGES & PAYROLL

Most expenses will be allocated towards development and sales. The employees will be paid competitive
wages so that the company can acquire and retain top talent and compete with large competitors. As the
company grows, it may work in options and bonuses into the salaries, but will focus on a straight full-time
salary with benefits for employees.

Personnel Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Personnel Count
Sr. Developer 1 2 4 8 16
Developers 6 9 14 16 19
Sales 8 10 12 14 17
Administrative 1 1 1 2 2
Management 0 2 2 2 2

Total Personnel 16 24 32 42 56

Personnel Wage
Sr. Developer $ 100,000 $ 200,000 $ 400,000 $ 800,000 $ 1,600,000
Developers $ 450,000 $ 675,000 $ 1,012,500 $ 1,215,000 $ 1,458,000
Sales $ 280,000 $ 336,000 $ 403,200 $ 483,840 $ 580,608
Administrative $ 35,000 $ 42,000 $ 50,400 $ 60,480 $ 72,576
Management $ - $ 172,000 $ 172,000 $ 172,000 $ 172,000

Personnel Costs
Employer Expenses $ 34,600 $ 44,980 $ 89,960 $ 269,880 $ 809,640
Total Payroll $ 974,163 $ 1,591,863 $ 2,301,749 $ 3,233,467 $ 5,022,423

Page | 21
PROJECTED PROFIT AND LOSS

The profit and loss assume that the company will have margins at a comparable level to companies within
its industry. While management might not have incurred exactly for future operating expenses, they have
been assumed to reasonable reach comparable profit margins to industry comparables. The management
will operate with minimal expenditures to focus on R&D and commercialization expenses until the
company has sufficient income to support dividend distribution.

Pro Forma Profit and Loss


Year 1 Year 2 Year 3
Revenue $ 793,357 $ 1,523,246 $ 2,589,518
Subtotal Cost of Revenue $ 198,339 $ 380,811 $ 647,379
Total Cost of Revenue $ 198,339 $ 380,811 $ 647,379

Gross Margin $ 595,018 $ 1,142,434 $ 1,942,138

Gross Margin/Revenue 75% 75% 75%

Expenses
Public Relations & Marketing 300,000 456,974 776,855
Tradeshows 7,200 20,800 20,800
Banking Fees 420 21,200 27,560
Office Expenses & Utilities 2,400 3,120 4,056
Travel & Communication 3,600 4,680 6,084
Misc. SG&A 9 24,149 31,393
Total Operating Expenses $ 313,629 $ 530,923 $ 866,749

Wages & Payroll $ 170,511 $ 221,591 $ 287,995


Depreciation, Amortization & Taxes $ 173,333 $ 173,333 $ 173,333
Net Income $ (81,023) $ 216,587 $ 614,061
Net Income/Revenue -10% 14% 24%

Page | 22
PROJECTED CASH FLOW

Pro Forma Cash Flow


Year 1 Year 2 Year 3
Beginning Cash Balance $ 525,000 $ 617,311 $ 1,007,231
Cash Inflows
Income from Sales $ 793,357 $ 1,523,246 $ 2,589,518
Accounts Receivable $ - $ - $ -
Total Cash Inflows $ 793,357 $ 1,523,246 $ 2,589,518

Cash Outflows

Investing Activities
New Fixed Assets Purchases $ - $ - $ -
Inventory Addition to Bal.Sheet $ - $ - $ -
Cost of Sales $ 198,339 $ 380,811 $ 647,379

Operating Activities
Salaries and Wages $ 170,511 $ 221,591 $ 287,995
Fixed Business Expenses $ 332,196 $ 530,923 $ 866,749
Taxes $ - $ - $ -

Financing Activities
Loan Payments $ - $ - $ -
Line of Credit Interest $ - $ - $ -
Line of Credit Repayments $ - $ - $ -
Dividends Paid $ - $ - $ -

Total Cash Outflows $ 701,046.54 $ 1,133,325.07 $ 1,802,123.15


Cash Flow $ 92,310.61 $ 389,920.65 $ 787,394.57
Operating Cash Balance $ 617,310.61 $ 1,007,231.25 $ 1,794,625.82
Ending Cash Balance $ 617,310.61 $ 1,007,231.25 $ 1,794,625.82

Year 1 Cash
700,000

600,000

500,000

400,000 Net Cash Flows

300,000

200,000
Cash Balance
100,000

-
Month 2
Month 1

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

(100,000)

Page | 23
PROJECTED BALANCE SHEET

The projected balance sheet assumes that there are no dividend draws and all cash flow is re-invested
back into the company at the end of the year. The balance sheet does not assume any line of credits or
account receivables that are outstanding at the end of the year and that the company will have paid off
all liabilities. Likewise, it assumes that all accounts will pay within thirty-days and there will be no
delinquency of payments.

Pro Forma Balance Sheet


Year 1 Year 2 Year 3
Assets
Current Assets
Cash $ 617,311 $ 1,007,231 $ 1,794,626
Other Current Assets $ 362,667 $ 189,333 $ 16,000
Total Current Assets $ 979,977 $ 1,196,565 $ 1,810,626

Long-term Assets
Long-term Assets $ - $ - $ -
Accumulated Depreciation $ - $ - $ -
Total Long-term Assets $ - $ - $ -
Total Assets $ 979,977 $ 1,196,564 $ 1,810,625

Liabilities and Capital


Current Liabilities
Accounts Payable $ - $ - $ -
Current Borowing $ - $ - $ -
Other Current Liabilities $ - $ - $ -
Subtotal Current Liabilities $ - $ - $ -

Long-term Liabilities $ - $ - $ -
Total Liabilities $ - $ - $ -

Common Stock $ 1,061,000 $ 1,061,000 $ 1,061,000


Retained Earnings $ (81,023) $ 135,565 $ 749,626
Total Capital $ 979,977 $ 1,196,565 $ 1,810,626
Total Liabilities and Capital $ 979,977 $ 1,196,564 $ 1,810,625

Page | 24
SENSITIVITY ANALYSIS

Best Case Scenario (Revenue Increase by 15%)


Year 1 Year 2 Year 3
Revenue $ 912,361 $ 1,751,733 $ 2,977,945
Cost of Goods Sold $ 228,090 $ 437,933 $ 744,486
Gross Margin $ 684,271 $ 1,313,799 $ 2,233,459
Gross Margin/Revenue 75% 75% 75%
Operating Expenses $ 332,196 $ 530,923 $ 866,749
EBIT $ 352,075 $ 782,877 $ 1,366,710
EBIT/Revenue 39% 45% 46%

Worst Case Scenario (Revenue Decrease by 15%)


Year 1 Year 2 Year 3
Revenue $ 674,354 $ 1,294,759 $ 2,201,090
Cost of Goods Sold $ 168,588 $ 323,690 $ 550,273
Gross Margin $ 505,765 $ 971,069 $ 1,650,818
Gross Margin Revenue 75% 75% 75%
Operating Expenses $ 332,196 $ 530,923 $ 866,749
EBIT $ 173,569 $ 440,147 $ 784,069
EBIT/Revenue 26% 34% 36%

Revenue
$3,500,000

$3,000,000
Best Case

$2,500,000

$2,000,000
Most Likely

$1,500,000

$1,000,000
Worst Case

$500,000

$-
Year 1 Year 2 Year 3

Page | 25
Year 1 Profit & Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Revenue 71,429 71,429 54,000 55,000 61,000 62,000 63,000 65,000 67,000 70,000 73,500 80,000
Subtotal Cost of Revenue 17,857 17,857 13,500 13,750 15,250 15,500 15,750 16,250 16,750 17,500 18,375 20,000
Total Cost of Revenue 17,857 17,857 13,500 13,750 15,250 15,500 15,750 16,250 16,750 17,500 18,375 20,000

Gross Margin $ 53,571 $ 53,571 $ 40,500 $ 41,250 $ 45,750 $ 46,500 $ 47,250 $ 48,750 $ 50,250 $ 52,500 $ 55,125 $ 60,000
Gross Margin/Revenue 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75%

Expenses
Public Relations & Marketing 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Tradeshows 600 600 600 600 600 600 600 600 600 600 600 600
Banking Fees 35 35 35 35 35 35 35 35 35 35 35 35
Office Expenses & Utilities 200 200 200 200 200 200 200 200 200 200 200 200
Travel & Communication 300 300 300 300 300 300 300 300 300 300 300 300
Misc. SG&A 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,548
Total Operating Expenses $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683 $ 27,683

EBIT $ 25,888 $ 25,888 $ 12,817 $ 13,567 $ 18,067 $ 18,817 $ 19,567 $ 21,067 $ 22,567 $ 24,817 $ 27,442 $ 32,317
EBIT/Revenue 36% 36% 24% 25% 30% 30% 31% 32% 34% 35% 37% 40%

Page | 26
Year 1 Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Revenue
$ 71,428.6 $ 71,428.6 $ 54,000.0 $ 55,000.0 $ 61,000.0 $ 62,000.0 $ 63,000.0 $ 65,000.0 $ 67,000.0 $ 70,000.0 $ 73,500.0 $ 80,000.0
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 71,428.6 $ 71,428.6 $ 54,000.0 $ 55,000.0 $ 61,000.0 $ 62,000.0 $ 63,000.0 $ 65,000.0 $ 67,000.0 $ 70,000.0 $ 73,500.0 $ 80,000.0

Expenditures

Expenditures from Operations


$ 59,749.4 $ 59,749.4 $ 55,392.3 $ 55,642.3 $ 57,142.3 $ 57,392.3 $ 57,642.3 $ 58,142.3 $ 58,642.3 $ 59,392.3 $ 60,267.3 $ 61,892.3
Subtotal Spent on Operations
$ 59,749.4 $ 59,749.4 $ 55,392.3 $ 55,642.3 $ 57,142.3 $ 57,392.3 $ 57,642.3 $ 58,142.3 $ 58,642.3 $ 59,392.3 $ 60,267.3 $ 61,892.3

Additional Cash Spent

Current Borrowing Repay


$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 59,749.4 $ 59,749.4 $ 55,392.3 $ 55,642.3 $ 57,142.3 $ 57,392.3 $ 57,642.3 $ 58,142.3 $ 58,642.3 $ 59,392.3 $ 60,267.3 $ 61,892.3

Net Cash Flow


$ 11,679.2 $ 11,679.2 $ (1,392.3) $ (642.3) $ 3,857.7 $ 4,607.7 $ 5,357.7 $ 6,857.7 $ 8,357.7 $ 10,607.7 $ 13,232.7 $ 18,107.7
Cash Balance
$ 536,679.2 $ 548,358.3 $ 546,966.0 $ 546,323.8 $ 550,181.5 $ 554,789.2 $ 560,147.0 $ 567,004.7 $ 575,362.4 $ 585,970.1 $ 599,202.9 $ 617,310.6

Page | 27