Bionex Corporation

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I.D. Verification Technology Business Plan

Financial Plan

The value of the patents and the size of their potential markets enables several back-up plans of action if this plan doesn't work as indicated. Venture capital can be pursued, and historically, investments of $250,000 to $750,000 thousand are common for similar companies. Even after successfully completing the start-up and seed stages as indicated, second round venture or mezzanine funding is potentially available in the $1 million range to motivate future growth.

7.1 Important Assumptions

Our plan is based on the following key assumptions for our U.S.-based, New York corporation:

  • Sufficient access to capital.
  • Steady economy without a major recession.
  • No unforeseen changes to ISO biometric standards.
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 9.00% 9.00% 9.00% 9.00% 9.00%
Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00%
Other 0 0 0 0 0

7.2 Break-even Analysis

For our break-even analysis, we calculated per month running costs, which include our payroll, rent, utilities, insurance and an estimation of other running costs. The chart shows what we need to sell per month to break-even, according to these assumptions.

Break-even Analysis
Monthly Revenue Break-even $58,540
Assumptions:
Average Percent Variable Cost 28%
Estimated Monthly Fixed Cost $42,208

7.3 Projected Profit and Loss

The following table and chart displays profit and loss expectations for Bionex. The company will begin to make a profit in September of its first year of operation.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $987,767 $1,877,219 $3,574,245 $6,818,019 $13,029,554
Direct Cost of Sales $275,580 $482,265 $843,964 $1,476,937 $2,584,639
Other Costs of Goods $0 $0 $0 $0 $0
Total Cost of Sales $275,580 $482,265 $843,964 $1,476,937 $2,584,639
Gross Margin $712,187 $1,394,954 $2,730,281 $5,341,082 $10,444,915
Gross Margin % 72.10% 74.31% 76.39% 78.34% 80.16%
Expenses
Payroll $380,000 $398,000 $405,000 $440,000 $465,000
Sales and Marketing and Other Expenses $12,000 $20,000 $40,000 $300,000 $140,000
Depreciation $0 $0 $0 $0 $0
Contracted Employees $0 $125,000 $300,000 $700,000 $1,360,000
Rent $49,992 $100,000 $100,000 $150,000 $150,000
Utilities $1,500 $5,000 $5,000 $10,000 $10,000
Insurance $6,000 $20,000 $25,000 $40,000 $40,000
Payroll Taxes $57,000 $59,700 $60,750 $66,000 $69,750
Other $0 $50,000 $50,000 $50,000 $50,000
Total Operating Expenses $506,492 $777,700 $985,750 $1,756,000 $2,284,750
Profit Before Interest and Taxes $205,695 $617,254 $1,744,531 $3,585,082 $8,160,165
EBITDA $205,695 $617,254 $1,744,531 $3,585,082 $8,160,165
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $51,424 $154,313 $436,133 $896,271 $2,040,041
Net Profit $154,272 $462,940 $1,308,398 $2,688,812 $6,120,124
Net Profit/Sales 15.62% 24.66% 36.61% 39.44% 46.97%

7.4 Projected Cash Flow

We plan to begin the year with start-up capital from initial investment of the founder, family and a private investor. Thus, although our initial cash flow is negative, our cash balance will remain positive throughout year one, as we establish ourselves in the market.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $592,660 $1,126,331 $2,144,547
Cash from Receivables $302,584 $667,574 $1,270,740
Subtotal Cash from Operations $895,245 $1,793,905 $3,415,287
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 $0 $0 $0
Subtotal Cash Received $895,245 $1,793,905 $3,415,287
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $380,000 $398,000 $405,000
Bill Payments $419,510 $978,612 $1,791,430
Subtotal Spent on Operations $799,510 $1,376,612 $2,196,430
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $799,510 $1,376,612 $2,196,430
Net Cash Flow $95,735 $417,293 $1,218,857
Cash Balance $207,612 $624,906 $1,843,763

7.5 Projected Balance Sheet

The highlights of the balance sheets are the cash position and the net worth at the end of year three. As seen in the balance sheet, a strong growth in net worth is expected over the next five years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $207,612 $624,906 $1,843,763 $4,379,012 $10,143,768
Accounts Receivable $92,523 $175,836 $334,794 $638,632 $1,220,456
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $300,135 $800,742 $2,178,556 $5,017,644 $11,364,225
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 $300,135 $800,742 $2,178,556 $5,017,644 $11,364,225
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $45,863 $83,530 $152,946 $303,223 $529,679
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $45,863 $83,530 $152,946 $303,223 $529,679
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $45,863 $83,530 $152,946 $303,223 $529,679
Paid-in Capital $550,000 $550,000 $550,000 $550,000 $550,000
Retained Earnings ($450,000) ($295,728) $167,212 $1,475,610 $4,164,422
Earnings $154,272 $462,940 $1,308,398 $2,688,812 $6,120,124
Total Capital $254,272 $717,212 $2,025,610 $4,714,422 $10,834,545
Total Liabilities and Capital $300,135 $800,742 $2,178,556 $5,017,644 $11,364,225
Net Worth $254,272 $717,212 $2,025,610 $4,714,422 $10,834,545

7.6 Business Ratios

The year three return on equity should be very attractive to early investors. All ratios are in good shape for traditional borrowing to fund further growth. Industry profile ratios based on the Standard Industrial Classification (SIC) code  7382.9903 Protective devices, security, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 90.05% 90.40% 90.75% 91.10% 7.51%
Percent of Total Assets
Accounts Receivable 30.83% 21.96% 15.37% 12.73% 10.74% 22.90%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 42.13%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 69.02%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 30.98%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 15.28% 10.43% 7.02% 6.04% 4.66% 32.36%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 18.49%
Total Liabilities 15.28% 10.43% 7.02% 6.04% 4.66% 50.85%
Net Worth 84.72% 89.57% 92.98% 93.96% 95.34% 49.15%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 72.10% 74.31% 76.39% 78.34% 80.16% 100.00%
Selling, General & Administrative Expenses 55.57% 50.05% 40.10% 38.96% 33.22% 84.14%
Advertising Expenses 0.00% 0.00% 0.00% 0.00% 0.00% 0.79%
Profit Before Interest and Taxes 20.82% 32.88% 48.81% 52.58% 62.63% 1.59%
Main Ratios
Current 6.54 9.59 14.24 16.55 21.45 1.60
Quick 6.54 9.59 14.24 16.55 21.45 1.23
Total Debt to Total Assets 15.28% 10.43% 7.02% 6.04% 4.66% 3.32%
Pre-tax Return on Net Worth 80.90% 86.06% 86.12% 76.05% 75.32% 59.08%
Pre-tax Return on Assets 68.53% 77.09% 80.08% 71.45% 71.81% 8.10%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin 15.62% 24.66% 36.61% 39.44% 46.97% n.a
Return on Equity 60.67% 64.55% 64.59% 57.03% 56.49% n.a
Activity Ratios
Accounts Receivable Turnover 4.27 4.27 4.27 4.27 4.27 n.a
Collection Days 56 65 65 65 65 n.a
Accounts Payable Turnover 9.89 12.17 12.17 12.17 12.17 n.a
Payment Days 28 23 23 23 24 n.a
Total Asset Turnover 3.29 2.34 1.64 1.36 1.15 n.a
Debt Ratios
Debt to Net Worth 0.18 0.12 0.08 0.06 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 $254,272 $717,212 $2,025,610 $4,714,422 $10,834,545 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.30 0.43 0.61 0.74 0.87 n.a
Current Debt/Total Assets 15% 10% 7% 6% 5% n.a
Acid Test 4.53 7.48 12.05 14.44 19.15 n.a
Sales/Net Worth 3.88 2.62 1.76 1.45 1.20 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a