NovOculi

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Eye Surgery Equipment Maker Business Plan

Financial Plan

CAPITAL RAISING (THE OFFER)
The company intends to raise an amount of seed capital. Startup investment has already been committed by management.

Current Capital Structure:

Stock Type Shares Authorized Shares Issued
Common30,000,0003,000,000
Preferred2,000,0000

Current Shareholders:

OwnerShares Granted Stock Type
Daniel Burnett 1,950,000Common
Joseph Hewitt 300,000Common
Andy Rubinson 300,000Common
Joseph Walker 300,000Common
Dr. Terry Kim 150,000Common

For $1.5 million, the investing party will receive 1,500,000 preferred shares or 33.3% of the company. Preferred shares will include senior debt and anti-dilution provisions as negotiated.

The proceeds from the offer will be used to fund the working capital requirements of the Company (and its subsidiary and associated companies, if any).

Land building, plant and machinery, and other fixed assets will be purchased as and when deemed necessary to maximize the profits of the company.

Cashflows incidental to the normal business operations of the company.

Funds will be used for the purpose of business operations of the company.

Exit Considerations
The most likely exit afforded investors will be through acquisition. If the company's actual operational and financial results are in any reasonable range of the projected results herein, the company will become an attractive asset to an acquisitive competitor or larger medical device company. No particular competitor or medical device company is thought to be more likely than another to be interested in NovOculi's technology.

To the extent that actual operational results materially exceed those projected herein, the probability of an IPO exit increases. Exceptional results would enhance the NovOculi's brand name and financial position, making new product development and the likelihood of new product success more plausible. In this scenario, the opportunity to raise capital and provide an investment exit to shareholders becomes more likely.

A third exit possibility for investors may be an acquisition after IPO. This strategy would allow an investor to delay exit until after capital from an IPO is invested in successful projects, further raising the value of the firm.

9.1 Important Assumptions

Market

  • Growth of NICS will parallel that of LASIK.
  • Expansion into foreign markets will not occur in this 5-year plan.
  • Projections related to consumer acceptance were estimated using market survey.
  • Total market size was based on only 1/3 of all patients having both eyes corrected (current data supports as much as 2/3).

Research

  • Research Grant of $2 million applied for in May of 2001 will be received by December 2002.
  • Stanford University backing of research proposal and offering of facilities will decrease total research and design expenditures by 50%.

Sales/Revenues

  • Projections were based on continued rejection by insurance companies to reimburse for refractive correction.
  • Acceptable premiums were developed using preliminary market survey of n=50.
General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42% 25.00% 25.42%
Other 0 0 0 0 0

9.2 Break-even Analysis

With a fully operational average monthly fixed cost, NovOculi will break-even once the sales volume as shown in the table below is reached. Per-unit revenue and costs for the Iontophoretic Device, Licensing Fees, and the Polymeric Vehicle have been averaged. The management estimates that the company will reach this sales volume by the third year of operations, at which time the per-unit direct costs and direct costs of sales will begin decreasing.

Break-even Analysis
Monthly Units Break-even 19
Monthly Revenue Break-even $65,769
Assumptions:
Average Per-Unit Revenue $3,500.00
Average Per-Unit Variable Cost $150.00
Estimated Monthly Fixed Cost $62,950

9.3 Projected Profit and Loss

The Projected Profit and Loss table takes into account the significant subsidization of NovOculi's research efforts by the Stanford University Department of Ophthalmology. Due to this strategic alliance, the company's research expenditures have been nearly halved.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $0 $544,500 $1,897,175 $8,261,700 $56,981,829
Direct Cost of Sales $0 $37,550 $85,018 $332,025 $2,102,782
Other $0 $0 $0 $0 $0
Total Cost of Sales $0 $37,550 $85,018 $332,025 $2,102,782
Gross Margin $0 $506,950 $1,812,158 $7,929,675 $54,879,047
Gross Margin % 0.00% 93.10% 95.52% 95.98% 96.31%
Expenses
Payroll $136,000 $573,000 $900,300 $1,653,410 $5,085,027
Sales and Marketing and Other Expenses $539,000 $795,000 $1,450,000 $2,425,000 $6,775,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0
Utilities $12,000 $0 $0 $0 $0
Insurance $30,000 $0 $0 $0 $0
Rent $18,000 $18,000 $18,000 $18,000 $18,000
Payroll Taxes $20,400 $85,950 $135,045 $248,012 $762,754
Other $0 $0 $0 $0 $0
Total Operating Expenses $755,400 $1,471,950 $2,503,345 $4,344,422 $12,640,781
Profit Before Interest and Taxes ($755,400) ($965,000) ($691,188) $3,585,254 $42,238,266
EBITDA ($755,400) ($965,000) ($691,188) $3,585,254 $42,238,266
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $896,313 $10,735,559
Net Profit ($755,400) ($965,000) ($691,188) $2,688,940 $31,502,707
Net Profit/Sales 0.00% -177.23% -36.43% 32.55% 55.29%

9.4 Projected Cash Flow

Important points to note in Projected Cash Flow are as follows:

  • In Year 1 of the business plan, the company expects to raise (Section 1) working capital.
  • While the company has planned for additional capital raising (Section 2) in Year 3 of the business plan, it is expected that research grants will have been secured by this point and capital raising will not be necessary.
Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $0 $136,125 $474,294 $2,065,425 $14,245,457
Cash from Receivables $0 $408,375 $1,422,881 $6,196,275 $42,736,372
Subtotal Cash from Operations $0 $544,500 $1,897,175 $8,261,700 $56,981,829
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $1,500,000 $0 $1,000,000 $0 $0
Subtotal Cash Received $1,500,000 $544,500 $2,897,175 $8,261,700 $56,981,829
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $136,000 $573,000 $900,300 $1,653,410 $5,085,027
Bill Payments $594,315 $884,612 $1,626,290 $3,735,956 $19,040,007
Subtotal Spent on Operations $730,315 $1,457,612 $2,526,590 $5,389,366 $24,125,034
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $730,315 $1,457,612 $2,526,590 $5,389,366 $24,125,034
Net Cash Flow $769,685 ($913,112) $370,585 $2,872,334 $32,856,796
Cash Balance $1,086,685 $173,573 $544,157 $3,416,491 $36,273,287

9.5 Projected Balance Sheet

While Inventory on the Balance Sheet may appear disproportionately low in comparison to sales, this is due to the fact that one of the components of total sales, licensing fees, is not a durable good and will require no inventory.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $1,086,685 $173,573 $544,157 $3,416,491 $36,273,287
Accounts Receivable $0 $0 $0 $0 $0
Inventory $0 $0 $0 $0 $0
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $1,086,685 $173,573 $544,157 $3,416,491 $36,273,287
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $1,086,685 $173,573 $544,157 $3,416,491 $36,273,287
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $25,085 $76,973 $138,745 $322,138 $1,676,227
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $25,085 $76,973 $138,745 $322,138 $1,676,227
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $25,085 $76,973 $138,745 $322,138 $1,676,227
Paid-in Capital $1,850,000 $1,850,000 $2,850,000 $2,850,000 $2,850,000
Retained Earnings ($33,000) ($788,400) ($1,753,400) ($2,444,588) $244,353
Earnings ($755,400) ($965,000) ($691,188) $2,688,940 $31,502,707
Total Capital $1,061,600 $96,600 $405,413 $3,094,353 $34,597,060
Total Liabilities and Capital $1,086,685 $173,573 $544,157 $3,416,491 $36,273,287
Net Worth $1,061,600 $96,600 $405,413 $3,094,353 $34,597,060

9.6 Business Ratios

The following table presents important ratios from the Opthalmic goods industry, as determined by the Standard Industry Classification (SIC) Index code 3851.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 0.00% 248.43% 335.47% 589.71% 3.10%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 0.00% 0.00% 24.20%
Inventory 0.00% 0.00% 0.00% 0.00% 0.00% 20.90%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 34.70%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 79.80%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 20.20%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 2.31% 44.35% 25.50% 9.43% 4.62% 37.70%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 17.60%
Total Liabilities 2.31% 44.35% 25.50% 9.43% 4.62% 55.30%
Net Worth 97.69% 55.65% 74.50% 90.57% 95.38% 44.70%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 0.00% 93.10% 95.52% 95.98% 96.31% 52.50%
Selling, General & Administrative Expenses 0.00% 270.33% 131.95% 63.43% 40.72% 32.70%
Advertising Expenses 0.00% 45.91% 18.45% 9.08% 6.14% 1.70%
Profit Before Interest and Taxes 0.00% -177.23% -36.43% 43.40% 74.13% 2.80%
Main Ratios
Current 43.32 2.25 3.92 10.61 21.64 2.10
Quick 43.32 2.25 3.92 10.61 21.64 1.30
Total Debt to Total Assets 2.31% 44.35% 25.50% 9.43% 4.62% 55.30%
Pre-tax Return on Net Worth -71.16% -998.96% -170.49% 115.86% 122.09% 4.70%
Pre-tax Return on Assets -69.51% -555.96% -127.02% 104.94% 116.44% 10.50%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 0.00% -177.23% -36.43% 32.55% 55.29% n.a
Return on Equity -71.16% -998.96% -170.49% 86.90% 91.06% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 0.00 0.00 n.a
Collection Days 0 0 0 0 0 n.a
Inventory Turnover 0.00 0.00 0.00 0.00 0.00 n.a
Accounts Payable Turnover 24.69 12.17 12.17 12.17 12.17 n.a
Payment Days 27 20 23 21 18 n.a
Total Asset Turnover 0.00 3.14 3.49 2.42 1.57 n.a
Debt Ratios
Debt to Net Worth 0.02 0.80 0.34 0.10 0.05 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,061,600 $96,600 $405,413 $3,094,353 $34,597,060 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales n.a. 0.32 0.29 0.41 0.64 n.a
Current Debt/Total Assets 2% 44% 25% 9% 5% n.a
Acid Test 43.32 2.25 3.92 10.61 21.64 n.a
Sales/Net Worth 0.00 5.64 4.68 2.67 1.65 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a