MedNexis, Inc.

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Medical Equipment Business Plan

Financial Plan

CAPITAL RAISING ("THE OFFER")

The company intends to raise an amount of approximately $750,000 of seed capital. $250,000 has already been committed by management.

Current Capital Structure

Shares AuthorizedShares Issued
15,000,000 common1,500,000 common
1,000,000 preferred0 preferred

Current Shareholders:

Daniel Burnett
Mike Marriott300,000 shares
Nathan Wain300,000 shares
Brian Bell300,000 shares

For $750,000, the investing party will receive 750,000 preferred shares, or 33.3% of the company. Preferred shares will include senior debt and anti-dilution provisions as negotiated.

Utilization of Proceeds:

Working capital

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).

Acquisition of assets

Land & building, plant & 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 MedNexis' 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 Mednexis 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.

8.1 Break-even Analysis

The break-even analysis below is based on estimates for fixed costs, average revenue per unit and average variable cost per unit for both MedStim and TheraMag systems.

Break-even Analysis
Monthly Units Break-even 545
Monthly Revenue Break-even $130,241
Assumptions:
Average Per-Unit Revenue $239.13
Average Per-Unit Variable Cost $132.41
Estimated Monthly Fixed Cost $58,124

8.2 Important Assumptions

Demand

  • Using 1997 data, 10% of all patients with reported fractures (the approximate rate of fractures that result in muscular fibrosis), 50% of all patients with reported long-term immobilization, and 100% of all patients with reported paralysis or coma were considered potential customers for MedStim.

  • 20% of consumers who visited an energy healer in 1997 (202 consumers per 1,000 in population) were considered potential customers for TheraMag (magnetism was the most frequently used modality reported among energy healers between 1990 and 1997). Total Energy healing devices used between 1990 and 1997 were 40 million.

Product Mix

  • TheraMag will be leased less frequently than MedStim, thus the total potential market for logic controllers (LC) will be 1 for every potential customer. MedStim will be owned by hospitals and leased to patients more routinely and the total potential market for LCs will be 1 for every 10 potential customers. The potential market for the arrays of overlapping coils (AOC) will be as follows: single AOC per potential customer for the TheraMag system and 5 AOCs per 10 potential customers for the MedStim system.

  • In evaluating the breakeven volume, a unit was taken to be 1 LC and the AOCs sold along with the LC in that market, ie for TheraMag, 1 unit was an LC and an AOC. For MedStim, 1 unit was an LC and 5 AOCs. The cost/unit and revenue/unit were then assumed to be the average cost/unit and revenue/unit of the 2 products.

Sales/Revenues

  • The maximum penetration of any market segment was conservatively estimated to be no more than 3% by Year 5.
  • Assume 5% growth of both costs/unit and price/unit.
  • Insurance company reimbursement will be approved by year 3.
General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 13.00% 13.00% 13.00% 13.00% 13.00%
Long-term Interest Rate 12.00% 12.00% 12.00% 12.00% 12.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0

8.3 Projected Profit and Loss

Barring any unforseen circumstances, MedNexis is anticipated to break-even by Year 3 of operations. Profits for the company in subsequent years will accelerate with the increase in anticipated sales volume.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $121,000 $2,799,113 $23,502,101 $73,299,901 $191,679,647
Direct Cost of Sales $67,000 $1,204,249 $8,089,964 $23,652,657 $54,279,004
Production Payroll $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Total Cost of Sales $67,000 $1,204,249 $8,089,964 $23,652,657 $54,279,004
Gross Margin $54,000 $1,594,864 $15,412,137 $49,647,244 $137,400,644
Gross Margin % 44.63% 56.98% 65.58% 67.73% 71.68%
Operating Expenses
Sales and Marketing Expenses
Sales and Marketing Payroll $36,000 $635,000 $1,240,000 $2,156,000 $3,610,000
Advertising/Promotion $45,000 $50,000 $200,000 $300,000 $500,000
Travel $18,000 $40,000 $80,000 $150,000 $200,000
Research and Design Expenses $240,000 $1,000,000 $1,500,000 $2,250,000 $2,500,000
Miscellaneous $3,000 $10,000 $15,000 $22,000 $30,000
Total Sales and Marketing Expenses $342,000 $1,735,000 $3,035,000 $4,878,000 $6,840,000
Sales and Marketing % 282.64% 61.98% 12.91% 6.65% 3.57%
General and Administrative Expenses
General and Administrative Payroll $134,000 $419,000 $731,000 $910,000 $1,182,000
Sales and Marketing and Other Expenses $0 $0 $0 $0 $0
Depreciation $0 $0 $0 $0 $0
Leased Equipment $0 $0 $20,000 $20,000 $20,000
Utilities $12,000 $12,360 $12,731 $13,113 $13,506
Insurance $30,000 $40,000 $40,000 $40,000 $40,000
Rent $24,000 $24,720 $25,462 $26,225 $27,012
Payroll Taxes $56,490 $275,940 $508,830 $748,860 $1,124,550
Other General and Administrative Expenses $0 $0 $0 $0 $0
Total General and Administrative Expenses $256,490 $772,020 $1,338,022 $1,758,198 $2,407,068
General and Administrative % 211.98% 27.58% 5.69% 2.40% 1.26%
Other Expenses:
Other Payroll $99,000 $260,000 $452,000 $500,000 $563,000
Consultants $0 $0 $0 $0 $0
Contract/Consultants $0 $20,000 $20,000 $20,000 $20,000
Total Other Expenses $99,000 $280,000 $472,000 $520,000 $583,000
Other % 81.82% 10.00% 2.01% 0.71% 0.30%
Total Operating Expenses $697,490 $2,787,020 $4,845,022 $7,156,198 $9,830,068
Profit Before Interest and Taxes ($643,490) ($1,192,156) $10,567,115 $42,491,046 $127,570,575
EBITDA ($643,490) ($1,192,156) $10,567,115 $42,491,046 $127,570,575
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $3,170,134 $12,747,314 $38,271,173
Net Profit ($643,490) ($1,192,156) $7,396,980 $29,743,732 $89,299,403
Net Profit/Sales -531.81% -42.59% 31.47% 40.58% 46.59%

8.4 Projected Cash Flow

It will be noted that the company's cash flow will be steadily declining for the first year of operations. This is expected due to large capital investments and initial slow sales. the company has calculated its financial plan so that it will have enough cash from investors and debt to survive until profitability reaches acceptable levels.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $30,250 $1,119,645 $9,400,840 $29,319,960 $76,671,859
Cash from Receivables $40,470 $799,239 $7,218,971 $27,425,670 $75,654,839
Subtotal Cash from Operations $70,720 $1,918,885 $16,619,812 $56,745,630 $152,326,698
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 $750,000 $6,000,000 $342,000 $0 $0
Subtotal Cash Received $820,720 $7,918,885 $16,961,812 $56,745,630 $152,326,698
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $269,000 $1,314,000 $2,423,000 $3,566,000 $5,355,000
Bill Payments $450,767 $2,948,740 $15,357,265 $44,383,794 $107,947,792
Subtotal Spent on Operations $719,766 $4,262,740 $17,780,265 $47,949,794 $113,302,792
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 $30,000 $100,000 $150,000 $150,000 $150,000
Dividends $0 $0 $0 $0 $5,000,000
Subtotal Cash Spent $749,766 $4,362,740 $17,930,265 $48,099,794 $118,452,792
Net Cash Flow $70,954 $3,556,144 ($968,454) $8,645,836 $33,873,906
Cash Balance $152,954 $3,709,098 $2,740,644 $11,386,480 $45,260,386

8.5 Projected Balance Sheet

The table below presents the Balance Sheet for MedNexis.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $152,954 $3,709,098 $2,740,644 $11,386,480 $45,260,386
Accounts Receivable $50,280 $930,508 $7,812,797 $24,367,068 $63,720,018
Inventory $26,950 $484,396 $3,254,097 $10,149,093 $26,539,935
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $230,184 $5,124,002 $13,807,539 $45,902,641 $135,520,339
Long-term Assets
Long-term Assets $30,000 $130,000 $280,000 $430,000 $580,000
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $30,000 $130,000 $280,000 $430,000 $580,000
Total Assets $260,184 $5,254,002 $14,087,539 $46,332,641 $136,100,339
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $71,674 $257,648 $1,352,205 $3,853,575 $9,321,870
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $71,674 $257,648 $1,352,205 $3,853,575 $9,321,870
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $71,674 $257,648 $1,352,205 $3,853,575 $9,321,870
Paid-in Capital $1,000,000 $7,000,000 $7,342,000 $7,342,000 $7,342,000
Retained Earnings ($168,000) ($811,490) ($2,003,646) $5,393,334 $30,137,066
Earnings ($643,490) ($1,192,156) $7,396,980 $29,743,732 $89,299,403
Total Capital $188,510 $4,996,354 $12,735,334 $42,479,066 $126,778,469
Total Liabilities and Capital $260,184 $5,254,002 $14,087,539 $46,332,641 $136,100,339
Net Worth $188,510 $4,996,354 $12,735,334 $42,479,066 $126,778,469

8.6 Business Ratios

The ratios contained herewith are not based on a post-diluted enlarged capital base. The figures come from the Standard Industry Classification (SIC) Index code 3845, Electromedical Equipment.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 2213.32% 739.63% 211.89% 161.50% 0.00%
Percent of Total Assets
Accounts Receivable 19.32% 17.71% 55.46% 52.59% 46.82% 0.00%
Inventory 10.36% 9.22% 23.10% 21.90% 19.50% 0.00%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%
Total Current Assets 88.47% 97.53% 98.01% 99.07% 99.57% 100.00%
Long-term Assets 11.53% 2.47% 1.99% 0.93% 0.43% 0.00%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 27.55% 4.90% 9.60% 8.32% 6.85% 0.00%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Liabilities 27.55% 4.90% 9.60% 8.32% 6.85% 0.00%
Net Worth 72.45% 95.10% 90.40% 91.68% 93.15% 100.00%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 44.63% 56.98% 65.58% 67.73% 71.68% 0.00%
Selling, General & Administrative Expenses 576.44% 99.57% 34.10% 27.15% 25.09% 0.00%
Advertising Expenses 37.19% 1.79% 0.85% 0.41% 0.26% 0.00%
Profit Before Interest and Taxes -531.81% -42.59% 44.96% 57.97% 66.55% 0.00%
Main Ratios
Current 3.21 19.89 10.21 11.91 14.54 0.00
Quick 2.84 18.01 7.80 9.28 11.69 0.00
Total Debt to Total Assets 27.55% 4.90% 9.60% 8.32% 6.85% 0.00%
Pre-tax Return on Net Worth -341.36% -23.86% 82.97% 100.03% 100.62% 0.00%
Pre-tax Return on Assets -247.32% -22.69% 75.01% 91.71% 93.73% 0.00%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -531.81% -42.59% 31.47% 40.58% 46.59% n.a
Return on Equity -341.36% -23.86% 58.08% 70.02% 70.44% n.a
Activity Ratios
Accounts Receivable Turnover 1.80 1.80 1.80 1.80 1.80 n.a
Collection Days 38 107 113 134 140 n.a
Inventory Turnover 10.91 4.71 4.33 3.53 2.96 n.a
Accounts Payable Turnover 7.29 12.17 12.17 12.17 12.17 n.a
Payment Days 27 19 18 20 21 n.a
Total Asset Turnover 0.47 0.53 1.67 1.58 1.41 n.a
Debt Ratios
Debt to Net Worth 0.38 0.05 0.11 0.09 0.07 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $158,510 $4,866,354 $12,455,334 $42,049,066 $126,198,469 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 2.15 1.88 0.60 0.63 0.71 n.a
Current Debt/Total Assets 28% 5% 10% 8% 7% n.a
Acid Test 2.13 14.40 2.03 2.95 4.86 n.a
Sales/Net Worth 0.64 0.56 1.85 1.73 1.51 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.06 n.a