ASP B2B Technology Business Plan

Discover Productions

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Financial Plan

The company is seeking first round funding in the amount of $914,900 for staffing purposes, purchasing software and hardware computing equipment, office costs, and other Internet related costs. The company is also seeking second round funding in the amount of $3 million for developing B2B Web-based applications, and their educational application software.

The following sections outline the financial plan for Discover Productions.

General Assumptions
FY 2001 FY 2002 FY 2003
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

7.1 Projected Profit and Loss

Discover Productions' estimated income statements for FY2000-2002 are outlined below.

Pro Forma Profit and Loss
FY 2001 FY 2002 FY 2003
Sales $1,075,000 $16,125,000 $45,125,000
Direct Cost of Sales $100,000 $1,500,000 $3,000,000
Other $38,000 $570,000 $600,000
Total Cost of Sales $138,000 $2,070,000 $3,600,000
Gross Margin $937,000 $14,055,000 $41,525,000
Gross Margin % 87.16% 87.16% 92.02%
Expenses
Payroll $434,783 $2,200,000 $3,600,000
Sales and Marketing and Other Expenses $483,600 $3,780,000 $5,765,000
Depreciation $36,000 $100,000 $150,000
Utilities $3,600 $5,000 $6,000
Insurance $14,400 $40,000 $60,000
Rent $18,000 $40,000 $70,000
Utilities $24,000 $25,000 $25,000
Continuing Education $36,000 $518,000 $575,000
Payroll Taxes $65,217 $330,000 $540,000
Other $0 $0 $0
Total Operating Expenses $1,115,600 $7,038,000 $10,791,000
Profit Before Interest and Taxes ($178,600) $7,017,000 $30,734,000
EBITDA ($142,600) $7,117,000 $30,884,000
Interest Expense $5,452 $4,856 $3,782
Taxes Incurred $0 $1,753,036 $7,810,597
Net Profit ($184,052) $5,259,108 $22,919,621
Net Profit/Sales -17.12% 32.61% 50.79%

7.2 Projected Cash Flow

The table below provides the company's projected cash flow for FY2000-2002.

Pro Forma Cash Flow
FY 2001 FY 2002 FY 2003
Cash Received
Cash from Operations
Cash Sales $268,750 $4,031,250 $11,281,250
Cash from Receivables $698,750 $10,028,750 $29,864,680
Subtotal Cash from Operations $967,500 $14,060,000 $41,145,930
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $3,914,900 $0 $0
Subtotal Cash Received $4,882,400 $14,060,000 $41,145,930
Expenditures FY 2001 FY 2002 FY 2003
Expenditures from Operations
Cash Spending $434,783 $2,200,000 $3,600,000
Bill Payments $753,996 $7,926,120 $17,642,544
Subtotal Spent on Operations $1,188,779 $10,126,120 $21,242,544
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $2,624 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $646 $8,963 $9,902
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $1,052,000 $1,500,000 $1,500,000
Dividends $0 $0 $0
Subtotal Cash Spent $2,241,425 $11,637,707 $22,752,446
Net Cash Flow $2,640,975 $2,422,293 $18,393,484
Cash Balance $2,670,975 $5,093,269 $23,486,753

7.3 Balance Sheet

The projected Balance Sheet is shown below.

Pro Forma Balance Sheet
FY 2001 FY 2002 FY 2003
Assets
Current Assets
Cash $2,670,975 $5,093,269 $23,486,753
Accounts Receivable $147,500 $2,212,500 $6,191,570
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $2,823,475 $7,310,769 $29,683,323
Long-term Assets
Long-term Assets $1,152,000 $2,652,000 $4,152,000
Accumulated Depreciation $56,000 $156,000 $306,000
Total Long-term Assets $1,096,000 $2,496,000 $3,846,000
Total Assets $3,919,475 $9,806,769 $33,529,323
Liabilities and Capital FY 2001 FY 2002 FY 2003
Current Liabilities
Accounts Payable $64,273 $704,046 $1,516,880
Current Borrowing $5,000 $2,376 $2,376
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $69,273 $706,422 $1,519,256
Long-term Liabilities $49,354 $40,391 $30,489
Total Liabilities $118,627 $746,813 $1,549,745
Paid-in Capital $3,939,900 $3,939,900 $3,939,900
Retained Earnings $45,000 ($139,052) $5,120,056
Earnings ($184,052) $5,259,108 $22,919,621
Total Capital $3,800,848 $9,059,956 $31,979,577
Total Liabilities and Capital $3,919,475 $9,806,769 $33,529,323
Net Worth $3,800,848 $9,059,956 $31,979,577

7.4 Business Ratios

The following table contains important business ratios for the consulting industry, as determined by the Standard Industry Classification (SIC) Index code 8748.

Ratio Analysis
FY 2001 FY 2002 FY 2003 Industry Profile
Sales Growth 115.00% 1400.00% 179.84% 12.40%
Percent of Total Assets
Accounts Receivable 3.76% 22.56% 18.47% 26.10%
Other Current Assets 0.13% 0.05% 0.01% 44.70%
Total Current Assets 72.04% 74.55% 88.53% 74.50%
Long-term Assets 27.96% 25.45% 11.47% 25.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.77% 7.20% 4.53% 44.30%
Long-term Liabilities 1.26% 0.41% 0.09% 16.00%
Total Liabilities 3.03% 7.62% 4.62% 60.30%
Net Worth 96.97% 92.38% 95.38% 39.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 87.16% 87.16% 92.02% 0.00%
Selling, General & Administrative Expenses 104.28% 54.55% 40.95% 80.80%
Advertising Expenses 11.16% 6.05% 2.77% 1.30%
Profit Before Interest and Taxes -16.61% 43.52% 68.11% 2.20%
Main Ratios
Current 40.76 10.35 19.54 1.75
Quick 40.76 10.35 19.54 1.38
Total Debt to Total Assets 3.03% 7.62% 4.62% 60.30%
Pre-tax Return on Net Worth -4.84% 77.40% 96.09% 3.80%
Pre-tax Return on Assets -4.70% 71.50% 91.65% 9.70%
Additional Ratios FY 2001 FY 2002 FY 2003
Net Profit Margin -17.12% 32.61% 50.79% n.a
Return on Equity -4.84% 58.05% 71.67% n.a
Activity Ratios
Accounts Receivable Turnover 5.47 5.47 5.47 n.a
Collection Days 58 36 45 n.a
Accounts Payable Turnover 12.26 12.17 12.17 n.a
Payment Days 28 16 22 n.a
Total Asset Turnover 0.27 1.64 1.35 n.a
Debt Ratios
Debt to Net Worth 0.03 0.08 0.05 n.a
Current Liab. to Liab. 0.58 0.95 0.98 n.a
Liquidity Ratios
Net Working Capital $2,754,202 $6,604,347 $28,164,066 n.a
Interest Coverage -32.76 1,445.00 8,127.25 n.a
Additional Ratios
Assets to Sales 3.65 0.61 0.74 n.a
Current Debt/Total Assets 2% 7% 5% n.a
Acid Test 38.63 7.22 15.46 n.a
Sales/Net Worth 0.28 1.78 1.41 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
FY 2001 FY 2002 FY 2003
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0
Pro Forma Profit and Loss
FY 2001 FY 2002 FY 2003
Sales $1,075,000 $16,125,000 $45,125,000
Direct Cost of Sales $100,000 $1,500,000 $3,000,000
Other $38,000 $570,000 $600,000
Total Cost of Sales $138,000 $2,070,000 $3,600,000
Gross Margin $937,000 $14,055,000 $41,525,000
Gross Margin % 87.16% 87.16% 92.02%
Expenses
Payroll $434,783 $2,200,000 $3,600,000
Sales and Marketing and Other Expenses $483,600 $3,780,000 $5,765,000
Depreciation $36,000 $100,000 $150,000
Utilities $3,600 $5,000 $6,000
Insurance $14,400 $40,000 $60,000
Rent $18,000 $40,000 $70,000
Utilities $24,000 $25,000 $25,000
Continuing Education $36,000 $518,000 $575,000
Payroll Taxes $65,217 $330,000 $540,000
Other $0 $0 $0
Total Operating Expenses $1,115,600 $7,038,000 $10,791,000
Profit Before Interest and Taxes ($178,600) $7,017,000 $30,734,000
EBITDA ($142,600) $7,117,000 $30,884,000
Interest Expense $5,452 $4,856 $3,782
Taxes Incurred $0 $1,753,036 $7,810,597
Net Profit ($184,052) $5,259,108 $22,919,621
Net Profit/Sales -17.12% 32.61% 50.79%
Pro Forma Cash Flow
FY 2001 FY 2002 FY 2003
Cash Received
Cash from Operations
Cash Sales $268,750 $4,031,250 $11,281,250
Cash from Receivables $698,750 $10,028,750 $29,864,680
Subtotal Cash from Operations $967,500 $14,060,000 $41,145,930
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $3,914,900 $0 $0
Subtotal Cash Received $4,882,400 $14,060,000 $41,145,930
Expenditures FY 2001 FY 2002 FY 2003
Expenditures from Operations
Cash Spending $434,783 $2,200,000 $3,600,000
Bill Payments $753,996 $7,926,120 $17,642,544
Subtotal Spent on Operations $1,188,779 $10,126,120 $21,242,544
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $2,624 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $646 $8,963 $9,902
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $1,052,000 $1,500,000 $1,500,000
Dividends $0 $0 $0
Subtotal Cash Spent $2,241,425 $11,637,707 $22,752,446
Net Cash Flow $2,640,975 $2,422,293 $18,393,484
Cash Balance $2,670,975 $5,093,269 $23,486,753
Pro Forma Balance Sheet
FY 2001 FY 2002 FY 2003
Assets
Current Assets
Cash $2,670,975 $5,093,269 $23,486,753
Accounts Receivable $147,500 $2,212,500 $6,191,570
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $2,823,475 $7,310,769 $29,683,323
Long-term Assets
Long-term Assets $1,152,000 $2,652,000 $4,152,000
Accumulated Depreciation $56,000 $156,000 $306,000
Total Long-term Assets $1,096,000 $2,496,000 $3,846,000
Total Assets $3,919,475 $9,806,769 $33,529,323
Liabilities and Capital FY 2001 FY 2002 FY 2003
Current Liabilities
Accounts Payable $64,273 $704,046 $1,516,880
Current Borrowing $5,000 $2,376 $2,376
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $69,273 $706,422 $1,519,256
Long-term Liabilities $49,354 $40,391 $30,489
Total Liabilities $118,627 $746,813 $1,549,745
Paid-in Capital $3,939,900 $3,939,900 $3,939,900
Retained Earnings $45,000 ($139,052) $5,120,056
Earnings ($184,052) $5,259,108 $22,919,621
Total Capital $3,800,848 $9,059,956 $31,979,577
Total Liabilities and Capital $3,919,475 $9,806,769 $33,529,323
Net Worth $3,800,848 $9,059,956 $31,979,577
Ratio Analysis
FY 2001 FY 2002 FY 2003 Industry Profile
Sales Growth 115.00% 1400.00% 179.84% 12.40%
Percent of Total Assets
Accounts Receivable 3.76% 22.56% 18.47% 26.10%
Other Current Assets 0.13% 0.05% 0.01% 44.70%
Total Current Assets 72.04% 74.55% 88.53% 74.50%
Long-term Assets 27.96% 25.45% 11.47% 25.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 1.77% 7.20% 4.53% 44.30%
Long-term Liabilities 1.26% 0.41% 0.09% 16.00%
Total Liabilities 3.03% 7.62% 4.62% 60.30%
Net Worth 96.97% 92.38% 95.38% 39.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 87.16% 87.16% 92.02% 0.00%
Selling, General & Administrative Expenses 104.28% 54.55% 40.95% 80.80%
Advertising Expenses 11.16% 6.05% 2.77% 1.30%
Profit Before Interest and Taxes -16.61% 43.52% 68.11% 2.20%
Main Ratios
Current 40.76 10.35 19.54 1.75
Quick 40.76 10.35 19.54 1.38
Total Debt to Total Assets 3.03% 7.62% 4.62% 60.30%
Pre-tax Return on Net Worth -4.84% 77.40% 96.09% 3.80%
Pre-tax Return on Assets -4.70% 71.50% 91.65% 9.70%
Additional Ratios FY 2001 FY 2002 FY 2003
Net Profit Margin -17.12% 32.61% 50.79% n.a
Return on Equity -4.84% 58.05% 71.67% n.a
Activity Ratios
Accounts Receivable Turnover 5.47 5.47 5.47 n.a
Collection Days 58 36 45 n.a
Accounts Payable Turnover 12.26 12.17 12.17 n.a
Payment Days 28 16 22 n.a
Total Asset Turnover 0.27 1.64 1.35 n.a
Debt Ratios
Debt to Net Worth 0.03 0.08 0.05 n.a
Current Liab. to Liab. 0.58 0.95 0.98 n.a
Liquidity Ratios
Net Working Capital $2,754,202 $6,604,347 $28,164,066 n.a
Interest Coverage -32.76 1,445.00 8,127.25 n.a
Additional Ratios
Assets to Sales 3.65 0.61 0.74 n.a
Current Debt/Total Assets 2% 7% 5% n.a
Acid Test 38.63 7.22 15.46 n.a
Sales/Net Worth 0.28 1.78 1.41 n.a
Dividend Payout 0.00 0.00 0.00 n.a