Professional Documents
Culture Documents
Contents
Executive Summary...3
08
Company Overview....5
Market Opportunity Analysis.........6
Market....6
Customer........6
Competitor......7
SWOT Analysis..8
Market Plan and Tactics...11
Target Market Segments..11
Product Lines12
Pricing..13
Promotion.14
Sales Channel...15
Store Sales.15
Distribution15
Web Sales..15
Management and Human Resources17
Team.17
Personnel Requirements and Management .17
Compensation Packages...............17
Manufacturing Plans19
Financial Statement and Analysis22
Cash Flow22
Income Statement.....23
Balance Sheet...23
Financial Plans.25
Tactics and Future Planning.27
Executive Summary
Overview
Financial Status
After paying off the emergency loan we received in quarter 2 due to an
oversight in hiring salespeople in the correct location, C&B has been greatly
expanding. We have been focusing more on research and development, advertising
and, creating sales offices in high-demand locations. In the first two quarters, our
revenue was relatively low. In quarter 3 however, we saw a large increase in revenue
of an impressive 3101.4%. Our gross margin has also been increasing and we now
project a conservative estimate of 53.6% growth in quarter 4 -- nearly a 10%
improvement from the previous quarter. Improving our margins also means that we
will see more profits and grow into an even better company. In the absence of a
venture capital investment of $4 million C&B would still be a self-sustainable and
profitable by next quarter. However, we know that there is a great potential growth
opportunity in purchasing the research and development. It would benefit both
investors and our company. Our R&D expenses are targeted toward adding additional
security to our computers, a feature that all three segments want to see in a computer.
We believe that in receiving this funding, C&B will be highly profitable and can
create a huge return for our investors.
units), and South America (3,729 units). With a total demand of 825 units in Q3, the
market is only 3.5% saturated. The main demographics of the market include highpowered professionals in need of a computer with high networking capabilities that
can be used in controlling manufacturing processes, engineering and design, and word
processing. Their main priorities are high performance and fast and powerful
processing. Their web customers prioritize the security of their credit card / identity,
access to human sales and service representatives, and the ability to track their
purchases. They are ranked at the highest price point with 100% of the market willing
to pay $4,100 and less per unit.
Traveler
The Traveler segment is the smallest segment globally, with a 12-month total
potential demand of 18,494 units, geographically concentrated in order from most to
least in: North America (5,762 units), Europe (5,528 units), Asia (3,938 units), and
South America (3,266 units). With a total demand of 1,345 units in Q3, the market is
the most mature market thus far at only 7.3% saturated. The main demographics of
the market include regular users who are consistently on the road in need of a
computer with high networking capabilities that can be used in presentation building,
word processing, and business graphics. Their main priorities are portability, size,
and brand recognition. Their web clientele prioritize security of their personal
information, ease of website navigation, and access to human service and sales
representatives. They are ranked at the medium price point with 100% of the market
willing to pay $3,000 and less per unit.
Workhorse
The Workhorse market segment is the largest globally, with a 12-month total
potential demand of 34,203 units, geographically concentrated in order from most to
least in: North America (9,374 units), Asia (9,081 units), Europe (8,334 units), and
South America (7,414 units). With a total demand of 1,702 units in Q3, the market is
only 5% saturated. The main demographics of the market include regular users in
need of a computer with high networking capabilities that can be used in word
processing, bookkeeping and budgeting, and data management. Their main priorities
are cost efficiency, ease of use, and multitasking abilities. Their web customers
prioritize the security of their personal and payment information, access to human
sales and service representatives, and ease of navigation/purchase. They are ranked at
the lowest price point with 100% of the market willing to pay $2,500 and less per
unit.
Competitor Profiles
XLerate Inc. (Toughest Competitor Overall and in Workhorse Segment)
XLerate is our toughest competitor overall and in the Workhorse segment with
44% total market share comprising of a 98% market share in the Workhorse segment,
almost a full monopoly. XLerate has maintained a full monopoly over the Workhorse
market since the first quarter of production, and they are the only company to
maintain its market share in its target segment. However, they have decreased around
10% in terms of total market share. Their unit demand has increased 162% since the
first quarter of production. They have the highest demand per salesperson by at least
double, and they have the highest advertising budget with 13 regional ads. Their main
brands are XLerator ($2399 with $300 promotional rebate), which held the highest
demand and was rated 74% acceptable by the workhorse segment and 20% acceptable
in the Mercedes segment. They have had the mostly highly rated advertisements
across all market segments. We anticipate that they will continue to maintain majority
market share in the Workhorse segment, but will make the effort to engage with other
market segments. They will probably also introduce a new brand, as a result. They
could improve in terms of factory worker productivity, and will probably increase
factory worker compensation in response to that. They will probably also need to
increase their manufacturing plants fixed capacity.
improve their financial situation with more conservative methods than others, and will
work to capitalize on their new Sao Paulo market and potentially explore adding a
workhorse-targeted product.
Weaknesses
We had a difficult start, and produced many computers that did not satisfy our
markets. We had to scrap them and start over, causing us to lose money that would
have been spent elsewhere. We also accidentally only trained our staff to sell to
Workhorse clients while only producing for Mercedes, but that has since been
corrected as well. Human resources also takes a high expenditure to keep our workers
happy. Our main weaknesses has been recovering from mistakes made in earlier
quarters, but we believed we have learned from our mistakes and will make fewer of
them in the future.
Opportunities
On top of redesigning our computers to better fit our clientele, we also
designed a brand new laptop to break into the Traveler market that we were
previously attaining customers in only by accident. Now that we have a significant
market share (24%) of the Traveler segment, we can capture even more of them with
our new Traveler laptop. Eventually, we would like to make a new office in Paris,
which has no competition currently and has a large Mercedes segment that we could
capture.
Threats
Currently XLerate dominates the Workhorse market we wanted to capture.
Our market share is not as high as we would like it, and if we do not establish our
brands soon, we may miss our opportunity. Other companies are growing steadily, and
we will have to grow at an even faster rate to maintain our presence in this market. We
also need to stay out of debt so that we do not waste money paying interest.
10
while only hiring Workhorse salesmen in the other. With no salesmen to promote our
product, very few were sold and our company went largely unnoticed.
The following quarter, we had a lot of debt because of our mistake. We wanted
to improve our brand this time around, but at the same time, did not want to spend
money on marketing when our company was failing. We thought it would be smart to
minimize marketing costs while in debt, but to try to use our money effectively. We
spent $15,000 on market research and also updated our advertisements. We also
noticed how consumers were responding to the market, and even made a new product
specifically designed to fit the Workhorse niche that we believed was still accessible.
While XLerate managed to claim 98% of the Workhorse share early on, we were not
ready to give up. At this point, we unintentionally gained a lot of attention from the
Traveler segment. In fact, we claimed 22% of their market without even trying. At this
point, we realized that this was a market that needed a product. From here, we agreed
to appeal to all three market segments, while maintaining our business model to make
the fastest, most secure computers at the cheapest price.
Despite our difficult start, we have learned a lot in our first three quarters as
business owners, and we do not make the same mistakes twice. After much market
research, we are highly confident that we have produced computers that our market
segments will love, placed ads in places they will be seen, and hired salespeople in the
correct locations. Finally, we have modified our target markets so that we will target
them in the following order: 1) Mercedes, 2) Traveler, 3) Workhorse.
This quarter, we polled consumers for what they were looking for in a laptop,
and filtered those responses in order of importance. On top of this, we took note of
what consumers were buying which laptops that were already on the market. We
strategically produced new computers using both consumer response information, and
data on consumer behavior within the market. It is because of this new evaluation that
we are more confident than ever that this quarter will be our strongest one yet.
Product Lines
Chips & Bits currently has three products for sale. The Desk 2.0 is our new
edition for the Mercedes segment. We noticed that none of the laptops on the market
are satisfying the Mercedes segment, except for one of Millenials desktops which just
barely scores a 70. Our Desk 2.0 comes in second, at a score of 60. We also noticed
that the Mercedes segment rated price as 100 for every computer on the market,
meaning nobody on the market is pricing anything too high for their segment. We
deduced that the Mercedes therefore requires a better laptop than the ones on the
market -- even if they have to pay for it. We created our Desk 2.0 by adding every
12
feature available to us, except games because we didnt think this would appeal to
them. We hope that this is the kind of desktop they are looking for, even if they have
to pay extra to get it.
We noticed we could charge more for mercedes and improve our brand. they
felt nobody in the entire market was charging too much. 100% of them were satisfied
by all prices in the market. We hope to make a desktop they will love by including
every feature available to us. while we originally wanted to try to save costs where
possible, it has become apparent that to mercedes customers money is no object, and
they would prefer to have the absolute best computer money can by.
Our second product, Lab 1.0 targets the Traveler. Though originally created
for the Workhorse, our Traveler rated our only laptop a 68, while the Workhorse rated
it a 30. We realized that this was wrong to try to sell a laptop to a Workhorse, because
they only want their computer at home. They also want a cheaper price, and laptops
are inherently more expensive. We therefore revamped our laptop and came out with a
brand new Lab 2.0, specifically designed for the Traveler segment. We used their
consumer data to tweak the features to better fit this segment. We expect to claim even
more of their market in the future quarter.
For our final product, the Work 1.0, we target the Workhorse. XLerate is
dominating the Workhorse market with a 99% share. We recognized that XLerate
clearly understood the Workhorse segment the best, and no longer tried to outdo them.
Instead, we imitated their product and made one nearly identical to the one they
managed to sell so much of, but with slightly less features. We expect to be able to
break into this market next quarter by selling at a cheaper price than XLerate. We can
do this because our cost of production is cheaper. We also notice that while XLerate
has this market almost entirely to themselves, the Workhorse only rated their
computer a 74. But second to them is our Desk 1.0 at 40. Such a large gap explains
why Workhorse unanimously chooses their product. Next quarter, we think we will
offer much greater competition.
Pricing
Our pricing has been very well received. In fact, our target markets report
100% satisfaction with our price. We are proud of this, as it is a part of our mission
statement to supply products at the most affordable price. We also noticed it as an
opportunity for growth. For example, as mentioned above, the Mercedes segment is
not very satisfied with any of the products in the market, but it is satisfied with the
price. We therefore will make them a better product because they are willing to pay
for it. We will sell our Desk 2.0 at $4,050 with a $100 rebate, $150 above Milenials
13
Desk product. We anticipate margins (with respect to production) of around $1000 per
unit, or 25%.
The Traveler market we expect to be the easiest to capture because we have
already gotten a good portion of their market without targeting them at all.
Unfortunately, laptops are naturally more expensive than desktops, so we could not
keep the price too low. But this segment needs a laptop and are willing to pay for
portability. We are selling our Lab 2.0 at $2,799 with a $199 rebate. We anticipate
margins (with respect to production) of around $400 per unit, or 15%.
As for the Workhorse, they are the most sensitive segment in regards to price.
We believe we can undercut the current market leader on price by producing a laptop
with fewer features. Though it may not have everything the Workhorse would want in
a desktop, price is their biggest factor in choosing what to buy. By making a cheaper
laptop, we hope to offer an alternative that does not exist but is still appealing to this
segment. Since workhorse clients would prefer cheaper cost, we hope that they would
be satisfied with a laptop that is less expensive but has similar features to the one they
already enjoy. We will sell our Work 1.0 at $100 below XLerates XLerator price, at
2,299 with a $299 rebate. We anticipate margins (with respect to production) of
around $100 per unit, or 5%.
Promotion
Making cuts on marketing after quarter 2 to conserve our money and prevent
more debt taught us why marketing is important. Our sales were low during quarter 3
because of this, however C&B stands by its decision. We did not have a whole lot of
products to sell at this point, nor did we know if consumers would like them. We
advertised modestly as a test to feel out the market, and we learned what we needed
to. Now we are stronger than ever, with products strategically designed based on
consumer reports and competitor products that we are very confident will appeal to
the designated markets. This means we are ready to promote heavily.
Along with designing our new laptops, we had to design a new advertisement
for each one. Of the 9 ads currently produced between the four companies, only two
of them were deemed acceptable by the workhorse segment alone. The rest of the ads
were deemed unsatisfactory by all market segments. We took this into careful
consideration. An advertisement should be well-placed and appealing to the target
market in order for it to be effective, and currently no company seems to be doing this
well. We went back over consumer reports and carefully designed the advertisement
with features we felt would appeal to our targets. We also looked closely at what the
satisfactory ads had that ours did not, and made changes accordingly. For the
14
Sales Channel:
Distribution
C&B operates sales offices in both Chicago and Shanghai. We feel that by
having two offices, we are able to successfully reach into two different populations,
covering most of North America and Asia. It is our goal to soon be able to open a
third office in Paris, which not only has the largest Mercedes segment second only to
Chicago, but also currently has no competition. This would allow us to control the
European market as well, and with our new Desk 2.0, we believe it is a likely
possibility.
Store Sales
C&B currently places a great emphasis on its stores, relying on them for
73.7% of our total computer sales. As of right now, we have 7 sales people in both our
Chicago stores and our Shanghai stores. At each location, we have trained our
workforce to be able to sell all three of our computer brands. We are confident that
our employees at our stores will be able to help all types of customers, regardless of
their desired brand. We look forward to hiring more salespeople as our company
grows to better accommodate our growing customer base. Additionally, service repair
workers have become increasingly important to us at our stores. For this reason, we
15
plan to hire additional service people to work alongside our sales force in both our
Chicago and Shanghai locations. At C&B, it is our goal for our customers to leave our
store satisfied, both with their purchases and their service. In order to ensure that we
continue to please our customers, we are committed to maintaining a sufficient
number of sales and service employees at all of store locations.
Web Sales
As of right now, our web sales currently account for 26.3% of our total
computer sales. We run all of our web sales out of our web center based in Chicago.
We currently have four web sales people and two service people hired. In order to
keep up with a growing demand for our web sales, we plan to continually hire both
additional web service and sales people. As C&B continues to grow, we expect web
sales to increase linearly. In order to reach out to more web consumers, we will begin
employing new techniques, such as listing our company on major electronics websites
and coming up more frequently on search engines. We feel this will give us a
competitive advantage when people decide to purchase their computers online. In
addition, we feel strongly that the presentation of our website is extremely important
to our company. For this reason, we will be investing into more web maintenance and
additional web features in the coming weeks. We feel that our website should be easy
to navigate and possess features that make computer shopping easy for our
consumers. By continually upgrading our website and hiring additional employees,
we are confident that our web sales will continue to increase, ultimately taking up a
larger percentage of our total revenue.
16
17
18
Manufacturing Plan
Production Plan
Lean manufacturing is one of C&Bs strengths: we have consistently produced
to demand; although our current market share is small, our decisions to tailor
production to demand has enabled us to avoid significant debt and oversight in
judging our sales revenue. We initially chose to retain a small amount of inventory (50
Lab Pro models), but we did not realize the detrimental qualities of this choice.
Consequently, we scrapped our inventory in the next quarter for a cost of
approximately $35,000 and changed our brand to better fit customer needs. Currently,
we carry no inventory and do not intend to do soour only variable that could
potentially change this decision is whether we ultimately produce a model that proves
to be a cash cow and wish to take advantage of production over two quarters.
Our current production plant is centered in Shanghai, China. The location
19
allows for C&B to take advantage of the benefits of offshoring; namely, lower prices
for our customers fueled by lower production costs in labor, raw materials, and trade
restrictions. Presently, fixed capacity is set at 50 units per day (per 65 day/13 week
period) and we are well below this maximum limit. To avoid crowded conditions and
overworked employees, we operate at a capacity of 35 units per day, and again fall
well below this maximum (specifics below in chart). We anticipate that in quarter 4,
demand will improve for our products, based on our three new models: Desk 2.0
(marketed towards Mercedes sector), Work 1.0 (marketed toward Workhorse sector),
and Lab 2.0 (marketed towards Traveler sector). If this is the case, we intend to
expand our fixed capacity by 25-50 units, enabling production of 75-100 units per
day. Since we are still paying off debt, we are slowly expanding, but hope to take
advantage of larger factory size and smaller overhead costs in the future. We intend to
expand in the next few quarters and increase our ability to serve a growing market.
Capacity and Cost Current situations and projections (highlighted current quarter)
Q1
Q2
Q3
Q4
Q5
Q6
Q7-10 (avg)
1625
3250
3250
3250
6500
19500
975
1950
2275
2925
4875
16575
Percentage in use
9%
31%
69%
90%
75%
85%
600
600
1100
1100
7200
Employees
Our factory has coordinated with human resources to hire workers on a need
basis. Currently, we are often sending our workers home because we do not have
enough demand to produce a days worth of work. We operated at about 31% of
capacity in Quarter 3, up from 9% the previous quarter. We aim to improve this
problem with our three new product lines aimed directly at our target sectors in
Quarter 4. Productivity has been consistent at 70%, but we may choose to up
productivity depending on demand.
We have attempted to provide a model that overpays our employees slightly
and offers the highest health benefits to retain loyalty and keep employees happy and
productive. As we increase the size of our factory, we will be able to reduce costs of
overheads and can redistribute operating capacity to avoid overcrowding and
employee dissatisfaction. We aim to retain works and provide benefits more attractive
than our competitors: strong employee benefits have been within our mission
20
statement since the founding of C&B, as we believe that the cost of training and
loyalty are paramount to our success.
Production Cost vs. Demand Results and Projections (highlighted current quarter)
Q2
Q3
Q4
Q5
Q6
Q7-10
Next Year
Operating Capacity
975
1950
2275
2925
4875
16575
22100
Productivity
9%
31%
69%
90%
75%
85%
85%
Units Produced
138
616
1560
2925
4875
16575
22100
1700
1403
1350
1300
1150
1000
800
21
450
950
1560
2925
4875
16575
22100
88
616
Stock Outs
Cost in R&D
120000
2.74M
Demand Projection
Actual Demand
quarters. The fourth quarter we expect to see the market growth rate to double. We
revitalized our marketing strategies as well as our product designs and now expect to
have a 25% market share in Workhorse, 40% in Traveler, and 50% in Mercedes. From
these market shares we are expecting revenue to be $4.2 million, an increase of $2.4
million, or 133% growth. The margin percentage will increase from 43.2% to 53.6%.
This can be attributed to the slight increase in prices and the increased production
capacity, lowering our costs. One thing we noticed was that our prices were lower
than the other competitors and 100% of each market segment was willing to pay that
price for our products. Based on this, we were able to create computers for each
segment with our priorities being: mercedes, traveler and workhorse and raise the
prices slightly in order to still remain competitive, but ensure that we try and capture
as much revenue as possible. From research, the typical gross margin range for a
personal computer industry is around 50-100%. We project our margin at the lower
end of the range because we are trying to produce more product at a lower cost in
order to turn a profit.
Revenue
$56,682
$1,814,634
$4,151,537
COGS
$29,518
$946,256
$1,779,704
Gross Margin
45.6%
43.2%
53.6%
In quarter two our two biggest expenses can be found in the excess capacity costs,
sales office and web center expenses, and sales force expense. Looking at quarter 4
we project an increase in the sales force expense, due to the hiring of more
salespeople, a maintenance of sales office and web expense and a decrease in the
excess capacity cost due to better resource management. In quarter 4 we see a large
focus on research and development, with expenditures increasing from $120,000 to
$2,738,312. Looking at the below chart, Q4 we will request additional funding to try
and accomplish this ambitious research and development spending. We expect this
spending to be highly profitable because of the high investment in the future. WE
intend on developing features that will please our clients and in turn bring in more
revenue. These features will become available in Q5 and we will begin to see the
returns then.
23
Net Cash
Flow
-$580,000
-$1,371,480
-$541,042
-$1,809,767
$1,270,900
-$156,233
Cash
Balance
$820,000
$1
$307,478
$2,497,711
$2,668,611
$2,912,378
For more detailed listing of expenses, please see Appendix for full Cash Flow.
Income Statement
The income statement gives an insight into the profitability of C&B as well as the
earnings per share. While quarter 3 we focused on minimizing costs and repaying the
emergency loan, quarter 4 we intend on focusing a great deal on expanding and
spending a lot of money on this as well as the fixed costs. Quarter 5 we expect to see a
large net income. This can be attributed this to an increase in research and
development spending and the introduction of a new feature. Earnings per share
dramatically increases from -$23 in quarter 4 to $28 and $33 in quarters 5 and 6
respectively. Looking at this data, we can see that our company will see impressive
growth from quarter 4 to quarter 5.
Net Income and Earnings Per Share Trend
Quarter
Net Income
-580,000
-1,314,487
-673,035
-1,859,767
$2,300,900
$2,690,933
Earnings Per
Share
-29
-42
-16
-23
28
33
Balance Sheet
The balance sheet displays the assets and liabilities that C&B currently holds. At this
moment in time, we have no emergency or regular loans, as we have paid off our
emergency loan in quarter 3, and we have no debt capacity. Noted in the chart below,
the cash to total asset ratio has improved from a low in quarter 2 of nearly 0% to a
healthy 21.5-69,9%, which shows that our revenue is being utilised appropriately.
Looking ahead to the market projections, we are expecting total assets to increase in
Q4 and Q5 as we expect to see more demand of our products.
24
Asset in
Cash
$820,000
$1
$307,478
$2,497,711
$2,668,611
$2,668,611
Total
$1,420,000
$1,256,95
$1,432,478
$3,572,711
$5,873,611
$9,564,545
Financial Plan
25
Financial Assumptions
This quarter we are focusing a large amount of capital on research and
development to improve the available features of the computer, therefore increasing
our fixed costs. In absence of this additional $4 million to fund our research and
development, by quarter 4 C&B will have lower variable costs as well as increased
price, leading to a healthier business. We, however, feel that this investment in R&D
will greatly benefit both our investors and our company more generally. These
features will appeal to the customers and lead to an increase in revenue.
Funding Needs
We would like to request $4 million in funding in order to pay for this new
research and development expense, launching a new security feature in Q5 as well as
three new computer designs appealing to the three market segments. As noted in the
income statement analysis, we will expect to breakeven in quarter 5.
How are we going to spend the Investment?
As seen in the pie chart below, we anticipate spending the large majority
(67.5%) on research and development, which we know will appeal to our clients. We
are focusing on a security suite as all three client segments voted that security was the
most important feature they look for when purchasing a computer.
Pie Chart on Spending Investment Funds
Looking at the analysis of the financials, we know that C&B can be a very
profitable business. We realize that by investing the $4 million, the venture capitalists
will then be holding 50% of the companys shares. With this knowledge, we must
keep in mind the earnings per share. This number increases to $28 and $33 per every
100 dollars in quarter 5 and 6 respected.
27
Tactical Plan
Quarter
1
Segments Targeted
Quarter 2
Quarter 3
Workhorse Workhorse
Mercedes
Mercedes
Quarter 4
Workhorse
Mercedes
Traveler
Quarter 5
Quarter 6
Workhorse
Mercedes
Traveler
Workhorse
Mercedes
Traveler
Workhorse
Mercedes
Traveler
Lab 2.0
Desk 2.0
Work 1.0
Lab Pro
Lab
None
Lab 1.0
Desk 1.0
None
None
None
Lab Pro
(3149)
None
None
3,149
None
2,889
None
Security suite
Projects
Brand Feature R&D
81,737
78,000
15,000
36,000
Office
upgrade
High speed
Fail-proof
ultra cap.
Expense
Advertising Budget
Web Marketing Budget
28
ShanghaiAPAC
ChicagoNORAM
260,000
ChicagoNORAM
None
380,000
None
None
ParisEMEA
None
None
None
None
220,000
None
200,000
160,000
160,000
14
32
27
18
616
1,560
2,200
2,820
35,050
56,682
1,814,634
4,192,375
6,820,000
8,742,000
29,518
864,262
1,779,250
2,970,000
3,807,000
People
Unit Demand per Office
Sales Person
Number of Web Sales
People
Unit Demand per Web
Sales Person
Projected Demand
Projected Revenue
29
Factory Worker
23,686
23,686
43,057
43,057
96,878
215,286
306,111
400,000
520,000
67,739
88,396
47,100
47,100
65,570
164,617
303,682
353,211
447,100
585,570
25
25
50
25
600,000
600,000
1,100,000
600,000
1,625
3,250
3,250
3,250
6,500
50
800
50
68
616
68
616
1,375
3,000
5,800
50
800
2,980
185
Compensation
Average Sales Person
Compensation
Investment in Fixed
Capacity
Available Fixed Capacity
Starting Inventory
Unwanted Inventory
Production Volume
Available Inventory
Ending Inventory
Lost Sales
30
0.00
1,639.87
1,403.02
111,511
864,262
30
29
30
95
120,000
Emergency Loan
Cost
Total Production Cost
1,779,250
4,050,000
6,750,000
885
1,833
3,750
6,250
120,000
2,738,312
180,000
120,000
151,481
151,481
2,000,000
3,000,000
4,000,000
1,420,000
1,256,995
1,432,478
Employee Morale
Operating Capacity to
Satisfy Production Volume
Equity Investment
Total Assets
Appendix A
Pro Forma Cash Flow, Income Statement, and Balance Sheet
31
Quarter 2
0
Quarter 3
820,000
Quarter 4
1
Quarter 5
307,478
Quarter 6
2,497,711
2,668,611
8,742,000
56,682
1,814,634
4,151,537
6,820,000
- Rebates
Revenues
1,341
84,192
147,969
- Production
111,511
864,262
1,779,704
4,050,000
6,750,000
120,000
120,000
2,738,312
180,000
120,000
- Advertising
81,737
78,000
207,678
300,000
200,000
- Sales Force
Expense
174,617
351,682
417,209
447,100
585,570
460,000
540,000
380,000
380,000
380,000
380,000
- Marketing
Research
15,000
15,000
15,000
- Shipping
1,616
27,276
51,852
- Inventory
Holding Cost
8,199
108,000
402,300
- Excess Capacity
Cost
479,141
391,689
139,580
- Web Marketing
Expenses
15,000
36,000
84,000
84,000
84,000
- Income Taxes
376,363
+ Interest Income
- Interest Charges
7,574
+ Licensing
Income
- Licensing Fees
+ Other Income
- Other Expenses
= Net Operating
Cash Flow
-580,000
-1,371,480
-541,042
-1,809,767
1,270,900
-156,233
- Research and
Development
Investing Activities
Fixed Plant
Capacity
= Total Investing
Activities
600,000
600,000
1,100,000
600,000
600,000
600,000
1,100,000
600,000
Financing Activities
Increase in
Common Stock
2,000,000
1,000,000
1,000,000
4,000,000
1,000,000
+ Borrow
Conventional Loan
- Repay
Conventional Loan
+ Borrow
Emergency Loan
151,481
- Repay Emergency
Loan
151,481
32
- Deposit 3 Month
Certificate
+ Withdraw 3
Month Certificate
2,000,000
1,151,481
848,519
4,000,000
1,000,000
820,000
307,478
2,497,711
2,668,611
2,912,378
= Total Financing
Activities
Cash Balance,
End of Period
81,994
1,080,000
+ Production
111,511
864,262
1,779,704
4,050,000
6,750,000
= Available
Inventory
111,511
946,256
1,779,704
4,050,000
7,830,000
29,518
946,256
1,779,704
2,970,000
3,807,000
81,994
1,080,000
4,023,000
- Cost of Goods
Sold
= Ending
Inventory
Quarter
2
Quarter
3
Quarter
4
Quarter
5
Quarter
6
Gross Profit
Revenues
56,682
1,814,634
4,151,537
6,820,000
8,742,000
- Rebates
1,341
84,192
147,969
29,518
946,256
1,779,704
2,970,000
3,807,000
= Gross Profit
25,823
784,186
2,223,864
3,850,000
4,935,000
Expenses
Research and Development
120,000
120,000
2,738,312
180,000
120,000
+ Advertising
81,737
78,000
207,678
300,000
200,000
174,617
351,682
417,209
447,100
585,570
460,000
540,000
380,000
380,000
380,000
380,000
+ Marketing Research
15,000
15,000
15,000
+ Shipping
1,616
27,276
51,852
33
8,199
108,000
402,300
479,141
391,689
139,580
+ Depreciation
25,000
50,000
50,000
50,000
95,833
15,000
36,000
84,000
84,000
84,000
= Total Expenses
580,000
1,340,310
1,449,648
4,083,631
1,549,100
1,867,703
Operating Profit
-580,000
-1,314,487
-665,461
-1,859,767
2,300,900
3,067,297
- Licensing Fees
+ Other Income
- Other Expenses
-580,000
-1,314,487
-665,461
-1,859,767
2,300,900
3,067,297
+ Interest Income
- Interest Charges
7,574
-580,000
-1,314,487
-673,035
-1,859,767
2,300,900
3,067,297
2,300,900
2,126,389
= Taxable Income
940,908
- Income Taxes
376,363
-580,000
-1,314,487
-673,035
-1,859,767
2,300,900
2,690,933
-29
-42
-16
-23
28
33
= Net Income
34
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Current Assets
Cash
820,000
307,478
2,497,711
2,668,611
2,912,378
+ 3 Month
Certificate of
Deposit
+ Finished Goods
Inventory
81,994
1,080,000
4,023,000
600,000
1,175,000
1,125,000
1,075,000
2,125,000
2,629,167
1,420,000
1,256,995
1,432,478
3,572,711
5,873,611
9,564,545
Debt
Conventional
Bank Loan
+ Emergency
Loan
151,481
Equity
+ Common Stock
+ Retained
Earnings
= Total
2,000,000
3,000,000
4,000,000
8,000,000
8,000,000
9,000,000
-580,000
-1,894,487
-2,567,522
-4,427,289
-2,126,389
564,545
1,420,000
1,256,995
1,432,478
3,572,711
5,873,611
9,564,545
35