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Confidentiality Agreement

The undersigned reader of Automagic.ais Business Plan hereby acknowledges that the information provided
is completely confidential and therefore the reader agrees not to disclose anything found in the business plan
without the express written consent of Automagic.ai.

It is also acknowledged by the reader that the information to be furnished in this business plan is in all aspects
confidential in nature, other than information that is in the public domain through other means and that any
disclosure or use of the same by the reader may cause serious harm and or damage to Automagic.ai.

Upon request this business plan document will be immediately returned to Automagic.ai.

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

Applicable Law

This contract shall be governed by the laws in the country of Australia.

__________________________________________________

Signature

__________________________________________________

Printed Name

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Overview

The United States is well below average for global math scores, reformation in the
mathematics curriculum in the United States is widely recognized for its need for reform.
Perfect Tutors provides live and in-person after school math tutoring for students.

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Table of Contents

Executive Summary ............................................................................................................... 5


Product & Service Summary ................................................................................................................. 6
Market Summary ................................................................................................................................. 6
Objectives ............................................................................................................................................ 7
Keys to Success .................................................................................................................................... 7
Mission Statement ............................................................................................................................... 7
Financing Summary .............................................................................................................................. 7

Product & Services ................................................................................................................ 7


Service Description ............................................................................................................................... 7

Industry Overview ................................................................................................................. 9


Market Needs .................................................................................................................................... 10
Market Trends ................................................................................................................................... 10
Market Growth .................................................................................................................................. 11
Market Segmentation......................................................................................................................... 12

Strategy & Implementation Summary .................................................................................. 13


Management Team ............................................................................................................................ 14
SWOT Analysis ................................................................................................................................... 16

Competitive Comparison ..................................................................................................... 17


Marketing Plan .................................................................................................................... 18
Promotion Strategy ............................................................................................................................ 18

Financial Projections............................................................................................................ 20
Startup Summary ............................................................................................................................... 20
Financial Highlights ............................................................................................................................ 21
Financial Indicators ............................................................................................................................ 22
Revenue Forecast ............................................................................................................................... 23
Projected Profit and Loss .................................................................................................................... 24
Projected Cash Flow ........................................................................................................................... 25
Projected Balance Sheet ..................................................................................................................... 26
Sensitivity Analysis ............................................................................................................................. 27

Appendix............................................................................................................................. 28

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Table of Figures

Figure 1: Organizational Chart ............................................................................................................................12


Figure 2: Post-Financing Expenses ......................................................................................................................16
Figure 3: Financial Highlights ..............................................................................................................................17
Figure 4: Financial Indicators ..............................................................................................................................18
Figure 5: Revenue Forecast .................................................................................................................................19
Figure 6: Profit & Loss .........................................................................................................................................20
Figure 7: Cash Flow .............................................................................................................................................21
Figure 8: Wages & Payroll ...................................................................................................................................22
Figure 9: Balance Sheet .......................................................................................................................................23
Figure 10: Scenario Analysis ................................................................................................................................24
Figure 11: Break-Even Analysis ...........................................................................................................................25
Figure 12: 12 Month Profit & Loss ......................................................................................................................26
Figure 13: 12 Month Cash Flow Statement.........................................................................................................27

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Executive Summary
Perfect Tutors is a growing in person after class tutoring service designed to help high school and
elementary school students to improve their academic skills, with a specialty on math. The company hires
university level teachers to provide one-on-one, group tutoring, summer school camps and other related
academic improvement activities.

Product & Service Summary

The public education system is widely recognized to not adequately prepare students for top competitive
universities and professional careers due to the imbalance in education provided at a more custom
levels.1 Many parents are concerned that their students are not receiving the education of their children
and the public schools inability to meet these standards.

Perfect tutors is designed to provide a highly tailored after school program that enables elementary
school children and high school children to learn at their own pace and under a more interactive, more
personal learning environment. The company provides small workshops, standardized test preparation,
holds competitions and an annual summer camp. Children may follow all the opportunities that Perfect
Tutors has to offer, or take part in a program that best first their needs.

Market Summary

According to a recent article by Forbes magazine and Global Industry Analysts, the global private tutoring
market is projected to surpass $1.208 B by 2018, driven by the failure of standard education systems to
cater to the unique needs of students, combined with growing parental desire to secure the best possible
education for their children.2 In the United States, revenue is an estimated $840.4 M with annual growth
of 0.9% expected in the next five years due to the industrys stability. The profit margin for the industry
is around 6% with a relatively high concentration level of 56 companies operating in the space, as many
competitors are unregistered freelancer workers (because of this, much of the revenue for the industry
is underestimated due to data being acquired only from registered companies).

1 Source: http://www.washingtonpost.com/blogs/answer-sheet/wp/2013/10/26/the-real-21st-century-problem-in-public-education/
2
Source: http://www.forbes.com/sites/jamesmarshallcrotty/2012/10/30/global-private-tutoring-market-will-surpass-102-billion-by-2018/

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Objectives

Perfect Tutors has objectives that it must meet in order to achieve its financial goals:

Scale to open 1,500 franchises in the USA and 100 in international markets in next 10 years.
Develop new curriculums through research and teacher training methods.
Refine and standardize the classroom design for a consistent image.
Focus on accelerated math courses and competitions for advanced students.
Create software that will help to standardize the classroom franchises for quality control.
Stay more organized internally and better streamline educational processes.
Host math and spelling bee contests locally in the town of operations.
Build a better future for students and their families through education.

Keys to Success

Perfect Tutors has keys to success that it must achieve in order to build its business and client base:

Create a more tailored learning experience, enabling students to reach their full potential.
Pushing students for performance beyond the normal classroom standards.
Focus on Chinese or Indian immigrant franchise holders, mainly educated women.
Making students score well above average for standardized tests, such as SAT-ACT.
Working closely with parents to keep them up to date on their childs performance.
Have a curriculum with continual improvement structured around the best learning
methods.
Scaling marketing and promotions to create a market awareness and increasing demand.

Mission Statement

The mission of Perfect Tutors is to provide a custom and interactive after school tutoring program so that
students may be guided to reach their full academic performance and potential.

Financing Summary

The company has been self-financed up to this point, however, it will need to have an immediate injection
of cash flows in order to scale its operations with the franchise model globally. Perfect Tutors is seeking
$1.0 M (USD) to cover new marketing expenses, the development of the franchise management system
and internal operations improvements to prepare the company to be scaled to new franchise locations.

Product & Services

Service Description

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Perfect Tutors specializes in tutoring after school tutoring programs that provides small and engaging
classroom environment learning conditions taught by university level academic professionals. Many of
the customers of Perfect Tutors are not satisfied with the current performance of the public education
system. They would like to invest in furthering their childrens education beyond the normal classroom
setting. In order to accommodate this market need, Perfect Tutors provides the following services:

Tutoring Services

The tutoring services consist of small classroom group setting with optional one on one tutoring services
available. The program covers Pre-K to K12 up to calculus, including problem solving skill courses. The
tutoring is designed to help students reach their individual potential and not be limited by the
performance of other students in a large classroom setting. The smaller course sizes enable more tailored
educational experiences and the experienced educational professionals engage students in the learning
process that not possible on a large scale. Unlike individual tutoring, a small class size also created an
environment of well performing students that can collaborate to solve problems. Perfect Tutors starts
tutoring services in Pre-K because it believes that education should start at an early age in Pre-K to build
a solid foundation for the future.

Summer Camp

The summer camp focuses on grades 1 -5 to have a focused teaching environment structured around the
latest teaching approaches and materials of Perfect Tutors. The summer camps include both half days
and full days in Overland Park, Kansas. With the franchise model, the venue location would change to
meet the location region and be adapted to the local market. The initiatives of the summer camp is to
make learning fun using educational games and competitions related to English, science and math.

Xpress Math

Xpress Math is the amalgam of the age-old principles of Vedic Math, Abacus Math and Brain Teasers.
Vedic Math increases mental agility, Abacus Math helps improving the comprehension abilities in math
and Brain Teasers sharpen your memory. Collectively Xpress Math will help children build the logics that
will make them excel in grade and competitive math, increase IQ level, while boosting up confidence.

Standardized Test Preparation

The ACT and SAT are college admission tests that determine students ability to perform in a university
setting. The standard grade point average is only a single aspect of the college review process and many
look to standardized tests to help forecast the academic performance and future potential of a high
school student. The tests measure critical thinking skills, problem solving, and other academic areas that
Perfect Tutors can help both directly and indirectly with.

It provides a three month course that consists of 12 classes ninety minutes each by highly experienced
professionals that are designed to help with all aspects to test preparation. Unlike many online
preparation courses, Perfect Tutors, provides custom programs by concentrating on weaker areas and
bringing out the best strengths. It is through this diagnostic that the company can provide a streamlined
and tailored service for students.

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Competitive Programs
Math Competition

The competitive math programs focuses on 1st to 8th graders to prepare them for competitions like Math
Olympiad, Math Kangeroo, KCATM, Math Bee, MATHCOUNTS and NSF for a monthly fee. This services
focuses on helping students to compete in high ranking math competitions from all aspects including
time and stress management, along with program solving and strategy building exercises.

English and Spelling Bee

The English focus is placed in the competition during the Spelling Bee, designed to reinforce spelling skills
by nurturing a competitive learning environment. Through these competitions, students can learn
beyond improving their English skills by competing against one another. It also prepares students for
competitive university programs and highly competitive professional careers.

Industry Overview

There is a significant demand for tutoring services in the United States, Europe and Asia-Pacific (notably
Hong Kong, Japan, Singapore, South Korea and China). These regions are responsible for more than 90%
of the global private tutoring market.3

A main target demographic in the United States is immigrant families that are not satisfied with the quality
of the public education system compared to their original country or expectations. The United States ranks
below the OECD average for math, reading and science scores for the global education sector. The absence
of a quality education system to meet expectations creates the demand for private tutoring services.

In other countries, such as South Korea, which accounts for roughly 15% of the entire global tutoring
market, education is held to high regard. Although the public education system focuses on math and
sciences, partners are still not often satisfied with the quality of their childrens education and prefer a
more in depth and competitive approach.

3
Source: http://thetutorreport.com/private-tutoring-set-to-exceed-102-8-billion-globally-by-2018/

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Market Needs

The key need for Perfect Tutors is the ability to help their children enter quality universities and achieve
professional careers in the competitive economy. Everything else is a means to reach this end, which
includes investing very early in the childs development for education.

Perfect Tutors understands these needs and structures its programs around not just improving the raw
intelligence of students, but also improving their social skills, SAT-ACT performance and general academic
management ability.

Market Trends

Overall, college enrollment rates have been dramatically increasing year over year. The public enrollment
rates in particular have seen a surge as more middle class families send their children to institutions. With
this growth, enrollment becomes more competitive and requires more competition amongst students for
higher SAT/ACT scores and more impressive backgrounds.

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Market Growth

The market will grow in line with the youth population rates, however, there is very little market volatility
caused from the economy compared to other industries. As more families have children, the wealth
distribution chart (located in the market segmentation section) remains relatively constant and the target
segment will surge in the next ten years.

As economics become more competitive and college enrollment rates increase, parents will also spend
more money on their childrens education to have a higher probability of getting them into top-tier
universities. In October 2013, 65.9 percent of 2013 high school graduates were enrolled in colleges or
universities4

4
Source: http://www.bls.gov/news.release/hsgec.nr0.htm

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United States Population Growth for Ages 1217 (In Millions)
27.0

26.5

26.0

25.5

25.0

24.5

24.0

23.5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Market Segmentation

In the United States market, the main demographic includes families with young children that generally
hold professional careers and are at least college educated, many graduate or post-graduate level earning
$70,000 per year or more. Several of the families are also immigrants and do not believe that the public
education sector properly teaching students and preparing them for top universities. The market size can
be estimated by region and youth as percent of the population.

Wealth Distribution by Income (Percent)

600% of poverty threshold and above

400599% of poverty threshold

200399% of poverty threshold

100199% of poverty threshold

5099% of poverty threshold

Below 50% of poverty threshold

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Approximately 30% of children are 200-399% above the poverty threshold, with approximately 13%
having household incomes six times or more the poverty threshold. This amount demonstrates significant
market potential to target wealthier students that may seek an additional supplement to the private
education system or as an alternative to a higher priced private school.

The families being targeted have a concern for their childrens academic performance and pursuing the
same path as the families. The demographic will likely be found in more affluent areas with a high density

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of business, science, academic or medical professionals. However, the market is also expected to be very
competitive in these regions and the company must refine its business model to compete aggressively in
these competitive markets to take advantage of the market share opportunities.

Strategy & Implementation Summary


Perfect Tutors has three strategies that is applies for scaling, staying efficient and focusing on the end
goal of the customer. The first is by implementing a franchise model, it can quickly scale the business
internationally by opening 1,500 franchises in the USA and 100 nationally within a 10 year period. It will
also enable a more regionally tailored experience, such that international franchises may source and
teach according to cultural and linguistic practices.

The second strategy focuses on efficiency to source better educators than the competition at higher
rates, while in taking and managing more pupils without sacrificing a customized learning process. The
company is developing a smart management platform that will more efficiently manage franchise
locations, curriculums and progress for more reliability and consistency. This ensures quality control and
lowers manual time commitment to reduce expenses.

The third focuses on the primary market need, that is, the bottom-line goal of preparing children for
professional jobs and acceptance into top universities. This means not just helping children in classes
they may struggle in, but focusing on high potential students with a multi-sided approach from social
summer camps to ACT-SAT exam practices with multiple levels of learning aside from just the content.

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Management Team

John Doe Chief Executive Officer

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Susan Miller Chief Operating Officer


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Kevin Jones -Chief Financial Officer


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Adrian Wilcourt Legal Compliance


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Organizational Chart

Adrian
Board/Investors
Wilcourt/Legal

John Doe/CEO

Susan Kevin
Miller/COO Jones/CFO

Marketing
Sales Director Accounting
Director

Sales Reps Collections

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SWOT Analysis

Strengths

Strong management team that is passionate about teaching students.


Future software that will make the company more efficient than competitors.
The business has a proven model and previous success in its operations.
The curriculums will be improved and updated based on prior experiences.
The educators part of Perfect Tutors are extremely reputable university level teachers.

Weaknesses

The company needs capital to scale the business internally before growing the franchise.
The company must improve its internal system before scaling to be more competitive.
There is always the risk unsatisfied parents or incidents and dealing with them remotely.

Opportunities

The company can easily scale nationally in very selective locations.


The tutoring market is growing quickly in the USA, Europe and Asia-Pacific.
A poor economy has little impact on the education sector and target demographics.
The target demographic of young students is expected to surge in the next 10 years.

Threats

Many companies are competing for market share internationally online.


In most markets, there are already tutoring services available.
There are many smaller and individual players that may offer more personal services.
There is always market risk in having control over the franchise operations and brand.

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Competitive Comparison

The market is very competitive, with many franchise based tutoring services, however they each have a
different business model and structure to their operations. Many focus on helping students that are
under-performing to achieve at par with other children, while even direct competitors focusing on
children learning at an advanced level only provide individual or group sessions focused on the classwork.
The competitive edge of Perfect Tutors is its multi-sided approach focusing on the end result, getting
children into top universities and high paying professional careers through academic excellence. It uses
academic professionals with top credentials and teaching experience to help children benefit and interact
in a focused learning environment. In order to cover the entire competitive landscape, we have
segmented competitors based on positioning.

High Performers

The tutoring companies that focus on higher performing students generally emphasize competitive
programs to maximize the potential of the children, opposed to close hands on assistance and instruction.
Class sizes vary, but smaller classes enable higher levels of engagement from individual students and
interactive workshops. The high performing specialists can be segmented into three areas. The first is
online or software assistance, where online tutoring services help children to learn problems by watching
videos. The second is small or large group classes that enable collaboration and greater efficiency. The
third is in-person individual specialist tutors at-home or a specific location.

Low Performers

The low performing segment focuses on getting children up to par with their peers in the classroom setting
by more engaging help. The tutoring is more focused around one on one engagement with children and
less competitions or public activities. Rather than emphasizing acceptance into top universities and
professional level careers, it emphasizes passing specific classes or getting grades parallel with peers. The
courses are not structured the same way and would make any tutoring service focusing on lower
performing students a poor competitor with Perfect Tutors.

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Marketing Plan

Franchising Promotion Strategy


The marketing tackles two segments, the first is promotion of the tutoring service to parents and
educators and the second is promotion of the franchising program to key cities for entry. Perfect Tutors
will target franchise companies to provide it as an option for individuals seeking a franchise. It will also
post the opportunity on relevant franchise websites and promote the program in collaboration with
universities, business research parks and other areas with a high density of educated individuals through
flyers.

It may also share the opportunity with many accounting firms in key target cities, which may share the
opportunity with existing clients seeking to start a franchise in the area of their interest. Finally, a separate
sub-domain of the website will be exclusive to promote the franchise with PPC marketing campaigns and
SEO for starting a tutoring franchise. Franchises will be strategically located nearby large shopping areas,
mainly Asian centric shopping locations.

Tutoring Promotion Strategy

Mass Promotions

The mass promotion efforts will be highly targeted around schools, professional areas such as business
districts, research parks or business innovation zones and schools. Flyers may be provided to franchise
holders that explain the service effectively with individuals responsible for placing them in strategic areas.
Local Internet advertisements with an educated reader base or parenting magazines may also be targeted,
along with more guerilla approaches such as classified advertisement sites. Television advertisements will
also be strategically broadcasted on Asian television channels.

Public Relations

The franchise location can immediately alert the press of its entry and a media kit may be available for
each new franchise to provide them. The kit will explain how Perfect Tutors operates, the story and
mission behind it, its strengths and offerings and visuals for content. The company will focus on public
relations when a new franchise location is about to begin operations to local media outlets.

Sales & Partnerships

Partnerships will be focused around with local schools in an attempt to acquire referrals for additional
math programs aside from the standard level. Discussions may be held with individual teachers in K-12
and also academic leaders for recommendations to parents. Franchise holders could also be encouraged
to attend parent teacher conferences to network with parents if allowed by the school.

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Website Strategy

The owner of the website if focusing on building an effective website with strong backend SEO. The
website is being continually optimized and reviewed to determine the best structure and content
organization for sales generation and conversions. As the company begins to scale its franchise model, a
separate division of the website will be designed to inform, engage and train franchise holders. The
company is also engaging in social media, which it may use to leverage its brand and keep parents engaged
outside the classroom.

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Financial Projections

The company expects that it will have three branches in 2015, five in 2016 and ten in 2017, bringing in a
minimum of $340,000 per year in 2017, to increase 100% or more per year. This is a conservative figure
given that with the franchise model, the company will be able to scale easier without massive
investments to capital expenditures.

The profit margin of 40-50% is unusually high, however the classroom compared to individual sessions
enables a higher return off each individual teacher and many of the expenses are pre-paid from the star-
up section and not accounted for in the financial model. The software is also expected to enable greater
profit margins by avoidance of hiring a franchise manager and the current administrative team having
sufficient background to both operate and scale the company.

The company is seeking $1.0 M to scale its operations to cover marketing expenses for the first two years
for the franchise and brand development, internal program and operations development and pre-paid
staffing expenses for the first two years. The exit strategy for the company is to pursue an IPO after
scaling through the franchise business model to reach a valuation to be placed on the NASDAQ.

Startup Summary

Startup Expenses Startup Liabilities


Marketing Expenses $100,000 Liabilities and Capital
Franchise Management System $90,000 Current Borrowing $0
Cirriculum Refinements $70,000 Long-Term Liabilities $0
Franchise Agreements $70,000 Accounts Payable $0
Operational Manual $30,000 Other Current Liabilities $0
Renovations of Sample Store $20,000
Pre-Paid Staffing Expense Year 1 $200,000
Startup Investments
Pre-Paid Staffing Expense Year 2 $200,000 Planned Investment
Total Startup Expenses $780,000 Owner $0
Investor 1,000,000
Startup Assets Total Planned Investment $1,000,000
Cash on Hand 220,000
Total Startup Assets $220,000 Startup Funding
Total Liabilities $0
Total Requirements Total Planned Investment 1,000,000
Total Startup Expenses $780,000 Total Funding $1,000,000
Total Startup Assets 220,000
Total Requirements $1,000,000

Startup Expenses
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Marketing Franchise Cirriculum Franchise Operational Renovations Pre-Paid Pre-Paid
Expenses Management Refinements Agreements Manual of Sample Staffing Staffing
System Store Expense Year Expense Year
1 2

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Financial Highlights

The financial highlights are how the company is projected to perform over the course of the next twelve months
and three to five years. The projections are based on comparable facilities based on estimated revenue range
and size, along with geographic location. We have assumed that for at least the first six-months of post-money
financing that expenses may be greater than revenues while the company invests into growth.

Financial Highlights ($000)


Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 Year 2 Year 3
Revenue 18 18 18 18 40 9 9 18 35 35 35 53 303 453 857
Gross Margin 17 17 17 17 38 8 8 17 33 33 33 50 288 430 814
Operating Expense 12 12 12 12 12 12 12 12 12 12 12 12 144 182 226
EBITDA 5 5 5 5 26 (4) (4) 5 21 21 21 38 144 248 372
Net Profit 4 4 4 4 24 (3) (3) 4 20 20 20 35 132 228 343

Gross Margin/Revenue 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95%
EBITDA/Revenue 26% 26% 26% 26% 65% -42% -42% 26% 61% 61% 61% 72% 47% 55% 43%
Net Profit/Revenue 24% 24% 24% 24% 59% -39% -39% 24% 56% 56% 56% 66% 44% 50% 40%

Net Cash Flow 5 5 4 5 26 (6) (4) 5 20 21 21 32 132 228 343


Cash Balance - Ending 5 9 13 18 43 37 34 38 58 79 100 132 132 360 703

Projected Operating Highlights By Year ($000) Projected Revenues By Year ($000)


1000 900
800
800
700
600 600
500
400
400
200 300
200
0
Year 1 Year 2 Year 3 100
0
Revenue Gross Margin EBITDA Net Profit Year 1 Year 2 Year 3

Projected Cash Flow By Year ($000) Projected Net Income By Year ($000)
800 400
700 350
600
300
500
250
400
300 200
200 150
100 100
0
50
Year 1 Year 2 Year 3
0
Net Cash Flow Cash Balance Year 1 Year 2 Year 3

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Financial Indicators

The company believes that it can reach an increasing net profit margin due to economies of scale. Through
investments in capital expenditures, it may decrease its general and administrative expenses. Financial
indicators are based upon the performance of comparable companies in the same asset class, revenue
range and age both from publicly available information and our internal database of research.

Financial Indicators
Year 1 Year 2 Year 3
Profitability %'s:
Gross Margin 95% 95% 95%
Net Profit Margin 44% 50% 40%
EBITDA to Revenue 47% 55% 43%
Return on Assets 12% 17% 20%
Return on Equity 12% 17% 20%

Financial Indicators
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Year 1 Year 2 Year 3

Gross Margin Net Profit Margin EBITDA to Revenue Return on Assets

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Revenue Forecast

Revenue Forecast
Year 1 Year 2 Year 3
Revenue Forecast
Tutoring (Math & English) $ 281,134 $ 386,559 $ 790,689
Summer Camp $ 22,000 $ 66,000 $ 66,000
Total Revenue $ 303,134 $ 452,559 $ 856,689

Direct Cost of Revenue


Tutoring (Math & English) $ 14,057 $ 19,328 $ 39,534
Summer Camp $ 1,100 $ 3,300 $ 3,300
Subtotal Cost of Revenue $ 15,157 $ 22,628 $ 42,834

Year 1 Revenue Monthly


60,000

50,000

40,000

30,000

20,000

10,000

-
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12
Revenue By Year
900
800
700
600
500
400
300
200
100
0
Year 1 Year 2 Year 3

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Projected Profit and Loss

The profit and loss assume that the company will have margins at a comparable level to companies within
its industry. While management might not have incurred exactly for future operating expenses, they have
been assumed to reasonable reach comparable profit margins to industry comparables. The management
will operate with minimal expenditures to focus on R&D and commercialization expenses until the
company has sufficient income to support dividend distribution.

Historical & Pro Forma Profit and Loss


2012 2013 2014 2015 2016
Revenue $ 84,384 $ 178,928 $ 303,134 $ 452,559 $ 856,689
Subtotal Cost of Revenue $ - $ - $ 15,157 $ 22,628 $ 42,834
Total Cost of Revenue $ - $ - $ 15,157 $ 22,628 $ 42,834

Gross Margin $ 84,384 $ 178,928 $ 287,977 $ 429,931 $ 813,854


Gross Margin/Revenue 100% 100% 95% 95% 95%

Expenses
Rent lease $ 18,716 $ 34,868 $ 100,044 $ 100,044 $ 100,044
Supplies $ 7,558 $ 8,442 $ 12,804 $ 25,608 $ 38,412
Utilities $ 3,115 $ 5,858 $ 9,456 $ 9,456 $ 9,456
Webserivices/Internet marketing $ 4,355 $ 2,153 $ 1,800 $ 5,400 $ 10,800
Summer Camp Teacher $ - $ - $ 2,352 $ 4,704 $ 9,408
Trade Shows/Events $ - $ - $ 12,000 $ 12,000 $ 18,000
Travel $ - $ - $ - $ 5,000 $ 10,000
Misc. SG&A $ 14,301 $ 37,993 $ 6,000 $ 20,000 $ 30,000
Total Operating Expenses $ 48,045.0 $ 89,313.6 $ 144,456 $ 182,212 $ 226,120
Wages & Payroll $ 42,932 $ 94,826 $ - $ - $ 215,300
Depreciation, Amortization & Taxes 0 0 $ 11,482 $ 19,818 $ 29,795
Net Income $ (6,593.0) $ (5,211.7) $ 132,039 $ 227,901 $ 342,639
Net Income/Revenue -8% -3% 44% 50% 40%

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Projected Cash Flow

Pro Forma Cash Flow


Year 1 Year 2 Year 3
Beginning Cash Balance $ - $ 132,039 $ 359,941
Cash Inflows
Income from Sales $ 303,134 $ 452,559 $ 856,689
Accounts Receivable $ - $ - $ -
Total Cash Inflows $ 303,134 $ 452,559 $ 856,689

Cash Outflows

Investing Activities
New Fixed Assets Purchases $ - $ - $ -
Inventory Addition to Bal.Sheet $ - $ - $ -
Cost of Sales $ 15,157 $ 22,628 $ 42,834

Operating Activities
Salaries and Wages $ - $ - $ 215,300
Fixed Business Expenses $ 144,456 $ 182,212 $ 226,120
Taxes $ 11,482 $ 19,818 $ 29,795

Financing Activities
Loan Payments $ - $ - $ -
Line of Credit Interest $ - $ - $ -
Line of Credit Repayments $ - $ - $ -
Dividends Paid $ - $ - $ -

Total Cash Outflows $ 171,094.37 $ 224,657.46 $ 514,049.16


Cash Flow $ 132,039.35 $ 227,901.40 $ 342,639.41
Operating Cash Balance $ 132,039.35 $ 359,940.75 $ 702,580.16
Ending Cash Balance $ 132,039.35 $ 359,940.75 $ 702,580.16

Year 1 Cash
3,000,000

2,500,000 Net Cash Flows

2,000,000

1,500,000

1,000,000

500,000
Cash Balance

-
Month Month Month Month Month Month Month Month Month Month Month Month
(500,000) 1 2 3 4 5 6 7 8 9 10 11 12

25
Projected Balance Sheet

The projected balance sheet assumes that there are no dividend draws and all cash flow is re-invested
back into the company at the end of the year. The balance sheet does not assume any line of credits or
account receivables that are outstanding at the end of the year and that the company will have paid off
all liabilities. Likewise, it assumes that all accounts will pay within thirty-days and there will be no
delinquency of payments.

Pro Forma Balance Sheet


Year 1 Year 2 Year 3
Assets
Current Assets
Cash $ 132,039 $ 359,941 $ 702,580
Other Current Assets $ 780,000 $ 780,000 $ 780,000
Total Current Assets $ 912,039 $ 1,139,941 $ 1,482,580

Long-term Assets
Long-term Assets $ 220,000 $ 220,000 $ 220,000
Accumulated Depreciation $ - $ - $ -
Total Long-term Assets $ 220,000 $ 220,000 $ 220,000
Total Assets $ 1,132,039 $ 1,359,940 $ 1,702,580

Liabilities and Capital


Current Liabilities
Accounts Payable $ - $ - $ -
Current Borowing $ - $ - $ -
Other Current Liabilities $ - $ - $ -
Subtotal Current Liabilities $ - $ - $ -

Long-term Liabilities $ - $ - $ -
Total Liabilities $ - $ - $ -

Common Stock $ 1,000,000 $ 1,000,000 $ 1,000,000


Retained Earnings $ 132,039 $ 359,941 $ 702,580
Total Capital $ 1,132,039 $ 1,359,941 $ 1,702,580
Total Liabilities and Capital $ 1,132,039 $ 1,359,940 $ 1,702,580

26
Sensitivity Analysis

Best Case Scenario (Revenue Increase by 15% )


Year 1 Year 2 Year 3
Revenue $ 348,604 $ 520,443 $ 985,192
Cost of Goods Sold $ 17,430 $ 26,022 $ 49,260
Gross Margin $ 331,174 $ 494,421 $ 935,932
Gross Margin/Revenue 95% 95% 95%
Operating Expenses $ 144,456 $ 182,212 $ 226,120
EBIT $ 186,718 $ 312,209 $ 709,812
EBIT/Revenue 54% 60% 72%

Worst Case Scenario (Revenue Decrease by 15% )


Year 1 Year 2 Year 3
Revenue $ 257,664 $ 384,675 $ 728,185
Cost of Goods Sold $ 12,883 $ 19,234 $ 36,409
Gross Margin $ 244,780 $ 365,441 $ 691,776
Gross Margin Revenue 95% 95% 95%
Operating Expenses $ 144,456 $ 182,212 $ 226,120
EBIT $ 100,324 $ 183,229 $ 465,656
EBIT/Revenue 39% 48% 64%

Revenue
$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$-
Year 1 Year 2 Year 3

Best Case Most Likely Worst Case

27
Appendix

Year 1 Profit & Loss


Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Revenue $ 17,571 $ 17,571 $ 17,571 $ 17,571 $ 39,571 $ 8,785 $ 8,785 $ 17,571 $ 35,142 $ 35,142 $ 35,142 $ 52,713
Subtotal Cost of Revenue $ 879 $ 879 $ 879 $ 879 $ 1,979 $ 439 $ 439 $ 879 $ 1,757 $ 1,757 $ 1,757 $ 2,636
Total Cost of Revenue $ 879 $ 879 $ 879 $ 879 $ 1,979 $ 439 $ 439 $ 879 $ 1,757 $ 1,757 $ 1,757 $ 2,636

Gross Margin $ 16,692 $ 16,692 $ 16,692 $ 16,692 $ 37,592 $ 8,346 $ 8,346 $ 16,692 $ 33,385 $ 33,385 $ 33,385 $ 50,077
Gross Margin/Revenue 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% 95%

Expenses
Rent lease $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337
Supplies $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067 $ 1,067
Utilities $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788 $ 788
Webserivices/Internet marketing $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
Summer Camp Teacher $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196 $ 196
Trade Shows/Events $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Travel $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Misc. SG&A $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500 $ 500
Total Operating Expenses $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038 $ 12,038

EBIT $ 4,654 $ 4,654 $ 4,654 $ 4,654 $ 25,554 $ (3,692) $ (3,692) $ 4,654 $ 21,347 $ 21,347 $ 21,347 $ 38,039
EBIT/Revenue 26% 26% 26% 26% 65% -42% -42% 26% 61% 61% 61% 72%

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Year 1 Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cash Received

Revenue
$ 17,570.9 $ 17,570.9 $ 17,570.9 $ 17,570.9 $ 39,570.9 $ 8,785.4 $ 8,785.4 $ 17,570.9 $ 35,141.7 $ 35,141.7 $ 35,141.7 $ 52,712.6
New Current Borrowing
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Long-Term Liabilities
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Other Current Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Sale of Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
New Investment Received
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Subtotal Cash Received
$ 17,570.9 $ 17,570.9 $ 17,570.9 $ 17,570.9 $ 39,570.9 $ 8,785.4 $ 8,785.4 $ 17,570.9 $ 35,141.7 $ 35,141.7 $ 35,141.7 $ 52,712.6

Expenditures

Expenditures from Operations


$ 12,916.5 $ 12,916.5 $ 14,033.6 $ 12,916.5 $ 14,016.5 $ 14,598.6 $ 12,477.3 $ 12,916.5 $ 15,579.8 $ 13,795.1 $ 13,795.1 $ 21,132.2
Subtotal Spent on Operations
$ 12,916.5 $ 12,916.5 $ 14,033.6 $ 12,916.5 $ 14,016.5 $ 14,598.6 $ 12,477.3 $ 12,916.5 $ 15,579.8 $ 13,795.1 $ 13,795.1 $ 21,132.2

Additional Cash Spent

Current Borrowing Repay


$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
L-T Liabilities Principal Repay
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Inventory
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Purchase Long-Term Assets
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Dividends
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Cash Spent
$ 12,916.5 $ 12,916.5 $ 14,033.6 $ 12,916.5 $ 14,016.5 $ 14,598.6 $ 12,477.3 $ 12,916.5 $ 15,579.8 $ 13,795.1 $ 13,795.1 $ 21,132.2

Net Cash Flow


$ 4,654.3 $ 4,654.3 $ 3,537.3 $ 4,654.3 $ 25,554.3 $ (5,813.2) $ (3,691.8) $ 4,654.3 $ 19,561.9 $ 21,346.6 $ 21,346.6 $ 31,580.4
Cash Balance
$ 4,654.3 $ 9,308.6 $ 12,845.9 $ 17,500.2 $ 43,054.5 $ 37,241.4 $ 33,549.5 $ 38,203.8 $ 57,765.7 $ 79,112.4 $ 100,459.0 $ 132,039.3

29