Financial

by Organicsan Management Team

1. Start-Up Expenses

Based on the likelihood of pre-orders and production capacity of local partners in Vietnam, this summary shows a high-level of sources of funds and uses of funds for the year 2021. With total capital source of $650,000 comprising $400,000 (or 61%) of owner’s equity and $250,000 (or 39%) of a bank loan. The bank loan is mainly used to invest in long-term assets such as equipment and machinery for production and the remaining disbursed to supplement the working capital with nuts inventory used as collateral for export purpose. Another note is that we also invest heavily in the D2C online platform that requires an upfront cost of about $70,000 since the beginning. As a result, total projected start-up expenses would be around $583,000 and founders also set aside another $100,000 which is almost 20% of total startup costs for contingencies given the potential downside of the market during this Covid-19 pandemic.

2. Opening Day Balance Sheet

The opening balance to start would be as minimum as $10,000 before applying for the incorporation license and all founders are expected to contribute up to their 100% commitment to reach the total equity of $400,000 before the Bank of America can disburse the loan of $150,000 for purchase of equipment and machinery and withdrawal of $100,000 as credit export loan from the local bank in Vietnam. Further details can be referred to the below Financial Plan for Balance Sheet and 12-Month Cash Flow.

3. Owner’s Investment and Collaterals for Loan

4. Financial Statements - Profit & Loss projection

Also known as an income statement or P&L, the 12-month profit and loss projection is the centerpiece of this business plan. Revenues are coming from main four items, roasted organic macadamia nuts in small-size packages for consumers, raw organic macadamia nuts in larger package size for wholesale importers, roasted organic cashew nuts in small-size packages for consumers, raw organic cashew nuts in bulk packages for wholesale importers and catering companies, and imported snacks and imported nuts from US market to be sold in Vietnam. All assumptions are based on the first-year sales target of $2 million in 2021 with a margin of around 32%.

Following the projected assumptions, Organicsan can break even after the first 6 months of operations and make a small profit with positive cash flow at the end of the first year.

5. Financial Statements - Cash flow projection

Organicsan has an asset-light strategy where we leverage on the serviced factory for immediate production and saving of set-up costs. We can reach the target of revenue over $100,000, then cash flow stays positive, specifically starting after the 6th month of the first year of operations.

Projected Balance Sheet

Balance Sheet stays healthy with debt-to-equity of 1.17 whilst short-term debt is used mainly for trade financing, and for the purpose of exporting products from outside into the US.

6. Break-even calculation

In order to recoup the investment cost, monthly revenue should be no less than $97,333. In another word, the US office must find ways to get into the sales channel of major retailers. Otherwise, the Company must focus on wholesale or importation of raw nuts at the beginning to reach the target of break-even at the end of the first year of operation in the US.

The company plans to raise $400,000 from the cofounders as equity, and raise $250,000 as loans from Bank of America and another US bank as a means to reach the $650,000 needed for startup expenses.

Repayment Plan

Based on the projected cashflow, the company is projected to reach positive cash flow after 6 months of operation. At that time, it will pay down the bank loans, while investing some of the profits back to the business. As the company grows and brings in more revenue thanks to expansion, more revenue will be raised to fund this growth. All debt will be paid down right away at a rate lower than the company’s returns. Year two is projected to bring in a profit of $450,000, which will be used to pay off the debt of $250,000 and provide a return on investment to equity funds and year three profit of $880,000 will be used to pay down debt to future investors and loans.

III. Conclusion

In conclusion, our initial plan is to request $250,000 as a loan to enable us to build our operations. By end of the year 2023, we plan to raise another $1 million for 30.3 % equity (post-valuation of $3.3 million) after we have been operating profitably for 2 consecutive years. The extra funding will be used for capital expenditure (CAPEX) and new lab investment for Research and Development (R&D) of healthy, organic snacks. Please see above the breakdown details of 5-year projections and below how we spend an extra $1 million for our future operational activities.

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