December 2001

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Table of Contents
1.0

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1
Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2
Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0

Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1
Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2
Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3.0

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.0

Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1
Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4
4

5.0

Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1
Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.2
Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.2.1 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.3
Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.3.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5
5
6
6
6
7

6.0

Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1
Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

7.0

Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1
Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2
Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3
Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4
Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.5
Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9
9
10
11
13
13

Liquid Culture
1.0 Executive Summary
The 2002-2003 season will be a great one for women looking for distinctive outdoor clothing
online. Liquid Culture will eliminate the middle man and offer creative outdoor clothing that is
both functional and beautiful. The savings are passed on to our customers who will be paying
a fraction of what they normally do for current retreated fashion in stores.
Liquid Culture's 2002-2003 line consists of the best fabric, designs and styling on the market.
Larry Wilson and Maggie Granger, co-owners of Liquid Culture, have fifteen years of
experience between them in the outdoor garment industry. Maggie has been a senior clothing
designer for Manic Woman Clothing for the past seven years. Larry has been the website
administrator for South Face the past eight years.
Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid
Culture has contracted with Magic Clothing Company, located in Los Angeles, California, to
produce and ship all Liquid Culture clothing. Our design team will work closely with the
Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain
the inventory and will produce sufficient product to meet the planned demand.

1.1 Mission
Liquid Culture's mission is to present consumers with designs, styling and clothes that
energizes any outdoor activity. Whether it be snowboarding, running along the beach, or
drifting down a river, Liquid Culture has comfortable, durable clothing that will look and feel
wonderful.

1.2 Keys to Success

Accessible website that is entertaining to surf. Like a trip to your favorite store where
you always find something new that you want.
Establishing a strong advertising campaign in a traditional media vehicle; i.e.
magazines.
Excellent vendor relationship that will facilitate quality manufacturing of Liquid
Culture's clothing and quick shipment of orders.
Acquiring an excellent design staff.

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Liquid Culture

Highlights (Planned)

$4,500,000
$4,000,000
$3,500,000
$3,000,000

Sales

$2,500,000

Gross Margin

$2,000,000

Net Profit

$1,500,000
$1,000,000
$500,000
$0
2002

2003

2004

2.0 Company Summary

Liquid Culture will offer creative women's outdoor clothing, online, that is both functional and
beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a costeffective operation that will eliminate the cost of inventory by having a third-party, Magic
Clothing Company, handle all manufacturing and shipping of clothing to the customer. Liquid
Culture will process the order and collect the payment online. The order will then be sent to
Magic Clothing Company to be filled and shipped. Liquid Culture will focus on clothing design
and marketing of its products.

2.1 Company Ownership

Liquid Culture is owned by Larry Wilson and Maggie Granger.

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Liquid Culture
2.2 Start-up Summary
Liquid Culture's start-up costs consists mostly of design and marketing. Liquid Culture has
$260,000 in investments and $200,000 in a short-term loan.
Table: Start-up
Start-up
Requirements
Start-up Expenses
Legal
Stationery etc.
Brochures
Consultants
Insurance
Rent
Leased Office Equipment
Computer Equipment/Software
Website
Other
Total Start-up Expense

$1,000
$500
$0
$5,000
$0
$2,000
$10,000
$30,000
$10,000
$0
$58,500

Start-up Assets Needed

Cash Balance on Starting Date
Other Short-term Assets
Total Short-term Assets

$401,500
$0
$401,500

Long-term Assets
Total Assets
Total Requirements

$0
$401,500
$460,000

Funding
Investment
Investor 1
Investor 2
Other
Total Investment
Short-term Liabilities
Accounts Payable
Current Borrowing
Other Short-term Liabilities
Subtotal Short-term Liabilities

$130,000
$130,000
$0
$260,000
$0
$0
$0
$0

Long-term Liabilities
Total Liabilities

$200,000
$200,000

Loss at Start-up
Total Capital
Total Capital and Liabilities

($58,500)
$201,500
$401,500

Page 3

Liquid Culture
3.0 Services
Liquid Culture will sell, women's outdoor clothing online. We will offer outdoor clothing for
almost every type of active use. We will focus on the seasonal clothing demands of our
customers including the following:

Fleece outerwear.
Rain gear, waterproof breathables, as well as coated nylon.
Synthetic clothing for outdoor activities.
Hats.
Shorts.
Pants.
Shirts.

4.0 Market Analysis Summary

In the past 15 years, women's outdoor wear has grown into a billion dollar niche in the
clothing industry. The popularity of the Internet has launched a number of online stores for
women's outdoor wear but no company is exclusively selling their products online. There are
a number of reasons for this but the strongest is that the concept is new and untested. Will
customers buy something that they wear that can only be seen online? We believe they will,
if the process is fun and the products are great and cheap.
The key is marketing our target customers in the traditional advertising medium for fashion,
i.e. women fitness magazines.
The ads will focused on the eliminating the middle man in your clothing budget and stepping
up to the distinctive style of Liquid Culture. The company logo will also be an important
marketing tool in bringing customers to our website.

4.1 Market Segmentation

Liquid Culture will be focusing on two distinct groups of women that purchase outdoor
clothing:
Women 17-25 years of age: Youth drives the market so this is the important group
to attract to the website. They have less money than the older group so we must give
them what they want for less. The key is to have inexpensive selections in each
clothing group that have the popular cut. The company's logo attractiveness to this
group can not be stressed strongly enough. The initial small purchases will grow larger
over time.
Women 26-40 years of age: They are the core group that will drive Liquid Culture's
success. This target group is responsible for the growth of outdoor women's wear.
They will be harder to pull into the website. Once there, the key will be promoting the
quality, attractiveness and savings. In addition, we will have to assure that the
purchase will fit the way the customer wants it to. It will be crucial that the return
policy is hassle-free and speedy.

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Liquid Culture
Table: Market Analysis
Market Analysis
Potential Customers
Women Ages 16-25
Women Ages 26-40
Other
Total

Growth
2002
2003
2004
2005
2006
20% 6,000,000 7,200,000 8,640,000 10,368,000 12,441,600
15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031
0%
0
0
0
0
0
17.81% 11,000,000 12,950,000 15,252,500 17,972,375 21,186,631

CAGR
20.00%
15.00%
0.00%
17.81%

Market Analysis (Pie)

Women Ages 16-25

Women Ages 26-40
Other

5.0 Strategy and Implementation Summary

Liquid Culture will win market share in the women's outdoor clothing niche by aggressively
pursuing visibility with its target customers.

5.1 Competitive Edge

Liquid Culture's competitive edge is its focus on the process than on product. The website is
just the endpoint of an entire marketing program to drive customers' interest in Liquid
Culture. Though we have confidence in the quality and attractiveness of our products, we
know that building the road to the website is our most important job.
Larry Wilson's experience with South Face is pivotal to the success of Liquid Culture's
website. South Face's website averaged five million hits a year and is considered one of the
most accessible and attractive websites in the clothing industry. His experience is invaluable
in assuring customers' satisfaction with the shopping experience online.
Larry will introduce a new clothing measurement feature that is fun to use and will reduce
customers confusion on how the clothing will fit. This will increase customer satisfaction and
reduce returns.
Maggie Granger will be in charge of the clothing design team. As senior clothing designer for
Manic Woman Clothing, she watched the Manic Woman's sales grow by 20% for the past five
years. Her clothing designs have been praised in the industry and have spawned many
imitators. With Liquid Culture, Maggie is ready to change how quality women's outdoor
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Liquid Culture
clothing is sold.
Liquid Culture's agreement with Magic Clothing Company is another strong competitive
advantage. Our design team will work closely with the Magic's Indonesian-based
manufacturing facilities. The Magic Clothing Company will maintain the inventory and will
produce sufficient product to meet the planned demand. This will keep production costs low
for products and put a cap on Liquid Culture's overhead.

5.2 Marketing Strategy

Liquid Culture's marketing strategy is a simple one. In women's fitness magazines like Self,
Shape and Strive, Liquid Culture will introduce customers to their products and website. We
will also advertise in CosmoGirl and Ellegirl magazines.
For the first two months, Liquid Culture will offer 10% off for all purchases under $100 and
15% off all purchases over $100. We will offer the same discount strategy three more times
during the year when new seasonal clothing is introduced.

5.2.1 Pricing Strategy

Liquid Culture's pricing strategy is to pass on most of the store mark-up to the consumer in
reduced price for clothing. This advantage has no negative impact on our sales profit and will
also absorb some of the initial cost of offering discounts during our first three months of
operation.

5.3 Sales Strategy

Liquid Culture will launch a $245,000 ad campaign targeted at our core customer groups. The
focus of the ads will be to "keep the money you give to the middleman" and use it to get
outdoors and enjoy life. Liquid Culture's attractive logo will be heavily displayed in these ads.
We estimate it will take most of the year to build our sales to the point where we begin to
show a profit.
Liquid Culture will offer discounts at various times of the year to even out seasonality and
build initial awareness of the website.

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Liquid Culture
5.3.1 Sales Forecast
We expect sales to increase at a steady rate for the first year. It will begin slow as we open,
but will quickly pick up as our customer base increases. We estimate that we will begin to
show a profit in November. Liquid Culture will see an increase of 4% for the year 2002 and
2003. We feel that we can accomplish this steady goal and maintain this amount of sales.
Table: Sales Forecast (Planned)
Sales Forecast
Sales
Clothing
Other
Total Sales

2002
2003
2004
$2,170,000 $3,000,000 $4,300,000
$0
$0
$0
$2,170,000 $3,000,000 $4,300,000

Direct Cost of Sales

Clothing
Other
Subtotal Direct Cost of Sales

2002
2003
2004
$1,249,000 $1,800,000 $2,580,000
$0
$0
$0
$1,249,000 $1,800,000 $2,580,000

Sales Monthly (Planned)

$400,000
$350,000
$300,000
$250,000

Clothing

$200,000

Other

$150,000
$100,000
$50,000
$0
Jan Feb Mar Apr May Jun

Jul Aug Sep Oct Nov Dec

Page 7

Liquid Culture
6.0 Management Summary
Larry Wilson will manage the marketing team, as well as the development and administration
of Liquid Culture's website. Maggie Granger will be in charge of the clothing design team. She
will also manage the production of the designs by Magic Clothing Company.

6.1 Personnel Plan

Besides Larry and Maggie, Liquid Culture will have a staff of eight:

Three member clothing design team.

Web administrator.
Two member marketing team.
Office manager.
Accountant.

Table: Personnel (Planned)

Personnel Plan
Marketing/Website Director
Design Director
Designers
Web Administrator
Office Manager
Marketing Staff
Accountant
Other
Total Payroll

2002
$84,000
$84,000
$144,000
$48,000
$36,000
$96,000
$39,600
$0
$531,600

2003
$90,000
$90,000
$156,000
$52,000
$39,000
$104,000
$44,000
$0
$575,000

2004
$95,000
$95,000
$166,000
$56,000
$42,000
$112,000
$48,000
$0
$614,000

Total People
Payroll Burden
Total Payroll Expenditures

8
$79,740
$611,340

8
$86,250
$661,250

8
$92,100
$706,100

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Liquid Culture
7.0 Financial Plan
The following is the financial plan for Liquid Culture.

7.1 Break-even Analysis

Our break-even analysis is based on running costs, the costs we incur to keep the business
running, not on theoretical fixed costs that would be relevant only if we were closing.
Between payroll, rent, utilities, and marketing costs, we think $60,000 is a good estimate of
fixed costs. The break-even amount for monthly sales is $150,000.
Table: Break-even Analysis
Break-even Analysis:
Monthly Units Break-even
Monthly Sales Break-even

1,000
$150,000

Assumptions:
Average Per-Unit Revenue
Average Per-Unit Variable
Cost
Estimated Monthly Fixed Cost

$150.00
$90.00
$60,000

Break-even Analysis
$80,000
$60,000
$40,000
$20,000
$0
($20,000)
($40,000)
($60,000)
$0

$60,000

$120,000

$180,000

$240,000

$300,000

Monthly break-even point

Break-even point = where line intersects with 0

Page 9

Liquid Culture
7.2 Projected Profit and Loss
The following table and chart are the projected profit and loss for three years.
Table: Profit and Loss (Planned)
Pro Forma Profit and Loss
Sales
Direct Cost of Sales
Other Production Expenses
Total Cost of Sales
Gross Margin
Gross Margin %
Operating Expenses:
Advertising/Promotion
Travel
Miscellaneous
Payroll Expense
Payroll Burden
Depreciation
Leased Equipment
Utilities
Insurance
Rent
Contract/Consultants
Total Operating Expenses
Profit Before Interest and Taxes
Interest Expense Short-term
Interest Expense Long-term
Taxes Incurred
Extraordinary Items
Net Profit
Net Profit/Sales

2002
$2,170,000
$1,249,000
$0
-----------$1,249,000
$921,000
42.44%

2003
$3,000,000
$1,800,000
$0
-----------$1,800,000
$1,200,000
40.00%

2004
$4,300,000
$2,580,000
$0
-----------$2,580,000
$1,720,000
40.00%

$245,000
$300,000
$400,000
$0
$0
$0
$0
$0
$0
$531,600
$575,000
$614,000
$79,740
$86,250
$92,100
$0
$0
$0
$0
$0
$0
$2,400
$2,400
$2,400
$0
$0
$0
$24,000
$24,000
$24,000
$20,000
$40,000
$40,000
---------------------------------$902,740 $1,027,650 $1,172,500
$18,260
$172,350
$547,500
$0
$0
$0
$17,574
$13,281
$8,801
$206
$47,721
$161,610
$0
$0
$0
$481
$111,349
$377,089
0.02%
3.71%
8.77%

Profit Monthly (Planned)

$80,000
$60,000
$40,000
$20,000
$0
($20,000)
($40,000)
($60,000)
Jan Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov Dec

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Liquid Culture
7.3 Projected Cash Flow
The following table and chart are the projected cash flow for three years.
Table: Cash Flow (Planned)
Pro Forma Cash Flow

2002

2003

2004

Cash Received
Cash from Operations:
Cash Sales
From Receivables
Subtotal Cash from Operations

$2,170,000 $3,000,000 $4,300,000

$0
$0
$0
$2,170,000 $3,000,000 $4,300,000

Additional Cash Received

Extraordinary Items
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of other Short-term Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received

$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$2,170,000 $3,000,000 $4,300,000

Expenditures
Expenditures from Operations:
Cash Spent on Costs and Expenses
Wages, Salaries, Payroll Taxes, etc.
Payment of Accounts Payable
Subtotal Spent on Operations

$155,818
$222,740
$321,681
$611,340
$661,250
$706,100
$1,156,881 $1,899,230 $2,739,255
$1,924,039 $2,783,220 $3,767,036

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Short-term Assets
Purchase Long-term Assets
Dividends
Adjustment for Assets Purchased on Credit
Subtotal Cash Spent

$0
$0
$0
$0
$0
$0
$0
$0
$0
$44,796
$44,796
$44,796
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$1,968,835 $2,828,016 $3,811,832

Net Cash Flow

Cash Balance

2002

$201,165
$602,665

2003

2004

$171,984
$488,168
$774,649 $1,262,818

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Liquid Culture

Cash (Planned)
$700,000
$600,000
$500,000
$400,000

Net Cash Flow

$300,000

Cash Balance

$200,000
$100,000
$0
($100,000)
Jan Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov Dec

Page 12

Liquid Culture
7.4 Projected Balance Sheet
The following is the projected balance sheet for three years.
Table: Balance Sheet (Planned)
Pro Forma Balance Sheet
Assets
Short-term Assets
Cash
Other Short-term Assets
Total Short-term Assets
Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets

2002
$602,665
$0
$602,665

2003
2004
$774,649 $1,262,818
$0
$0
$774,649 $1,262,818

$0
$0
$0
$602,665

$0
$0
$0
$0
$0
$0
$774,649 $1,262,818

Accounts Payable
Current Borrowing
Other Short-term Liabilities
Subtotal Short-term Liabilities

2002
$245,481
$0
$0
$245,481

2003
$350,912
$0
$0
$350,912

2004
$506,787
$0
$0
$506,787

Long-term Liabilities
Total Liabilities

$155,204
$400,685

$110,408
$461,320

$65,612
$572,399

Paid-in Capital
Retained Earnings
Earnings
Total Capital
Total Liabilities and Capital
Net Worth

$260,000
($58,500)
$481
$201,981
$602,665
$201,981

$260,000
$260,000
($58,019)
$53,329
$111,349
$377,089
$313,329
$690,418
$774,649 $1,262,818
$313,329
$690,418

Liabilities and Capital

7.5 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy
ratios for profitability, risk, and return. These ratios have been determined by the 5137
industry, Women's and Children's Clothing, as found in the Standard Industry Code (SIC)
Index.

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Liquid Culture
Table: Ratios (Planned)
Ratio Analysis
2002
0.00%

2003
38.25%

2004
43.33%

Industry Profile
10.40%

0.00%
0.00%
0.00%
100.00%
0.00%
100.00%

0.00%
0.00%
0.00%
100.00%
0.00%
100.00%

0.00%
0.00%
0.00%
100.00%
0.00%
100.00%

29.60%
34.10%
25.70%
89.40%
10.60%
100.00%

0.00%
40.73%
25.75%
66.49%
33.51%

0.00%
45.30%
14.25%
59.55%
40.45%

0.00%
40.13%
5.20%
45.33%
54.67%

40.70%
34.60%
9.00%
43.60%
56.40%

100.00%
42.44%
42.42%
11.29%
0.84%

100.00%
40.00%
36.29%
10.00%
5.75%

100.00%
40.00%
31.23%
9.30%
12.73%

100.00%
24.80%
14.80%
0.90%
2.00%

2.46
2.46
66.49%
17.74%
5.95%

2.21
2.21
59.55%
59.24%
23.96%

2.49
2.49
45.33%
80.57%
44.05%

2.36
1.09
49.70%
4.90%
9.70%

2002
$271,250

2003
$375,000

2004
$537,500

Industry
$0
0.00%

2002
0.02%
0.24%

2003
3.71%
35.54%

2004
8.77%
54.62%

n.a
n.a

Activity Ratios
Accounts Receivable Turnover
Collection Days
Inventory Turnover
Accounts Payable Turnover
Total Asset Turnover

0.00
0
0.00
5.71
3.60

0.00
0
0.00
5.71
3.87

0.00
0
0.00
5.71
3.41

n.a
n.a
n.a
n.a
n.a

Debt Ratios
Debt to Net Worth
Short-term Liab. to Liab.

1.98
0.61

1.47
0.76

0.83
0.89

n.a
n.a

$357,185
1.04

$423,737
12.98

$756,030
62.21

n.a
n.a

0.28
41%
2.46
10.74
$0

0.26
45%
2.21
9.57
0.00

0.29
40%
2.49
6.23
0.00

n.a
n.a
n.a
n.a
n.a

Sales Growth
Percent of Total Assets
Accounts Receivable
Inventory
Other Short-term Assets
Total Short-term Assets
Long-term Assets
Total Assets
Other Short-term Liabilities
Subtotal Short-term Liabilities
Long-term Liabilities
Total Liabilities
Net Worth
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Business Vitality Profile
Sales per Employee
Survival Rate
Additional Ratios
Net Profit Margin
Return on Equity

Liquidity Ratios
Net Working Capital
Interest Coverage
Additional Ratios
Assets to Sales
Current Debt/Total Assets
Acid Test
Sales/Net Worth
Dividend Payout

Page 14

Appendix
Appendix Table: Sales Forecast (Planned)
Sales Forecast
Sales
Clothing

Jan
$40,000

Feb
$40,000

Mar
$60,000

Apr
$80,000

May
$110,000

Jun
$140,000

Jul
$180,000

Aug
$220,000

Sep
$250,000

Oct
$300,000

Nov
$350,000

Dec
$400,000

Other
Total Sales

$0
$40,000

$0
$40,000

$0
$60,000

$0
$80,000

$0
$110,000

$0
$140,000

$0
$180,000

$0
$220,000

$0
$250,000

$0
$300,000

$0
$350,000

$0
$400,000

Direct Cost of Sales

Clothing

Jan
$20,000

Feb
$20,000

Mar
$31,000

Apr
$42,000

May
$58,000

Jun
$78,000

Jul
$100,000

Aug
$120,000

Sep
$150,000

Oct
$180,000

Nov
$210,000

Dec
$240,000

Other
Subtotal Direct Cost of Sales

$0
$20,000

$0
$20,000

$0
$31,000

$0
$42,000

$0
$58,000

$0
$78,000

$0
$100,000

$0
$120,000

$0
$150,000

$0
$180,000

$0
$210,000

$0
$240,000

2002
$2,170,00
0
$0
$2,170,00
0

2003
$3,000,00
0
$0
$3,000,00
0

2004
$4,300,00
0
$0
$4,300,00
0

2002
$1,249,00
0
$0
$1,249,00
0

2003
$1,800,00
0
$0
$1,800,00
0

2004
$2,580,00
0
$0
$2,580,00
0

Page 1

Appendix
Appendix Table: Personnel (Planned)
Personnel Plan
Marketing/Website Director
Design Director
Designers
Web Administrator
Office Manager
Marketing Staff
Accountant
Other
Total Payroll

Jan
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Feb
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Mar
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Apr
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

May
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Jun
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Jul
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Aug
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Sep
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Oct
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Nov
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

Dec
$7,000
$7,000
$12,000
$4,000
$3,000
$8,000
$3,300
$0
$44,300

2002
$84,000
$84,000
$144,000
$48,000
$36,000
$96,000
$39,600
$0
$531,600

2003
$90,000
$90,000
$156,000
$52,000
$39,000
$104,000
$44,000
$0
$575,000

2004
$95,000
$95,000
$166,000
$56,000
$42,000
$112,000
$48,000
$0
$614,000

Total People
Payroll Burden
Total Payroll Expenditures

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$6,645
$50,945

8
$79,740
$611,340

8
$86,250
$661,250

8
$92,100
$706,100

Page 2

Appendix
Appendix Table: Profit and Loss (Planned)
Pro Forma Profit and Loss
Sales

Jan
$40,000

Feb
$40,000

Mar
$60,000

Apr
$80,000

Direct Cost of Sales

$20,000

$20,000

$31,000

$0
-----------$20,000

$0
-----------$20,000

Gross Margin

$20,000

Gross Margin %
Operating Expenses:
Advertising/Promotion
Travel
Miscellaneous
Payroll Expense

Other Production Expenses

Total Cost of Sales

Payroll Burden
Depreciation
Leased Equipment
Utilities
Insurance
Rent
Contract/Consultants
Total Operating Expenses
Profit Before Interest and Taxes
Interest Expense Short-term
Interest Expense Long-term
Taxes Incurred
Extraordinary Items
Net Profit
Net Profit/Sales

$42,000

May
$110,00
0
$58,000

Jun
$140,00
0
$78,000

$0
-----------$31,000

$0
-----------$42,000

$0
-----------$58,000

$0
-----------$78,000

$20,000

$29,000

$38,000

$52,000

$62,000

Jul
$180,00
0
$100,00
0
$0
-----------$100,00
0
$80,000
44.44%

Aug
$220,00
0
$120,00
0
$0
-----------$120,00
0
$100,00
0
45.45%

Sep
$250,00
0
$150,00
0
$0
-----------$150,00
0
$100,00
0
40.00%

Oct
$300,00
0
$180,00
0
$0
-----------$180,00
0
$120,00
0
40.00%

Nov
$350,00
0
$210,00
0
$0
-----------$210,00
0
$140,00
0
40.00%

Dec
$400,00
0
$240,00
0
$0
-----------$240,00
0
$160,00
0
40.00%

2002
$2,170,0
00
$1,249,0
00
$0
-----------$1,249,0
00
$921,00
0
42.44%

2003
$3,000,0
00
$1,800,0
00
$0
-----------$1,800,0
00
$1,200,0
00
40.00%

2004
$4,300,0
00
$2,580,0
00
$0
-----------$2,580,0
00
$1,720,0
00
40.00%

50.00%

50.00%

48.33%

47.50%

47.27%

44.29%

$30,000

$20,000

$10,000

$40,000

$15,000

$40,000

$10,000

$10,000

$20,000

$10,000

$30,000

$10,000

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$93,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$68,145

$6,645
$0
$0
$200
$0
$2,000
$5,000
-----------$98,145

$6,645
$0
$0
$200
$0
$2,000
$5,000
-----------$68,145

$6,645
$0
$0
$200
$0
$2,000
$5,000
-----------$68,145

$6,645
$0
$0
$200
$0
$2,000
$5,000
-----------$78,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$63,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$83,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$63,145

($55,145
)
$0
$1,542
($17,006
)
$0
($39,681
)
-49.60%

($16,145
)
$0
$1,511
($5,297)

($36,145
)
$0
$1,480
($11,288
)
$0
($26,338
)
-18.81%

$11,855

$31,855

$21,855

$56,855

$56,855

$96,855

$245,00
0
$0
$0
$531,60
0
$79,740
$0
$0
$2,400
$0
$24,000
$20,000
-----------$902,74
0
$18,260

$0
$1,449
$3,122

$0
$1,418
$9,131

$0
$1,387
$6,140

$0
$1,356
$16,650

$0
$1,324
$16,659

$0
$1,293
$28,668

$0
$17,574
$206

$300,00
0
$0
$0
$575,00
0
$86,250
$0
$0
$2,400
$0
$24,000
$40,000
-----------$1,027,6
50
$172,35
0
$0
$13,281
$47,721

$0
$7,284

$0
$21,306

$0
$14,328

$0
$38,850

$0
$38,871

$0
$66,893

$0
$481

4.05%

9.68%

5.73%

12.95%

11.11%

16.72%

0.02%

$400,00
0
$0
$0
$614,00
0
$92,100
$0
$0
$2,400
$0
$24,000
$40,000
-----------$1,172,5
00
$547,50
0
$0
$8,801
$161,61
0
$0
$377,08
9
8.77%

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$0
$0
$44,300

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$83,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$73,145

$6,645
$0
$0
$200
$0
$2,000
$0
-----------$63,145

($63,145
)
$0
$1,636
($19,434
)
$0
($45,346
)
113.37%

($53,145
)
$0
$1,604
($16,425
)
$0
($38,325
)
-95.81%

($34,145
)
$0
$1,573
($10,716
)
$0
($25,003
)
-41.67%

$0
($12,359
)
-11.24%

$0
$111,34
9
3.71%

Page 3

Appendix
Appendix Table: Cash Flow (Planned)
Pro Forma Cash Flow

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2002

2003

2004

Cash Received
Cash from Operations:
Cash Sales

$40,000

$40,000

$60,000

$80,000

From Receivables
Subtotal Cash from Operations

$0
$40,000

$0
$40,000

$0
$60,000

$0
$80,000

$110,00
0
$0
$110,00
0

$140,00
0
$0
$140,00
0

$180,00
0
$0
$180,00
0

$220,00
0
$0
$220,00
0

$250,00
0
$0
$250,00
0

$300,00
0
$0
$300,00
0

$350,00
0
$0
$350,00
0

$400,00
0
$0
$400,00
0

$2,170,0
00
$0
$2,170,0
00

$3,000,0
00
$0
$3,000,0
00

$4,300,0
00
$0
$4,300,0
00

$0
$0
$0
$0
$0
$0
$0
$0
$40,000

$0
$0
$0
$0
$0
$0
$0
$0
$40,000

$0
$0
$0
$0
$0
$0
$0
$0
$60,000

$0
$0
$0
$0
$0
$0
$0
$0
$80,000

$0
$0
$0
$0
$0
$0
$0
$0
$110,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$140,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$180,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$220,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$250,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$300,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$350,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$400,00
0

$0
$0
$0
$0
$0
$0
$0
$0
$2,170,0
00

$0
$0
$0
$0
$0
$0
$0
$0
$3,000,0
00

$0
$0
$0
$0
$0
$0
$0
$0
$4,300,0
00

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2002

2003

2004

$222,74
0
$661,25
0
$1,899,2
30
$2,783,2
20

$321,68
1
$706,10
0
$2,739,2
55
$3,767,0
36

Additional Cash Received

Extraordinary Items
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of other Short-term Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received

0.00%

Expenditures
Expenditures from Operations:
Cash Spent on Costs and Expenses

$3,440

$2,738

$3,406

$6,874

$7,141

$11,539

$12,177

$14,775

$18,473

$21,021

$26,018

$28,216

Wages, Salaries, Payroll Taxes, etc.

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$50,945

$1,032

$30,751

$24,842

$31,692

$61,943

$65,592

$55,417

$84,434

$79,193

$89,511

$120,02
9

$128,07
6

$104,04
5
$167,16
7

$110,37
3
$176,09
3

$134,08
3
$203,50
1

$167,01
9
$238,98
4

$190,68
4
$267,64
8

$234,82
5
$313,98
6

$155,81
8
$611,34
0
$1,156,8
81
$1,924,0
39

$0
$0
$0
$3,733
$0
$0
$0
$0
$59,150

$0
$0
$0
$3,733
$0
$0
$0
$0
$88,167

$0
$0
$0
$3,733
$0
$0
$0
$0
$82,926

$0
$0
$0
$3,733
$0
$0
$0
$0
$93,244

$0
$0
$0
$3,733
$0
$0
$0
$0
$123,76
2

$0
$0
$0
$3,733
$0
$0
$0
$0
$131,80
9

$0
$0
$0
$3,733
$0
$0
$0
$0
$170,90
0

$0
$0
$0
$3,733
$0
$0
$0
$0
$179,82
6

$0
$0
$0
$3,733
$0
$0
$0
$0
$207,23
4

$0
$0
$0
$3,733
$0
$0
$0
$0
$242,71
7

$0
$0
$0
$3,733
$0
$0
$0
$0
$271,38
1

$0
$0
$0
$3,733
$0
$0
$0
$0
$317,71
9

$0
$0
$0
$44,796
$0
$0
$0
$0
$1,968,8
35

$0
$0
$0
$44,796
$0
$0
$0
$0
$2,828,0
16

$0
$0
$0
$44,796
$0
$0
$0
$0
$3,811,8
32

($19,150
)
$382,35
0

($48,167
)
$334,18
3

($22,926
)
$311,25
7

($13,244
)
$298,01
3

($13,762
)
$284,25
1

$8,191

$9,100

$40,174

$42,766

$57,283

$78,619

$82,281

$292,44
2

$301,54
2

$341,71
6

$384,48
2

$441,76
5

$520,38
4

$602,66
5

$201,16
5
$602,66
5

$171,98
4
$774,64
9

$488,16
8
$1,262,8
18

Payment of Accounts Payable

Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current Borrowing
Other Liabilities Principal Repayment
Long-term Liabilities Principal Repayment
Purchase Other Short-term Assets
Purchase Long-term Assets
Dividends
Adjustment for Assets Purchased on Credit
Subtotal Cash Spent
Net Cash Flow
Cash Balance

Page 4

Appendix
Appendix Table: Balance Sheet (Planned)
Pro Forma Balance Sheet
Assets
Short-term Assets

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2002

2003

2004

Cash

Starting
Balances
$401,500

$382,350

$334,183

$311,257

$298,013

$284,251

$292,442

$301,542

$341,716

$384,482

$441,765

$520,384

$602,665

$602,665

$774,649

Other Short-term Assets

Total Short-term Assets

$0
$401,500

$0
$382,350

$0
$334,183

$0
$311,257

$0
$298,013

$0
$284,251

$0
$292,442

$0
$301,542

$0
$341,716

$0
$384,482

$0
$441,765

$0
$520,384

$0
$602,665

$0
$602,665

$0
$774,649

$1,262,81
8
$0
$1,262,81
8

Long-term Assets
Long-term Assets
Accumulated Depreciation
Total Long-term Assets
Total Assets

$0
$0
$0
$401,500

$0
$0
$0
$382,350

$0
$0
$0
$334,183

$0
$0
$0
$311,257

$0
$0
$0
$298,013

$0
$0
$0
$284,251

$0
$0
$0
$292,442

$0
$0
$0
$301,542

$0
$0
$0
$341,716

$0
$0
$0
$384,482

$0
$0
$0
$441,765

$0
$0
$0
$520,384

$0
$0
$0
$602,665

$0
$0
$0
$602,665

$0
$0
$0
$774,649

$0
$0
$0
$1,262,81
8

$0
$0
$0
$0

Jan
$29,929
$0
$0
$29,929

Feb
$23,820
$0
$0
$23,820

Mar
$29,630
$0
$0
$29,630

Apr
$59,800
$0
$0
$59,800

May
$62,130
$0
$0
$62,130

Jun
$100,391
$0
$0
$100,391

Jul
$105,941
$0
$0
$105,941

Aug
$128,542
$0
$0
$128,542

Sep
$160,713
$0
$0
$160,713

Oct
$182,879
$0
$0
$182,879

Nov
$226,360
$0
$0
$226,360

Dec
$245,481
$0
$0
$245,481

2002
$245,481
$0
$0
$245,481

2003
$350,912
$0
$0
$350,912

2004
$506,787
$0
$0
$506,787

Long-term Liabilities
Total Liabilities

$200,000
$200,000

$196,267
$226,196

$192,534
$216,354

$188,801
$218,431

$185,068
$244,868

$181,335
$243,465

$177,602
$277,993

$173,869
$279,810

$170,136
$298,678

$166,403
$327,116

$162,670
$345,549

$158,937
$385,297

$155,204
$400,685

$155,204
$400,685

$110,408
$461,320

$65,612
$572,399

Paid-in Capital
Retained Earnings
Earnings

$260,000
($58,500)
$0

$260,000
($58,500)
($45,346)

$260,000
($58,500)
($83,671)

$260,000
($58,500)
($148,355)

$260,000
($58,500)
($144,134
)
$57,366
$384,482

$260,000
($58,500)
($105,284
)
$96,216
$441,765

$260,000
$53,329
$377,089

$53,145
$298,013

$260,000
($58,500)
($158,461
)
$43,039
$341,716

$260,000
($58,019)
$111,349

$117,829
$334,183

$260,000
($58,500)
($179,767
)
$21,733
$301,542

$260,000
($58,500)
$481

$156,154
$382,350

$260,000
($58,500)
($187,052
)
$14,448
$292,442

$260,000
($58,500)
$481

$201,500
$401,500

$260,000
($58,500)
($160,714
)
$40,786
$284,251

$260,000
($58,500)
($66,413)

Total Capital
Total Liabilities and Capital

$260,000
($58,500)
($108,674
)
$92,826
$311,257

$135,087
$520,384

$201,981
$602,665

$201,981
$602,665

$313,329
$774,649

Net Worth

$201,500

$156,154

$117,829

$92,826

$53,145

$40,786

$14,448

$21,733

$43,039

$57,366

$96,216

$135,087

$201,981

$201,981

$313,329

$690,418
$1,262,81
8
$690,418

Liabilities and Capital

Accounts Payable
Current Borrowing
Other Short-term Liabilities
Subtotal Short-term
Liabilities

Page 5