Financial Plan

Pizza House, Inc. has included three financial forecasts. The first forecast, “Worst
Case “ scenario assumes that the restaurant will not be open and operating until the
1st of April 2002. The Realistic and Best case scenario assume that the build-out
will be done by the end of March and we will be able to open our doors for
operations on the 1st of April 2002. A contingency in all scenarios has been added
in order to meet the challenges of building the business within the first three
months including the Worst case scenario, should it occur.

Financial Statement pro formas:

Budgets
Pizza House, Inc. has included month to month forecasted operating budgets for
the next 5 years to include all specific assumptions for review affecting the five
years forecasted. Income and Balance Sheet statements for all forecasts have been
included.
The Worst Case forecast is made under the assumption that build out for the
leasehold is finished within three months and the store is able to generate a full one
month’s revenue as of April 1, 2002. Revenue calculations are based upon
competitive price comparisons and established menu values in the current
marketplace, (See supporting documents section Competition, Menu). The
following are the Pizza House’s Five Year projected revenue goals based upon an
average ticket of $1.00 Beverage; $ 6.00 lunch and $8.00 for diner.
Worst Case

Year Daily Turnover Annual Sales Net After Taxes

Year 1 1 $ 639,900 $ ( 89,032)
Year 2 1.25 $ 979,200 $ 51,767
Year 3 1.25 $ 1,087,200 $ 88,604
Year 4 1.25 $ 1,195,200 $ 118,043
Year 5 1.5 $ 1,429,200 $ 196,545

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Cost of Goods sold
Cost of goods sold have been calculated as a percentage of sales and will be
monitored on a daily basis in order to maintain a 33% cost of goods sold for food
and a 26% cost of goods sold for beverage with retail being held at 50%.
Operating expenses assumptions have been conservatively estimated for both
forecasts. , ( See supporting documents section Operating Expense Assumptions.).
Total General and Administrative salaries for both forecasts are the following;
Owner/Manager $ 48,000
Owner/Manager $ 48,000

Income Statements
There are month to month Statements for five years in the Supporting Documents
section for each forecast.

Tax rates used in forecasts;

0$-$83, 050.00 = 28%
$83,050.00-$134,500.00 = 31%
$134,500-$263,750 = 36%
$263,750, and above = 39%

Balance Sheets
There are month to month Statements for five years in the Supporting Documents
section for each forecast.

Cash Flow Projections

Working capital assumptions;
Accounts receivable turnover is calculated to be 0 days as payment is rendered
with service. Inventory is turned on a daily cycle as inventory is used daily within
all categories, and accounts payable are paid as you go.

Capital Requirements, ( See supporting documents Year One Cash Flow

Projections)
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The entire Pizza House endeavor will require funding of $150,000.00. Harry Smith
and Jim O’Neil have invested $100,000 into Pizza House, Inc., but an additional
$150,000.00 is required. The forecasts included are based upon $150,000.00 being
obtained for a loan to Business guaranteed personally by both partners (See
supporting documents section,Worst Case, Realistic and Best Case Scenario
financing assumptions). The personally invested funds of $100,000 represent a
working capital line necessary for operating capital and as a contingency should
the worst case scenario occur. This loan has been calculated as a five year loan at a
fixed interest rate of 9% with a principal and interest payment of $3,375.84. It is
assumed for the calculation of these proformas that the full amount of both loans
are received the first day of January 2002.

How Funds Will Be Used/ Use of Proceeds ( See supporting documents Year
One Cash Flow Projections)

The $150,000 long term, (5 year) loan in the Realistic forecast will be used in
combination with the owners investment of $100,000 for the following;

Total Capital Expenditures

Leasehold Deposits/First/Last $ 5,000.00
Building Permits $ 780.00
Licensing $ 1,554.00
Utility Deposits $ 3,442.00
Remodeling Build-out $ 65,587.00
Equipment $ 45,936.00
Furniture $ 20,150.00
Total Capital Expenditures $ 142,449.00

Working Capital 90 day build-out including additionally expensed start up

costs; $ 107,551.

(See also for specific details Location and Operations Chapter)

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At the end of the 4th month of, March 31st, 2002 with the completion of all capital
expenditures and the first full month of operations the ending cash balance is
projected to be $ 14,942 in the worst case forecast.
( See supporting documents section Worst Case Cash Flow Projections Year 1.)

Exit /Collateral/ Pay-back Strategy

The financial projections indicate that exit will be achievable over 5 years for the
operating capital line of credit in all forecasts. Under the worst case scenario the
Company should have over $ 14,000 in cash in the bank after income taxes the first
year. Should the Company fail completely, both O'Neil and Smith will collateralize
the note with assets totaling $150,000.

Conclusion
Based on the attached financial projections, and supporting documentation we
believe that this venture represents a sound business loan.
In order to proceed we are requesting a working capital line of credit in the amount
of $150,000.

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