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jSpan Corporation

Executive Summary

jSpan Corporation (jSpan) is an Application Service Provider (ASP) of Internet based remote access services to independent professionals and small to medium businesses. The jSpan user interface – the Webtop – serves to aggregate legacy systems, online applications, and value-added services into one work environment. The Webtop interface and infrastructure established at partner ISPs enable jSpan to serve as a distribution network for other application service providers. jSpan takes advantage of the rapid growth in demand for remote access and the industry trend towards outsourcing IT applications.

jSpan Corporation has raised $500,000 from private investors. The funds are being used to launch an initial test market deployment, complete the management team and license key technologies. The company is currently seeking an additional $3.2 million through the issuance of Series A Preferred equity. These funds will be used to support a full-scale product launch within six months from the closure of funding.

Business Model
jSpan provides remote access services through partnerships with Internet Service Providers (ISP), broadband wholesalers, and other network service providers. Remote access is managed through an Internet based Webtop that aggregates applications from remote office networks and other Internet locations. The primary means of generating revenue is through a per user monthly subscription fee. Premium subscriptions and value added services eventually expand the revenue stream to include transaction and syndication fees.

Customer acquisition is driven by co-marketing and revenue sharing agreements with strategic network service providers. Direct end user marketing (advertising and promotions) will be used to build customer awareness and further solidify the jSpan brand. Content syndication through partnerships with Internet content providers, service providers, and product manufactures will build a broader customer base.

Market Opportunity
A flexible work environment and an increasingly mobile workforce are driving the demand for remote access to critical business information. Forecasts estimate the mobile workforce in the United States alone will exceed 47 million employees four years from now. To stay competitive, independent professionals and small to medium businesses are rapidly adopting mobile computing devices but lack the technical and economic resources to implement a comprehensive remote access solution.

Professionals are adopting a work style that requires access to office applications from multiple locations. As of last year, approximately 23% of home Internet users brought office work home on nights and weekends while another 17% used the Internet to run a home-based business. The number of telecommuters has shown rapid growth, exceeding 9.7 million this year.

According to Access Media International, small businesses invested $138 billion on information technology and telecommunications products last year. Businesses are seeking technology solutions that leverage a smaller number of employees over a larger market. Increasingly, these companies are outsourcing technology services.

Product
jSpan provides remote access through a universally accessible Webtop using Virtual Private Networking (VPN) technology to establish a secure connection to the remote target system. The combination of these two technologies eliminates the expense and expertise needed to custom configure a typical remote access solution. Access can be provided over xDSL, T1, or cable modems, resulting in a secure Internet hosted Webtop that offers functionality similar to an office-based workstation. Taking advantage of core technology that is available in the market will allow jSpan to minimize development time and rapidly enter the market. Over time, premium subscriptions and value added services improve the customer value proposition.

Financial Analysis
Gross revenue is based on per user revenue of $21.25 per month and forecast to exceed $422 million by the end of year five of operations. The target market size is based on the projected mobile workforce as determined by International Data Corporation. Additional opportunities in the enterprise or consumer market segments, or international expansion, could substantially increase the potential market.

By consolidating the highly fragmented market for independent professionals and businesses, jSpan is a potential acquisition target for corporations that offer goods and services to this market segment. Based on a $450 per user acquisition cost, management conservatively estimates an acquisition value of $105 million at the end of year three, increasing to over $1 billion by the end of year five.

Management Team
jSpan has assembled a team of experienced managers and technical specialists. The founders, John Millar and Kim Niquette, have management experience in high growth technology companies and international entrepreneurial organizations. Members of jSpan’s technical team have software development and operations experience with Sun Microsystems, Raytheon Corporation, and a number of start-up ventures. Additional senior managers have been identified and plan to join the team subsequent to a major funding event. jSpan has also assembled a strong advisory board that includes experienced entrepreneurs and leading professional services organizations.

John G. Millar, Co-Founder and CEO.
Kim Niquette, Co-Founder and CFO.
Norman Walters, COO.
Carlos Garcia, Technology Specialist.

Board of Advisors
Joseph Addison, Co-Founder and CFO of StartABusiness.com.
James Smith, Vice President of Business Development for Exodus Networks.
Michael M. Rodgers, Partner at Watson, Sonoma, Goodson & Rodgers.
Peter J. Wilson, Director of Business Development at Advanced Network Communications.

Additional biographical information on the Management Team and Board of Advisors may be found in topics 7.1 and 7.2 respectively.

1 “Where’s the Office?  U.S. Remote and Mobile Worker Market Review and Forecast,” International Data Corporation, July 1999, p. 2.
2 “Online Nation: 1998 U.S. Internet User Survey”, International Data Corporation, 1998.
3 “Where’s the Office?  U.S. Remote and Mobile Worker Market Review and Forecast,” International Data Corporation, July 1999, p. 2.

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Business Model

jSpan Corporation is an Application Service Provider (ASP) of Internet based remote access services to independent professionals and businesses. Access is managed through a customized Webtop that aggregates applications and content from home computers, office networks, and other Internet locations. The primary means of generating revenue is a per-user monthly subscription fee. Over time, the company expects to generate additional revenue from transaction fees on value added services. jSpan provides remote access by co-hosting jSpan application servers at strategic partner locations. Targeted strategic partners include Internet Service Providers (ISP), xDSL wholesalers, cable network providers, and vertically integrated telecommunications operators. Partnerships will be structured as revenue sharing and co-marketing agreements.

2.1 Competitive Edge

The jSpan Corporation competitive advantage is based on:

  • Establishing strong business relationships with network service providers that allow jSpan to control an application service provider distribution network.
  • Rapidly building market share through aggressive customer acquisition programs.
  • Developing and deploying premium subscriptions and value added services.

Business relationships with network service and infrastructure providers, particularly those that offer high bandwidth connectivity to the business market, serve to give jSpan a strategic advantage by facilitating a network connection to potential jSpan customers. By co-hosting an application server in the network provider central office or the ISP data center, jSpan has preferred access to remote systems and can offer superior performance on applications that require remote connectivity. Once established, the jSpan network will serve as an aggregator and distribution channel for other ASPs. jSpan Corporation will seek to establish exclusive relationships that serve as a barrier to entry.

Rapid customer acquisition is accomplished by syndicating the jSpan service through Internet content providers that target a similar customer base. In addition, revenue sharing and joint advertising programs will add incentives for network service providers to offer the service to their customer base. Once customers adopt and configure the service, they are less likely to switch providers, resulting in reduced customer churn. Once deployed, the switching cost for both the service provider and the customer will serve as a barrier to entry and a competitive advantage.

Premium subscriptions and value added services extend the functionality of the jSpan remote access solution. jSpan will aggregate key applications into a series of Webtops designed to meet the needs of vertical market segments. Applications will be provided through strategic relationships with application providers, licensing agreements with product manufacturers and business agreements with third party services.

2.2 Strategic Alliances

jSpan Corporation is establishing strategic partnerships with network service and infrastructure providers that can provide high performance access to network facilities. The focus of jSpan’s strategic partnerships is on companies deploying xDSL, cable, T1 and other high-speed connectivity. There are approximately 7,000 ISPs in the United States and 14,000 worldwide, many of which are deploying broadband solutions. Incumbent Local Exchange Carriers (ILEC) and Competitive Local Exchange Carriers (CLEC) sell xDSL access to ISPs. Similarly, cable operators are deploying broadband over cable networks and selling the access back to ISPs. The expansion of low cost broadband solutions is accelerating the market for jSpan services and will encourage broadband providers to build strong partnerships with application service providers.

Large ISPs like EarthLink Inc., MindSpring Inc. and America Online Inc. provide dial-up Internet service to a substantial customer base. The top 5 ISPs have approximately 23.6 million subscribers. Similarly, network service providers like PSInet, Concentric Networks and Exodus Inc. provide high bandwidth connections to a broad range of business entities. These service providers are actively expanding their businesses to include broadband and value added services that can be bundled into an overall business package. These companies may initially outsource their broadband requirements to wholesalers. However, their ability to draw on large capital resources increases the probability that they will vertically integrate into the broadband market. Integration is likely to occur through the acquisition of regional xDSL and cable providers as well as through the direct deployment of broadband solutions. Due to their ability to influence a large customer base and invest substantial capital, these service providers represent attractive strategic partners.

To provide additional services to their customers, ILECs and CLECs are building strategic relationships with ASPs like jSpan. The higher percentage of business customers using CLECs represents an immediate market opportunity for jSpan. The three largest nationally based CLECs that offer xDSL services are Covad Communications Group Inc., Northpoint Communications Inc., and Rhythms NetConnections Inc. Collectively these solutions providers have approximately 25,500 subscribers and are able to offer xDSL service to approximately 40 million customers.

At Home Corporation, RoadRunner Corporation, High Speed Access Corporation, and Softnet Communications Inc. dominate the market for broadband services over cable. As of the end of June 1999, these companies have approximately 948,000 subscribers and can potentially provide service to 28.0 million homes. The focus of cable suppliers on home, rather than business accounts, makes them an attractive secondary market to xDSL providers.

Strategic partnerships with application providers, product manufacturers and third party services will serve to expand jSpan’s value proposition beyond remote connectivity. Online applications that meet the needs of a specific vertical market segment can be integrated into the Webtop work environment. Software manufacturers seeking to provide per-use licensing for legacy products can host their product on a jSpan server. Service providers that provide related services – e.g. printing services through Kinko’s, Inc. – can expand their customer base through a strategic partnership with jSpan Corporation.

5 The List, Boardwatch Magazine, June 1999 (http://www.boardwatch.com) and Intel Corporation as reported by Ziff-Davis Publishing, “Sun a winner in Intel ISP program”, June 1999 (http://www.zdnet.co.uk//news/1999/25/ns-8670.html ).
6 Competitive Local Exchange Carriers are often referred to as either CLECs or DLECs (Data Local Exchange Carriers). DLECs focus only on data services as opposed to a combination of data and telecom services.
7 “Small Players Deluge Market with Free Disks,” The Wall Street Journal, Tuesday, August 3, 1999 p. B-1 Information reprinted from research conducted by Jupiter Communications.
8 Deployment Update provided by xDSL.com based on a TeleChoice survey. xDSL deployment figures represent US lines in service as of Q2’99  (
http://www.xDSL.com).
9 Northpoint Communications Group, Inc. Company analysis. Pacific Crest Securities Institutional Equity Research. July 28, 1999.
10 ibid.

2.3 Sales and Distribution Model

jSpan Corporation is initially targeting professionals and businesses that do not have the resources or technical skills to deploy an internal remote access solution. Sales to this market segment will be conducted through strategic partnerships with network service providers. The company will develop a secondary market segment comprised of enterprise customers and premium services following the success of the initial product launch.

End user pricing is value-based and determined by the comparable per-user cost of deploying and managing a remote access solution using existing technologies. An end-user price of $25 per month ($300 annually) will facilitate market entry and development. Over time, the competitive nature of the market will serve to lower the price for basic service but will increase the opportunity to offer premium subscriptions and value added services. Strategic partners will participate in revenue sharing agreements. Revenue sharing agreements will range from 3% to 15% of subscription revenue. To insure a conservative forecast, financial projections assume strategic partners retain 15% of all end user subscription revenue.

The jSpan service is distributed through a jSpan application server co-hosted at a network service provider location. Remote access to customer systems can then be sold directly to the service provider customer base or bundled as part of a complete service package. Co-hosting allows jSpan to provide secure network links directly to target systems without the need to route traffic through numerous sites, resulting in superior network performance and added security. The proximity of the jSpan application server to the physical network connection also facilitates the addition of value added services.
jSpan Corporation’s target customers can be classified into three broad categories:

  1. Independent Professionals: Identify the need for the jSpan service, establish the account, and are the primary user. Typically made up of telecommuters, mobile professionals, and Small Office – Home Office (SOHO) workers. Individual customers are independent decision-makers and are likely to demand access to a single office location or home computer.
  2. Business Customers: Primarily need remote access to an office computer or a small office network. Business customers identify the need but usually work as part of a larger decision making group. The account is billed to a business entity and may include multiple users on a single bill.
  3. Enterprise Customers: Large corporations that have a widespread employee base and require a remote access solution for some or all of their employees. Enterprise customers have the resources of an IT department but are pursuing an outsourcing strategy to manage the cost of remote access. Enterprise customers may have multiple office locations with multiple Internet access points.

4 Research sponsored by Cisco Systems Inc, San Jose, CA, estimates an average annual cost of $975 per user for a typical remote access solution and $700 annual cost for an outsourced, VPN based, remote access solution. Reprinted in “The Future of Remote Access”, Gary Kim, Virgo Publishing Inc. Jan., 1999.

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Services and Technology

jSpan Corporation is an ASP that combines an Internet based Webtop work environment with a VPN link to one or more remote target systems. The combination of these two technologies eliminates the expense and expertise needed to custom configure a typical remote access solution. The Webtop work environment can be used to aggregate applications from a number of different sources including an office network, a home computer, or an Internet based service provider. The core technology required to implement the basic service is generally available in the market. Additional development is required to support the unique jSpan implementation and to expand the range of system interoperability.

3.1 Service Functionality

The functionality of the jSpan Service can be divided into three primary components. The first is the universally accessibly user interface – the Webtop – that provides an interface into applications both on the remote target system, and on the Internet. The Webtop controls access to the jSpan service and adapts the environment to meet the needs of different web browsers. The second component is a VPN connection between the jSpan application server and the remote target system. A VPN link can be readily established on a broadband link but a system that uses a dynamically allocated IP address or that resides on a dial-up link represents an additional challenge. The final component of the jSpan Service is client software on the remote target system that launches target applications. The software establishes communication over the VPN link and interacts with the application to insure that the appropriate content is returned to the Webtop.

Webtop
Internet websites are designed to deliver content but only accept limited user input. A Webtop differs because it supports the use of interactive applications that do not have pre-defined input limitations. Users can write or edit documents, transfer files, access databases, or interact with desktop-based applications. A Webtop should allow a user to customize the appearance, the applications, and the work methodology to effectively meet their work requirements. Once the Webtop is configured, it must maintain the configuration through multiple user sessions and across multiple browser platforms. This is further complicated by the proliferation of intelligent information appliances that access the Internet through customized Web browsers or that run a proprietary Internet access protocol.

Virtual Private Networking
VPN is the process of establishing network functionality – file and print services, personal and shared network applications, database access, etc. – using public network infrastructure. A number of commercial hardware and software solutions are available that support a VPN link over TCP/IP protocol. While VPNs are more secure than dial-up remote access networks, they still require customization on both the client and server system. jSpan establishes a VPN link from a locally hosted jSpan server to a customer remote target system. The jSpan application server implementation can support a number of different industry standard VPN solutions, based on the hardware and software configuration available at each hosting site. The common component is a TCP/IP link between the jSpan server and the target application.

Client Software
Secure access to desktop and network applications requires a software component that terminates the VPN link. The software must support data encryption over a broadband connection, terminate and reestablish the VPN connection, and limit access to authorized users. Because there are a number of potential target operating systems – Windows 95/98/NT, Solaris, Linux, NetWare, and others – multiple client components may be required.

3.2 Development of Core System

Software development is required to accomplish three critical tasks prior to the first customer deployment. The first task is the adaptation of a suitable remote access product to a distributed environment. Secondly, the user interface should reflect the jSpan “look-and-feel” and offer simplified functionality for non-technical users. Finally, an administrative management console is needed to simplify the management of a large number of customer accounts. Additional development will provide the value-added features that distinguish the jSpan product from competitors.

The two key differences in the jSpan deployment are the location of firewall protection and the establishment of a VPN link to the target system. A firewall typically limits access through remote access server but, once accessed, the server has unrestricted access to the rest of the network. While access control is desirable in the jSpan deployment, target systems will still require firewall protection from public Internet traffic. Without specific development, firewall protection will limit the functionality of the service.

Most VPN solutions anticipate a remote client that connects to an established VPN server. The jSpan server is designed to establish an outbound VPN link to a remote site. In general, this requires a reversal of the authentication process so that a connection can be established at the request of an Internet based remote user. Further development is necessary to customize the VPN link for the specific hardware available at the partnering network service provider.

The customer experience is determined by the “look-and-feel” associated with the jSpan Webtop. An effective interface should provide a work environment that is easy to configure and use, serves the functional needs of the customer, and enhances the image and brand of jSpan. jSpan will undertake a development process to identify and implement solutions that meet the needs of the target customer base.

To manage a large number of customer accounts, the jSpan server must include a management console that offers a high degree of automation. Enterprise based solutions are designed to be used by a single management team and offer similar access to all users. These solutions often do not support the billing requirements of an outsourced service. jSpan will develop a management console that provides for the deployment of jSpan servers at multiple physical locations across a number of organizations.

A comprehensive solution will support remote access from a variety of Internet browsers, including Personal Digital Assistants (PDA), cellular telephones and similar information appliances. Each of these appliances is limited in its ability to display and store information and to interact with Internet sites. To build a strategic competitive advantage, jSpan will launch a development program focused on developing new functionality and adding support for a variety of information appliances.

3.3 Available Core Applications

Commercial applications can be used as the core infrastructure for the jSpan remote access service. Two of the most complete solutions are the iPlanet Webtop from SUN Microsystems and the Tarantella Webtop from SCO Inc. Both of these applications were initially designed for a corporate enterprise environment but can be customized to meet the needs of the jSpan application server.

The iPlanet software is designed to provide access to a corporate network by allowing an Internet browser to penetrate a corporate firewall. The iPlanet server then validates the user and permits access to designated network resources. Resources include corporate intranet applications, email access, calendar access, access to PC and Windows NT applications, and file transfer. Some of the applications require the addition of a third party client component. Most notably, a driver from Symantec Corporation is needed to access a PC running Windows and a driver from Citrix is needed to access a Windows NT environment. Because the iPlanet solution is designed to reside within a corporate firewall, jSpan will develop modifications to extend the functionality to the Internet. At present, the iPlanet remote access solution is only available on the Solaris operating system running on a SPARC platform.

The Tarantella solution provided by SCO Inc. is specifically designed as a Webtop and does not incorporate the add-on applications offered in the SUN product. However, as most of those applications are generally available, the Tarantella solution is a viable alternative. This package also benefits from its compatibility with different hardware and software platforms including SCO Unixware, SUN SPARC Solaris, IBM Aix, and HP-UX. Windows applications are only supported under the Windows Terminal Server operating system although most X11 based UNIX applications are supported. Tarantella also requires a non-standard browser plug-in that may not be accepted at some publicly available Web browsers.The Tarantella solution will require additional development to effectively meet the needs of the jSpan application server.

VPN hardware and software drivers are available for the most common remote target systems. A PC running Microsoft Windows NT RRAS or Windows 98 Dial-Up Networking already has a VPN driver installed. Over the next year, other OS vendors will integrate standard L2TP and IPsec tunneling protocols into their TCP/IP protocol stack. Additional operating systems can be supported at minimal cost through licensing agreements with VPN developers.

A sufficient number of target system drivers to effectively launch the jSpan service are currently available in the market. Symantec, Citrix, and GraphOn already manufacture drivers for various operating systems and applications. Custom development will extend target system compatibility beyond the most common operating systems and to target specialized applications like WebTV, home networking products, and interfaces based on SUN Microsystems’ JINI technology.

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Marketing Strategy

jSpan Corporation’s marketing program will position the company as an ASP to mobile workers. The service will be marketed to independent professionals and businesses that wish to outsource remote access. At a later stage, the addition of premium subscriptions and value added services will shift the jSpan Webtop from a remote access portal to a core productivity tool. The Webtop will replace the desktop as the users’ primary workspace. The jSpan Webtop will be customized and promoted to specific vertical market industry segments.

4.1 Strategic Market Entry

jSpan will launch its service through ISPs that provide broadband services to small and medium businesses. This market entry strategy establishes jSpan in the market while providing manageable growth. It also facilitates direct interaction with the customer base to further refine the service. jSpan will co-market with ISP partners as well as marketing directly to end users. Availability of the service depends on the combined reach of partner ISPs.

jSpan will also seek partnerships with medium sized broadband wholesalers – Covad Communications Group, Inc., Northpoint Communications Inc., Rhythms NetConnections Inc., and Softnet Systems Inc. These partnerships will rapidly expand jSpan’s regional coverage and accelerate the acquisition of ISP customers.

4.2 Sales Forecast

The jSpan sales forecast is based on the acquisition of individual users. Revenue is assumed to be a constant $21.25 throughout the sales forecast period. The number of jSpan users shown for each year is the number of user subscriptions at the end of that year ignoring the effect of customer churn. The revenue forecast accounts for users that were acquired mid-way through the year. The jSpan fiscal year begins on October 1st. Market size estimates were interpolated to the jSpan fiscal year from a calendar year forecast. jSpan anticipates the unit price for basic connectivity services to eventually decline to between $10 and $15 per month. To provide a conservative estimate, the potential market size was calculated using a flat-rate basic subscription fee of $10.00 per user per month.

Internet asp business plan, marketing and sales forecast chart image

Internet asp business plan, marketing and sales forecast chart image

Sales Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
Sales
jSpan Customers $39,100 $4,706,250 $44,396,875 $199,306,250 $422,384,125
Other $0 $0 $0 $0 $0
Total Sales $39,100 $4,706,250 $44,396,875 $199,306,250 $422,384,125
Direct Cost of Sales Year 1 Year 2 Year 3 Year 4 Year 5
jSpan Customers $412,241 $2,437,134 $15,945,617 $49,092,698 $138,293,331
Other $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $412,241 $2,437,134 $15,945,617 $49,092,698 $138,293,331

4.3 Pricing Strategy

The per user cost for jSpan service takes into account other remote access options and the price individuals are willing to pay for value added services. On average, Internet user households spend more than other households on communications and communications services. Internet user households spend an average of $101 per month on telephone services, exceeding the national average by $30 (not including long distance charges).

The projected end user price of $25 per month averages basic service accounts and additional fees for premium subscriptions and value added services. As the service gains customer acceptance, eventually prices will erode. However, the specialization of the Webtop into vertical market segments, the addition of value added services and premium subscriptions, all serve to maintain the projected average of $25 per user per month. Revenue sharing with jSpan partners will be treated as a 3% to 15% price discount, reducing jSpan’s revenue to $21.25 per user per month.

20 State of the Net, The New Frontier, McGraw-Hill, 1998.

4.4 Customer Acquisition and Advertising

The end user of the jSpan service is an independent professional or business that has broadband Internet access. By sharing revenue with the service provider, jSpan creates an incentive for the service provider to bundle the jSpan service into a complete service package. CLECs and ILECs are efficient links to broadband ISPs and are seeking partnerships with ASPs. As wholesalers, they are well positioned to make the jSpan service available through their ISP customer base.

jSpan will co-market the service with service provider partners as well as market directly to potential users. Service providers can be reached directly through trade magazines (e.g. Boardwatch, CIO and Industry Standard), trade shows (e.g. ISPCON and COMDEX) and online content aggregators targeted at ISPs (e.g. ISP Network and internet.com’s ISP Resources Channel). In addition to co-branding in advertisements, co-marketing may include bundling jSpan service with other ISP service options or offering free trial periods when broadband service is initiated.

End user marketing is designed around a co-marketing strategy with service providers. In jSpan advertisements, it may be necessary to refer to service providers that offer the jSpan service, creating an incentive for ISP participation. jSpan will build marketing relationships with product manufacturers who are targeting a similar customer base. Potential marketing partners are the manufacturers of cellular telephones, PDAs, and other devices widely used by mobile professionals. jSpan service increases the functionality of any device that supports a compatible web browser.

Advertising will utilize electronic and print media directed at telecommuters and mobile workers. IDC estimates that 74% of PC owning telecommuters have Internet access. jSpan will establish an Internet presence through vertically oriented Internet content providers. Advertisements will be placed in magazines and newspapers read by remote and mobile professionals.

4.5 Competitive Comparison

There are three competitive threats to jSpan: Web based applications, other remote connectivity solutions, and Application Service Providers (ASP).

An increasing number of applications are migrating to the Internet and may be viewed as competitors to jSpan. However, jSpan facilitates the transition to online service providers by aggregating online and remote applications into one work environment. As a result, many providers are potential jSpan partners. Entirely virtual desktops force a user to adopt all new applications and new work methodologies and do not provide the ability to access customized applications.

Direct-dial remote access solutions have been on the market for some time. However, these solutions are often complex to install and only provide remote access from one pre-configured computer to another. While some of these solutions have been upgraded to support connectivity over Internet infrastructure, the companies providing the software are sustaining a product oriented business model. Integration into the service provider model poses a significant threat to their existing revenue stream.

Companies are increasingly relying on ASPs to provide high end IT applications. ASPs generally offer a single enterprise application or a suite of integrated applications to a broad base of medium sized companies. ASPs could potentially adopt services similar to jSpan and utilize their existing customer base to rapidly acquire market share. However, currently ASPs are targeting large organizations with significant resources rather than the Independent professionals and small to medium businesses targeted by jSpan. ISPs are better positioned than ASPs to reach the jSpan customer base and are willing to outsource their value added services from jSpan.

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Operations

jSpan Corporation is establishing strategic partnerships with network service providers that will permit the company to co-host a remote access server at their facility. The initial deployment is focused on service providers who generate a majority of their revenue through broadband services to businesses. This strategy establishes jSpan in the remote access market while maintaining the company growth at a manageable level. Following the initial deployment, jSpan will target a broader base of service providers and larger corporate end users. Long term revenue growth will result from the addition of value added and premium services.

5.1 Staffing Plan

In addition to the two founders, a VP of Operations and a Project Manager will be added following the first funding event. By the end of the first year of operations jSpan will have a total of 21 employees: six each in Administration, Sales and Marketing, and Operations, and three in Engineering. Revenue per employee will be approximately $1,862. The number of employees will grow from 34 at the end of year two to 1,073 at the end of year five. During this same period revenue per employee will increase from $94,125 to $393,648.

Personnel Plan
Year 1 Year 2 Year 3 Year 4 Year 5
Operations $209,500 $600,600 $2,006,550 $3,310,808 $10,681,869
Engineering $98,000 $403,200 $2,469,600 $11,113,200 $32,050,469
Sales & Marketing $90,000 $336,000 $1,446,480 $6,038,172 $15,597,376
Administration $194,332 $372,395 $558,593 $2,463,394 $5,604,220
Total People 21 34 121 410 1073
Total Payroll $591,832 $1,712,195 $6,481,223 $22,925,573 $63,933,934

5.2 Product Deployment

jSpan, in partnership with a regional Internet service provider, will offer service to a limited number of users in month four. This market test will run for approximately three months. jSpan will continue to build relationships with other service providers for a full regional launch in month seven. jSpan’s rollout strategy will establish relationships with multiple ISPs until the service is widely available. Additional relationships will be initiated with ILECs and CLECs that are seeking to provide added value services through ASPs.

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Company Summary

jSpan Corporation was formed as a C Corporation headquartered in the State of California. The two founders are currently the directors of the company and the majority shareholders. In addition to shares held by the founding partners a number of shares have been set aside to accommodate an employee incentive plan. Shares have been authorized, but are not yet issued, to accommodate future investors.

6.1 Professional Services

Additional professional services will be obtained, as necessary, from:

David Miller
Emerging Technologies Division
San Francisco Valley Bank

Albert Sharpe
Partner-In-Charge, Industry Services
Arthur Coopers L.L.P.

Michael Rodgers
Partner
Watson, Sonoma, Goodson & Rodgers

6.2 Board of Advisors

Joseph Addison, Co-Founder and CFO of StartABusiness.com, has extensive experience in the formation of new ventures. As a partner at Arthur Coopers L.L.P., Mr. Addison founded and served as the Director of the Entrepreneurial Services Group in the San Francisco Bay Area. He is a Co-Founder and Limited Partner of Addison and Bates Ventures, a Sonoma based venture capital fund and serves as the Director of Entrepreneurship at the University of San Francisco. Mr. Addison completed degrees at Penn State University and the Wharton School of Business.

James Smith, Vice President of Business Development for Exodus Networks, joined Exodus in October 1995. From July 1988 to October 1995, Mr. Smith held various positions at Next Computer, including Group Manager Product Marketing, Next On-Line Services Division, and Business Development Manager of Next On-Line Services Division. Mr. Smith has an MBA from the University of California-Berkeley.

Michael M. Rodgers, Partner at Watson, Sonoma, Goodson & Rodgers, joined the firm in 1974. Mr. Rodgers serves as an advisor and board member for a wide variety of high-tech companies in the computer, semiconductor, entertainment, software, and biotech industries. Mr. Rodgers is the managing partner of MyMoney investments and specializes in corporate law as it relates to venture capital and the creation of high-technology companies. Mr. Rodgers completed his undergraduate degree at University of California-Los Angeles and his law degree at the University of California-Berkeley.

Peter J. Wilson, Director of Business Development at Advanced Network Communications, has both technical and business experience in the deployment of emerging broadband technologies. Prior to ANC, Mr. Wilson served as a Product Manager with Hewlett-Packard Corporation. Mr. Wilson also has experience at General Electric and American Power Conversion Inc. He completed his undergraduate degree at Cornell University and an MBA from the University of California-Berkeley.

6.3 Management Team

In addition to the management team shown here, jSpan is actively seeking experienced management and additional technical specialists that are prepared to join the jSpan team once funding is secured.

John G. Millar, Co-Founder and CEO, has recent management experience as the Director of Business Development for Advanced Digital Information Corporation (ADIC), a Redmond, WA based data management company. He also founded, and serves as a managing partner, the consulting firm of J.G. Millar & Associates. In addition to ADIC, Mr. Millar has worked with Rexon Corporation, Thomas-Conrad Inc. and American Power Conversion Corporation. He began his career as an engineer for Northrop Corporation where he led a software development project as part of the Advanced Tactical Fighter program. Mr. Millar completed an MBA from the Haas School of Business at University of California-Berkeley and has both graduate and undergraduate degrees in engineering.

Kim Niquette, Co-Founder and CFO, has financial management and industry analysis experience with both Dodge & Cox Inc. and Barbary Coast Capital Management and extensive international experience in entrepreneurship. She also co-founded the consulting firm of J.G. Millar & Associates. Most recently, Ms. Niquette coordinated business development and credit programs for emerging economies in East Africa. Ms. Niquette has an undergraduate degree in Business and an MBA from the Haas School of Business at University of California-Berkeley.

Norman Walters, COO, has over 25 years experience in operations and sales management in the high technology industry, most recently as the Vice President of Sales for IBM’s Internet division. Prior to his experience at IBM, Mr. Walters served as the President of Fairchild Semiconductor, a Vice President at StorageNow Inc., and as a consultant to numerous technology ventures. Mr. Walters completed a degree in Engineering at California State College and spent approximately 10 years as a practicing engineer.

Carlos Garcia, Technology Specialist, has software development and management experience with Sun Microsystems where he worked on JavaOS, HotJava Browsers, and Personal Java. Mr. Garcia also served as the Chief Technology Officer of Carbuyer.com Inc., a Bay Area start-up company and has additional experience with Amdahl Corporation and as a systems programmer for University of California-Santa Cruz. He completed both undergraduate and graduate degrees in computer science at University of California-Santa Cruz.

6.4 Long-term Plan

The nature of this business venture requires substantial initial investment and expenditure to build the service infrastructure and then build the client base. Tables and charts in this plan were extended to five years to show the projected break-even and profitability schedule.

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Financial Plan

jSpan Corporation is an ASP that provides remote access. jSpan allows independent professionals and small to medium businesses to have the same information access previously available in an enterprise environment.

7.1 Important Assumptions

  1. jSpan Corporation assumes a constant price of $25 per month over the forecast period. The price for the service may decline over time; however, the addition of premium subscriptions and value added services will compensate for the price degradation. Approximately 15% of revenue will be shared with jSpan partners. Shared revenue is treated as a discount on the $25 price, resulting in per user revenue of $21.25 per month.
  2. Under COGS, direct material cost is estimated based on the cost of bandwidth, monthly operational costs and licensing costs. An average cost and performance of T1 lines is used to approximate the cost of bandwidth. Operational costs are expected to be similar to the cost of customer care for Internet Service Providers, $3 to $7.50. Software will be licensed and other software added as value added services. Total per unit direct material cost is estimated at $6.50 for years one and two, $6, $5.50 and $5 for years three, four, and five, respectively. The drop in cost is due to the realization of economies of scale.
  3. Employee salaries increase annually by 5%. Initial salaries may be somewhat lower than forecast, but will include options.
  4. Operational hardware is leased on a 3-year capital lease. Some portion of this hardware may be purchased depending on the terms jSpan is able to negotiate. Hardware requirements are based on the number of servers and routers needed to support 2,000 users. The hardware cost per 2,000 users is estimated at $130,000 for years one and two, dropping to $65,000 for years three, four and five.
  5. All capital purchases (hardware, software, furniture and fixtures) are depreciated over three years.

21 The Infrastructure Report: Internet Service Provider Industry Overview, Credit Suisse First Boston Corporation, December 1998.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50%
Tax Rate 2.50% 0.00% 2.50% 0.00% 2.50%
Other 0 0 0 0 0

7.2 Financing Plan

The management estimates that achieving forecast results will require approximately $14.9 million in capital. Break-even operations are anticipated in the second quarter of FY 2003, at which time gross revenues will be approaching a $109 million annual run rate, and gross margin contribution of 64%.

jSpan Corporation has either completed or anticipates funding the above capital requirement as follows:

  • Seed, June, 1999 — $500,000
  • Series A, January, 2000 — $3,200,000
  • Series B, October, 2000 — $11,200.000
  • Total — $14,900,000
Start-up
Requirements
Start-up Expenses
Legal $0
Other $0
Total Start-up Expenses $0
Start-up Assets
Cash Required $498,500
Other Current Assets $0
Long-term Assets $1,500
Total Assets $500,000
Total Requirements $500,000

Start-up Funding
Start-up Expenses to Fund $0
Start-up Assets to Fund $500,000
Total Funding Required $500,000
Assets
Non-cash Assets from Start-up $1,500
Cash Requirements from Start-up $498,500
Additional Cash Raised $0
Cash Balance on Starting Date $498,500
Total Assets $500,000
Liabilities and Capital
Liabilities
Current Borrowing $0
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $0
Capital
Planned Investment
Investor 1 $200,000
Investor 2 $200,000
Other $100,000
Additional Investment Requirement $0
Total Planned Investment $500,000
Loss at Start-up (Start-up Expenses) $0
Total Capital $500,000
Total Capital and Liabilities $500,000
Total Funding $500,000

7.3 Exit Strategy

By consolidating the highly fragmented market for independent professionals and businesses, jSpan is a potential acquisition target for corporations that offer goods and services to this market segment. Research indicates that recent acquisitions value qualified users between $300 and $500 per user. The interactive nature of the jSpan service is such that the value is likely to fall near the upper end of the range. Based on a $450 per user price, a conservative estimate is an acquisition value of approximately $105 million at the end of year three, increasing to over $1 billion by the end of year five. Successful diversification into related market segments could substantially increase the value of the corporation by exceeding the projected number of user accounts. The result would be a higher acquisition value or a potential public stock offering.

7.4 Projected Profit and Loss

The following table presents the projected profit and loss.

Internet asp business plan, financial plan chart image

Internet asp business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $39,100 $4,706,250 $44,396,875 $199,306,250 $422,384,125
Direct Cost of Sales $412,241 $2,437,134 $15,945,617 $49,092,698 $138,293,331
Other $0 $0 $0 $0 $0
Total Cost of Sales $412,241 $2,437,134 $15,945,617 $49,092,698 $138,293,331
Gross Margin ($373,141) $2,269,116 $28,451,258 $150,213,552 $284,090,794
Gross Margin % -954.32% 48.21% 64.08% 75.37% 67.26%
Expenses
Payroll $591,832 $1,712,195 $6,481,223 $22,925,573 $63,933,934
Sales and Marketing and Other Expenses $1,894,597 $2,614,784 $5,324,365 $35,693,325 $85,000,000
Depreciation $40,328 $201,000 $330,200 $1,103,600 $2,573,650
Bank Charges $1,958 $188,250 $200,000 $1,000,000 $3,000,000
Insurance $60,000 $60,000 $80,000 $120,000 $500,000
Rent $12,000 $24,000 $84,000 $250,000 $1,000,000
Payroll Taxes $88,775 $256,829 $972,183 $3,438,836 $9,590,090
Other $0 $0 $0 $0 $0
Total Operating Expenses $2,689,490 $5,057,058 $13,471,971 $64,531,334 $165,597,674
Profit Before Interest and Taxes ($3,062,631) ($2,787,942) $14,979,287 $85,682,218 $118,493,120
EBITDA ($3,022,303) ($2,586,942) $15,309,487 $86,785,818 $121,066,770
Interest Expense $23,077 $107,995 $352,032 $658,273 $1,410,643
Taxes Incurred $0 $0 $365,681 $0 $2,927,062
Net Profit ($3,085,708) ($2,895,938) $14,261,573 $85,023,945 $114,155,414
Net Profit/Sales -7891.84% -61.53% 32.12% 42.66% 27.03%

7.5 Projected Cash Flow

The Cash Flow chart and table are shown below.

Internet asp business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $0 $0 $0 $0 $0
Cash from Receivables $13,115 $1,604,540 $18,019,147 $96,356,061 $274,130,287
Subtotal Cash from Operations $13,115 $1,604,540 $18,019,147 $96,356,061 $274,130,287
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $231,074 $605,792 $1,408,222 $1,727,000 $5,507,278
New Other Liabilities (interest-free) $0 $0 $0 $0 $7,559,441
New Long-term Liabilities $274,565 $1,211,583 $2,816,445 $3,454,000 $11,014,555
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $1,500 $0 $0 $0 $0
New Investment Received $3,703,050 $11,200,000 $41,835,000 $0 $0
Subtotal Cash Received $4,223,304 $14,621,915 $64,078,814 $101,537,061 $298,211,561
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $591,832 $1,712,195 $6,481,223 $22,925,573 $63,933,934
Bill Payments $2,131,372 $5,582,680 $21,874,436 $84,752,098 $229,271,702
Subtotal Spent on Operations $2,723,204 $7,294,876 $28,355,659 $107,677,671 $293,205,637
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $93,792 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $100,000 $200,000 $2,000,000 $2,000,000
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $605,000 $1,405,000 $1,292,000 $7,734,000 $14,700,000
Dividends $0 $1,000,000 $2,000,000 $1,000,000 $0
Subtotal Cash Spent $3,421,996 $9,799,876 $31,847,659 $118,411,671 $309,905,637
Net Cash Flow $801,308 $4,822,039 $32,231,155 ($16,874,609) ($11,694,075)
Cash Balance $1,299,808 $6,121,848 $38,353,003 $21,478,393 $9,784,318

7.6 Projected Balance Sheet

The Balance Sheet follows.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $1,299,808 $6,121,848 $38,353,003 $21,478,393 $9,784,318
Accounts Receivable $25,985 $3,127,695 $29,505,423 $132,455,612 $280,709,450
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $1,325,793 $9,249,543 $67,858,426 $153,934,005 $290,493,768
Long-term Assets
Long-term Assets $605,000 $2,010,000 $3,302,000 $11,036,000 $25,736,000
Accumulated Depreciation $40,328 $241,328 $571,528 $1,675,128 $4,248,778
Total Long-term Assets $564,672 $1,768,672 $2,730,472 $9,360,872 $21,487,222
Total Assets $1,890,465 $11,018,215 $70,588,898 $163,294,877 $311,980,990
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $361,276 $467,588 $1,917,031 $7,418,066 $19,867,490
Current Borrowing $137,282 $743,074 $2,151,296 $3,878,296 $9,385,574
Other Current Liabilities $0 $0 $0 $0 $7,559,441
Subtotal Current Liabilities $498,558 $1,210,662 $4,068,327 $11,296,362 $36,812,505
Long-term Liabilities $274,565 $1,386,148 $4,002,593 $5,456,593 $14,471,148
Total Liabilities $773,123 $2,596,810 $8,070,920 $16,752,955 $51,283,653
Paid-in Capital $4,203,050 $15,403,050 $57,238,050 $57,238,050 $57,238,050
Retained Earnings $0 ($4,085,708) ($8,981,646) $4,279,928 $89,303,873
Earnings ($3,085,708) ($2,895,938) $14,261,573 $85,023,945 $114,155,414
Total Capital $1,117,342 $8,421,404 $62,517,978 $146,541,923 $260,697,337
Total Liabilities and Capital $1,890,465 $11,018,215 $70,588,898 $163,294,877 $311,980,990
Net Worth $1,117,342 $8,421,404 $62,517,978 $146,541,923 $260,697,337

7.7 Business Ratios

Standard business ratios are presented below, as well as comparative information for S.I.C code 7375, Computer Programming, Data Processing, And Information Retrieval Services.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 11936.45% 843.36% 348.92% 111.93% 9.70%
Percent of Total Assets
Accounts Receivable 1.37% 28.39% 41.80% 81.11% 89.98% 25.00%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 46.30%
Total Current Assets 70.13% 83.95% 96.13% 94.27% 93.11% 76.60%
Long-term Assets 29.87% 16.05% 3.87% 5.73% 6.89% 23.40%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 26.37% 10.99% 5.76% 6.92% 11.80% 49.40%
Long-term Liabilities 14.52% 12.58% 5.67% 3.34% 4.64% 21.20%
Total Liabilities 40.90% 23.57% 11.43% 10.26% 16.44% 70.60%
Net Worth 59.10% 76.43% 88.57% 89.74% 83.56% 29.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin -954.32% 48.21% 64.08% 75.37% 67.26% 0.00%
Selling, General & Administrative Expenses 7216.16% 117.68% 38.92% 36.46% 48.96% 78.10%
Advertising Expenses 4771.19% 53.44% 11.60% 17.67% 24.86% 0.90%
Profit Before Interest and Taxes -7832.82% -59.24% 33.74% 42.99% 28.05% 1.90%
Main Ratios
Current 2.66 7.64 16.68 13.63 7.89 1.57
Quick 2.66 7.64 16.68 13.63 7.89 1.19
Total Debt to Total Assets 40.90% 23.57% 11.43% 10.26% 16.44% 70.60%
Pre-tax Return on Net Worth -276.16% -34.39% 23.40% 58.02% 44.91% 4.10%
Pre-tax Return on Assets -163.22% -26.28% 20.72% 52.07% 37.53% 13.80%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -7891.84% -61.53% 32.12% 42.66% 27.03% n.a
Return on Equity -276.16% -34.39% 22.81% 58.02% 43.79% n.a
Activity Ratios
Accounts Receivable Turnover 1.50 1.50 1.50 1.50 1.50 n.a
Collection Days 46 122 134 148 179 n.a
Accounts Payable Turnover 6.90 12.17 12.17 12.17 12.17 n.a
Payment Days 27 27 19 19 21 n.a
Total Asset Turnover 0.02 0.43 0.63 1.22 1.35 n.a
Debt Ratios
Debt to Net Worth 0.69 0.31 0.13 0.11 0.20 n.a
Current Liab. to Liab. 0.64 0.47 0.50 0.67 0.72 n.a
Liquidity Ratios
Net Working Capital $827,235 $8,038,880 $63,790,099 $142,637,644 $253,681,263 n.a
Interest Coverage -132.71 -25.82 42.55 130.16 84.00 n.a
Additional Ratios
Assets to Sales 48.35 2.34 1.59 0.82 0.74 n.a
Current Debt/Total Assets 26% 11% 6% 7% 12% n.a
Acid Test 2.61 5.06 9.43 1.90 0.27 n.a
Sales/Net Worth 0.03 0.56 0.71 1.36 1.62 n.a
Dividend Payout 0.00 0.00 0.14 0.01 0.00 n.a

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Appendix

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
Operations 0% $10,000 $10,000 $10,000 $10,000 $15,000 $17,500 $17,500 $20,000 $21,500 $26,000 $26,000 $26,000
Engineering 0% $0 $0 $0 $0 $3,000 $8,000 $13,000 $13,000 $13,000 $16,000 $16,000 $16,000
Sales & Marketing 0% $0 $0 $0 $0 $0 $5,000 $8,000 $13,000 $16,000 $16,000 $16,000 $16,000
Administration 0% $10,000 $10,000 $10,000 $10,000 $10,000 $12,000 $14,000 $17,000 $25,333 $25,333 $25,333 $25,333
Total People 2 2 2 2 4 8 10 13 18 20 21 21
Total Payroll $20,000 $20,000 $20,000 $20,000 $28,000 $42,500 $52,500 $63,000 $75,833 $83,333 $83,333 $83,333
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
jSpan Customers 0% $0 $0 $0 $744 $744 $744 $1,594 $2,125 $2,656 $4,250 $7,756 $18,488
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Sales $0 $0 $0 $744 $744 $744 $1,594 $2,125 $2,656 $4,250 $7,756 $18,488
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
jSpan Customers $0 $0 $0 $7,841 $7,841 $7,841 $16,803 $22,404 $28,005 $44,808 $81,775 $194,922
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $7,841 $7,841 $7,841 $16,803 $22,404 $28,005 $44,808 $81,775 $194,922

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 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Long-term Interest Rate 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Tax Rate 30.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
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 $0 $0 $0 $744 $744 $744 $1,594 $2,125 $2,656 $4,250 $7,756 $18,488
Direct Cost of Sales $0 $0 $0 $7,841 $7,841 $7,841 $16,803 $22,404 $28,005 $44,808 $81,775 $194,922
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $0 $0 $0 $7,841 $7,841 $7,841 $16,803 $22,404 $28,005 $44,808 $81,775 $194,922
Gross Margin $0 $0 $0 ($7,098) ($7,098) ($7,098) ($15,209) ($20,279) ($25,349) ($40,558) ($74,018) ($176,434)
Gross Margin % 0.00% 0.00% 0.00% -954.31% -954.31% -954.31% -954.31% -954.31% -954.31% -954.31% -954.31% -954.34%
Expenses
Payroll $20,000 $20,000 $20,000 $20,000 $28,000 $42,500 $52,500 $63,000 $75,833 $83,333 $83,333 $83,333
Sales and Marketing and Other Expenses $156,500 $156,500 $156,500 $157,000 $160,400 $157,000 $157,500 $157,500 $157,500 $157,580 $159,150 $161,467
Depreciation $0 $0 $0 $0 $5,041 $5,041 $5,041 $5,041 $5,041 $5,041 $5,041 $5,041
Bank Charges $0 $0 $0 $37 $37 $37 $80 $106 $133 $214 $386 $928
Insurance $15,000 $0 $0 $15,000 $0 $0 $15,000 $0 $0 $15,000 $0 $0
Rent $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Payroll Taxes 15% $3,000 $3,000 $3,000 $3,000 $4,200 $6,375 $7,875 $9,450 $11,375 $12,500 $12,500 $12,500
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operating Expenses $195,500 $180,500 $180,500 $196,037 $198,678 $211,953 $238,996 $236,097 $250,882 $274,668 $261,410 $264,269
Profit Before Interest and Taxes ($195,500) ($180,500) ($180,500) ($203,135) ($205,776) ($219,051) ($254,205) ($256,376) ($276,231) ($315,226) ($335,428) ($440,703)
EBITDA ($195,500) ($180,500) ($180,500) ($203,135) ($200,735) ($214,010) ($249,164) ($251,335) ($271,190) ($310,185) ($330,387) ($435,662)
Interest Expense $664 $1,637 $1,637 $1,637 $1,637 $1,637 $1,637 $1,637 $1,637 $2,820 $3,582 $2,917
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Net Profit ($196,164) ($182,137) ($182,137) ($204,772) ($207,413) ($220,688) ($255,842) ($258,013) ($277,867) ($318,046) ($339,010) ($443,620)
Net Profit/Sales 0.00% 0.00% 0.00% -27532.32% -27887.41% -29672.28% -16052.81% -12141.79% -10460.89% -7483.43% -4370.80% -2399.57%

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 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash from Receivables $0 $0 $0 $0 $25 $744 $744 $772 $1,611 $2,143 $2,709 $4,367
Subtotal Cash from Operations $0 $0 $0 $0 $25 $744 $744 $772 $1,611 $2,143 $2,709 $4,367
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 $93,792 $137,282 $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 $167,000 $107,565 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $1,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $503,050 $0 $0 $3,200,000 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $598,342 $137,282 $0 $3,200,000 $25 $744 $744 $772 $1,611 $169,143 $110,274 $4,367
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 $20,000 $20,000 $20,000 $20,000 $28,000 $42,500 $52,500 $63,000 $75,833 $83,333 $83,333 $83,333
Bill Payments $5,872 $175,697 $162,137 $162,916 $185,169 $175,075 $174,757 $199,635 $192,349 $200,792 $234,737 $262,237
Subtotal Spent on Operations $25,872 $195,697 $182,137 $182,916 $213,169 $217,575 $227,257 $262,635 $268,182 $284,125 $318,070 $345,570
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 $93,792
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 $605,000 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $25,872 $195,697 $182,137 $787,916 $213,169 $217,575 $227,257 $262,635 $268,182 $284,125 $318,070 $439,362
Net Cash Flow $572,470 ($58,415) ($182,137) $2,412,084 ($213,144) ($216,831) ($226,513) ($261,862) ($266,570) ($114,982) ($207,796) ($434,995)
Cash Balance $1,070,970 $1,012,555 $830,418 $3,242,502 $3,029,358 $2,812,528 $2,586,014 $2,324,152 $2,057,581 $1,942,599 $1,734,803 $1,299,808
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 $498,500 $1,070,970 $1,012,555 $830,418 $3,242,502 $3,029,358 $2,812,528 $2,586,014 $2,324,152 $2,057,581 $1,942,599 $1,734,803 $1,299,808
Accounts Receivable $0 $0 $0 $0 $744 $1,463 $1,463 $2,313 $3,666 $4,710 $6,818 $11,865 $25,985
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $498,500 $1,070,970 $1,012,555 $830,418 $3,243,246 $3,030,821 $2,813,990 $2,588,327 $2,327,817 $2,062,292 $1,949,417 $1,746,668 $1,325,793
Long-term Assets
Long-term Assets $1,500 $0 $0 $0 $605,000 $605,000 $605,000 $605,000 $605,000 $605,000 $605,000 $605,000 $605,000
Accumulated Depreciation $0 $0 $0 $0 $0 $5,041 $10,082 $15,123 $20,164 $25,205 $30,246 $35,287 $40,328
Total Long-term Assets $1,500 $0 $0 $0 $605,000 $599,959 $594,918 $589,877 $584,836 $579,795 $574,754 $569,713 $564,672
Total Assets $500,000 $1,070,970 $1,012,555 $830,418 $3,848,246 $3,630,780 $3,408,908 $3,178,204 $2,912,653 $2,642,087 $2,524,171 $2,316,381 $1,890,465
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 $0 $170,292 $156,732 $156,732 $179,332 $169,278 $168,094 $193,231 $185,694 $192,995 $226,124 $249,779 $361,276
Current Borrowing $0 $93,792 $231,074 $231,074 $231,074 $231,074 $231,074 $231,074 $231,074 $231,074 $231,074 $231,074 $137,282
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $0 $264,084 $387,806 $387,806 $410,406 $400,352 $399,168 $424,305 $416,768 $424,069 $457,198 $480,853 $498,558
Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $167,000 $274,565 $274,565
Total Liabilities $0 $264,084 $387,806 $387,806 $410,406 $400,352 $399,168 $424,305 $416,768 $424,069 $624,198 $755,418 $773,123
Paid-in Capital $500,000 $1,003,050 $1,003,050 $1,003,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050 $4,203,050
Retained Earnings $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Earnings $0 ($196,164) ($378,301) ($560,438) ($765,210) ($972,622) ($1,193,310) ($1,449,151) ($1,707,164) ($1,985,032) ($2,303,077) ($2,642,087) ($3,085,708)
Total Capital $500,000 $806,886 $624,749 $442,612 $3,437,840 $3,230,428 $3,009,740 $2,753,899 $2,495,886 $2,218,018 $1,899,973 $1,560,963 $1,117,342
Total Liabilities and Capital $500,000 $1,070,970 $1,012,555 $830,418 $3,848,246 $3,630,780 $3,408,908 $3,178,204 $2,912,653 $2,642,087 $2,524,171 $2,316,381 $1,890,465
Net Worth $500,000 $806,886 $624,749 $442,612 $3,437,840 $3,230,428 $3,009,740 $2,753,899 $2,495,886 $2,218,018 $1,899,973 $1,560,963 $1,117,342

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