2.

2 Start-up Summary

Equipment and Inventory will make up 75% of start-up requirements. Leasehold

improvements and general expenses comprise the remaining 25%. The owners are
contributing $10,330 of investment to the business. We need a total of $63,963, and are
seeking a long-term loan of $53,633; we plan to pay this loan back in full within 6 years,
at a 9.25% interest rate.

Long-term Assets, $13,808

 Refrigerated Chocolate Case:  $3,500

 Tea Racks: $2,300
 Coffee Maker:   $908
 Hot Water and Steam machine: $1,100
 Dishwasher: $3,000
 Other Hardware & Appliances: $3,000

Short-term Assets, $6,605

 Coffee Grinder:   $564
 Iced Tea Shakers:   $541
 Furniture:    $5,500

Expensed Supplies, $1,200

 Napkins, Stirrers, cleaning supplies, tea-balls, tasting cups

Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal $750
Stationery etc. $800
Brochures $200
Insurance $500
Rent $3,000
Leashold Improvements $10,000
Start-up Supplies $1,200
Dishes, Teacups, Teapots $2,000
Other $100
Total Start-up Expenses $18,550

Start-up Assets
Cash Required $15,000
Start-up Inventory $10,000
Other Current Assets $6,605
Long-term Assets $13,808
Total Assets $45,413

Total Requirements $63,963

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund $18,550
Start-up Assets to Fund $45,413
Total Funding Required $63,963

Assets
Non-cash Assets from Start-up $30,413
Cash Requirements from Start-up $15,000
Additional Cash Raised $0
Cash Balance on Starting Date $15,000
Total Assets $45,413

Liabilities and Capital

Liabilities
Current Borrowing $0
Long-term Liabilities $53,633
Accounts Payable (Outstanding Bills) $0
Other Current Liabilities (interest-free) $0
Total Liabilities $53,633

Capital

Planned Investment
Owners $10,330
Other $0
Additional Investment Requirement $0
Total Planned Investment $10,330

Loss at Start-up (Start-up Expenses) ($18,550)

Total Capital ($8,220)

Total Capital and Liabilities $45,413

Total Funding $63,963

 Chart: Start-up

Start-up

$50,000

$40,000

$30,000

$20,000

$10,000

$0
Expenses Assets Investment Loans

5.3.1 Sales Forecast

The following table and chart give a highlight of our forecasted sales. We expect sales to
start off conservatively and increase extensively during the Christmas, Valentine's Day,
Easter and Mother's Day holidays.

Jasmine teahouse expects average sales of just over $16,000 per month for the first
year, as we build name recognition and status in the community. In the second and
third year we look to see increased sales of roughly 10% per year, as we gain a larger
percentage of the market share and increase our customer base beyond Simsbury and
into the connecting towns.

Pricing

 Hot Tea: We offer two sizes of sit-down hot tea: small pots, at $3.50 each, and large
pots, at $5.25 each (for two people). For customers wishing to take tea with them,
we offer a flat rate of $2.50 for a 16oz. cup or a customer's own mug.
 Iced Tea: Iced Teas are served in 12oz. or 16oz. cups, at $2.00 and $3.00,
respectively.
 Pastries: Our pastry prices range from $1.25 for a lavender-lemon sugar cookie to
$4.00 for a slice of cake. Prices depend on our daily cost of such items from the local
bakery, and should be only 25 to 30 cents higher than the price of that item sold in
the bakery itself.
 Chocolates: Chocolate prices vary widely, from $85 cents for a chocolate covered
piece of candied ginger, to $4.00 for large truffles.
  Gift Baskets: Gift baskets start at $15, and can range up to $150 for the largest
chocolate and tea selection combinations at holidays. We expect the average gift
basket sale will be about $25.

Table: Sales Forecast

11 12
Sales Forecast

10 Month
Year 1 Year 2 Year 3
Sales

9 Month
Hot Teas $52,400 $62,000 $66,000
Iced Teas $22,400 $24,000 $25,500

8 Month
Pastries $14,400 $15,000 $16,000

7 Month
Chocolate $88,000 $92,000 $100,000
Tea Paraphernalia $3,000 $3,200 $3,400
Gift Baskets $3,895 $4,000 $4,200

6 Month
Loose Teas $10,150 $10,920 $13,104
Total Sales $194,245 $211,120 $228,204

5 Month
Direct Cost of Sales Year 1 Year 2 Year 3
Hot Teas 4 Month $15,720 $18,600 $18,480
Iced Teas $7,168 $7,680 $7,650
3 Month

Pastries $9,504 $9,900 $10,240

Chocolate $39,600 $41,400 $43,000
Tea Paraphernalia $1,500 $1,600 $1,666
2 Month

Gift Baskets $1,558 $1,600 $1,596

Loose Teas $4,060 $4,368 $4,980
1 Month

Subtotal Direct Cost of Sales $79,110 $85,148 $87,612

MonthMonth

Chart: Sales Monthly

Sales Monthly

$24,000
Hot Teas
$21,000
Iced Teas
$18,000
Pastries
$15,000
Chocolate
$12,000
Tea Paraphernalia
$9,000
Gift Baskets
$6,000
Loose Teas
$3,000

$0
Chart: Sales by Year

Sales by Year

$210,000
Hot Teas

Iced Teas
$180,000
Pastries
$150,000
Chocolate
$120,000
Tea Paraphernalia
$90,000
Gift Baskets
$60,000
Loose Teas
$30,000

$0
Year 1 Year 2 Year 3
7.3 Projected Profit and Loss

The following table shows our profit and loss projections for the next three years. We
will become profitable early in the first year, with net profits continuing to rise as sales
increase. Sales and Marketing expenses include the costs of all advertisements, plus
promotions like the monthly tastings and 1/2 off coupons for tourists. Depreciation
reflects a straight-line depreciation of our long-term assets over 10 years.

Chart: Profit Monthly

Profit Monthly

$5,000

$4,000

$3,000

$2,000

$1,000

$0

($1,000)

Month 1 Month 3 Month 5 Month 7 Month 9 Month 11

Month 2 Month 4 Month 6 Month 8 Month 10 Month 12
Chart: Profit Yearly

Profit Yearly

$21,000

$18,000

$15,000

$12,000

$9,000

$6,000

$3,000

$0
Year 1 Year 2 Year 3

Chart: Gross Margin Monthly

Gross Margin Monthly

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$0
Month 1 Month 3 Month 5 Month 7 Month 9 Month 11
Month 2 Month 4 Month 6 Month 8 Month 10 Month 12
Chart: Gross Margin Yearly

Gross Margin Yearly

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0
Year 1 Year 2 Year 3
Table: Profit and Loss

Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales $194,245 $211,120 $228,204
Direct Cost of Sales $79,110 $85,148 $87,612
Other Costs of Goods $0 $0 $0
Total Cost of Sales $79,110 $85,148 $87,612

Gross Margin $115,135 $125,972 $140,592

Gross Margin % 59.27% 59.67% 61.61%

Expenses
Payroll $43,600 $56,000 $63,500
Marketing/Promotion $5,400 $6,000 $6,000
Depreciation $1,380 $1,380 $1,380
Rent $18,000 $19,000 $20,000
Utilities $8,010 $8,200 $8,600
Monthly disposable supplies $1,200 $1,200 $1,200
Insurance $5,000 $5,000 $5,000
Payroll Taxes $0 $0 $0
Other $0 $0 $0

Total Operating Expenses $82,590 $96,780 $105,680

Profit Before Interest and Taxes $32,545 $29,192 $34,912

EBITDA $33,925 $30,572 $36,292
Interest Expense $4,513 $3,721 $2,894
Taxes Incurred $8,410 $7,641 $9,606

Net Profit $19,622 $17,830 $22,413

Net Profit/Sales 10.10% 8.45% 9.82%

7.4 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table. The table shows our
planned loan principal repayment. We will be responsible for collecting and repaying
sales tax at the 6% rate charged by Connecticut.
Chart: Cash

Cash

$40,000

$35,000

$30,000

$25,000
Net Cash Flow
$20,000

$15,000
Cash Balance

$10,000

$5,000

$0

($5,000)
Month 1 Month 3 Month 5 Month 7 Month 9 Month 11
Month 2 Month 4 Month 6 Month 8 Month 10 Month 12
Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales $194,245 $211,120 $228,204
Subtotal Cash from Operations $194,245 $211,120 $228,204

Additional Cash Received

Sales Tax, VAT, HST/GST Received $11,655 $12,667 $13,692
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $205,900 $223,787 $241,896

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $43,600 $56,000 $63,500
Bill Payments $117,261 $135,613 $140,469
Subtotal Spent on Operations $160,861 $191,613 $203,969

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $11,655 $12,667 $13,692
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $8,938 $8,938 $8,938
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $181,453 $213,218 $226,599

Net Cash Flow $24,446 $10,569 $15,297

Cash Balance $39,446 $50,016 $65,313
7.5 Projected Balance Sheet

All of our tables will be updated monthly to reflect past performance and future
assumptions. Future assumptions will not be based on past performance but rather
economic cycle activity, regional industry strength, and future cash flow possibilities. We
expect solid growth in Jasmine Teahouse beyond the year 2005.

The accompanying pro forma Balance Sheet shows our steadily increasing net worth, as
we pay off our loans.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets
Cash $39,446 $50,016 $65,313
Inventory $7,400 $8,588 $8,448
Other Current Assets $6,605 $6,605 $6,605
Total Current Assets $53,451 $65,209 $80,366

Long-term Assets
Long-term Assets $13,808 $13,808 $13,808
Accumulated Depreciation $1,380 $2,760 $4,140
Total Long-term Assets $12,428 $11,048 $9,668
Total Assets $65,879 $76,257 $90,034

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable $9,782 $11,268 $11,570
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $9,782 $11,268 $11,570

Long-term Liabilities $44,695 $35,757 $26,819

Total Liabilities $54,477 $47,025 $38,389

Paid-in Capital $10,330 $10,330 $10,330

Retained Earnings ($18,550) $1,072 $18,902
Earnings $19,622 $17,830 $22,413
Total Capital $11,402 $29,232 $51,645
Total Liabilities and Capital $65,879 $76,257 $90,034

Net Worth $11,402 $29,232 $51,645

7.6 Business Ratios

Business ratios for the next three years are shown below. Industry profile ratios based
on the Standard Industrial Classification (SIC) code 5812, Eating Places (including cafes
and tearooms), are shown for comparison.
 The following table outlines some of the more important ratios from the Eating Places 
industry. The final column, Industry Profile, details specific ratios based on the industry
as it is classified by the Standard Industry Classification (SIC) code, 5812.

Table: Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 8.69% 8.09% 5.24%

Percent of Total Assets

Inventory 11.23% 11.26% 9.38% 2.72%
Other Current Assets 10.03% 8.66% 7.34% 32.59%
Total Current Assets 81.14% 85.51% 89.26% 41.88%
Long-term Assets 18.86% 14.49% 10.74% 58.12%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 14.85% 14.78% 12.85% 21.75%

Long-term Liabilities 67.84% 46.89% 29.79% 29.17%
Total Liabilities 82.69% 61.67% 42.64% 50.92%
Net Worth 17.31% 38.33% 57.36% 49.08%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 59.27% 59.67% 61.61% 55.74%
Selling, General & Administrative Expenses 52.78% 52.47% 50.50% 37.46%
Advertising Expenses 0.00% 0.00% 0.00% 2.06%
Profit Before Interest and Taxes 16.75% 13.83% 15.30% 1.50%

Main Ratios
Current 5.46 5.79 6.95 0.81
Quick 4.71 5.02 6.22 0.51
Total Debt to Total Assets 82.69% 61.67% 42.64% 53.68%
Pre-tax Return on Net Worth 245.84% 87.13% 62.00% 2.39%
Pre-tax Return on Assets 42.55% 33.40% 35.56% 5.16%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 10.10% 8.45% 9.82% n.a
Return on Equity 172.09% 60.99% 43.40% n.a

Activity Ratios
Inventory Turnover 10.67 10.65 10.29 n.a
Accounts Payable Turnover 12.99 12.17 12.17 n.a
Payment Days 27 28 30 n.a
Total Asset Turnover 2.95 2.77 2.53 n.a

Debt Ratios
Debt to Net Worth 4.78 1.61 0.74 n.a
Current Liab. to Liab. 0.18 0.24 0.30 n.a

Liquidity Ratios
Net Working Capital $43,669 $53,941 $68,796 n.a
Interest Coverage 7.21 7.85 12.06 n.a

Additional Ratios
Assets to Sales 0.34 0.36 0.39 n.a
Current Debt/Total Assets 15% 15% 13% n.a
Acid Test 4.71 5.02 6.22 n.a
Sales/Net Worth 17.04 7.22 4.42 n.a
Dividend Payout 0.00 0.00 0.00 n.a