Bionex Corporation
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 |
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