fincial statement

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8.1 Financial Overview

a) Business Model Description

Moving Beyond Depression is a set of protocols to train and guide the work of therapists and home visitors in the in-home treatment for mothers who are identified with clinical depression. This successful home visiting model was borne out of the research of two prominent doctors who will participate in the Affiliate implementations.

In addition, the efficacy of the intervention has been validated in three independent Affiliates. Therapists, a Business Manager, a Program Manager and a Research Coordinator will also participate in Affiliate implementations.

The pricing of the product will be directly related to the amount of time required of personnel for each phase of the program per unit. [A unit is defined as the full product lifecycle for up to four therapists. An Affiliate with more than four therapists engaged in the program will require multiple units.] The product price will be determined by the following:

· Direct personnel time required per unit

· Indirect personnel time required per unit

· Travel Expenses per unit

· Profit Margin per unit

Due to the nature of the product, a training and support program, the majority of the venture’s expenses are attributed to the cost of personnel. Year over year, personnel expenses will comprise an average of 77 percent of total venture expenses for the first five years.

b) Financial Targets

The two core underlying financial targets for Moving Beyond Depression are the following:

1. Reach self-sustainability after year 2

2. Generate a sustainable annual profit margin of 15-20 percent to be used to fund expansion of the parent program as well as additional research and continued investment in the Moving Beyond Depression venture.

Based on the assumptions stated in section 8.2, the revenue, expenses and profit margin for the first five years of the venture are noted below.

· Moving Beyond Depression will be profitable Years 3-5

· The cost of sales as a percentage of revenue will average 89% during Years 3-5

	Year 1	Year 2	Year 3	Year 4	Year 5
# of Units*	3	6	7	8	9
*Revenue*	$779,755	$725,675	$707,441	$860,452	$1,007,334
*Expenses*	$777,320	$668,036	$690,171	$705,065	$868,645
*Net Income*	*$2,435*	*$57,639*	*$17,271*	*$155,387*	*$138,688*
*Profit Margin*	0%	8%	2%	18%	14%
Revenue Growth		175%	47%	22%	17%
Cost of Sales	100%	92%	98%	82%	86%
Cumulative Cash Flow	*$2,435*	*$60,074*	*$77,345*	*$232,732*	*$371,420*
Debt Ratio	1.00	0.69	0.98	0.82	0.86
Current Ratio	1.00	1.45	1.03	1.22	1.16

*A ‘unit’ comprises four therapists. A single Affiliate may have multiple units depending on the number of therapists to be trained.

*$605,000 of the revenue of $774,755 for year 1 and $245,000 of the revenue of $730,765 for year 2 can be attributed to the assumption of the receipt of a start- up grant.

8.2 Key Assumptions

The revenue targets noted in Section 8.1 are predicated on the following assumptions:

a) Start-up Funds

 Moving Beyond Depression will receive a grant for $850,000 to cover startup expenses and a portion of operating expenses during Year 1 and Year 2. This total is composed of the following:

Year 1 Expenses
System Development Costs: · Portal Development - $100,000 · Website Development - $35,000 · CRM implementation - $20,000	$156,000
 Licenses - $1,000
Personnel	$409,940*
Government Relations Specialist	$100,000
Facility	$60,600
Marketing	$20,000
General Administrative Costs	$15,780
Legal Costs	$5,000
Advisory Council Meetings	$10,000

*Personnel expenses include base salary, benefits, taxes and expenses.

b) Program Price

· The table below displays the components of the program price of $98,478.

· The program price for affiliates with less than four therapists will be $70,342.

· The program price for affiliates with greater than four therapists will be $98,478 plus $24,620 for each additional therapist.

· The price for additional training services will be determined by multiplying a fullyloaded hourly rate for the staff member performing the work by the estimated time required of the service.

Components of the Average Program Price per Unit
Average Direct Personnel Cost to *MBD*	$ 52,493
Indirect Personnel Costs (10 percent)	$ 5,249
Travel Expenses: Phase I	$ 3,200
Travel Expenses: Phase III	$ 6,400
Expenses	$ 3,000
Total	$ 70,342
Mark up	40%
Program Price	$ 98,478

Number of Therapists per Unit	4
Average Price Per Therapist	$ 24,620
Average Cost Per Therapist	$ 17,585

c) Year 1 Personnel

· Only personnel critical to the launch of the venture are employed in Year 1.

· The table below denotes which personnel are critical Year 1:

Title	Name	Capacity
Program Director	Robert T. Ammerman, Ph.D.	50%
Research Director	Frank W. Putnam, M.D.	10%
Program Manager	Future Hire	100%
Business Manager	Glenn T. Flick	50%
Therapist 1	Future Hire	50%
Research Coordinator	Future Hire	50%
Sr. Administrative Assistant	Jennifer L. Diers	25%

d) Resource Capacity

 MBD has modeled the capacity needed with growth – it is available upon request.

e) Incremental Personnel

 Additional personnel will be hired on an incremental basis according to what the growth in units demands.

f) Program Growth

 The revenue estimates are based on conservative growth projections. The first year target is three new units. Through word of mouth, marketing efforts and lobbying efforts, the second year target is six new units. Incremental growth is targeted for years 3 through 5, with seven new units targeted for year 3, eight new units for year 4 and nine new units for year 5.

g) Annuity Revenue (Year 3 and Beyond)

 65 percent of Affiliates will subscribe to an annual organizational MBD

Membership Program for $5000/year which will consist of the following:

· Access to MBD Portal o Discounts on additional Training o Research Updates o Therapist Newsletter

· Discounts and early access to new MBD products

h) Personnel Expenses

· The table below displays the base salary, benefit amount and total salary for each of the personnel in the venture.

Title	Base Salary	Benefits (28%)	Total Salary
Program Director	$ 181,250	$ 50,750	$ 232,000
Research Director	$ 243,750	$ 68,250	$ 312,000
Doctor 3	$ 101,563	$ 28,438	$ 130,000
Program Manager	$ 84,500	$ 23,660	$ 108,160
Business Manager	$ 84,500	$ 23,660	$ 108,160
Therapist 1	$ 50,000	$ 14,000	$ 64,000
Therapist 2	$ 50,000	$ 14,000	$ 64,000
Research Coordinator	$ 67,969	$ 19,031	$ 87,000
Administrative Assistant	$ 31,250	$ 8,750	$ 40,000
Government Relations Specialist	$ 100,000	$ 0	$ 100,000

· MBD Personnel will receive an annual base salary raise of 3 percent

i) Facilities

 Facility expenses have been estimated based on the market value of an office space that can accommodate 15-20 personnel. The Facility expense of $60,600 for year one is comprised of the following monthly costs:

· Rent: $2,500

· Utilities, Internet, and Phone: $850 o Insurance: $200 o Building Expenses: $1,500

8.4 Projected Financials

8.4.1 Income Statement

· Summary of Projected Net Income: Our revenue projections for the five-year plan include revenue increases every year (excluding the grant) based on the growth in the number of units.

· 59 percent of the program price of $98,478 is allocated to the first year of the program (Current Revenue) and 41 percent is allocated to the second year of the program (Deferred Revenue) to account for revenue that has been received but not yet earned.

	Year 1	Year 2 Year 3 Year 4 Year 5
Revenues
Current Revenue	$174,755	$359,995 $432,594 $509,225 $590,064
Deferred Revenue	$ -	$ 120,681 $ 248,602 $ 298,737 $ 351,656
Membership-based fees	$ -	$ - $ 10,000 $ 20,000 $ 25,000
Additional Training Grants TOTAL REVENUES	$ - $605,000	$ 16,245 $ 32,491 $ 40,614
		$245,000 $0	$0 $0
	$779,755	$725,675 $707,441	$860,452 $1,007,334
Costs
Launch development costs	$155,000	$0	$0	$0 $0
Ongoing costs Tech. Infrastructure Sales/Marketing Personnel Facility General & Admin.	$1,000 $20,000 $509,940 $60,600 $15,780	$38,050 $12,500 $530,928 $62,418 $8,590	$39,953 $20,000 $545,306 $64,291 $4,500
				$41,950 $44,048
				$12,500 $20,000
				$560,185 $713,744
				$66,219 $68,206
				$7,495 $5,315
Legal	$5,000	$5,250	$5,513	$5,788 $6,078
Advisory Council	$10,000	$10,300	$10,609	$10,927 $11,255
Total Ongoing Costs	$622,320	$668,036	$690,171	$705,065 $868,645
Depreciation TOTAL COSTS	$0	$0	$0	$0 $0
	$777,320	$668,036	$690,171	$705,065 $868,645

Operating Income Income Tax (at 0%) Net Income	$2,435 $0 $2,435	$57,639 $0 $57,639	$17,271 $0 $17,271	$155,387 $0 $155,387	$138,688
					$0
					$138,688
Profit Margin	0.3%	7.9%	2.4%	18.1%	13.8%

8.4.2 Cash Flow Statement

	Year 1	Year 2	Year 3	Year 4 Year 5
Operations
Cash receipts from Affiliates/Grants	$779,755	$725,675	$707,441	$860,452 $1,007,334
Cash Paid for Tech. Infrastructure	($1,000)	($38,050)	($39,953)	($41,950)	($44,048)
Sales/Marketing	($20,000)	($12,500)	($20,000)	($12,500)	($20,000)
Personnel	($509,940)	($530,928)	($545,306)	($560,185)	($713,744)
Facility	($60,600)	($62,418)	($64,291)	($66,219)	($68,206)
General & Admin.	($15,780)	($8,590)	($4,500)	($7,495)	($5,315)
Legal	($5,000)	($5,250)	($5,513)	($5,788)	($6,078)
Advisory Council	($10,000)	($10,300)	($10,609)	($10,927)	($11,255)
Operating Costs Net Cash Flow from Operations	($622,320) $157,435	($668,036) $57,639	($690,171) $17,271	($705,065) ($868,645)
				$155,387 $138,688
Taxes	$0	$0	$0	$0 $0
Deferred Tax Credit	$0	$0	$0	$0 $0
Adjusted Taxes Net Cash from Operating Activities	$0	$0	$0	$0 $0
	$157,435	$57,639	$17,271	$155,387 $138,688
Investing Activities
Capital Expenditures	($155,000)	$0	$0	$0 $0
Net Cash Flow	$2,435	$57,639	$17,271	$155,387 $138,688
Cumulative Cash Flow	$2,435	$60,074	$77,345	$232,732 $371,420
Discounted Cash Flow (10%)	$2,435	$52,399	$14,273	$116,745 $94,726
Cumulative Disc Cash Flow	$2,435	$54,834	$69,107	$185,852 $280,578