December 2001

This sample business plan has been made available to users of Business Plan Pro, business planning software published by Palo Alto Software. Names, locations and numbers may have been changed, and substantial portions of text may have been omitted from the original plan to preserve confidentiality and proprietary information.

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This is a business plan. It does not imply an offering of securities.

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Company Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 Company Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.2 Start-up Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3.0 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4.0 Market Analysis Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.1 Market Segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

5.0 Strategy and Implementation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.1 Competitive Edge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.2 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.2.1 Pricing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.3 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.3.1 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

6.0 Management Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.1 Personnel Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

7.0 Financial Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97.2 Projected Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.3 Projected Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117.4 Projected Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137.5 Business Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Table of Contents

1.0 Executive Summary

The 2002-2003 season will be a great one for women looking for distinctive outdoor clothing online. Liquid Culture will eliminate the middle man and offer creative outdoor clothing that is both functional and beautiful. The savings are passed on to our customers who will be paying a fraction of what they normally do for current retreated fashion in stores.

Liquid Culture's 2002-2003 line consists of the best fabric, designs and styling on the market. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, have fifteen years of experience between them in the outdoor garment industry. Maggie has been a senior clothing designer for Manic Woman Clothing for the past seven years. Larry has been the website administrator for South Face the past eight years.

Another strength of Liquid Culture is that it will not maintain any clothing inventory. Liquid Culture has contracted with Magic Clothing Company, located in Los Angeles, California, to produce and ship all Liquid Culture clothing. Our design team will work closely with the Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand.

1.1 Mission

Liquid Culture's mission is to present consumers with designs, styling and clothes that energizes any outdoor activity. Whether it be snowboarding, running along the beach, or drifting down a river, Liquid Culture has comfortable, durable clothing that will look and feel wonderful.

1.2 Keys to Success

Accessible website that is entertaining to surf. Like a trip to your favorite store where you always find something new that you want.

Establishing a strong advertising campaign in a traditional media vehicle; i.e. magazines.

Excellent vendor relationship that will facilitate quality manufacturing of Liquid Culture's clothing and quick shipment of orders.

Acquiring an excellent design staff.

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$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

2002 2003 2004

Sales

Gross Margin

Net Profit

Highlights (Planned)

2.0 Company Summary

Liquid Culture will offer creative women's outdoor clothing, online, that is both functional and beautiful. Larry Wilson and Maggie Granger, co-owners of Liquid Culture, will create a cost-effective operation that will eliminate the cost of inventory by having a third-party, Magic Clothing Company, handle all manufacturing and shipping of clothing to the customer. Liquid Culture will process the order and collect the payment online. The order will then be sent to Magic Clothing Company to be filled and shipped. Liquid Culture will focus on clothing design and marketing of its products.

2.1 Company Ownership

Liquid Culture is owned by Larry Wilson and Maggie Granger.

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2.2 Start-up Summary

Liquid Culture's start-up costs consists mostly of design and marketing. Liquid Culture has $260,000 in investments and $200,000 in a short-term loan.

Table: Start-up

Start-up

Requirements

Start-up ExpensesLegal $1,000Stationery etc. $500Brochures $0Consultants $5,000Insurance $0Rent $2,000Leased Office Equipment $10,000Computer Equipment/Software $30,000Website $10,000Other $0Total Start-up Expense $58,500

Start-up Assets NeededCash Balance on Starting Date $401,500Other Short-term Assets $0Total Short-term Assets $401,500

Long-term Assets $0Total Assets $401,500Total Requirements $460,000

Funding

InvestmentInvestor 1 $130,000Investor 2 $130,000Other $0Total Investment $260,000

Short-term LiabilitiesAccounts Payable $0Current Borrowing $0Other Short-term Liabilities $0Subtotal Short-term Liabilities $0

Long-term Liabilities $200,000Total Liabilities $200,000

Loss at Start-up ($58,500)Total Capital $201,500Total Capital and Liabilities $401,500

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3.0 Services

Liquid Culture will sell, women's outdoor clothing online. We will offer outdoor clothing for almost every type of active use. We will focus on the seasonal clothing demands of our customers including the following:

Fleece outerwear. Rain gear, waterproof breathables, as well as coated nylon. Synthetic clothing for outdoor activities. Hats. Shorts. Pants. Shirts.

4.0 Market Analysis Summary

In the past 15 years, women's outdoor wear has grown into a billion dollar niche in the clothing industry. The popularity of the Internet has launched a number of online stores for women's outdoor wear but no company is exclusively selling their products online. There are a number of reasons for this but the strongest is that the concept is new and untested. Will customers buy something that they wear that can only be seen online? We believe they will, if the process is fun and the products are great and cheap.

The key is marketing our target customers in the traditional advertising medium for fashion, i.e. women fitness magazines.

The ads will focused on the eliminating the middle man in your clothing budget and stepping up to the distinctive style of Liquid Culture. The company logo will also be an important marketing tool in bringing customers to our website.

4.1 Market Segmentation

Liquid Culture will be focusing on two distinct groups of women that purchase outdoor clothing:

Women 17-25 years of age: Youth drives the market so this is the important group to attract to the website. They have less money than the older group so we must give them what they want for less. The key is to have inexpensive selections in each clothing group that have the popular cut. The company's logo attractiveness to this group can not be stressed strongly enough. The initial small purchases will grow larger over time.

Women 26-40 years of age: They are the core group that will drive Liquid Culture's success. This target group is responsible for the growth of outdoor women's wear. They will be harder to pull into the website. Once there, the key will be promoting the quality, attractiveness and savings. In addition, we will have to assure that the purchase will fit the way the customer wants it to. It will be crucial that the return policy is hassle-free and speedy.

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Table: Market Analysis

Market AnalysisPotential Customers Growth 2002 2003 2004 2005 2006 CAGRWomen Ages 16-25 20% 6,000,000 7,200,000 8,640,000 10,368,000 12,441,600 20.00%Women Ages 26-40 15% 5,000,000 5,750,000 6,612,500 7,604,375 8,745,031 15.00%Other 0% 0 0 0 0 0 0.00%Total 17.81% 11,000,000 12,950,000 15,252,500 17,972,375 21,186,631 17.81%

Women Ages 16-25

Women Ages 26-40

Other

Market Analysis (Pie)

5.0 Strategy and Implementation Summary

Liquid Culture will win market share in the women's outdoor clothing niche by aggressively pursuing visibility with its target customers.

5.1 Competitive Edge

Liquid Culture's competitive edge is its focus on the process than on product. The website is just the endpoint of an entire marketing program to drive customers' interest in Liquid Culture. Though we have confidence in the quality and attractiveness of our products, we know that building the road to the website is our most important job.

Larry Wilson's experience with South Face is pivotal to the success of Liquid Culture's website. South Face's website averaged five million hits a year and is considered one of the most accessible and attractive websites in the clothing industry. His experience is invaluable in assuring customers' satisfaction with the shopping experience online.

Larry will introduce a new clothing measurement feature that is fun to use and will reduce customers confusion on how the clothing will fit. This will increase customer satisfaction and reduce returns.

Maggie Granger will be in charge of the clothing design team. As senior clothing designer for Manic Woman Clothing, she watched the Manic Woman's sales grow by 20% for the past five years. Her clothing designs have been praised in the industry and have spawned many imitators. With Liquid Culture, Maggie is ready to change how quality women's outdoor

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clothing is sold.

Liquid Culture's agreement with Magic Clothing Company is another strong competitive advantage. Our design team will work closely with the Magic's Indonesian-based manufacturing facilities. The Magic Clothing Company will maintain the inventory and will produce sufficient product to meet the planned demand. This will keep production costs low for products and put a cap on Liquid Culture's overhead.

5.2 Marketing Strategy

Liquid Culture's marketing strategy is a simple one. In women's fitness magazines like Self, Shape and Strive, Liquid Culture will introduce customers to their products and website. We will also advertise in CosmoGirl and Ellegirl magazines.

For the first two months, Liquid Culture will offer 10% off for all purchases under $100 and 15% off all purchases over $100. We will offer the same discount strategy three more times during the year when new seasonal clothing is introduced.

5.2.1 Pricing Strategy

Liquid Culture's pricing strategy is to pass on most of the store mark-up to the consumer in reduced price for clothing. This advantage has no negative impact on our sales profit and will also absorb some of the initial cost of offering discounts during our first three months of operation.

5.3 Sales Strategy

Liquid Culture will launch a $245,000 ad campaign targeted at our core customer groups. The focus of the ads will be to "keep the money you give to the middleman" and use it to get outdoors and enjoy life. Liquid Culture's attractive logo will be heavily displayed in these ads. We estimate it will take most of the year to build our sales to the point where we begin to show a profit.

Liquid Culture will offer discounts at various times of the year to even out seasonality and build initial awareness of the website.

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5.3.1 Sales Forecast

We expect sales to increase at a steady rate for the first year. It will begin slow as we open, but will quickly pick up as our customer base increases. We estimate that we will begin to show a profit in November. Liquid Culture will see an increase of 4% for the year 2002 and 2003. We feel that we can accomplish this steady goal and maintain this amount of sales.

Table: Sales Forecast (Planned)

Sales ForecastSales 2002 2003 2004Clothing $2,170,000 $3,000,000 $4,300,000Other $0 $0 $0Total Sales $2,170,000 $3,000,000 $4,300,000

Direct Cost of Sales 2002 2003 2004Clothing $1,249,000 $1,800,000 $2,580,000Other $0 $0 $0Subtotal Direct Cost of Sales $1,249,000 $1,800,000 $2,580,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Clothing

Other

Sales Monthly (Planned)

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6.0 Management Summary

Larry Wilson will manage the marketing team, as well as the development and administration of Liquid Culture's website. Maggie Granger will be in charge of the clothing design team. She will also manage the production of the designs by Magic Clothing Company.

6.1 Personnel Plan

Besides Larry and Maggie, Liquid Culture will have a staff of eight:

Three member clothing design team. Web administrator. Two member marketing team. Office manager. Accountant.

Table: Personnel (Planned)

Personnel Plan2002 2003 2004

Marketing/Website Director $84,000 $90,000 $95,000Design Director $84,000 $90,000 $95,000Designers $144,000 $156,000 $166,000Web Administrator $48,000 $52,000 $56,000Office Manager $36,000 $39,000 $42,000Marketing Staff $96,000 $104,000 $112,000Accountant $39,600 $44,000 $48,000Other $0 $0 $0Total Payroll $531,600 $575,000 $614,000

Total People 8 8 8Payroll Burden $79,740 $86,250 $92,100Total Payroll Expenditures $611,340 $661,250 $706,100

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7.0 Financial Plan

The following is the financial plan for Liquid Culture.

7.1 Break-even Analysis

Our break-even analysis is based on running costs, the costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Between payroll, rent, utilities, and marketing costs, we think $60,000 is a good estimate of fixed costs. The break-even amount for monthly sales is $150,000.

Table: Break-even Analysis

Break-even Analysis:Monthly Units Break-even 1,000Monthly Sales Break-even $150,000

Assumptions:Average Per-Unit Revenue $150.00Average Per-Unit Variable Cost

$90.00

Estimated Monthly Fixed Cost $60,000

($60,000)

($40,000)

($20,000)

$0

$20,000

$40,000

$60,000

$80,000

$0 $60,000 $120,000 $180,000 $240,000 $300,000

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

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7.2 Projected Profit and Loss

The following table and chart are the projected profit and loss for three years.

Table: Profit and Loss (Planned)

Pro Forma Profit and Loss2002 2003 2004

Sales $2,170,000 $3,000,000 $4,300,000Direct Cost of Sales $1,249,000 $1,800,000 $2,580,000Other Production Expenses $0 $0 $0

------------ ------------ ------------Total Cost of Sales $1,249,000 $1,800,000 $2,580,000Gross Margin $921,000 $1,200,000 $1,720,000Gross Margin % 42.44% 40.00% 40.00%Operating Expenses: Advertising/Promotion $245,000 $300,000 $400,000Travel $0 $0 $0Miscellaneous $0 $0 $0Payroll Expense $531,600 $575,000 $614,000Payroll Burden $79,740 $86,250 $92,100Depreciation $0 $0 $0Leased Equipment $0 $0 $0Utilities $2,400 $2,400 $2,400Insurance $0 $0 $0Rent $24,000 $24,000 $24,000Contract/Consultants $20,000 $40,000 $40,000

------------ ------------ ------------Total Operating Expenses $902,740 $1,027,650 $1,172,500Profit Before Interest and Taxes $18,260 $172,350 $547,500Interest Expense Short-term $0 $0 $0Interest Expense Long-term $17,574 $13,281 $8,801Taxes Incurred $206 $47,721 $161,610Extraordinary Items $0 $0 $0Net Profit $481 $111,349 $377,089Net Profit/Sales 0.02% 3.71% 8.77%

($60,000)

($40,000)

($20,000)

$0

$20,000

$40,000

$60,000

$80,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profit Monthly (Planned)

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7.3 Projected Cash Flow

The following table and chart are the projected cash flow for three years.

Table: Cash Flow (Planned)

Pro Forma Cash Flow 2002 2003 2004

Cash ReceivedCash from Operations: Cash Sales $2,170,000 $3,000,000 $4,300,000From Receivables $0 $0 $0 Subtotal Cash from Operations $2,170,000 $3,000,000 $4,300,000

Additional Cash ReceivedExtraordinary Items $0 $0 $0Sales Tax, VAT, HST/GST Received $0 $0 $0New Current Borrowing $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0New Long-term Liabilities $0 $0 $0Sales of other Short-term Assets $0 $0 $0Sales of Long-term Assets $0 $0 $0New Investment Received $0 $0 $0 Subtotal Cash Received $2,170,000 $3,000,000 $4,300,000

Expenditures 2002 2003 2004Expenditures from Operations:Cash Spent on Costs and Expenses $155,818 $222,740 $321,681Wages, Salaries, Payroll Taxes, etc. $611,340 $661,250 $706,100Payment of Accounts Payable $1,156,881 $1,899,230 $2,739,255 Subtotal Spent on Operations $1,924,039 $2,783,220 $3,767,036

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $0 $0Principal Repayment of Current Borrowing $0 $0 $0Other Liabilities Principal Repayment $0 $0 $0Long-term Liabilities Principal Repayment $44,796 $44,796 $44,796Purchase Other Short-term Assets $0 $0 $0Purchase Long-term Assets $0 $0 $0Dividends $0 $0 $0 Adjustment for Assets Purchased on Credit $0 $0 $0 Subtotal Cash Spent $1,968,835 $2,828,016 $3,811,832

Net Cash Flow $201,165 $171,984 $488,168Cash Balance $602,665 $774,649 $1,262,818

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($100,000)

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Net Cash Flow

Cash Balance

Cash (Planned)

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7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets 2002 2003 2004Cash $602,665 $774,649 $1,262,818Other Short-term Assets $0 $0 $0Total Short-term Assets $602,665 $774,649 $1,262,818Long-term AssetsLong-term Assets $0 $0 $0Accumulated Depreciation $0 $0 $0Total Long-term Assets $0 $0 $0Total Assets $602,665 $774,649 $1,262,818

Liabilities and Capital2002 2003 2004

Accounts Payable $245,481 $350,912 $506,787Current Borrowing $0 $0 $0Other Short-term Liabilities $0 $0 $0Subtotal Short-term Liabilities $245,481 $350,912 $506,787

Long-term Liabilities $155,204 $110,408 $65,612Total Liabilities $400,685 $461,320 $572,399

Paid-in Capital $260,000 $260,000 $260,000Retained Earnings ($58,500) ($58,019) $53,329Earnings $481 $111,349 $377,089Total Capital $201,981 $313,329 $690,418Total Liabilities and Capital $602,665 $774,649 $1,262,818Net Worth $201,981 $313,329 $690,418

7.5 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return. These ratios have been determined by the 5137 industry, Women's and Children's Clothing, as found in the Standard Industry Code (SIC) Index.

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Table: Ratios (Planned)

Ratio Analysis2002 2003 2004 Industry Profile

Sales Growth 0.00% 38.25% 43.33% 10.40%

Percent of Total AssetsAccounts Receivable 0.00% 0.00% 0.00% 29.60%Inventory 0.00% 0.00% 0.00% 34.10%Other Short-term Assets 0.00% 0.00% 0.00% 25.70%Total Short-term Assets 100.00% 100.00% 100.00% 89.40%Long-term Assets 0.00% 0.00% 0.00% 10.60%Total Assets 100.00% 100.00% 100.00% 100.00%

Other Short-term Liabilities 0.00% 0.00% 0.00% 40.70%Subtotal Short-term Liabilities 40.73% 45.30% 40.13% 34.60%Long-term Liabilities 25.75% 14.25% 5.20% 9.00%Total Liabilities 66.49% 59.55% 45.33% 43.60%Net Worth 33.51% 40.45% 54.67% 56.40%

Percent of SalesSales 100.00% 100.00% 100.00% 100.00%Gross Margin 42.44% 40.00% 40.00% 24.80%Selling, General & Administrative Expenses 42.42% 36.29% 31.23% 14.80%Advertising Expenses 11.29% 10.00% 9.30% 0.90%Profit Before Interest and Taxes 0.84% 5.75% 12.73% 2.00%

Main RatiosCurrent 2.46 2.21 2.49 2.36Quick 2.46 2.21 2.49 1.09Total Debt to Total Assets 66.49% 59.55% 45.33% 49.70%Pre-tax Return on Net Worth 17.74% 59.24% 80.57% 4.90%Pre-tax Return on Assets 5.95% 23.96% 44.05% 9.70%

Business Vitality Profile 2002 2003 2004 IndustrySales per Employee $271,250 $375,000 $537,500 $0Survival Rate 0.00%

Additional Ratios 2002 2003 2004Net Profit Margin 0.02% 3.71% 8.77% n.aReturn on Equity 0.24% 35.54% 54.62% n.a

Activity RatiosAccounts Receivable Turnover 0.00 0.00 0.00 n.aCollection Days 0 0 0 n.aInventory Turnover 0.00 0.00 0.00 n.aAccounts Payable Turnover 5.71 5.71 5.71 n.aTotal Asset Turnover 3.60 3.87 3.41 n.a

Debt RatiosDebt to Net Worth 1.98 1.47 0.83 n.aShort-term Liab. to Liab. 0.61 0.76 0.89 n.a

Liquidity RatiosNet Working Capital $357,185 $423,737 $756,030 n.aInterest Coverage 1.04 12.98 62.21 n.a

Additional RatiosAssets to Sales 0.28 0.26 0.29 n.aCurrent Debt/Total Assets 41% 45% 40% n.aAcid Test 2.46 2.21 2.49 n.aSales/Net Worth 10.74 9.57 6.23 n.aDividend Payout $0 0.00 0.00 n.a

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Appendix Table: Sales Forecast (Planned)

Sales ForecastSales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004Clothing $40,000 $40,000 $60,000 $80,000 $110,000 $140,000 $180,000 $220,000 $250,000 $300,000 $350,000 $400,000 $2,170,00

0$3,000,00

0$4,300,00

0Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Sales $40,000 $40,000 $60,000 $80,000 $110,000 $140,000 $180,000 $220,000 $250,000 $300,000 $350,000 $400,000 $2,170,00

0$3,000,00

0$4,300,00

0

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004Clothing $20,000 $20,000 $31,000 $42,000 $58,000 $78,000 $100,000 $120,000 $150,000 $180,000 $210,000 $240,000 $1,249,00

0$1,800,00

0$2,580,00

0Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Direct Cost of Sales $20,000 $20,000 $31,000 $42,000 $58,000 $78,000 $100,000 $120,000 $150,000 $180,000 $210,000 $240,000 $1,249,00

0$1,800,00

0$2,580,00

0

Appendix

Page 1

Appendix Table: Personnel (Planned)

Personnel PlanJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004

Marketing/Website Director $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $84,000 $90,000 $95,000Design Director $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $7,000 $84,000 $90,000 $95,000Designers $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $144,000 $156,000 $166,000Web Administrator $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $48,000 $52,000 $56,000Office Manager $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $36,000 $39,000 $42,000Marketing Staff $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $96,000 $104,000 $112,000Accountant $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $3,300 $39,600 $44,000 $48,000Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Payroll $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $531,600 $575,000 $614,000

Total People 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8Payroll Burden $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $79,740 $86,250 $92,100Total Payroll Expenditures $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $611,340 $661,250 $706,100

Appendix

Page 2

Appendix Table: Profit and Loss (Planned)

Pro Forma Profit and LossJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004

Sales $40,000 $40,000 $60,000 $80,000 $110,000

$140,000

$180,000

$220,000

$250,000

$300,000

$350,000

$400,000

$2,170,000

$3,000,000

$4,300,000

Direct Cost of Sales $20,000 $20,000 $31,000 $42,000 $58,000 $78,000 $100,000

$120,000

$150,000

$180,000

$210,000

$240,000

$1,249,000

$1,800,000

$2,580,000

Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------

Total Cost of Sales $20,000 $20,000 $31,000 $42,000 $58,000 $78,000 $100,000

$120,000

$150,000

$180,000

$210,000

$240,000

$1,249,000

$1,800,000

$2,580,000

Gross Margin $20,000 $20,000 $29,000 $38,000 $52,000 $62,000 $80,000 $100,000

$100,000

$120,000

$140,000

$160,000

$921,000

$1,200,000

$1,720,000

Gross Margin % 50.00% 50.00% 48.33% 47.50% 47.27% 44.29% 44.44% 45.45% 40.00% 40.00% 40.00% 40.00% 42.44% 40.00% 40.00%Operating Expenses: Advertising/Promotion $30,000 $20,000 $10,000 $40,000 $15,000 $40,000 $10,000 $10,000 $20,000 $10,000 $30,000 $10,000 $245,00

0$300,00

0$400,00

0Travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Miscellaneous $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Payroll Expense $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $44,300 $531,60

0$575,00

0$614,00

0Payroll Burden $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $6,645 $79,740 $86,250 $92,100Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Leased Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $2,400 $2,400 $2,400Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $24,000 $24,000 $24,000Contract/Consultants $0 $0 $0 $0 $0 $5,000 $5,000 $5,000 $5,000 $0 $0 $0 $20,000 $40,000 $40,000

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Operating Expenses $83,145 $73,145 $63,145 $93,145 $68,145 $98,145 $68,145 $68,145 $78,145 $63,145 $83,145 $63,145 $902,74

0$1,027,6

50$1,172,5

00Profit Before Interest and Taxes ($63,145

)($53,145

)($34,145

)($55,145

)($16,145

)($36,145

)$11,855 $31,855 $21,855 $56,855 $56,855 $96,855 $18,260 $172,35

0$547,50

0Interest Expense Short-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Interest Expense Long-term $1,636 $1,604 $1,573 $1,542 $1,511 $1,480 $1,449 $1,418 $1,387 $1,356 $1,324 $1,293 $17,574 $13,281 $8,801Taxes Incurred ($19,434

)($16,425

)($10,716

)($17,006

)($5,297) ($11,288

)$3,122 $9,131 $6,140 $16,650 $16,659 $28,668 $206 $47,721 $161,61

0Extraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Net Profit ($45,346

)($38,325

)($25,003

)($39,681

)($12,359

)($26,338

)$7,284 $21,306 $14,328 $38,850 $38,871 $66,893 $481 $111,34

9$377,08

9Net Profit/Sales -

113.37%-95.81% -41.67% -49.60% -11.24% -18.81% 4.05% 9.68% 5.73% 12.95% 11.11% 16.72% 0.02% 3.71% 8.77%

Appendix

Page 3

Appendix Table: Cash Flow (Planned)

Pro Forma Cash Flow Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004

Cash ReceivedCash from Operations: Cash Sales $40,000 $40,000 $60,000 $80,000 $110,00

0$140,00

0$180,00

0$220,00

0$250,00

0$300,00

0$350,00

0$400,00

0$2,170,0

00$3,000,0

00$4,300,0

00From Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash from Operations $40,000 $40,000 $60,000 $80,000 $110,00

0$140,00

0$180,00

0$220,00

0$250,00

0$300,00

0$350,00

0$400,00

0$2,170,0

00$3,000,0

00$4,300,0

00

Additional Cash ReceivedExtraordinary Items $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Received $40,000 $40,000 $60,000 $80,000 $110,00

0$140,00

0$180,00

0$220,00

0$250,00

0$300,00

0$350,00

0$400,00

0$2,170,0

00$3,000,0

00$4,300,0

00

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004Expenditures from Operations:Cash Spent on Costs and Expenses $3,440 $2,738 $3,406 $6,874 $7,141 $11,539 $12,177 $14,775 $18,473 $21,021 $26,018 $28,216 $155,81

8$222,74

0$321,68

1Wages, Salaries, Payroll Taxes, etc. $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $50,945 $611,34

0$661,25

0$706,10

0Payment of Accounts Payable $1,032 $30,751 $24,842 $31,692 $61,943 $65,592 $104,04

5$110,37

3$134,08

3$167,01

9$190,68

4$234,82

5$1,156,8

81$1,899,2

30$2,739,2

55 Subtotal Spent on Operations $55,417 $84,434 $79,193 $89,511 $120,02

9$128,07

6$167,16

7$176,09

3$203,50

1$238,98

4$267,64

8$313,98

6$1,924,0

39$2,783,2

20$3,767,0

36

Additional Cash SpentSales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Long-term Liabilities Principal Repayment $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $3,733 $44,796 $44,796 $44,796Purchase Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Adjustment for Assets Purchased on Credit $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Subtotal Cash Spent $59,150 $88,167 $82,926 $93,244 $123,76

2$131,80

9$170,90

0$179,82

6$207,23

4$242,71

7$271,38

1$317,71

9$1,968,8

35$2,828,0

16$3,811,8

32

Net Cash Flow ($19,150)

($48,167)

($22,926)

($13,244)

($13,762)

$8,191 $9,100 $40,174 $42,766 $57,283 $78,619 $82,281 $201,165

$171,984

$488,168

Cash Balance $382,350

$334,183

$311,257

$298,013

$284,251

$292,442

$301,542

$341,716

$384,482

$441,765

$520,384

$602,665

$602,665

$774,649

$1,262,818

Appendix

Page 4

Appendix Table: Balance Sheet (Planned)

Pro Forma Balance Sheet

AssetsShort-term Assets Starting

BalancesJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004

Cash $401,500 $382,350 $334,183 $311,257 $298,013 $284,251 $292,442 $301,542 $341,716 $384,482 $441,765 $520,384 $602,665 $602,665 $774,649 $1,262,818

Other Short-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Short-term Assets $401,500 $382,350 $334,183 $311,257 $298,013 $284,251 $292,442 $301,542 $341,716 $384,482 $441,765 $520,384 $602,665 $602,665 $774,649 $1,262,81

8Long-term AssetsLong-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Total Assets $401,500 $382,350 $334,183 $311,257 $298,013 $284,251 $292,442 $301,542 $341,716 $384,482 $441,765 $520,384 $602,665 $602,665 $774,649 $1,262,81

8

Liabilities and CapitalJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003 2004

Accounts Payable $0 $29,929 $23,820 $29,630 $59,800 $62,130 $100,391 $105,941 $128,542 $160,713 $182,879 $226,360 $245,481 $245,481 $350,912 $506,787Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Other Short-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Subtotal Short-term Liabilities

$0 $29,929 $23,820 $29,630 $59,800 $62,130 $100,391 $105,941 $128,542 $160,713 $182,879 $226,360 $245,481 $245,481 $350,912 $506,787

Long-term Liabilities $200,000 $196,267 $192,534 $188,801 $185,068 $181,335 $177,602 $173,869 $170,136 $166,403 $162,670 $158,937 $155,204 $155,204 $110,408 $65,612Total Liabilities $200,000 $226,196 $216,354 $218,431 $244,868 $243,465 $277,993 $279,810 $298,678 $327,116 $345,549 $385,297 $400,685 $400,685 $461,320 $572,399

Paid-in Capital $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000 $260,000Retained Earnings ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,500) ($58,019) $53,329Earnings $0 ($45,346) ($83,671) ($108,674

)($148,355) ($160,714

)($187,052

)($179,767

)($158,461

)($144,134

)($105,284

)($66,413) $481 $481 $111,349 $377,089

Total Capital $201,500 $156,154 $117,829 $92,826 $53,145 $40,786 $14,448 $21,733 $43,039 $57,366 $96,216 $135,087 $201,981 $201,981 $313,329 $690,418Total Liabilities and Capital $401,500 $382,350 $334,183 $311,257 $298,013 $284,251 $292,442 $301,542 $341,716 $384,482 $441,765 $520,384 $602,665 $602,665 $774,649 $1,262,81

8Net Worth $201,500 $156,154 $117,829 $92,826 $53,145 $40,786 $14,448 $21,733 $43,039 $57,366 $96,216 $135,087 $201,981 $201,981 $313,329 $690,418

Appendix

Page 5

Cover PageLegal PageTable of Contents1.0 Executive Summary2.0 Company Summary3.0 Services4.0 Market Analysis Summary 5.0 Strategy and Implementation Summary6.0 Management Summary7.0 Financial PlanAppendix