evergreen tv

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Table of Contents

1.0 Executive Summary ..............................................................................................................11.1 Objectives ....................................................................................................................11.2 Keys to Success ...........................................................................................................21.3 Mission .........................................................................................................................3

Chart: Highlights ........................................................................................................42.0 Company Summary ..............................................................................................................4

2.1 Company Ownership ....................................................................................................52.2 Company Locations and Facilities................................................................................5

2.3 Start-up Summary ........................................................................................................5Table: Start-up ...........................................................................................................5Table: Start-up Funding .............................................................................................6Chart: Start-up ...........................................................................................................7

3.0 Products and Services ..........................................................................................................73.1 Product and Service Description ..................................................................................73.2 Competitive Comparison ..............................................................................................83.3 Sales Literature ............................................................................................................8

3.4 Fulfillment .....................................................................................................................93.5 Technology ...................................................................................................................93.6 Future Products and Services ......................................................................................9

4.0 Market Analysis Summary ..................................................................................................104.1 Market Segmentation .................................................................................................10

Chart: Market Analysis (Pie) ....................................................................................11Table: Market Analysis............................................................................................11

4.2 Target Market Segment Strategy ...............................................................................12

4.2.1 Market Growth ................................................................................................124.2.2 Market Needs .................................................................................................134.2.3 Market Trends .................................................................................................13

4 3 Service Business Analysis 14


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Table of Contents6.1 Organizational Structure.............................................................................................24

6.2 Management Team ....................................................................................................256.3 Management Team Gaps ..........................................................................................256.4 Personnel Plan ...........................................................................................................25

Table: Personnel......................................................................................................267.0 Financial Plan .....................................................................................................................27

7.1 Important Assumptions ..............................................................................................27Table: General Assumptions...................................................................................27

7.2 Key Financial Indicators .............................................................................................27

Chart: Benchmarks ..................................................................................................287.3 Break-even Analysis...................................................................................................29

Table: Break-even Analysis .....................................................................................29Chart: Break-even Analysis .....................................................................................29

7.4 Projected Profit and Loss ...........................................................................................30Table: Profit and Loss ..............................................................................................30Chart: Profit Monthly ................................................................................................31Chart: Profit Yearly ..................................................................................................31

7.5 Projected Cash Flow ..................................................................................................32Chart: Cash ..............................................................................................................32Table: Cash Flow .....................................................................................................33

7.6 Projected Balance Sheet ............................................................................................34Table: Balance Sheet ..............................................................................................34

7.7 Business Ratios .........................................................................................................35Table: Ratios............................................................................................................35

Table: Sales Forecast .................................................................................................................1

Table: Personnel ........................................................................................................................2Table: General Assumptions ......................................................................................................3Table: Profit and Loss .................................................................................................................4Table: Cash Flow 6


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EvergreenTV Productions, Inc.

1.0 Executive Summary

EvergreenTV Productions, Inc. is a multi-faceted company, with the potential to branch into newvenues as the company grows. There are currently three phases to development, beginning withour home division. By developing this division to include three stores in the Tampa/St.Petersburg area, we can generate enough revenue to assist in the growth of two other divisions;tour and travel, and the business to business division. However, we will need additional fundingto accomplish this plan.

The Home Division produces digital video scrapbooks by digitizing customers' photos, settingthem to music, and using selected digital effects to create the video memory. Our operationsmanual is a business system designed to produce the maximum number of videos per weekwhile maintaining a rigid standard for quality. Using this system, and following this videoproduction business plan, we will generate the revenue needed to allow us flexibility in acceptingother projects more commonly associated with a production company, leading into the nextdivision.

The Tour and Travel Division provides specialized production on a wide range of hand-pickedprojects, depending upon the client's needs. This division creates videos of local interest for playin doctors offices' waiting rooms, videos to promote area businesses, and tour/travel videos fortour companies. We will develop this division into a self-sufficient branch within the first year.

The Business to Business (B2B) Division markets the news stories of college and universitycommunications students, and provides a resume posting service for said students. Those storiesare sold to small market tv stations nationwide. This division is the heart of EvergreenTVProductions, and the reason for incorporation. After seven months of development, our website is

complete. We are ready to revolutionize television news programming. Selecting only the best,we gather an impressive selection of "timeless" news stories produced by college and universitystudents. Market research shows that nearly every day, small market tv stations need "filler" news,either local, regional or national, to complete their newscasts. Many subscribe to costly services,with little choice for story selection EvergreenTV Productions will provide them with quality news


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EvergreenTV Productions, Inc.4. Obtain 30 sales to small market tv stations by the end of year one.

Long Term:

1. B2B Division sales increasing to XX by the third year.2. Build B2B news stories inventory to a minimum of 300 stories by the third year.3. Open two home division stores per year in various markets throughout state. i.e., Naples,

Miami, Orlando, Jacksonville, Pensacola. Each store following our business system tomaintain consistency and product control.

4. Maintain a profit, to reinvest into business and further expansion.

1.2 Keys to Success

Home Division:

Product quality. Begins with a complete customer's understanding of the process.Customers should be comfortable turning over their treasured photos for production, andshould be completely satisfied with the end product.

Implementation of business system. Every employee should be fully trained and able toassist other employees in the goals and objectives as defined within the business system.This ensures that the first key to success is achieved.

Marketing. Initial market saturation within key customer demographics is essential, followedby an extensive referral program, as outlined in the business system guidelines.Presentations to select demographics, such as retirement villas and professionalphotographers is vital. Building alliances and co-promotions programs with like businesses(such as wedding photographers, disc jockeys, travel agencies and photo processingcenters) is key to further growth.

Tour and Travel Division:

Product quality/customer satisfaction. All productions must meet the complete satisfaction


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1.3 Mission

"In the factory Revlon manufactures cosmetics, but in the store Revlon sells hope." CharlesRevson, founder of Revlon.

While EvergreenTV Productions, Inc. operates as a production company, it sells personalmemories, opportunities and trust.

The home division creates video scrapbooks set to music, but sells memories and quality service.Customers must trust that we cherish their photos and will produce every video as if for our ownfamilies. Our employees must feel equal to the standards expected of them, and feel free tocontribute new ideas to improve upon our business model. Employees are also our internalcustomers, and should be treated with the same respect given to customers who walk throughthe door.

The tour and travel division maintains an open mind to new video projects, so the clientunderstands that his goal is our objective. While we will suggest alternatives and bring our

experience to the table, we hold the client's goal as the primary target. If we cannot achieve ourclient's goal, we will present that information in our initial encounter and suggest other possibleproduction means, rather than altering the project to our comfort level.

The business to business division of EvergreenTV Productions, Inc. understands the frustrationsand needs of small market tv news, and the desire of broadcast students to become part of thetv news environment. Using skills developed in tv newsrooms, EvergreenTV Productions providesa service and a product which match the quality and expectations of tv news directors. It makesprofessional experience accessible to hundreds of broadcast students every year. It unites students

with stations, according to industry quality standards. While keeping these standards high, itmakes a profit and generates cash. It provides a personal service and guidance system tostudents. It provides a professional service and an affordable programming opportunity to stations.And EvergreenTV Productions constantly searches for innovative news programming ideas to takethis company to the next level while loyally serving its clients in every possible capacity


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2.0 Company Summary

EvergreenTV Productions is a multi-faceted production company operating on three basic levels.

The Home Division of EvergreenTV Productions is centered around one product. Using the mostadvanced, all-digital editing equipment, our company turns standard photos into video"scrapbooks" of various length and style, all set to selected music backgrounds. Customers aregiven a free consultation to review the process help in selecting needed music and given an


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EvergreenTV Productions, Inc.Florida corporation, Subchapter S.

2.1 Company Ownership

EvergreenTV Productions is a privately-held Subchapter S corporation owned in majority by itsfounder and president, Louanne Walters. There is one other director, Bobby G. Walters,Louanne's father, who is also vice-president. Louanne owns 70%, with Bobby owning 30%.Shares are available for additional ownership.

2.2 Company Locations and Facilities

All equipment and office management space is held within one room, approximately 10x10 feetat Louanne Walters' home.

We are currently looking for an initial storefront, and have priced several in the North Tampa and

Carrollwood areas. Needed space is 500-750 sq. ft. In these areas, price per square foot runs $1-$1.50, or approximately $500-$1,125 per month for rent. Many of these locations include utilities.

2.3 Start-up Summary

Expenses and funding for the business start-up are shown below.

Table: Start-up

Start-up


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Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund $800Start-up Assets to Fund $14,600

Total Funding Required $15,400

Assets

Non-cash Assets from Start-up $500

Cash Requirements from Start-up $14,100

Additional Cash Raised $0

Cash Balance on Starting Date $14,100Total Assets $14,600

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $400

Other Current Liabilities (interest-free) $0

Total Liabilities $400

Capital

Planned Investment

Investor 1 $15,000

Other $0

Additional Investment Requirement $0

Total Planned Investment $15,000

Loss at Start-up (Start-up Expenses) ($800)

Total Capital $14,200

Total Capital and Liabilities $14,600

T t l F di $15 400


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3.0 Products and Services

As stated in the Company Summary section, Evergreen TV Productions is a company of three

divisions, selling both products and services according to each division.

3 1 Product and Service Description


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3.2 Competitive Comparison

We stand apart from our competition in price and value.

Home Division:Currently, production companies are hesitant to offer video scrapbooks due to the amount ofwork necessary for a minimal return on revenue. They would much rather produce corporateproductions with a high fee. Locally, a few companies will produce these scrapbooks, but they

charge enormous fees. The reason for this is that they do not have a business system in place toallow them to produce these scrapbooks on a timely schedule with minimal cost. From aninformal phone survey we gathered rates for a 10 minute video from $500 to $2,000.Additionally, this phone survey showed no true committment to the production elements of musicand digital effects. Again, this is due to having no business system in place to provide theseessential elements. It can be compared to a hamburger stand trying to become McDonald's with noactual system in place to keep quality consistent.


We offer high value and quality to our customers, and treat every project as if it were the onlyproject. Production companies in general have a reputation for sloppy and careless producing, foroverbooking projects, and for inconsistent and exorbitant charges. Our referral acceptanceprogram ensure we will not overbook, we will have a higher degree of responsibility with eachcustomer who is referred, and we cannot charge one customer amount X, and another customeramount Y, as they will probably know each other. The referral program sets us apart, andreassures otherwise wary customers.

B2B Division:

CONUS sells yearly subscriptions of regional news to tv stations nationwide for $20,000/year. Dr.Dean Edell sells yearly subscriptions of health news only, for nearly $30,000/year. MedStar sellsyearly subscriptions of health news only for $24 000/year Mr Food Mrs Fixit TravelNet and


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3.4 Fulfillment

All end product supplies can be purchased locally from Office Depot, Sam's Club, or Staples, orfrom a production company on the Internet at minimal cost. End product supplies include tapelabels, and VHS/Beta/DVC video tape.

All photos being turned into video are provided by our clients and returned with the finishedvideo product.

For the B2B Division, we do not buy our stories, but trade our marketing and resume services tostudents for their stories. A legally drawn-up contract is held between EvergreenTV Productionsand each student, once his/her story is accepted. By agreeing, the student gives us the story forany commercial use, and he/she agrees to use that story only in job-searching. We then sell thestory for profit and expenses (such as video tapes for dubbing purposes).

We also own over $12,000 worth of video and editing equipment, and can do our own stories, atno further cost to the company.

3.5 Technology

We use both Windows and Macintosh technology in our company. Windows and Office products areused mainly for all databases, word processing, and accounting needs. Macintosh products areused primarily for video editing, and loading video onto our website. We also have all the necessarycomponents for a digital video production center, including cameras, mini-disc recorders,

microphones, and lights. All other items can be rented per project at a low cost. Eventually, wewould like to include DVD-R drives on our computers, to allow us to copy to DVD, rather thansimply VHS tape (Home Division).

I dditi t t d d t i i t t l l t i f i i


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4.0 Market Analysis Summary

Home Division:

There are no production companies in the area which currently focus on video scrapbooks.Several smaller companies "can" and "will" produce this for a high cost to the customer. With theadvertising by both Apple and Sony focused on home digital video production, the awareness ofthis type of production is growing within the community, but as yet, no company has stepped up to

the plate to offer this product. Consumers are becoming more educated about what can be done,but they do not know how to do it themselves.

For several months, EvergreenTV Productions has promoted this concept via word of mouth tosmall businesses, consumers on the street, and educated professionals. All show a keen interestin buying the product.

Tour and Travel Division:Many production facilities exist in the Tampa Bay Area; and all are capable of producing

professional projects. As this is a referral division only, we do not plan to compete regularly forbusiness. Instead, we will build a web of quality prospects by maintaining high productionsstandards, and accepting only those clients who come highly recommended. This is not our mainfocus, but is a tool to generate business and reputation.

B2B Division:

EvergreenTV Productions focuses on the bottom 115 (Nielsen) tv markets. These are themarkets whose station budgets don't easily allow an expense of $20,000+ per year for

programming services. We will offer the affordable alternative.

EvergreenTV Productions conducted a mail-in survey of 113 stations in the bottom 65 markets.The majority of these do subscribe to CONUS, Dr. Dean Edell, MedStar, or Medical Breakthrough.Of the 10 responses received four stations did not subscribe to any news provider but did indicate


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Table: Market Analysis

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5Potential Customers Growth CAGR

Home Division 9% 22,000 23,980 26,138 28,490 31,054 9.00%Tour and Travel Division 4% 756 786 817 850 884 3.99%

B2B Division 1% 45 45 45 45 45 0.00%

Other 0% 0 0 0 0 0 0.00%

Total 8.83% 22,801 24,811 27,000 29,385 31,983 8.83%


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4.2 Target Market Segment Strategy

Home Division:

Strategy for the home division is two-fold. First, we must find the appropriate means tocommunicate our product to potential customers. Because nearly everyone today has the abilityto take photos and has a wide selection of photos at home, we must first narrow down ourcustomer base by appealing to the emotions people attach to their photos. Older persons with

larger families are more inclined to want to share their family histories. Newlyweds want theirfamily and friends to share in their newfound happiness. By emphasizing these traits (nostalgia andeuphoria) we can begin to gain a following for our product. Second, we must find a suitablelocation for our storefront, which enables us to find customers who share these traits. Malls andmovie theaters appeal to "togetherness," shopping together for gifts, weekend outings, brunch/lunch/dinner dates. The right location will give us access to our primary customers, those whowill help us launch the product in the area by word of mouth.


This division's strategy relies entirely on our referral program. Doctors' offices and travelagencies give us a wider demographic schematic, as patients and families of patients are confinedto a waiting room during a visit. Instead of watching afternoon televised programming, doctors willbe able to provide their clients with informative, educational and entertaining programming ascompared to many daytime talk shows.

B2B Division:

Because EvergreenTV Productions utilizes the stories of university students, it is important torecognize the average age of a station's reporters. A previous survey conducted by our companydid confirm our experience, in that most small market tv stations hire only young "cub"reporters, as experienced reporters tend to move onward to larger markets and bigger stations.The quality of our product will match the quality of the station's news Therefore it is essential to


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EvergreenTV Productions, Inc.110 this year, market 98 next year, and market 113 the following year due to population decline in

year two and growth in year three.

4.2.2 Market Needs

Home Division:With the advent of digital editing capabilities on home computer systems, more consumers areaware of the potential of creating video scrapbooks, but most are not familiar enough with the

technology to accomplish a simple video. Apple and Sony are selling large numbers of thesecomputers despite a recent turndown in the computer industry. Digital still cameras are a musthave, with consumers expanding their vocabularies to include "Memory Stick," "Pixels," and"Jpegs." Yet, in the Tampa Bay area, no production companies are actively marketing videoscrapbooks. We can use the above product interest, and the continued success of photo processingcenters, to create a gauge for interest in this product. However, as with any relatively newproduct, we will not know the market's true needs until several quarters of sales.

B2B Division:

A void currently exists in the area of news programming. Larger stations are able to budget tens ofthousands of dollars per year to support their needs. Smaller stations often rely on extending theweather and sports segments, or sitting on credits at the end of cast to "eat up extra time." Thisreduces the newscasts' value, and thus reduces the price of selling advertising as commercials,which is where tv stations make money.

Other small markets may subscribe to one or two programming services, at the expense of hiringquality personnel. These services limit the news directors and producers, because they have to run

whatever story comes down on the satellite link that day. It may have nothing to do with otherstories in a cast, or interest to the local viewing audience.

EvergreenTV Productions allows the stations to pick their own stories and run them when needed.In addition by ordering weekly they can choose from a constantly upgraded catalogue and pick


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EvergreenTV Productions, Inc.The advent of home computers capable of digital editing can certainly be considered a market

trend, and one that is highly influential to our home division. As more consumers know of thetechnology, more interest is created in our product. While large corporations spend millions inadvertising to promote these computers, we can take advantage of this advertising second-hand.The interest is created by the large corporations, and we use like advertising and terminology toincrease interest in our particular product. A second major trend is with photo processingcenters, such as those at Walgreens, offering pictures on CD-ROMS. These centers are alreadytaking pictures to the next level, with the purpose of sharing these memories with family andfriends. The logical next step is to put these pictures together in a creative and professional videoscrapbook, then copy them to VHS tape or DVD.

B2B Division:

One major trend in the television news industry is staffing cut-backs. Newsrooms are using fewerreporters and photographers and replacing them with bought programming. Instead of paying$18,000/year for a reporter and $16,000/year for a photographer, smaller markets are buyingnews programming services at $20,000/year and saving on salary and health care expenses,while increasing the number of stories running per day. On average, a reporter will turn out oneor two stories per day, while CONUS offers the ability to run two or three stories per day.

Another trend focuses on freelancing opportunities for reporters. Many are now working on theirown, producing stories bought by several different companies. As tv begins to reflect the magazineindustry in freelancing opportunities, more and more reporters will make a living working forthemselves. In a long-term analysis, EvergreenTV Productions will be able to utilize thesefreelancers to do specific stories which fit the mission of our company.

A third trend is greater reliance on the Internet for programming. With the advent of TIVO, viewerscan choose what they want to watch when they want to watch it. An even further long-termanalysis could lend EvergreenTV Productions the opportunity to provide news that viewers canaccess specifically without going through their local tv stations. In the short term, local newsstations may soon be able to download news stories directly to their control centers, withoutneeding a tape for playback. By initially locating on the Internet, EvergreenTV Productions isputting itself in the position to take advantage of the increasing opportunities of Internet


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EvergreenTV Productions, Inc.from these photos.


We are limiting our production output in this division to a referral basis only. In general, theproduction company industry is very large, with companies specializing in corporate trainingvideos, tour videos, advertising, etc. They rarely limit their productions to referral only, whichmeans most often they will specialize in one area. To the customer, this means outsourcing toseveral production companies to meet his needs. A corporate president may have to hire twoproduction companies to produce a training video and a travel video.

B2B Division:We are both a marketing service and news provider. Therefore, half of our business deals withinthe marketing industry, promoting students, while the other half deals within the news industry,selling news programming to news stations.

1. Marketing services for students: Industry magazines:For a nominal fee, students seeking employment can post

a want ad, specifying the type of job they are looking for. These magazines havegood responses from tv stations advertising jobs, but have a lower success ratefor students seeking jobs.

Internet websites:For a nominal fee, students may post their resume andinformation on an industry targeted website such as www.tvjobs.com. Thousandsof students and currently employed reporters compete for the same positions, againwith lower success rates.

2. News Programming: Network-based programming:Affiliates belong to network news services which

provide daily programming on hourly feeds. These stories are limited in region andtopic, extremely time-sensitive, and restricted to the affiliation only. NBC affiliates

belong to NBC Newschannel. ABC affiliates belong to NewsOne, etc. Subscription programming:For an annual rate, any affiliate may subscribe to

these programming services. Their downside is in limiting the stories they offer toone specific topic such as healthcare, travel, or politics, rather than offering a wide


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EvergreenTV Productions, Inc.of the Internet. Like travel agents, talent agents are finding their once lucrative positions

threatened by the Internet.2. There are dozens of job search services available, more in the past few years due to the

insurgence of the Internet. Most require an upfront fee of $10-15 per month for resumeposting service, and the privilege of searching for jobs on their website from thosestations which have subscribed to them. They will continue to do well as long as reportersare seeking positions.

Station Services:

1. While there are many production companies, few offer news to tv stations. Mostprogramming services are based in larger markets where their product has taken hold.They offer topic specific news for tv stations nationally, at a high cost. Most generate storiesby one well-known personality and offer only one story possibility per day. They makethe majority of their revenue from mid-to-large markets. They have a strong position in theindustry, and because they are topic specific, do not threaten each other. Internet newson demand, where viewers can watch their favorite station from their home computers, isthe biggest threat.

2. Freelance reporters infrequently sell their stories to stations.

4.3.2 Distributing a Service

Home Division:

Customers are accustomed to going into retail locations to make purchases or place orders. Havinga storefront will provide them with this opportunity. Initially, we will host presentations to explainthe product at various outlets such as retirement villas and apartment clubhouses.

B2B Division:

TV Stations buy directly from the programming source. A sales representative may call or visit a


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EvergreenTV Productions, Inc.B2B Division:

TV stations are prone to purchase news stories based on the bottom line. If one programmingservice becomes too expensive, the station will spin off to another programming service for a fewthousand dollars less. Small market tv stations do not have this option, as most services are tooexpensive for their budgets.

EvergreenTV Productions will offer quality news stories at a very competitive price--in fact, half thecost of most other programming services--to gain access to those smaller markets. In addition,having a variety of news topics makes us a hot choice. Stations do not have to spend thousandsfor only one brand of news, i.e., health stories. They can choose from a wide variety, health,

politics, financial, innovative, unusual, personalities, etc.

4.3.4 Main Competitors

Home Division (Video Scrapbook Production Companies):

Family Tree Videos:

Strengths: A franchise production company geared toward genealogy, but includesproducing video scrapbooks. Good-looking productions revolving around familyinterviews, documentation, and photos.Weaknesses: The formula is too complex to generate quality products in quantity. Manysmaller production companies learn this method first, then give up due to lost time andnot enough revenue.

Independent Companies:

Strengths: Nationwide, dozens of independently owned production companies producevideo scrapbooks. Most are your neighbors, businesses you want to trust.Weaknesses: Quality is inconsistent and depends entirely upon the owner's ability. If you'renot a close friend or family member you may not get the product you really want or


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EvergreenTV Productions, Inc.Weaknesses:Generic writing for travel pieces. Limited to one topic, travel news. Too high a

cost for smaller markets.

Mrs. Fix It:

Strengths:Appealing change of gender, national image, excellent writing and presentation.Weaknesses:Too high a cost for smaller markets, limited to one topic, do-it-yourselfhome/yard/car improvements.

Many other services fall within this category, too many to mention. Some are purely regional and

do not appeal nationally. Most are of high cost to small market stations. None that we've foundoffers a variety of news topics.

5.0 Strategy and Implementation Summary

Home Division:

1. Create a "gotta have it" campaign. Our marketing efforts need to focus on a) introducingour specific brand of video scrapbooks and b) telling our customers why they and theirfriends all need one.

2. Emphasize service and quality. Especially as this is a fairly new product to be launchedinto the market, customers need to know that we will cherish their memories and createa quality video.

B2B Division:

1. Emphasize variety and cost savings. We must differentiate ourselves from the large

programming services by detailing the variety of news stories and affordable pricing.2. Build a relationship with schools and stations. Build long-term relationships with

professors, deans and news directors to continue service and sales annually.3. Focus on key schools and markets. We need to focus on building a client base of schools


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EvergreenTV Productions, Inc.graduating broadcasting students.

5.2 Sales Strategy

Home Division:

1. We need to sell the memories and emotions of these videos, not the product. While weproduce videos, we create and tap into a lifetime of emotions cherished by ourcustomers. Our advertising and marketing need to reflect this concept.

2. We need to understand exactly what our service is, so our customers will alsounderstand. Our customers must feel confident that we value their memories andemotions as much as our own, and will treasure them individually. An order for a video isnot a product order, but a piece of family gold we are holding in safekeeping.

B2B Division:

1. We need to sell both the company and the product. As this is a new venture into anantiquated system, generating sales will require an enthusiastic approach in order to

renovate the tv news programming concept. In-person sales are essential in the primarystages of generating sales. A reputation for service excellence, news variety andaffordable pricing will continue the momentum of sales in the future.

2. We have to sell our service and support to schools nationwide. Gaining the support of deansand professors is a vital element to generating inventory on a yearly basis. By developinga loyal clientele of professors, we ensure continued inventory growth annually.

5.2.1 Sales Forecast

Yearly sales forecasts are shown below and the initial year's monthly forecast is shown in theappendix.


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Table: Sales Forecast

Sales Forecast

Year 1 Year 2 Year 3Unit Sales

Photo Memories 800 2,880 4,800News Story Reels 160 1,000 2,000

Tampa Bay Video 48 50 50

Other Projects 6 12 20

Total Unit Sales 1,014 3,942 6,870


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5.3 Strategic Alliances

Home Division:

Strategic alliances with photographers, photo processing centers and travel agents will be key togenerating sales in the first few quarters. We plan to initiate a co-marketing campaign, bypossibly adding on 30-second commercials at the end of each video, promoting a photographer ortravel agency. These will be tasteful and placed at the end of the tape, but will also co-promote a

like business. In the future, we could sell these spots to like businesses to generate revenue.

Additionally, our alliances with retirement villas will be instrumental from start-up. While thesewill not involve co-promotions, it will be necessary to build a strong relationship so the villa officialswelcome us to their facilities.

B2B Division:We heavily depend upon building a strong alliance with schools to create a substantial inventoryto generate sales. The greater the size of inventory, the greater the variety we have to offer

stations. We need to concentrate on making as many contacts with schools as possible. If wecannot offer students a marketing position, i.e., a substantial time frame in which we markettheir stories and post their resumes, we will not have their interest and it would follow, their storiesto add to our inventory.

After the first year, the inventory will grow at a consistent rate. However, the first year'sinventory size could well determine our company's sales success.


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5.4 Marketing Strategy

Home/Travel Divisions:

1. Build relationships with primary target customers (Market Segmentation section) and likebusinesses, such as photography shops, photography processing centers, and travelagencies.

2. Emphasize service and quality while building a referral basis.

B2B Division:

1. Emphasize variety and affordability.2. Emphasize service while building relationships.3. Focus on schools with tv stations and broadcast communications programs.4. Focus on small market tv stations, bottom 115 Nielsen markets.

5.4.1 Positioning Statement

Home Division:Initially, for people celebrating an event or recognizing a lifetime of memories who would like toshare photos of those memories in a video scrapbook with friends and family, our videos providea special and unique gift opportunity. Unlike standard production companies which produce videoscrapbooks in a random and time-consuming fashion, our videos meet consistently professionalstandards in quality in a timely manner. (See Competitive Comparison section.)

B2B Division:For students about to graduate and seek their first job within the tv news industry, EvergreenTVProductions offers an incredible marketing and resume posting service. Unlike www.tvjobs.com andothers, it offers these services for free, and for a longer period of time (i.e., three months as


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EvergreenTV Productions, Inc.B2B Division:

Our pricing strategy is key to our offering. If we charge too much, or even 3/4 the price of largerprogramming services, we are undercutting our potential orders. The market of small marketstations cannot bear the higher prices offered by larger programming services.

Likewise, by offering a free resume and marketing service to students, we are ensuring continuedinterest in our service in exchange for news stories. We need to be positioned to offer paymentfor these stories a few years down the road. As the popularity of EvergreenTV Productions grows,so will the number of programming services offering similar services.

5.4.3 Promotion Strategy

Home Division:Initially, we will depend upon presentations and business relationships to reach new customers.

1. Retirement villas "social nights:" We have been invited to attend certain nights set asideat retirement villas for residents and family members in which we will present PhotoMemories thru discussion and a brief video presentation.

2. Photographers, photo processing centers, and travel agencies: We will form businessreferral relationships with like businesses to promote the product.

B2B Division:

We depend on direct contact with communications deans and professors as our main way toreach students. That contact will be made to specific schools.

1. Promotional Kits. We are sending colleges, universities and technical schools with tv

stations on campus promotional kits which will include our objectives and student guidelinesfor various topics.

2. Campus Visits and Phone Calls. We are contacting the professors and deans directly,either through campus visits or phone calls, to gain the support needed from deans and


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5.5 Milestones

Part of the business's success will be based on planned tasks and timely completion of those steps.The table below lists steps, timeline and estimated budgets.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department

Build Website 9/7/2000 5/31/2001 $19,000 LW President

Contact 30 Colleges/Universities 11/1/2000 2/28/2001 $20 LW President

Brochures Photeo Memories 3/15/2001 5/15/2001 $220 LW President

Write/Finalize Operations Manual 5/31/2001 12/31/2001 $0 LW President

Store Location 5/31/2001 7/15/2001 $0 LW President

Office Furniture 5/31/2001 7/31/2001 $2,000 LW President

Open Photeo Memories Store #1 5/31/2001 7/15/2001 $2,000 LW President

Additional Office Equipment 7/15/2001 8/15/2001 $2,000 LW PresidentHire 1st Employee 7/15/2001 8/15/2001 $30 LW President

Produce 1 Hr Tampa Bay Video 6/1/2001 9/15/2001 $5 LW President

Sell Tampa Bay Video to Dr'sOffices

9/15/2001 12/31/2001 $100 LW President

Build Inventory to 15 News Stories 9/1/2001 12/15/2001 $500 LW President

Build Inventory to 50 News Stories 12/15/2001 3/31/2002 $500 LW PresidentObtain 30 Sales to TV Stations 12/15/2001 4/1/2002 $1,000 LW/Sales Rp B2B Sales

Hire Employees per PersonnelForecast

10/1/2001 12/31/2001 $50 Store Mgr Home Div.

Name me 12/1/2001 6/30/2002 $6,000 LW President

Totals $33,425

6.0 Management Summary

EvergreenTV Productions is owned and operated by its founders Louanne Walters and Bobby Gene


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EvergreenTV Productions, Inc.The following chart outlines the anticipated organizational set-up for the first three to five years

of EvergreenTV Productions, Inc.

6.2 Management Team

Louanne Walters, president: 33 years old, extensive experience in the radio and tv news industries.Formerly a tv news producer, reporter and anchor. Degree in broadcast communications, sevenyears with three NBC affiliates (KPOM, Ft. Smith, Arkansas - KRIS, Corpus Christ, Texas -

KWQC, Davenport, Iowa) and one year as video programmer with Royal Caribbean International.Extensive public relations background as anchor and cruise director with Royal CaribbeanInternational. Strong writing skills, strong story development and news sense. Attending courses atSmall Business Development Center USF. Louanne also has strong sales skills, and is formerly aToyota new car product specialist, and Voice Stream territory representative.

Bobby G. Walters, vice-president: 61 years old, extensive management background during 33years with USAF. Degree in business and management. Twelve years as manager with local Wal-Mart stores.

6.3 Management Team Gaps

We believe we have strong leadership for developing the concept behind EvergreenTVProductions. At present, our weakest area is in accounting. We are currently taking an accountingcourse produced by "Great Courses on Tape," focusing on finance and accounting. Additionally,we have hired Jim Wessman, CPA to advise and aid us in the development of EvergreenTVProductions. Jim is a qualified management counselor, and QuickBooks advisor.

We also need to hire division managers with a well-rounded management background, includinghuman resources, accounting, benchmarking and goal-setting abilities.


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Table: PersonnelPersonnel Plan

Year 1 Year 2 Year 3Production Personnel

Photo Editor $13,500 $18,500 $19,000

Photo Editor $12,000 $18,500 $19,000

Photo Editor $6,000 $18,500 $19,000

Photo Editor (2) $1,500 $18,500 $19,000

Additional Employees (3 stores) $0 $92,500 $100,000

Additional Employees (5 stores) $0 $0 $209,000

Subtotal $33,000 $166,500 $385,000

Sales and Marketing Personnel

Marketing Manager (President) $0 $41,400 $46,000

News Sales Representative $4,998 $22,000 $24,000

News Sales Representative Commission $3,000 $15,000 $15,000

Other $0 $0 $0

Subtotal $7,998 $78,400 $85,000

General and Administrative Personnel

Store Manager $17,600 $20,000 $20,000

Store Manager Commission $4,200 $5,000 $5,000Store Manager (2) $3,200 $20,000 $20,000

Store Manager Commission (2) $800 $5,000 $5,000

Store Mgr/Commission (3 & 5 stores) $0 $25,000 $75,000

Subtotal $25,800 $75,000 $125,000

Other Personnel

President $37,500 $51,750 $69,000

Operations Manager $0 $46,000 $63,250

Home Division Manager $0 $0 $40,000B2B Division Manager $0 $0 $45,000

Other $0 $0 $0

Subtotal $37,500 $97,750 $217,250

Total People 8 16 26

T t l P ll $104 298 $417 650 $812 250


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7.0 Financial Plan

The most important element in the financial plan is the critical need for additional capital to assistin business operations through the remaining start-up process, and to maintain a positive cashbalance for the first fiscal quarters. We do not anticipate any changes to our financial planthrough accounts receivables or inventory, as our company operates upon the "payment uponreceipt" principal for all goods, and our inventory cycle does not meet the standard criteria.

Moving from a home office to a storefront with employees, introduces greater liabilities. Duringthe past seven month start-up process, we have largely committed to EvergreenTV Productionsthrough personal savings, cashed stocks, personal credit lines and personal long-term loan options.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following

table. The key underlying assumptions are:

We assume access to equity capital and financing sufficient to follow and maintain our financialplan as shown in the tables. We anticipate our financing to hold higher long-term interest thanour current loan against stock. We assume that as our company grows, we will be able to utilize alarger credit line, decreasing our expenses in cash. Likewise, our short-term credit line will beavailable with a lower short-term interest rate, making more cash available.

We assume opening and promoting three stores within the Tampa Bay area before reachingsaturation. Likewise, we assume relatively quick initial growth within the Home Division, followingour plan of two stores open within the first year, and 10 stores statewide within five years.

We assume many tv markets are, or will become, Internet proficient. We assume most collegesd i iti ill b I t t fi i t W l i iti l th ithi th


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EvergreenTV Productions, Inc.monthly to avoid keeping a large inventory of tapes.

Our Gross Margin increases with increased sales, but as we have a very low direct cost of sales,this number will only increase fractionally compared to sales.

Sales and Operating Expenses are our closest measurements in this forecast. While salesincrease dramatically, operating expenses increase with new stores, additional employees andtaxes. However, by maximizing the number of employees within each store, we are alsomaximizing our location and limiting further expenses that additional storefronts would incur. Weare also able to save drastically on advertising expenses, which would naturally increase with

each new location.


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7.3 Break-even Analysis

We assume running costs which include rent, utilities, office expenses, and an average of travel,advertising and miscellaneous costs. Miscellaneous costs are equal to quarterly costs such asbusiness cards, brochures, bulk tape supplies and occasional equipment rental. Payroll increasesevery other month as we add new employees.

Table: Break-even AnalysisBreak-even Analysis

Monthly Units Break-even 51

Monthly Revenue Break-even $10,303

Assumptions:

Average Per-Unit Revenue $203.45

Average Per-Unit Variable Cost $7.06Estimated Monthly Fixed Cost $9,946


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7.4 Projected Profit and Loss

Profit and Loss projects look very good, with the usual start-up loss limited to the first two months.The monthly projections for the first year are included in the appendix.

Table: Profit and Loss

Pro Forma Profit and Loss Year 1 Year 2 Year 3

Sales $206,300 $814,116 $1,421,860

Direct Cost of Sales $7,155 $32,770 $59,450

Production Payroll $33,000 $166,500 $385,000

Other $0 $0 $0

Total Cost of Sales $40,155 $199,270 $444,450

Gross Margin $166,145 $614,846 $977,410

Gross Margin % 80.54% 75.52% 68.74%

Operating Expenses

Sales and Marketing Expenses

Sales and Marketing Payroll $7,998 $78,400 $85,000

Advertising/Promotion $20,000 $20,000 $30,000

Travel $6,500 $10,000 $8,000

Miscellaneous $9,500 $7,500 $10,000

Total Sales and Marketing Expenses $43,998 $115,900 $133,000

Sales and Marketing % 21.33% 14.24% 9.35%

General and Administrative Expenses

General and Administrative Payroll $25,800 $75,000 $125,000

Sales and Marketing and Other Expenses $0 $0 $0Depreciation $0 $0 $0

Leased Equipment $0 $0 $0

Utilities $1,260 $3,600 $6,000Insurance $1 040 $2 880 $4 800


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7.5 Projected Cash Flow

Cash flow projections are good, as shown in the annual table below, and the monthly table in theappendix. There are only two months of negative cash flow the foreseen the first year, and the allimportant cash balance shows steady increases.


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Table: Cash FlowPro Forma Cash Flow

Year 1 Year 2 Year 3Cash Received

Cash from Operations

Cash Sales $206,300 $814,116 $1,421,860

Subtotal Cash from Operations $206,300 $814,116 $1,421,860

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0New Current Borrowing $5,000 $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 $211,300 $814,116 $1,421,860

Expenditures Year 1 Year 2 Year 3

Expenditures from OperationsCash Spending $104,298 $417,650 $812,250

Bill Payments $59,036 $189,141 $264,923

Subtotal Spent on Operations $163,334 $606,791 $1,077,173

Additional Cash Spent

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

Principal Repayment of Current Borrowing $2,830 $2,170 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0Subtotal Cash Spent $166,164 $608,961 $1,077,173

Net Cash Flow $45,136 $205,155 $344,687

C h B l $59 236 $264 391 $609 079


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7.6 Projected Balance Sheet

The balance sheet below and in the appendix show steady increase in net worth over the life of theplan.

Table: Balance Sheet

Pro Forma Balance Sheet Year 1 Year 2 Year 3

Assets

Current Assets

Cash $59,236 $264,391 $609,079

Inventory $1,480 $19,672 $14,136

Other Current Assets $500 $500 $500

Total Current Assets $61,216 $284,563 $623,715

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $61,216 $284,563 $623,715

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $9,960 $16,046 $22,287

Current Borrowing $2,170 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $12,130 $16,046 $22,287

Long-term Liabilities $0 $0 $0

Total Liabilities $12,130 $16,046 $22,287

Paid in Capital $15 000 $15 000 $15 000


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7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on theStandard Industrial Classification (SIC) code 7812, Motion Picture and Video Production, are shownfor comparison.

Table: Ratios

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth n.a. 294.63% 74.65% 14.20%

Percent of Total Assets

Inventory 2.42% 6.91% 2.27% 3.40%

Other Current Assets 0.82% 0.18% 0.08% 46.90%

Total Current Assets 100.00% 100.00% 100.00% 68.40%Long-term Assets 0.00% 0.00% 0.00% 31.60%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 19.82% 5.64% 3.57% 41.60%

Long-term Liabilities 0.00% 0.00% 0.00% 17.20%

Total Liabilities 19.82% 5.64% 3.57% 58.80%Net Worth 80.18% 94.36% 96.43% 41.20%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 80.54% 75.52% 68.74% 0.00%

Selling, General & Administrative Expenses 63.71% 46.92% 43.99% 74.80%

Advertising Expenses 9.69% 2.46% 2.11% 1.60%

Profit Before Interest and Taxes 22.68% 35.96% 31.39% 1.60%

Main Ratios

Current 5.05 17.73 27.98 1.67

Quick 4.92 16.51 27.35 1.12

T t l D bt t T t l A t 19 82% 5 64% 3 57% 58 80%


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Appendix

Page 1

Table: Sales Forecast

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

Unit Sales

Photo Memories 0% 15 20 40 50 60 60 70 80 95 90 100 120

News Story Reels 0% 0 0 0 0 0 0 4 10 16 25 40 65

Tampa Bay Video 0% 0 0 0 2 3 5 12 2 2 18 2 2

Other Projects 0% 1 0 1 0 1 0 1 0 1 0 1 0

Total Unit Sales 16 20 41 52 64 65 87 92 114 133 143 187

Unit Prices Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Photo Memories $200.00 $200.00 $200.00 $200.00 $250.00 $250.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00

News Story Reels $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00

Tampa Bay Video $0.00 $0.00 $0.00 $0.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00 $50.00

Other Projects $1,000.00 $0.00 $1,000.00 $0.00 $1,000.00 $0.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00

Sales

Photo Memories $3,000 $4,000 $8,000 $10,000 $15,000 $15,000 $14,000 $16,000 $19,000 $18,000 $20,000 $24,000

News Story Reels $0 $0 $0 $0 $0 $0 $800 $2,000 $3,200 $5,000 $8,000 $13,000

Tampa Bay Video $0 $0 $0 $0 $150 $250 $600 $100 $100 $900 $100 $100

Other Projects $1,000 $0 $1,000 $0 $1,000 $0 $1,000 $0 $1,000 $0 $1,000 $0

Total Sales $4,000 $4,000 $9,000 $10,000 $16,150 $15,250 $16,400 $18,100 $23,300 $23,900 $29,100 $37,100

Direct Unit Costs Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Photo Memories 0.00% $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00

News Story Reels 0.00% $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00 $15.00

Tampa Bay Video 0.00% $0.00 $0.00 $0.00 $0.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00

Other Projects 0.00% $75.00 $0.00 $50.00 $0.00 $500.00 $0.00 $500.00 $0.00 $500.00 $0.00 $500.00 $0.00

Direct Cost of Sales

Photo Memories $45 $60 $120 $150 $180 $180 $210 $240 $285 $270 $300 $360

News Story Reels $0 $0 $0 $0 $0 $0 $60 $150 $240 $375 $600 $975

Tampa Bay Video $0 $0 $0 $0 $15 $25 $60 $10 $10 $90 $10 $10

Other Projects $75 $0 $50 $0 $500 $0 $500 $0 $500 $0 $500 $0

Subtotal Direct Cost of Sales $120 $60 $170 $150 $695 $205 $830 $400 $1,035 $735 $1,410 $1,345


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Appendix

Page 2

Table: Personnel

Personnel Plan


Production Personnel

Photo Editor $0 $0 $0 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Photo Editor $0 $0 $0 $0 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Photo Editor $0 $0 $0 $0 $0 $0 $0 $0 $1,500 $1,500 $1,500 $1,500

Photo Editor (2) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,500

Additional Employees (3 stores) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Additional Employees (5 stores) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal $0 $0 $0 $1,500 $3,000 $3,000 $3,000 $3,000 $4,500 $4,500 $4,500 $6,000

Sales and Marketing Personnel

Marketing Manager (President) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

News Sales Representative $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,666 $1,666 $1,666

News Sales Representative Commission $0 $0 $0 $0 $0 $0 $0 $0 $0 $500 $1,000 $1,500

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

Subtotal $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,166 $2,666 $3,166

General and Administrative Personnel

Store Manager $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Store Manager Commission $0 $300 $300 $400 $400 $400 $400 $400 $400 $400 $400 $400

Store Manager (2) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,600 $1,600

Store Manager Commission (2) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $400 $400

Store Mgr/Commission (3 & 5 stores) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal $0 $1,900 $1,900 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $4,000 $4,000

Other Personnel

President $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $3,500 $3,500 $4,000 $4,000 $4,000

Operations Manager $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Home Division Manager $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

B2B Division Manager $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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

Subtotal $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $3,500 $3,500 $4,000 $4,000 $4,000

Total People 1 2 2 3 4 4 4 4 5 6 6 8

Total Payroll $2,500 $4,400 $4,400 $6,000 $7,500 $7,500 $8,500 $8,500 $10,000 $12,666 $15,166 $17,166


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Appendix

Page 3

Table: General Assumptions

General Assumptions


Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00% 13.00%

Long-term Interest Rate 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%

Tax Rate 30.00% 25.00% 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 0


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Appendix

Page 4

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $4,000 $4,000 $9,000 $10,000 $16,150 $15,250 $16,400 $18,100 $23,300 $23,900 $29,100 $37,100

Direct Cost of Sales $120 $60 $170 $150 $695 $205 $830 $400 $1,035 $735 $1,410 $1,345

Production Payroll $0 $0 $0 $1,500 $3,000 $3,000 $3,000 $3,000 $4,500 $4,500 $4,500 $6,000

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

Total Cost of Sales $120 $60 $170 $1,650 $3,695 $3,205 $3,830 $3,400 $5,535 $5,235 $5,910 $7,345

Gross Margin $3,880 $3,940 $8,830 $8,350 $12,455 $12,045 $12,570 $14,700 $17,765 $18,665 $23,190 $29,755

Gross Margin % 97.00% 98.50% 98.11% 83.50% 77.12% 78.98% 76.65% 81.22% 76.24% 78.10% 79.69% 80.20%

Operating Expenses

Sales and Marketing Expenses

Sales and Marketing Payroll $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,166 $2,666 $3,166

Advertising/Promotion $2,000 $1,500 $1,500 $2,000 $2,000 $2,000 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Travel $0 $0 $0 $0 $0 $750 $750 $750 $750 $1,500 $1,000 $1,000

Miscellaneous $500 $500 $500 $500 $500 $500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,500

Total Sales and Marketing

Expenses

$2,500 $2,000 $2,000 $2,500 $2,500 $3,250 $3,250 $3,250 $3,250 $6,166 $6,166 $7,166

Sales and Marketing % 62.50% 50.00% 22.22% 25.00% 15.48% 21.31% 19.82% 17.96% 13.95% 25.80% 21.19% 19.32%

General and Administrative Expenses

General and Administrative Payroll $0 $1,900 $1,900 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $4,000 $4,000

Sales and Marketing and OtherExpenses

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Utilities $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $160

Insurance $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $80 $160

Rent $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $1,500

Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other General and Administrative

Expenses

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total General and AdministrativeExpenses

$930 $2,830 $2,830 $2,930 $2,930 $2,930 $2,930 $2,930 $2,930 $2,930 $4,930 $5,820

General and Administrative % 23.25% 70.75% 31.44% 29.30% 18.14% 19.21% 17.87% 16.19% 12.58% 12.26% 16.94% 15.69%

Other Expenses:

Other Payroll $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $3,500 $3,500 $4,000 $4,000 $4,000

Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Contract/Consultants $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Other Expenses $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $3,500 $3,500 $3,500 $4,000 $4,000 $4,000

Other % 62.50% 62.50% 27.78% 25.00% 15.48% 16.39% 21.34% 19.34% 15.02% 16.74% 13.75% 10.78%

Total Operating Expenses $5,930 $7,330 $7,330 $7,930 $7,930 $8,680 $9,680 $9,680 $9,680 $13,096 $15,096 $16,986


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Appendix

Page 5

Profit Before Interest and Taxes ($2,050) ($3,390) $1,500 $420 $4,525 $3,365 $2,890 $5,020 $8,085 $5,569 $8,094 $12,769

EBITDA ($2,050) ($3,390) $1,500 $420 $4,525 $3,365 $2,890 $5,020 $8,085 $5,569 $8,094 $12,769

Interest Expense $54 $44 $42 $40 $38 $36 $34 $32 $30 $28 $26 $24

Taxes Incurred ($631) ($858) $365 $95 $1,122 $832 $714 $1,247 $2,014 $1,385 $2,017 $3,186

Net Profit ($1,473) ($2,575) $1,094 $285 $3,366 $2,497 $2,142 $3,741 $6,042 $4,156 $6,051 $9,559

Net Profit/Sales -36.82% -64.38% 12.15% 2.85% 20.84% 16.37% 13.06% 20.67% 25.93% 17.39% 20.80% 25.77%


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Appendix

Page 6

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $4,000 $4,000 $9,000 $10,000 $16,150 $15,250 $16,400 $18,100 $23,300 $23,900 $29,100 $37,100

Subtotal Cash from Operations $4,000 $4,000 $9,000 $10,000 $16,150 $15,250 $16,400 $18,100 $23,300 $23,900 $29,100 $37,100

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 $5,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

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

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

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

Subtotal Cash Received $9,000 $4,000 $9,000 $10,000 $16,150 $15,250 $16,400 $18,100 $23,300 $23,900 $29,100 $37,100

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 $2,500 $4,400 $4,400 $6,000 $7,500 $7,500 $8,500 $8,500 $10,000 $12,666 $15,166 $17,166

Bill Payments $528 $3,795 $2,156 $3,344 $3,632 $5,571 $5,082 $6,050 $5,539 $7,866 $7,366 $8,106

Subtotal Spent on Operations $3,028 $8,195 $6,556 $9,344 $11,132 $13,071 $13,582 $14,550 $15,539 $20,532 $22,532 $25,272

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 $980 $185 $185 $185 $185 $185 $185 $185 $185 $185 $185

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

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

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

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

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

Subtotal Cash Spent $3,028 $9,175 $6,741 $9,529 $11,317 $13,256 $13,767 $14,735 $15,724 $20,717 $22,717 $25,457

Net Cash Flow $5,972 ($5,175) $2,259 $471 $4,833 $1,994 $2,633 $3,365 $7,576 $3,183 $6,383 $11,643

Cash Balance $20,072 $14,897 $17,156 $17,627 $22,460 $24,453 $27,086 $30,451 $38,027 $41,210 $47,593 $59,236


46/46

Appendix

Page 7

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $14,100 $20,072 $14,897 $17,156 $17,627 $22,460 $24,453 $27,086 $30,451 $38,027 $41,210 $47,593 $59,236

Inventory $0 $880 $820 $650 $500 $805 $600 $913 $513 $1,139 $1,404 $1,551 $1,480

Other Current Assets $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500

Total Current Assets $14,600 $21,452 $16,217 $18,306 $18,627 $23,765 $25,553 $28,499 $31,464 $39,665 $43,113 $49,644 $61,216

Long-term Assets

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

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Assets $14,600 $21,452 $16,217 $18,306 $18,627 $23,765 $25,553 $28,499 $31,464 $39,665 $43,113 $49,644 $61,216

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 $400 $3,724 $2,045 $3,225 $3,446 $5,403 $4,880 $5,868 $5,277 $7,621 $7,098 $7,762 $9,960Current Borrowing $0 $5,000 $4,020 $3,835 $3,650 $3,465 $3,280 $3,095 $2,910 $2,725 $2,540 $2,355 $2,170

Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Current Liabilities $400 $8,724 $6,065 $7,060 $7,096 $8,868 $8,160 $8,963 $8,187 $10,346 $9,638 $10,117 $12,130

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Liabilities $400 $8,724 $6,065 $7,060 $7,096 $8,868 $8,160 $8,963 $8,187 $10,346 $9,638 $10,117 $12,130

Paid-in Capital $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000

Retained Earnings ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800) ($800)

Earnings $0 ($1,473) ($4,048) ($2,954) ($2,669) $697 $3,194 $5,336 $9,078 $15,119 $19,275 $25,327 $34,886

Total Capital $14,200 $12,727 $10,152 $11,246 $11,531 $14,897 $17,394 $19,536 $23,278 $29,319 $33,475 $39,527 $49,086

Total Liabilities and Capital $14,600 $21,452 $16,217 $18,306 $18,627 $23,765 $25,553 $28,499 $31,464 $39,665 $43,113 $49,644 $61,216

Net Worth $14,200 $12,727 $10,152 $11,246 $11,531 $14,897 $17,394 $19,536 $23,278 $29,319 $33,475 $39,527 $49,086

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