Hi,

I need help creating a pro-forma income statement and statement of cash flow. Can you help? Thank you!

MGT 404 - ASSIGNMENT #2 ALLGOMOTIVE INC (AGM) AllGoMotive Inc (AGM) was founded by Leslie Smith in 2012. A chemical engineer by training, Leslie started the company after developing aluminum-air technology that could extend the life of lithium-ion batteries. This technology (which she named, \"the battery extension system\") was used in \"mission-critical\" batteries and had recently been applied for use in electric cars. In practical terms, the technology could extend a typical car battery's life. On average, this extension allowed it to operate for up to 1,000 miles between charges. Initial capital for the company was provided by Leslie and three family friends, with Leslie being the majority shareholder. Additional debt financing was provided by a regional bank. AGM had just finished a great fiscal 2014, and things continued to look bright for its projected fiscal 2015 (which began on November 1st, 2014). First, just before its 2014 year-end, AGM signed 5-year agreements with two of the largest electric car manufacturers in the country. Importantly, both manufacturers were quite profitable despite the fact that electric cars had yet to gain a real foothold in the marketplace. While some of the pricing terms had yet to be ironed out for the last two years of each contract, Leslie was optimistic about the contracts' potential to drive future growth in the company. Second, Leslie had spent time over the last year improving on AGM's existing product. In particular, she had developed a battery extension system that would now allow car batteries to last up to 2,000 miles between charges. She had already branded the new product as, the \"Battery Extender 2000\" (code named BX2000). The patents for the new product were likely to be completed somewhere near the end of fiscal 2015. Leslie was optimistic that the new technology would not only open up more growth opportunities for AGM, but also make it more difficult for new entrants to compete with her company. Finally, Leslie had approached her bank about obtaining additional debt financing at the beginning of fiscal 2015. The additional financing (which would be added to AGM's existing loan from the same bank) would help fund the company's new growth initiatives and give the company sufficient operating flexibility. To date, AGM's bank loan had been structured so that AGM would not have to pay down any of the loan until fiscal 2020 (although AGM would have to pay applicable interest on the loan in every year). As part of the negotiations for the additional financing, the bank wanted to restructure the terms of AGM's loan. Specifically, on top of providing additional debt financing, the bank agreed to charge AGM a lower interest rate in fiscal 2015 than it had been charged in fiscal 2014. However, the bank also insisted that AGM would now have to start re-paying back substantial portions of its debt by the end of fiscal 2016 instead of fiscal 2020. Moreover, AGM would be charged a higher interest rate on its loan (i.e., 20%) starting at the beginning of fiscal 2016. Leslie thought she needed the extra financing to help her firm grow, but wasn't entirely sure about how the additional financing would affect other elements of her business. In particular, while the new loan terms seemed to yield some benefits for fiscal 2015, they also appeared to generate some drawbacks for fiscal periods beyond 2015. You have been friends with Leslie for years. It is now November 2nd, 2014 and you just found the following email in your inbox: I need your MBA talents! My accountant just quit!! I'm having discussions with the bankers next week to negotiate a new loan, but I'm not even sure that I need one. Just before quitting, I asked the accountant to prepare pro-forma financial statements for fiscal 2015. I have the pro-forma balance sheet for 2015, but I cannot seem to find the pro-forma income statement or the proforma statement of cash flows. The bank will want to see these! Can you please help me? I've attached the financials that I have, as well as a list of underlying assumptions of our expectations for fiscal 2015. Thanks so much! Leslie. Exhibit 1: Assumptions and expectations for fiscal 20151 Fiscal year end for AGM is October 31st. Additional assumptions and expectations are listed below. 1) According to the new terms negotiated with the bank, the bank will provide AGM with an additional $3,680,000 of debt financing at the beginning of fiscal 2015. Interest payments totaled $115,000 in fiscal 2014, and interest payments are expected to increase to $460,000 in fiscal 2015. 2) During fiscal 2014, AGM paid out a total of $3,450,000 in cash relating to wages. In addition, wage expenses were allocated as follows. 80% of wage expenses were allocated to the manufacturing of the battery systems and the remaining amount was allocated to executive salaries. The expectation is that AGM will end up paying $4,855,000 in cash relating to wages during fiscal 2015 (and once again, in 2015 80% of the total wage expenses will be allocated to manufacturing the units, and 20% will relate to executive salaries). 3) AGM ended up making $1,725,000 in cash payments for inventory materials in fiscal 2014. In fiscal 2015, cash payments for inventory materials are expected to be 225% of what they were in fiscal 2014.2 This increase is not related to an increase in input costs, as AGM is expecting to get a unit discount on some of its inputs next year. This increase arose because AGM felt it needed to stock up on product to keep up with expected demand. 4) Cash collected from customers in fiscal 2015 is expected to increase by 20% from the $6,612,500 collected in fiscal 2014. 5) AGM's lawyer (Mark Eagleton) has been particularly impressed by AGM's future growth prospects. As a result, Leslie expects Mark to do all of AGM's patent filing for the BX2000 in 2015 in exchange for shares in the company. The value of the legal work to file the patents in multiple countries was expected to reach $250,000, and the patents were expected to be filed at the end of fiscal 2015. In addition, AGM is expecting to issue $230,000 of additional shares in fiscal 2015 (for cash). No shares were issued in fiscal 2014. 6) On November 1st, 2014, AGM got rid of one of its original pieces of equipment: the AlO2 Purifier Max. Leslie commented that, \"We realized on November 1st that the machinery was completely useless. The net carrying value on the balance sheet was $200,000 and I ended up immediately selling it for scrap for $10,000.\" 1 The impact of all assumptions has been incorporated in to the pro-forma financial statements for fiscal 2015. By \"cash payments for inventory materials are expected to be 225% of what they were in fiscal 2014\