SPIN KICKS LIMITED

SOLUTION

Spin Kicks Limited

Projected Statement of Operations
For the Year Ended December 31
($000) Forecast
2019 2018 2020

Revenue
Spin Bikes Product $ 158,000 $ 78,000 474,000
Treadmill Product - 35,000
Subscription 70,000 34,000 280,000
Total Revenue 228,000 112,000 789,000
Cost of Revenue
Spin Bikes Product 68,000 42,000 203,820
Treadmill Product - - 12,250
Subscription 21,000 11,000 84,000
Total Cost of Revenue 89,000 53,000 300,070
Gross Profit 139,000 59,000 488,930
Sales and Marketing 78,000 46,000 268,260
General and Administrative 61,000 50,000 15,400
Reseach and Development 17,000 12,000 30,000
Depreciation 60,000 25,000 116,894
Operating Income (77,000) (74,000) 58,376
Interest expense 17,400 11,000 32,909
Pre-tax Earnings (94,400) (85,000) 25,466
Income taxes - - -
Net Earnings (94,400) (85,000) 25,466

See below for calculations

 Projected Bike Sales
Prior Year (2019)- Bikes $ 158,000
Plus:
Increase new sales- 200% x 158,000 316,000
$ 474,000
Projected Treadmill Sales
Increase sales +35,000 $ 35,000

Projected Subscription Sales

Prior Year (2019)- Subscription $ 70,000
Plus:
Increase new sales- 300% x 70,000 210,000
$ 280,000
Projected COS
COGS - Bikes (1-57%) of Sales $ 203,820
COGS - Treadmill (1-65%) of Sales 12,250
COGS - Subscription (1-70%) of Sales 84,000
$ 300,070

Projected SG&A
34% of Revenues $ 268,260

Projected General and Admin

General & Admin (2019) $ 61,000
Less: legal fees (50,000)
11,000
Increase 40% 4,400
15,400

Projected R&D
Case facts- R&D $ 30,000

Projected Depreciation Expense

Beginning Capital Asset (Cost) $ 691,000
Plus: 1/2 of CAPEX Budget 250,000
Average Capital Asset (Cost) 941,000

X Depreciation Expense Ratio 12%

$ 116,894

Depreciation Expense Ratio

Depreciation Exp/(Begin Capital Asset + 1/2 CAPEX) 12%

Projected Interest Expense

Debt due in 1 year $ 100,000
LTD 295,000
+/-: 1/2 of Addition - repayment in year 75,000
Average LTD $ 470,000
X Interest Expense Ratio 7%
$ 32,909

Interest Expense Ratio

Interest Exp/(Begin LTD + 1/2 new loans) 7%

Projected Income Tax Expense

Pre-tax Earnings $ 25,466
X Income Tax Expense Ratio 0%
$ -

Income Tax Expense Ratio

Income Tax Expense/Pre-tax Income 0%
Spin Kicks Limited
Projected Balance Sheet
As at December 31 ($000) Forecast
2019 2018 2020
ASSETS
Cash $ 551,600 $ 198,000 $ 289,905
Accounts Receivable 21,000 14,000 67,652
Inventories 17,000 7,000 54,018
Prepaid Expenses 6,000 8,000 6,000
Total Current Assets 595,600 227,000 417,575

Capital Assets -Cost 691,000 275,000 1,191,000

Capital Assets - Accumulated Depreciation (85,000) 606,000 (25,000) 250,000 (201,894) 989,106
Goodwill 33,000 33,000 33,000
Total Assets 1,234,600 510,000 33,000 1,439,680

LIABILITIES
Accounts Payable and Accrued Liabilities $ 13,600 $ 5,000 $ 43,214
Current portion of long term debt 100,000 41,000 130,000
Total Current Liabilities 113,600 46,000 173,214

Long Term debt 295,000 61,000 415,000

Total Liabilities 408,600 107,000 588,214

SHAREHOLDERS' EQUITY
Common Shares 1,550,400 1,033,000 1,550,400
Retained Earnings (724,400) (630,000) (698,934)
826,000 403,000 851,466
Total Liabilities and Shareholders' Equity 1,234,600 510,000 1,439,680

See below for calculations

 Projected A/R
Projected Revenues(excl subs) $ 509,000
Divided by:
A/R Turnover 2019 7.52
$ 67,652

A/R Turnover Ratio- prior year

Revenue/Accounts Receivable 7.52

Projected Inventory
Projected Cost of Sales $ 216,070
Divided by:
Inventory Turnover 2019 4.00
$ 54,018

Inventory Turnover Ratio Prior Year

Cost of Sales/Inventory 4.00
Projected Prepaids

Constant at Prior Year Level $ 6,000

Projected Capital Asset

Capital Asset (cost) - Begin of Year $ 691,000
Plus: CAP EX Budget 500,000
$ 1,191,000

Projected Accum Dep

Capital Asset (AD) - Begin of Year $ (85,000)
Plus: Current Year Depreciation (116,894)
$ (201,894)

Projected Goodwill

Constant at Prior Year Level $ 33,000

Projected A/P
Projected Cost of sales $ 216,070
Divided by:
A/P Turnover 2019 5.00
$ 43,214

A/P Turnover Ratio Prior Year

Cost of Accounts Payable 5.00

Projected Long Term Debt

LTD- Beginning of year (excl current) $ 295,000
New Debt in 2019 250,000
Less: Current Portion of LTD - loan (130,000)
Non-Current Portion of LTD $ 415,000

Projected Common Shares

C/S - Beginning of year $ 1,550,400
Add Issuance; Deduct Repurchase -
C/S - End of year $ 1,550,400

Projected Retained Earnings

Retained Earnings- Beginning of Year $ (724,400)
Add Net Income(Loss) - Current Year 25,466
Deduct: Dividends paid -
Retained Earnings- End of Year $ (698,934)
Reason why Cash Decreased:

- Working Capital increased- A/R, Inv and slightly offset by increase in Payables
- Purchase of $500M of capital assets only financed by $250M of LTD; plus repaid $100M of LTD