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Electronic Detectives

Executive Summary

Introduction
Electronic Detectives, Inc. helps lawyers identify, acquire, restore, and analyze electronic data in litigation. From tape restoration to hard drive imaging, our full-time, certified forensic, discovery and testifying experts are highly experienced in acquiring data from NT, Novell, Unix and Linux servers and PCs, among others. As testifying experts, we will help shape the field of electronic discovery.

The Company
Electronic Detectives will be a limited liability corporation registered in the state of Delaware for tax purposes. The company has a limited number of private investors and does not plan to go public. The company has its main offices in Portland, Oregon. The company’s main clients will be law firms requiring identification, restoration, and analysis of electronic data.

The company’s private investors will own 47% of the company’s shares. The rest will be owned by the senior management including Mr. David Radcliffe, (20%), Mrs. Julie Walters (10%), Mr. Brad Rinke (15%), and Mr. William Orcott (7%). All other financing will come from loans.

The Services
Electronic Detectives has experts well versed in all commercial operating systems such as Unix, Linux, Novell and others. The firm will assist in 30(b)(6) depositions to produce and go on-site to inventory data and look for hidden sources. The company also plans to maintain well recorded chains-of-custody in order to protect our clients. Our written protocols and internal procedures ensure that our work product withstands scrutiny in all jurisdictions. Our firm will offer detailed written reports, presentations, and analyses to support our conclusions. We also have a wealth of experience providing expert testimony in federal and state court.

The Market
The electronic evidence gathering business is an offshoot of the detective industry and it is such a new segment that gathering market data is impossible. However, a look at the profitability of one of our older competitors will give the reader an idea of the profit and growth potential of this market. Computer Forensics of Bellevue, WA has been in business for four years now and has experienced explosive growth averaging 40% per year. The company, after significant investment, achieved record pre-tax returns on net worth of 65%. This is an indication of how much demand there is in the market and the overall growth capacity. Therefore this is an excellent market to enter now and achieve a defensible position based on customer satisfaction and reputation before more competitors enter.

Financial Considerations
We conservatively expect to begin to make monthly profits in November of the first year and yearly profits by year three. In case our predictions are erroneous, Electronic Detectives has secured an additional $60,000 credit line. Our break-even analysis indicates we need to complete six projects per month to cover costs. During the next three years we expect to maintain a positive cash flow and to begin to payoff our various loans.

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1.1 Objectives

The three year goals for Electronic Detectives are the following:

  • Achieve break-even by year two.
  • Establish 40 law firm clients by end of year three.
  • Establish minimum 95% customer satisfaction rate.
  • Achieve project completion time of 10 days or less.

1.2 Keys to Success

Electronic Detectives’ keys to long-term survivability and profitability are:

  • Attracting the best talent in the computer science field and establishing close contacts with those institutions and firms conducting the latest R&D in computer security.
  • Keeping close contact with clients and establishing a well functioning long-term relationship with clients to generate repeat business and a top notch reputation.
  • Establishing procedures to ensure rapid, accurate retrieval of information, and client processing.

1.3 Mission

It is the mission of Electronic Detectives to create a new standard in the detective industry. With the creation of computers and the Internet for business and personal communication and data storage, much of needed court evidence is now retained on computers and PDA’s in the form of personal files, emails, electronic picture formats, and other forms. Currently, there are few companies who offers investigative services for institutions and firms that require accurate retrieval of such information. Electronic Detectives intends to lead the way in establishing standards for customer service, accurate recovery, timeliness, and professionalism that will allow the company to gain significant market share and an agressive, defensible position in the industry.

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Company Summary

Electronic Detectives will be a limited liability corporation registered in the state of Delaware for tax purposes. The company has a limited number of private investors and does not plan to go public. The company has its main offices in Portland, Oregon. The facilities include a computer forensics lab,  conference rooms and office spaces. The company expects to begin offering its services in January of 2003.

The company’s main clients will be law firms requiring identification, restoration, and analysis of electronic data. The firm offers a wide variety of services in order to reduce costs to our clients, which can reduce overall legal fees to individuals, firms and institutions.

2.1 Company Ownership

The company will have a number of outside private investors who will own 47% of the company’s shares. The rest will be owned by the senior management including Mr. David Radcliffe, (20%), Mrs. Julie Walters (10%), Mr. Brad Rinke (15%), and Mr. William Orcott (7%). All other financing will come from loans.

2.2 Start-up Summary

Total start-up requirements are $510,750 which includes a cash account of $341,550 to cover initial operating expenses prior to achieving the break-even level. The majority of our financing comes from investors, who are providing $297,000. Current borrowing will also provide $50,000 and there is long-term borrowing of $120,000.

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Start-up
Requirements
Start-up Expenses
Legal $6,000
Insurance $5,000
utilities $200
Rent $2,000
Accounting and bookkeeping fees $2,000
Research and Development $4,500
Advertising $6,500
Other $15,000
Total Start-up Expenses $41,200
Start-up Assets
Cash Required $341,550
Other Current Assets $0
Long-term Assets $128,000
Total Assets $469,550
Total Requirements $510,750
Start-up Funding
Start-up Expenses to Fund $41,200
Start-up Assets to Fund $469,550
Total Funding Required $510,750
Assets
Non-cash Assets from Start-up $128,000
Cash Requirements from Start-up $341,550
Additional Cash Raised $0
Cash Balance on Starting Date $341,550
Total Assets $469,550
Liabilities and Capital
Liabilities
Current Borrowing $50,000
Long-term Liabilities $120,000
Accounts Payable (Outstanding Bills) $43,750
Other Current Liabilities (interest-free) $0
Total Liabilities $213,750
Capital
Planned Investment
Mr. David Radcliffe $60,000
Mrs. Julie Walters $30,000
Mr. Brad Rinke $45,000
Mr. William Orcott $21,000
Others $141,000
Additional Investment Requirement $0
Total Planned Investment $297,000
Loss at Start-up (Start-up Expenses) ($41,200)
Total Capital $255,800
Total Capital and Liabilities $469,550
Total Funding $510,750

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Services

Electronic Detectives offers its computer forensics services in four phases:

  • Identification of pertinent data including encrypted, compressed and password-protected files.
  • Acquisition and restoration of data.
  • Analysis.
  • Production of reports and presentations for our clients and the relevant court.

Electronic Detectives has experts well versed in all commercial operating systems such as Unix, Linux, Novell and others. The firm will assist in 30(b)(6) depositions to produce and go on-site to inventory data and look for hidden sources. The company also plans to maintain well recorded chains-of-custody in order to protect our clients. Our written protocols and internal procedures ensure that our work product withstands scrutiny in all jurisdictions. Our firm will offer detailed written reports, presentations, and analyses to support our conclusions. We also have a wealth of experience providing expert testimony in federal and state court.

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Market Analysis Summary

Electronic Detectives will be concentrating on large law firms with a proven track record with fields in the environmental, corporate, malpractice, intellectual property rights, and general law areas. This is because these types of companies have the greatest needs and the highest profit margins.

Profitability and growth in this little-tapped market is astounding, as evidenced by one of our major competitors, who has experienced explosive growth averaging 40% per year. The company, after significant investment, achieved record pre-tax returns on net worth of 65%.

An analysis of the market using the five forces of profitability indicates that there will be a short time where growth of market share and profitability will be extremely high while demand outstrips supply. As new entrants move into the market this opportunity will disappear. This is the time for Electronic Detectives to create its reputation and niche in the industry.

4.1 Market Segmentation

For Electronic Detectives’ first three years it will be concentrating exclusively on acquiring contracts with West coast law firms employing over twenty individuals and having a respectable reputation for at least fifteen years. This is to insure long-term contracts with satisfied customers who can afford our services and create a self-generating word-of-mouth marketing campaign. In addition, we will be focusing on law firms that are in the following fields of practice

  • Intellectual property rights;
  • Corporate and business law;
  • Environmental law;
  • General practice;
  • Malpractice.

Firms such as these have high demand for electronic investigations due to their client’s needs and work environments. The Market Analysis table includes all the law firms of these types in the West coast area of California, Oregon, and Washington.

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Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Malpractice firms 2% 103 105 107 109 111 1.89%
Intellectual property firms 6% 34 36 38 40 42 5.42%
Corporate firms 4% 220 229 238 248 258 4.06%
General practice firms 2% 84 86 88 90 92 2.30%
Environmental firms 7% 72 77 82 88 94 6.89%
Total 3.86% 513 533 553 575 597 3.86%

4.2 Service Business Analysis

The electronic evidence gathering business is an offshoot of the detective industry and it is such a new segment that gathering market data is impossible. However, a look at the profitability of one of our older competitors will give the reader an idea of the profit and growth potential of this untapped market.

Computer Forensics of Bellevue, WA has been in business for four years now and has experienced explosive growth averaging 40% per year. The company, after significant investment, achieved record pre-tax returns on net worth of 65%. This is an indication of how much demand there is in the market and the overall growth capacity. Therefore this is an excellent market to enter now and achieve a defensible position based on customer satisfaction and reputation before more competitors enter.

Within this new market, the existing rivalry among firms is very low. This is because currently demand greatly outstrips the amount of services available. Since this is such a growing market, competing firms are concentrating on growing their own client base and not on market share or direct competitive strategies. However, the threat of new entrants is very high, so high that a large number of new entrants to the market is guaranteed.

This is the reason why Electronic Detectives plans to be first to market with comprehensive services and creating industry standards in customer satisfaction and thoroughness. Additionally, the influence that suppliers have on this market is quite significant. The most important suppliers for Electronic Detectives is specialty software companies producing file encryption/decryption software. Although our firm anticipates creating some of its own software in-house, the majority of our programs will come from the open market. Therefore, much of our success depends on the capability of our suppliers.  

4.2.1 Competition and Buying Patterns

There are three competitors within our geographical operating area: Computer Forensics of Bellevue, WA; Techno Solutions of Pasadena, CA; and Booth & Anderson Business Consultants of Los Angeles, CA.

Of these three competitors, only Computer Forensics is a direct threat to us. Techno Solutions is currently concentrating on providing the same services for companies looking to investigate internal fraud and computer misuse such as banks and other financial institutions. Booth & Anderson is a general business consulting firm that offers electronic investigation as only one of its many services, and therefore lacks the focus to offer a comprehensive client-provider experience.

Currently Computer Forensics is going through a rapid expansion phase as it ramps up for maximum service delivery. Due to the high demand for such services we will not have direct competition for some time. Once new entrants become plentiful, we anticipate that this will change.

One of the advantages to operating in this market is that clients tend to be relatively price insensitive as long as they get a professional and satisfying experience. Therefore we expect to be able to charge a significant profit margin.

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Strategy and Implementation Summary

Electronic Detectives’ overall strategy is to capitalize on client’s buying patterns of demanding top-quality work with an emphasis on thoroughness in investigations to reputable companies.

We intend to create industry standards of excellence that will be leveraged into a significant brand image and name that will provide us with a highly defensible market position. This will allow us to have a higher profit margin than our competitors.

5.1 Sales Strategy

Initially, sales will be dealt with by Mr. Radcliffe and Mr. Orcott, as they have the most number of contacts in the industry. Mrs. Walters will handle the administrative side of sales to our clients including customer service and billing. As the company grows, we expect to add to our staff a permanent sales force to handle all aspects of our sales strategy.

In the majority of cases, we anticipate that the entire project will last about ten days from the time we have permission to go on site. This will insure good turnaround and customer satisfaction. We intend to have close customer relations by having each job developed, scoped, sold, and fulfilled by the same people.

5.1.1 Sales Forecast

Sales are based on the various contract projects we anticipate acquiring in the various market segments. Revenues are based on average costs per project based on estimated time and complexity of project plus an undisclosed profit margin. The company does not have any significant direct costs of sales.

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Sales Forecast
Year 1 Year 2 Year 3
Sales
Malpractice lawsuits $64,000 $100,000 $135,000
Corporate/business lawsuits $72,000 $156,000 $225,000
Intellectual property lawsuits $14,000 $60,000 $120,000
General practice lawsuits $30,000 $75,000 $100,000
Environmental lawsuits $35,000 $90,000 $135,000
Total Sales $215,000 $481,000 $715,000
Direct Cost of Sales Year 1 Year 2 Year 3
Row 1 $0 $0 $0
Other $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0

5.2 Marketing Strategy

In order to attract clients, Electronic Detectives will offer free consultations or an initial contract at reduced prices to promising firms. These promotions will build our reputation. In addition, Mr. Radcliffe and Mrs. Walters will be traveling to six trade shows and conventions across the Midwest and Western part of the country where we will have booths to advertise our services. Finally, we will be setting up cold calls to potential clients and have half and full page advertisements in such publications as Nation Law Journal, The Journal of Corporate Law, and Eisley’s Law Review.

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Management Summary

The company will have four officers including our president, Mr. David Radcliffe. Our heart of operations will include an operations chief, Mr. Brad Rinke, plus two other forensics analysts. Legal issues will be handled by our in-house lawyer, Mr. Orcott, and finances and general admin by Mrs. Walter.

The company plans to hire additional computer forensic analysts as we begin to get large numbers of contracts.

6.1 Personnel

Mr. David Radcliffe is a former special agent of the FBI. During his twenty years with the bureau, Mr. Radcliffe worked in a variety of different departments, but starting in 1981 he transferred to and eventually headed the FBI’s electronic information investigation branch. In 1985 Mr. Radcliffe received an MBA in information systems from the University of Washington.

Mr. Brad Rinke graduated from Penn State University with a bachelors degree in forensic sciences in 1975. From 1978-1988 Mr. Rinke worked with the California State Patrol as a forensic investigator. In 1992 Mr. Rinke received a masters degree in computer science from the University of Southern California. For the past ten years Mr. Rinke has worked with Symantec, Inc. identifying and developing computer programs to fight viruses and worms.

Mr. William Orcott is a graduate of the Stanford School of Law. For the past eight years Mr. Orcott has worked with White, Curley, & Pineda, a top law firm in Los Angeles specializing in intellectual property lawsuits. Mr. Orcott will serve as the legal advisor for Electronic Detectives and will also be the senior evidence custodian, maintaining the evidence locker inventory.

Personnel Plan
Year 1 Year 2 Year 3
Mr. Radcliffe – President $36,000 $45,000 $60,000
Mrs. Walters – CFO $36,000 $45,000 $60,000
Mr. Rinke – Operations Manager $36,000 $45,000 $45,000
Mr. Orcott – Law Consultant $36,000 $45,000 $45,000
Computer Forensics Analyst $36,000 $40,000 $45,000
Computer Forensics Analyst $36,000 $40,000 $45,000
Computer Forensics Analyst $0 $40,000 $40,000
Computer Forensics Analyst $0 $0 $0
Total People 0 0 0
Total Payroll $216,000 $300,000 $340,000

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Financial Plan

Our financial plan anticipates two years of negative profits as we gain sales volume. We have budgeted enough investment to cover these losses and have an additional credit line of $60,000 available if sales do not match predictions.

7.1 Important Assumptions

We are assuming approximately 75% sales on credit and average interest rates of 10%. These are considered to be conservative in case our predictions are erroneous.

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

7.2 Break-even Analysis

Our break-even analysis is based on the assumptions that our gross margin is 100%. In other words, we will have insignificant direct cost of sales. Since each project will be of different scope, length, and complexity, it is difficult to assign and average per unit revenue figure. However, it is conservatively believed that during the first three years, average profitability will be about $5,000. This is because we will be dealing with smaller companies at first that have smaller projects. We expect that about six projects per month will guarantee a break-even point.

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Break-even Analysis
Monthly Revenue Break-even $25,483
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $25,483

7.3 Projected Profit and Loss

The following table itemizes our revenues and associated costs. We expect to be paying higher costs in marketing and advertising than other companies as we attempt to build sales volume. As the reader can see, we expect monthly profits to begin in November 2003 and yearly profits to occur in 2005.

Data recovery business plan, financial plan chart image

Data recovery business plan, financial plan chart image

Data recovery business plan, financial plan chart image

Data recovery business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $215,000 $481,000 $715,000
Direct Cost of Sales $0 $0 $0
Other Costs of Sales $15,800 $25,000 $65,000
Total Cost of Sales $15,800 $25,000 $65,000
Gross Margin $199,200 $456,000 $650,000
Gross Margin % 92.65% 94.80% 90.91%
Expenses
Payroll $216,000 $300,000 $340,000
Sales and Marketing and Other Expenses $30,000 $50,000 $50,000
Depreciation $2,400 $2,500 $2,500
Rent $24,000 $24,000 $28,000
Utilities $6,000 $6,000 $6,000
Insurance $12,000 $14,000 $15,000
Travel $8,200 $12,000 $12,000
Payroll Taxes $0 $0 $0
Other $7,200 $10,000 $10,000
Total Operating Expenses $305,800 $418,500 $463,500
Profit Before Interest and Taxes ($106,600) $37,500 $186,500
EBITDA ($104,200) $40,000 $189,000
Interest Expense $17,000 $15,150 $11,450
Taxes Incurred $0 $6,705 $52,515
Net Profit ($123,600) $15,645 $122,535
Net Profit/Sales -57.49% 3.25% 17.14%

7.4 Projected Cash Flow

The following is our cash flow chart and diagram. We do not expect to have any short-term cash flow problems even though we will be operating at a loss for the first two years. Our short-term SBA loan of $50,000 will be repaid in two equal payments in 2004-2005. Our $120,000 long-term loan will be paid off in ten years.

Data recovery business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $53,750 $120,250 $178,750
Cash from Receivables $111,075 $298,673 $481,641
Subtotal Cash from Operations $164,825 $418,923 $660,391
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 $13,000 $0
Subtotal Cash Received $164,825 $431,923 $660,391
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $216,000 $300,000 $340,000
Bill Payments $150,401 $163,019 $242,805
Subtotal Spent on Operations $366,401 $463,019 $582,805
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $25,000 $25,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $12,000 $12,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $366,401 $500,019 $619,805
Net Cash Flow ($201,576) ($68,096) $40,586
Cash Balance $139,974 $71,878 $112,464

7.5 Projected Balance Sheet

The following is the projected balance sheet for Electronic Detectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $139,974 $71,878 $112,464
Accounts Receivable $50,175 $112,252 $166,861
Other Current Assets $0 $0 $0
Total Current Assets $190,149 $184,130 $279,325
Long-term Assets
Long-term Assets $128,000 $128,000 $128,000
Accumulated Depreciation $2,400 $4,900 $7,400
Total Long-term Assets $125,600 $123,100 $120,600
Total Assets $315,749 $307,230 $399,925
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $13,549 $13,385 $20,545
Current Borrowing $50,000 $25,000 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $63,549 $38,385 $20,545
Long-term Liabilities $120,000 $108,000 $96,000
Total Liabilities $183,549 $146,385 $116,545
Paid-in Capital $297,000 $310,000 $310,000
Retained Earnings ($41,200) ($164,800) ($149,155)
Earnings ($123,600) $15,645 $122,535
Total Capital $132,200 $160,845 $283,380
Total Liabilities and Capital $315,749 $307,230 $399,925
Net Worth $132,200 $160,845 $283,380

7.6 Business Ratios

We have included industry standard ratios from the detective agency industry to compare with ours. As this is a new sub market of the overall industry, we expect some significant differences especially in sales growth, financing ratios, long-term asset investments and net worth. However, our projections indicate a healthy company that will be able to obtain and retain long-term profitability.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 123.72% 48.65% 7.51%
Percent of Total Assets
Accounts Receivable 15.89% 36.54% 41.72% 29.53%
Other Current Assets 0.00% 0.00% 0.00% 41.06%
Total Current Assets 60.22% 59.93% 69.84% 74.47%
Long-term Assets 39.78% 40.07% 30.16% 25.53%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 20.13% 12.49% 5.14% 34.85%
Long-term Liabilities 38.00% 35.15% 24.00% 17.54%
Total Liabilities 58.13% 47.65% 29.14% 52.39%
Net Worth 41.87% 52.35% 70.86% 47.61%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.65% 94.80% 90.91% 100.00%
Selling, General & Administrative Expenses 165.21% 100.95% 78.76% 82.58%
Advertising Expenses 0.00% 0.00% 0.00% 1.75%
Profit Before Interest and Taxes -49.58% 7.80% 26.08% 1.21%
Main Ratios
Current 2.99 4.80 13.60 1.73
Quick 2.99 4.80 13.60 1.38
Total Debt to Total Assets 58.13% 47.65% 29.14% 2.33%
Pre-tax Return on Net Worth -93.49% 13.90% 61.77% 60.48%
Pre-tax Return on Assets -39.14% 7.27% 43.77% 5.91%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -57.49% 3.25% 17.14% n.a
Return on Equity -93.49% 9.73% 43.24% n.a
Activity Ratios
Accounts Receivable Turnover 3.21 3.21 3.21 n.a
Collection Days 55 82 95 n.a
Accounts Payable Turnover 8.87 12.17 12.17 n.a
Payment Days 37 30 25 n.a
Total Asset Turnover 0.68 1.57 1.79 n.a
Debt Ratios
Debt to Net Worth 1.39 0.91 0.41 n.a
Current Liab. to Liab. 0.35 0.26 0.18 n.a
Liquidity Ratios
Net Working Capital $126,600 $145,745 $258,780 n.a
Interest Coverage -6.27 2.48 16.29 n.a
Additional Ratios
Assets to Sales 1.47 0.64 0.56 n.a
Current Debt/Total Assets 20% 12% 5% n.a
Acid Test 2.20 1.87 5.47 n.a
Sales/Net Worth 1.63 2.99 2.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Appendix

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Malpractice lawsuits 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $5,000 $7,000 $7,000 $9,000 $9,000 $9,000
Corporate/business lawsuits 0% $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $5,000 $5,000 $5,000 $9,000 $11,000 $13,000
Intellectual property lawsuits 0% $0 $0 $0 $0 $0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
General practice lawsuits 0% $0 $0 $0 $0 $2,000 $2,000 $3,000 $4,000 $4,000 $5,000 $5,000 $5,000
Environmental lawsuits 0% $0 $0 $0 $0 $0 $0 $5,000 $6,000 $6,000 $6,000 $6,000 $6,000
Total Sales $7,000 $7,000 $7,000 $7,000 $9,000 $11,000 $20,000 $24,000 $24,000 $31,000 $33,000 $35,000
Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Row 1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Mr. Radcliffe – President 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mrs. Walters – CFO 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mr. Rinke – Operations Manager 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mr. Orcott – Law Consultant 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Computer Forensics Analyst 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 0 0 0 0 0 0 0 0 0 0 0 0
Total Payroll $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $7,000 $7,000 $7,000 $7,000 $9,000 $11,000 $20,000 $24,000 $24,000 $31,000 $33,000 $35,000
Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Costs of Sales $500 $500 $500 $500 $500 $600 $700 $1,000 $2,000 $2,000 $2,000 $5,000
Total Cost of Sales $500 $500 $500 $500 $500 $600 $700 $1,000 $2,000 $2,000 $2,000 $5,000
Gross Margin $6,500 $6,500 $6,500 $6,500 $8,500 $10,400 $19,300 $23,000 $22,000 $29,000 $31,000 $30,000
Gross Margin % 92.86% 92.86% 92.86% 92.86% 94.44% 94.55% 96.50% 95.83% 91.67% 93.55% 93.94% 85.71%
Expenses
Payroll $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000
Sales and Marketing and Other Expenses $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Depreciation $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Utilities $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Travel $600 $0 $600 $1,000 $1,000 $0 $1,000 $0 $1,000 $1,000 $1,000 $1,000
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Total Operating Expenses $25,400 $24,800 $25,400 $25,800 $25,800 $24,800 $25,800 $24,800 $25,800 $25,800 $25,800 $25,800
Profit Before Interest and Taxes ($18,900) ($18,300) ($18,900) ($19,300) ($17,300) ($14,400) ($6,500) ($1,800) ($3,800) $3,200 $5,200 $4,200
EBITDA ($18,700) ($18,100) ($18,700) ($19,100) ($17,100) ($14,200) ($6,300) ($1,600) ($3,600) $3,400 $5,400 $4,400
Interest Expense $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($20,317) ($19,717) ($20,317) ($20,717) ($18,717) ($15,817) ($7,917) ($3,217) ($5,217) $1,783 $3,783 $2,783
Net Profit/Sales -290.24% -281.67% -290.24% -295.95% -207.96% -143.79% -39.58% -13.40% -21.74% 5.75% 11.46% 7.95%

Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $1,750 $1,750 $1,750 $1,750 $2,250 $2,750 $5,000 $6,000 $6,000 $7,750 $8,250 $8,750
Cash from Receivables $0 $175 $5,250 $5,250 $5,250 $5,300 $6,800 $8,475 $15,100 $18,000 $18,175 $23,300
Subtotal Cash from Operations $1,750 $1,925 $7,000 $7,000 $7,500 $8,050 $11,800 $14,475 $21,100 $25,750 $26,425 $32,050
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $1,750 $1,925 $7,000 $7,000 $7,500 $8,050 $11,800 $14,475 $21,100 $25,750 $26,425 $32,050
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000
Bill Payments $44,054 $9,097 $8,537 $9,130 $9,517 $9,487 $8,653 $9,693 $9,083 $11,017 $11,017 $11,117
Subtotal Spent on Operations $62,054 $27,097 $26,537 $27,130 $27,517 $27,487 $26,653 $27,693 $27,083 $29,017 $29,017 $29,117
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $62,054 $27,097 $26,537 $27,130 $27,517 $27,487 $26,653 $27,693 $27,083 $29,017 $29,017 $29,117
Net Cash Flow ($60,304) ($25,172) ($19,537) ($20,130) ($20,017) ($19,437) ($14,853) ($13,218) ($5,983) ($3,267) ($2,592) $2,933
Cash Balance $281,246 $256,074 $236,538 $216,408 $196,391 $176,954 $162,101 $148,883 $142,899 $139,633 $137,041 $139,974
Pro Forma Balance Sheet
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances
Current Assets
Cash $341,550 $281,246 $256,074 $236,538 $216,408 $196,391 $176,954 $162,101 $148,883 $142,899 $139,633 $137,041 $139,974
Accounts Receivable $0 $5,250 $10,325 $10,325 $10,325 $11,825 $14,775 $22,975 $32,500 $35,400 $40,650 $47,225 $50,175
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $341,550 $286,496 $266,399 $246,863 $226,733 $208,216 $191,729 $185,076 $181,383 $178,299 $180,283 $184,266 $190,149
Long-term Assets
Long-term Assets $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000
Accumulated Depreciation $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400
Total Long-term Assets $128,000 $127,800 $127,600 $127,400 $127,200 $127,000 $126,800 $126,600 $126,400 $126,200 $126,000 $125,800 $125,600
Total Assets $469,550 $414,296 $393,999 $374,263 $353,933 $335,216 $318,529 $311,676 $307,783 $304,499 $306,283 $310,066 $315,749
Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Current Liabilities
Accounts Payable $43,750 $8,813 $8,233 $8,813 $9,199 $9,199 $8,329 $9,393 $8,716 $10,649 $10,649 $10,649 $13,549
Current Borrowing $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $93,750 $58,813 $58,233 $58,813 $59,199 $59,199 $58,329 $59,393 $58,716 $60,649 $60,649 $60,649 $63,549
Long-term Liabilities $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000
Total Liabilities $213,750 $178,813 $178,233 $178,813 $179,199 $179,199 $178,329 $179,393 $178,716 $180,649 $180,649 $180,649 $183,549
Paid-in Capital $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000
Retained Earnings ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200)
Earnings $0 ($20,317) ($40,033) ($60,350) ($81,067) ($99,783) ($115,600) ($123,517) ($126,733) ($131,950) ($130,167) ($126,383) ($123,600)
Total Capital $255,800 $235,483 $215,767 $195,450 $174,733 $156,017 $140,200 $132,283 $129,067 $123,850 $125,633 $129,417 $132,200
Total Liabilities and Capital $469,550 $414,296 $393,999 $374,263 $353,933 $335,216 $318,529 $311,676 $307,783 $304,499 $306,283 $310,066 $315,749
Net Worth $255,800 $235,483 $215,767 $195,450 $174,733 $156,017 $140,200 $132,283 $129,067 $123,850 $125,633 $129,417 $132,200

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