tively participating in various studies and experiments relating to production methods.

These machines also incorporate quality checking by lasers.  All products must come within XX% of specifications.  Also, at regular intervals we will be using human inspection of products and machines.

We do not anticipate generating any toxic materials at this time for these products.  However, we will be closely monitoring all production to determine if any hazardous materials are being generated.  We have contracted with an environmental engineering company to advise us on any possible problems as well as solutions including legal disposal of all hazardous wastes.

We anticipate the following outlays for this capital equipment:

       A&M Machines             $XXX

       Service Contract    $XXX  


Research & Development
SAMPLE:
We have already spent a considerable amount of time in researching and developing our complex widgets.  We have a very simple laboratory equipped with the basic research equipment we need.  We have thus far been able to discover lighter materials and several cost cutting manufacturing methods.  The largest achievement to date is the discovery of a water based lubricant that does not disintegrate in rainstorms.  We have called this lubricant “H2Ocus-Pocus”.

Presently our research is being supervised by our Technical Director, John Q. Public.  He will continue in this capacity.  Having been the researcher involved with all our activities to this point, he is well qualified to continue our research efforts.

Our next research project will center around using this new lubricant in our manufacturing processes and testing of a new material that has come to our attention.

To this point, our research has paid for itself as we have been keying on bringing this new product to market.  However, now that we are becoming more experimental in our research efforts such a continued success ratio can not be maintained.

We have been investigating several potential government (both state and federal) funding sources.  Our present program of joint research with the local university has b=proven very beneficial.  


Historical Financial Data
See “Attachments”
[This discussion should include all facts pertaining to your financial statements.]  

SAMPLE:
Income Statement
[Discuss both positive and negative aspects of your income statements.  This is no time for trying to hide the facts.]  

Balance Sheet
[Discuss both positive and negative aspects of your balance sheets.  This is no time for trying to hide the facts.]  

Asset Worksheet
[Discuss both positive and negative aspects of your assets.  This is no time for trying to hide the facts.]  

Ratio Analysis
Financial ratios are included for your convenience.  

Financial Standards
We have also included financial standards as compiled by Dun & Bradstreet and Robert Morris Associates.


Proforma Financial Data
See “Attachments”  
Proforma Cash Flow Analysis

SAMPLE:
Assumptions:

Cash Receipts:  Percentages as indicated.

Rent: Building rental at $12/square foot.

Utilities: Water, gas, sewer, trash, electric

Telephone: Local, long distance and cellular

Salaries: Executives.

Payroll: Hourly, non executive

Withholding: Figured at XX %.

Inventory:

Freight-In:

Office Supplies:

Postage:

Advertising: Trade, magazine, direct mail, etc.

Professionals:

Commissions: Figured at 10%.

Insurance:

Travel & Entertainment:

Research: [Explanation]

Miscellaneous:

State Taxes:  XX%

Federal Taxes:   XX%  

Terms to customers:  2/10, n/30 (only to qualified accounts).  

Terms from suppliers: Suppliers offers 3% cash discount.


      Sales Forecast

SAMPLE:
Sales have been forecast at the following growth rates:  

Year 2    Year 3  

Product 1:         XX%       XX%

Product 2:         XX%       XX%


Cash Flow Variables:

SAMPLE:
We project that we will be able to generate sufficient capital from operations to meet our initial needs after the infusion of $200,000.  However, our projections are in industries that have never been fully addressed and are based upon present real buying conditions and our own experience.  Should sales not be up to projections, adjustments will be made in ordering and long term commitments decreased or postponed.  

Income Statement
Assumptions:

Returns, discounts: We are offering a range of quantity discounts, plus an early payment discount to those extended credit.  Average is estimated to be 5%.

Cost of goods sold:

Expenses:  Totaled from Cash Flow Analysis spreadsheets.  

Freight:  Paid by customers.  

Risks & Variables:  

SAMPLE:
We have considered seasonal trends and have forecasted accordingly.  [I/We] believe the forecasts are conservative.


Proforma Balance Sheet
  

Cost Control
SAMPLE:
Our books will initially be maintained manually.  [My Company] seeks at a future point to use a computerized accounting package to monitor our financial performance.  This information will be compiled at the end of each month for preparation of financial statements.  Each month these statements will be reviewed against our proformas and appropriate action taken to adjust costs or our budget.  If we find that we are continually over budget, our first step will be to reevaluate our markup on products and then to recheck our costs to make certain that we are obtaining the best possible prices.

Ratio Analysis
Financial ratios are included for your convenience.  

Financial Standards  
We have also included financial standards as compiled by Dun & Bradstreet and Robert Morris Associates.  

Breakeven Point  
Taken from BPMBREAK.WK1 spreadsheet.  

SAMPLE:
The following chart shows our breakeven point:

Profit       Revenue  Fixed Costs    Variable Costs  

$0         $20,000.00       $3,900.00          $16,100.00  

It is intended that [My Company] will be profitable in the XXX Quarter, 199X.


Effects of Loan or Investment
SAMPLE:
The money invested in [My Company] will be used for the following purposes:

§  Purchase of DEF Machine, Model # 333058

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