garbles cellular phones

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Table of Contents

Page 1

1.0 Executive Summary.............................................................................................................................1Chart: Highlights ......................................................................................................................2

1.1 Keys to Success ........................................................................................................................21.2 Mission ........................................................................................................................................21.3 Objectives ...................................................................................................................................2

2.0 Company Summary.............................................................................................................................32.1 Company Ownership .................................................................................................................42.2 Start-up Summary ......................................................................................................................4

Chart: Start-up .........................................................................................................................4Table: Start-up .........................................................................................................................5

3.0 Products ...............................................................................................................................................54.0 Market Analysis Summary ..................................................................................................................5

4.1 Market Segmentation ................................................................................................................6Table: Market Analysis ...........................................................................................................6Chart: Market Analysis (Pie) ..................................................................................................7

4.2 Industry Analysis .........................................................................................................................74.2.1 Competition and Buying Patterns................................................................................8

4.3 Target Market Segment Strategy .............................................................................................95.0 Strategy and Implementation Summary ............................................................................................9

5.1 Competitive Edge ......................................................................................................................95.2 Marketing Strategy ..................................................................................................................105.3 Sales Strategy..........................................................................................................................10

5.3.1 Sales Forecast ............................................................................................................11Table: Sales Forecast.................................................................................................11Chart: Sales Monthly ...................................................................................................12Chart: Sales by Year ...................................................................................................12

5.4 Milestones ................................................................................................................................12Table: Milestones..................................................................................................................13Chart: Milestones ..................................................................................................................13

6.0 Management Summary ....................................................................................................................136.1 Personnel Plan .........................................................................................................................13

Table: Personnel ...................................................................................................................147.0 Financial Plan ....................................................................................................................................14

7.1 Start-up Funding ......................................................................................................................15Table: Start-up Funding........................................................................................................15

7.2 Important Assumptions............................................................................................................157.3 Break-even Analysis................................................................................................................16

Table: Break-even Analysis .................................................................................................16Chart: Break-even Analysis .................................................................................................16

7.4 Projected Profit and Loss .......................................................................................................16Chart: Profit Monthly .............................................................................................................17Chart: Profit Yearly ................................................................................................................17Chart: Gross Margin Monthly ...............................................................................................18Chart: Gross Margin Yearly..................................................................................................18Table: Profit and Loss ..........................................................................................................19

7.5 Projected Cash Flow ...............................................................................................................19Chart: Cash ...........................................................................................................................20

Table of Contents

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Table: Cash Flow ..................................................................................................................217.6 Projected Balance Sheet ........................................................................................................22

Table: Balance Sheet ...........................................................................................................227.7 Business Ratios .......................................................................................................................23

Table: Ratios .........................................................................................................................24Table: Sales Forecast ...............................................................................................................................1Table: Personnel ........................................................................................................................................2Table: Profit and Loss ...............................................................................................................................3Table: Cash Flow .......................................................................................................................................4Table: Balance Sheet ................................................................................................................................5

Garbles Cellular Phones

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1.0 Executive Summary

Cellular telephones have revolutionized the communications arena, redefining how we perceivevoice communications. Traditionally, cellular phones remained out of the hands of mostconsumers due to their high cost. As a result, cell phone carriers have invested time andresources into finding ways to give the systems higher capacity and thus lower cost. Cellsystems are benefiting from this research and starting to develop into large-scale consumerproducts.

Today, cellular phones are truly consumer electronics devices with over 59 million subscribers.The Nokia Bowl and Qualcomm Stadium are further evidence of the idea that cell phones areconsumer electronics devices. Cell phones have ceased to be an exclusive status symbol ofhigh-powered lawyers and are now in the hands of millions of consumers.

Garbles Cellular Phones, Inc. is taking advantage of an opportunity to become a highlydistinguished and recognized leader in the cellular communications industry. It is the goal ofour company to become established as the leading distributor of wireless communicationsservices in the metro Niceburg area.

In order to achieve this goal, Garbles Cellular Phones' critical success factors will be to identifyemerging trends and integrate them into our company operations, respond quickly totechnology changes/be there early, provide high-quality services, invest time and money inmarketing and advertising, expand into specialty markets, and stay ahead of the "technologycurve."

The company was initially formed as a sole proprietorship by Mr. Seramed Garbles in the EastAtlantic Island Archipelago (EAIA), and succeeded tremendously in that market. Capitalizing onthe growing wireless communications industry and based on their success in EAIA the Garblesfamily decided to expand their company's operations to the U.S.A. and create a niche market forits products and accessories.


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1.1 Keys to Success

Our company keys to success will include:

1. Provide excellent customer service2. Grow and maintain a referral network of customers3. Focus expertise in GSM cellular phones and GSM cellular phone programs4. Respond rapidly to customer problems with product or plan

1.2 Mission

Garbles Cellular's mission is to offer its customers the highest quality cell phone products andservices. Its owner focuses on personalized service to his customers by offering convenienceand rapid service. Additionally, Garbles Cellular has the technological expertise to assistcustomers in picking the product and service that best meets their needs. Finally, our staffwill have strong vendor relationships with the product suppliers and will be able to meetcustomers' demand for the newest innovation in cellular phone technology.

We believe it is important to remain an active member of the community, and to impact people'slives in more ways than deriving a profit from them. We propose to host community eventsthat bring out the best in people.

1.3 Objectives

The company plans to focus on the following target markets that will provide us with the


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greatest market penetration: the specialty business users, the general business users, and thepersonal users. We intend to offer products and service packages that are priced appropriatelyfor each segment and will offer the services that best suit each segment's needs.

The suburb of Pleasant Village, picked to be our headquarters' location, is a focal point in theNiceburg area. Located a few miles south of downtown Niceburg, it is a community with a smalltown atmosphere but big city conveniences.

The Metro Niceburg area is populated today by more than 700,000 inhabitants, is home to 13Fortune 500 and 24 Fortune 1,000 company headquarters. The Metropolitan Niceburg Chamber ofCommerce and corporate executives are committed to actively recruiting new companies to theregion. Public and private partnerships with business, financial and nonprofit communities are keyto spurring quality job creation and investment throughout the city’s neighborhoods.

Our company will center on serving the growing the Niceburg community (presently at a 6%per year rate) as well as concentrating on the local Pleasant Village population, banking on thecurrent growing trend of using mobile phones.

Our company will concentrate on selling Global System for Mobile Communications (GSM)protocol cellular phones - sales, services and support.

Business Objectives

· Company growth· Become established as the leading distributor of cellular phones and wireless

communications services· Increase number of retail outlets

Financial Objectives

· Create and increase revenue

Marketing Objectives

· Increase marketing efforts· Expand market area· Expand marketing reach· Brand recognition· Increase telemarketing efforts

2.0 Company Summary

Garbles Cellular Phones, Inc. will offer its customers GSM cellular phones, and cellular phonesaccessories.

GSM stands for "Global System for Mobile Communications." GSM is originally a Europeansystem and is largely being adopted today in the United States. Its greatest advantage, atechnical one, is that the owner can use the phone all over the world since the system is usedmostly anywhere.

Market demand drives cell phone manufactures and service providers to offer new andimproved services and functions in their cell phones. The demand for more visual interaction


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and entertainment with cell phones in the Japanese market, for instance, is great and as such,their phones are many years ahead of what we will see in the U.S.A. Phones have definitelybecome an important part of people's lives all over the world, whereas in North America manystill view the cell phone as a tool and not as a entertainment device. The average phone inNorth America lasts 3-5 years before being replaced, in Japan it is a fraction of this time.

We believe that, with our long and thorough experience in the EAIA, our store will be in theperfect location to start our operations in the U.S.A., and will start operating in the right time.Garbles Cellular Phones will provide its customers support and convenience second to none.

2.1 Company Ownership

Garbles Cellular Phones is wholly owned by Mr. Seramed Garbles, who is a citizen of the EastAtlantic Island Archipelago and the owner of Garbles Cellular Phones Ltd in that country.

2.2 Start-up Summary

Mr. Seramed Garbles will invest $43,000 in Garbles Cellular Phones, Inc. He will also investan additional $50,000 when operation takes off in April Year 1. The following chart and tableshow projected initial start-up costs for Garbles Cellular Phones, Inc.


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Table: Start-up

Start-up

Requirements

Start-up Expenses

Legal $5,000

Insurance $1,000

Rent $2,000

Equipment $2,000

Other $1,000

Total Start-up Expenses $11,000

Start-up Assets

Cash Required $2,000

Start-up Inventory $30,000

Other Current Assets $0

Long-term Assets $0

Total Assets $32,000

Total Requirements $43,000

3.0 Products

The following are the products that will be offered by Garbles Cellular Phones:

· GSM Cellular Phones: Motorola, Nokia, Sharp, Siemens, Samsung, Alcatel, Ericsson,Fujitsu, Hyundai, LG Electronics, and others.

· Fixed Wireless Phones· Cellular Phone Accessories: antennas, batteries, belt clips, cables and adapters,

cases, chargers, faceplates, and modems.

4.0 Market Analysis Summary

The market potential is huge for our products, evidenced by what appears to be the unstoppablegrowth of the telecom industry. Currently, the telecom industry is among the strongest growthindustries and is responsible for huge gains in the capital markets. The proliferation of cellularphones is increasing at rates which at one time were unimaginable. One illustrative example isthat it is forecasted that within two years over 65% of children from age of 10-15 will havecell phones.

Future growth of the market/products is projected in the following areas:

Text messages between friends (in Japan this big). Users can send regular Short-MessageService (SMS) or email on their phones. Email is of course limited to small file sizes, but manyof the phones allow for English characters to be sent. Each provider also allows specialcharacters to be sent, such as an array of happy and sad faces, small animated images, animals,people, hearts, etc. When special characters are not available, people often use a specializedset of faces to show emotion. Email can also be sent between different provider phones, butmany of the special characters are lost, hence users may try to keep a circle of friends on thesame provider to receive the special characters. Email, of course, may be sent from computers


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as well, but files are often stripped of headers and attachments when received on cell phones.

Most North American phones come with a few games to keep people entertained for a limitedduration. Japanese phones come with two different types of games: built-in ones and Javaapplication ones. The built-in ones are simple, but again the graphics are very important to thegame value. Java application games are delivered via the network to the customer's phone andthere is a charge for this service. These games are much more complex and require streamingdata to access. New games come out monthly. You can even buy joysticks and navigationconsoles that plug into your phone.

One of the recent popular additions to many of the Japanese and Korean phone models is aCCD Camera that is mounted either on the outside of the clamshell or on the clamshell hinge.The camera lens is slightly smaller than a dime and takes 4x4 cm pictures to display on thephone's screen or to send to others. Not only can users take pictures, they can take videoclips as well. Most phones take between 5-15 seconds of footage due to memory limitations,but they can send streaming video. Many of the advertisements for camera phones showpeople taking to each other and watching each other on the screen (both holding the phone andcamera at arm's length and using a hands-free microphone and earpiece). The camera also has acouple of neat accessories including an external flash that pops into an accessory port and aminiature printer that will print out pictures.

Our company will try to take advantage of these developments and serve its customers in allthese new trends and developments.

4.1 Market Segmentation

Garbles Cellular Phones, Inc. will focus on five customer groups, bearing in mind that it is quitecustomary today to have more than one cell phone per family:

· Children in the age group of 10-17 years old· Students· General public· Professionals· Service organizations and companies that need to be in constant communication with

their employees.

Table: Market Analysis

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

Children 10-17 years old 3% 90,000 92,700 95,481 98,345 101,295 3.00%

Students 2% 50,000 51,000 52,020 53,060 54,121 2.00%

Professionals 2% 40,000 40,800 41,616 42,448 43,297 2.00%

General Public 2% 250,000 255,000 260,100 265,302 270,608 2.00%

Operating Service Companies 4% 40,000 41,600 43,264 44,995 46,795 4.00%

Other 1% 30,000 30,300 30,603 30,909 31,218 1.00%

Total 2.29% 500,000 511,400 523,084 535,059 547,334 2.29%


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4.2 Industry Analysis

The U.S. market is dominated today by three large companies:

T-Mobile Wireless - owned by a subsidiary of Deutsche Telekom since May 31, 2001.

· Revenues:Exceeding $13.6 billion in 2001.· Wireless Phone Service Subscribers: Cellular voice, messaging and high-speed wireless

data services to more than 8 million customers.· Cellular Phone Service and Technology: T-Mobile Wireless operates the largest all

digital, wireless network based exclusively on GSM (Global System for MobileCommunications) technology. GSM is the most widely used digital standard worldwide,accounting for more than 70 percent of the total digital wireless market.

Cingular Wireless is the second largest wireless company in the U.S. A leader in mobile voiceand data communications, Cingular is a wireless company determined to promote the individual toa new level.

· Ownership: Cingular Wireless is a joint venture between the domestic wireless divisions ofSBC (NYSE:SBC) and BellSouth (NYSE: BLS). Headquarters in Atlanta, Georgia. SBCowns 60 percent of the company and BellSouth owns 40 percent, based on the value ofthe assets both contributed to the venture.

· Revenue on the cellular service in Year 2002 was more than $14.7 billion.· Cellular Phone Service Subscribers: more than 22 million voice and data customers

across the U.S.A.· Cellular Phone Service and Technology: A leader in mobile voice and data

communications, Cingular is the only U.S. wireless carrier to offer Rollover, the wirelessplan that lets customers keep their unused monthly minutes. Cingular provides cellular/PCS service in 43 of the top 50 markets nationwide, and provides corporate e-mail and


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other advanced data services through its GPRS and Mobitex packet data networks

Nextel Communications, based in Reston, VA, is a leading provider of fully integrated,wireless communications services on the largest guaranteed, all-digital, wireless network in thecountry.

· Ownership: Nextel Wireless is traded on the NASDAQ National Market under the symbolNXTL. Nextel Partners is a separate company traded on the NASDAQ National Market.

· Revenue on the cellular service $8.7 billion (2002).· Cellular Phone Service Subscribers: 10.61 million (Q4 2002).· Cellular Phone Service and Technology: Nextel uses a packet-based platform, the

integrated Digital Enhanced Network (iDEN™) technology, developed by Motorola. TheNextel 4-in-1 service—Nextel Digital Cellular, Direct ConnectSM, Nextel MobileMessaging, and Nextel Online®—covers thousands of communities across the UnitedStates. Nextel and Nextel Partners, Inc., currently serve 197 of the top 200 U.S.markets.

Garbles Cellular Phones is aiming to gather a share of the market from these three.

4.2.1 Competition and Buying Patterns

Brand names are of little, if any, importance. The key to the buying decision on the part of theconsumer is the salesman and the cell phone being in front of them. As has been pointed out inthe Competitive Analysis section there are other sellers with similar brand names as thosesupplied by Garbles Cellular Phones, Inc. which may even be less expensive. It is essential thatthe salesman point out the salient features and selling points favoring our products. Mostimportantly, our products must be available in the retail outlet, since whatever products ourstore carries are the ones that are going to be sold.

The need to attract, acquire, leverage, and retain customers remains a primary concern tobusiness. Revenue growth through customer acquisition and retention is as important arequirement in e-commerce as it is in other business. Customers, especially in the Westernbusiness culture, count speed of service as a key reason why they do business with acompany. They resent delays and hate waiting for service. In the United States, almost 80%of the gross domestic product (GDP) is generated through different kinds of services, andspeed of service no longer distinguishes an enterprise as providing superior value. Customersgenerally are not thrilled if they receive good service, but they are highly dissatisfied if they donot. Garbles Cellular will provide the necessary framework to cope with these demands bycutting the waiting time for a service.

Customers also want consistent, reliable, and easy-to-use service. As the speed of serviceincreases, customer expectations grow, making friendly, easy, and solution-oriented customerservice an important business trend.

Reflective shoppers get some support from e-commerce as well. They like to investigateproducts precisely and consciously. However, when browsing costs a lot because of on-linecharges, they do less of it. Consequently, they do not get a holistic view of the availableoptions, and their expectations often are not met. Reference-spending customers do not letthemselves be hurried or forced. They use alternative offline sources to get information. Theyrefuse aggressive marketing, which is accepted in Western e-commerce.

Soon, shoppers will simply wave their cell phone over the item they want and the charge will


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automatically appear on their cell phone bill. It’s happening in some cities overseas already. Andright now, MasterCard and Motorola are testing out a similar program here in the States.Retailers have registers that will take the signal from the cell phone, and the purchase isautomatically converted to a MasterCard charge. Buyers don’t have to sign anything. Thescary part is what could happen when people lose their cell phones or have them stolen. Thereare lots of technical and legal issues to work out here, but paying wirelessly is going to gainmomentum quickly.

Garbles Cellular is planning to take advantage of these trends of buying patterns. We shall alsobe very quick in establishing our own website to take advantage of E-trade.

4.3 Target Market Segment Strategy

The market for cellular phones and their accessories is very fragmented, crowded andcompetitive. Among these, there are only a few large local firms that serve the entire city ofNiceburg and its surroundings. The remainder are small firms that sell from kiosks in thesurrounding malls. Garbles Cellular Phones current niche in its location, variety of products andexpertise in serving the public will assure the projected sales.

We expect to take full advantage of the trends described in the Market Analysis above, and tryto penetrate the market with new innovations and gadgets — mainly with the youngergeneration, using advertisements and demonstrations. We shall also try to lure independent smallsellers to join our effort.

5.0 Strategy and Implementation Summary

Garbles Cellular Phones will use a strategy of total market service. Assumptions:

1. Every person is a potential customer and all our potential markets will experience growth.2. Marketing to one segment of the population will lead to an expansion in overall market

growth.

The following sections review the various strategies that will support this effort.

5.1 Competitive Edge

The Seramed Communication's competitive edge will be:

Location: Locating the company in a suburb of Niceburg, Homestate enables thecompany to cover a large and rapidly developing customer populace.

Customer Service: Mr. Seramed Garbles, owner and CEO of Garbles Cellular Inc.,has been the CEO of the Garbles Cellular Phones Ltd. in the East Atlantic IslandArchipelago for many years past, and accumulated a vast knowledge and experience inthe cellular phone market, with a special expertise in GSM phones. He is very familiar withhis target customer base. He has an excellent reputation for customer service.

E-Commerce: The company will make an effort to enhance its sales through a serious


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and advantageous website in order to attract customers that are reluctant to dobusiness with large companies.

5.2 Marketing Strategy

Short-term marketing strategies are those that bring will bring us a temporary boost in traffic.Although these techniques are very important to our over-all plan, they are only a temporarytraffic source and must not be solely relied upon. Short-term marketing strategies include:

· Purchasing Advertising· Bulletin Boards· Search Engines

Long-term marketing strategies are those that will bring us a steady stream of targeted trafficover time. These strategies will continue to produce results even years down the road. Long-term marketing strategies include:

· Opt-in Lists· Freebies· Content

By creating and implementing a balanced marketing strategy, using both short-term and long-term strategies, Garbles Cellular will drive a steady stream of targeted traffic to our website.

Using this simple formula when creating our Internet marketing strategy and excelling at allthree, we hope to guarantee our success.

Our short-term marketing strategy will focus heavily on sales promotion, niche positioning inthe market and customer service with loyalty and retention in sales.

Our promotions will always stay in tune with our company objectives and mission statement.

5.3 Sales Strategy

Constructing our Sales Strategy we shall follow the following steps:

Sales Success Requires Planning - we shall formulate our sales strategy and tactics toachieve our sales success.

Analyze Our Potential - we shall step through a structured process that will prepare us forthe development of our sales strategy.

Strategize Around Strengths - the description of our sales activity will be analyzedproducing a report that reveals factors impacting our sales potential.

Develop Our Tactics - we shall receive guidance to develop a comprehensive tactical plan toachieve our success.

Measure Our Success - we shall constantly develop key measurements that mark the


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progress of financial estimates that guide our growth.

Employ An Action Plan for Success - we shall provide our sales force a clear tactical plan thatis also aligned with management's strategic objectives.

The sales strategy of Garbles Cellular Phones is simple. The key to customer satisfaction ishaving the product and services that meet the customer's needs. A crucial part of that is to alsohave knowledgeable employees to help customers quickly find what they want.

5.3.1 Sales Forecast

Sales forecast displayed here is very conservative — although we aim very high, we decided toshow a very slow growth and revise the plan on a yearly basis. As a rule we expect to expandthe volume much more rapidly.

Table: Sales Forecast

Sales Forecast

Year 1 Year 2 Year 3

Sales

Cellular Phones $138,000 $190,000 $270,000

Cellular Phones Accessories $126,000 $160,000 $200,000

Fixed Wireless Phones $46,500 $60,000 $90,000

Other Sevices $46,500 $90,000 $150,000

Total Sales $357,000 $500,000 $710,000

Direct Cost of Sales Year 1 Year 2 Year 3

Cellular Phones $31,650 $43,560 $61,900

Cellular Phones Accessories $30,450 $41,500 $51,800

Fixed Wireless Phones $11,700 $15,500 $23,300

Other Services $11,710 $23,300 $38,900

Subtotal Direct Cost of Sales $85,510 $123,860 $175,900


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5.4 Milestones

The Milestones table hereunder is destined to be a working plan for the formation of the neworganization, including legal negotiations, hiring of personnel, rental of the facility, building ofinitial inventory, beginning of marketing and start of physical operation.


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The team to execute the chores will have to follow up on the timetable and make sure thateverything falls in place — to ensure smooth start of sales and success of the organization.

Table: Milestones

Milestones

Milestone Start Date End Date Budget Manager Department

Preview of Business Plan by

Investor

1/1/2005 1/15/2005 $1,000 CEO Department

Concluding Legal Matters 1/10/2005 2/10/2005 $4,000 Owner Department

Hiring of Operators 2/1/2005 3/1/2005 $500 CEO Department

Conclussion of Rentals 1/15/2005 2/15/2005 $2,000 Owner Department

Preparation of Website 1/15/2005 3/1/2005 $2,500 Programmer Department

Acquiring Initial Inventory 2/15/2005 3/15/2005 $31,000 Store Personnel Department

Start of Marketing 3/1/2005 4/1/2005 $0 Marketing Mgr. Department

Start of Operation 4/1/2005 4/10/2005 $2,000 All Department

Totals $43,000

6.0 Management Summary

The management of Garbles Cellular Phones, Inc. is made up of the owner, a Marketingmanager (Mr. Nomassu Perozia) and three other members who will be hired locally and willbe added: a Programmer, and two store attendants with one serving at the beginning assecretary.

6.1 Personnel Plan


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The Garbles Cellular Phones' store will operate virtually 24 hours a day 7 days a week. Althoughthe store opening hours will be officially 10:00 a.m. to 6:00 p.m., it is clear that due to ourInternet operation the customer support will be a non-stop one. The personnel plan, as detailedin the following table, has been developed to support these hours.

Assumptions regarding personnel have been made for year 1 through year 3 as follows:

Year 1 Ending March, 2006 - Owner, Mr. Seramed Garbles, will draw a salary of $42,000.The Marketing Manager, Mr. Nomassu Perozia will receive a yearly salary of $26,400. Theprogrammer will have $21,000 a year plus a percentage of his Internet sales, and the twostore attendants will earn $16,800 each. However, they will divide the total week hours betweenthem so that only during busy hours will they both be present.

Year 2 Ending March, 2007 - Salaries will be boosted by 10 - 15 percent. Additional staff willbe hired if significant increases in sales warrant.

The same applies to Year 3 Ending March, 2008.

Table: Personnel

Personnel Plan


CEO $42,000 $48,000 $54,000

Marketing Manager $26,400 $28,800 $31,200

Programmer/Office Administrator $21,000 $22,200 $23,400

2 Store Attendantds $33,600 $36,960 $40,000

Other $0 $0 $0

Total People 0 0 0

Total Payroll $123,000 $135,960 $148,600

7.0 Financial Plan

It is assumed that the owner's private resources will be sufficient to finance any monthly cash-flow shortage. However, it would be advisable to establish a bank relationship as soon aspossible. Sales could very well increase at a much sharper rate than assumed in theseconservative projections. Sharper sales will result in a greater need for funds in support ofinventory and receivables. An over-draft line of credit with the bank will be an excellentcushion to fall back on.

This is considered a very good time to start a new business. The economy is beginning itstrek up, and consumer spending is up. The Commerce Department reported, "Consumers hadincreased their spending, the largest advance in nine months."

A shorter learning curve will be brought to the business by the owner due to his extensivebackground and in-depth market knowledge. He has a clear understanding of the need tomanage costs and forecast future needs so that the business is not "broadsided" by theunexpected.

One other component on which the financial plan is based is wise purchases. Finding the rightproduct, at the right price will enable the business to meet planned margins and maintain


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inventory at an attractive level with a high turn rate.

7.1 Start-up Funding

Mr. Seramed Garbles will invest $43,000 in Garbles Cellular Phones, Inc. to cover start-upcosts. He will also invest an additional $50,000 when operation takes off in April 2005. Thetable below illustrates funding sources for our start-up costs.

Table: Start-up Funding

Start-up Funding

Start-up Expenses to Fund $11,000

Start-up Assets to Fund $32,000

Total Funding Required $43,000

Assets

Non-cash Assets from Start-up $30,000

Cash Requirements from Start-up $2,000

Additional Cash Raised $0

Cash Balance on Starting Date $2,000

Total Assets $32,000

Liabil ities and Capital

Liabil ities

Current Borrowing $0

Long-term Liabil ities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabil ities (interest-free) $0

Total Liabil ities $0

Capital

Planned Investment

Owner $43,000

Investor $0

Additional Investment Requirement $0

Total Planned Investment $43,000

Loss at Start-up (Start-up Expenses) ($11,000)

Total Capital $32,000

Total Capital and Liabil ities $32,000

Total Funding $43,000

7.2 Important Assumptions

As a general rule our company will not sell on credit. However for very special cases we mightoffer short-term credit against valid assurances. We shall accept cash and checks, Visa,MasterCard, Discover and American Express, and PayPal on the Internet. All sales paid via


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credit cards will be deposited in our business checking account within 48 hours.

7.3 Break-even Analysis

Our break-even analysis is summarized by the following chart and table.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $17,916

Assumptions:

Average Percent Variable Cost 24%

Estimated Monthly Fixed Cost $13,625

7.4 Projected Profit and Loss

There are many factors to include when determining a projected profit and loss statement, theseare included in the following table.


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Table: Profit and Loss

Pro Forma Profit and Loss


Sales $357,000 $500,000 $710,000

Direct Cost of Sales $85,510 $123,860 $175,900

Other Costs of Sales $26,824 $30,000 $45,000

Total Cost of Sales $112,334 $153,860 $220,900

Gross Margin $244,666 $346,140 $489,100

Gross Margin % 68.53% 69.23% 68.89%

Expenses

Payroll $123,000 $135,960 $148,600

Marketing/Promotion $4,500 $10,000 $25,000

Depreciation $0 $0 $0

Rent $24,000 $24,000 $24,000

Insurance $12,000 $12,000 $12,000

Payroll Taxes $0 $0 $0

Other $0 $0 $0

Total Operating Expenses $163,500 $181,960 $209,600

Profit Before Interest and Taxes $81,166 $164,180 $279,500

EBITDA $81,166 $164,180 $279,500

Interest Expense $0 $0 $0

Taxes Incurred $24,350 $49,254 $83,850

Net Profit $56,816 $114,926 $195,650

Net Profit/Sales 15.91% 22.99% 27.56%

7.5 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table.


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Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $357,000 $500,000 $710,000

Subtotal Cash from Operations $357,000 $500,000 $710,000

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabil ities (interest-free) $0 $0 $0

New Long-term Liabil ities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $50,000 $0 $0

Subtotal Cash Received $407,000 $500,000 $710,000

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $123,000 $135,960 $148,600

Bill Payments $139,315 $256,158 $364,659

Subtotal Spent on Operations $262,315 $392,118 $513,259

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabil ities Principal Repayment $0 $0 $0

Long-term Liabil ities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $262,315 $392,118 $513,259

Net Cash Flow $144,685 $107,882 $196,741

Cash Balance $146,685 $254,566 $451,307


Page 22

7.6 Projected Balance Sheet

The table shows the annual balance sheet results, with a healthy projected increase in networth. Detailed monthly projections are in the appendix.

Table: Balance Sheet

Pro Forma Balance Sheet


Assets

Current Assets

Cash $146,685 $254,566 $451,307

Inventory $8,000 $20,694 $28,814

Other Current Assets $0 $0 $0

Total Current Assets $154,685 $275,261 $480,121

Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $154,685 $275,261 $480,121

Liabil ities and Capital Year 1 Year 2 Year 3

Current Liabil ities

Accounts Payable $15,869 $21,518 $30,729

Current Borrowing $0 $0 $0

Other Current Liabil ities $0 $0 $0

Subtotal Current Liabil ities $15,869 $21,518 $30,729

Long-term Liabil ities $0 $0 $0

Total Liabil ities $15,869 $21,518 $30,729

Paid-in Capital $93,000 $93,000 $93,000

Retained Earnings ($11,000) $45,816 $160,742

Earnings $56,816 $114,926 $195,650

Total Capital $138,816 $253,742 $449,392

Total Liabil ities and Capital $154,685 $275,261 $480,121

Net Worth $138,816 $253,742 $449,392


Page 23

7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on theStandard Industrial Classification (SIC) code 5731.9902, Consumer electronic equipment, nec,are shown for comparison.


Page 24

Table: Ratios

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profi le

Sales Growth n.a. 40.06% 42.00% 5.90%

Percent of Total Assets

Inventory 5.17% 7.52% 6.00% 33.94%

Other Current Assets 0.00% 0.00% 0.00% 26.57%

Total Current Assets 100.00% 100.00% 100.00% 80.73%

Long-term Assets 0.00% 0.00% 0.00% 19.27%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabil ities 10.26% 7.82% 6.40% 41.85%

Long-term Liabil ities 0.00% 0.00% 0.00% 11.83%

Total Liabil ities 10.26% 7.82% 6.40% 53.68%

Net Worth 89.74% 92.18% 93.60% 46.32%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 68.53% 69.23% 68.89% 32.59%

Selling, General & Administrative Expenses 52.62% 46.24% 41.33% 17.11%

Advertising Expenses 0.00% 0.00% 0.00% 2.28%

Profit Before Interest and Taxes 22.74% 32.84% 39.37% 0.85%

Main Ratios

Current 9.75 12.79 15.62 1.73

Quick 9.24 11.83 14.69 0.79

Total Debt to Total Assets 10.26% 7.82% 6.40% 58.93%

Pre-tax Return on Net Worth 58.47% 64.70% 62.20% 2.27%

Pre-tax Return on Assets 52.47% 59.65% 58.21% 5.54%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 15.91% 22.99% 27.56% n.a

Return on Equity 40.93% 45.29% 43.54% n.a

Activity Ratios

Inventory Turnover 8.67 8.63 7.11 n.a

Accounts Payable Turnover 9.78 12.17 12.17 n.a

Payment Days 27 26 26 n.a

Total Asset Turnover 2.31 1.82 1.48 n.a

Debt Ratios

Debt to Net Worth 0.11 0.08 0.07 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $138,816 $253,742 $449,392 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.43 0.55 0.68 n.a

Current Debt/Total Assets 10% 8% 6% n.a

Acid Test 9.24 11.83 14.69 n.a

Sales/Net Worth 2.57 1.97 1.58 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Page 1

Table: Sales Forecast

Sales Forecast

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

Sales

Cellular Phones 0% $10,000 $10,000 $10,000 $11,000 $11,000 $11,000 $12,000 $12,000 $12,000 $13,000 $13,000 $13,000

Cellular Phones Accessories 0% $9,000 $9,000 $9,000 $10,000 $10,000 $10,000 $11,000 $11,000 $11,000 $12,000 $12,000 $12,000

Fixed Wireless Phones 0% $3,500 $3,500 $3,500 $3,750 $3,750 $3,750 $4,000 $4,000 $4,000 $4,250 $4,250 $4,250

Other Sevices 0% $3,500 $3,500 $3,500 $3,750 $3,750 $3,750 $4,000 $4,000 $4,000 $4,250 $4,250 $4,250

Total Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Cellular Phones $2,300 $2,300 $2,300 $2,500 $2,500 $2,500 $2,750 $2,750 $2,750 $3,000 $3,000 $3,000

Cellular Phones Accessories $2,250 $2,250 $2,250 $2,400 $2,400 $2,400 $2,600 $2,600 $2,600 $2,900 $2,900 $2,900

Fixed Wireless Phones $900 $900 $900 $950 $950 $950 $1,000 $1,000 $1,000 $1,050 $1,050 $1,050

Other Services $900 $900 $900 $950 $950 $950 $1,000 $1,000 $1,000 $1,060 $1,050 $1,050

Subtotal Direct Cost of Sales $6,350 $6,350 $6,350 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000

Appendix

Page 2

Table: Personnel

Personnel Plan


CEO 0% $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500

Marketing Manager 0% $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200 $2,200

Programmer/Office Administrator 0% $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750

2 Store Attendantds 0% $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800 $2,800

Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total People 0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250

Appendix

Page 3

Table: Profit and Loss

Pro Forma Profit and Loss


Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500

Direct Cost of Sales $6,350 $6,350 $6,350 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000

Other Costs of Sales $2,000 $2,040 $2,081 $2,122 $2,165 $2,208 $2,252 $2,297 $2,343 $2,390 $2,438 $2,487

Total Cost of Sales $8,350 $8,390 $8,431 $8,922 $8,965 $9,008 $9,602 $9,647 $9,693 $10,400 $10,438 $10,487

Gross Margin $17,650 $17,610 $17,569 $19,578 $19,535 $19,492 $21,398 $21,353 $21,307 $23,100 $23,062 $23,013

Gross Margin % 67.88% 67.73% 67.57% 68.69% 68.54% 68.39% 69.02% 68.88% 68.73% 68.95% 68.84% 68.70%

Expenses

Payroll $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250

Marketing/Promotion $0 $500 $500 $500 $0 $0 $1,000 $0 $1,000 $0 $1,000 $0

Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000

Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $13,250 $13,750 $13,750 $13,750 $13,250 $13,250 $14,250 $13,250 $14,250 $13,250 $14,250 $13,250

Profit Before Interest and Taxes $4,400 $3,860 $3,819 $5,828 $6,285 $6,242 $7,148 $8,103 $7,057 $9,850 $8,812 $9,763

EBITDA $4,400 $3,860 $3,819 $5,828 $6,285 $6,242 $7,148 $8,103 $7,057 $9,850 $8,812 $9,763

Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Taxes Incurred $1,320 $1,158 $1,146 $1,748 $1,886 $1,873 $2,144 $2,431 $2,117 $2,955 $2,644 $2,929

Net Profit $3,080 $2,702 $2,673 $4,079 $4,400 $4,369 $5,003 $5,672 $4,940 $6,895 $6,168 $6,834

Net Profit/Sales 11.85% 10.39% 10.28% 14.31% 15.44% 15.33% 16.14% 18.30% 15.93% 20.58% 18.41% 20.40%

Appendix

Page 4

Table: Cash Flow

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500

Subtotal Cash from Operations $26,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Investment Received $50,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Received $76,000 $26,000 $26,000 $28,500 $28,500 $28,500 $31,000 $31,000 $31,000 $33,500 $33,500 $33,500

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Expenditures from Operations

Cash Spending $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250 $10,250

Bill Payments $211 $6,333 $6,699 $6,836 $10,148 $13,851 $13,961 $16,256 $15,103 $15,850 $17,017 $17,050

Subtotal Spent on Operations $10,461 $16,583 $16,949 $17,086 $20,398 $24,101 $24,211 $26,506 $25,353 $26,100 $27,267 $27,300

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Cash Spent $10,461 $16,583 $16,949 $17,086 $20,398 $24,101 $24,211 $26,506 $25,353 $26,100 $27,267 $27,300

Net Cash Flow $65,539 $9,417 $9,051 $11,414 $8,102 $4,399 $6,789 $4,494 $5,647 $7,400 $6,233 $6,200

Cash Balance $67,539 $76,957 $86,008 $97,421 $105,523 $109,922 $116,710 $121,204 $126,852 $134,251 $140,484 $146,685

Appendix

Page 5

Table: Balance Sheet

Pro Forma Balance Sheet


Assets Starting Balances

Current Assets

Cash $2,000 $67,539 $76,957 $86,008 $97,421 $105,523 $109,922 $116,710 $121,204 $126,852 $134,251 $140,484 $146,685

Inventory $30,000 $23,650 $17,300 $10,950 $6,800 $6,800 $6,800 $7,350 $7,350 $7,350 $8,010 $8,000 $8,000

Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Current Assets $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685

Long-term Assets

Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Accumulated Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Assets $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685

Liabilities and Capital Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Current Liabilities

Accounts Payable $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869

Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Subtotal Current Liabilities $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Liabilities $0 $6,109 $6,475 $6,502 $9,687 $13,389 $13,418 $15,753 $14,576 $15,283 $16,448 $16,503 $15,869

Paid-in Capital $43,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000 $93,000

Retained Earnings ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000) ($11,000)

Earnings $0 $3,080 $5,782 $8,455 $12,535 $16,934 $21,304 $26,307 $31,979 $36,919 $43,813 $49,982 $56,816

Total Capital $32,000 $85,080 $87,782 $90,455 $94,535 $98,934 $103,304 $108,307 $113,979 $118,919 $125,813 $131,982 $138,816

Total Liabilities and Capital $32,000 $91,189 $94,257 $96,958 $104,221 $112,323 $116,722 $124,060 $128,554 $134,202 $142,261 $148,484 $154,685

Net Worth $32,000 $85,080 $87,782 $90,455 $94,535 $98,934 $103,304 $108,307 $113,979 $118,919 $125,813 $131,982 $138,816

garbles cellular phones

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