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Group Case Questions 1. How many cakes would Lady M need to sell in a year in order to break-even? Does this number seem feasible?

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Group Case Questions 1. How many cakes would Lady M need to sell in a year in order to break-even? Does this number seem feasible? 2 Assuming sales in year one are break-even, how quickly would sales need to grow after the first year to pay the start-up costs within 5 years? s this growth rate feasible? 3. What is your recommendation? Should Romaniszyn open the new location in the World Trade Center? 4 What is Lady M's enterprise value? Does it matter if one uses an EBITDA multiple or a perpetuity growth formula for a terminal value? How much of an equity stake should they be giving up to the Chinese investors? 5 What do you think Romanniszyn's and Tom's baseline assumptions? Are they realistic? 6 Do you think they should take the Chinese investor's offer? Why/why not? Exhibit 2a Unaudited Consolidated Statements of Financial Conditiorn 12/31/2012 12/31/2013 Assets Cash Investments in subsidiaries Intercompany receivable Affiliated receivable Accounts receivable Inventory Prepaid expenses and other receivables Deposits Fixed assets, net 524,785 712,011 53,037 135,267 276,197 387,044 39,360 107,937 5,689 99,809 449,900 1,512,610 1,397,402 2,960,367 23 54,100 Total Assets Liabilities and Shareholders' Equity Liabilities Compensation payable Intercompany payable Accounts payable and accrued expenses Deferred rent payable Advanced receipts Corporate tax payable Interest payable Loans payable-short term Loans payable-long term 281,383 267,826 328,561 63,097 6,022 2,842 3,500 412.500 99,980 295,001 917,635 979,261 1,703,021 434 ,500 Total Liabilities Shareholders' Equity Capital Stock Retained earnings Current earnings Accumulated other comprehensive income (loss) 1,886,5041,886,504 (1,780.234) (1,484,770) 311,871 855,613 Total Shareholders' Equity 418,141 1,257,346 Total Liabilities and Members Equity 1,397,402 2,960,367 Exhibit 2b Unaudited Consolidated Statements of Income and Com prehensive Income 12/31/2012 12/31/2013 4.132,517 7,491,187 1,303,416 1,632,722 2,829,101 5,858,465 Sales Revenue Cost of Sales Gross Margin Compensation Salaries and wages Employee benefits Total Compensation ,309,589 2,691,881 124,827 1,375,265 2,816,708 1,453,836 3,041,758 65,676 PRIME COST Other Controllable Expenses Sales, General, & Admin. Direct operating expenses Marketing Utilities General and Administrative Repairs and Maintenance Research and Development Total other controllable expenses 2,449,200 4,342,500 273,864 499,837 24,679 91,272 125,102 233,335 406,819 98,506 104,450 4,004 700,982 ,160,887 752,854 1,880,871 CONTROLLABLE PROFIT Occupancy and Depreciation Expenses 351,075 753,379 Occupancy Depreciation & Amortization 41800 149.007 41,800 149,007 Depreciation Amortization 40,332 49,974 Insurance Other (Income) Expense Other (Income) Interest Expense Other expense 21,804 3,179 316,292 (21,627) (38,479) 37,186 NET INCOME BEFORE INCOME TAXES Corporate Taxes 929,804 74,191 NET INCOME 311,871 855,613 Exhibit 2c Unaudited Consolidated Statements of Retained Earnings and Stockholders Equity 12/31/2012 12/31/2013 Capital Stock Beginning Balance 1,886,504 1,886.504 Stock Issued Ending Balance 1.886,504 1,886,504 Reinvested Earnings Beginning Balance (1,780,234) (1,484,770) 311,871 855,613 Net Income Dividends Ending Balance (1.468,363) (629,158) Accumulated Other Comprehensive Income (loss) Beginning Balance Net foreign currency translation Ending Balance 418,141 1,257,346 Total Shareholders' Equity Source: Company documents. Exhibit 2d Unaudited Consolidated Statements of Cash Flows Cash Flows from Operating Activities 12/31/2012 12/31/2013 Net Income Adjustments to reconcile net income to net cash provided (used) by operating activities 311,871 855.613 Depreciation and amortization expense Other 149,007 Decrease (increase) in: (227) Affiliated receivable Prepaid expenses and other receivables Accounts receivables Intercompany receivables Deposits Inventory 7,782 (135.267) (5,666) (17,677) (110,847) (16,875) (45,709) 4,597)(68,577) Increase (decrease) in: Compensation payable Intercompany payables Accounts payable and accrued expenses Deferred rent payables 281,383 63,837 Advanced receipts Corporate tax payable 558 (22) 270,000 1.750 5.328 (12.520) Loans payable short term Interest payable 240,692 184,065 Total Adjustments Net cash provided (used) by operating activities 552,563 1,039,678 Cash Flows from Investing Activities Purchase of fixed assets Leasehold improvements (15,197) (394,150) (127,015) (800,244) Net cash provided by (used in) investing activities (142,.212) (1.194,393) Cash Flows from Financing Activities Proceeds (payments) on long-term loan (24,540) 222,634 Net cash provided by (used in) financing activities (24,540) 222,634 Net increase (decrease) in cash and cash equivalents Cash, beginning of period Cash, end of period 385,811 138,975 524,785 67,919 644,092 712,011 Group Case Questions 1. How many cakes would Lady M need to sell in a year in order to break-even? Does this number seem feasible? 2 Assuming sales in year one are break-even, how quickly would sales need to grow after the first year to pay the start-up costs within 5 years? s this growth rate feasible? 3. What is your recommendation? Should Romaniszyn open the new location in the World Trade Center? 4 What is Lady M's enterprise value? Does it matter if one uses an EBITDA multiple or a perpetuity growth formula for a terminal value? How much of an equity stake should they be giving up to the Chinese investors? 5 What do you think Romanniszyn's and Tom's baseline assumptions? Are they realistic? 6 Do you think they should take the Chinese investor's offer? Why/why not? Exhibit 2a Unaudited Consolidated Statements of Financial Conditiorn 12/31/2012 12/31/2013 Assets Cash Investments in subsidiaries Intercompany receivable Affiliated receivable Accounts receivable Inventory Prepaid expenses and other receivables Deposits Fixed assets, net 524,785 712,011 53,037 135,267 276,197 387,044 39,360 107,937 5,689 99,809 449,900 1,512,610 1,397,402 2,960,367 23 54,100 Total Assets Liabilities and Shareholders' Equity Liabilities Compensation payable Intercompany payable Accounts payable and accrued expenses Deferred rent payable Advanced receipts Corporate tax payable Interest payable Loans payable-short term Loans payable-long term 281,383 267,826 328,561 63,097 6,022 2,842 3,500 412.500 99,980 295,001 917,635 979,261 1,703,021 434 ,500 Total Liabilities Shareholders' Equity Capital Stock Retained earnings Current earnings Accumulated other comprehensive income (loss) 1,886,5041,886,504 (1,780.234) (1,484,770) 311,871 855,613 Total Shareholders' Equity 418,141 1,257,346 Total Liabilities and Members Equity 1,397,402 2,960,367 Exhibit 2b Unaudited Consolidated Statements of Income and Com prehensive Income 12/31/2012 12/31/2013 4.132,517 7,491,187 1,303,416 1,632,722 2,829,101 5,858,465 Sales Revenue Cost of Sales Gross Margin Compensation Salaries and wages Employee benefits Total Compensation ,309,589 2,691,881 124,827 1,375,265 2,816,708 1,453,836 3,041,758 65,676 PRIME COST Other Controllable Expenses Sales, General, & Admin. Direct operating expenses Marketing Utilities General and Administrative Repairs and Maintenance Research and Development Total other controllable expenses 2,449,200 4,342,500 273,864 499,837 24,679 91,272 125,102 233,335 406,819 98,506 104,450 4,004 700,982 ,160,887 752,854 1,880,871 CONTROLLABLE PROFIT Occupancy and Depreciation Expenses 351,075 753,379 Occupancy Depreciation & Amortization 41800 149.007 41,800 149,007 Depreciation Amortization 40,332 49,974 Insurance Other (Income) Expense Other (Income) Interest Expense Other expense 21,804 3,179 316,292 (21,627) (38,479) 37,186 NET INCOME BEFORE INCOME TAXES Corporate Taxes 929,804 74,191 NET INCOME 311,871 855,613 Exhibit 2c Unaudited Consolidated Statements of Retained Earnings and Stockholders Equity 12/31/2012 12/31/2013 Capital Stock Beginning Balance 1,886,504 1,886.504 Stock Issued Ending Balance 1.886,504 1,886,504 Reinvested Earnings Beginning Balance (1,780,234) (1,484,770) 311,871 855,613 Net Income Dividends Ending Balance (1.468,363) (629,158) Accumulated Other Comprehensive Income (loss) Beginning Balance Net foreign currency translation Ending Balance 418,141 1,257,346 Total Shareholders' Equity Source: Company documents. Exhibit 2d Unaudited Consolidated Statements of Cash Flows Cash Flows from Operating Activities 12/31/2012 12/31/2013 Net Income Adjustments to reconcile net income to net cash provided (used) by operating activities 311,871 855.613 Depreciation and amortization expense Other 149,007 Decrease (increase) in: (227) Affiliated receivable Prepaid expenses and other receivables Accounts receivables Intercompany receivables Deposits Inventory 7,782 (135.267) (5,666) (17,677) (110,847) (16,875) (45,709) 4,597)(68,577) Increase (decrease) in: Compensation payable Intercompany payables Accounts payable and accrued expenses Deferred rent payables 281,383 63,837 Advanced receipts Corporate tax payable 558 (22) 270,000 1.750 5.328 (12.520) Loans payable short term Interest payable 240,692 184,065 Total Adjustments Net cash provided (used) by operating activities 552,563 1,039,678 Cash Flows from Investing Activities Purchase of fixed assets Leasehold improvements (15,197) (394,150) (127,015) (800,244) Net cash provided by (used in) investing activities (142,.212) (1.194,393) Cash Flows from Financing Activities Proceeds (payments) on long-term loan (24,540) 222,634 Net cash provided by (used in) financing activities (24,540) 222,634 Net increase (decrease) in cash and cash equivalents Cash, beginning of period Cash, end of period 385,811 138,975 524,785 67,919 644,092 712,011

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