Morningstar Bakery

Executive Summary 
Morningstar Bakery is a new organic bakery specializing in gluten, wheat and dairy
free products. Within the last three years there has been significant increases in
demand for these bakery products. This can be explained to a large degree by the
fact that up until recently Americans have had food allergies that have been
undiagnosed. It has been only in the last few years that medical doctors have
begun to diagnosis food allergies correctly. What was once an unknown problem
that affected so many people with no recourse has become a manageable ailment
that is easily dealt with through modification of diets. This is very positive for both
those people that are affected as well as bakeries such as Morningstar that
specialize in these products.

The Products

Morningstar offers a wide range of exciting products. The first group is spelt
breads, muffins, and pastries. Spelt is used as there are far fewer people that are
allergic to this grain. Yeast allergies are also common and Morningstar offers a
menu of yeast free breads. Dairy free muffins and pastries are offered for vegans.
Lastly, egg free breads, muffins, and pastries are offered.

Customers

Morningstar will focus on three distinct customer segments. The first group is the
Allergy group. This segment is growing at 15% a year with 32,000 potential
customers. The second niche is the Doctor group. This segment is also growing at
15% with 14,200 potential people. The last group is the Dieters group. This segment
is typically making modifications to their diet based on their desire to lose weight.
This niche also is growing at 15% with 48,000 possible customers.

Management Team

Recognizing the importance of human capital, Morningstar has assembled a strong

management team. The team is led by Donna Sharp. Donna comes to Morningstar
with 10 years of baking experience. In addition to her industry specific experience,
Donna has had 2 years of management experience. Donovan Bailey brings financial
skills to Morningstar after a 15 year CPA career. Tara Juniper-Reid will lead the
marketing efforts having participated in her own PR firm. Lastly, Lucy Hamilton will
be on the team as an assistant baker with over five years of experience.

Morningstar is an exciting opportunity that combines, fresh baked goods with spelt,
yeast free, dairy free, and egg free products, addressing the recent need for these
new products. Demand for these products is expected to grow exponentially as
medical doctors become more and more aware of food allergies Americans are
afflicted with. Profitability is forecasted to occur by month three. Through a
combination of a strong management team, a solid business model, and exciting,
market demanded products will allow Morningstar to quickly gain market
penetration and cash richness.

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1.1 Objectives
 1. To establish a working storefront for Morningstar bakery.
2. To develop the strong presence in the community needed to support sales
goals.

3. To develop a full menu by the end of the second quarter.

1.2 Mission

Morningstar Bakery aims to be a cornerstone in the community creating a

neighborhood atmosphere where customers feel comfortable and become instant
regulars. We are sensitive to the often over-looked population of allergy sufferers
and cater to their needs for healthy, delicious baked goods. We seek fair and
responsible profit, enough to keep the company financially healthy for the long
term and to fairly compensate owners and investors for their money and risk.

Company Summary 
Morningstar Bakery will be located in downtown [Name omitted] in a historical
building. This downtown district is a very popular destination because of the
historical architecture for weekenders and tourists. It is also a prime location for all
the employees of the surrounding downtown businesses. The bakery sells non-
wheat and other health specific breads, sweets and pastries to the surrounding
community every Tuesday through Sunday.

2.1 Company Ownership

Currently Morningstar Bakery is a sole proprietorship owned by Donna Sharp.

Eventually, as the company becomes established, Morningstar Bakery will apply to
be incorporated.

2.2 Start-up Summary

The primary expense to establish the Morningstar Bakery is the mortgage loan

estimated at $175,000 to purchase the vacant space on [Name omitted] street. The
building was previously used as a bakery and we plan to buy the used equipment
along with the space. This cost is also calculated into the loan estimate. Donna
Sharp intends to invest $7,500 of her savings to cover the other cost of start-up.

These costs include:

  Advertising brochures.
 Bakery ingredients.

 Insurance.

 Bakery accessories, i.e. paper bags, cartons, etc.

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Start-up

Requirements
Start-up Expenses

Legal $0

Stationery etc. $0

Brochures $2,500

Consultants $0

Insurance $150

Mortgage $1,258

Research and development $0

Bakery Ingredients $500

Other $1,000

Total Start-up Expenses $5,408

Start-up Assets
Cash Required $12,092

Other Current Assets $0

Long-term Assets $175,000

Total Assets $187,092

Total Requirements $192,500

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Start-up Funding

Start-up Expenses to Fund $5,408

Start-up Assets to Fund $187,092

Total Funding Required $192,500

Assets

Non-cash Assets from Start-up $175,000

Cash Requirements from Start-up $12,092

Additional Cash Raised $0

Cash Balance on Starting Date $12,092

Total Assets $187,092

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $173,000

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $12,000

Total Liabilities $185,000

Capital

Planned Investment

Untitled $0

Donna Sharp $7,500

Other $0

Additional Investment Requirement $0

Total Planned Investment $7,500

Loss at Start-up (Start-up Expenses) ($5,408)

Total Capital $2,092

Total Capital and Liabilities $187,092

Total Funding $192,500

Products
Morningstar Bakery provides non-gluten baked goods and pastries to diet-
conscious and wheat-allergic consumers. Special considerations are made for all
common food allergies such as dairy, yeast, wheat, and eggs.

Example of goods:

Spelt breads, muffins and pastries

Spelt flour is the most common wheat-alternative flour as it has the same
characteristics as wheat which provides similar taste, consistency and behaviors
creating goods that are just as good as any wheat baked good.

Yeast-free breads
Many people have an allergy to yeast, or have been warned by their doctors not to
eat it. We provide a line of yeast-free breads.

Dairy-free muffins and pastries

Most breads do not require any dairy products, so they are not a consideration.
Muffins and pastries most often require butter. To avoid this, we use a soy
substitute.
Egg-free breads, muffins and pastries
Eggs are most common in muffins and pastries. Applesauce can be used as a
substitute as it provides the same amount of moisture that is required.

Market Analysis Summary 

Our target market includes people who are health conscious and/or have common
food allergies. This is a niche market since most bakeries do not cater to these
needs with the exception of high-fiber diets.

4.1 Market Segmentation

Our target market consists of three groups:

The Allergy Group

According to Health Magazine, one out of five people suffer from a common food
allergy, however many bakeries do not cater to their needs.

The Doctor Diet Group

For health reasons, many people are warned off certain foods by their doctors
because of high cholesterol and blood pressure. Currently the main killer in the U.S.
is heart disease according the American Heart Association. Many Americans aged
50+ are going on special diets to prevent heart disease.

The Diet Craze Group

According to Self Magazine, the year 2000 saw 20 new diet fads that discouraged
certain foods such as wheat and dairy. The best selling book on the New York Time
list for health was the “Blood Type Diet” which encourages readers to eat only non-
gluten flours such as spelt, and to avoid dairy. While this target market is quite
large, it is ever fluctuating since most people who diet yo-yo between different diets
(Self Magazine September 2000).
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Market Analysis

Potential Customers Growth CA

The Allergy Group 15% 32,000 36,800 42,320 48,668 55,968 15.00%

The Doctor Group 15% 19,200 22,080 25,392 29,201 33,581 15.00%

The Dieters Group 15% 48,000 55,200 63,480 73,002 83,952 15.00%
Total 15.00% 99,200 114,080 131,192 150,871 173,501 15.00%

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4.2 Target Market Segment Strategy

In our target market, we will mainly focus on the “allergy group” since they are the
most prevalent and steady of customers. We expect that the “doctor diet group”
and the ‘”diet craze” group will make up a smaller portion of our customers. We
have not listed “regular customers” as a target group since the customers who do
not fit into any of our groups are too varied to segment. We are specifically filling
the needs of the “allergy group” so we expect the most business from this group.

4.3 Industry Analysis

Morningstar bakery competes in the Food Services Industry. In addition to

competing with other organic and non-wheat bakeries, it competes with all
restaurants, delis, bakeries and supermarkets for a share of its customers’s food
dollar. Morningstar is most concerned with competitors who differentiate their
products and services with a healthy, organic focus. Because this group is so large,
Morningstar has chosen to limit its analysis to other gluten-free bakeries.

4.3.1 Competition and Buying Patterns

Currently there are two bakeries in town that provide non-wheat goods.

Great Harvest Bread Company

Strengths: Makes spelt bread, muffins and cookies every Monday, Wednesday and
Friday. Well-established bakery in town. Sells breads in local grocery stores.

Weaknesses: Does not provide a wide selection of non-wheat goods. Furthermore

the texture and flavor of their spelt goods is very dense and flavorless. They use
whole spelt bread which makes a denser, crumby consistency bread. We use white
spelt in our spelt breads and other goods which has a texture and flavor similar to
wheat.

The Sweet Life Patisserie

Strengths: Makes spelt bread, muffins and brownies every day. Will make custom-
ordered non-gluten cakes.

Weaknesses: Does not produce a wide selection or large quantity of non-wheat

goods. Their main focus is wheat goods.

Strategy and Implementation Summary

Our strategy focuses on serving a niche market with quality goods. We are determined to become
a part of the community – an establishment that becomes as much of the community as a church
or local grocery store. To achieve these goals, we will provide the following:

 Friendly, neighborhood-feel atmosphere.

 Quality baked goods for everyone to enjoy at a fair price.
 Special diet menus in relation to the advice of local healthcare providers.

5.1 Sales Strategy

Our strategy focuses on building a customer base by providing good customer experience. With
the addition of the coffee bar and lunch menu in early spring, we hope to have customers make
the bakery their one-stop destination for breakfast or lunch. In the summer, when we open the
outdoor patio, more and more customers will make the bakery a destination for their lunches
more often since the atmosphere will be so pleasing.

We would also like to work closely with local doctors and elder care homes to bring in
customers with health problems. We are already in negotiations with Dr. Goodman’s office to
insure referrals to the bakery for his patients.
To develop good business strategies, perform a SWOT analysis of your business. It's easy with
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5.1.1 Sales Forecast

Our sales forecast assumes the following changes:

 Bread sales in the summer months will be slightly higher since more people will be
having BBQs and picnics requiring items such as hamburger and hotdog buns.
 Bread and pastry sales will be higher in November and December because of the food-
oriented holidays.
 Coffee sales will be higher in winter months, and for summer months sales of sodas and
iced beverages will increase.

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Sales Forecast

Sales

Breads $75,900 $96,000 $120,000

Coffee/Beverages $36,400 $48,000 $60,000

Lunch Items (Soups & Sandwiches) $80,000 $96,000 $120,000

Pastries/Sweets $59,400 $84,000 $100,000

Total Sales $251,700 $324,000 $400,000

Direct Cost of Sales Year 1 Year 2 Yea

Breads $22,770 $28,800 $36,000

Coffee/Beverages $10,920 $14,400 $18,000

Lunch Items (Soups & Sandwiches) $32,000 $38,400 $48,000

Pastries/Sweets $23,760 $33,600 $40,000

Subtotal Direct Cost of Sales $89,450 $115,200 $142,000

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5.2 Competitive Edge

Our competitive edge is our quality of goods. We use only organic flours of the highest quality
that create incredible non-gluten goods that can’t be matched anywhere else in town. We also
focus mainly on non-gluten goods. The other bakeries in town focus on wheat goods and
sometimes, as an afterthought, use alternative flours.

5.3 Milestones

The table below displays the milestones that Morningstar Bakery would like to accomplish in the
first three years. Emphasis in the first year will be on advertising to make the Morningstar
Bakery an established business in town.

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Milestones

Milestone Start Date End Date Budget Manager Departm

First Advertising Campaign 12/1/2001 3/1/2002 $5,000 Tara Juniper-Reid Market

Full-Service Coffee Bar Integration 2/1/2002 2/28/2002 $5,000 Donna Sharp Bak

Establishing a Lunch Menu 3/1/2002 3/30/2002 $1,000 Donna Sharp Bak

Outdoor Cafe Seating 5/1/2002 9/30/2002 $10,000 Donna Sharp Bak

Totals $21,000

Management Summary 
Donna Sharp is the founder of Morningstar Bakery. She brings to the bakery her
experience as a baker and as an entrepreneur. She has worked as a baker for over
10 years including two years as an apprentice in a well-known Paris patisserie. As a
teenager she helped her parents at the family’s general store, both in sales and
marketing. For her last two years at her family’s store, she was the general
employee manager. Her duties at the bakery will include employee hiring and
training, head baker and store management.

Donovan Bailey has run his own successful CPA consulting firm for 15 years. His
duties will include the bookkeeping, inventory management and stock fulfillment.

Tara Juniper-Reid runs her own PR company and will be assisting the Morningstar
Bakery in its marketing campaigns on a part-time basis.

Lucy Hamilton has worked as a baker for over five years and will be the assistant
baker. Her responsibilities will also include the management of the bakery
shopping list.

6.1 Personnel Plan

Once the bakery becomes established and the cash flow is steady, we would like to
hire one person for counter help and another assistant baker.

The table below illustrates the needs of the current employees, plus the integration of two more
employees within three months of operation. The new hirings will coincide with the opening of a
lunch menu and coffee bar which will most certainly require more help.

Personnel Plan

Donna Sharp – Head Baker $24,000 $26,400 $29,040

Lucy Hamilton $21,000 $23,100 $25,410

Tara Juniper-Reid – Part-time $9,000 $9,900 $10,890

Counter Help – Full Time $18,000 $19,800 $21,780

Assistant Baker – Part time $9,000 $9,900 $10,890

Donovan Hamilton – Bookkeeper $24,000 $26,400 $29,040

Total People 6 6 6

Total Payroll $105,000 $115,500 $127,050

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Financial Plan 
The following sections will outline important financial assumptions.

7.1 Important Assumptions

The current economic climate in the U.S. appears to be on the brink of recession. However, we do not
believe that if the country does enter a recession that our business will be unduly affected. Since our
products are ones that help contribute to and maintain good health, we believe that people will
continue to buy our products over traditional wheat bread. We are operating in a niche market, and in
addition, the price of our breads and sweets although slightly higher than traditional bakeries they
are not positioned as expensive, luxury items.

General Assumptions

Plan Month 1 2

Current Interest Rate 9.00% 9.00% 9.00%

Long-term Interest Rate 8.50% 8.50% 8.50%

Tax Rate 25.42% 25.00% 25.42%

Other 0 0 0

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7.2 Break-even Analysis

Our Break-Even Analysis includes running costs of production. These are fairly low

since we manufacture all of our goods at a low cost to us. Here are the items
included in the average percent variable cost:

 Manufacturing ingredients, i.e. flour, sugar, yeast and butter.

 Payroll.

 Mortgage.

 Utilities.

 Advertising.

The Break-Even Analysis as it appears below indicates that the break-even point will
be attainable each month.
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Break-even Analysis

Monthly Revenue Break-even $19,036

Assumptions:

Average Percent Variable Cost 36%

Estimated Monthly Fixed Cost $12,271

7.3 Projected Profit and Loss

The following table shows the projected profit and loss for Morningstar Bakery.
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Pro Forma Profit and Loss

Sales $251,700 $324,000 $400,000

Direct Cost of Sales $89,450 $115,200 $142,000

Other $0 $0 $0

Total Cost of Sales $89,450 $115,200 $142,000

Gross Margin $162,250 $208,800 $258,000

Gross Margin % 64.46% 64.44% 64.50%

Expenses

Payroll $105,000 $115,500 $127,050

Sales and Marketing and Other Expenses $13,040 $14,640 $16,640

Depreciation $3,492 $3,492 $3,492

Utilities $519 $600 $800

Insurance $1,800 $2,400 $2,800

Mortgage $10,800 $15,096 $15,096

Payroll Taxes $12,600 $13,860 $15,246

Other $0 $0 $0
Total Operating Expenses $147,251 $165,588 $181,124

Profit Before Interest and Taxes $14,999 $43,212 $76,876

EBITDA $18,491 $46,704 $80,368

Interest Expense $14,705 $14,705 $14,705

Taxes Incurred ($473) $7,127 $15,802

Net Profit $767 $21,380 $46,369

Net Profit/Sales 0.30% 6.60% 11.59%

7.4 Projected Cash Flow

The following chart illustrates a healthy cash balance for the first three years,
enabling the company to grow through reinvestment.
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Pro Forma Cash Flow

Cash Received

Cash from Operations

Cash Sales $251,700 $324,000 $400,000

Subtotal Cash from Operations $251,700 $324,000 $400,000

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 $251,700 $324,000 $400,000

Expenditures Year 1 Year 2 Yea

Expenditures from Operations

Cash Spending $105,000 $115,500 $127,050

Bill Payments $128,199 $182,776 $219,845

Subtotal Spent on Operations $233,199 $298,276 $346,895

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 $233,199 $298,276 $346,895

Net Cash Flow $18,501 $25,724 $53,105

Cash Balance $30,593 $56,316 $109,421

7.5 Projected Balance Sheet

The following table represents the financial position of the Morningstar Bakery at the end of each of the
three upcoming fiscal years.

Pro Forma Balance Sheet

Assets

Current Assets

Cash $30,593 $56,316 $109,421

Other Current Assets $0 $0 $0

Total Current Assets $30,593 $56,316 $109,421

Long-term Assets

Long-term Assets $175,000 $175,000 $175,000

Accumulated Depreciation $3,492 $6,984 $10,476

Total Long-term Assets $171,508 $168,016 $164,524

Total Assets $202,101 $224,332 $273,945

Liabilities and Capital Year 1 Year 2 Yea

Current Liabilities

Accounts Payable $14,241 $15,093 $18,336

Current Borrowing $0 $0 $0

Other Current Liabilities $12,000 $12,000 $12,000

Subtotal Current Liabilities $26,241 $27,093 $30,336

Long-term Liabilities $173,000 $173,000 $173,000

Total Liabilities $199,241 $200,093 $203,336

Paid-in Capital $7,500 $7,500 $7,500

Retained Earnings ($5,408) ($4,641) $16,740

Earnings $767 $21,380 $46,369

Total Capital $2,859 $24,240 $70,609

Total Liabilities and Capital $202,101 $224,332 $273,945

Net Worth $2,859 $24,240 $70,609

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7.6 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard
Industrial Classification (SIC) code 5461, Retail Bakeries, are shown for comparison.
Ratio Analysis

Sales Growth 0.00% 28.72% 23.46% 2.58%

Percent of Total Assets

Other Current Assets 0.00% 0.00% 0.00% 29.82%

Total Current Assets 15.14% 25.10% 39.94% 55.20%

Long-term Assets 84.86% 74.90% 60.06% 44.80%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 12.98% 12.08% 11.07% 25.40%

Long-term Liabilities 85.60% 77.12% 63.15% 23.07%

Total Liabilities 98.59% 89.19% 74.23% 48.47%

Net Worth 1.41% 10.81% 25.77% 51.53%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 64.46% 64.44% 64.50% 36.64%

Selling, General & Administrative Expenses 64.14% 57.51% 52.56% 23.68%

Advertising Expenses 4.13% 3.70% 3.50% 1.65%

Profit Before Interest and Taxes 5.96% 13.34% 19.22% 1.92%

Main Ratios

Current 1.17 2.08 3.61 1.70

Quick 1.17 2.08 3.61 0.96

Total Debt to Total Assets 98.59% 89.19% 74.23% 5.56%

Pre-tax Return on Net Worth 10.28% 117.61% 88.05% 56.30%

Pre-tax Return on Assets 0.15% 12.71% 22.69% 12.72%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 0.30% 6.60% 11.59%

Return on Equity 26.84% 88.20% 65.67%

Activity Ratios

Accounts Payable Turnover 10.00 12.17 12.17

Payment Days 27 29 27

Total Asset Turnover 1.25 1.44 1.46

Debt Ratios

Debt to Net Worth 69.68 8.25 2.88

Current Liab. to Liab. 0.13 0.14 0.15

Liquidity Ratios
Net Working Capital $4,351 $29,224 $79,085

Interest Coverage 1.02 2.94 5.23

Additional Ratios

Assets to Sales 0.80 0.69 0.68

Current Debt/Total Assets 13% 12% 11%

Acid Test 1.17 2.08 3.61

Sales/Net Worth 88.03 13.37 5.67

Dividend Payout 0.00 0.00 0.00

Appendix
Sales Forecast

Sales
Breads 0% $3,000 $4,800 $6,000 $6,000 $6,800 $7,000 $7,000 $7,000 $6,

Coffee/Beverages 0% $0 $3,500 $3,500 $3,000 $3,000 $3,200 $3,200 $3,200 $3,

Lunch Items (Soups & 0% $0 $0 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,
Sandwiches)

Pastries/Sweets 0% $2,000 $4,600 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,

Total Sales $5,000 $12,900 $22,500 $22,000 $22,800 $23,200 $23,200 $23,200 $23

Direct Cost of Sales Month Month Month Month Month Month Month Month M
1 2 3 4 5 6 7 8

Breads $900 $1,440 $1,800 $1,800 $2,040 $2,100 $2,100 $2,100 $2,

Coffee/Beverages $0 $1,050 $1,050 $900 $900 $960 $960 $960 $96

Lunch Items (Soups & $0 $0 $3,200 $3,200 $3,200 $3,200 $3,200 $3,200 $3,
Sandwiches)

Pastries/Sweets $800 $1,840 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,

Subtotal Direct Cost of Sales $1,700 $4,330 $8,050 $7,900 $8,140 $8,260 $8,260 $8,260 $8,

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Personnel Plan

Donna Sharp – 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2
Head Baker

Lucy Hamilton 0% $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1

Tara Juniper-Reid 0% $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $7
– Part-time

Counter Help – 0% $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1
Full Time

Assistant Baker – 0% $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $7
Part time

Donovan 0% $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2
Hamilton –
Bookkeeper

Total People 6 6 6 6 6 6 6 6 6 6 6
Total Payroll $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8

General Assumptions

Plan Month 1 2 3 4 5 6 7 8 9 10 1

Current Interest 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Rate

Long-term 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Interest Rate

Tax Rate 30.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

Other 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss

Sales $5,000 $12,900 $22,500 $22,000 $22,800 $23,200 $23,200 $23,200

Direct Cost of Sales $1,700 $4,330 $8,050 $7,900 $8,140 $8,260 $8,260 $8,260

Other $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $1,700 $4,330 $8,050 $7,900 $8,140 $8,260 $8,260 $8,260

Gross Margin $3,300 $8,570 $14,450 $14,100 $14,660 $14,940 $14,940 $14,940

Gross Margin % 66.00% 66.43% 64.22% 64.09% 64.30% 64.40% 64.40% 64.40%

Expenses

Payroll $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750

Sales and Marketing and $1,820 $1,820 $1,820 $720 $720 $1,220 $720 $720
Other Expenses

Depreciation $291 $291 $291 $291 $291 $291 $291 $291

Utilities $50 $50 $48 $45 $45 $35 $35 $35

Insurance $150 $150 $150 $150 $150 $150 $150 $150

Mortgage $900 $900 $900 $900 $900 $900 $900 $900

Payroll Taxes 12% $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050

Other $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $13,011 $13,011 $13,009 $11,906 $11,906 $12,396 $11,896 $11,896

Profit Before Interest and ($9,711) ($4,441) $1,441 $2,194 $2,754 $2,544 $3,044 $3,044
Taxes

EBITDA ($9,420) ($4,150) $1,732 $2,485 $3,045 $2,835 $3,335 $3,335

Interest Expense $1,225 $1,225 $1,225 $1,225 $1,225 $1,225 $1,225 $1,225

Taxes Incurred ($3,281) ($1,417) $54 $242 $382 $330 $455 $455

Net Profit ($7,655) ($4,250) $162 $726 $1,146 $989 $1,364 $1,364
Net Profit/Sales - -32.94% 0.72% 3.30% 5.03% 4.26% 5.88% 5.88%
153.11%

Pro Forma Cash Flow

Cash Received

Cash from Operations

Cash Sales $5,000 $12,900 $22,500 $22,000 $22,800 $23,200 $23,200 $23,200 $23,0

Subtotal Cash from $5,000 $12,900 $22,500 $22,000 $22,800 $23,200 $23,200 $23,200 $23,0
Operations

Additional Cash Received

Sales Tax, VAT, HST/GST 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0

Received

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0

(interest-free)
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current $0 $0 $0 $0 $0 $0 $0 $0 $0

Assets

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received $5,000 $12,900 $22,500 $22,000 $22,800 $23,200 $23,200 $23,200 $23,0

Expenditures Month 1 Month Month Month Month Month Month Month Mo

2 3 4 5 6 7 8

Expenditures from
Operations

Cash Spending $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,750 $8,75

Bill Payments $120 $3,764 $8,282 $13,262 $12,245 $12,631 $13,158 $12,795 $12,7

Subtotal Spent on $8,870 $12,514 $17,032 $22,012 $20,995 $21,381 $21,908 $21,545 $21,5
Operations
Additional Cash Spent

Sales Tax, VAT, HST/GST $0 $0 $0 $0 $0 $0 $0 $0 $0

Paid Out

Principal Repayment of $0 $0 $0 $0 $0 $0 $0 $0 $0
Current Borrowing

Other Liabilities Principal $0 $0 $0 $0 $0 $0 $0 $0 $0

Repayment

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment

Purchase Other Current $0 $0 $0 $0 $0 $0 $0 $0 $0

Assets

Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Spent $8,870 $12,514 $17,032 $22,012 $20,995 $21,381 $21,908 $21,545 $21,5
Net Cash Flow ($3,870) $386 $5,468 ($12) $1,805 $1,819 $1,292 $1,655 $1,45

Cash Balance $8,222 $8,607 $14,075 $14,064 $15,868 $17,687 $18,980 $20,635 $22,0

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Pro Forma Balance Sheet

Assets Starting Balances

Current Assets

Cash $12,092 $8,222 $8,607 $14,075 $14,064 $15,868 $17,687 $18,98

Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0

Total Current Assets $12,092 $8,222 $8,607 $14,075 $14,064 $15,868 $17,687 $18,98
Long-term Assets

Long-term Assets $175,000 $175,000 $175,000 $175,000 $175,000 $175,000 $175,000 $175,0

Accumulated Depreciation $0 $291 $582 $873 $1,164 $1,455 $1,746 $2,037

Total Long-term Assets $175,000 $174,709 $174,418 $174,127 $173,836 $173,545 $173,254 $172,9

Total Assets $187,092 $182,931 $183,025 $188,202 $187,900 $189,413 $190,941 $191,9

Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Mont

Current Liabilities

Accounts Payable $0 $3,494 $7,839 $12,854 $11,825 $12,192 $12,731 $12,36

Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0

Other Current Liabilities $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,00
Subtotal Current Liabilities $12,000 $15,494 $19,839 $24,854 $23,825 $24,192 $24,731 $24,36

Long-term Liabilities $173,000 $173,000 $173,000 $173,000 $173,000 $173,000 $173,000 $173,0

Total Liabilities $185,000 $188,494 $192,839 $197,854 $196,825 $197,192 $197,731 $197,3

Paid-in Capital $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500 $7,500

Retained Earnings ($5,408) ($5,408) ($5,408) ($5,408) ($5,408) ($5,408) ($5,408) ($5,40

Earnings $0 ($7,655) ($11,905) ($11,744) ($11,017) ($9,871) ($8,882) ($7,51

Total Capital $2,092 ($5,563) ($9,813) ($9,652) ($8,925) ($7,779) ($6,790) ($5,42

Total Liabilities and Capital $187,092 $182,931 $183,025 $188,202 $187,900 $189,413 $190,941 $191,9

Net Worth $2,092 ($5,563) ($9,813) ($9,652) ($8,925) ($7,779) ($6,790) ($5,42