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Confidentiality Agreement

The undersigned reader of KAPULUAN COS 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 KAPULUAN CO..

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
KAPULUAN CO...

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

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

__________________________________________________

Signature

__________________________________________________

Printed Name
Mission

To help people have a healthy body and mind by creating an all-natural product that is
good for numerous wellness and beauty related issues. At the same time, helping the
planet by developing a sustainable product that leads to zero waste and planting new
coconut palms to help the Philippines rebound from typhoon Hiayan.
Table of Contents
Executive Summary ............................................................................................................... 5
Product & Service Summary ...........................................................................................................6
Market Summary ...........................................................................................................................6
Vision ............................................................................................................................................7
Objectives ......................................................................................................................................7
Keys to Success ..............................................................................................................................7
Start-up Summary ..........................................................................................................................7

Product & Services ................................................................................................................ 8


Service Description.........................................................................................................................8

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


The Market ....................................................................................................................................9
Market Needs ................................................................................................................................9
Market Trends ...............................................................................................................................9
Market Growth ............................................................................................................................ 10
Market Segmentation................................................................................................................... 10

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


Management Team ...................................................................................................................... 12
SWOT Analysis ............................................................................................................................. 14
Value Proposition ......................................................................................................................... 14
Competitive Comparison .............................................................................................................. 14
Marketing Plan............................................................................................................................. 15
Promotion Strategy ...................................................................................................................... 15

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


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

Appendix............................................................................................................................. 26
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
EXECUTIVE SUMMARY

PRODUCT & SERVICE SUMMARY

Coconut Oil is a powerful solution to the problem of eating healthy and finding an organic skin-care
product that is also good for the environment. Moreover, cases like Toms shoes demonstrate the high
degree of interest consumers have in products that are either directly or indirectly philanthropic.
Kapuluan Coconut Oil, the company, is a Vancouver based Coconut Oil brand offering the worlds finest
organic hand cold pressed coconut oil.

The Coconut Oil is sourced from Eastern Samar in the Philippines, where it practices better than fair trade
standards, sustainable farming and planting initiatives, while providing small impoverished villages with
jobs, resources, and community development. Most competitors have mass production lines, sacrificing
quality for quantity, Kapuluan will be the exclusive brand that is hand pressed to focus on pure coconut
oil through the traditional way.

MARKET SUMMARY

The organic market is particularly remarkable in the U.S. where total sales reached US$11.9 billion in 2010,
ranking it as the largest market for organic food and beverages. The global organic food and beverages
industry, with value sales predicted to rise 33% by 2015, is expected to reach combined sales of US$36.1
billion due to increased consumer health awareness and broader distribution. Coconut oil consumption
in the United States has risen steadily, a steady increase that can likely be extrapolated globally. Since
1973 yearly consumption rose from 254,000 metric tons to 522,000 metric tons in 2103.
VISION

The vision of the company is to provide the worlds most ethically sourced multi-purpose organic material
through directly benefiting the community of Eastern Samar and helping people to live more simple lives.

OBJECTIVES

Kapuluan has core objectives that it must meet in order to achieve its financial objectives:

Raise $400,000 to establish its operations and prepare for commercialization.


Set-up the manufacturing facility in the Philippines for the Coconut Oil.
Source and train staff related to the Coconut Oil production process.
Establish a system of planting the Coconut plants efficiently and effectively.
Focus on the key target customers of women ages 28-40 living a wellness oriented life.
Launch the hand pressed Coconut Oil product in the health/beauty and foods sectors.

KEYS TO SUCCESS

Kapuluan has keys to success that it must achieve in order to build a successful business and client base:

Gain a position the in the market as the leading provider of coconut oil distribution globally.
Build the reputation and identity of enabling consumers to be philanthropic while simplifying life.
Ensure that the brand is quickly built, as no quality coconut oil products exist for health & beauty.
Maintaining an extremely efficient supply chain with low production costs for retail opportunities.
Scaling to eventually have Kapuluan competing with industry leaders.

START-UP SUMMARY

The initial start-up period will be designed to finalize web development, set-up the manufacturing line
and establish the overall supply chain. Cash flows for operations will primarily be used to build the brand
and emphasize marketing to introduce the Kapuluan brand as the premier provider of coconut oil in the
health and beauty/food sectors. Through this, it can establish a stable customer base very early on and
better defend its brand against imitators entering the market.
PRODUCT & SERVICES

SERVICE DESCRIPTION

The Kapuluan brand does not just simplify the lives of people and help them to live healthier, it gives
people the feeling that their purchase is contributing to a better world. Kapuluan is taken a step beyond
standard ethical product procurement or sustainability compliance, it is directly changing the lives of a
community impacted by a natural disaster and giving men, women and children a second chance in life.
These ideologies, in addition to having exclusive access to an unattested market, will position and protect
the company in the hand pressed coconut oil industry.

The Coconut Oil being hand pressed ensures pure oils with an organic production line, opposed to many
additives that reduce the purity. This ensures that it is better for the skin than other oils with several
additives also used for cooking applications and enables market penetration into the health & beauty
sector.

Coconut Oil: Kapuluans, premier product is its hand pressed, organic Coconut Oil. This oil is used as a
healthy cooking alternative to other fattening, high cholesterol cooking oils and is applied to the skin for
health benefits. This provides two market opportunities for the oil, which the brand can both enter and
dominate with its combination of other value points.

Philanthropic Values: The ethical sourcing of Kapuluan enables the brand to help people contribute to a
higher mission, beyond the mass production in a sterile assembly line. This grants the brand the
opportunity to have higher levels of public relations media coverage, gain positioning in a market with a
nearly identical commodity and have higher degrees of customer loyalty.

In addition to planting the coconut oil trees and producing locally, it may also partner with local farmers
and other manufacturers to have potential profit sharing agreements or higher than minimum wage
payment structures. Such an agreement would potentially be formed after analyzing the companys
financial and market positioning to make a financially feasible decision.

Reputable Brand: Through the managements marketing and leadership experience, the company can
eventually achieve and sustain majority market share and place Coconut oil as a branded alternative to
top name brand cooking and skin care products. This will make having Kapuluan oil a brand that shares
the reputation and image as demonstrating your support of ethical operations by wearing a cancer
awareness shirt or the sophistication of wearing a high-end brand of clothing.

Future Products: In addition to the pure hand pressed coconut oil, the development of the Kapuluan
brand enables expansion into other markets within the coconut oil industry. Future products may
eventually include organic additives to the oil and expansion into addition applications. Examples include
food or spice additives to cooking oils, or additional herbs or body additives or productions such as soaps
for the health & beauty segment.
INDUSTRY OVERVIEW

THE MARKET

The Coconut oil industry is sustainably growing in terms of consumption and recently, it has been applied
to natural health purposes as an alternative to artificial chemicals in many health and beauty products.
This is partially due to the overall long-term increasing shift towards more organic lifestyles.
The target market seeks out Coconut Oil to sustain healthier eating habits for cooking and to sustain
healthy skin for health applications. The target market, therefore, is focused around women ages 28-40
that have a wellness oriented life or use all natural products in their daily life.
The competition for the Coconut Oil industry is competitive as an application for cooking oil, as the oils
are a commodity and need branding for quality and performance positioning. However, the health &
beauty segments are still an untapped market with significant potential. The competitors that are
operating within this space do not currently have positioning in the hand pressed segment, or as a higher
end product. Hence, Kapuluan may target this area and control the higher end market.

MARKET NEEDS

The market needs of the consumers are to find products that support their healthy, organic lifestyle and
philanthropic values. Some of the target demographic will actively seek out these products, while others
will just prefer them over products that do not promote their lifestyle when making competitive retail
purchase decisions.

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 2012 article in
Business Insider forecasted that by the end of 2013, global smartphone penetration will have exploded
from 5% of the global population in 2009, to 22%. Thats an increase of nearly 1.3 billion smartphones in
four years. In order to accommodate this rising demand, in addition to the already rapid growth of e-
commerce, the company will integrate a mobile version of the website optimized for conversions. It may
also potentially promote its product on the mobile internet segment, such as proving a recipe cook book
for coconut oil application.
MARKET GROWTH

According to Euromarket, in 2010, the global organic food and beverage industries were worth US $24.4
billion and US $2.7 billion respectively. However, organic foods only made up 1.3% of total world food
sales, with penetration of organics highest in North America and Western Europe. North America has been
a leading player with sales of organic food and beverages totaling US$13.2 billion in 2011.

MARKET SEGMENTATION

We have segmented our market based on three categories. Each category will have unique service needs,
methods of targeting our advertising methods and demands. Our expectations that most sales will be
within the property owners and residential contractors segment.

Lifestyles of Health and Sustainability (LOHAS)

LOHAS is an acronym for Lifestyles of Health and Sustainability, which is a market segment that
mainly focuses on health and fitness, the environment, personal development, sustainable living,
and social justice.
LOHAS consumers are interested in products covering a range of market sectors and sub-sectors,
including organic foods, socially responsible products, integrative healthcare, dietary
supplements, and green products.
This is a relatively small but growing group of 41 million individuals who are dedicated to a specific
lifestyle, which makes them a very attractive niche market.

Women & Children

Manufacturers of healthier foods continue to mainly target female consumers, although men are
now
also
emerging as a lucrative health and wellness consumer group. Generally, women are more
concerned with body image and health, and they are often the ones making purchasing decisions
within their households.
Parents are also monitoring their children's diets much more closely, as they are becoming more
aware of the increasing global prevalence of childhood obesity and the dangers associated with
it, such as diabetes, heart disease, and high cholesterol and blood pressure.
In order to try and prevent childhood obesity and improve overall health and wellness, parents
are purchasing healthier snacks, and more organic fruits and vegetables for their children.
Manufacturers are also heavily advertising the nutritional benefits of certain functional
ingredients to parents, such as omega-3, which is believed to aid in brain and eye development,
which is thought to improve digestive health, control hunger and improve heart health.

The Ageing Population

A significant portion of the world population is now over 55 years of age, especially within North
America, Western Europe, and China. This consumer segment has now become a major target
group for the health and wellness industry, due to their increasing concern for improving their
health and maintaining their lifestyles. The ageing population spends a significant amount of
money on healthier foods, exercise equipment, and supplements.
The number of baby boomers aged 65 and/or older in Canada is predicted to rise from 4.8 million
in 2010 to 6.5 million by 2020. This means that in 10 years, one in six Canadians will be over the
age of 65.
This particular group of consumers is highly interested in maintaining a healthy lifestyle and a
certain level of vitality long into their retirement. Today's ageing population is also highly
educated because of the increasing amount of information available to them.

STRATEGY & IMPLEMENTATION SUMMARY

The strategy in the market is applied in three areas with one being a cost efficient production system, the
second being distribution and the third being the marketing. The production facility will be based in
Eastern Samar, where Coconut trees will be planted and processed for making the coconut oil. The
finished oil will packaged and bottled from outsourced wholesale packaging manufacturers and prepared
for shipping to the warehouse based in the United States or Canada.

The company will structure the logistics center around the lowest cost option. Shipping directly increases
expenses and having a drop shipper such as Amazon reduces the profit margin. The company will likely
use a drop shipper initially and later gather data on the country with most interest to establish a fulfillment
center there and reduce customs complexities and international shipping fees.

The third component is marketing, which will be the clear positioning against present and future
competitors. The company will compete indirectly with top name cosmetic and cooking oil brands and
directly with emerging brands selling coconut oil. The competitive edge that the company has is its
procurement and production methods, selling an organic lifestyle through the hand pressed pure quality
and philanthropic image. The ability for the brand to tell a story will help to introduce and sell it globally,
the tangible value from hand pressed production will make repeat buyers.
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


SWOT ANALYSIS

Strengths

Targeted consumer recognized with high demand for the product.


Charitable driven focus.
Strong brand identity.
Beautiful packaging.

Weaknesses

Low capital
High production and startup costs
High marketing Costs
Lack of initial management team
Scaling the company may take a year or more

Opportunities

Significantly lower production costs while creating a better story and more loyal followers
Extend brand product line
Gain market share for coconut oil as a beauty and skincare product
Gain market share for travel and convenience packaging
Use packaging, and beauty segmentation to create awareness and increase engagement
Create an ecommerce driven business model, increasing margins and control while significantly
improving cash flow
Threats

Competitors has access to significant capital.

VALUE PROPOSITION

The value proposition of Kapuluan oil is the capability of delivering ethically sourced pure hand pressed
coconut oil in the traditional method. For individuals, this means they can feel better about themselves
by contributing to a better world while improving their physical health and using a product that tells a
story. It positions an organic product with the same brand quality of top cosmetic application brands.

COMPETITIVE COMPARISON

There are two competitor groups that the brand will have to compete against. The first is the health
segment of coconut oil, there are many market entrants focusing on coconut oils health benefits and

14
cooking applications. However, most of these coconut oil brands are perfectly similar and none of them
have strong market positioning.

The Coconut oil brand focuses on the health benefits of cooking with Coconut Oil, compared to other
cooking oil. The differentiation of brands depends on the bottle size, design and product price. With the
exception of some additives, little differentiation exists. The company will uniquely position its product
with a focus on philanthropy, design and quality through the story.

MARKETING PLAN
Pricing Strategy

Bottles will be sold at $29.99 for a 473 ml amount directly from the website, with two alternative pricing
features. One will be wholesale distribution to be sold in spas and boutique health & beauty stores, where
a more intimate relationship with the customer enables explanation of the brands story. Wholesale price
will enable the retailer a 60-70% mark-up to reach the retail price, with no allotment for price decreases
compared to the online price. The third pricing model is subscription based, will be $24.99 per month for
consistent recipient of

PROMOTION STRATEGY

Corporate marketing will be our main area of focus. This area of marketing includes branding, analyst
relations, product launches, programs to upsell to and retain customers, and communications, both
internal and external all essential components of a marketing program.

Our packaging is developed to promote a feeling of quality and care. Putting the effort into beautiful
packaging will help our brand resonate with our target market and will facilitate relationships with
boutique retailers.

Packaging

100% recycled, recyclable, and reusable packaging


Mason jars good for glassware, storage
Lids can be recycled
Paper recycled
Rope used for gifts, camping etc.

Developing our own charitable initiative as well as working with established organizations will ensure
recognition and respect with our target market. It will also help establish relationships with risk takers,
idea spreading people, influencers, and salesmen and we can leverage these relationships for media and
exposure.

15
Product Launches

Initially we will offer coconut oil in 400 ml/14oz mason jars, as well as in 100ml and 200ml tube packaging,
for travel and convenience.

Once Kapuluan has gained traction and has a loyal user base, we will implement other products such as
soaps, hair treatments, lip ointments, moisturizers, sun protection, as well as other specialty creams and
lotions.

Upsell & Retention Programs

Because we will be selling primarily on our own online store, implementing a subscription model will be a
key to cash flow, growth, and long term success. Travel packaging will act as a great upsell. Consumers
will often purchase a tube package along with the jar, so they may carry their coconut oil on the go, or
make it easier to use in the shower etc. We will implement members only discounts and perks, to ensure
that our subscribers feel the love and know we care about them all year long.

Sponsorships

We intend to develop sponsorships with our efforts related to the environment, global warming,
developing 3rd world communities, simplification, and anti-consumerism, better than fair trade
standards, charities, healthy bodies, and healthy minds.

PR / Guerilla Marketing

Our strategy of challenging the status quo, and being activists may require a few dramatic performances
or demonstrations to get as much news, and social media coverage as possible. While staying within the
bounds of the law, we may stage guerilla marketing efforts designed to anger people, or get peoples
attention on a controversial issue, while leveraging relationships with bloggers, journalists, media, and
celebrities who focus or support such issues.

16
FINANCIAL FORECASTS

START-UP SUMMARY

Startup Expenses Startup Liabilities


Pre-Opening Salaries and Wages $650 Liabilities and Capital
Prepaid Insurance Premiums $1,700 Current Borrowing $0
Legal and Accounting Fees $800 Long-Term Liabilities $0
Rent Deposits $300,000 Accounts Payable $0
Utility Deposits $3,000 Other Current Liabilities $0
Supplies $0
Advertising and Promotions $0
Startup Investments
Licenses $0 Planned Investment
Other Initial Start-Up Expenses $0 Owner $0
Total Startup Expenses $306,150 Investor 400,000
Total Planned Investment $400,000
Startup Assets
Working Capital (Cash On Hand) - Startup Funding
Inventory $2,900 Total Liabilities $0
Equipment - Total Planned Investment 400,000
Furniture and Fixtures - Total Funding $400,000
Other Fixed Assets -
Total Startup Assets $2,900
Total Requirements
Total Startup Expenses $306,150
Total Startup Assets 2,900
Total Requirements $309,050

Startup
$450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0
Expenses Assets Investment Loans

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 24 30 36 43 49 56 62 69 75 82 89 96 712 2491 4982
Gross Margin 20 25 30 35 40 45 51 56 61 67 72 78 581 2033 4066
Operating Expense 7 7 7 7 7 7 7 7 7 7 7 7 88 647 1373
EBITDA 13 18 23 28 33 38 43 49 54 60 65 71 493 1386 2693
Net Profit 2 6 10 14 18 22 26 30 35 39 44 48 293 1007 2053

Gross Margin/Revenue 83% 83% 82% 82% 82% 82% 82% 81% 81% 81% 81% 81% 82% 82% 82%
EBITDA/Revenue 53% 58% 62% 65% 67% 69% 70% 71% 72% 72% 73% 74% 69% 56% 54%
Net Profit/Revenue 7% 18% 26% 32% 36% 40% 42% 44% 46% 48% 49% 50% 41% 40% 41%

Net Cash Flow 13 18 12 28 33 18 43 49 25 60 65 32 395 1109 2155


Cash Balance - Ending 13 30 42 70 103 121 165 213 238 298 363 395 395 1504 3658

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


6000 6000
5000 5000
4000
4000
3000
3000
2000
1000 2000

0 1000
Year 1 Year 2 Year 3
0
Revenue Gross Margin EBITDA Net Profit Year 1 Year 2 Year 3

Projected Cash Flow By Year ($000) Projected Net Income By Year ($000)
5000 2500

4000 2000
3000
1500
2000
1000
1000

0 500
Year 1 Year 2 Year 3
0
Net Cash Flow Cash Balance Year 1 Year 2 Year 3

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 82% 82% 82%
Net Profit Margin 41% 40% 41%
EBITDA to Revenue 69% 56% 54%
Return on Assets 42% 59% 55%
Return on Equity 42% 59% 55%

Financial Indicators

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Year 1 Year 2 Year 3

Gross Margin Net Profit Margin EBITDA to Revenue Return on Assets

19
REVENUE FORECAST

Revenue Forecast
Year 1 Year 2 Year 3
Revenue Forecast
Unit Sales $ 381,884 $ 1,336,593 $ 2,673,186
Subscriptions $ 329,868 $ 1,154,538 $ 2,309,076
Total Revenue $ 381,884 $ 1,336,593 $ 2,673,186

Direct Cost of Revenue


General COGS $ 130,894 $ 458,128 $ 916,257
Other $ - $ - $ -
Subtotal Cost of Revenue $ 130,894 $ 458,128 $ 916,257

Year 1 Revenues (Monthly)


160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

Revenue By Year
6000

5000

4000

3000

2000

1000

20
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 $ 711,752 $ 2,491,131 $ 4,982,262

Subtotal Cost of Revenue $ 130,894 $ 458,128 $ 916,257

Total Cost of Revenue $ 130,894 $ 458,128 $ 916,257

Gross Margin $ 580,858 $ 2,033,003 $ 4,066,005


Gross Margin/Revenue 82% 82% 82%

Expenses
Rent $ 15,600 $ 17,160 $ 37,752
Gross Wages $ 36,000 $ 39,600 $ 87,120
Payroll Expenses $ 7,200 $ 7,920 $ 17,424
Utilities $ 3,600 $ 3,960 $ 8,712
Supplies $ 600 $ 660 $ 1,452
Repair & Maintainence $ 14,400 $ 15,840 $ 34,848
Advertising (10% of sales) $ - $ 133,659 $ 267,319
Auto, Delivery, and Travel $ 5,400 $ 5,940 $ 13,068
Accounting and Legal $ - $ 1,474 $ 3,243
Telephone and Communications $ - $ 2,640 $ 5,808
Production Facility Scaling $ - $ 55,000 $ 121,000
Insurance $ 4,800 $ 5,280 $ 11,616
Taxes-Other $ - $ - $ -
Interest $ - $ - $ -
Social Media $ - $ 59,400 $ 130,680
Shipping $ - $ 149,600 $ 329,120
Customer Service $ - $ 33,000 $ 72,600
Total Operating Expenses $ 87,600 $ 531,133 $ 1,141,761
Wages & Payroll $ - $ - $ -
Depreciation, Amortization & Taxes $ 200,702 $ 402,424 $ 686,899
Net Income $ 292,556 $ 1,099,445 $ 2,237,345
Net Income/Revenue 41% 44% 45%

21
PROJECTED CASH FLOW

Pro Forma Cash Flow


Year 1 Year 2 Year 3
Beginning Cash Balance $ - $ 394,606 $ 1,596,102
Cash Inflows
Income from Sales $ 711,752 $ 2,491,131 $ 4,982,262
Accounts Receivable $ - $ - $ -
Total Cash Inflows $ 711,752 $ 2,491,131 $ 4,982,262

Cash Outflows

Investing Activities
New Fixed Assets Purchases $ - $ - $ -
Inventory Addition to Bal.Sheet $ - $ - $ -
Cost of Sales $ 130,894 $ 458,128 $ 916,257

Operating Activities
Salaries and Wages $ - $ - $ -
Fixed Business Expenses $ 87,600 $ 531,133 $ 1,141,761
Taxes $ 98,652 $ 300,374 $ 584,849

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

Total Cash Outflows $ 317,145.40 $ 1,289,635.55 $ 2,642,866.93


Cash Flow $ 394,606.30 $ 1,201,495.40 $ 2,339,394.96
Operating Cash Balance $ 394,606.30 $ 1,596,101.70 $ 3,935,496.66
Ending Cash Balance $ 394,606.30 $ 1,596,101.70 $ 3,935,496.66 \

Year 1 Cash
3,000,000
Net Cash Flows
2,500,000
2,000,000
1,500,000
1,000,000
500,000
Cash Balance
-
(500,000) Month Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 12

22
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 $ 394,606 $ 1,596,102 $ 3,935,497
Other Current Assets $ 207,000 $ 104,950 $ 2,900
Total Current Assets $ 601,606 $ 1,701,052 $ 3,938,397

Long-term Assets
Long-term Assets $ 90,950 $ 90,950 $ 90,950
Accumulated Depreciation $ - $ - $ -
Total Long-term Assets $ 90,950 $ 90,950 $ 90,950
Total Assets $ 692,556 $ 1,792,001 $ 4,029,346

Liabilities and Capital


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

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

Common Stock $ 400,000 $ 400,000 $ 400,000


Retained Earnings $ 292,556 $ 1,392,002 $ 3,629,347
Total Capital $ 692,556 $ 1,792,002 $ 4,029,347
Total Liabilities and Capital $ 692,556 $ 1,792,001 $ 4,029,346

23
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

24
SENSITIVITY ANALYSIS

Best Case Scenario (Revenue Increase by 15% )


Year 1 Year 2 Year 3
Revenue $ 439,166 $ 1,537,082 $ 3,074,164
Cost of Goods Sold $ 150,528 $ 526,848 $ 1,053,695
Gross Margin $ 288,638 $ 1,010,234 $ 2,020,468
Gross Margin/Revenue 66% 66% 66%
Operating Expenses $ 87,600 $ 531,133 $ 1,141,761
EBIT $ 201,038 $ 479,101 $ 878,707
EBIT/Revenue 46% 31% 29%

Worst Case Scenario (Revenue Decrease by 15% )


Year 1 Year 2 Year 3
Revenue $ 324,601 $ 1,136,104 $ 2,272,208
Cost of Goods Sold $ 111,260 $ 389,409 $ 778,818
Gross Margin $ 213,341 $ 746,695 $ 1,493,390
Gross Margin Revenue 66% 66% 66%
Operating Expenses $ 87,600 $ 531,133 $ 1,141,761
EBIT $ 125,741 $ 215,562 $ 351,628
EBIT/Revenue 39% 19% 15%

Revenue
$3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$-
Year 1 Year 2 Year 3

Best Case Most Likely Worst Case

25
APPENDIX

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 $ 23,992 $ 30,190 $ 36,447 $ 42,768 $ 49,154 $ 55,611 $ 62,140 $ 68,745 $ 75,431 $ 82,201 $ 89,060 $ 96,012
Subtotal Cost of Revenue $ 4,079 $ 5,282 $ 6,496 $ 7,720 $ 8,956 $ 10,203 $ 11,463 $ 12,736 $ 14,023 $ 15,324 $ 16,640 $ 17,971
Total Cost of Revenue $ 4,079 $ 5,282 $ 6,496 $ 7,720 $ 8,956 $ 10,203 $ 11,463 $ 12,736 $ 14,023 $ 15,324 $ 16,640 $ 17,971

Gross Margin $ 19,913 $ 24,907 $ 29,951 $ 35,047 $ 40,198 $ 45,407 $ 50,676 $ 56,009 $ 61,408 $ 66,878 $ 72,421 $ 78,041
Gross Margin/Revenue 83% 83% 82% 82% 82% 82% 82% 81% 81% 81% 81% 81%

Expenses
Rent $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300 $ 1,300
Gross Wages $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Payroll Expenses $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600 $ 600
Utilities $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300 $ 300
Supplies $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
Repair & Maintainence $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200 $ 1,200
Advertising (10% of sales) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Auto, Delivery, and Travel $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450 $ 450
Accounting and Legal $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Telephone and Communications $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Production Facility Scaling $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Insurance $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400 $ 400
Total Operating Expenses $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300 $ 7,300

EBIT $ 12,613 $ 17,607 $ 22,651 $ 27,747 $ 32,898 $ 38,107 $ 43,376 $ 48,709 $ 54,108 $ 59,578 $ 65,121 $ 70,741
EBIT/Revenue 53% 58% 62% 65% 67% 69% 70% 71% 72% 72% 73% 74%

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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
$ 23,992.0 $ 30,189.6 $ 36,447.2 $ 42,767.7 $ 49,154.4 $ 55,610.5 $ 62,139.6 $ 68,745.2 $ 75,431.1 $ 82,201.5 $ 89,060.4 $ 96,012.5
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 23,992.0 $ 30,189.6 $ 36,447.2 $ 42,767.7 $ 49,154.4 $ 55,610.5 $ 62,139.6 $ 68,745.2 $ 75,431.1 $ 82,201.5 $ 89,060.4 $ 96,012.5

Expenditures

Expenditures from Operations


$ 11,378.6 $ 12,582.2 $ 24,370.3 $ 15,020.3 $ 16,256.0 $ 37,254.1 $ 18,763.4 $ 20,036.3 $ 50,561.5 $ 22,623.7 $ 23,939.7 $ 64,359.4
Subtotal Spent on Operations
$ 11,378.6 $ 12,582.2 $ 24,370.3 $ 15,020.3 $ 16,256.0 $ 37,254.1 $ 18,763.4 $ 20,036.3 $ 50,561.5 $ 22,623.7 $ 23,939.7 $ 64,359.4

Additional Cash Spent

Current Borrowing Repay


$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 11,378.6 $ 12,582.2 $ 24,370.3 $ 15,020.3 $ 16,256.0 $ 37,254.1 $ 18,763.4 $ 20,036.3 $ 50,561.5 $ 22,623.7 $ 23,939.7 $ 64,359.4

Net Cash Flow


$ 12,613.4 $ 17,607.4 $ 12,076.9 $ 27,747.4 $ 32,898.4 $ 18,356.5 $ 43,376.2 $ 48,708.9 $ 24,869.6 $ 59,577.8 $ 65,120.8 $ 31,653.1
Cash Balance
$ 12,613.4 $ 30,220.8 $ 42,297.7 $ 70,045.1 $ 102,943.5 $ 121,300.0 $ 164,676.2 $ 213,385.1 $ 238,254.7 $ 297,832.4 $ 362,953.2 $ 394,606.3

27