Executive Summary

The Watertower is a full-service restaurant/cafe located in the Sweet Auburn

District of Atlanta. The restaurant features a full menu of moderately priced
"comfort" food influenced by African and French cooking traditions, but based
upon time honored recipes from around the world. The cafe section of The
Watertower features a coffeehouse with a dessert bar, magazines, and space
for live performers.

The Watertower will be owned and operated by The Watertower LLC, a Georgia
limited liability corporation managed by David N. Patton IV, a resident of the
Empowerment Zone. The members of the LLC are David N. Patton IV (80%) and
the Historic District Development Corporation (20%).

This business plan offers financial institutions an opportunity to review our vision
and strategic focus. It also provides a step-by-step plan for the business start-up,
establishing favorable sales numbers, gross margin, and profitability.

This plan includes chapters on the company, products and services, market
focus, action plans and forecasts, management team, and financial plan.

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1.1 Objectives
1. Sales approaching and surpassing $1.9 million by the end of the first year.

2. Targeting and maintaining a net profit of at least 14% by the second year.

3. To cultivate monthly sales to reach $167,000 by the end of the fourth

month of operation, and $220,000 monthly by the end of the first year of
operation.

1.2 Mission

The Watertower concept is built upon the success stories of Atlanta's many
casual dining and coffeehouse venues. Located in the Sweet Auburn District of
Atlanta adjacent to the Studioplex on Auburn residential loft development, The
Watertower will provide accessible and affordable high quality food, coffee-based
products, and entertainment to the thousands of residents and hotel visitors
located within a five-mile radius. In time, The Watertower will establish itself as a
"destination" of choice to the many residents of the greater Atlanta metropolitan
area, as well as numerous out-of-town visitors.

The establishment will provide a "complete, high-quality" evening experience for

those searching for something that is rapidly becoming popular among Atlanta
diners. Not only will patrons be able to dine on "comfort" food based upon time
honored recipes from the world over, they will do so in a facility containing ample
patio space for a favorite pastime of Atlanta's residents: alfresco dining. Patrons
will also have the option of enjoying coffee, desserts, and live entertainment in
The Watertower's coffeehouse or, a relaxed game of bocci in the gardens located
adjacent to the patio space.

The cafe's aim is simple. It will provide a completely sophisticated, sensual, yet
casual dining and/or coffeehouse experience for the many Atlantans and visitors
who frequent the city's casual dining spots and entertainment venues. It will be
an affordable venture for patrons, one that will encourage them to return on many
occasions. The menu will feature hearty fare of the type that is frequently out of
the reach of the typical young professional...out of reach because time frequently
prevents her/him from cooking hearty meals like those featured on our menu.

Finally, and quite significantly, The Watertower will provide a much needed
neighborhood-based retail food operation that is currently unavailable to the
southern end of Atlanta's Old Fourth Ward neighborhood. Not only is it projected
that the business will generate 21 new jobs, the partnership responsible for
creating The Watertower will generate additional revenue specifically dedicated
to assisting the Historic District Development Corporation in its efforts to bring
affordable housing, new jobs, and commercial activity to the Old Fourth Ward.

1.3 Keys to Success

The keys to success in this business are:

1. Product quality: Food, coffee-based beverages, and entertainment are our

products. They must be of the high quality and value.

2. Service: Our patrons are paying to have a good time. Their experience will
suffer if service is not of the highest caliber. Each member of the staff will be
courteous, efficient, and attentive.

3. Marketing: We will need to target our audience early and often. While the
business is located in a central and accessible location, many people will
have to be re-introduced to the neighborhood surrounding the Martin Luther
King National Historic Site and Auburn Avenue.

4. Management: We will need to have a firm grasp on food, beverage, and

labor costs. The dining/entertainment/coffeehouse experience must be
delivered in a fashion that will not only inspire repeat business, but
encourage word-of-mouth recommendations to others. Proper inventory,
employee management, and quality control is key.

Company Summary
The Watertower is a bistro and coffeehouse facility located in a renovated house
immediately adjacent to the Studioplex on Auburn residential loft development.
The Watertower derives its name from an historic 200+ foot tall watertower
located on the grounds of the restaurant, and immediately across the street from
the main entrance of the Studioplex facility. Architecturally, this watertower will
serve as a beacon/locator for our facility as it towers over the southern end of the
Old Fourth Ward neighborhood and the eastern end of the Sweet Auburn
residential and business district.

The facility is bordered by Auburn Avenue to the south and Irwin Street to the
north. Residential live/work townhouses are planned for construction across the
street from, and adjacent to, The Watertower on Irwin Street.

2.1 Company Ownership

The Watertower is a privately held limited liability corporation wholly owned by

David N. Patton IV(80%) and the Historic District Development Corporation
(20%).

2.2 Start-up Summary

The start-up costs for The Watertower cafe can be found in the chart and table
below.

Since the business property is located in an enterprise zone, property taxes on

the property are abated for the initial years covered by the business plan. The
owner/general manager will be responsible for maintaining insurance that will
cover the loss of the building and all of its contents, as well as insurance covering
business interruption and death or injury to himself.

 
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START-UP REQUIREMENTS

Start-up Expenses

Legal $2,000

Stationery etc. $500

Brochures $500

Consultants $1,500

Insurance $1,745

Debt Service $5,000

Licenses/Tax/Deposits $12,000
Expensed Equipment $36,600

Employee/Payroll $26,834

Accounting $1,000

Soft Opening Expense $4,000

Grand Opening Advertising $3,000

Misc. Expenses $2,000

TOTAL START-UP EXPENSES $96,679

Start-up Assets

Cash Required $100,000

Start-up Inventory $61,157

Other Current Assets $0

Long-term Assets $595,040

TOTAL ASSETS $756,197

 Total Requirements $852,876

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START-UP FUNDING

Start-up Expenses to Fund $96,679

Start-up Assets to Fund $756,197

TOTAL FUNDING REQUIRED $852,876

Assets

Non-cash Assets from Start-up $656,197

Cash Requirements from Start-up $100,000

Additional Cash Raised $0

Cash Balance on Starting Date $100,000

TOTAL ASSETS $756,197

Liabilities and Capital

Liabilities

Current Borrowing $29,850

Long-term Liabilities $695,399

Accounts Payable (Outstanding Bills) $29,627

Other Current Liabilities (interest-free) $0

TOTAL LIABILITIES $754,876

Capital

Planned Investment

Investor 1(Home Equity/Pre-develop. Invest) $64,000

 Investor 2(Pre-development Investment) $34,000

Other $0

Additional Investment Requirement $0

TOTAL PLANNED INVESTMENT $98,000

Loss at Start-up (Start-up Expenses) ($96,679)

TOTAL CAPITAL $1,321

TOTAL CAPITAL AND LIABILITIES $756,197

Total Funding $852,876

2.3 Company Locations and Facilities

The Watertower will be located in a newly renovated facility designed by the

architectural firm of Richard Rauh & Associates, Atlanta, GA.

The facility will be divided equally between the cafe/restaurant function and the
coffeehouse/entertainment function. The restaurant will feature dining room
seating for approximately 100 patrons and flexible indoor/outdoor patio seating
for an additional 40 patrons. The cafe/coffeehouse will provide a full-service dine-
in and carry-out coffee-based beverages, as well as a dessert bar. The
coffeehouse/cafe portion of the business will also contain a full-service bar, a
small entertainment stage, and niche magazines and newspapers available for
purchase. The coffeehouse will maintain ample indoor/outdoor seating under a
covered patio space shared with the restaurant.

The facility's perimeter will feature a simple garden and bocci courts which will
provide comfortable waiting areas during the warm weather months.

Finally, an historic 200+ foot watertower forms the centerpiece of the grounds
immediately adjacent to the proposed business. This watertower, constructed in
1906, features extraordinary cathedral-like interior space. It is our hope that our
construction plans will support dramatic lighting of the tower after sundown,
creating a rather visible nighttime landmark for northeast Atlanta.

Products
The Watertower is a cafe/restaurant/coffeehouse venue that sells moderately-
priced food to an upscale casual dining market. The venue features brewed
coffee and espresso-based beverages, granita ices, fruit smoothies and juices,
and other beverages typically associated with a coffee shop. A dessert bar will
serve a range of freshly prepared desserts, as well as baked goods associated
with breakfast.

Luncheon offerings contain both carry-out and dine-in menu selections, while
evening hours will accommodate full-service dining and Spanish tapas
(appetizer) service, a full-service bar and light, weekend, live entertainment.

Reflecting a target niche market, a limited selection of out-of-town newspapers,

as well as art, architecture, cinema, design and lifestyle magazines will be sold.
Additionally, the venue will feature art and products made by Studioplex artists,
providing a cross-selling opportunity.

3.1 Product Description

The company menu will feature a selection of coffee and pastries influenced by
Korean and Filipino cooking [Link] menu items will have an identifiable
African origin and/or influence.

Generally, the dishes will offer variations on "country" cooking themes. Braised
and smoked meats and poultry, seafood, and vegetarian offerings will change
seasonally.

Dinner items will only be available in the dining room section of the
establishment. Standard appetizer/tapas offerings will be available in the coffee
shop and patio area through the late evening.

Specialty coffees, espresso-based drinks, desserts and pastries, and light

sandwiches will be available in the coffee shop.

Niche-magazines and newspapers will be readily available for purchase by the

venue's patrons.

Musical offerings will span jazz, Latin, and urban musical traditions. The
performance space will also offer ample opportunities for space for an artist,
poet, reader, etc. When not in use as a stage, the space will double as a
customer seating area with tables and chairs.

3.2 Competitive Comparison

The Watertower's closest competitors (relative to location) are Virginia's (Inman
Park), Sotto Sotto (Inman Park), The Roman Lily, and Thumb's Up Diner (Old
Fourth Ward), Cabbagetown Grill (Cabbagetown), Eureka (Cabbagetown).

Virginia's, The Roman Lily, Cabbagetown Grill, and Eureka feature fairly similarly
priced menus and menu offerings with a notable traditional American southern
influence. The Roman Lily is notably more "downscale" from Eureka and
Cabbagetown Grill. Virginia's decor and menu offerings strikes squarely in
between downscale casual and upscale casual. Sotto Sotto is an upscale casual
dining establishment featuring finer northern Italian cuisine (the restaurant is
currently undergoing a significant expansion).

None of these establishments features a traditional coffeehouse atmosphere or

live or recorded evening entertainment.

Relative to the location of these establishments, The Watertower is centrally

geographically located. It's location will easily allow for patrons from these other
establishments to finish an evening with dessert, coffee, drinks, and/or dancing.

3.3 Sales Literature

A sample copy of a menu to be featured at The Watertower is attached in an

appendix at the end of this document.

**Some supplemental materials are not available for this sample plan.

3.4 Sourcing

The Watertower will buy from a select group of Atlanta restaurant suppliers and
liquor distributors. Direct sales relationships will also be established with fresh
produce, meat, and seafood distributors based at the Sweet Auburn Curb
Market. Negotiations are also underway to establish direct relationships with
seafood suppliers on the Florida Gulf coast.

The cafe will receive substantial discounts from artists and artisans participating
in the manufacture of signature pieces of dinnerware, furniture, lighting, and
sculpture to be featured at The Watertower. As part of a marketing agreement
with Studioplex merchants, the business will prominently feature their products in
exchange for these discounted fixtures and equipment.

3.5 Technology

The Watertower logo is protected by federal trademark laws. All of our menu
creations will not necessarily have the same protections, however, when
possible, popular "trade-names" will be protected. The business of The
Watertower is not dependent upon process technology or patentable inventions.

3.6 Future Products

While The Watertower will initially focus upon the dining, coffeehouse, and
entertainment functions located on the immediate grounds of the establishment,
future expansion efforts will focus upon providing full-scale catering for
Studioplex events as well as other off-site venues. The Watertower's owner has
established relationships with Atlanta law firms and Emory University, these
institutions offer many opportunities for catering/special event service.

Market Analysis Summary

The casual dining/full service restaurant market is a $100+ billion industry in the
United States, with annual increases in revenue outpacing 5% yearly. More and
more people are choosing to eat out. One of the most common reasons cited by
restauranteurs and industry associations is that women have joined the
workforce in record numbers. In fact, from 1955 to 1995, the dollars spent for
food away from home rose by almost 20%, coinciding with the number of women
entering the work force. With two income earners per household, neither person
may have time to fix meals. Since the 1950s, commercial food service sales have
continued to rise as more and more people find that eating away from home suits
their lifestyles.

Specialty coffee is a $5+ billion per year industry in the United States, and has
grown at a rate in excess of 20% per year in the last decade. That sustained
growth is expected into this decade according the the Specialty Coffee
Association of America.

Atlanta in the mid-1990s had only a handful of specialty coffee retailers: San
Francisco Roasters, Cafe Diem, Cafe Intermezzo, Aurora Coffee, J. Martinez,
and others. Now, coffee roasters, shops, and suppliers take more than two full
pages in the Yellow Pages. Starbucks announced last year that it expects to
open 600 additional stores in 2000.

4.1 Market Segmentation

The "Market Opportunity Analysis for Residential and Commercial Uses along the
Auburn Avenue Corridor," written by Robert Charles Lesser & Co., makes the
following points about food retail for The Watertower at the Studioplex on Auburn
site:

Studioplex is in proximity to new and existing residences, including the affluent,

and immediately adjacent Inman Park neighborhood; a restaurant would be a
destination space within the neighborhood.

A restaurant/coffeehouse would provide one of the best food and beverage

opportunities for the more than 500,000 annual visitors to the Martin Luther King
Historic District.

Location is close to employment centers or within retail corridor.

Studioplex patrons and residents will provide primary support; secondary support
will come from area residents and hotel visitors/conventioneers.

Cross-selling opportunities exist with coffee beverages and magazines.

The coffee shop and the magazines sold there will be positioned to fill a niche
demand for people interested in art, architecture, design photography, and
home and garden pursuits.

Target market audience is a mix of Studioplex residents, artists, patrons, intown

residents, downtown hotel visitors/conventioneers, and workers.

The immediate market area is within a four-mile radius of The Watertower and
Studioplex and includes the neighborhoods of Sweet Auburn, Fairlie Poplar,
Downtown, Grant Park, Inman Park, Poncey Highlands, Virginia Highland, Little
Five Points, Lake Claire, Midtown, East Atlanta, Candler Park, Morningside,
Cabbagetown, Druid Hills, and adjacent neighborhoods.

 
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MARKET ANALYSIS

YEAR YEAR YEAR YEAR YEAR

1 2 3 4 5

Potential Customers Growt CAGR

h

Atlanta Area Residents 10% 91,568 100,72 110,79 121,87 134,06 10.00
5 8 8 6 %
 Hotel/Convention/Visito 15% 32,100 36,915 42,452 48,820 56,143 15.00
rs %

Downtown Workers 20% 23,350 28,020 33,624 40,349 48,419 20.00

%

Total 12.87 147,01 165,66 186,87 211,04 238,62 12.87

% 8 0 4 7 8 %

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4.2 Target Market Segment Strategy

The Watertower will appeal to urban professionals residing in the targeted intown
neighborhoods, the many downtown hotel visitors/conventioneers, and workers
who desire a sophisticated yet casual eating, coffeehouse entertainment
experience. The business will also meet an under-served need for a pedestrian-
friendly dining/coffeehouse establishment for the numerous residents in the area,
particularly newcomers to the immediate area.

Members of this market segment dine out frequently, approximately three times
or more per week. The market segment is largely made up of singles between
the ages of 25 and 40, married couples in the same age bracket without children,
graduate and professional students attending area universities, tourists, and
conventioneers.

4.2.1 Market Needs

Our customer's dining and entertainment needs are critical to the success of The
Watertower. As a supplier of a full-service dining experience, The Watertower
must appeal to people who are interested in integrating our type of cuisine
regularly into their dining/food purchase experiences. Moreover, we must also
appeal to those customers who regularly take advantage of Atlanta's coffeehouse
and/or evening entertainment scene.

Our customers are well educated and interested in partaking of new experiences.
Keeping the menu and the entertainment offerings "fresh" will remain a constant
challenge to the business. Segments of the target market tend to dine out, visit
coffee shops, and seek evening entertainment frequently. They tend to choose
comfortable, affordable venues, and repeat appearances at places that offer
familiar scenery with new twists.

4.2.2 Market Trends

Atlanta is experiencing a trend toward the creation of evening

dining/entertainment venues. They are popular and gaining more recognition.
Evidence of this is found in local news and magazine coverage. These venues
are finding new homes in the areas close to and/or adjacent to downtown.

The city's burgeoning music scene is growing and in need of more venues to
accommodate the mainstream jazz, acid jazz, Latin, and live dance music artists
that are choosing Atlanta as home for their production efforts.

The market opportunity for coffee shop establishments has never been better in
this area of Atlanta. The immediate area surrounding the business venue is
undergoing a building renaissance as many residents chose to move into or
return to the inner city.

4.2.3 Market Growth

Intown Atlanta is currently in the middle of a building and population explosion.
Young singles and couples are choosing to reject long commutes in favor of
living closer to their work and recreational venues. With the extra time that comes
from being in a vibrant growing city with an active nightlife, intown neighborhoods
that were formerly dotted with a limited number of night spots have seen their
neighborhoods burgeon with new venues.

The section of Midtown Atlanta along 10th Street near Peachtree Street and
Piedmont Avenue has experienced remarkable growth in it's nightlife scene. After
a devastating demolition in the mid 1980s of buildings located in and around this
area to make way for a mall that was never built, the area is featuring a
resurgence. The development is rapidly moving south along Juniper Street and
Peachtree Street.

As the area's population increases and the frustration with Buckhead congestion
grows, people are opting for dining, coffeehouse, and entertainment venues
closer to and in Downtown Atlanta.

4.3 Industry Analysis

The restaurants and coffeehouses that make up the community of

establishments in the area surrounding The Watertower are quite diverse. Their
concepts range from typical fast food/chain venues to expensive fine dining
establishments. However, the predominating nature of the immediately
surrounding restaurants and coffee shops is casual/upscale.

4.3.1 Competition and Buying Patterns

The general nature of the competition is typically a 70 to 150 seat restaurant with
outdoor seating. The menu prices for entree's range from $7.00 to over $25.00.
All of the surrounding establishments serve, at a minimum, beer and wine. Most
serve liquor-spirits as well.
Some of these venues have added live entertainment to their offerings, however,
most are prevented by their facilities from expanding into this area of service.
Most of the live entertainment/dancing venues are located in Midtown and
Buckhead to the north with a few more venues located west in Downtown
Atlanta, and to the east in Little Five Points.

While historically Buckhead has remained a center for restaurants and

entertainment venues, Virginia Highland, Little Five Points, and Midtown have
grown tremendously in their appeal to diners and partygoers. With the
tremendous rise in intown property values, a residential building boom, and a
decrease in crime statistics, venues closer to downtown have seen a remarkable
rise in business.

A busy population of urban professionals, intent upon working hard and playing
hard, has fewer and fewer opportunities to cook at home. These people eat out
often and do so with friends.

Because this population tends to eat out far more than the typical population,
they look for value. While they might not regularly frequent a restaurant featuring
entree prices of $17.00 and higher, they will repeat appearances at restaurants
featuring entrees ranging between $7.00 and $16.00.

Many of these patrons also seek entertainment venues on the weekends that are
close to their dining venues and homes. Historically, live jazz and Latin music
venues in northeast Atlanta have been unavailable to patrons. The market
currently suggests that such a venue on Auburn Avenue is not only desired by
the populations frequenting restaurants and clubs in northeast Atlanta, it is
suggested that it is needed. As Buckhead traffic and appeal has grown beyond
the capacity of the neighborhood, patrons are now looking for "easier" places to
go out, eat, and have [Link] parking and traffic woes of Buckhead have grown
to notorious proportions. Midtowners and residents in adjacent neighborhoods
would much rather patronize venues closer to downtown. The Watertower offers
them an attractive dining/entertainment/coffeehouse option.

4.3.2 Main Competitors

Loca Luna: Located in the heart of Midtown, this establishment features a Latin

house band which is often a group of four Brazilian musicians. The menu is
primarily a Spanish tapas style menu with other entree offerings. The venue also
features a small dance floor.

While its location near two longstanding Atlanta nightclubs, Backstreet and The
Armory, would seem to offer considerable overflow, the restaurant is not easily
seen from the street and parking is at a premium. Its concept has received very
favorable press in Atlanta.

Yin Yang Cafe: Located on Spring Street, just north of Atlanta's landmark Varsity
restaurant, the club features a limited menu and a regular offering of acid jazz,
hip-hop, and R&B acts.

The location is very "out-of-the-way" and can be perceived as a marginally safe

area. Nevertheless, the club remains wildly popular given the parking difficulties,
its small size, and it's rather hidden location. It has become identified nationally
as a residence of Atlanta's growing African-American music scene.

Kaya: A bistro and large scale nightclub located on Peachtree Street in Midtown,
Kaya boasts an impressive array of entertainment, from Latin music, to hip-hop,
disco, and live bands. The restaurant is located on the Peachtree Street side of
the club. In the evening, the restaurant generally features a dj or a live band,
while the large club portion in the rear of the establishment features a large
dance floor and a dj.
It is very popular and regularly features large crowds. Kaya maintains limited
parking immediately adjacent to the club.

Cosmopolitan: Cosmopolitan is located in a converted house in Midtown. It is a

very small venue featuring a casual-upscale dining menu. The club is converted
to a cocktail bar/nightclub in the evening with a small dance floor. It has no
designated parking.

Newly arrived to the Atlanta scene, the club features long lines in the evenings.
Quite often the club is not able to accommodate the numbers of people
interested in visiting the establishment.

The Somber Reptile: Located in downtown Atlanta on Marietta Street, the club

features live rock bands and a cajun oriented menu. The clientele is growing
steadily as the club's reputation grows. It offers an alternative to the traditional
Atlanta nightlife scene.

The Somber Reptile is part of the growing renovation trend taking place in the
warehouse district along Marietta Street just west of Downtown Atlanta. While it
naturally draws from the nearby residents, it competes directly with the rock
music venues located in Little Five Points on the east side of the Atlanta.

Cafe/Apres Diem: Cafe Diem, the first coffeehouse/restaurant to be located

south of Ponce De Leon Avenue on the northeast side of Atlanta, has enjoyed
extraordinary success. Formerly located on Highland Avenue, the business
recently (and reluctantly) located to a strip mall in midtown after a lengthy dispute
with its former landlord. It's departure from the immediate area provides an
extraordinary opportunity for The Watertower to capitalize on an even greater
unmet need for a casual restaurant/coffeehouse experience.
Highland Bagel/Caribou Coffee: Located on North Highland Avenue, this is a
traditional corporate coffeehouse which provides morning coffee and sandwich
service. The owners are currently expanding to provide evening service.

4.3.3 Industry Participants

Establishments which combine dining and entertainment functions are a smaller

segment of the overall, Downtown, Midtown, Virginia Highland, Little Five Points
dining market. There are approximately five venues that combine these functions
and are regularly recognized by Atlanta media outlets as "hits" in the growing
Atlanta nightlife scene.

Strategy and Implementation Summary

The Watertower's strategy is based upon targeting and serving:

 The atypical Atlanta intown resident. This urban professional works long
hours and has relatively little time to cook at home. She/he has an active
social life and spends a substantial amount of disposable income maintaining
it.

 The many downtown businesses which regularly use restaurant dining as

an function of conducting business.

 The tourist and convention populations centered in downtown venues.

5.1 Competitive Edge

The Watertower maintains a competitive edge in several significant areas:

 The facility's location puts it into close proximity to substantial populations

of affluent Atlantans.

 The owner, a 16-year-resident of Atlanta, was educated in and works

professionally in northeast Atlanta. His early work experience included a
 substantial period working within a casual/upscale restaurant in the mid-to-
late 1980s in Virginia Highland. As the Dean of Students at Emory University
School of Law, he has conferred over 1,300 law degrees during his tenure,
most of them have remained in the Atlanta area. His position at Emory also
required him to manage significant catering budgets. The owner, through his
business, academic, and community activities, maintains a substantial
Atlanta-based network of professionals.

 The facility's construction will easily allow for flexible

dining/coffeehouse/entertainment options making it attractive to numerous
populations.

 The facility's location in an Empowerment Zone and local Enterprise Zone

provides significant tax advantages.
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5.2 Value Proposition

We think our value proposition is quite clear and quite easily distinguished from
most others in the market. We offer affordable and accessible menu items and
entertainment as measured by their inherently natural value, at an affordable
price that will encourage regular visits.

5.3 Sales Strategy

The first category of our sales strategy is to establish and maintain a position with
our primary constituents: intown Atlanta residents within a 4 mile radius of The
Watertower's location. We will depend upon keeping these people happy with our
food and beverage products and entertainment options.

Our second strategy is to utilize the downtown hotel/convention business through

developing and maintaining close relationships with the planners of upcoming
conventions and their respective attendees in order to create a "private
function/party" option for corporations visiting Atlanta during the early part of the
week, as well as encouraging individual visits by conventioneers later in the
week. This strategy will also target the many hotel concierges who are available
to promote dining options located within two miles of downtown hotel venues.

Our third strategy targets the more than 500,000 visitors to the Martin Luther
King National Historic Site. This segment provides mainly lunch business.

Fourth, the restaurant will target sales to downtown and midtown businesses
(particularly law firms) for regular business lunch and dinner entertaining.

5.3.1 Sales Forecast

Our sales forecast assumes no change in cost of prices, which is a reasonable

assumption for the last few years.

We are expecting to increase sales from $2.0 million at the end of 2002, to $2.5
million by the end of 2004. The growth forecast is in line with the restaurants in
the area and is tied to the projected increase in population of the immediate area.

The combined sales figures (across all sale items for the restaurant and coffee
shop) presume an average of 2.5 "turns" per day for a 155 seat dining room with
an average tab of $12.54. The business will be open an average of 26 days per
month.

The projections show increases in:

November, resulting from Halloween party planning for Emory University

graduate and professional students.
January, based upon corporate Christmas party and New Year's Eve
programming.

May, as a result of catering programming scheduled for Emory University

Commencement functions.

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SALES FORECAST

YEAR 1 YEAR 2 YEAR 3

 Sales

Restaurant $1,926,217 $2,078,138 $2,285,951

Coffeehouse $260,384 $273,403 $287,073

TOTAL SALES $2,186,601 $2,351,541 $2,573,024

Direct Cost of Sales Year 1 Year 2 Year 3

Restaurant $1,270,196 $1,277,010 $1,340,860

Coffeehouse $78,112 $0 $0

Subtotal Direct Cost of Sales $1,348,308 $1,277,010 $1,340,860

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5.4 Milestones
The accompanying table lists important program milestones, with dates and
managers in charge, and budgets for each. The milestone schedule indicates our
emphasis on planning for implementation.

What the table doesn't show is the commitment behind it. Our business plan
software includes complete provisions for plan-vs.-actual analysis, and we will be
holding monthly follow-up meetings to discuss the variance and course
corrections.

MILESTONES

Milestone Start Date End Date Budget Manager Department

Leasehold 11/1/200 2/1/2001 $30,000 David Patton Owner

Buildout 0

Equipment 1/1/2001 2/1/2001 $75,000 David Patton Owner

Installation

Marketing Plan 1/1/2001 5/1/2001 $4,500 Cindy Abel Marketing

Fixture/table 12/1/200 5/1/2001 $3,500 David Patton DNP/PTC

Construction 0

Begin 10/1/200 3/1/2001 $0 [Link] HDDC

Construction 0
Process
 Design 5/1/2000 12/1/2000 $0 [Link] [Link]
Management

Legal Research 1/1/2000 4/1/2000 $1,000 Patton/Mose Legal

r

Interior Design 10/1/200 7/1/2000 $0 [Link] [Link]

0

Entertainment 2/1/2000 12/31/200 $0 David Patton Owner

Research 0

Purchasing 1/1/2000 10/1/2000 $0 David Patton Owner

Research

Totals $114,000

5.5 Marketing Strategy

The most important element of our marketing strategy is the delivery of a quality
product. Our food, beverage, newspaper/magazine, and entertainment products
must first sell themselves through word of mouth.

Next, the packaging of The Watertower's concept and external messages have to
fit our positioning. We offer an upscale feel without a required "pinch" in your
wallet. We then communicate this through the free weekly media (Creative
Loafing, Southern Voice, and others), radio advertising on particular jazz, acid-jazz,
Latin, and dance-oriented music shows, and traditional public radio
sponsorships.
Through establishing relationships with the concierges of the local hotels and
with the Atlanta Convention and Visitors Bureau, we will then attempt to create
opportunities for visitors to the city to look forward to experiencing The
Watertower.

5.5.1 Sales Programs

Specific Sales Programs:

1. Special Event Sales: Develop opportunities to sell to companies for private

parties and special events. The specific responsibility is with the owner with
assistance from the manager on staff and Real World Communications.

2. Music Related Special Events: Develop relationships with artists and

promoters in the area to feature artists rising in popularity, either through CD
release parties or live performances.

3. Artist/Studioplex Special Events: Develop opportunities to host or cater

artist openings.

5.5.2 Positioning Statement

For our most important target market, local residents who crave new and
sophisticated dining/entertainment/coffeehouse options, The Watertower satisfies
the need for a casual, all-in-one dining and entertainment experience. Unlike our
key competition, The Watertower is designed to handle this need from its
inception, starting with the general construction of the facility. The general food
programming, coupled with the entertainment programming, will offer the
customer an experience unlike anything he or she has currently available.

5.5.3 Pricing Strategy

Our food, drinks, and entertainment options are priced to give us an attractive
margin while at the same time offering value to the consumer. We want repeat
business. We also want the experience to remain fresh. Therein lies why the
food, beverages, and musical/entertainment programming will be relatively
flexible.

A sample menu is included in an appendix.

**Some supplemental materials are not available for this sample plan.

5.5.4 Promotion Strategy

We will promote our company name and label almost more than the product
itself, because to be successful we have to stand for brand-name integrity,
excellent menu offerings, and first class entertainment and fun. Therefore, our
promotion strategy includes focusing on events and messages that match:

1. Our participation in the Chocolate Soul and Funk Jazz Kafe' special
promotions and the Sweet Auburn and Inman Park festivals is important
because these are events that bring our target market together.

2. Our participation in local radio and specifically targeted PBS shows on the
local stations.

3. Public relations programs focusing on related opportunities, guest

appearances on local radio, etc.

4. Advertising placed carefully, in mostly-alternative channels like Creative

Loafing, Southern Voice, university newspapers, etc.

5.5.5 Marketing Programs

Our marketing program will be handled by Cindy Abel of Real World

Communications. With an annual budget of $16,000, and with a milestone
beginning in August, Ms. Abel will assist with the initial marketing programs and
ongoing efforts to increase the visibility of The Watertower and its offerings.
5.6 Strategic Alliances

We depend on our alliances with personnel at Emory University, the Historic

District Development Corporation, the Atlanta Executive Network, The Atlanta
Convention and Visitors Bureau, and local music promoters to generate
continuous leads for new sales and promotional opportunities. We need to make
sure that the personnel of these allies are especially aware of our support and
reciprocation.

Management Summary
The Watertower is owned by a limited liability corporation including David N.
Patton IV and the Historic District Development Corporation. Mr. Patton will also
operate as general manager/managing partner. Crucial employees include an
additional manager who will assist in maintaining and reviewing operations of the
restaurant and the entertainment venue/bar, and a chef who will manage kitchen
operations.

Additionally, an assistant manager/senior server and a sous-chef/line cook will

perform secondary management functions.

Part-time personnel will be hired to handle bartending, serving, and dishwashing

functions.

6.1 Organizational Structure

The Watertower is owned by David N. Patton IV (80%) and the Historic District
Development Corporation (20%). Mr. Patton who will also operate as general
manager/managing partner.

An additional manager (to be hired) will assist in maintaining and reviewing

operations of the restaurant and the entertainment venue/bar.
A chef (to be hired) will manage kitchen operations and be crucial to maintaining
food inventory stability and assistance in menu development.

An assistant manager/senior server (to be hired) who will be a salaried

employee, will provide regular table service as well as assistance to the manager
and the general manager.

A sous-chef/line cook (to be hired) will perform secondary management functions

in the kitchen as well as provide assistance to the chef in main kitchen/cooking
functions.

Part-time personnel will be hired to handle bartending, serving, and dishwashing

functions.

The marketing, and accounting function will be handled by independent

contractors/consultants.

6.2 Personnel Plan

The personnel plan calls for hiring 5 full-time salaried employees at start-up. Part
time barristas/bartenders will have to be hired to manage approximately 135
hours of operation per week, servers/waiters will have to be hired for
approximately 203 hours of operation per week, and dishwashers will have to be
hired to handle approximately 62 hours of operation per week.

Any additional hires will be part time and devoted to the expansion of any
catering function, as well as increased capacity/operation of a private party
function.

Employee salaries are as follows:

Position Salary
Owner/General Manager $39,900
Chef $30,000
Manager $28,000
Sous-chef/Line Cook $23,000
Assistant Mgr/Senior Server $14,560 + Tips
Barristas/Bartenders $7/Hour
Servers $3/Hour + Tips
Dishwashers/Bussers $6/Hour

PERSONNEL PLAN

YEAR 1 YEAR 2 YEAR 3

Owner/Manager $39,996 $39,996 $39,996

Employees $282,012 $282,012 $282,012

TOTAL PEOPLE 21 21 21

Total Payroll $322,008 $322,008 $322,008

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6.3 Management Team

David N. Patton IV - Owner and General Manager: Mr. Patton worked for 6
years as the Dean of Students for Emory University School of Law. While
working at Emory, he was responsible for special event planning and catering,
particularly related to student centered events. Mr. Patton is the Chairman of the
Board of Directors of the Historic District Development Corporation, an
organization devoted to the redevelopment of the properties and neighborhood
surrounding Atlanta's Martin Luther King National Historic Site and Preservation
District. He is also a member of the Advisory Board for the Atlanta Executive
Network, a 1,000+ member business organization in Atlanta, and the past
Chairman of the Board of Directors for Fulton County Court Appointed Special
Advocates. Prior to his position at Emory, Mr. Patton worked as an attorney for a
Cincinnati, Ohio-based law where he specialized in litigation and small business
development. Mr. Patton received his law degree from the University of Georgia
in 1991 and his undergraduate degree from Emory University in 1988. Mr. Patton
put himself through college working in a casual dining establishment in the
Virginia Highland neighborhood in the late 1980s.

The following potential managers are under consideration for employment

Nicolas Godebert - Chef: Mr. Godebert is currently the Executive Chef of the

Chanteclair Restaurant, St. Martin, F.W.I. He has been in this position since
1997. Prior to this appointment, he was the sous-chef at Dessirier Restaurant,
Paris, France and the sous-chef for the Raphael Hotel Restaurant, Paris, France.
He received his apprenticeship and cooking school certificate from the Sous
l'Olivier Restaurant and the Ecole de Paris des Metiers de la Table in 1993,
respectively.

Cristina Brito - Manager: Ms. Brito, currently a food and beverage supervisor

for the Westin Atlanta North hotel, received her start in the hotel and restaurant
business in Recife-PE/ Brazil. At the Mar Hotel, she was responsible for the sales
and marketing of a five-star establishment. She maintained extensive contact
with corporate clients, thus requiring her to speak English, French, Italian, and
Portuguese fluently. Ms. Brito has extensive experience in Atlanta's catering
industry dating from 1988, as well as experience as a chef.

6.4 Management Team Gaps

The management team will have to partially rely upon outside

contractors/consultants for both the marketing and accounting functions.

The management team is still in the early stages of formation. Nicolas Godebert
and Cristina Brito are under heavy consideration. Cristina Brito is currently
working as a consultant on many issues facing the establishment of The
Watertower's start-up.

Financial Plan
We want to finance growth mainly through cash flow. We recognize that this
means we will have to grow more slowly than we might like.

The most important indicator in our case is inventory turnover. We have to make
sure that food inventory turnover stays at approximately four turns per month, or
we risk loss through spoilage.

We do not want to let our average collection days get above 45 under any
circumstances. This could cause a serious problem with cash flow, because our
working capital situation is tight. Most credit sales will be via credit and debit
cards. We do have plans to initiate direct billing for law firms and other
businesses conducting regular visits.

We must target a net profit of 14% at the least, and hold marketing costs to no
more than one to three percent of gross sales.
7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown
in the following table. The key underlying assumptions are:

 We assume a slow-growth economy, without major recession.

 We assume of course that there are no unforeseen changes in technology

to make equipment immediately obsolete.

 We assume access to equity capital and financing sufficient to maintain

our financial plan as shown in the tables.

GENERAL ASSUMPTIONS

YEAR 1 YEAR 2 YEAR 3

Plan Month 1 2 3

Current Interest Rate 12.25% 12.25% 12.25%

Long-term Interest Rate 6.75% 6.75% 6.75%

Tax Rate 25.42% 25.00% 25.42%

Other 0 0 0

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7.2 Projected Cash Flow

We expect to manage cash flow over the next three years with minimal new
investment required over the first two years. It is our expectation that revenue
beyond projected sales will be invested in retiring long-term debt early.

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PRO FORMA CASH FLOW

YEAR 1 YEAR 2 YEAR 3

Cash Received

Cash from Operations

Cash Sales $2,186,601 $2,351,541 $2,573,024

SUBTOTAL CASH FROM OPERATIONS $2,186,601 $2,351,541 $2,573,024

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $29,559

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 $2,186,601 $2,351,541 $2,602,583

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $322,008 $322,008 $322,008

Bill Payments $1,633,772 $1,677,517 $1,773,221

SUBTOTAL SPENT ON OPERATIONS $1,955,780 $1,999,525 $2,095,229

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $23,160 $26,435 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $27,430 $29,329 $31,339

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

SUBTOTAL CASH SPENT $2,006,370 $2,055,289 $2,126,568

Net Cash Flow $180,231 $296,252 $476,015

 Cash Balance $280,231 $576,483 $1,052,498

7.3 Key Financial Indicators

The most important indicators in our case are are daily seating "counts" and
weekly sales numbers. We must also make sure that we are turning our
inventory rapidly so as to avoid food spoilage.

We must target net profit/sales figures toward the 14% level with gross margins
never dipping below 38%. Marketing costs should never exceed three percent of
sales.

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7.4 Break-even Analysis

The Break-even Analysis shows that The Watertower has a good balance of
fixed costs and sufficient sales strength to remain healthy. Our break-even point
is $106,101 on sales averaging $12.54 per patron. This break-even position is
achieved on a monthly fixed cost of $57,873 and and per unit/patron variable
cost of $5.70.
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BREAK-EVEN ANALYSIS

Monthly Revenue Break-even $122,179

Assumptions:

Average Percent Variable Cost 62%

Estimated Monthly Fixed Cost $46,841

7.5 Projected Profit and Loss

We expect income to approach $2.1 million for calendar year 2002. It should
increase to $2.57 million by the end of the years covered in this plan.

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PRO FORMA PROFIT AND LOSS

YEAR 1 YEAR 2 YEAR 3

Sales $2,186,601 $2,351,541 $2,573,024

Direct Cost of Sales $1,348,308 $1,277,010 $1,340,860

Other $0 $0 $0

TOTAL COST OF SALES $1,348,308 $1,277,010 $1,340,860

Gross Margin $838,293 $1,074,531 $1,232,164

Gross Margin % 38.34% 45.69% 47.89%

Expenses

Payroll $322,008 $322,008 $322,008

Sales and Marketing and Other $80,800 $80,800 $80,800

Expenses

Depreciation $6,900 $6,900 $6,900

Leased Equip/Van/Dispensing $12,600 $12,600 $12,600

Systems

Utilities $24,000 $24,000 $24,000

Insurance $20,940 $22,000 $23,000

Other Taxes $24,000 $24,000 $24,000

Payroll Taxes $70,842 $70,842 $70,842

Other $0 $0 $0
 Total Operating Expenses $562,090 $563,150 $564,150

Profit Before Interest and Taxes $276,203 $511,381 $668,014

EBITDA $283,103 $518,281 $674,914

Interest Expense $48,095 $43,298 $41,442

Taxes Incurred $55,675 $117,021 $159,254

Net Profit $172,433 $351,062 $467,318

Net Profit/Sales 7.89% 14.93% 18.16%

7.6 Projected Balance Sheet

As shown in the Balance Sheet, we expect a healthy growth in net worth from
approximately $172,000 at the end of 2002 to almost $1 million by the end of the
plan period.

PRO FORMA BALANCE SHEET

YEAR 1 YEAR 2 YEAR 3

Assets

Current Assets

Cash $280,231 $576,483 $1,052,498

Inventory $129,671 $122,814 $128,955

Other Current Assets $0 $0 $0

TOTAL CURRENT ASSETS $409,902 $699,297 $1,181,453

Long-term Assets

Long-term Assets $595,040 $595,040 $595,040

Accumulated Depreciation $6,900 $13,800 $20,700

TOTAL LONG-TERM ASSETS $588,140 $581,240 $574,340

TOTAL ASSETS $998,042 $1,280,537 $1,755,793

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $149,628 $136,826 $146,543

Current Borrowing $6,690 ($19,745) $9,814

Other Current Liabilities $0 $0 $0

SUBTOTAL CURRENT LIABILITIES $156,318 $117,081 $156,357

Long-term Liabilities $667,969 $638,640 $607,301

TOTAL LIABILITIES $824,287 $755,721 $763,658

Paid-in Capital $98,000 $98,000 $98,000

Retained Earnings ($96,679) $75,754 $426,817

Earnings $172,433 $351,062 $467,318

TOTAL CAPITAL $173,754 $524,817 $992,135

TOTAL LIABILITIES AND CAPITAL $998,042 $1,280,537 $1,755,793

Net Worth $173,754 $524,817 $992,135

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7.7 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios
based on the Standard Industrial Classification (SIC) code 5812, Eating Places,
are shown for comparison. The ratios show a plan for balanced, healthy growth.

RATIO ANALYSIS

YEAR 1 YEAR 2 YEAR 3 INDUSTRY

PROFILE

Sales Growth 0.00% 7.54% 9.42% 7.60%

Percent of Total Assets

Inventory 12.99% 9.59% 7.34% 3.60%

Other Current Assets 0.00% 0.00% 0.00% 35.60%

Total Current Assets 41.07% 54.61% 67.29% 43.70%

Long-term Assets 58.93% 45.39% 32.71% 56.30%

TOTAL ASSETS 100.00% 100.00 100.00% 100.00%

%

Current Liabilities 15.66% 9.14% 8.91% 32.70%

Long-term Liabilities 66.93% 49.87% 34.59% 28.50%

Total Liabilities 82.59% 59.02% 43.49% 61.20%

NET WORTH 17.41% 40.98% 56.51% 38.80%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 38.34% 45.69% 47.89% 60.50%

Selling, General & Administrative 30.51% 30.77% 29.62% 39.80%

Expenses

Advertising Expenses 0.73% 0.68% 0.62% 3.20%

Profit Before Interest and Taxes 12.63% 21.75% 25.96% 0.70%

Main Ratios

Current 2.62 5.97 7.56 0.98

Quick 1.79 4.92 6.73 0.65

Total Debt to Total Assets 82.59% 59.02% 43.49% 61.20%

Pre-tax Return on Net Worth 131.28% 89.19% 63.15% 1.70%

Pre-tax Return on Assets 22.86% 36.55% 35.69% 4.30%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin 7.89% 14.93% 18.16% n.a

Return on Equity 99.24% 66.89% 47.10% n.a

Activity Ratios

Inventory Turnover 10.91 10.12 10.65 n.a

Accounts Payable Turnover 11.72 12.17 12.17 n.a

Payment Days 28 31 29 n.a

Total Asset Turnover 2.19 1.84 1.47 n.a

Debt Ratios

Debt to Net Worth 4.74 1.44 0.77 n.a

Current Liab. to Liab. 0.19 0.15 0.20 n.a

Liquidity Ratios

Net Working Capital $253,583 $582,217 $1,025,096 n.a

Interest Coverage 5.74 11.81 16.12 n.a

Additional Ratios

Assets to Sales 0.46 0.54 0.68 n.a

Current Debt/Total Assets 16% 9% 9% n.a

Acid Test 1.79 4.92 6.73 n.a

 Sales/Net Worth 12.58 4.48 2.59 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix
SALES FORECAST

MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
1 2 3 4 5 6 7 8 9 10 11 12

Sales

Restaurant 0 $116,330 $126,271 $132,163 $150,898 $142,787 $153,458 $164,320 $190,700 $184,871 $184,871 $189,120 $190,428
%

Coffeehous 0 $14,525 $14,525 $16,800 $16,800 $19,800 $19,800 $22,770 $22,770 $26,185 $26,185 $30,112 $30,112
e %

TOTAL $130,85 $140,79 $148,96 $167,69 $162,58 $173,25 $187,09 $213,47 $211,05 $211,05 $219,23 $220,54
SALES 5 6 3 8 7 8 0 0 6 6 2 0

Direct Cost Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
of Sales

Restaurant $101,350 $102,363 $103,386 $105,419 $104,420 $105,850 $106,908 $108,850 $107,350 $107,350 $108,100 $108,850

Coffeehous $4,357 $4,357 $5,040 $5,040 $5,940 $5,940 $6,831 $6,831 $7,855 $7,855 $9,033 $9,033
e
Subtotal $105,707 $106,720 $108,426 $110,459 $110,360 $111,790 $113,739 $115,681 $115,205 $115,205 $117,133 $117,883
Direct Cost
of Sales

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PERSONNEL PLAN

MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT
H1 H2 H3 H4 H5 H6 H7 H8 H9 H 10 H 11 H 12

Owner/Manag 0 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333 $3,333
er %

Employees 0 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50 $23,50
% 1 1 1 1 1 1 1 1 1 1 1 1

TOTAL 21 21 21 21 21 21 21 21 21 21 21 21
PEOPLE

Total Payroll $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83 $26,83
4 4 4 4 4 4 4 4 4 4 4 4

GENERAL ASSUMPTIONS

MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT MONTH
H1 H2 H3 H4 H5 H6 H7 H8 H9 H 10 H 11 12
Plan 1 2 3 4 5 6 7 8 9 10 11 12
Month

Current 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% 12.25%
Interest
Rate

Long- 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75%
term
Interest
Rate

Tax Rate 30.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0

PRO FORMA PROFIT AND LOSS

MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
1 2 3 4 5 6 7 8 9 10 11 12

Sales $130,85 $140,79 $148,96 $167,69 $162,58 $173,25 $187,09 $213,47 $211,05 $211,05 $219,23 $220,54
5 6 3 8 7 8 0 0 6 6 2 0

Direct Cost of $105,70 $106,72 $108,42 $110,45 $110,36 $111,79 $113,73 $115,68 $115,20 $115,20 $117,13 $117,88
Sales 7 0 6 9 0 0 9 1 5 5 3 3

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

TOTAL COST OF $105,7 $106,7 $108,4 $110,4 $110,3 $111,7 $113,7 $115,6 $115,2 $115,2 $117,1 $117,8
SALES 07 20 26 59 60 90 39 81 05 05 33 83

Gross Margin $25,148 $34,076 $40,537 $57,239 $52,227 $61,468 $73,351 $97,789 $95,851 $95,851 $102,09 $102,65
9 7

Gross Margin % 19.22% 24.20% 27.21% 34.13% 32.12% 35.48% 39.21% 45.81% 45.41% 45.41% 46.57% 46.55%

Expenses
Payroll $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834

Sales and $7,900 $6,500 $7,900 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500
Marketing and
Other Expenses

Depreciation $575 $575 $575 $575 $575 $575 $575 $575 $575 $575 $575 $575

Leased $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050 $1,050
Equip/Van/Dispen
sing Systems

Utilities $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Insurance $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745 $1,745

Other Taxes $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000

Payroll Taxes 22 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903 $5,903
%

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating $48,007 $46,607 $48,007 $46,607 $46,607 $46,607 $46,607 $46,607 $46,607 $46,607 $46,607 $46,607
Expenses

Profit Before ($22,85 ($12,53 ($7,470) $10,632 $5,620 $14,861 $26,744 $51,182 $49,244 $49,244 $55,492 $56,050
Interest and Taxes 9) 1)

EBITDA ($22,28 ($11,95 ($6,895) $11,207 $6,195 $15,436 $27,319 $51,757 $49,819 $49,819 $56,067 $56,625
4) 6)

Interest Expense $4,185 $4,154 $4,122 $4,090 $4,058 $4,026 $3,993 $3,960 $3,927 $3,893 $3,860 $3,826

Taxes Incurred ($8,113) ($4,171) ($2,898) $1,635 $390 $2,709 $5,688 $11,805 $11,329 $11,338 $12,908 $13,056

Net Profit ($18,93 ($12,51 ($8,695) $4,906 $1,171 $8,126 $17,063 $35,416 $33,987 $34,013 $38,724 $39,168
1) 4)

Net Profit/Sales -14.47% -8.89% -5.84% 2.93% 0.72% 4.69% 9.12% 16.59% 16.10% 16.12% 17.66% 17.76%
PRO FORMA CASH FLOW

MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
1 2 3 4 5 6 7 8 9 10 11 12

Cash
Received

Cash from
Operations

Cash Sales $130,85 $140,79 $148,96 $167,69 $162,58 $173,25 $187,09 $213,47 $211,05 $211,05 $219,23 $220,54
5 6 3 8 7 8 0 0 6 6 2 0

SUBTOTAL $130,85 $140,79 $148,96 $167,69 $162,58 $173,25 $187,09 $213,47 $211,05 $211,05 $219,23 $220,54
CASH 5 6 3 8 7 8 0 0 6 6 2 0
FROM
OPERATIO
NS

Additional
Cash
Received

Sales Tax, 0.00 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

VAT, %
HST/GST
Received

New Current $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Borrowing

New Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
(interest-
free)

New Long- $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
term
Liabilities

Sales of $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other
Current
Assets

Sales of $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term
Assets

New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Investment
Received

SUBTOTAL $130,85 $140,79 $148,96 $167,69 $162,58 $173,25 $187,09 $213,47 $211,05 $211,05 $219,23 $220,54
CASH 5 6 3 8 7 8 0 0 6 6 2 0
RECEIVED

Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month Month Month
10 11 12

Expenditures
from
Operations

Cash $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834 $26,834
Spending

Bill $35,544 $175,81 $127,18 $132,30 $137,49 $134,07 $139,47 $145,02 $152,66 $149,15 $149,82 $155,20
Payments 5 6 8 5 8 8 9 0 3 1 6

SUBTOTAL $62,378 $202,64 $154,02 $159,14 $164,32 $160,91 $166,31 $171,86 $179,49 $175,98 $176,65 $182,04
SPENT ON 9 0 2 9 2 2 3 4 7 5 0
OPERATIO
NS

Additional
Cash Spent

Sales Tax, $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
VAT,
HST/GST
Paid Out

Principal $1,824 $1,843 $1,861 $1,880 $1,900 $1,919 $1,939 $1,958 $1,978 $1,999 $2,019 $2,040
Repayment
of Current
Borrowing

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Liabilities
Principal
Repayment

Long-term $2,221 $2,223 $2,243 $2,257 $2,268 $2,281 $2,292 $2,305 $2,317 $2,328 $2,341 $2,354
Liabilities
Principal
Repayment

Purchase $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other
Current
Assets

Purchase $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term
Assets

Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SUBTOTAL $66,423 $206,71 $158,12 $163,27 $168,49 $165,11 $170,54 $176,12 $183,78 $180,31 $181,01 $186,43
CASH 5 4 9 7 2 3 6 9 4 5 4
SPENT

Net Cash $64,432 ($65,919 ($9,161) $4,419 ($5,910) $8,146 $16,547 $37,344 $27,267 $30,742 $38,217 $34,106
Flow )

Cash $164,43 $98,513 $89,352 $93,771 $87,861 $96,007 $112,55 $149,89 $177,16 $207,90 $246,12 $280,23
Balance 2 3 7 4 7 4 1

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PRO FORMA BALANCE SHEET

MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
1 2 3 4 5 6 7 8 9 10 11 12

Assets Starting
Balances

Current
Assets

Cash $100,00 $164,43 $98,513 $89,352 $93,771 $87,861 $96,007 $112,55 $149,89 $177,16 $207,90 $246,12 $280,23
0 2 3 7 4 7 4 1

Inventory $61,157 $116,27 $117,39 $119,26 $121,50 $121,39 $122,96 $125,11 $127,24 $126,72 $126,72 $128,84 $129,67
8 2 9 5 6 9 3 9 6 6 6 1

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Assets

TOTAL $161,1 $280,71 $215,90 $208,62 $215,27 $209,25 $218,97 $237,6 $277,1 $303,8 $334,6 $374,9 $409,9
CURRENT 57 0 5 1 6 7 6 66 46 90 32 70 02
ASSETS

Long-term
Assets

Long-term $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04 $595,04
Assets 0 0 0 0 0 0 0 0 0 0 0 0 0

Accumulate $0 $575 $1,150 $1,725 $2,300 $2,875 $3,450 $4,025 $4,600 $5,175 $5,750 $6,325 $6,900
d
Depreciatio
n

TOTAL $595,0 $594,46 $593,89 $593,31 $592,74 $592,16 $591,59 $591,0 $590,4 $589,8 $589,2 $588,7 $588,1
LONG- 40 5 0 5 0 5 0 15 40 65 90 15 40
TERM
ASSETS

TOTAL $756,1 $875,17 $809,79 $801,93 $808,01 $801,42 $810,56 $828,6 $867,5 $893,7 $923,9 $963,6 $998,0
ASSETS 97 5 5 6 6 2 6 81 86 55 22 85 42

Liabilities Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month Month Month
and Capital 10 11 12

Current
Liabilities

Accounts $29,627 $171,58 $122,78 $127,72 $133,03 $129,43 $134,65 $139,93 $147,68 $144,16 $144,64 $150,04 $149,62
Payable 1 1 1 2 5 3 7 8 5 7 6 8

Current $29,850 $28,026 $26,183 $24,322 $22,442 $20,542 $18,623 $16,684 $14,726 $12,748 $10,749 $8,730 $6,690
Borrowing

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Current
Liabilities

SUBTOTAL $59,47 $199,60 $148,96 $152,04 $155,47 $149,97 $153,27 $156,6 $162,4 $156,9 $155,3 $158,7 $156,3
CURRENT 7 7 4 3 4 7 6 21 14 13 96 76 18
LIABILITI
ES

Long-term $695,39 $693,17 $690,95 $688,71 $686,45 $684,18 $681,90 $679,61 $677,30 $674,99 $672,66 $670,32 $667,96
Liabilities 9 8 5 2 5 7 6 4 9 2 4 3 9

TOTAL $754,8 $892,78 $839,91 $840,75 $841,92 $834,16 $835,18 $836,2 $839,7 $831,9 $828,0 $829,0 $824,2
LIABILITI 76 5 9 5 9 4 2 35 23 05 60 99 87
ES

Paid-in $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000 $98,000
Capital

Retained ($96,67 ($96,679 ($96,679 ($96,679 ($96,679 ($96,679 ($96,679 ($96,67 ($96,67 ($96,67 ($96,67 ($96,67 ($96,67
Earnings 9) ) ) ) ) ) ) 9) 9) 9) 9) 9) 9)

Earnings $0 ($18,931 ($31,445 ($40,140 ($35,234 ($34,063 ($25,937 ($8,874) $26,542 $60,529 $94,542 $133,26 $172,43
) ) ) ) ) ) 6 3

TOTAL $1,321 ($17,61 ($30,12 ($38,81 ($33,91 ($32,74 ($24,61 ($7,553 $27,86 $61,85 $95,86 $134,5 $173,7
CAPITAL 0) 4) 9) 3) 2) 6) ) 3 0 3 87 54

TOTAL $756,1 $875,17 $809,79 $801,93 $808,01 $801,42 $810,56 $828,6 $867,5 $893,7 $923,9 $963,6 $998,0
LIABILITI 97 5 5 6 6 2 6 81 86 55 22 85 42
ES AND
CAPITAL

Net Worth $1,321 ($17,610 ($30,124 ($38,819 ($33,913 ($32,742 ($24,616 ($7,553) $27,863 $61,850 $95,863 $134,58 $173,75
) ) ) ) ) ) 7 4