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NEIGs financial plan is comprised of financial projections for the first five years of operations.

Attached are the income statement, balance sheet, and statement of cash flows, along with other
supportive pieces of the financial model. NEIGs fiscal year is from January 1 to December 31.
Based on the thorough analysis of the industry, market research and an efficient business model,
NEIG will successfully launch the product nationally and remain a profitable entity.
Initial Capitalization
NEIG will require $350,000 in paid-in capital in the first month of operations. The Company
plans on securing this financing from external investors. NEIG team is working for free currently
which not only shows their commitment to the organization but also their belief into the
business. The capital will fund initial startup costs, including a salesperson, an administrative
assistant, travel expenses, marketing, a website, a professional sales video, legal expenses,
insurance, and other office expenses. Securing this equity is highly critical to the launch of
operations since the initial start-up funds will be used to initiate marketing efforts like visiting
various trade shows, conferences and live product demonstrations.
NEIG should be cash positive from year one and should generate a positive net income in all
years of operation. The gross profit margin will remain relatively stable at 38% since the
contracts for purchase of machines are already in place. By year three, NEIG should have
generated enough cash to be able to fund expansion into new regions.
Financial Statement Explanations & Assumptions
Income Statement
Sales Revenue: NEIGs revenues are derived from the sale of the P-3000LM machines. Even
though NEIG is exploring options of leasing the machines to the hospitals in partnership with
external lenders and providing external servicing and maintenance contracts, the revenue from
leasing and maintenance are not considered in the projections. Harmonys revenues are derived
from both products and services. The number of P-3000 LM projected to be sold are estimated
from the number of hospitals in the target segment that will be first to accept the new technology
for waste disposal. This number has been estimated from the interviews carried out with a
sample of hospitals in the New England region. The price for a single machine will be kept
constant for the first two years at $265,000 (plus transportation costs) with a price escalation of
3% going forward every year. After five years, NEIG will increase the price to $295,000 after
having established itself as a proven alternative to current disposable techniques.
Cost of Goods Sold: The cost of goods sold consists of cost of the machine being sold.
SterAssure currently demands $165,000 for every single machine sold by NEIG with freight
being proposed to be paid by the end customer. Commission of $10,000 per machine sold will be
offered by NEIG during the initial years to motivate the sales team.

Salary: For the first 7 months of operations, the management and employees will work on
reduced salary. Once the cash flows stabilize, the salary will be increased proportionately.

Annual

President
CFO
VP Strategy & Marketing & Sales
Admin (Part time initially)

$
$
$
$

150,000
150,000
150,000
55,000

Annual rate
for first 7
months

$
$
$
$

60,000
60,000
60,000
24,000

Overhead Expense:
Rent: NEIG will be working out of a suite in Newton, MA. With the current leasing rate of
$25/square foot, NEIG will pay $3,000 rent per month for the space. 1
Utilities: Monthly costs of utilities, including water, electricity, and heat, are forecasted to equal
$7,250
Depreciation/Amortization: NEIG will depreciate the PP&E over a period of 5 years, using
straight-line depreciation.
Insurance Expense: NEIG will be paying $500 per month for the inventory and premises.
Advertising and Promotions Expenses: The advertising and sales expenses include marketing,
travelling and attending trade shows, and event marketing. Rob, Bill and Beth are each expected
to travel and attend conferences and trade shows every month.
SG&A (Including Personnel Expenses): NEIG will hire additional sales rep as and when the
volume starts to increase. NEIG will also hire additional staff to deal with customer service.
Taxes: NEIG is organized as a LLC. As a result, it does not pay taxes.
Balance Sheet
Cash: NEIG will target to maintain one month of sales as a target cash balance. Excess cash at
month end, before interest income, will be allocated to buy short-term investments.
Investments: Investments for NEIG are classified as short-term Investments, such as a bank
savings account and CDs. If the need for cash should arise, the investments will be liquidated
and the funds transferred back into the cash account.
Accounts receivable: NEIG will provide a period of 30 days to the hospitals after installations to
pay the bills.
1 http://www.cityfeet.com/cont/ma/boston-retail-space#pgNum=2;
http://www.officespace.com/Boston-MA

Merchandise Inventory: NEIG will target to maintain 1 day of inventory. Inventory will consists
of spares and other parts required for general maintenance.
Building & Equipment: NEIGs office space will be renovated by items like chairs and desks,
supply closets, as well as causal as casual furniture and fixtures. This also includes the IT
hardware and software that are purchased for operations.
Depreciation: NEIG will depreciate its PP&E over a period of 5 years, using straight-line
depreciation.
Accounts Payable: NEIG will pay SterAssure within 45 days of purchase.
Financial Ratios
The ratios have been generated using five-year pro-forma financials (see Figure 6). Key results
from the ratios are as follows:

While the gross profit margin stays at approximately 44%, the net profit margin is
trending upward. This is the result of fixed costs, such as corporate staff, and IT being
paid over larger revenue.
The cash conversion cycle is projected to remain constant. For the purpose of the model,
inventory will consist of spares and parts required for maintenance services. Receivables
from hospitals will be collected within 30 days of sale. NEIG has a fixed term of payment
to SterAssure of 45 days which is modelled to remain at the same number.

Profitability
Gross Profit Margin
Net Profit Margin

Year 1

Year 2

Year 3

Year 4

Year 5

38%
17%

38%
18%

39%
23%

40%
28%

40%
31%

Working Capital
Inventory Days
Average Receivable
Days
Average Payable
Days
Working Capital
Cycle

(14)

30

30

30

30

30

45

45

45

45

45

(14)

(14)

(14)

(14)

Sensitivity Analysis
NEIG is aware that several factors can affect the validity of a business model, especially
one participating in the reselling industry. The most critical element that could affect

NEIGs expansion is lower than expected market penetration. Since the cost of goods sold are
fixed because of existing contracts, the sensitivity of the model to changes in COGS is not
critical.
Lower than expected revenue:
The greatest threat to NEIG is the possibility of lower than projected sales. For example, if the
number of machines being sold falls below half of the forecasted sales, the company will likely
incur cash losses till year 2. (see Exhibit ). Though no additional funding will be required, if this
scenario were to materialize, the management team would attempt to bring the revenues up
through revamping marketing efforts.

Exhibit
Income Statement, Fiscal Year 1

Balance Sheet, Fiscal Year 1

Cash Flow Statement, Fiscal Year 1

Income Statement, Fiscal Year 1-5


Year
1

Year
2

Year
3

Year
4

Year
5

Reven
ue
Sales
Warrant
y
COGS
Gross Profit

$
3,710,000
$
$
2,310,000
$
1,400,000

Gross Profit %

$
6,625,000
$
148,400
$
4,166,250
$
2,607,150

38%

$
10,600,000
$
413,400
$
6,732,660
$
4,280,740

38%

$
16,758,600
$
689,000
$
10,539,979
$
6,907,621

39%

$
24,813,540
$
1,094,344
$
15,452,970
$
10,454,914

40%

40%

SG&A Expenses

Commissions
Payroll
Payroll taxes & Fringe
Insurance workers comp
Health & Dental
Insurance
Office Space
Office Equipment &
supplies
Communications

$
140,000
$
293,500
$
117,400
$
2,050
$
$
28,500
$
2,950
$
3,000

$
250,000
$
631,520
$
252,608
$
3,600
$
$
36,000
$
6,000
$
3,000

$
400,000
$
746,835
$
298,734
$
3,708
$
$
37,080
$
6,180
$
3,090

$
620,000
$
785,909
$
314,363
$
3,819
$
$
38,192
$
6,365
$
3,183

$
900,000
$
919,413
$
367,765
$
3,934
$
$
39,338
$
6,556
$
3,278

Total Expenses

$
6,000
$
27,900
$
19,000
$
10,800
$
13,000
$
6,000
$
35,500
$
48,000
$
3,036
$
7,681
$
37,100
$
764,317

$
6,000
$
32,400
$
24,000
$
14,400
$
6,000
$
6,000
$
60,000
$
48,000
$
3,636
$
$
66,250
$
1,383,164

$
6,180
$
33,372
$
24,720
$
14,832
$
6,180
$
6,180
$
61,800
$
49,440
$
5,576
$
$
106,000
$
1,703,907

$
6,365
$
34,373
$
25,462
$
15,277
$
6,365
$
6,365
$
63,654
$
50,923
$
7,516
$
$
167,586
$
1,988,133

$
6,556
$
5,404
$
6,225
$
5,735
$
6,556
$
6,556
$
5,564
$
2,451
$
,
456
$
$
248,135
$
2,464,790

Operating Profit

$
635,683

$
1,223,986

$
2,576,833

$
4,919,488

$
7,990,125

Income Before Tax

$
$
635,683

$
$
1,223,986

$
$
2,576,833

$
$
4,919,488

$
$
7,990,125

Taxes

$
-

$
-

$
-

$
-

$
-

Insurance Risk
Air
Travel
Meals, Entertainment &
Travel
Marketing, trade
show,ETC
Legal Expense and IP
Accounting Fees
Consulting Expense
Corp Communication
Depreciation
Startup Expenses
Warranty Expenses

Interest

$
635,683

Net Income

$
1,223,986

$
2,576,833

$
4,919,488

$
7,990,125

Balance Sheet, Fiscal Year 1-5


Year
1

Year
2

Year
3

Year
4

Year
5

Asse
ts
Current Assets
Cash
Investments
Inventory
Accounts
Receivables
Others
Total Current
Assets
Fixed Assets
Buildings and
Improvements
Fixtures and
Equipments
Less Accumulated
Depreciation
Net FA

$
140,094
$
325,528
$
495,000
$
795,000

$
977,241
$
1,490,523
$
11,573
$
552,083

$
1,330,456
$
3,603,378
$
18,702
$
883,333

$
1,426,200
$
8,506,597
$
29,278
$
1,396,550

$
1,663,017
$
16,395,644
$
42,925
$
2,067,795

$
1,755,622

$
3,031,420

$
5,835,869

$
11,358,625

$
20,169,382

$
7,500
$
7,681
$
3,036
$
12,145

$
8,000
$
10,181
$
6,672
$
11,509

$
12,200
$
15,681
$
12,249
$
15,632

$
16,400
$
21,181
$
19,765
$
17,816

$
20,600
$
26,681
$
29,221
$
18,060

Total Assets

$
1,767,766

$
3,042,929

$
5,851,501

$
11,376,441

$
20,187,442

$
742,500
$
39,583
$
782,083

$
742,500
$
440,760
$
1,183,260

$
841,583
$
573,418
$
1,415,000

$
1,317,497
$
702,954
$
2,020,452

$
1,931,621
$
909,707
$
2,841,328

$
-

$
-

$
-

$
-

$
-

$
782,083

$
1,183,260

$
1,415,000

$
2,020,452

$
2,841,328

$
350,000
$
635,683

$
350,000
$
1,509,669

$
350,000
$
4,086,501

$
350,000
$
9,005,989

$
350,000
$
16,996,114

$
985,683

$
1,859,669

$
4,436,501

$
9,355,989

$
17,346,114

$
1,767,766

$
3,042,929

$
5,851,501

$
11,376,441

$
20,187,442

Liabilities and Shareholder's


Equity
Current Liabilities
Accounts
Payables
Others
Total Current
Liabilities
Non Current Liabilities
Long Term Debt

Total Liabilities
Shareholder's Equity
Paid up Capital
Retained Earnings
Total
Shareholder's
Equity
Total Liabilities and
Shareholder's Equity

Cash Flow Statement, Fiscal Year 1-5


Year
1

Year
2

Year
3

Year
4

Year
5

Cash Flow from Operating


Activities
Net Income

$
635,683

$
1,223,986

$
2,576,833

$
4,919,488

$
7,990,125

Add Depreciation and


Amortization

$
3,036

$
3,636

$
5,576

$
7,516

$
9,456

$
(795,000)
$
(495,000)
$
742,500
$
39,583

$
242,917
$
483,427
$
$
401,177

$
(331,250)
$
(7,129)
$
99,083
$
132,658

$
(513,217)
$
(10,576)
$
475,915
$
129,537

$
(671,245)
$
(13,647)
$
614,124
$
206,752

$
130,802

$
2,355,142

$
2,475,770

$
5,008,663

$
8,135,565

$
(7,500)
$

$
(500)
$

$
(4,200)
$

$
(4,200)
$

$
(4,200)
$

Changes in Working
Capital
Accounts
Receivables
Inventory
Accounts Payables
Others
Net Cash from
Operating Activities
Cash Flow from Investing
Activites
Buildings and
Imrovements
Fixtures and Equipments

Investments

(7,681)
$
(325,528)

(2,500)
$
(1,514,995)

(5,500)
$
(2,112,855)

(5,500)
$
(4,903,219)

(5,500)
$
(7,889,048)

Net Cash Used in


Investing Activities

$
(340,709)

$
(1,517,995)

$
(2,122,55
5)

$
(4,912,919
)

$
(7,898,748)

$
$
$
350,000

$
$
$
-

$
$
$
-

$
$
$
-

$
$
$
-

$
350,000

$
-

$
-

$
-

$
-

$
$
140,094
$
140,094

$
140,094
$
837,147
$
977,241

$
977,241
$
353,215
$
1,330,456

$
1,330,456
$
95,744
$
1,426,200

$
1,426,200
$
236,817
$
1,663,017

Cash Flow from Financing


Activities
Proceeds from Long
Term Debt
Payment of Long Term
Debt
Issue of Equity
Net Cash Provided
from Financing
Activities

Beginning Cash Balance


Increase (Decrease) in Cash
Ending Cash
Balance

Sensitivity Analysis:
Original Forecast
Year 1
# of Machines Sold
Revenue
COGS
Cash from Operations
Cash and Short Term
Investments
Net Income
Retained Earnings

14
$
3,710,000
$
2,310,000
$
130,802
$
465,622
$
635,683
$
635,683

Sales fall to 50% of forecast


Year 1
# of Machines Sold
8
Revenue

$ 2,120,000

COGS

$ 1,320,000
$
(54,198)

Cash from Operations


Cash and Short Term
Investments
Net Income

$
$

280,622
95,683

Year 2
25
$
6,773,400
$
4,166,250
$
2,355,142
$
2,467,764
$
1,223,986
$
1,509,669

Year 2
11
$
2,999,800
$
1,833,150
$
450,290
$
377,912
$

Year 3

Year 4

Year 5

40
$
11,013,400
$
6,732,660
$
2,475,770
$
4,933,834
$
2,576,833
$
4,086,501

62
$
17,447,600
$
10,539,979
$
5,008,663
$
9,932,797
$
4,919,488
$
9,005,989

90
$
25,907,884
$
15,452,970
$
8,135,565
$
18,058,662
$
7,990,125
$
16,996,114

Year 4

Year 5

Year 3
16
$
4,441,400
$
2,693,064
$
348,990
$
717,202
$

22
$
6,232,800
$
3,739,993
$
947,468
$
1,654,970
$

29
$
8,402,938
$
4,979,290
$
1,660,797
$
3,306,067
$

Retained Earnings

95,683

(76,514)
$
(330,831)

284,429
$
(46,403)

904,674
$
858,272

Cost Assumptions

Annual
President

150,000

CFO
VP Strategy & Marketing &
Sales

150,000

150,000

Admin
Director Customer Service

$
$

55,000
85,000

Monthly
$
12,500
$
12,500
$
12,500
$
4,583
$

annual rate for


first 7 months;
shorter if sales
are better
$

60,000

60,000

60,000

24,000
-

1,568,858
$
2,427,130

7,083

Office Set
Up
Tables and
Chairs
Storage
Units
Stationery

Cost/Unit
$
170
$
99
$
500

Unit
s

Total
Costs

Comments

680

IKEA Micke Table and Malcolm Chairs

198

IKE Eric File Cabinet

$
500
$
1,378

Unit
s
4

Total
Costs
$ 2,600

Total
Hardware
Dell
Inspiron
15 5000

Cost/Unit
$
650

4th Generation Intel Core i5 Processor, Windows


8.1, 8GB Memory, 1TB Hard Drive

Series
Dell Power
Edge
Server
Linksys
WRT54GL
Router
Netgear
DM111PSP
Modem
Printer,
Scanner
and Fax

$
620

620

$
48

48

Amazon

$
50

50

Amazon

$
75

Total

$
75
$
3,393

Additiona
l
Enterprise
Software
Domain
Registratio
n
Website
Developm
ent

DELL - POWEREDGE 2800 BASE - 2X XEON DUALCORE 2.8GHZ 2 GB RAM 1X 36GB 10K HDD 1X
GIGABIT ETHRNET DVD ROM ILO DUAL ULTRA320
SCSI RPS RAILS 5U RACK SERVER

Cost/Unit
$
350

Unit
s

Total
Costs

350

$
40

40

$
2,500

$ 2,500

HP Envy 4500 e-All-in-One Printer

Webhostin
g

$
20

Total

Other FA
Travel
Hotels per night
Flights
Flights per
month

$
20
$
2,910

$ 7,500

$
$

100
600
3