5.

Finance
Information regarding risk assessment including cash flow projections, income statements, and
balance sheet, followed with a capital expenditures budget and information on funding are
provided, below.

5.1.Risk Assessment

5.1.1. Cash Flow Projections

Cash flow projections including financial information used to create an interim cash receipts
schedule, cash payment schedule, and a cash budget for the months of March to August, 2017
are provided, below. Sales of 5 S.T.A.C.S. units per month were assumed constant as a sales
target in order to satisfy payments and service debt, initially estimated at $5,000,000.

5.1.1.1.Cash Receipts Schedule

With sales set flat at $1,000,000 monthly, and collections as listed at left in the following table,
cash receipts are equivalent to sales on a month by month basis. It is anticipated that these targets
may not be fully realized on a constant basis with the following information reflecting estimates
only.

Figure 5.1.1.1.: Cash Receipts Schedule

 5.1.1.2.Cash Payment Schedule
With the assumed sales of 5 units per month, and purchases and payments determined as shown
at left in the following table, total monthly payments for materials are constant at $300,000.
Labour costs were assumed constant at $100,000 monthly, and overhead was calculated as noted
below the table. Interest payments were assumed constant at $200,000 quarterly, payable every
third calendar month. Sales commissions were assumed at 1.5% of sales, payable every six
months.

Figure 5.1.1.2.: Cash Payment Schedule

5.1.1.3.Cash Budget
For the six month period beginning March 2017, the following cash budget table shows a
positive net cash flow that allows a monthly repayment toward the $5,000,000 start-up,
consistently reducing the principal. The interest on the principle is addressed in the preceding
cash payment schedule. $2,000,000 is maintained as cash-on-hand as a float to service
unforeseen complications in meeting financial obligations. Following this budget regimen,
corporate debt is better than halved in this six month timeframe, provided sales can be
maintained at the flat forecast of 5 S.T.A.C.S. units per month, or $1,000,000, barring unforeseen
incidences.
Figure 5.1.1.3.: Cash Budget
 5.1.2. Income Statements
Below is the format and approximated figures for the income statements of Cycle Storage Corp.
because income statements are based off actual figures in the past approximations were used
based on previously estimated sales and expenses of the company.
 5.1.3. Balance Sheet
This Balance sheet for 6 months period.

5.2.Capital Expenditures Budget

C.S.C.’s upper management will decide where to allocate capital expenditure’s monetary
resources. Tangible capital expenditures include equipment, vehicles, computers, and physical
improvements. One discussion to be had will be whether to own or lease equipment. By leasing
equipment, capital expenditures are reduced by moving those computer costs to operating costs.
This allows the computer equipment to be deductible from tax liability and avoids the inevitable
depreciation of equipment as well. Aside from the discussion of borrowing or using company
money, capital expenditures are quite concrete in terms of the amount spent. With that said, the
goal is to reduce capital expenditures as much as possible by budgeting and deferring costs to
operating costs.
 5.3.Funding (Mike)

Funding for the project will require significant amounts of capital to start and maintain the
business. Although our breakeven plans are aggressive, it may take several years to achieve a
realistic profit. We may need to rely on funding and grant money to keep Cycle STorage Corp
afloat for several years. As shown above with the income statements and cash flow estimates
CYC will be seeking 5 million dollars in startup capital. This will provide us with the necessary
cash for research and development, prototyping, testing, manufacturing and sustaining the
business for the first 5 years.

5.3.1 Government Grants

The four main grants we will be applying for are listed in the table below:

Program Purpose

IRAP (Accelerated Review Process) Research and Development Funding Grants

DTAPP (Digital Technology Adoption Pilot Grant Funding for Business Software
Program) Implementation

GEI (Graduate Enterprise Internship) Grant Funding for Hiring New Grads

CME (Smartr Prosperity Now Program) Business Funding Grants for Capital
Equipment

Table ​1​: Grant programs for funding (​Funding Programs 2)

The four main grants will provide CYC a significant start to the funding process. It will not
provide all of the funding but if successful should provide the first couple million dollars.

The IRAP program will provide CYC with funding to complete research and development. This
will allow the company to build and develop several prototype models. Aswell it will provide
CYC with the opportunity to test the product.

The DTAPP program, while the program focuses more on the software aspect of our product, it
will allow CYC to develop the required software systems that the product will use. It will allow
CYC to develop a database and server system to monitor the products remotely and control key
aspects of the product from one central location. The grant money from DTAPP will allow CYC
to develop the sophisticated software required to run the product.
GEI program will allow CSC to recruit and the best and brightest graduates from the aera. The
grant will provide significant capital to assist with human resource costs. It will also allow CYC
to more talent and more advanced talent then without the assistance of the grant.

CME will provide CYC the funding for capital and equipment. This grant will be the backbone
of CYC’s manufacturing. The manufacturing costs will be significant portion of the start-up
capital required. CYC will uses the funding to invest in its own manufacturing facilities and
processes. This will allow for better quality, more control over the product and more effective
long term sustainability.

CYC will focus on the 4 main grants but will also apply for several other smaller grants as they
become available. The grants will go a long way in developing CYC and sustaining the business.

5.3.2 Venture Capital

CYC will be appealing in large part to venture capitals. The company will offer private shares in
order to raise the cash needed to start and maintain the business. The majority of the funding will
come from Venture Capital. CYC will pitch to private venture capitalists and large investment
firms. The goal of the venture capitals will be to provide enough cash to cover the 5 million
dollars in start up funding required. The government grants will cover approximately 2 million
dollars of funding if all of the grant applications are successful. Realistically venture capital
funding will need to provide the other 3 million dollars in funding as well as some extra float to
cover any grants that are not successful in the application process due to the competitive and
limited nature of grant funding.

Venture capital funding will have the benefit of bringing successful venture capitalists who
should become valuable resources and assets in making strategic business decisions that will
support CYC in long term success.

Sources for 5.3 (assembler please delete this line and add 2 to our source)

2 ​Top Canadian Funding Programs for Manufacturers. Website. Mentor Works Ltd. March 6,
2013.​http://www.mentorworks.ca/blog/government-funding/top-canadian-government-funding-p
rograms-for-manufacturers/