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Rob Westerlund

Business Plan
TABLE OF CONTENTS

I. Executive Summary…………...……………………………………………5

II. Company Description……………………..………………………………………..10


A. Company Name…………...………………………..……………………………10
B. Mission Statement………………………….….…………………..…………….10
C. Vision Statement……………………………………………...…………………11
D. Form of Business………………………………………………………………...11
E. Products and Services……………………………………………………………11
F. Management/Leadership………………………………………………...………11
G. Location and Geographical Information…………………………………………12

III. The Target Market………………………………………………...…..……………13


A. Demographics/Geographics……………………………………………………..13
B. Lifestyle and Psychographics……………………………………………………14
C. Purchasing Patterns………………………………………………………………15
D. Buying Sensitivities……………………………………………………………...15
E. Market Size and Trends………………………………………………………….15
F. The Competition…………………………………………………………………16

IV. Strategic Position and Risk Assessment……………………………...………..18


A. SWOT Analysis………………………………………………………………….18
B. Legal Risk Assessment…………………………………………………………..19

V. Marketing Plan and Sales Strategy………………………………..……………29


A. Company’s Message……………………………………………………………..29
B. Our Customer…………………………………………………………………….29
C. Marketing Strategy……………………………………………………………….30
D. Strategic Partnership……………………………………………………………..30
E. Sales Structure…………………………………………………………………...30
VI. Operations…………………………………….………………………………………31
A. Plant and Facilities…………………….…………………………………………31
B. Manufacturing/Production Plan………………………………………………….31
C. Labor Requirements ……………………………………………………………..32
D. Quality Control…………………………………………………………………..34
E. Equipment and Furniture………………………………………………………...34
F. Inventory and Management……………………………………………………...35
G. Supply Distribution………………………………………………………………36
H. Order Fulfillment and Customer Service………………………………………...36
I. Research and Development………………………………………………………37
J. Financial Control………………………………………………………………...37
K. Contingency Planning……………………………………………………………37

VII. Technology Plan……………………………………..………………………………39


A. Technology Goals and Position………………………………………………….39
B. Internet Goals and Plan…………………………………………………………..40
C. Software Needs…………………………………………………………………..40
D. Hardware Needs………………………………………………………………….41
E. Telecommunication Needs……………………………………………………….41
F. Technology Personnel Needs…………………………………………………….42

VIII. Management and Organization………………………………………………….43


A. Key Employees/Principals…………….….……….………….………………….43
B. Compensation and Incentives……………………………………………………44
C. Advisory Committee……………………………………………………………..44
D. Management to be Added………………………………………………………..44
E. Organizational Chart……………………………………………………………..45
IX. Development, Milestones & Exit Plan………………………………………….47
A. Long-Term Company Goals……………………………………………………..47
B. Growth Strategy………………………………………………………………….47
C. Milestones………………………………………………………………………..47
D. Exit Plan………………………………………………………………………….48

X. The Financials………………………………….…………………………………….49
A. Sales/Revenue Forecast………………………………………………………….49
B. Cost of Goods Sold………………………………………………………………51
C. SG & A Expenses………………………………………………………………..53
D. Financing…………………………………………………………………………56
E. Income Statement………………………………………………………………...57
F. Cash-Flow Projection…………………………………………………………….59
G. Break-Even Analysis…………………………………………………………….61

XI. Appendix………………………………………………………………………………62
Executive Summary
The Company
Halo Technologies has developed a location system which incorporates tracking devices,
software, and the technical support to enable our customers to keep track of personal items and
family members. Whether keeping track of the family van, a child’s backpack, or of elderly
members of the family, the HaloTech’s locating system provides the means to keep track of
objects or to recover lost items.

The Company’s Mission


Halo Technologies’ mission is to provide peace of mind, confidence and security to individuals
and organizations by empowering our customers with the ability to locate lost items and
possessions and family members which are constantly on the move. We exist to serve our
customers with the trusted software and hardware systems required to simplify the process of
rediscovering lost items and tracking possessions or individuals. In short, we offer peace of
mind by eliminating the fear of losing those things most important to us.

Products and Services


We offer an integration of products and services which together provide a system with which our
customers can keep track of children, parents, cars, keys, and other valuable items. Our tracking
devices vary in range of size and power so that our customers can track something as small as
keys or a wallet or purse, or something as large as a boat or truck. Our software interacts with
smartphone technology which allows the user to receive live information concerning the location
of their transmitter. This service of tracking items on the move enables one to track by
smartphone where their possessions, or individuals, are in real time.

Marketing and Sales Strategy


Marketing and Sales Strategy is key to the success of Halo Technologies. Our company will
focus on the consumer market, providing our system to individuals and families which have a
need to track possessions and individuals. By partnering with a large consumer distributer, such
as Best Buy, we can reach a very focused demographic of technologically sophisticated
consumers who understand the value of a personal GPS tracking system and can afford to buy
one.
The Competition
Halo Technologies is well-poised to enter into the market of tracking devices given the
timeliness of this up-and-coming technology and the as-yet unrealized value of personal GPS
tracking capabilities. GPS technology has grown in power, signal strength, compactness, and
interactivity with smartphones so that HaloTech can quickly adapt existing technology to fulfill
the role of our tracking devices. While there are companies which do offer GPS tracking
devices, none of them have positioned themselves to take neither advantage of the technology
nor the need of the average potential customer to fill this need in their lives. The ability is
available, but no company has successfully become a household name in tracking devices. In
fact, most Americans aren’t even aware of tracking device capability. We stand ready to
communicate the value of our product and provide a channel for our customers to buy one.

Target Market
Our target market is the socio-economic middle to upper-class Americans including males and
females between 18 and 45 who embrace new technology, readily use social media and
smartphones, and enjoy using technology to keep in touch with friends, family, and the
whereabouts of their family and possessions. They are early adopters who like to try out new
technology, recognize its value earlier than others, and share their findings online with those
within their social circle. They are technologically adept, trend-setting, socially responsible,
security-minded, and insightful.

Management
The management of Halo Technologies will include several officers who will oversee Marketing
and Sales, Finance, and Operations at start-up. Rob Westerlund will be the President as well as
holding the title of vice-president of Sales and Marketing. Jake Bredemus will be vice-president
of Finance and will coordinate our financial side of development, including payroll, expenses
and costs, accounts payable and receivable, as well as being responsible for raising money or
future growth and development. Dustin Duerr will be vice-president Operations, responsible for
Human Resources, Production, R & D, and IT. One of our first employees to be hired would be
an Engineer who would help to direct the technical side of our company. Technological issues
involved with GPS tracking, both hardware and software, require a seasoned veteran who can
lead us in these technological areas.
Operations
Halo Technologies will initially be working with professionals who are established
manufacturers of tracking device hardware, software applications, and satellite technology. Our
in-house engineers would establish the design and functional requirements for our devices and
work closely with the manufacturer to ensure quality. It is of highest importance to have a
quality transmitter which will have better-than industry standards so that our company can
differentiate itself from other companies and earn the trust of our customers. Likewise, the apps
and software requirements would be developed by professionals working closely with our
engineers to ensure quality in function and interactivity. Our operations department would also
oversee the shipping of the devices to our warehouse or directly to the distributors. Packaged in
each unit would be printed instructions how to use and troubleshoot problems, including contact
information for HaloTech. Halo would also provide web and phone support via a 1-800 number
to our customers to ensure a simplified start to our customers’ enjoyment of our products.

Stage of Development
Halo Technologies is just completing its start-up phase in which we have carried out in-depth
research of the development of this technology and the likelihood of success on marketing this
product. See Appendix for Support via materials that reflect the research results. Our next step is
to raise investment funds, including investing our own money into this company in order to
network with manufacturers, distributors, and customers to prepare our company for making
presentations to potential investors for start-up money. In our Financials section we breakdown
the costs of start-up and development of our product.

Financials
Our financial plan outlines a five year forecast covering upfront financing needs, revenue and
sales projections, cost of goods sold, SG&A, financing needs, and monthly cash flows. Based on
our retail roll out and projected sales of 25 units per store, we project first year sales of
approximately 14,400 units in 2014 growing to 76,000 units in 2018 as our products are
integrated across all of Best Buy’s retail locations. This equates to approximately $531,000 in
sales in our first year of operation, growing to over $5 million by 2018. Utilizing low cost
manufacturing in China and GPS services from GPSGate, we expect to yield a healthy gross
profit margin 33%, or $180,000 in our first year of operation growing to over $2 million by
2015. We project Halo Technologies to turn profitable in its second year of operation (2014) and
break even by January of 2016.

Funds Sought and Utilization


To get the business off the ground we will require upfront financing to cover production costs of
the GPS units for six months, half a year’s salary for an IT consultant and QA Engineer,
advertisement costs, upfront legal fees, website and smartphone design and office supplies. Up-
front expenses are expected to total approximately $320,000. Each of the founding members of
Halo Technologies has agreed to personally contribute $30,000 to establish the business. The
remaining balance of $230k will be sought through a five year small business loan.
Company Description

Company Name

Our company will be called Halo Technologies, chosen to reflect the halo of protection our
customers will enjoy when they use our products, as well as the shape of some of our devices.
With this brand we believe we can create a recognizable name which consumers will identify as
a company which makes products they can trust and services which improve their lives. We
will protect our brand through trademarking the trade name “Halo Technologies” on both a state
(Minnesota) and national level. Our company has reserved the legal name of “Halo
Technologies” and intends in the future to consider adopting one or more other public names
(compatible with the Halo Technologies trade name.) Our company reserves the right to adopt a
public name which will be used in marketing efforts, one which we find is more effective in
making our trademark identifiable to potential customers and which also reflects the appearance
of our products. Given the national and likely international scope of these products and apps, it
is very important that the Company move early and promptly (as well as aggressively) to secure,
preserve and protect the following trademarks:

- Halo Technologies

- HaloTech

- HaloShield

- HaloKey and HaloLock

Mission Statement

Halo Technologies’ mission is to provide peace of mind, confidence and security to individuals
and organizations by empowering our customers with the ability to locate and track unique and
valuable possessions and to monitor the location of loved ones.
Vision Statement

Halo will become a leading provider of consumer tracking and ‘peace of mind’ location devices
by providing fast response, informed expertise, and consistently high quality products,
generating enough satisfied repeat customers to provide a stable sales base.

Form of Business

Halo Technologies will form as a Limited Liability Corporation in order to do business as a


closely-held company until the time would arise in which we would either have an Initial Public
Offering or find advantages to functioning as a C- or S-corp. Halo Technologies will be an LLC
due to the advantages this corporate structure offers; limiting personal liability, avoiding double
taxation, streamlined administrative requirements, and flexibility in sharing profits. The Officers
of this LLC would be Dustin Duerr as Vice-President/Corporate Secretary, Jake Bredemus as
Treasurer, and Rob Westerlund as President.

Products and Services

Halo Technology has created more than just a tracking device or a slick new app. We provide a
comprehensive system of tracking the location and history of any device purchased by a
consumer and properly operated. A parent might use it to keep tabs on where their children are
by inserting a tracking pin into their child’s shoe or backpack. A customer may affix a halo to
their key ring, bicycle, motorcycle, boat, or pet in order to locate their car in a mall parking lot,
or where they are on a body of water when they are in a boat, or by finding their lost keys so they
don’t have to buy new ones.

Management/Leadership

In the start-up phase of Halo Technologies, LLC there will be three principals, including Dustin
Duerr, Jake Bredemus, and Rob Westerlund, each of whom will fill the following roles and
responsibilities;

President – Rob Westerlund – Rob will be responsible, along with the other officers, for casting a
vision of the company, charting a course for production start-up, and developing the sales and
marketing branch of the company by developing a network of connections with major retailers,
like Target and Best Buy, to raise awareness and create a distribution network for our product.
Rob will head up sales and marketing with the expectation in 6 months to find a Senior V-P of sales
and marketing for the Company..

Vice-President of Finance – Jake Bredemus – Jake has many years of experience in finance and
accounting with 3M and United HealthPartners. Jake will be charged with raising capital for our
production operations, coordinating financial matters for corporate finances, for sales and
invoicing, and for future growth for the organization.

Vice-President of Operations – Dustin Duerr – Dustin’s ten years of experience of managing a


large work force and running a major corporate branch has prepared him to initially direct the
day to day operations involving Human Resources, Production, R & D, and IT. Departmental
Vice-Presidents will be hired within the first year of operations dependent upon the growth of
revenue from our product.

Our organization will grow from a start-up of a three people with plans to hire an engineer and
vice-presidents for each critical area of operation. At the time our product goes into the stores,
the follow number of employees is estimated: Nine Executives (President, vice-presidents of
Finance, Marketing, R & D, Production, Sales, Legal, and IT) and ten administrative employees
(Directors and managers, including Customer Service, Office Manager, etc.) HaloTech will have
a total of nineteen (19) employees 12 months after start-up.

Location and Geographical Information

Halo Technologies will be created in the state of Minnesota and at the time of start-up will be
housed in a small office complex in Roseville, Minnesota. The Bonestroo Building is
conveniently located on Highway 36 Between 35W and Highway 280. This is a central location
between Minneapolis and St. Paul just north of the U of M. Our corporate offices will be in the
Midwest with a focus on the Twin Cities retail outlets. Our vision for our company is to grow to
the point of branching out into other regions of the U.S.
The Target Market

Demographics/Geographics

The demographics of the Personal Locator Device industry are nearly identical to that of the
smartphone user. The Personal Locator Device (or Personal Locator Service) industry is fairly
new in the consumer market, but as most analysts agree, this is the beginning of a brand new
industry with the potential for explosive growth due to the rapidly decreasing technology costs,
which will allow consumers to afford and utilize a technology which was originally developed
by, and for, the military in the 1970's.

Ovum Research states that "Location Services" revenues grew to $18 billion in 2006. ABI, a NY
based technology research firm states that the global personal GPS market will be propelled to
more than $22 billion by 2013. While there is a market potential for more than a billion users
worldwide, we are estimating a more realistic long-term market for Personal GPS/GSM
technology, initially marketed within the United States. Business Insider stated the following
statistics:

• Comscore says 114 million Americans used smartphones in July, 2012


• Flurry reports that there are at least 165 million active Android and Apple iOS devices in
the U.S. and that they are used by 78% of the adult population (age 15-64).
• Nielsen reported that two-thirds of handsets sold in Q2 2012 were smartphones and that
the market is now 55% penetrated (see chart below)
• The vast majority of the primary smartphone market, U.S. adults between 18-54, already
have smartphones. The demographics of those who don't yet have smartphones,
meanwhile, are older Americans and those who make less than $50,000 per year.
With the number of Americans using smartphones at 140 million and projected to grow over the
next ten years, the market for tracking technology is young and growing. The demographic of
our customers is a male or female, from 18-45, who has at least one child, makes between
$75,000 and $150,000 a year, and owns a smartphone. The demographic of each type of
tracking device will depend on its use. For example, the device designed especially for tracking
the whereabouts of children may attract customers who are more likely to be married, wealthy,
and, naturally, have children. Single customers may be more likely to have transmitters which
can be utilized with motorcycles, boats, and cars. Our demographic in general would be urban,
suburban, and ex-urban users.

Lifestyle and Psychographics


The psychographics of our typical customer will be a male or female, who embraces new
technology, readily uses social media and smartphones and enjoys using technology to keep in
touch with friends, family, and the whereabouts of their family and possessions. These
individuals are more likely to access their news information online, as well as shop online. They
are early adopters who like to try out new technology, recognize its value earlier than others, and
share their findings online with those within their social circle. They are technologically adept,
trend-setting, socially responsible, security-minded, and insightful.
Purchasing Patterns
Our future customers will first buy our products due to the loss of a valuable possession or
temporary loss of a child or elderly adult. Once they have tried our product they will pass along
their findings to those in their immediate network of friends and social contacts. Over the next
five years they will buy other products from us between five to ten times, often buying in bulk in
order to save money. They will initially be motivated to buy these products in order to track
family members, and then later also to track valuable possessions. Our customers will first see
our products in major retail outlets, later finding links to our website online through email
banners, and will predominately buy our products online. They will use our products by
attaching them to backpacks or shoes of children, to the necklace or belt of elderly parents, and
also to expensive bicycles and motorcycles. There will be a dual purpose to the use of Halo
Technology; one to track the position of their children and other family members, and also to
track the location of transitory items. They will utilize their smartphones in order to track those
transmitters’ signals.

Buying Sensitivities
Our average customer is not as sensitive to price as they are to quality. What is foremost in their
mind when using a personal tracking device is that our product works extremely well in serving
its stated purpose; that is, locating a transmitter device using a smartphone app. When tracking
children, parents will be much less concerned with the price than they are with its feature of
being able to see the location of their children when they are out of their field of vision. When
utilizing our transmitters in order to locate or track possession, then the issue of price comes into
play as a ratio to the value of the item tracked. A consumer might be willing to pay $45 to track
a motorcycle, but not to track a $200 camera. What our market is most interested in is Quality,
Product Features, Reliability, and Customer Service. What they are less sensitive to is Brand
Name, Packaging, Store Location and Store Décor, and a Maintenance Program.

Market Size and Trends


The market size of our tracking devices is a large subset of all American smartphone users.
There are currently 140 million smartphone users in the United States with that number growing
every year, soon to be reaching a point of saturation. Assuming that our key customers will not
only need a smartphone to utilize our personal tracking devices but are also of that technological
mindset to buy our product, then our market size is less than 140 million people.
“GPS personal tracking devices and applications are forecast to grow with a CAGR of 40%, with
both markets breaking $1 billion in 2017. Senior analyst Patrick Connolly says, “The hardware
market remained below 100,000 units in 2011. However, it is forecast to reach 2.5 million units
in 2017, with significant growth in elderly, health, and lone worker markets. Dedicated devices
can offer significant benefits, with insurance and liability increasingly encouraging the use of
approved equipment (ABIresearch.com).”

If an estimated 2.5 million personal GPS units are forecasted to sell by 2017, when there will be
around 200 million smartphone users, then this means that our market could grow to about ten
percent of the smartphone user population. This market is not only growing, but it has only
begun to become a recognizable offering to the public, which means that projections of multiple
millions of sales of units a year in personal tracking devices alone is reasonable. Just capturing
5% of this market could mean sales of 125,000 units a year. This makes for a growing market
with great potential for expansion in the near future.

The Competition

We are part of the life-saving electronic devices industry, specifically Personal Locator
Device(s), an industry projected to grow to over $22 billion dollars within the next five years.
Market leaders in this small but growing personal locator industry are iTrack, Wherify and
uLocate, and LoJack for the automotive industry. Halo Technologies' Personal Locator Devices
(PLDs) are smaller and more easily concealed, less expensive, uniquely programmable for
individual needs, and more user-friendly than our competitors' products.

“Despite the fact that the personal location devices and applications market has been around for a
number of years, it is still in the very early stages of development. The potential is huge, with a
large available market, a clear benefit in the technology, and the potential of legislation as a
major driver. The market has made progress, with many of the barriers around cellular M2M
connectivity having come down, yet it remains hampered by fragmentation, high prices, and a
lack of awareness. There is a consensus within the industry that the market is large enough to
support hardware and smartphone applications. Many are now looking at ways to combine both.
Traditional hardware vendors like GTX Corp and Connexion2 have launched their own
applications, while application developers like Life360 are looking to use their huge installed
base as a way to drive additional revenue through hardware (ABIResearch.com). In the Personal
Locator Industry, consumers are searching for the most effective product at the lowest possible
price; different market segments will put different emphases on ease of use versus reliability or
cost, depending on their needs and budgets. Although we will emphasize some aspects of our
products differently for the distinct market segments described above, our products beat the
competition on all grounds.
Strategic Position and Legal Risk Assessment

SWOT Analysis

A key to determining the strategic direction and positioning for our business is conducting an
analysis of any current or future impacts that could affect our desired/projected outcome. As
such, the following SWOT analysis details identified strengths, weaknesses, opportunities, and
threats for our business to consider moving forward.

Strengths

- Ease of use for HaloShield (mobile application) vs. competitors’ offering


- “Star” status of Tracking device / Location Based service markets and industries
- Direct Ship Production Model (Favorable position for leverage of capital)
- GPS Tracking Subscription Costs favorable versus competition
- Retail partner core business pairs well with our product offering

Weaknesses

- Pricing on GPS Technologies / Hardware still unfavorable (trending toward “tipping


point”, but not achieved)
- No Direct Sales line to consumer at this time (decreased profit margins on offered goods)
- New Entry into Marketplace/Industry (no established relationships to
consumers/suppliers)
- Reliance on single retail partner (diversification)

Opportunities

- Developing a direct sales channel for future use (Improved profit margins on offered
hardware goods)
- Expansion into commercial use channels for tracking services
Threats

- Smartphones may also serve as substitute for tracking device needs


- New entries from other established hardware/software tracking businesses (favorable
established platform to enter business)

Legal Risk Assessment

A detailed legal audit was performed in May 2013 for the business concept of Halo Technologies
by the founding members Dustin Duerr, Rob Westerlund, and Jake Bredemus. Numerous legal
issues were examined and addressed during the legal audit process. The potential legal issues
discovered were as follows.

1. Intellectual Property

2. Business Organization

3. Independent Contractors and Agency Law

4. Government Regulations - FCC

5. Contracts

6. Employee Welfare

7. Government Regulations - FTC

8. Business Torts – Failure of Performance

9. Business Torts – Invasion of Privacy

10. Employee Ethics

While there is some risk potential in each of the identified legal issues, the following issues were
considered “higher risk”. As such, these “high risk” issues were further detailed with strategies
to mitigate legal risk. Each of these issues are detailed below.
Intellectual Property

Due to the focus of the technology relating to the business plan and the need to offer a
differentiated product in order to achieve market penetration, knowledge of intellectual property
laws and their application to our product offering will be crucial to the success of Halo
Technologies, LLC. Our interaction with intellectual property includes the hardware design that
will be used to build our devices to the software that will allow monitoring and consumer
interaction with the devices. We must be fully cognizant of what our competitors and other
businesses already protect, and what we can protect in order to gain a competitive advantage in
the marketplace.

Specifically applying Intellectual Property laws to our business model, the two areas of concern
are the use of patents and the use of copyrights. Patent law is applicable to our interaction with
the technology and concept of the device, including the physical hardware resulting in the final
product. Copyright law is applicable to any software programs or code that is produced with the
intention of being utilized with our device. These programs and code include the interfaces in
which our customers use our devices, whether it is through an Internet site or a mobile
application.

Patent law and the protections that it will provide our business are located in Article 1, Section 8,
of the U.S. Constitution (Jennings, 2013, p. 332). However, in order for our business to take
advantage of patent laws as it applies to our devices and their design, we must take care to ensure
that it meets requirements allowing for patent protection. This means that the idea must be “non-
obvious, novel, useful, and must be reduced to some tangible form” (Jennings, 2013, p. 332). In
this case, we will be making use of utility patents, which provides protection for improvements
to existing devices. A successful patent application to our device will provide protection for 20
years. We must also take care to observe potential applicable patents that are already in place on
similar devices. Failure to do so would be detrimental to our overall business plan.

Copyright law and the protections that it will provide our business are located under Title 17,
U.S. Code. Copyrights generally apply to works of art or an expression of an idea; therefore, it
makes sense that this law would apply to software. Specifically, the Computer Software
Copyright Act of 1980 will provide protection for our intended use of software. Under this Act,
all software that is written in ordinary language or machine code can be copyrighted (Jennings,
2013, p. 333). All works created in this regard are automatically copyrighted pursuant of the
law. Our software is not required to be registered; however, this is recommended in order to
deter others from claiming ignorance in copying our work.

The main issue that could potentially arise for our business in the area of Intellectual Property
relates to the methods and technology we use for our devices versus the acts of competitors and
others interested in our business model. With plenty of activity already centering on GPS
location and services, we must be careful that we don’t infringe on others’ protected works,
while protecting our own work where applicable. Additionally, our ability to patent our work
may be crucial to establishing a competitive advantage; therefore, we must work to ensure that
we meet “patentable” criteria as much as possible.

Additionally, we must be able to restrict the flow of trade secrets or intellectual property flowing
out through employees or third parties. This may occur when an employee that has provided
substantial time of service terminates their employment or if we contract a third party to provide
support. We must take care to ensure that when an employee leaves our employment to go
elsewhere, our property doesn’t go elsewhere.

All of our senior leaders understand the importance of this legal issue, and will be expected to
monitor the flow of critical information in and out of our company. However, in order to
mitigate our risk in the areas identified in this topic, we will consult an IP attorney. An IP
attorney’s knowledge of expertise in maneuvering this landscape far exceeds our capabilities,
and we feel that this issue is far too important to not address properly. Documents we see being
of use in this area of concentration are as follows.

- Copyright Notice

- Provisional Patent Notice

- Full Non-Provisional Patent Notice

- Cease and Desist Letter

- DCMA (Digital Millennium Copyright Act) Takedown Notice

- Confidentiality Agreement

- Non-Compete Agreement
Our trade secrets, whether they are in the form of designs, programs, production of our devices,
or our business strategy, must be protected in today’s ever increasing competitive marketplace.
Failure to do so could diminish any advantage in the marketplace we currently have or we may
have in the future. These defenses that are available to us will help to protect our investments,
both in the form of financial and human capital, from adverse activity.

Business Tort – Invasion of Privacy

Due to the nature of our product offering, there is the potential for people to use it for purpose
other than those rightfully intended. The function of our hardware devices would allow less-than
well-meaning people to surreptitiously attach a tracking device to another person’s car or purse
in order to track them, monitoring their location through our technology, further enabling people
to cyber-stalk individuals. Our company would need to discuss and plan how we might be able
to avoid being sued in such a situation, to have proper insurance to cover such a suit, and to
determine if there is satisfactory technological capability in which we would be able to block or
stop signals emanating from certain people’s accounts.

If our company encounters a lawsuit for aiding in the Invasion of Privacy of an individual, it is
possible to simply argue that we cannot be held liable for the actions of a customer who uses the
tracking device for a purpose other than how it was designed. The standard for imposing
“vicarious liability for invasion of privacy” would be that we have sold equipment with
constructive knowledge of the fact that our customers will definitely utilize our equipment to
illegally track the whereabouts of other people without their permission and without a warrant.
Our product can be used for tracking other individuals unbeknownst to them, but the general
design, service, marketing, and advertising is for using the hardware devices to track one’s own
possession, therefore we would not be party to Invasion of Privacy due to the fact that our
equipment has a design and purpose and valuable uses apart from invasion of other people’s
privacy.

However, instead of relying on this argument in court, our company can avoid or diminish this
legal issue by utilizing a warning label that it is illegal to use our tracking device hardware, in
order to track another person’s location without their permission without a warrant in many
states. The legal offenses include invasion of privacy, breaking and entering, and trespassing
depending on how one places the tracking device into the person’s property. It would be useful
to also explain what the penalty is for using SAH for illicit purposes.

Another technologically based approach to this problem is to provide the option of being able to
turn off a device’s unique signature signal when requested. While such an issue might have
other legal ramifications of its own, we might offer to turn of the signal if we receive a complaint
from public individuals who have learned that there is a device in their car that they cannot find
and want the signal nullified. By doing so, we not only demonstrate that our company will not
tolerate our products being used for salacious actions, and in a pragmatic way assist in defeating
the illegal or unethical use of our transmitting devices.

The source of the legal principle of Vicarious Liability of Invasion of Privacy is a tort, found in
common law, which restricts people from invading the life of another person. Invasion of
privacy is defined as “the intrusion into the personal life of another, without just cause, which
can give the person whose privacy has been invaded a right to bring a lawsuit for damages
against the person or entity that intruded.” (us.legal.com, 2013) “The tort doctrine that imposes
responsibility upon one person for the failure of another, with whom the person has a special
relationship,” describes vicarious liability. Though often used to describe how a boss or parent is
responsible for damage caused by their employee or child, respectively, it can also refer to the
responsibility a company has for the use of its products by consumers (legaldictionary.com,
2013).

Our hardware devices are designed to provide the technology and service with which our
customers can attach a tracking device to valuable but portable possessions in order to find them
in the event they are misplaced. Issues concerning invasion of privacy through the use of
tracking devices has been in the media, and have been issues of legal action. In some cases it is
not illegal if a husband puts a tracking device in a shared family car and catches his wife
cheating on him. In some cases it is legal if one has a warrant. The law is different from state to
state, but in many cases it is illegal to go into a person’s car without their permission; this is
trespassing. In some states it is illegal to possess GPS tracking devices. In others, it is allowed,
but even if it is legal to use one, stalking and invasion of privacy are illegal. The reason this is a
concern to Halo Technologies is that our technology has the potential to be used to stalk people.
Halo Technologies cannot be held responsible for consumers who have used the tracking
transmitter to break the law, but it would be important for our company to prepare for such a
case.

Due to the nature of our product’s function, we are more likely to be sued due to its misuse by
people who are trying to track other people’s activities. The most commonly heard scenario is
when a man (or woman) attaches a tracking device to the target’s vehicle and is able to keep
track of where they go and when. While there are several questions about when this is legal or
illegal, there is the potential of our company being sued as being vicariously liable. The
company would need to address these areas of legal liability before the shipping of their first
order.

The senior leadership at Halo Technologies should have the most insight into the potential issues
facing the company concerning their processes, product, and sales. Our legal staff should be able
to assist in sorting through the statutory side of these issues, and our marketing and sales
department would need to be in the loop also in order to insure that when we are selling or
advertising our product that there are no suggestions that our product be used to track individuals
other than minor immediate family members.

There are two avenues to take to alleviate the potential of being found vicariously liable for our
product being used in an invasion of privacy. The first is to be sure to include in our literature,
webpage, and legal releases that using our hardware devices to invade someone’s privacy is
illegal. The second is to ensure that all advertisements and websites depict very positive uses of
the devices in order to portray Halo Technologies’ products as friendly and helpful, not
vindictive and malicious.

Business Tort – Failure of Performance

Failure of Performance: If the unit quits transmitting due to product failure then consumers may
sue due to loss of property or family members.

Our company may be liable for the performance or non-performance of our product. Any
company can be held legal responsible for the non-performance of its product. With the product
offering, our company has the potential of being sued in the event an important property or
person, such as one’s car, bicycle, or child, is missing and the consumer, who is counting on
tracking said important item is not able to due to the non-performance of our product. This is
important because of the moral responsibility we have to people who are trusting in our company
to help them track their personal items or family members. We also have a fiduciary duty to our
consumers. This is when our customers have placed the utmost trust and confidence to manage
and protect property or money, a relationship wherein one person has an obligation to act for
another's benefit. In selling our products and taking other people’s money, we have a fiduciary
duty to assure our customers that we are doing everything we can to deliver the product we have
advertised.

Our company can avoid or diminish this legal issue by utilizing a warning label and by including
a legal warranty with the product which limits our company’s liability. The warning label will
need to state that tracking a lost item will only be successful if the unit’s battery is functioning
within its stated lifespan and the lost item is within range of a cell phone which can receive its
signal. The warranty can guarantee the performance of the device under normal circumstances
and provide a replacement device in the event the tracker does not function properly. What we
would not cover under the warranty is the cost of replacement of the lost item.

The source of the legal principle of Failure of Performance is regulated by the Federal Trade
Commission which is authorized under the Federal Trade Commission Act of 1914 to prevent
“unfair and deceptive trade practices.” If our company advertises that our product promises to
perform a certain function, that of tracking items through a tracking device attached to said item,
and it doesn’t perform that function then our company is open to be sued for non-performance
under the Implied Warranty of Merchantability (UCC§ 2-314) and breach of Implied Warranty
of Fitness (UCC§ 2-315) (Jennings, 2010, p. 208). The implied warranty of merchantability
protects consumers so that what they buy is fit for the ordinary purposes for which goods of that
description are used (Jennings, 2010, p. 206). This means that if consumers buy our tracker to
track an item, then it should work under ordinary circumstances. The implied warranty of fitness
promises that our product will perform the functions described, meaning that a customer would
be able to attach our device to a personal item and be able to track it if lost.

Halo Technologies would need to advertise that its tracking devices will help to locate items to
which our devices are attached to. Consumers who use our product may assume that our
company promises that they will be able to locate and repossess those items and that if the
tracker’s battery is too weak, too old, or is broken off by another person, that our company will
replace the item lost or stolen. Likewise, our company could be held liable in the event a child is
lost and the child’s parents were counting on being able to locate their child through our tracker
but were not able to locate the item of clothing or property to which the tracker was affixed. It
might be assumed by consumers that our company’s promise of selling a tracking device which
will enable customers to track items also offers a promise of recovering the lost tracker and the
item to which it has been affixed. Halo Technologies does stand behind the quality of the
mechanical function of its hardware tracking devices, which are designed to emit a signal
through which smart phone apps can track the location of the device in order to recover items
which have been lost or stolen. However, Halo Technologies cannot be held responsible for
consumers who have used the tracking transmitter beyond the recommended life of the battery,
who have allowed the device to be broken through unusual use, who have had somebody steal
their possessions and have located and destroyed the tracking transmitter, or have lost the item or
had it stolen and had the item and transmitter relocated to a location beyond the transmission
range of the transmitter.

In our litigious society, a mindset much more bent on legal action than most other European and
Asian countries, a business which wishes to provide products and services to the public needs to
carefully examine areas in which their organization could have legal exposure. Due to the nature
of our product’s function, we are more likely to be sued due to issues of non-performance of our
units and any related losses. While we considered providing insurance with the cost of our
transmitters, which is still a possibility based upon the overall additional cost which would be
added to the units, at this juncture we would rather keep prices down by not insuring any
potential loss and instead make it clear that we will guarantee the performance of each unit, but
not warrantee the value of any item lost and unrecovered. There would be too many legal and
business affairs issues to sort through in order to do this.

For example, if somebody attached our device to their bicycle and then deactivated the device
and threw the bike away in a dumpster and then issued a claim for a bicycle, we would have no
way in which to determine which bike was lost, what the value of the bike was, nor whether or
not it was lost, stolen, or hidden. Another issue, a much more significant one, is one in which a
parent utilizes the tracking device in order to keep track of where their children are. Scenarios in
which children go on field trips, ride home on buses, are picked up by ex-spouses, and other
situations would provide an excellent opportunity to track the whereabouts of their child with our
tracking devices, but if they malfunctioned just when their child is abducted, then there is
concern that Halo Technologies could be held liable for the inability to locate their abducted
child. The company would need to address these areas of legal liability before the shipping of
their first order.

The senior leadership of Halo Technologies should have the most insight into the
potential issues facing the company concerning their processes, product, and sales. Our legal
support should be able to assist in sorting through the statutory side of these issues, and our
marketing and sales department would need to be in the loop also in order to insure that when we
are selling or advertising our product that there are no promises being made which we cannot or
do not want to keep.

The single most important element of avoiding any potential lawsuits would be to have very
clear release text which would emphasize the limit of the liability of the corporation and its
officers. Another related policy would be that we not make any implied or overt promises in our
print ads or commercials which would lead people to believe that our tracking devices could
replace proper parental or adult supervision of children. These tracking devices are not intended
as a substitute to a babysitter or proper adult supervision.

Definition of Strategic Position

Our product offering will be operating in a competitive space where emerging technologies
and efficiencies are constantly improving. While our business fully understands that cost is an
important factor in our ability to be profitable and financially sound, the business’ sustainability
will be a result of the quality and value proposition of our product offering. Therefore, the
success of our business hinges on our ability to deliver the following outcomes.

1. A maximizing balance in the quality/dependability vs. cost-effectiveness of our


product offering (Customer satisfaction)

Striking the correct balance here will allow our business to maximize the value proposition for
our customers. Customer feedback will provide us with metrics to measure how products are
delivering and whether consumer utility is being maximized. We believe that our target
consumer is willing to spend more for a product as long as it is a quality product.

2. Creating/Building a solid platform from which our business can capitalize on the
tipping point of tracking devices (Application – HaloShield)
Bluetooth technology cost of production is already in the zone of being cost effective, while GPS
tracking technology cost of production is on the cusp of being cost effective. Industry experts
believe that this GPS cost-effectiveness zone will be breached within the next 5 years.
Positioning our business as a premier tracking company will allow us to capitalize on the GPS
tracking device market when it takes off. This may also be considered our exit strategy
depending on the timing of this event.

3. Excelling in defining the value proposition for our customer (Customer Education)

Assigning value to personal assets is an individual proposition. Several factors weigh into this
proposition, including personal/assessable value, ability to replace, and personal time wasted
looking for/replacing the lost item. There are also invaluable assets that can be lost, such as
loved ones. Our ability to create market penetration hinges on our ability to discern and
communicate value to consumers in regards to tracking their assets. This message must be clear
and memorable in our marketing of our product. Effectively marketing our product and services
will allow us positive differentiation from our competitors in the marketplace.
Marketing Plan and Sales Strategy

Company’s Message

HaloTech’s message is that our customer can find peace of mind by using our products.
Whether they are using our products to find a lost purse or car or tracking the location of a child
or elderly parent, they can know that they now have the wherewithal to identify the location of
something or someone they otherwise would not be able to. We are not just selling tracking
devices. We are not just selling a nifty toy or a neat trick. We are selling peace of mind.

Our Customer

We predict our systems will appeal strongly to families concerned about the safety of their
loved ones. According to the FBI's National Crime Information Center (NCIC), 85% to 90% of
the 876,213 persons reported missing to America's law enforcement agencies in 2010 were
juveniles (persons under 18 years of age). That indicates that 2,100 times per day, parents or
primary care givers felt the disappearance was serious enough to call law enforcement. In
addition, 152, 265 of the persons reported missing in 2000 were categorized as either endangered
or involuntary. The number of missing persons reported to law enforcement has increased from
154,341 in 1982 to 876,213 in 2010. These figures represent an increase of 468%, and the
numbers sadly continue to rise. According to the Missing Children Society of Canada (MCSC),
in 2002 there were 66,532 children reported missing in Canada alone. And even more
frightening, the National Center for Missing and Exploited Children (NCMEC) reports that 74%
of abducted children who are murdered are dead within three hours of the abduction.

These figures indicate the strong market need for a method of quickly and reliably locating
missing children. This so-far untapped market is quite large, even just within the U.S. According
to the 2010 U.S. Census Bureau reports, there are 60,492, 447 are under 14 years of age in the
U.S., including: 33,050,162 children in elementary school (grades 1-8), 4,005,938 children in
kindergarten, and 4,613,179 children in nursery/preschool

But the family market also has to worry about its elderly loved ones. According to the same
census report, there are 40,144,000 adults over 62 years of age in the U.S., 4.5 million of whom
have Alzheimer's disease. With a median income in the U.S. of $51,742 per family, our family
consumer market in the U.S. has the potential for selling our affordable devices for over
60,492,447 children under the age of 14, in addition to over 4,500,000 active senior citizens
afflicted with Alzheimer', based on the above figures, for a combined target market of over
64,992,447 consumers.

Marketing Strategy

Our marketing strategy is designed to capitalize on the demographics of our customers.


These people are tech-savvy, security-minded, and have the financial base with which to
purchase our products without much debate about price. Our first step in marketing out product
would be to reach out to the Best Buy Corporation to use their vast retail operations to sell out
products. We would start with an initial release in the Twin Cities area to test the viability of
selling our product on the national stage. We would also develop our own website to inform our
customers of how our products work, what different ways they can use them, and to provide
customer support.

Strategic Partnerships

We will develop a strategic partnership with Best Buy, which has already developed
relationships with our target market. Best Buy offers not only a broad base of contacts with our
market with 868 stores nationwide, but they also seem to be focusing more on selling
smartphones and accessories. This partnership would be cultivated within the context of the
Twin Cities in order to test our product, marketing plan, and market, with an eye towards
expansion upon reaching our primary goals of sales and revenue.

Sales Structure

Our sales structure will be developed by the Vice-President of Sales and Market, who would be
responsible for further developing the marketing and sales plans. A Director of Sales would be
hired to coordinate the sales efforts, who in turn would hire the requisite sales force for our
company. We would have no Inside Sales Personnel due to the fact that we would not have a
brick and mortar store from which to sell our product. She would hire outside sales personnel
who would coordinate our product distribution through other retailers. Our company’s officers
would coordinate the strategic partnerships with other retailers and then have our outside sales
personnel oversee the coordination of those sales.
Operations
Plant and Facilities

Through our assessment of the industry, marketplace, and competition, our business believes that
our best strategic position is to be a facilitator of the exchange of the tracking device hardware,
while focusing on the value proposition of the software experience. We also understand that,
strategically, we are not in any position to produce the hardware through our business holdings
due to the disadvantages of production on a small scale versus the industry. These disadvantages
include higher costs of production, lack of expertise in both technology or facility production,
and lack of capital to meet production/supply needs of our retail partners and consumers. Based
on these assumptions, Halo Technologies has decided to create a relationship with Shenzhen
Benway Technology Company, a premier producer of GPS/Bluetooth tracking device hardware
located in Shenzhen, China.

Our day-to-day operations will be facilitated by leased office space, centrally located in the Twin
Cities area. This space will allow for our business to conduct meetings with our supplier and
purchasing partners, as well as an office to facilitate the work of our day-to-day operations. The
ultimate decision for the location of the leased office space will be determined on proximity/ease
to staffing and costs to lease. Projected costs to lease are referenced in the financial section of
this business plan.

Manufacturing/Production Plan

The production of our hardware devices, HaloLock and HaloKey, will be fulfilled by our
supplying partner, Shenzhen Benway Technology Company. We have been able to secure an
exclusive agreement with Shenzhen Benway Technology Company to produce our products to
our high quality expectations and specification requirements. This exclusive agreement will cost
our business a surcharge of 5% per cost of unit produced, however, we believe that having high
performing, unique products built to our specifications aligns with our strategy of differentiation
and value proposition. The production plans will be built off of our orders with our retail
partner, Best Buy, and all completed orders will be shipped to our retail partners’ distribution
centers for future delivery to retail locations. Our production model is based off of “production
to order” fulfillment, therefore, we will not hold any inventory liability. This provides us with a
financial advantage; our ability to leverage our capital to other areas such as software
R&D/enhancement and marketing of our offering.

Our plan with regard to the software offering (HaloShield) is to consult with an IT business that
has a proven track record with mobile application and server maintenance in order to produce the
initial offering. Senior leadership of our business will be heavily involved in the initial
development and ensuing design of the software offering. This heavy involvement is aimed at
ensuring that the mobile application and accompanying website meet the proposed customer
experience that the leadership of the organization has laid out. We have brokered an agreement
with GPSGate, an IT business that specializes in GPS tracking service satellite utilization and
server maintenance. As part of our agreement with GPSGate, GPSGate will allow us access to
their servers, GPS tracking satellite, and accompanying hardware/software for a per user fee.
This agreement mitigates our business’ technological liability of the need to internally house the
physical servers and associated maintenance. We have negotiated this fee to be $10 per device
per month. As a result of this cost, users of our HaloKey devices will also be required to pay a
subscription fee that our business model has initially set at $14.99 per device per month. This
allows for an additional revenue channel, while pricing our monthly subscription very favorably
for entry into this market in comparison to our competition average of $25 per month. This
impacts of this cost and revenue channel is further detailed in the financial section of this
business plan.

As our business emerges from its inception and the initial building of the software offering, the
work of software maintenance, enhancement, and development of future versions of the
application/website will be moved internally.

Labor Requirements

Our initial labor requirements will require one Full-time Quality Assurance Manufacturing
Engineer and one Full-time IT support, in addition to the three founding members of Halo
Technologies. The initial build of the mobile application and website will be contracted out to
Dominion Consulting. However, the maintenance of the application and website will then be
turned over to our internal IT staffing for day-to-day operations. General tasks to be performed
by the Halo Technologies IT staff include…
- Daily maintenance/enhancement of current application and website
- Daily maintenance through tracking device server software
- Customer troubleshooting through our customer interaction avenues (email and forum)

Each of the two individual IT staff hires will also have their specializations as it pertains to our
business model. The specialized tasks for each of the employee classification as summarized
below.

Quality Assurance Manufacturing Engineer

- Must have experience in both GPS and Bluetooth hardware technologies as it relates to
location based tracking software.
- Must be able to troubleshoot any issues as they relate to our hardware offerings
(HaloLock and HaloKey).
- Will also serve as our primary quality assurance contact for our hardware devices. Must
be able to travel occasionally to China for facility/product inspections.
- Must be knowledgeable in technology advances as it relates to tracking device hardware.

IT Support

- Must be competent in software and code design troubleshooting as it relates to our mobile
application. This includes both iOS and Android platforms.
- Must be competent in software and code design troubleshooting as it relates to our
website offering.
- Must be competent in software and code design troubleshooting as it relates to GPS
tracking device servers.
As our business progresses to future years and expected growth, we anticipate a need to
additional IT Support and Software Designer hiring. This will help our IT staff to remain
properly staffed through the expected growth and anticipated future workload. This future
workload includes the increased number of customer inquiries based on the increased number of
devices on the market, realignment of the IT staff to focus on core competencies (QA & software
maintenance), and potential future Halo Technologies tracking device hardware/software
launches.
Quality Control

Our senior leadership has taken numerous trips to China to tour the Shenzhen Benway
Technology Company production facility and production facilities belonging to other hardware
suppliers, and after careful consideration weighing quality and cost, we feel confident in the
selection of our supplying partner. As part of our defined labor requirements, we will hire one
IT consultant who will act as our lead quality assurance engineer. The labor requirement defines
this employee as one that has substantial experience in both GPS and Bluetooth technology as it
relates to tracking device hardware. This employee will be responsible for assuring the quality
and dependability of our hardware offering. This quality assurance will be achieved through
continual testing of new shipments of our devices to our retail partner, several trips to the
production facility in China every year to ensure our specifications are being met, and
troubleshooting of hardware issues brought to our attention by our customers. The superior
dependability and performance of our hardware as it relates to our software offering is a
necessary deliverable goal for our business that will ultimately lift the customer value
proposition and differentiate our business from other location based tracking companies.

Equipment and Furniture

Our business model is highly technology-based, therefore all employees of Halo Technologies
will require a phone, computer, and internet access. There will not be any requirement of certain
brands of IT equipment, however, this equipment must meet and allow employees to perform
their job functions effectively and efficiently. Within the IT staff, there is a requirement of at
least one phone and computer from each of the core operating systems. For cell phones, there
will be a need for at least one smartphone operating on the Android OS and one phone operating
on iOS. For computers, there should be at least one computer operating under Windows
operating system and one computer operating under Macintosh operating system. The combined
cost of this equipment is outlined in the financial section of this business plan.
Office Furnishing

With the need for leased office space, there are anticipated initial costs for set-up of the office for
our operational needs. These expenditures will ensure that employees of Halo Technologies will
have all the necessary tools necessary to perform their job responsibilities effectively. The
following items are needed to furnish and equip our office properly.

• Work space desk, cabinet, and associated electrical wiring - $1,500 per workspace
($7,500 total)
• Office Chair - $500 per person ($2,500 total)
• Internet access including router, switches, and Ethernet - $500
• 25” Monitors for workstation - $350 per person ($1,750 total)
• Workstation computer accessories including keyboards and mouse - $100 per person
($500 total)
• Meeting room furnishing - $2,500
With these initial estimated costs, the projected spend for set up of the office is estimated to be
$15,250. The impacts of these costs are detailed in the financial section of this business plan.

Inventory and Management

Our production plans for our HaloLock and HaloKey hardware offerings will be produce to order
based. Production to order provides our business with several advantages, both operationally
and financially that align with our strategic positioning. Operationally, production to order based
management relieves our business of the need to operate a warehouse. It also allows order
fulfillment to be more timely and efficient in terms of meeting our customers’ needs. Finally, the
technology and costs of production are constantly improving; therefore, our inventory
management plans allow our business to be more nimble in a constantly changing market.

Financially, while we stand to lose some of the cost of goods advantages a business would gain
from ordering higher quantities, our financial planning projects a more advantageous position
through shipping production to order based inventory management. Financial advantages
through this method allow our business the relief of purchasing/leasing a warehouse property,
staffing of the warehouse, and additional shipping costs associated with order fulfillment from a
warehouse setting. Additionally, our business’ decision to not carry running inventory in our
operational plan provides our business flexibility with additional capital to leverage to other
areas of the operation, such as hardware/software R&D and marketing.

Supply Distribution

Our supply distribution plan, as previously laid out, is based on production to order. Our
hardware supply line is originates at the Shenzhen Benway Technology Company in Shenzhen,
China. All of our hardware products are shipped based on order fulfillment directly to our retail
partners’ distribution centers for further allocation. Our business will partner with United States
Postal Service (USPS) to ship all of our hardware products. Our hardware goods will cost, on
average, $5.20 per unit to ship from the Shenzhen facility. The impacts of these shipping costs
are detailed in the financial section of this business plan.

Order Fulfillment and Customer Service

Orders will be negotiated through our senior business leadership and our retail partners/suppliers.
Our preliminary plan outlines a systematic, regional product launch through Best Buy retail
locations. This regional launch begins in the Midwest region in 2014, expanding to the
Northeast region in 2015, the West and Southwest in 2016, and finally to Canada and Mexico in
2017.

Customer service for our mobile application will be forum and email based through the
application and the website. Use of a forum and frequently asked questions (FAQ) section on
both the application and the website will allow us the ability mitigate many of the frequent issues
our customers would face using, installing, and setting up their devices and applications for use.
Customers will be guided to submit an email or post an issue to the forum if the FAQ section
doesn’t alleviate their concerns. Our IT staff will be responsible for responding to
inquiries/concerns within our organization’s mandate of 24 hours. This will allow our business
to provide cost-effective customer service, while still being able to control the customer
experience in-house versus the uncertainty of an outsourced call center.
Research and Development

Our relationship with Shenzhen Benway Technology Company has provided us with a partner
who is a leading developer and producer of GPS and Bluetooth tracking devices. Through this
relationship and our exclusive agreement, Shenzhen Benway is working to provide us with the
leading technology as it becomes available. We are confident in their ability to continue to
provide us with new higher quality, more efficient devices as they become available.

Our relationships with our IT consultant and the work of our software developers ensure that we
will remain on the forefront in the market with regards to our software offering. Our ability to
leverage capital toward development on this front will position us as a leader in mobile tracking
device applications. We believe that the experience and value proposition offered through the
combined use of our devices and applications will differentiate us from our competition,
therefore we will always be researching new and better ways to use our technology.

Financial Control

The financial control methods of Halo Technologies are primarily determined based on the
guidance of Jake Bredemus, the VP of Finance. Jake brings substantial finance expertise from
previous positions at IBM and United HealthPartners to our business. While all major financial
decisions will be decided on by the senior leadership at Halo Technologies, Jake is the architect
of our financial control methods. As part of Jake’s daily responsibilities, he must ensure our
invoicing is correct and timely, while properly handling the accounts payable. In our initial
negotiations with both Shenzhen Benway and Best Buy, Halo Technologies is anticipating a “net
30” invoice policy from both partners.

Jake is also responsible for providing all pertinent accounting reports to all members of Halo
Technologies senior leadership for routine review. Periodic financial reviews will allow all
senior leaders to review financial results and discuss future actions and any areas of concern.

Contingency Planning

Our business must have contingency plans in place for any unforeseen circumstances that may
potentially put our future business growth and prosperity in jeopardy. Assessing the supply line
of our hardware, our business understands that there is a higher risk of entering into agreement
with one retailer. However, our initial industry and market analysis yielded multiple suitors to
partner with, including Target, Apple store, and other cell phone providers. For this reason, we
feel confident that, if need be, we could locate another retail partner. However on the supply
side, we feel there may be area for concern. Though we have the utmost confidence in our
hardware supply partner, Shenzhen Benway Technology Company, our business must always be
prepared in case a transition of suppliers is necessary. As part of our initial senior leadership
trips to China to tour production facilities, we also took the opportunity to note other facilities
that met our production specifications and quality requirements. Even though we notified the
other business of our intent to proceed with Shenzhen Benway, we did also add that their
offering was favorable to enter into agreement with for production in the future if Shenzhen
Benway was unable to meet our business needs. We also entered into an exclusivity agreement
with Shenzhen Benway for this exact reason; if there was ever a need to take our business
elsewhere, the physical build & technology in our hardware devices would accompany us to our
new partner per the agreement.
Technology Plan
Technology Goals and Position

In terms of the projected hardware offering (HaloKey and HaloLock) and any potential future
offerings, Halo Technologies will position itself as a seller of dependable, cost-effective tracking
devices. Our mission from the inception of Halo Technologies was to offer devices that first and
foremost, have the characteristic of being dependable and align with our vision of providing an
optimal experience. However, we at Halo Technologies understand that some consumers can be
price-sensitive; therefore, we are always working to find the right mix of quality and price to
produce. We define our Halo Technologies hardware products value proposition as one
consumers see as the one with the best return for their investment. We also understand that our
target consumer has different tracking needs, which is the reason we are initially offering two
different hardware products with two different technologies (Bluetooth and GPS). This allows
us to offer two different products (HaloKey and HaloLock) with different price levels, while
giving the consumer an option of the type of tracking experience they wish to have.

Our technology goals and position as they relate to our software offering is where our
business feels that differentiation must take place. There are many manufacturers of different
types, qualities, and costs of tracking device hardware, therefore, gaining a competitive
advantage in this regard will be very difficult and is not within our strategy. However, having a
quality, dependable product that pairs well with a great application experience adds to our
strategic position of differentiation. Our focus for the application and website is to provide a
software offering that is dependable, user friendly, and state-of-the-art, so much so that it
enhances the overall value proposition for our customers. Our initial analysis of the industry
indicates that there is growing demand for location-based services as it relates to tracking, and
those that are operating in the consumer marketplace haven’t been able to differentiate their
businesses as it relates to the customer experience. In order to deliver on this key strategic
position, our business must focus of the software offering. This means a continual investment of
capital and resources (time and labor) to ensure the success of this deliverable goal.
Internet Goals and Plan

One of the strategic positioning goals for our business is to differentiate our business through the
customer experience. The platform for which this will occur is how the hardware couples with
software, and the value proposition offered when the customer interacts with HaloShield. For
this reason, much of the operational, marketing, and investment activity will focus on continually
improving HaloShield. Halo Technologies aspires to meet the following objectives through the
HaloShield experience.

1. Consumer ease of use


2. Dependability and accuracy during use
3. Quality of experience
4. Leading edge tracking technology and its implementation to HaloShield

Delivering on these objectives will ultimately provide a positive value proposition to our
customers when using our products and will result in continual use and market penetration.

Software Needs

The following details the software needs for Halo Technologies.

Office 365 for Business - $12.50 per user per month

- Access to necessary business applications such as Word, Excel, and PowerPoint


- Access to SharePoint
- Active Directory integration provides security of access to Intranet

Intuit QuickBooks (Accounting and Invoicing Software) - $249 one-time cost

Sales Cloud from SalesForce (Customer Relation Management software) - $50 per month

Cost to publish Application and utilize iOS Developer Programming for Apple App Store -
$99/year

Cost to publish Application and utilize SDK Developer Programming for Android - $25 one-
time fee
Hardware Needs

In order for our employees to complete the functions of their jobs, each employee will require a
smartphone and laptop. This will allow employees the ability to access our network for work
necessities, communication necessities, and testing of the hardware/software offering. Initial set-
up of this equipment for each employee will cost approximately $1,300 to $1,700 based of laptop
and smartphone selection. We encourage a variety of laptop and smartphone use in order to test
different platforms and operating systems that our customers will be using. Additional needs for
the initial office set-up include a wireless router and wired ports for connection. This cost is
anticipated to be $500 one-time cost. The impacts of these costs are detailed in the financial
section of this business plan.

Telecommunication Needs

Our business will handle all customer concerns and inquiries through a forum and email based
system located on our HaloShield offering. Therefore, we will not be utilizing any type of call
center. We believe this approach allows us the best mix of cost effectiveness and quality control
in terms of customer interaction. We will have complete control of this segment of customer
engagement, which provides our business with the best opportunity the resolve customer issues
with greater customer satisfaction.

Each of our employees will be provided a smartphone for business communication and testing
purposes of the mobile application. This allows our employees to properly engage the needs of
the day-to-day operation, while testing the two operating systems on which our mobile
application will be offered. The estimated costs per user for the smartphone devices, which
include talk, data, and messaging, will be approximately $150.00 per month (AT&T Pricing
quote, 2013). The impacts of the costs of these devices are detailed in the financial section of this
business plan.

We will also require business class Internet for the sustainability of day-to-day operations. The
nature of our business requires that our Internet service has the capabilities of meeting the
technology demands. Based on the needs of the business, the cost for the Internet service is
estimated to be approximately $400/month (Comcast Business Pricing quote, 2013). Included in
this monthly price is the IP addresses for our website, e-mail for all employees, and access to
cloud document sharing. The impacts of the costs of this service are detailed in the financial
section of this business plan.

Technology Personnel Needs

Our initial technology staffing needs from day one are projected to be one Quality Assurance
Manufacturing Engineer and one IT Support employee. Their main job functions as indicated in
the “Labor Requirements” subsection of the “Operations” section are detailed accordingly. Our
future technology staffing needs are projected to be:

- Full-Time Software Designer in 2015 – Future enhancements & updates of HaloShield


- One Full-time IT Support Employee in 2016 – Increased workload on IT staff
- One Full-Time IT Support Employee in 2017 – Increased workload on IT staff

All of the initial building of the HaloShield software offering will be contracted to a third party
Dominion Consulting. The initial build of HaloShield will be a massive undertaking, and with
our planned startup labor projections, the time and labor that Halo Technologies would need to
complete the work aligns with our desired milestone goals. Our staffing will act as advisors for
the Dominion Consulting during the initial build, helping articulate the desired direction and
experience for HaloShield.

We have contracted GPSGate for use of physical servers and GPS tracking capabilities. Their
staff is responsible for maintenance of the servers and GPS-related hardware. Our agreement
with GPSGate allows us to utilize their servers and equipment for a “per user” fee. This fee is
detailed in the financial section of this business plan.
Management and Organization

Key Employees/Principals

In the start-up phase of Halo Technology, LLC there are three principals; Dustin Duerr, Jake
Bredemus, and Rob Westerlund, each of whom assume the following roles and responsibilities;

President – Rob Westerlund – Rob has 25 years of experience in management and


creative/critical thinking. Rob has worked for NBC and the Walt Disney Company, as well as
having pastored at churches, lectured at colleges, and managed at the national college Anthem
College. Rob will be responsible, along with the other officers, for casting a vision of the
company, charting a course for production start-up, and developing the sales and marketing
branch of the company by developing a network of connections with major retailers, like Target
and Best Buy, to raise awareness and create a distribution network for our product. Rob will
head up sales and marketing with the expectation in 6 months to find a Senior V-P of sales and
marketing for the Company..

Vice-President of Finance – Jake Bredemus – Jake has many years of experience in finance and
accounting with 3M and United HealthPartners. Jake will be charged with raising capital for our
production operations, coordinating financial matters for corporate finances, for sales and
invoicing, and for future growth for the organization.

Vice-President of Operations – Dustin Duerr – Dustin’s ten years of experience of managing a


large work force and running a major corporate branch has prepared him to initially direct the
day to day operations involving Human Resources, Production, R & D, and IT. Departmental
Vice-Presidents will be hired within the first year of operations dependent upon the growth of
revenue from our product.

Our organization will grow from a start-up of a three people with plans to hire an engineer and
vice-presidents for each critical area of operation. At the time our product goes into the stores,
the follow number of employees is estimated: Nine Executives (President, vice-presidents of
Finance, Marketing, R & D, Production, Sales, Legal, and IT) and ten administrative employees
(Directors and managers, including Customer Service, Office Manager, etc.) HaloTech will have
a total of nineteen (19) employees 12 months after start-up.

Compensation and Incentives

The compensation of our officers and employees will be based on standard corporate salary
bases in the United States and as a reflection of our revenues. For the first two years the officers
would draw no salary. By the third year a profit is projected, potentially enabling the officers to
leave their current jobs and work full-time for the company. For the salaries of the employees
please refer to the Appendix.

Advisory Committee

Our company has recruited eight to 10 professionals to form our Advisory Committee.
HaloTech defined our advisory board member profiles by creating a list of skills and connections
we wanted advisors to have. Our advisers would need would have experience/connections in the
following areas:

a. Cutting favorable and binding deals with mass-market retailers

b. Selecting, managing, assuring quality of outsourced manufacturers, shipping, lines of credit,


all aspects of retail infrastructure and operations

c. Satellite, cellular, and Bluetooth technology associated with Smartphone applications.

d. Building and collaborative partnerships to ensure that major retailers carry our wares and that
our merchandise is included in high-profile displays

e. Marketing expertise in building buzz and perception for an innovative brand carefully crafted
for the mass-market retailers.

We sought out advisers who would help us build our business as well as mentor us as an
executive. We found that the best size for an advisory board is eight to 10 people. With a group
of this size there is room for diverse skills and contacts.

Management to be Added

Halo Technologies' management will be slow to hire new people, and very loyal to those who are
hired. We believe our employees will be our greatest asset, and therefore, as we increase
personnel, we will be looking only for individuals whose experience, skills, contacts and
expertise will help foster the development and growth of our company. While there is a
temptation to hire inexpensive personnel in order to further control costs, our philosophy is that
there is a better rate of return in hiring more experienced personnel with expertise in areas we
need, so they can immediately contribute to helping attain or exceed the company's goals and
objectives.

Halo Technologies' day-to-day operations will be managed by its founders, who prefer a
close, hands-on approach to all aspects of their business. As the company grows, we will be
adding accomplished Executive Management in order to manage our growth with expertise in
the areas most needed. Halo Technologies is a small company with a minimum command
hierarchy and a maximum of community spirit and cooperation. Despite the small size of this
company, our business practices are centered on implementing our goals, never losing sight of
profitability objectives and ROI for our investor/partners.

Organizational Chart

In order to minimize our start-up costs, we will continue to outsource the manufacturing,
industrial design and packaging of our devices until the product demand warrants a more
profitable method of producing the quantities needed to fulfill sales orders. Only at that point
will we consider bringing production, packaging, and warehousing in-house.

Rob Westerlund’s role as President will be strongly supported by fellow directors of the
company and by our Advisory Committee. We have veteran businesspeople who have agreed to
mentor Rob in his position as President to help him to understand his role and responsibilities.
His responsibilities of Vice-president of Sales and Vice-president of Marketing will eventually
be filled by experienced new hires. Jake Bredemus will continue his role as Vice-president of
Finance, and Dustin Duerr will maintain his position of Vice-President of Operations while his
other responsibilities of Production, Corporate Affairs, Research and Development, and Legal
will be taken over by hiring new employees experienced in these areas.
Development, Milestones & Exit Plan

Long-Term Company Goals

Halo Technologies’ mission is to provide peace of mind, confidence and security to individuals
and organizations by empowering our customers with the ability to locate lost items and
possessions which are constantly on the move. We exist to serve our customers with the trusted
software and hardware systems required to simplify the process of rediscovering lost items and
tracking possessions or individuals which are constantly on the move. It is the long term goal for
our company to establish a specific niche in the consumer tracking device market place, to do it
consistently and do it well. We hope to accomplish this through innovative technological
development with GPS and smartphone applications as well as strategic retail and manufacturing
partnerships. We also see Halo Technologies as an innovator, taking existing technologies and
retooling them to serve an unmet need in the market place. This requires innovative design and
manufacturing of GPS hardware, development of new and creative smartphone applications and
effective online support.

Growth Strategy

Halo Technologies will adopt a market penetrations strategy, where our focus is to
establish a foothold in the GPS tracking consumer market and generate sustainable sales volume
to allow for additional product development and support. Our growth strategy is centered on our
relationship with the tech savvy retailor, Best Buy, which will be instrumental for the distribution
and sales of our products to our end users. It is our plan to introduce the new product in a staged
approach, beginning with Best Buy stores located in the Midwest in 2014, expanding to the
Northeast in 2015, to the West and Southeast in 2016, and lastly to Canada and Mexico in 2017
(store count by state available in the appendix).

Milestones

To achieve these goals it is important that we take a step back and identify the key milestones
that we needed to reach in order to achieve our long term goals.

➢ Completed: Development of HaloKey and HaloLock hardware devices


➢ Completed: Acquire Legal Patent Protection
➢ Completed: Secure Contract with Manufacturing Company – ‘Shenzhen Benway
Technology’
➢ Completed: Secure vendor status with Best Buy
➢ 8/10/2013: Secure start-up financing
➢ 10/1/2013: Develop Company Web Site (Contracted)
➢ 10/1/2013: Develop Smartphone Application (Contracted)
➢ 10/1/2013: Hire Quality Assurance / Manufacturing Engineer (1 FTE)
➢ 11/1/2013: Manufacture Prototypes / Conduct Quality Assurance and Testing
➢ 12/1/2013: Hire IT Tech Support (1 FTE)
➢ 12/1/2014: Begin taking orders for Central Region retail locations
➢ 2015: Begin taking orders for Northeast Region retail locations
➢ 2015: Hire Software Engineer (1 FTE)
➢ 2015: Acquire office location in Twin Cities Metro area
➢ 2016: Begin taking orders for West and Southeast retail locations
➢ 2016: Hire additional IT Tech Support (1 FTE)
➢ 2016: Break Even by 1Q’16

Exit Plan

Based on our financial forecast we estimate that Halo Technologies will become profitable by its
second year of operation (2015) and will break even by July 2016. After five years of operation
Halo Technologies products will be selling in all of Best Buy’s regional markets, we will have
established sound manufacturing and supply chain management, demonstrated that there is a
significant demand for personal tracking GPS devices and that the business is profitable. Our
product offering would make an excellent addition to the product line of a larger company in this
industry, such as Garmin, Magellan or Lowrance. As our sales become more and more
noticeable to these industry leaders, it is possible that an offer could be made to purchase Halo
Technologies. We have agreed that after five years of operation we would be open to accepting
any reasonable offer which, of course, is dependent on the success of the company. Any offers
would need to be agreed to by a majority of the cofounders (2 of 3) and would be split evenly
amongst the owners. If the company should fail to turn a profit by its second year or break even
by its 5th year of operation, we have agreed to close the business venture.
Financials
Sales / Revenue Forecast

Halo Technologies will generate revenue through direct sales of our GPS and Bluetooth-based
tracking devices to our retail partner Best Buy. The second source of revenue is through our
monthly subscription fees for our HaloShield GPS tracking application. It is our goal to utilize
the existing distribution and marketing power from each of these retailers to get our product in
front of consumers who are most likely to purchase tracking devices; those who are tech savvy,
those with discretionary spending, and those who have property which is worth protecting. Based
on preliminary negotiations with Best Buy we estimate that each retail location will,
conservatively, order 25 tracking devices in our first year of operation. Further, we expect Best
Buy to introduce the new product in a staged approach, beginning with stores located in the
Midwest in 2014, expanding to the Northeast in 2015, to the West and Southeast in 2016, and
lastly to Canada and Mexico in 2017 (store count by state available in the appendix). With this
phased approach in mind we expect to have our products integrated into 1,800 Best Buy
locations by 2017.

Roll out of Halo Technology Products to Best Buy Retail Locations


Year 2014 2015 2016 2017 2018
Central 577 577 577 577 577
Northeast - 362 362 362 362
Southeast - - 521 521 521
West - - 239 239 239
International - - - 133 133
Total Retail Locations 577 939 1,699 1,832 1,832

Based on our retail roll out and projected sales of 25 units per store, we project first year sales of
approximately 14,400 units in 2014 growing to 76,000 units in 2018 as our products are
integrated across all of Best Buy’s retail locations (Best Buy, 2013). Over the next five years we
expect that non-commercial use of GPS devices will grow by 13.6% based on the research from
the US GPS department (GPS, 2013). Applying this growth rate to our base year sales
assumption we estimate Halo Technologies will achieve the following total unit sales volumes
(assumes 80/20 split between Bluetooth and GPS device):
2014 - 2018 Unit Sales Forecast for Halo Technologies
Year 2014 2015 2016 2017 2018
Unit Sales / Store 25.00 28.40 32.26 36.65 41.63
Central 14,425 16,387 18,615 21,147 24,023
Northeast - 10,281 11,679 13,267 15,072
Southeast - - 16,809 19,095 21,692
West - - 7,711 8,759 9,951
International - - - 4,874 5,537
Total Unit Sales 14,425 26,668 54,814 67,143 76,274

Based on previous market analysis we estimate that our GPS offering, HaloKey, will retail at
$175 per unit and our Bluetooth product, HaloLock, to retail at $80 beginning in January of
2014. However, considering the significant power our retail partner commands in the supply
chain, we are estimating their mark up to be 50%, reducing our direct sales price to $87.50 for
each GPS device and $40.00 for each Bluetooth tracking device. As with all new technologies it
is expected that improvements in manufacturing and design will reduce the overall cost of the
product which, in turn, will reduce the overall sales price. To account for this trend, we factored
in an annual price decline of 7.5% per year based on the research from the US GPS department
(GPS, 2013). The HaloShield software subscription fee will be offered at $14.99 per month for
each GPS device that is sold. Subscription volumes are directly correlated with sales of the
HaloKey offering; however we are conservatively estimating that 10% of existing subscribers
will cancel the application each month. Applying these variables against the sales projections
above we estimate the following revenue stream over the next five years:
Halo Technologies Gross Sales Forecast
$4,000,000

$3,500,000

$3,000,000

$2,500,000 HaloKey
$2,000,000 HaloLock

$1,500,000 HaloSheild

$1,000,000

$500,000

$-
2014 2015 2016 2017 2018
Year

Projected Sales for HaloTechnologies 2014 - 2018


Year Units Sold Sales Price Gross Sales Total Sales
Key Lock Shield Key Lock Shield Key Lock Shield
2014 2,885 2,885 2,885 $ 87.50 $ 40.00 $ 179.88 $ 252,438 $ 115,400 $ 164,803 $ 532,641
2015 5,334 21,334 5,334 $ 80.94 $ 37.00 $ 179.88 $ 431,682 $ 789,361 $ 496,737 $ 1,717,779
2016 10,963 43,851 10,963 $ 74.87 $ 34.23 $ 179.88 $ 820,751 $ 1,500,802 $ 2,737,390 $ 5,058,943
2017 13,429 53,714 13,429 $ 69.25 $ 31.66 $ 179.88 $ 929,959 $ 1,700,496 $ 3,752,048 $ 6,382,503
2018 15,255 61,020 15,255 $ 64.06 $ 29.28 $ 179.88 $ 977,201 $ 1,786,881 $ 2,608,445 $ 5,372,527

Costs of Goods Sold

The primary costs of our business include the manufacturing and shipping costs related to the
production and distribution of our GPS devices. In an effort to reduce costs and maximize
profitability, we have decided to utilize low cost manufacturing resources available in China. In
researching the various Chinese manufacturing companies available, we determined that the
Shenzhen Benway Technology Company, a manufacturer of GPS devices, will best meet the
production needs of our company. In preliminary negotiations we have determined that
Shenzhen Benway Technology can produce our GPS tracking device for $50 per unit and the
Bluetooth tracking device for $20 per unit starting in January 2014 (Alibaba, 2013). As stated in
our manufacturing plan, we have been able to secure an exclusive agreement with our
manufacturing partner to help protect our intellectual property and to ensure our products are
produced to our specific requirements. Our agreement with Shenzhen Benway Technology
Company will cost 5% for each unit sold. Shipping presents another significant cost for our
business. In researching the shipping expenses with the USPS we have determined that it will
cost, on average, $5.20 to ship each unit from Shenzhen, China to various locations across the
United States. Shipping expense increases the total variable cost of each GPS unit to $57.97 and
$26.47 for each Bluetooth unit.

As stated in our technology plan, the HaloShield application will be supported by a third party
vendor GPSGate. As part of our agreement with GPSGate, GPSGate will allow us access to their
servers, GPS tracking satellite, and accompanying hardware/software for a per user fee. This
agreement mitigates our business’ technological liability of the need to internally house the
physical servers and associated maintenance. We have negotiated this fee to be $10 per device
per month. Applying these assumptions to our sales forecast we can expect the following costs
of goods sold over the next five year period. Tying the revenue projections and costs of goods
sold together, we are estimating gross profit of $179k in 2014 growing to $1.8 million by 2018 at
roughly a 34% margin.

Halo Technologies COGS Projections 2014 - 2018


Year Units Sold Unit Price Total COGS Total
Key Lock Shield Key Lock Shield Key Lock Shield
2014 2,885 2,885 2,885 $ 57.97 $ 26.47 $120.00 $ 167,245 $ 76,367 $ 109,942 $ 353,554
2015 5,334 21,334 5,334 $ 53.62 $ 24.49 $120.00 $ 285,998 $ 522,369 $ 331,379 $ 1,139,746
2016 10,963 43,851 10,963 $ 49.60 $ 22.65 $120.00 $ 543,764 $ 993,175 $ 1,826,144 $ 3,363,083
2017 13,429 53,714 13,429 $ 45.88 $ 20.95 $120.00 $ 616,116 $ 1,125,325 $ 2,503,034 $ 4,244,475
2018 15,255 61,020 15,255 $ 42.44 $ 19.38 $120.00 $ 647,415 $ 1,182,491 $ 1,740,123 $ 3,570,029
Halo Technologies - Gross Profit
7,000,000

6,000,000

5,000,000
Revenue
4,000,000 COGS
Gross Profit
3,000,000
Expon. (Gross Profit)
2,000,000

1,000,000

0
2014 2015 2016 2017 2018

SG&A Expenses:

The Halo Technology business plan is simple; leverage low-cost manufacturing in China to
produce and ship our products to powerful retailers across the U.S. This strategy greatly reduces
the complexity of our business and places the burden of many non-essential business functions,
such as manufacturing and logistics, onto our business partners who excel in these areas. Still, it
will be necessary for us to acquire quality assurance manufacturing, IT tech support and software
/ website development personnel, legal support, and various communication devices.

A key element of our business model is the smartphone application and customer support
website. We see the smart phone application is one of the big differentiating factors of our
business with limitless future opportunity. It is imperative that we make an aggressive upfront
investment to ensure excellence in its performance. In working with a smartphone application
design firm, we estimate the development cost to total $30,000. Further, we estimate that our
support site will cost an additional $25,000 to create. As we continue to grow we believe that it
will be necessary to hire or contract a software developer full time, beginning 2015, to continue
to develop and expand the capabilities of our smartphone applications and Halo Technology’s
customer support site. We estimate this will cost the company approximately $75,000 per year
(including benefits).

It is also important that our products (both the tracking device hardware and smart phone
applications) are working as advertised. Low customer satisfaction results higher volumes of
returns which can jeopardize our relationship with our key retail partners. To ensure end users
are getting support and customer service it will be necessary for us to hire a full time IT Tech
Support FTE ($60,000) to operate and respond to our online trouble shooting site. As we
continue to expand our operations across all of Best Buy’s regions, we believe it will be
necessary to hire an additional IT Tech Support FTE in 2016 to assist with increased customer
demands. It will also be necessary for us to hire a fulltime quality assurance manufacturing
engineer who can address hardware issues and assist with any manufacturing issues we
encounter with our partners in China. We estimate that an experienced full Quality Assurance
Manufacturing Engineer, with specialized skill in GPS technology, will cost the company
approximately $80,000 per year (including benefits).

Due to the focus of the technology relating to the business plan and the need to offer a
differentiated product in order to achieve market penetration, knowledge of intellectual property
laws and their application to our product offering will be crucial to the success of Halo
Technologies, LLC. Our interaction with intellectual property includes the hardware design that
will be used to build our devices to the software that will allow monitoring and consumer
interaction with the devices. We must be fully cognizant of what our competitors and other
businesses already protect, and what we can protect in order to gain a competitive advantage in
the marketplace. To ensure we are protecting our intellectual property it will be necessary to hire
a lawyer to file a patent on our behalf. We estimate upfront legal fees to total $15,000, then
$3,000 each year thereafter to place our lawyer on retainer.
The last SG&A considerations include our office equipment, rent and communication /
technology costs need to ensure our work can be done efficiently and effectively. To do this it
will be necessary to acquire office space (approximately 1,000 sqft.) in the Twin Cities metro
area beginning in 2014 ($12,000 / year). We also estimate that it will cost approximately $15,250
to properly furnish the building. All employees of Halo Technologies will require a phone ($150
/ month), computer ($1,500 / employee), and internet access ($400 / month). Lastly we estimate
that it will be necessary to meet with each retailer and manufacturer twice per year as various
business issues arise ($15,000).

Based these assumptions we expect our total selling, general and administrative costs to total
$287,250 in 2014, and increase to over $234,250 by 2018 as our operation continues to grow.

2014 - 2018 SG&A Projections


2014 2015 2016 2017 2018
SG&A
Salaries 140,000 218,500 287,000 294,175 301,529
QA Manufacturing Engineer 80,000 82,000 84,050 86,151 88,305
IT / Tech Support 60,000 61,500 126,075 129,227 132,458
Software Developer - 75,000 76,875 78,797 80,767
Advertisement 15,000 18,750 23,438 29,297 36,621
Legal Fees 15,000 3,000 3,000 3,000 3,000
Office Equipment 23,250 1,500 1,500 500 500
Travel 15,000 15,000 15,000 15,000 15,000
Communications 12,000 13,800 15,600 15,600 15,600
Rent 12,000 12,000 12,000 12,000 12,000
Software Development 55,000 - - - -
Total SG&A 287,250 282,550 357,538 369,572 384,250

2014 SG&A Costs


Software
Development
QA Manufacturing
Communications Engineer QA Manufacturing Engineer
IT / Tech Support
Rent Advertisement
Legal Fees
Office Equipment
Travel
Travel
IT / Tech Support Communications
Office Rent
Equipment
Advertisement Software Development
Legal Fees
Financing

To get the business off the ground we will require upfront financing to cover production costs of
the GPS units for six months, half a year’s salary for our IT consultant and QA Engineer,
advertisement costs, upfront legal fees as well as website and smartphone design and
development. These up-front expenses are expected to total approximately $320,000. Each of the
founding members of Halo Technologies has agreed to personally contribute $30,000 to establish
the business. The remaining balance of $230k will be financed through the bank via a five year
small business loan. In preliminary discussion with our local bank, we estimate that we can
secure a five year loan at 8.5%. This will cost Halo Technologies approximately $4,662.38 per
month or roughly $56,000 per year (see calculation below). A detailed monthly amortization
schedule is available in the appendix section.

Halo Technologies Start-Up Costs


Production Costs $ 100,000
Salaries (1/2 yr) 70,000
Smart Phone Application 30,000
Website Development 25,000
Office Equipment & Rent 35,250
Legal Fees 15,000
Travel Costs 15,000
Advertisement Expenses 15,000
Communication / Technology 12,000
Total Upfront Costs $ 317,250
Less Owner's Contributions $ (90,000)
Total Financing Required $ 227,250
Loan Payment Calculation

Number of Periods (months) 60

Interest Rate 8.50%

Present Value $ 239,676.13

Monthly Payment $4,917.32

Income Statement:

Piecing all the assumptions together we get a clear view of expected business performance. As
you can see 2014 and 2015 present some challenges in terms of sales volumes as we work to
expand our presence across each of Best Buy’s regional locations. Additionally, we face
increased pressure on the SG&A side as we address upfront costs, such as R&D related to our
HaloShield application, office supplies and furniture, communication equipment and legal fees.
As we move past the initial startup phase (2014-2015), we can see the business model becomes
much more attractive as sales volumes increase and upfront startup costs subside. Additionally,
we expect subscription sales to continually increase as the base number of users of the
HaloShield application continues to grow each year until 2017.
Halo Technologies, LLC
Proforma Income Statement
August 2013

2014 2015 2016 2017 2018


Hardware Sales 367,838 1,221,043 2,321,554 2,630,455 2,764,082
Subscription Sales 164,803 496,737 2,737,390 3,752,048 2,608,445
Total Sales 532,641 1,717,779 5,058,943 6,382,503 5,372,527
Manufacturing Costs 243,612 808,367 1,536,939 1,741,441 1,829,906
Software Costs 109,942 331,379 1,826,144 2,503,034 1,740,123
Total Costs of Goods Sold 353,554 1,139,746 3,363,083 4,244,475 3,570,029
Gross Profit 179,086 578,033 1,695,861 2,138,028 1,802,498
SG&A
Salaries 140,000 218,500 287,000 294,175 301,529
QA Manufacturing Engineer 80,000 82,000 84,050 86,151 88,305
IT / Tech Support 60,000 61,500 126,075 129,227 132,458
Software Developer - 75,000 76,875 78,797 80,767
Advertisement 15,000 18,750 23,438 29,297 36,621
Legal Fees 15,000 3,000 3,000 3,000 3,000
Office Equipment 23,250 1,500 1,500 500 500
Travel 15,000 15,000 15,000 15,000 15,000
Communications 12,000 13,800 15,600 15,600 15,600
Rent 12,000 12,000 12,000 12,000 12,000
Software Development 55,000 - - - -
Total SG&A 287,250 282,550 357,538 369,572 384,250
EBIT -108,164 295,483 1,338,323 1,768,456 1,418,247
Interest Expenses 55,949 55,949 55,949 55,949 55,949
Taxes (@ 35%) -57,439 83,837 448,831 599,378 476,804
Net Income / (Loss) -106,673 155,698 833,543 1,113,130 885,494
Profit Margin % -29.0% 12.8% 35.9% 42.3% 32.0%
Cash-Flow Projections

Cash flows over the first two years of the operation will need to be managed tightly as we cover
upfront expenses and ramp up sales across all of Best Buy’s regions. Our cash position begins
with a small business loan of $227,000 as well as a $90,000 contribution from each of the
founding members, leaving us with approximately $317,000 to get the business off the ground.
The majority of this cash will be used in the first month of our operation to pay for upfront R&D
costs related to our website and smartphone application ($55,000) upfront legal fees ($15,000)
and office furniture ($15,750). Another significant cash outflow consists of our variable costs
related to subscription fees for GPSGate ($10/month per user) which will support the HaloShield
application. We have agreed to net 30 payment terms for GPS Gate. The second significant
variable cost is related to our monthly manufacturing costs for our partners in China. It will be
necessary for us to send payment the same month products are ordered (net 30 payment terms).
We are expecting to see additional demand in the summer months, June – August, and a
significant spike in sales in the holiday months of November and December which is consistent
with Best Buy’s peak sales periods. This places additional pressure on our cash flow during these
months, where net cash flow is often negative. Our cash receipts, beginning in February of 2014,
represent direct payments from Best Buy as well as monthly subscription fees for our HaloShield
application. Our agreement with Best Buy stipulates that payment will be made to us, Halo
Technologies, 30 days after the product is available for resale (SEC, 2013). We are anticipating a
60 day window between the time we purchase goods from our manufacture to the time we
receive payment from Best Buy. Subscription fees for the HaloShield application are paid in
advance for each month the customer wishes to use the system, and will have the option of
paying for a full year of service in advance. In our analysis below we are assuming each month
that we will retain 95% of our total HaloKey customer base. We expect cash flows to remain
fairly tight through 2015 as sales ramp up in the Northeast region, however we should see some
significant cash flow relief as HaloShield subscription fees ramp up in correlation with HaloKey
sales. We expect our ending cash position in 2014 to drop down to approximately $50,000 in
2014, improve to $140,000 in 2015 and over $700,000 by 2016.
Halo Technologies - 2014 Cash Flow
Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 317,250 $ 127,702 $ 189,548 $ 189,548
February 20,554 35,750 (15,196) 174,352
March 22,500 36,919 (14,419) 159,933
April 24,252 37,970 (13,719) 146,214
May 25,828 38,917 (13,089) 133,126
June 27,247 53,392 (26,145) 106,981
July 49,078 55,457 (6,379) 100,602
August 52,173 57,315 (5,142) 95,460
September 54,959 45,364 9,594 105,054
October 36,912 45,571 (8,660) 96,394
November 37,222 73,004 (35,782) 60,612
December 78,610 89,391 (10,782) 49,830
Full Year 746,583.44 696,752.99 49,830.45 49,830.45
Break-Even Analysis

Based on previous cash flow analysis we estimate that Halo Technologies will break even in just
over two years of operation, or July 2016. Breakeven for our company represents the point where
earnings match our upfront investment ($90,000) and total amount loaned from the bank
($230,000), or approximately $320,000. During the first two years of operation most, if not all,
of our cash will be tied up in startup costs (R&D, Legal Fees) and manufacturing ramp up
needed to meet the increasing demands of Best Buy. Once our products are integrated across all
Best Buy locations and sales begins to level off, we will see significant improvement in our cash
position, as increased manufacturing needs for future periods will no longer be necessary. Cash
flow and profitability are expected to continue to grow through 2017 and 2018.
Appendix

Monthly Sales / Revenue Projections:

Projected Sales for HaloTechnologies 2014


Month Units Sold Unit Price Gross Sales Total Sales
HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield
January 144 577 144 $ 87.50 $ 40.00 $ 14.99 $ 12,621.88 $ 5,770.00 $ 2,162.31 $ 20,554.18
February 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 4,108.38 22,500.26
March 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 5,859.85 24,251.73
April 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 7,436.18 25,828.05
May 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 8,854.87 27,246.74
June 289 1,154 289 87.50 40.00 14.99 25,243.75 11,540.00 12,293.99 49,077.74
July 289 1,154 289 87.50 40.00 14.99 25,243.75 11,540.00 15,389.21 52,172.96
August 289 1,154 289 87.50 40.00 14.99 25,243.75 11,540.00 18,174.90 54,958.65
September 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 18,519.72 36,911.60
October 144 577 144 87.50 40.00 14.99 12,621.88 5,770.00 18,830.06 37,221.93
November 433 1,731 433 87.50 40.00 14.99 37,865.63 17,310.00 23,433.97 78,609.60
December 577 2,308 577 87.50 40.00 14.99 50,487.50 23,080.00 29,739.81 103,307.31
Full Year 2,885 11,540 2,885 $252,437.50 $115,400.00 $164,803.25 $532,640.75

Projected Sales for HaloTechnologies 2015


Month Units Sold Unit Price Gross Sales Total Sales
HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield
January 267 1,067 267 $ 80.94 $ 37.00 $ 14.99 $ 21,584.09 $ 39,468.05 $ 30,763.30 $ 91,815.44
February 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 31,684.44 92,736.58
March 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 32,513.47 93,565.61
April 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 33,259.60 94,311.73
May 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 33,931.11 94,983.25
June 533 2,133 533 80.94 37.00 14.99 43,168.18 78,936.10 38,532.95 160,637.22
July 533 2,133 533 80.94 37.00 14.99 43,168.18 78,936.10 42,674.60 164,778.87
August 533 2,133 533 80.94 37.00 14.99 43,168.18 78,936.10 46,402.08 168,506.36
September 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 45,759.35 106,811.49
October 267 1,067 267 80.94 37.00 14.99 21,584.09 39,468.05 45,180.89 106,233.02
November 800 3,200 800 80.94 37.00 14.99 64,752.27 118,404.14 52,655.22 235,811.63
December 1,067 4,267 1,067 80.94 37.00 14.99 86,336.36 157,872.19 63,379.59 307,588.14
Full Year 5,334 21,334 5,334 $431,681.78 $789,360.96 $496,736.59 $1,717,779.33
Projected Sales for HaloTechnologies 2016

Month Units Sold Unit Price Gross Sales Total Sales


HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield
January 548 2,193 548 $ 74.87 $ 34.23 $ 14.99 $ 41,037.56 $ 75,040.12 $ 65,258.22 $181,335.90
February 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 91,598.76 207,676.44
March 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 115,305.25 231,382.93
April 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 136,641.09 252,718.77
May 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 155,843.35 271,921.03
June 1,096 4,385 4,385 74.87 34.23 14.99 82,075.13 150,080.23 205,991.74 438,147.10
July 1,096 4,385 4,385 74.87 34.23 14.99 82,075.13 150,080.23 251,125.30 483,280.66
August 1,096 4,385 4,385 74.87 34.23 14.99 82,075.13 150,080.23 291,745.50 523,900.86
September 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 295,437.31 411,514.99
October 548 2,193 2,193 74.87 34.23 14.99 41,037.56 75,040.12 298,759.95 414,837.63
November 1,644 6,578 6,578 74.87 34.23 14.99 123,112.69 225,120.35 367,483.05 715,716.09
December 2,193 8,770 8,770 74.87 34.23 14.99 164,150.25 300,160.47 462,200.20 926,510.92
Full Year 10,963 43,851 42,207 $820,751.27 $1,500,802.33 $2,737,389.74 $5,058,943.34

Projected Sales for HaloTechnologies 2017


Month Units Sold Unit Price Gross Sales Total Sales
HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield
January 671 2,686 671 $ 69.25 $ 31.66 $ 14.99 $ 46,497.94 $ 85,024.81 $ 426,044.91 $557,567.66
February 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 393,505.15 525,027.90
March 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 364,219.37 495,742.11
April 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 337,862.16 469,384.91
May 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 314,140.67 445,663.42
June 1,343 5,371 1,343 69.25 31.66 14.99 92,995.88 170,049.61 302,856.06 565,901.56
July 1,343 5,371 1,343 69.25 31.66 14.99 92,995.88 170,049.61 292,699.92 555,745.41
August 1,343 5,371 1,343 69.25 31.66 14.99 92,995.88 170,049.61 283,559.38 546,604.88
September 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 265,268.17 396,790.92
October 671 2,686 671 69.25 31.66 14.99 46,497.94 85,024.81 248,806.09 380,328.83
November 2,014 8,057 2,014 69.25 31.66 14.99 139,493.82 255,074.42 254,119.67 648,687.91
December 2,686 10,743 2,686 69.25 31.66 14.99 185,991.76 340,099.23 268,966.62 795,057.61
Full Year 13,429 53,714 13,429 $929,958.82 $1,700,496.13 $3,752,048.17 $6,382,503.12

Projected Sales for HaloTechnologies 2018


Month Units Sold Unit Price Gross Sales Total Sales
HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield HaloKey HaloLock HaloShield
January 763 3,051 763 $ 64.06 $ 29.28 $ 14.99 $ 48,860.04 $ 89,344.07 $ 253,503.49 $391,707.59
February 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 239,586.67 377,790.78
March 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 227,061.54 365,265.64
April 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 215,788.92 353,993.02
May 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 205,643.56 343,847.66
June 1,525 6,102 1,525 64.06 29.28 14.99 97,720.07 178,688.13 207,946.27 484,354.47
July 1,525 6,102 1,525 64.06 29.28 14.99 97,720.07 178,688.13 210,018.71 486,426.91
August 1,525 6,102 1,525 64.06 29.28 14.99 97,720.07 178,688.13 211,883.90 488,292.11
September 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 202,129.04 340,333.15
October 763 3,051 763 64.06 29.28 14.99 48,860.04 89,344.07 193,349.67 331,553.77
November 2,288 9,153 2,288 64.06 29.28 14.99 146,580.11 268,032.20 208,315.30 622,927.61
December 3,051 12,204 3,051 64.06 29.28 14.99 195,440.15 357,376.27 233,217.90 786,034.32
Full Year 15,255 61,020 15,255 $977,200.73 $1,786,881.34 $2,608,444.96 $5,372,527.03
Best Buy Domestic Stores - Fiscal Year Ending 2013
Big Box Mobile Stand
State Region
Stores Alone Stores Total Stores
Arkansas Central 9 5 14
Idaho Central 5 2 7
Illinois Central 52 16 68
Indiana Central 23 12 35
Iowa Central 13 1 14
Kansas Central 9 4 13
Kentucky Central 9 7 16
Louisiana Central 16 7 23
Michigan Central 34 11 45
Minnesota Central 23 16 39
Nebraska Central 5 3 8
North Dakota Central 4 1 5
Ohio Central 37 12 49
Oklahoma Central 13 3 16
Oregon Central 12 3 15
South Dakota Central 2 1 3
Tennessee Central 16 8 24
Texas Central 108 39 147
Wisconsin Central 23 11 34
Wyoming Central 1 1 2
Total Central Region 414 163 577
Connecticut Northeast 12 6 18
Delaware Northeast 4 1 5
District of Columbia Northeast 2 1 3
Maine Northeast 5 0 5
Maryland Northeast 23 13 36
Massachusetts Northeast 27 12 39
New Hampshire Northeast 6 4 10
New Jersey Northeast 27 11 38
New York Northeast 54 16 70
Pennsylvania Northeast 38 16 54
Rhode Island Northeast 1 0 1
Vermont Northeast 1 0 1
Virginia Northeast 34 12 46
Washington Northeast 19 12 31
West Virginia Northeast 5 0 5
Total Northeast Region 258 104 362
Alabama Southeast 15 6 21
Florida Southeast 65 50 115
Georgia Southeast 28 12 40
Mississippi Southeast 9 2 11
Missouri Southeast 20 11 31
North Carolina Southeast 32 14 46
Puerto Rico Southeast 3 0 3
South Carolina Southeast 15 5 20
Total Southeast Region 371 150 521
Alaska West 2 0 2
Arizona West 24 1 25
California West 119 30 149
Colorado West 22 5 27
Hawaii West 2 0 2
Montana West 3 0 3
Nevada West 10 4 14
New Mexico West 5 2 7
Utah West 10 0 10
Total West Region 197 42 239
Total All Regions 1,240 459 1,699
Small Business Loan Amortization Schedule:
Amortization Schedule
Unpaid Unpaid
Month Payment Interest Month Payment Interest
Principle Principle
Jan-14 $4,662.38 1,609.69 $ 224,197.31 Jul-16 $4,662.38 889.74 $ 121,837.71
Feb-14 $4,662.38 1,588.06 $ 221,122.99 Aug-16 $4,662.38 863.02 $ 118,038.34
Mar-14 $4,662.38 1,566.29 $ 218,026.89 Sep-16 $4,662.38 836.10 $ 114,212.07
Apr-14 $4,662.38 1,544.36 $ 214,908.87 Oct-16 $4,662.38 809.00 $ 110,358.69
May-14 $4,662.38 1,522.27 $ 211,768.76 Nov-16 $4,662.38 781.71 $ 106,478.01
Jun-14 $4,662.38 1,500.03 $ 208,606.41 Dec-16 $4,662.38 754.22 $ 102,569.85
Jul-14 $4,662.38 1,477.63 $ 205,421.65 Jan-17 $4,662.38 726.54 $ 98,634.00
Aug-14 $4,662.38 1,455.07 $ 202,214.34 Feb-17 $4,662.38 698.66 $ 94,670.28
Sep-14 $4,662.38 1,432.35 $ 198,984.31 Mar-17 $4,662.38 670.58 $ 90,678.48
Oct-14 $4,662.38 1,409.47 $ 195,731.40 Apr-17 $4,662.38 642.31 $ 86,658.40
Nov-14 $4,662.38 1,386.43 $ 192,455.45 May-17 $4,662.38 613.83 $ 82,609.85
Dec-14 $4,662.38 1,363.23 $ 189,156.30 Jun-17 $4,662.38 585.15 $ 78,532.62
Jan-15 $4,662.38 1,339.86 $ 185,833.77 Jul-17 $4,662.38 556.27 $ 74,426.51
Feb-15 $4,662.38 1,316.32 $ 182,487.71 Aug-17 $4,662.38 527.19 $ 70,291.32
Mar-15 $4,662.38 1,292.62 $ 179,117.95 Sep-17 $4,662.38 497.90 $ 66,126.84
Apr-15 $4,662.38 1,268.75 $ 175,724.32 Oct-17 $4,662.38 468.40 $ 61,932.85
May-15 $4,662.38 1,244.71 $ 172,306.65 Nov-17 $4,662.38 438.69 $ 57,709.16
Jun-15 $4,662.38 1,220.51 $ 168,864.78 Dec-17 $4,662.38 408.77 $ 53,455.55
Jul-15 $4,662.38 1,196.13 $ 165,398.52 Jan-18 $4,662.38 378.64 $ 49,171.82
Aug-15 $4,662.38 1,171.57 $ 161,907.71 Feb-18 $4,662.38 348.30 $ 44,857.73
Sep-15 $4,662.38 1,146.85 $ 158,392.18 Mar-18 $4,662.38 317.74 $ 40,513.09
Oct-15 $4,662.38 1,121.94 $ 154,851.74 Apr-18 $4,662.38 286.97 $ 36,137.68
Nov-15 $4,662.38 1,096.87 $ 151,286.22 May-18 $4,662.38 255.98 $ 31,731.27
Dec-15 $4,662.38 1,071.61 $ 147,695.45 Jun-18 $4,662.38 224.76 $ 27,293.66
Jan-16 $4,662.38 1,046.18 $ 144,079.25 Jul-18 $4,662.38 193.33 $ 22,824.60
Feb-16 $4,662.38 1,020.56 $ 140,437.43 Aug-18 $4,662.38 161.67 $ 18,323.90
Mar-16 $4,662.38 994.77 $ 136,769.81 Sep-18 $4,662.38 129.79 $ 13,791.31
Apr-16 $4,662.38 968.79 $ 133,076.21 Oct-18 $4,662.38 97.69 $ 9,226.62
May-16 $4,662.38 942.62 $ 129,356.46 Nov-18 $4,662.38 65.36 $ 4,629.59
Jun-16 $4,662.38 916.27 $ 125,610.35 Dec-18 $4,662.38 32.79 $ 0.00
Monthly Cash Flows by Year:

Halo Technologies - 2014 Cash Flow


Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 317,250 $ 127,702 $ 189,548 $ 189,548
February 20,554 35,750 (15,196) 174,352
March 22,500 36,919 (14,419) 159,933
April 24,252 37,970 (13,719) 146,214
May 25,828 38,917 (13,089) 133,126
June 27,247 53,392 (26,145) 106,981
July 49,078 55,457 (6,379) 100,602
August 52,173 57,315 (5,142) 95,460
September 54,959 45,364 9,594 105,054
October 36,912 45,571 (8,660) 96,394
November 37,222 73,004 (35,782) 60,612
December 78,610 89,391 (10,782) 49,830
Full Year 746,583.44 696,752.99 49,830.45 49,830.45

Halo Technologies - 2015 Cash Flow


Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 103,307 $ 89,149 $ 14,158 $ 63,988.63
February 91,815 89,764 2,052 66,040
March 92,737 32,877 59,859 125,900
April 93,566 90,814 2,751 128,651
May 94,312 91,262 3,049 131,700
June 94,983 134,751 (39,767) 91,933
July 160,637 137,514 23,124 115,056
August 164,779 140,000 24,779 139,835
September 168,506 99,153 69,353 209,188
October 106,811 98,767 8,044 217,232
November 106,233 184,590 (78,357) 138,875
December 235,812 232,163 3,649 142,524
Full Year 1,513,498.50 1,420,805.23 92,693.26 142,523.71
Halo Technologies - 2016 Cash Flow

Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 307,588 $ 154,839 $ 152,750 $ 295,273
February 181,336 172,411 8,925 304,198
March 207,676 272,063 (64,386) 239,812
April 231,383 202,459 28,924 268,736
May 252,719 215,269 37,450 306,186
June 271,921 325,570 (53,649) 252,536
July 438,147 355,680 82,467 335,004
August 483,281 382,778 100,503 435,507
September 523,901 308,394 215,507 651,014
October 411,515 310,610 100,905 751,919
November 414,838 510,150 (95,313) 656,606
December 715,716 650,184 65,532 722,138
Full Year 4,440,020.55 3,860,406.02 579,614.53 722,138.25

Halo Technologies - 2017 Cash Flow

Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 926,511 $ 406,752 $ 519,759 $ 1,241,898
February 557,568 385,044 172,524 1,414,421
March 525,028 814,338 (289,310) 1,125,111
April 495,742 347,924 147,818 1,272,930
May 469,385 332,099 137,286 1,410,216
June 445,663 411,643 34,021 1,444,236
July 565,902 404,868 161,034 1,605,270
August 555,745 398,770 156,976 1,762,246
September 546,605 299,496 247,109 2,009,355
October 396,791 288,513 108,277 2,117,633
November 380,329 466,202 (85,873) 2,031,759
December 648,688 563,179 85,509 2,117,268
Full Year 6,513,956.44 5,118,826.56 1,395,129.88 2,117,268.13
Halo Technologies - 2018 Cash Flow

Month Cash Receipts Cash Disbursements Net Cash Flow Ending Cash Balance
January $ 795,058 $ 297,294 $ 497,764 $ 2,615,032
February 391,708 288,010 103,698 2,718,730
March 377,791 879,032 (501,241) 2,217,489
April 365,266 272,134 93,132 2,310,621
May 353,993 265,366 88,627 2,399,248
June 343,848 358,397 (14,550) 2,384,699
July 484,354 359,780 124,575 2,509,274
August 486,427 361,024 125,403 2,634,677
September 488,292 263,021 225,271 2,859,948
October 340,333 257,164 83,169 2,943,116
November 331,554 450,139 (118,585) 2,824,531
December 622,928 558,247 64,681 2,889,212
Full Year 5,381,550.32 4,609,606.20 771,944.12 2,889,212.24
Halo Technologies, LLC
Proforma Balance Sheet
August 2013

2014 2015 2016 2017 2018

ASSETS
Current Assets
Cash $49,830 $142,524 $722,138 $2,117,268 $2,889,212
Accounts Recievable 103,307 525,886 1,364,477 795,058 786,034
Inventory
Other Current Assets 11,881 - - - -
Total Current Assets 165,019 668,410 2,086,615 2,912,326 3,675,247
Fixed Assets
Land
Facilities
Equipment 23,250 17,438 8,719 2,180 -
Total Long Term Assets 23,250 17,438 8,719 2,180 -
TOTAL ASSETS 188,269 685,847 2,095,334 2,914,505 3,675,247

LIABILITIES
Current Liabilities
Accounts Payable 68,562 203,955 615,727 527,719 521,564
Income Taxes Due -57,439 83,837 448,831 599,378 476,804
Short Term Notes Payable 4,662 4,662 4,662 4,662 4,662
Other Current Liabilities 0 0 0 0 0
Total Current Liabilities 15,785 292,454 1,069,220 1,131,759 1,003,030
Long Term Notes Payable 189,156 147,695 102,570 53,456 -
Other Long Term Liabilities - - - - -
Total Long Term Liabilities 189,156 147,695 102,570 53,456 -
TOTAL LIABILITIES 204,942 440,150 1,171,790 1,185,214 1,003,030

Owner's Equity
Paid In Capital 90,000 90,000.00 90,000.00 90,000.00 90,000.00
Retained Earnings -106,673 155,698 833,543 1,639,291 2,582,216
Total Equity -16,673 245,698 923,543 1,729,291 2,672,216

Liabilities and Equity 188,269 685,847 2,095,334 2,914,505 3,675,247


References
Best Buy Store Statistics – Investor Relations (2013). Bestbuy.com. Retrieved from
http://phx.corporate-ir.net/phoenix.zhtml?c=83192&p=irol-reports

The Economic Benefits of Commercial GPS Use in the United States (2013). GPS.gov.
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GPS Manufacturing Costs (2013). Alibaba.com. Retrieved from


http://www.alibaba.com/productgs/958864121/mini_size_lower_cost_manufactures_
GPS.html.

Bluetooth Manufacturing Costs (2013). Alibaba.com. Retrieved from


http://www.alibaba.com/productgs/689780371/bluetooth_round_security_
tag_for_bags.html

Rogowsky, M. (2013). More Than Half Of Us Have Smartphones, Giving Apple And Google
Much To Smile About. Retrieved from
http://www.forbes.com/sites/markrogowsky/2013/06/06/more-than-half-of-us-have-
smartphones-giving-apple-and-google-much-to-smile-about/

Best Buy Vendor Agreement (2013). SEC.gov. Retrieved from:


http://www.sec.gov/Archives/edgar/data/1088825/000101287002001633/dex101.txt

(2013). Personal Tracking to Be the Next Billion Dollar GPS Market. Retrieved from
http://www.abiresearch.com/press/personal-tracking-to-be-the-next-billion-dollar-gp
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