Theatrical Music Producers Business Plan

Edgar Risk Ventures, Ltd.

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Financial Plan

Success Is a Journey, Not a Destination...

The next topics present in our Financial Plan supported by tables and charts.

Important Assumptions

The following financials cover the balance of the year 2001 and carry through year 2003, holding certain assumptions as to the level of activities and numbers of projects to be undertaken. The assumptions for the balance of the current year and well into year 2002 are based on rather definite and reliable data, knowing the nature and potential of projects already identified and ready to be produced. As additional clients and projects appear on the scene, the assumptions become less definite at this time, but certainly the revenue and exposure potential increases incrementally with each added project.

All financials except the 'Rainbow's End' components utilize the most conservative of figures. This is to protect both the legitimacy of expected revenues as well as the credibility of activity. The added assumption of the 'Rainbow's End' factors are utilized only to display possibilities inherent in each project.

General Assumptions
Year 1 Year 2 Year 3
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 30.00% 30.00% 30.00%
Other 0 0 0

Break-even Analysis

The following Break-even Analysis shows what is needed in monthly sales to break even in relation to monthly expenses.

Break-even Analysis
Monthly Revenue Break-even $20,479
Assumptions:
Average Percent Variable Cost 42%
Estimated Monthly Fixed Cost $11,797

Projected Profit and Loss

The following table and chart present the projected Profit and Loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $264,910 $475,025 $641,295
Direct Cost of Sales $112,304 $167,153 $215,316
Other Production Expenses $0 $0 $0
Total Cost of Sales $112,304 $167,153 $215,316
Gross Margin $152,607 $307,872 $425,979
Gross Margin % 57.61% 64.81% 66.42%
Expenses
Payroll $84,000 $84,000 $108,000
Sales and Marketing and Other Expenses $30,750 $86,200 $117,700
Depreciation $0 $0 $0
Leased Equipment $0 $2,000 $5,000
Publications/memberships $1,620 $1,620 $1,620
Insurance $3,600 $4,200 $4,500
Rent $9,000 $9,000 $10,000
Payroll Taxes $12,600 $12,600 $16,200
Other $0 $0 $0
Total Operating Expenses $141,570 $199,620 $263,020
Profit Before Interest and Taxes $11,037 $108,252 $162,959
EBITDA $11,037 $108,252 $162,959
Interest Expense $1,313 $850 $750
Taxes Incurred $2,917 $32,221 $48,663
Net Profit $6,807 $75,181 $113,546
Net Profit/Sales 2.57% 15.83% 17.71%

Projected Cash Flow

The following table and chart show the Projected Cash Flow and Cash Balance for Edgar Risk Ventures.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $238,419 $427,523 $577,166
Cash from Receivables $23,779 $45,351 $62,427
Subtotal Cash from Operations $262,198 $472,874 $639,593
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 $262,198 $472,874 $639,593
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $84,000 $84,000 $108,000
Bill Payments $160,883 $304,104 $411,209
Subtotal Spent on Operations $244,883 $388,104 $519,209
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $4,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $1,000 $1,000 $1,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $20,000 $28,000 $38,000
Dividends $0 $50,000 $60,000
Subtotal Cash Spent $269,883 $467,104 $618,209
Net Cash Flow ($7,685) $5,770 $21,384
Cash Balance $30,315 $36,085 $57,469

Projected Balance Sheet

The following table is the Projected Balance Sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $30,315 $36,085 $57,469
Accounts Receivable $2,712 $4,863 $6,566
Other Current Assets $0 $0 $0
Total Current Assets $33,027 $40,948 $64,035
Long-term Assets
Long-term Assets $24,500 $52,500 $90,500
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $24,500 $52,500 $90,500
Total Assets $57,527 $93,448 $154,535
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $14,220 $25,960 $34,500
Current Borrowing $0 $0 $0
Other Current Liabilities $2,000 $2,000 $2,000
Subtotal Current Liabilities $16,220 $27,960 $36,500
Long-term Liabilities $9,000 $8,000 $7,000
Total Liabilities $25,220 $35,960 $43,500
Paid-in Capital $44,000 $44,000 $44,000
Retained Earnings ($18,500) ($61,693) ($46,512)
Earnings $6,807 $75,181 $113,546
Total Capital $32,307 $57,488 $111,035
Total Liabilities and Capital $57,527 $93,448 $154,535
Net Worth $32,307 $57,488 $111,035

Business Ratios

The industry standard business ratios are taken from the music recording industry, Standard Industrial Classification (SIC) code 7922, Theatrical Producers and Services, Excluding Motion Pictures. ERV's ratios conform to most of the ratios, however there are some differences that must be explained. First of all, ERV will not be a highly leveraged company since it has access to significant amounts of investment capital prior to business launch. Furthermore the company is convinced that due to Mr. Edgar's past success and well developed "brand image" in the industry and with music listeners in general,  the company will be able to leverage this fame into higher initial profits. The company wishes to utilize this by spending a significantly more amount of money on advertising to strengthen its future profits.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 79.32% 35.00% 15.20%
Percent of Total Assets
Accounts Receivable 4.71% 5.20% 4.25% 5.70%
Other Current Assets 0.00% 0.00% 0.00% 32.50%
Total Current Assets 57.41% 43.82% 41.44% 41.30%
Long-term Assets 42.59% 56.18% 58.56% 58.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 28.20% 29.92% 23.62% 34.70%
Long-term Liabilities 15.64% 8.56% 4.53% 27.90%
Total Liabilities 43.84% 38.48% 28.15% 62.60%
Net Worth 56.16% 61.52% 71.85% 37.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.61% 64.81% 66.42% 0.00%
Selling, General & Administrative Expenses 55.04% 48.98% 48.72% 74.90%
Advertising Expenses 0.00% 10.53% 11.70% 2.90%
Profit Before Interest and Taxes 4.17% 22.79% 25.41% 2.00%
Main Ratios
Current 2.04 1.46 1.75 1.29
Quick 2.04 1.46 1.75 0.85
Total Debt to Total Assets 43.84% 38.48% 28.15% 62.60%
Pre-tax Return on Net Worth 30.10% 186.82% 146.09% 2.30%
Pre-tax Return on Assets 16.90% 114.93% 104.97% 6.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.57% 15.83% 17.71% n.a
Return on Equity 21.07% 130.78% 102.26% n.a
Activity Ratios
Accounts Receivable Turnover 9.77 9.77 9.77 n.a
Collection Days 57 29 33 n.a
Accounts Payable Turnover 12.24 12.17 12.17 n.a
Payment Days 27 23 26 n.a
Total Asset Turnover 4.60 5.08 4.15 n.a
Debt Ratios
Debt to Net Worth 0.78 0.63 0.39 n.a
Current Liab. to Liab. 0.64 0.78 0.84 n.a
Liquidity Ratios
Net Working Capital $16,807 $12,988 $27,535 n.a
Interest Coverage 8.41 127.35 217.28 n.a
Additional Ratios
Assets to Sales 0.22 0.20 0.24 n.a
Current Debt/Total Assets 28% 30% 24% n.a
Acid Test 1.87 1.29 1.57 n.a
Sales/Net Worth 8.20 8.26 5.78 n.a
Dividend Payout 0.00 0.67 0.53 n.a
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General Assumptions
Year 1 Year 2 Year 3
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 30.00% 30.00% 30.00%
Other 0 0 0
Break-even Analysis
Monthly Revenue Break-even $20,479
Assumptions:
Average Percent Variable Cost 42%
Estimated Monthly Fixed Cost $11,797
Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $264,910 $475,025 $641,295
Direct Cost of Sales $112,304 $167,153 $215,316
Other Production Expenses $0 $0 $0
Total Cost of Sales $112,304 $167,153 $215,316
Gross Margin $152,607 $307,872 $425,979
Gross Margin % 57.61% 64.81% 66.42%
Expenses
Payroll $84,000 $84,000 $108,000
Sales and Marketing and Other Expenses $30,750 $86,200 $117,700
Depreciation $0 $0 $0
Leased Equipment $0 $2,000 $5,000
Publications/memberships $1,620 $1,620 $1,620
Insurance $3,600 $4,200 $4,500
Rent $9,000 $9,000 $10,000
Payroll Taxes $12,600 $12,600 $16,200
Other $0 $0 $0
Total Operating Expenses $141,570 $199,620 $263,020
Profit Before Interest and Taxes $11,037 $108,252 $162,959
EBITDA $11,037 $108,252 $162,959
Interest Expense $1,313 $850 $750
Taxes Incurred $2,917 $32,221 $48,663
Net Profit $6,807 $75,181 $113,546
Net Profit/Sales 2.57% 15.83% 17.71%
Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $238,419 $427,523 $577,166
Cash from Receivables $23,779 $45,351 $62,427
Subtotal Cash from Operations $262,198 $472,874 $639,593
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 $262,198 $472,874 $639,593
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $84,000 $84,000 $108,000
Bill Payments $160,883 $304,104 $411,209
Subtotal Spent on Operations $244,883 $388,104 $519,209
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $4,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $1,000 $1,000 $1,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $20,000 $28,000 $38,000
Dividends $0 $50,000 $60,000
Subtotal Cash Spent $269,883 $467,104 $618,209
Net Cash Flow ($7,685) $5,770 $21,384
Cash Balance $30,315 $36,085 $57,469
Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $30,315 $36,085 $57,469
Accounts Receivable $2,712 $4,863 $6,566
Other Current Assets $0 $0 $0
Total Current Assets $33,027 $40,948 $64,035
Long-term Assets
Long-term Assets $24,500 $52,500 $90,500
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $24,500 $52,500 $90,500
Total Assets $57,527 $93,448 $154,535
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $14,220 $25,960 $34,500
Current Borrowing $0 $0 $0
Other Current Liabilities $2,000 $2,000 $2,000
Subtotal Current Liabilities $16,220 $27,960 $36,500
Long-term Liabilities $9,000 $8,000 $7,000
Total Liabilities $25,220 $35,960 $43,500
Paid-in Capital $44,000 $44,000 $44,000
Retained Earnings ($18,500) ($61,693) ($46,512)
Earnings $6,807 $75,181 $113,546
Total Capital $32,307 $57,488 $111,035
Total Liabilities and Capital $57,527 $93,448 $154,535
Net Worth $32,307 $57,488 $111,035
Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 79.32% 35.00% 15.20%
Percent of Total Assets
Accounts Receivable 4.71% 5.20% 4.25% 5.70%
Other Current Assets 0.00% 0.00% 0.00% 32.50%
Total Current Assets 57.41% 43.82% 41.44% 41.30%
Long-term Assets 42.59% 56.18% 58.56% 58.70%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 28.20% 29.92% 23.62% 34.70%
Long-term Liabilities 15.64% 8.56% 4.53% 27.90%
Total Liabilities 43.84% 38.48% 28.15% 62.60%
Net Worth 56.16% 61.52% 71.85% 37.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 57.61% 64.81% 66.42% 0.00%
Selling, General & Administrative Expenses 55.04% 48.98% 48.72% 74.90%
Advertising Expenses 0.00% 10.53% 11.70% 2.90%
Profit Before Interest and Taxes 4.17% 22.79% 25.41% 2.00%
Main Ratios
Current 2.04 1.46 1.75 1.29
Quick 2.04 1.46 1.75 0.85
Total Debt to Total Assets 43.84% 38.48% 28.15% 62.60%
Pre-tax Return on Net Worth 30.10% 186.82% 146.09% 2.30%
Pre-tax Return on Assets 16.90% 114.93% 104.97% 6.00%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 2.57% 15.83% 17.71% n.a
Return on Equity 21.07% 130.78% 102.26% n.a
Activity Ratios
Accounts Receivable Turnover 9.77 9.77 9.77 n.a
Collection Days 57 29 33 n.a
Accounts Payable Turnover 12.24 12.17 12.17 n.a
Payment Days 27 23 26 n.a
Total Asset Turnover 4.60 5.08 4.15 n.a
Debt Ratios
Debt to Net Worth 0.78 0.63 0.39 n.a
Current Liab. to Liab. 0.64 0.78 0.84 n.a
Liquidity Ratios
Net Working Capital $16,807 $12,988 $27,535 n.a
Interest Coverage 8.41 127.35 217.28 n.a
Additional Ratios
Assets to Sales 0.22 0.20 0.24 n.a
Current Debt/Total Assets 28% 30% 24% n.a
Acid Test 1.87 1.29 1.57 n.a
Sales/Net Worth 8.20 8.26 5.78 n.a
Dividend Payout 0.00 0.67 0.53 n.a