Balance sheet assumptions:

Income Statement:

Startup AB: After completing the last #2-Assignment (Financial Modeling Projections), a fully completed Integrated Financial Model-Startup AB has been constructed based upon the Co-Founder's initial business decisions and plans for the Startup. Based upon these previously stated set of Income Statement & Balance Sheet input assumptions, Startup AB has a "negative" cash balance for Years 1 thru 5, which is unacceptable. Obviously, Startup AB CANNOT operate as a viable business with a negative cash balance. Therefore, the executive management team must thoughtfully modify several of the "adjustable or manageable" business input assumptions within either the Income Statement Assumptions and/or Balance Sheet Assumptions until creating sufficient (i.e. adequate cash liquidity) positive Cash Balances across ALL five years. No single input assumption in either the income Statement Assumptions tab or Balance Sheet Assumptions tab i.e. remember do NOT adjust financial values within the Income Statement, Balance Sheet or Cash Flow Statement tabs), can be modified by more than +/- 25%, except for the Year 1 Equity Capital investment which is subject to a +/- $450,000 aggregate adjustment limit. However, any required incremental aggregate Equity Capital investment Assumptions amount after Year 1 has no percentage, since currently all input amounts are zero, or aggregate amount adjustment limitations. The focus on this "Capital Funding Strategy" needs to be on items or input business variables/assumptions that can reasonably be controlled or independently influenced by the executive management team. For example, it is not realistic or reasonable to assume that the current forecasted & negotiated Unit Price from the external manufacturer can be dramatically lowered or discounted, or that the large Year 1 Product Development Expenses can be dramatically cut/reduced and the Startup still be able to introduce Product A in Year 2 on time UNLESS the introduction timeframe is also proportionately pushed back. The offsetting ramifications of any modification or adjustment to the input business assumptions must be taken into account. In a Word document, prepare a prioritized list of recommendations and your supporting rationale or justification for each recommended modification to the corresponding Input Assumption for the executive management team. The supporting justification for each recommendation should not exceed a short paragraph. Each recommended Input Assumption modification must then be entered into the #3-Assignment (Financial Modeling-Startup AB). HIGHLIGHT ALL MODIFIED CELLS within this #3- Assigment (Financial Modeling-Startup AB) in "Yellow". Remember that the cumulative impact from implementing ALL your recommendations must be the creation of a viable financial capital strategy (i.e. a sufficient annual positive cash liquidity balance throughout all five years). Submit these two documents/files cumulatively depicting and justifying an acceptable "Capital Funding Strategy" i.e. creates positive annual cash balances through implementation of the aforementioned itemized recommendations). Unit Sales/Revenue Assumptions: Product A Units Sold Unit Price Unit A COGS (Outsourced Mfg.) Year 1 15,000 $100.00 $50.00 Year 2 30,000 $95.00 $50.00 Year 3 75,000 $90.00 $50.00 Year 4 125,000 $85.00 $50.00 Year 5 200,000 $80.00 $50.00 Product B Units Sold Unit Price Unit COGS $0.00 $0.00 7,500 $20.00 $8.00 20,000 $20.00 $8.00 40,000 $20.00 $8.00 80,000 $20.00 $8.00 $4.00 Unit Shipping Paid By Customer Unit Shipping Costs To Deliver $4,00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 Year 1 Year 2 Year 3 Year 4 Year 5 1.0 1.0 1.0 1.0 1.0 1.0 1.0 20 4.0 6.0 Staffing Plan/Compensation Assumptions: Annual Comp. President $150,000 VP Sales & Marketing $120,000 Shipping Clerks (1:50,000 units) $36,000 Sales Professionals $75,000 CFO/Controller $100,000 Accountants (1:200,000 units) $42,000 VP Engineering & Operations $132,000 IT Manager $75,000 HR Manager $50,000 Total #Employees 6.0 8.0 1.0 2.0 1.0 1.0 1.0 4.0 1.0 1.0 10 1.0 1.0 2.0 1.0 10 1.0 10 1.0 1.0 22.0 5.0 80 12.0 17.0 Sales Commission Employee Taxes & Benefits Annual Cost of Living Adjustments 0.0% 32% 0.0% Year 1 Year 2 Year 3 Year 4 Year 5 Marketing and SG&A Expense Assumptions: Sales & Marketing Expenses: #National Trade Shows Cost per Trade Show Marketing Materials Advertising Exp. 17 Sales) Travel Expense/Trade Show Monthly Travel Expense/Sales Prof. $17.500 $75,000 5.0% $50,000 5.0% $150,000 5.0% $200,000 5.0% $500,000 5.024 $3,000 Development Expenses: Product Development & Testing Regulatory Requirements Web Development & Hosting $175,000 $50,000 $50,000 $50,000 $0 $50,000 $0 $125,000 $0 $0 $90,000 $125,000 $125,000 $125,000 $40,000 $40,000 $80,000 $80,000 General & Administrative Expenses: Travel ExpenselExecutive/Month Annual Telephone-Base 800 Service Telephone-Variable Warehouse Rent/Year Office Rent/Employee Insurance-General (% Rev.) Insurance-Product Liability %. Rev.) Outside Accounting Outside Legal $2,500 $30,000 0.5% $40,000 $1,500 0.5% 1.0% $35,000 $30,000 $45,000 $30,000 $55,000 $50,000 $65,000 $70,000 $75,000 $90,000 Beg Year 1 Year 2 Year 3 Year 4 Year 5 Beginning Balance Sheet: Balances at Time/Year 0 Cash Accounts Receivables Inventory Leasehold Improvements Office Furniture & Computers Accumulated Depreciation Account Payable Bank Credit Line Long-term Debt Equity Retained Earnings Tax Distribution Check Figure $75,000 $10,000 $50,000 $0 $5,000 $0 $0 $0 $150,000 ($10,000) $0 $0 10 120 $125,000 $25.000 $75,000 $75,000 $100,000 Average # Days in Accts. Rec. Average # Days in Inventory-Finished Average # Days in COGS Accts. Payable Average # Days in Operating Expenses Payable Capital Expenditures: Equipment - Warehouse Equipment Depreciation Schedule (in yrs.) Office Equipment Office Furniture & Computers Depr. Sch. (in yrs.) Bank Credit Line: Advance Ratio for Accts. Rec. Advance Ratio for Inventory-Finished Interest Rate Equity Capital Raised Incremental Member Tax Rate $30,000 $20,000 $20,000 $35,000 $40,000 0% 0% 0.0% $500,000 25% Year 1 Year 2 Year 3 Year 4 Year 5 Revenues: Product A Product B Freight/Shipping Revenue Total Revenues $1,500,000 $0 $60,000 $1,560,000 $2,850,000 $150,000 $150,000 $3,150,000 $6,750,000 $10,625,000 $16,000,000 $400,000 $800,000 $1,600,000 $380,000 $660,000 $1,120,000 $7,530,000 $12,085,000 $18,720,000 $750,000 $60,000 Cost of Good Sold Freight/Shipping Expenses Sales Commissions Gross Profit Grass Fri May27/7 $1,560,000 $150,000 $0 $1,440,000 $3,910,000 $380,000 $0 $3,240,000 $6,570,000 $10,640,000 $660,000 $1,120,000 $0 $0 $4,855,000 $6,960,000|| $0 $750,000 $480,000 $153,600 $127,500 $75,000 $0 Operating (Overhead) Expenses: Salaries Employee Taxes & Benefits Marketing Expenses Advertising Expenses Sales Travel Product Development & Testing Product Certification Expenses Internet/Website Expenses Travel Expenses Telephone Expenses Office Rent Insurance Expenses Accounting Legal Total Operating Expenses $175,000 $0 $90,000 $60,000 $37,500 $47,500 $22,500 $35,000 $30,000 $1,333,600 $730,000 $233,600 $155,000 $150,000 $72,000 $50 000 $0 $125,000 $60,000 $45,000 $52.000 $45,000 $45,000 $30,000 $1,792,600 $991,000 $317,120 $255,000 $357,500 $144,000 $50,000 $0 $125,000 $60,000 $65,750 $58,000 $107,250 $55,000 $50,000 $2,635,620 $1,263,000 $404,160 $305,000 $571,250 $216,000 $50,000 $0 $125,000 $60,000 $87,125 $105,500 $171,375 $65,000 $70,000 $3,493,410 $1,527,000 $488,640 $605,000 $880,000 $288,000 $50,000 $0 $125,000 $60,000 $118,000 $113,000 $264,000 $75,000 $90,000 $4,683,640 EBITDA ($583,600) ($352,600) $604,380 $1,361,590 $2,276,360 $70,000 Depreciation Interest Expense $36,667 $0 $48,333 $0 $85,000 $0 $0 $111,667 $0 ($620,267) ($400,933) $534,380 $1,276,590 $2,164,693 Pre-Tax Income EBT Pri Mardin Startup AB: After completing the last #2-Assignment (Financial Modeling Projections), a fully completed Integrated Financial Model-Startup AB has been constructed based upon the Co-Founder's initial business decisions and plans for the Startup. Based upon these previously stated set of Income Statement & Balance Sheet input assumptions, Startup AB has a "negative" cash balance for Years 1 thru 5, which is unacceptable. Obviously, Startup AB CANNOT operate as a viable business with a negative cash balance. Therefore, the executive management team must thoughtfully modify several of the "adjustable or manageable" business input assumptions within either the Income Statement Assumptions and/or Balance Sheet Assumptions until creating sufficient (i.e. adequate cash liquidity) positive Cash Balances across ALL five years. No single input assumption in either the income Statement Assumptions tab or Balance Sheet Assumptions tab i.e. remember do NOT adjust financial values within the Income Statement, Balance Sheet or Cash Flow Statement tabs), can be modified by more than +/- 25%, except for the Year 1 Equity Capital investment which is subject to a +/- $450,000 aggregate adjustment limit. However, any required incremental aggregate Equity Capital investment Assumptions amount after Year 1 has no percentage, since currently all input amounts are zero, or aggregate amount adjustment limitations. The focus on this "Capital Funding Strategy" needs to be on items or input business variables/assumptions that can reasonably be controlled or independently influenced by the executive management team. For example, it is not realistic or reasonable to assume that the current forecasted & negotiated Unit Price from the external manufacturer can be dramatically lowered or discounted, or that the large Year 1 Product Development Expenses can be dramatically cut/reduced and the Startup still be able to introduce Product A in Year 2 on time UNLESS the introduction timeframe is also proportionately pushed back. The offsetting ramifications of any modification or adjustment to the input business assumptions must be taken into account. In a Word document, prepare a prioritized list of recommendations and your supporting rationale or justification for each recommended modification to the corresponding Input Assumption for the executive management team. The supporting justification for each recommendation should not exceed a short paragraph. Each recommended Input Assumption modification must then be entered into the #3-Assignment (Financial Modeling-Startup AB). HIGHLIGHT ALL MODIFIED CELLS within this #3- Assigment (Financial Modeling-Startup AB) in "Yellow". Remember that the cumulative impact from implementing ALL your recommendations must be the creation of a viable financial capital strategy (i.e. a sufficient annual positive cash liquidity balance throughout all five years). Submit these two documents/files cumulatively depicting and justifying an acceptable "Capital Funding Strategy" i.e. creates positive annual cash balances through implementation of the aforementioned itemized recommendations). Unit Sales/Revenue Assumptions: Product A Units Sold Unit Price Unit A COGS (Outsourced Mfg.) Year 1 15,000 $100.00 $50.00 Year 2 30,000 $95.00 $50.00 Year 3 75,000 $90.00 $50.00 Year 4 125,000 $85.00 $50.00 Year 5 200,000 $80.00 $50.00 Product B Units Sold Unit Price Unit COGS $0.00 $0.00 7,500 $20.00 $8.00 20,000 $20.00 $8.00 40,000 $20.00 $8.00 80,000 $20.00 $8.00 $4.00 Unit Shipping Paid By Customer Unit Shipping Costs To Deliver $4,00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 $4.00 Year 1 Year 2 Year 3 Year 4 Year 5 1.0 1.0 1.0 1.0 1.0 1.0 1.0 20 4.0 6.0 Staffing Plan/Compensation Assumptions: Annual Comp. President $150,000 VP Sales & Marketing $120,000 Shipping Clerks (1:50,000 units) $36,000 Sales Professionals $75,000 CFO/Controller $100,000 Accountants (1:200,000 units) $42,000 VP Engineering & Operations $132,000 IT Manager $75,000 HR Manager $50,000 Total #Employees 6.0 8.0 1.0 2.0 1.0 1.0 1.0 4.0 1.0 1.0 10 1.0 1.0 2.0 1.0 10 1.0 10 1.0 1.0 22.0 5.0 80 12.0 17.0 Sales Commission Employee Taxes & Benefits Annual Cost of Living Adjustments 0.0% 32% 0.0% Year 1 Year 2 Year 3 Year 4 Year 5 Marketing and SG&A Expense Assumptions: Sales & Marketing Expenses: #National Trade Shows Cost per Trade Show Marketing Materials Advertising Exp. 17 Sales) Travel Expense/Trade Show Monthly Travel Expense/Sales Prof. $17.500 $75,000 5.0% $50,000 5.0% $150,000 5.0% $200,000 5.0% $500,000 5.024 $3,000 Development Expenses: Product Development & Testing Regulatory Requirements Web Development & Hosting $175,000 $50,000 $50,000 $50,000 $0 $50,000 $0 $125,000 $0 $0 $90,000 $125,000 $125,000 $125,000 $40,000 $40,000 $80,000 $80,000 General & Administrative Expenses: Travel ExpenselExecutive/Month Annual Telephone-Base 800 Service Telephone-Variable Warehouse Rent/Year Office Rent/Employee Insurance-General (% Rev.) Insurance-Product Liability %. Rev.) Outside Accounting Outside Legal $2,500 $30,000 0.5% $40,000 $1,500 0.5% 1.0% $35,000 $30,000 $45,000 $30,000 $55,000 $50,000 $65,000 $70,000 $75,000 $90,000 Beg Year 1 Year 2 Year 3 Year 4 Year 5 Beginning Balance Sheet: Balances at Time/Year 0 Cash Accounts Receivables Inventory Leasehold Improvements Office Furniture & Computers Accumulated Depreciation Account Payable Bank Credit Line Long-term Debt Equity Retained Earnings Tax Distribution Check Figure $75,000 $10,000 $50,000 $0 $5,000 $0 $0 $0 $150,000 ($10,000) $0 $0 10 120 $125,000 $25.000 $75,000 $75,000 $100,000 Average # Days in Accts. Rec. Average # Days in Inventory-Finished Average # Days in COGS Accts. Payable Average # Days in Operating Expenses Payable Capital Expenditures: Equipment - Warehouse Equipment Depreciation Schedule (in yrs.) Office Equipment Office Furniture & Computers Depr. Sch. (in yrs.) Bank Credit Line: Advance Ratio for Accts. Rec. Advance Ratio for Inventory-Finished Interest Rate Equity Capital Raised Incremental Member Tax Rate $30,000 $20,000 $20,000 $35,000 $40,000 0% 0% 0.0% $500,000 25% Year 1 Year 2 Year 3 Year 4 Year 5 Revenues: Product A Product B Freight/Shipping Revenue Total Revenues $1,500,000 $0 $60,000 $1,560,000 $2,850,000 $150,000 $150,000 $3,150,000 $6,750,000 $10,625,000 $16,000,000 $400,000 $800,000 $1,600,000 $380,000 $660,000 $1,120,000 $7,530,000 $12,085,000 $18,720,000 $750,000 $60,000 Cost of Good Sold Freight/Shipping Expenses Sales Commissions Gross Profit Grass Fri May27/7 $1,560,000 $150,000 $0 $1,440,000 $3,910,000 $380,000 $0 $3,240,000 $6,570,000 $10,640,000 $660,000 $1,120,000 $0 $0 $4,855,000 $6,960,000|| $0 $750,000 $480,000 $153,600 $127,500 $75,000 $0 Operating (Overhead) Expenses: Salaries Employee Taxes & Benefits Marketing Expenses Advertising Expenses Sales Travel Product Development & Testing Product Certification Expenses Internet/Website Expenses Travel Expenses Telephone Expenses Office Rent Insurance Expenses Accounting Legal Total Operating Expenses $175,000 $0 $90,000 $60,000 $37,500 $47,500 $22,500 $35,000 $30,000 $1,333,600 $730,000 $233,600 $155,000 $150,000 $72,000 $50 000 $0 $125,000 $60,000 $45,000 $52.000 $45,000 $45,000 $30,000 $1,792,600 $991,000 $317,120 $255,000 $357,500 $144,000 $50,000 $0 $125,000 $60,000 $65,750 $58,000 $107,250 $55,000 $50,000 $2,635,620 $1,263,000 $404,160 $305,000 $571,250 $216,000 $50,000 $0 $125,000 $60,000 $87,125 $105,500 $171,375 $65,000 $70,000 $3,493,410 $1,527,000 $488,640 $605,000 $880,000 $288,000 $50,000 $0 $125,000 $60,000 $118,000 $113,000 $264,000 $75,000 $90,000 $4,683,640 EBITDA ($583,600) ($352,600) $604,380 $1,361,590 $2,276,360 $70,000 Depreciation Interest Expense $36,667 $0 $48,333 $0 $85,000 $0 $0 $111,667 $0 ($620,267) ($400,933) $534,380 $1,276,590 $2,164,693 Pre-Tax Income EBT Pri Mardin