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NaviTag Technologies, LLC

Financial Plan

Our financial plan is based on raising substantial seed capital by way of private equity to create the electronic tag, develop the central database, and establish the customer base.

We will achieve profitability in just over two years and due to the nature of the exponential growth of access charges, we will realize a respectable net profit on sales by year three.

[Confidential and proprietary information has, in some text and tables, been omitted or disguised in this sample plan.]

7.1 Important Assumptions

The table below presents the assumptions used in the financial calculations of this business plan.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Long-term Interest Rate 8.00% 8.00% 8.00% 8.00% 8.00%
Tax Rate 0.00% 0.00% 0.00% 0.00% 0.00%
Other 0 0 0 0 0

7.2 Break-even Analysis

NaviTag Technologies revenues are generated from NaviTag unit sales (a one time expense) and access charges (a monthly recurring fee). Given this, the break-even formula must be adjusted to reflect both one time and recurring revenue activities. Using the sales forecast as a guide, and based on estimates made for fixed cost, average revenue per NaviTag unit and access charges, variable cost for unit manufacturing and service fees, the break-even volume was established to be 700 units per month with a subscription base of 6,800. We anticipate achieving break even at month 24 as detailed in the graph below.

Shipment monitoring business plan, financial plan chart image

Table: Break-even Analysis

Break-even Analysis:

 

Monthly NaviTag Units Break-even

700

Monthly Access Charges Break-even

6,800

Monthly Sales Break-even

$480,432

Assumptions:

 

Average Per NaviTag Unit Revenue

$395.00

Average Per NaviTag Unit Cost

$296.25

Average Per Access Charge Revenue

$29.99

Average Per Access Charge Cost

$12.20

Estimated Monthly Fixed Cost

$150,000.00

7.3 Projected Profit and Loss

Based on the realistic sales projections and efficient cost control measures in place, NaviTag Technologies will achieve profitability in just over two years. Company profits in subsequent years will increase to the first million in 2005, and a five-fold increase in 2007 due largely to the exponential growth of the access charges. Gross margins reveal dramatic growth, again because of the growth in revenues from access charges.

[Confidential and proprietary information has, in some text and tables, been omitted or disguised in this sample plan.]

Shipment monitoring business plan, financial plan chart image

Shipment monitoring business plan, financial plan chart image

Shipment monitoring business plan, financial plan chart image

Shipment monitoring business plan, financial plan chart image

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $498,974 $4,082,552 $9,966,045 $16,161,144 $21,919,704
Direct Cost of Sales $353,970 $2,712,810 $6,340,725 $9,895,320 $13,092,120
Other Production Expenses $0 $0 $0 $0 $0
Total Cost of Sales $353,970 $2,712,810 $6,340,725 $9,895,320 $13,092,120
Gross Margin $145,004 $1,369,742 $3,625,320 $6,265,824 $8,827,584
Gross Margin % 29.06% 33.55% 36.38% 38.77% 40.27%
Expenses
Payroll $479,665 $596,000 $613,110 $643,765 $675,954
Sales Collateral $45,000 $30,000 $30,000 $30,000 $30,000
Depreciation $0 $0 $0 $0 $0
Payroll Taxes $0 $0 $0 $0 $0
Direct Mail $60,000 $30,000 $30,000 $30,000 $30,000
Stationery $1,000 $2,000 $2,000 $2,000 $2,000
Travel $60,000 $60,000 $60,000 $60,000 $60,000
Trade Shows $30,000 $30,000 $30,000 $30,000 $30,000
Advertising $80,000 $70,000 $70,000 $80,000 $80,000
New York – Rent $48,750 $45,000 $45,000 $45,000 $45,000
New York – Telephone System $5,500 $1,000 $1,000 $1,000 $1,000
New York – Telephone Charges $3,550 $4,800 $4,800 $4,800 $4,800
New York – Utilities $2,000 $2,000 $2,000 $2,000 $2,000
New York – Furniture $7,500 $1,000 $1,000 $1,000 $1,000
New York – Office Equipment/Networking $13,000 $1,000 $1,000 $1,000 $1,000
New York – Internet Access $2,000 $2,000 $2,000 $2,000 $2,000
New York – Misc./Office Supplies $2,000 $2,000 $2,000 $2,000 $2,000
Outsourced Development – Discovery $85,000 $0 $0 $0 $0
Outsourced Development – Inception $53,000 $0 $0 $0 $0
Outsourced Development – Elaboration $69,000 $0 $0 $0 $0
Outsourced Development – Construction $370,000 $0 $0 $0 $0
Outsourced Development – Production $43,000 $0 $0 $0 $0
Outsourced Services – Accounting $25,000 $25,000 $25,000 $25,000 $25,000
Outsourced Services – Legal $35,000 $30,000 $30,000 $30,000 $30,000
Laptop Computers $13,000 $5,000 $5,000 $15,000 $5,000
Desktop Computers $7,000 $2,000 $2,000 $10,000 $2,000
Development/Staging $30,000 $4,000 $4,000 $8,000 $4,000
Software Licenses/Tools $10,000 $1,000 $1,000 $2,000 $2,000
Production Hosting $68,500 $84,000 $84,000 $108,000 $108,000
Maintenance/Support $15,000 $15,000 $15,000 $15,000 $15,000
Monitoring Services $6,750 $10,000 $10,000 $10,000 $10,000
Boston – Rent $27,080 $25,000 $25,000 $25,000 $25,000
Boston – Telephone System $4,000 $500 $500 $500 $500
Boston – Telephone Charges $3,000 $3,000 $3,000 $3,000 $3,000
Boston – Utilities $2,000 $2,000 $2,000 $2,000 $2,000
Boston – Furniture $5,000 $1,000 $1,000 $1,000 $1,000
Boston – Office Equipment/Networking $6,000 $1,000 $1,000 $1,000 $1,000
Boston – Internet Access $1,000 $1,000 $1,000 $1,000 $1,000
Boston – Misc./Office Supplies $2,000 $2,000 $2,000 $2,000 $2,000
Other $0 $0 $0 $0 $0
Total Operating Expenses $1,720,295 $1,088,300 $1,105,410 $1,193,065 $1,203,254
Profit Before Interest and Taxes ($1,575,291) $281,442 $2,519,910 $5,072,759 $7,624,330
EBITDA ($1,575,291) $281,442 $2,519,910 $5,072,759 $7,624,330
Interest Expense $0 $0 $0 $0 $0
Taxes Incurred $0 $0 $0 $0 $0
Net Profit ($1,575,291) $281,442 $2,519,910 $5,072,759 $7,624,330
Net Profit/Sales -315.71% 6.89% 25.28% 31.39% 34.78%

7.4 Projected Cash Flow

Cash flow is projected to decline for the first two years of operation based on the reasonable assumption of 45-day credit collections. NaviTag Technologies has calculated its financial plan so that it will have enough cash from investors and debt to survive until a positive cash flow is realized in 2005.

Shipment monitoring business plan, financial plan chart image

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Subtotal Cash from Operations $290,554 $2,585,701 $7,508,526
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 $290,554 $2,585,701 $7,508,526
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $479,665 $596,000 $613,110
Bill Payments $1,386,014 $3,018,545 $6,385,748
Subtotal Spent on Operations $1,865,679 $3,614,545 $6,998,858
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 $1,865,679 $3,614,545 $6,998,858
Net Cash Flow ($1,575,126) ($1,028,844) $509,668
Cash Balance $1,401,874 $373,031 $882,699

7.5 Projected Balance Sheet

The table below presents the balance sheet for NaviTag Technologies. This table reflects a positive cash position throughout the period of this financial plan and dramatic growth in net worth in 2007.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $1,401,874 $373,031 $882,699 $3,813,048 $9,423,457
Accounts Receivable $208,420 $1,705,271 $4,162,790 $6,750,465 $9,155,800
Other Current Assets $0 $0 $0 $0 $0
Total Current Assets $1,610,295 $2,078,302 $5,045,489 $10,563,513 $18,579,257
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 $1,610,295 $2,078,302 $5,045,489 $10,563,513 $18,579,257
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $208,586 $395,151 $842,428 $1,287,693 $1,679,107
Current Borrowing $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $208,586 $395,151 $842,428 $1,287,693 $1,679,107
Long-term Liabilities $0 $0 $0 $0 $0
Total Liabilities $208,586 $395,151 $842,428 $1,287,693 $1,679,107
Paid-in Capital $3,010,000 $3,010,000 $3,010,000 $3,010,000 $3,010,000
Retained Earnings ($33,000) ($1,608,291) ($1,326,849) $1,193,061 $6,265,820
Earnings ($1,575,291) $281,442 $2,519,910 $5,072,759 $7,624,330
Total Capital $1,401,709 $1,683,151 $4,203,061 $9,275,820 $16,900,150
Total Liabilities and Capital $1,610,295 $2,078,302 $5,045,489 $10,563,513 $18,579,257
Net Worth $1,401,709 $1,683,151 $4,203,061 $9,275,820 $16,900,150

7.6 Business Ratios

The table below presents common business ratios as a reference. Since the business of “cargo tracking” does not fall underneath any predefined Industry dataset, for Industry Profile comparisons in this table we chose, NAICS 488390 Other Support Activities for Water Transportation (SIC 3731), as the closest option.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 718.19% 144.11% 62.16% 35.63% 9.27%
Percent of Total Assets
Accounts Receivable 12.94% 82.05% 82.51% 63.90% 49.28% 18.72%
Other Current Assets 0.00% 0.00% 0.00% 0.00% 0.00% 36.72%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 92.30%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 7.70%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 12.95% 19.01% 16.70% 12.19% 9.04% 42.56%
Long-term Liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 17.03%
Total Liabilities 12.95% 19.01% 16.70% 12.19% 9.04% 59.59%
Net Worth 87.05% 80.99% 83.30% 87.81% 90.96% 40.41%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 29.06% 33.55% 36.38% 38.77% 40.27% 18.16%
Selling, General & Administrative Expenses 383.83% 32.27% 13.48% 16.39% 15.08% 4.91%
Advertising Expenses 9.02% 0.73% 0.30% 0.19% 0.14% 0.41%
Profit Before Interest and Taxes -315.71% 6.89% 25.28% 31.39% 34.78% 3.42%
Main Ratios
Current 7.72 5.26 5.99 8.20 11.06 1.71
Quick 7.72 5.26 5.99 8.20 11.06 0.68
Total Debt to Total Assets 12.95% 19.01% 16.70% 12.19% 9.04% 67.28%
Pre-tax Return on Net Worth -112.38% 16.72% 59.95% 54.69% 45.11% 6.22%
Pre-tax Return on Assets -97.83% 13.54% 49.94% 48.02% 41.04% 19.01%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -315.71% 6.89% 25.28% 31.39% 34.78% n.a
Return on Equity -112.38% 16.72% 59.95% 54.69% 45.11% n.a
Activity Ratios
Accounts Receivable Turnover 2.39 2.39 2.39 2.39 2.39 n.a
Collection Days 40 86 107 123 132 n.a
Accounts Payable Turnover 7.64 8.11 8.11 8.11 8.11 n.a
Payment Days 40 34 33 37 40 n.a
Total Asset Turnover 0.31 1.96 1.98 1.53 1.18 n.a
Debt Ratios
Debt to Net Worth 0.15 0.23 0.20 0.14 0.10 n.a
Current Liab. to Liab. 1.00 1.00 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $1,401,709 $1,683,151 $4,203,061 $9,275,820 $16,900,150 n.a
Interest Coverage 0.00 0.00 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 3.23 0.51 0.51 0.65 0.85 n.a
Current Debt/Total Assets 13% 19% 17% 12% 9% n.a
Acid Test 6.72 0.94 1.05 2.96 5.61 n.a
Sales/Net Worth 0.36 2.43 2.37 1.74 1.30 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a

7.7 Long-term Plan

We anticipate that the percentage of ocean cargo deemed time sensitive, of high value, or of a hazardous nature will continue to increase faster than the average increase in cargo in general. Further, we believe that the concerns over ship, port, and national security risks will balloon. With only 2% of the imports being inspected today, the concern of dangerous cargoes compromising the port operations has created opportunities for a cargo tracking/security alert device such as ours.

Our cargo tracking efforts will be focused on those shippers with high value, time sensitive, or hazardous cargo. Our security focus will be directed to those government agencies seeking to improve security of the U.S. ports involved in processing the 600,000 containers entering weekly.

We will achieve profitability in just over two years and due to the nature of the exponential growth of access charges, we will realize a respectable net profit on sales by year three. The success of our implementation and sales efforts will have a strong affect on our year three through year five operations and fiscal position. If slower than planned, we risk a negative cash balance, even though we might have already reached profitability. Additional rounds of investment may be needed, or acquiring long-term business loans.

Ironically, a faster than planned industry acceptance of NaviTag could push us into a period of risky increased expansion, which would also drain our operating capital reserve, again requiring us to seek another round of investment or loans. 

Alternatively, early-on proof-of-concept and feasibility analyses, could spark high demand from governmental agencies and/or the military establishment could lead to substantial financial and operational grants, subsidies, contracts, etc.