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 Table of Contents

1.0 Executive Summary......................................................................................................................1

Chart: Highlights............................................................................................................................2
1.1 Objectives.....................................................................................................................................2
1.2 Keys to Success..........................................................................................................................2
1.3 Mission...........................................................................................................................................2
2.0 Company Summary......................................................................................................................3
2.1 Company Ownership................................................................................................................3
2.2 Start-up Summary.....................................................................................................................4
Table: Start-up...............................................................................................................................4
Table: Start-up Funding..............................................................................................................4
Chart: Start-up...............................................................................................................................5
3.0 Services.............................................................................................................................................5
4.0 Market Analysis Summary.........................................................................................................6
4.1 Market Segmentation..............................................................................................................6
Table: Market Analysis................................................................................................................6
Chart: Market Analysis (Pie)......................................................................................................7
4.2 Service Business Analysis......................................................................................................7
4.2.1 Competition and Buying Patterns................................................................................8
5.0 Strategy and Implementation Summary..............................................................................8
5.1 Sales Strategy.............................................................................................................................8
5.1.1 Sales Forecast.....................................................................................................................8
Table: Sales Forecast...............................................................................................................9
Chart: Sales Monthly................................................................................................................9
5.2 Marketing Strategy...................................................................................................................9
6.0 Management Summary.............................................................................................................10
6.1 Personnel....................................................................................................................................10
Table: Personnel..........................................................................................................................10
7.0 Financial Plan................................................................................................................................10
7.1 Important Assumptions.........................................................................................................11
Table: General Assumptions...................................................................................................11
7.2 Break-even Analysis...............................................................................................................12
7.2 Break-even Analysis...............................................................................................................12
Table: Break-even Analysis.....................................................................................................12
Chart: Break-even Analysis.....................................................................................................12
7.3 Projected Profit and Loss......................................................................................................13
Chart: Profit Monthly..................................................................................................................13
Chart: Profit Yearly.....................................................................................................................14
Chart: Gross Margin Monthly..................................................................................................14
Chart: Gross Margin Yearly......................................................................................................15
Table: Profit and Loss................................................................................................................15
7.4 Projected Cash Flow...............................................................................................................16
7.4 Projected Cash Flow...............................................................................................................16
Table: Cash Flow.........................................................................................................................16
Chart: Cash....................................................................................................................................17
7.5 Projected Balance Sheet.......................................................................................................18
Table: Balance Sheet.................................................................................................................18

Page
 Table of Contents

7.6 Business Ratios........................................................................................................................19

7.6 Business Ratios........................................................................................................................19
Table: Ratios.................................................................................................................................19
Table: Sales Forecast...........................................................................................................................1
Table: Personnel....................................................................................................................................2
Table: Personnel....................................................................................................................................2
Table: General Assumptions.............................................................................................................3
Table: General Assumptions.............................................................................................................3
Table: Profit and Loss..........................................................................................................................4
Table: Profit and Loss..........................................................................................................................4
Table: Cash Flow...................................................................................................................................5
Table: Cash Flow...................................................................................................................................5
Table: Balance Sheet...........................................................................................................................7
Table: Balance Sheet...........................................................................................................................7

Page
 Electronic Detectives Inc.

1.0 Executive Summary

Introduction
Electronic Detectives, Inc. helps lawyers identify, acquire, restore, and analyze electronic data
in litigation. From tape restoration to hard drive imaging, our full-time, certified forensic,
discovery and testifying experts are highly experienced in acquiring data from NT, Novell, Unix
and Linux servers and PCs, among others. As testifying experts, we will help shape the field of
electronic discovery.

The Company
Electronic Detectives will be a limited liability corporation registered in the state of Delaware for
tax purposes. The company has a limited number of private investors and does not plan to go
public. The company has its main offices in Portland, Oregon. The company's main clients will
be law firms requiring identification, restoration, and analysis of electronic data.

The company's private investors will own 47% of the company's shares. The rest will be owned
by the senior management including Mr. David Radcliffe, (20%), Mrs. Julie Walters (10%), Mr.
Brad Rinke (15%), and Mr. William Orcott (7%). All other financing will come from loans.

The Services
Electronic Detectives has experts well versed in all commercial operating systems such as Unix,
Linux, Novell and others. The firm will assist in 30(b)(6) depositions to produce and go on-site to
inventory data and look for hidden sources. The company also plans to maintain well recorded
chains-of-custody in order to protect our clients. Our written protocols and internal procedures
ensure that our work product withstands scrutiny in all jurisdictions. Our firm will offer detailed
written reports, presentations, and analyses to support our conclusions. We also have a wealth
of experience providing expert testimony in federal and state court.

The Market
The electronic evidence gathering business is an offshoot of the detective industry and it is such
a new segment that gathering market data is impossible. However, a look at the profitability of
one of our older competitors will give the reader an idea of the profit and growth potential of
this market. Computer Forensics of Bellevue, WA has been in business for four years now and
has experienced explosive growth averaging 40% per year. The company, after significant
investment, achieved record pre-tax returns on net worth of 65%. This is an indication of how
much demand there is in the market and the overall growth capacity. Therefore this is an
excellent market to enter now and achieve a defensible position based on customer satisfaction
and reputation before more competitors enter.

Financial Considerations
We conservatively expect to begin to make monthly profits in November of the first year and
yearly profits by year three. In case our predictions are erroneous, Electronic Detectives has
secured an additional $60,000 credit line. Our break-even analysis indicates we need to
complete six projects per month to cover costs. During the next three years we expect to
maintain a positive cash flow and to begin to payoff our various loans.

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 Electronic Detectives Inc.

Chart: Highlights

Highlights

$700,000

$600,000

$500,000

$400,000 Sales

$300,000 Gross Margin

Net Profit
$200,000

$100,000

$0

($100,000)
Year 1 Year 2 Year 3

1.1 Objectives

The three year goals for Electronic Detectives are the following:

 Achieve break-even by year two.

 Establish 40 law firm clients by end of year three.
 Establish minimum 95% customer satisfaction rate.
 Achieve project completion time of 10 days or less.

1.2 Keys to Success

Electronic Detectives' keys to long-term survivability and profitability are:

 Attracting the best talent in the computer science field and establishing close contacts with
those institutions and firms conducting the latest R&D in computer security.
 Keeping close contact with clients and establishing a well functioning long-term relationship
with clients to generate repeat business and a top notch reputation.
 Establishing procedures to ensure rapid, accurate retrieval of information, and client
processing.

Page 2
 Electronic Detectives Inc.

1.3 Mission

It is the mission of Electronic Detectives to create a new standard in the detective industry. With
the creation of computers and the Internet for business and personal communication and data
storage, much of needed court evidence is now retained on computers and PDA's in the form of
personal files, emails, electronic picture formats, and other forms. Currently, there are few
companies who offers investigative services for institutions and firms that require accurate
retrieval of such information. Electronic Detectives intends to lead the way in establishing
standards for customer service, accurate recovery, timeliness, and professionalism that will
allow the company to gain significant market share and an agressive, defensible position in the
industry.

2.0 Company Summary

Electronic Detectives will be a limited liability corporation registered in the state of Delaware for
tax purposes. The company has a limited number of private investors and does not plan to go
public. The company has its main offices in Portland, Oregon. The facilities include a computer
forensics lab, conference rooms and office spaces. The company expects to begin offering its
services in January of 2003.

The company's main clients will be law firms requiring identification, restoration, and analysis of
electronic data. The firm offers a wide variety of services in order to reduce costs to our clients,
which can reduce overall legal fees to individuals, firms and institutions.

2.1 Company Ownership

The company will have a number of outside private investors who will own 47% of the
company's shares. The rest will be owned by the senior management including Mr. David
Radcliffe, (20%), Mrs. Julie Walters (10%), Mr. Brad Rinke (15%), and Mr. William Orcott (7%). All
other financing will come from loans.

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 Electronic Detectives Inc.

2.2 Start-up Summary

Total start-up requirements are $510,750 which includes a cash account of $341,550 to cover
initial operating expenses prior to achieving the break-even level. The majority of our financing
comes from investors, who are providing $297,000. Current borrowing will also provide $50,000
and there is long-term borrowing of $120,000.

Table: Start-up

Start-up

Requirements

Start-up Expenses
Legal $6,000
Insurance $5,000
utilities $200
Rent $2,000
Accounting and bookkeeping fees $2,000
Research and Development $4,500
Advertising $6,500
Other $15,000
Total Start-up Expenses $41,200

Start-up Assets
Cash Required $341,550
Other Current Assets $0
Long-term Assets $128,000
Total Assets $469,550

Total Requirements $510,750

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 Electronic Detectives Inc.

Table: Start-up Funding

Start-up Funding
Start-up Expenses to Fund $41,200
Start-up Assets to Fund $469,550
Total Funding Required $510,750

Assets
Non-cash Assets from Start-up $128,000
Cash Requirements from Start-up $341,550
Additional Cash Raised $0
Cash Balance on Starting Date $341,550
Total Assets $469,550

Liabilities and Capital

Liabilities
Current Borrowing $50,000
Long-term Liabilities $120,000
Accounts Payable (Outstanding Bills) $43,750
Other Current Liabilities (interest-free) $0
Total Liabilities $213,750

Capital

Planned Investment
Mr. David Radcliffe $60,000
Mrs. Julie Walters $30,000
Mr. Brad Rinke $45,000
Mr. William Orcott $21,000
Others $141,000
Additional Investment Requirement $0
Total Planned Investment $297,000

Loss at Start-up (Start-up Expenses) ($41,200)

Total Capital $255,800

Total Capital and Liabilities $469,550

Total Funding $510,750

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 Electronic Detectives Inc.

Chart: Start-up

Start-up

$500,000

$450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0
Expenses Assets Investment Loans

3.0 Services

Electronic Detectives offers its computer forensics services in four phases:

 Identification of pertinent data including encrypted, compressed and password-protected

files.

 Acquisition and restoration of data.

 Analysis.

 Production of reports and presentations for our clients and the relevant court.

Electronic Detectives has experts well versed in all commercial operating systems such as Unix,
Linux, Novell and others. The firm will assist in 30(b)(6) depositions to produce and go on-site to
inventory data and look for hidden sources. The company also plans to maintain well recorded
chains-of-custody in order to protect our clients. Our written protocols and internal procedures
ensure that our work product withstands scrutiny in all jurisdictions. Our firm will offer detailed
written reports, presentations, and analyses to support our conclusions. We also have a wealth
of experience providing expert testimony in federal and state court.

Page 6
 Electronic Detectives Inc.

4.0 Market Analysis Summary

Electronic Detectives will be concentrating on large law firms with a proven track record with
fields in the environmental, corporate, malpractice, intellectual property rights, and general law
areas. This is because these types of companies have the greatest needs and the highest profit
margins.

Profitability and growth in this little-tapped market is astounding, as evidenced by one of our
major competitors, who has experienced explosive growth averaging 40% per year. The
company, after significant investment, achieved record pre-tax returns on net worth of 65%.

An analysis of the market using the five forces of profitability indicates that there will be a short
time where growth of market share and profitability will be extremely high while demand
outstrips supply. As new entrants move into the market this opportunity will disappear. This is
the time for Electronic Detectives to create its reputation and niche in the industry.

4.1 Market Segmentation

For Electronic Detectives' first three years it will be concentrating exclusively on acquiring
contracts with West coast law firms employing over twenty individuals and having a respectable
reputation for at least fifteen years. This is to insure long-term contracts with satisfied
customers who can afford our services and create a self-generating word-of-mouth marketing
campaign. In addition, we will be focusing on law firms that are in the following fields of practice

 Intellectual property rights;

 Corporate and business law;
 Environmental law;
 General practice;
 Malpractice.

Firms such as these have high demand for electronic investigations due to their client's needs
and work environments. The Market Analysis table includes all the law firms of these types in
the West coast area of California, Oregon, and Washington.

Table: Market Analysis

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Malpractice firms 2% 103 105 107 109 111 1.89%
Intellectual property firms 6% 34 36 38 40 42 5.42%
Corporate firms 4% 220 229 238 248 258 4.06%
General practice firms 2% 84 86 88 90 92 2.30%
Environmental firms 7% 72 77 82 88 94 6.89%
Total 3.86% 513 533 553 575 597 3.86%

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 Electronic Detectives Inc.

Chart: Market Analysis (Pie)

Market Analysis (Pie)

Malpractice firms

Intellectual property firms

Corporate firms

General practice firms

Environmental firms

4.2 Service Business Analysis

The electronic evidence gathering business is an offshoot of the detective industry and it is such
a new segment that gathering market data is impossible. However, a look at the profitability of
one of our older competitors will give the reader an idea of the profit and growth potential of
this untapped market.

Computer Forensics of Bellevue, WA has been in business for four years now and has
experienced explosive growth averaging 40% per year. The company, after significant
investment, achieved record pre-tax returns on net worth of 65%. This is an indication of how
much demand there is in the market and the overall growth capacity. Therefore this is an
excellent market to enter now and achieve a defensible position based on customer satisfaction
and reputation before more competitors enter.

Within this new market, the existing rivalry among firms is very low. This is because currently
demand greatly outstrips the amount of services available. Since this is such a growing market,
competing firms are concentrating on growing their own client base and not on market share or
direct competitive strategies. However, the threat of new entrants is very high, so high that a
large number of new entrants to the market is guaranteed.

This is the reason why Electronic Detectives plans to be first to market with comprehensive
services and creating industry standards in customer satisfaction and thoroughness.
Additionally, the influence that suppliers have on this market is quite significant. The most
important suppliers for Electronic Detectives is specialty software companies producing file
encryption/decryption software. Although our firm anticipates creating some of its own software
in-house, the majority of our programs will come from the open market. Therefore, much of our
success depends on the capability of our suppliers.

Page 8
 Electronic Detectives Inc.

4.2.1 Competition and Buying Patterns

There are three competitors within our geographical operating area: Computer Forensics of
Bellevue, WA; Techno Solutions of Pasadena, CA; and Booth & Anderson Business Consultants of
Los Angeles, CA.

Of these three competitors, only Computer Forensics is a direct threat to us. Techno Solutions is
currently concentrating on providing the same services for companies looking to investigate
internal fraud and computer misuse such as banks and other financial institutions. Booth &
Anderson is a general business consulting firm that offers electronic investigation as only one of
its many services, and therefore lacks the focus to offer a comprehensive client-provider
experience.

Currently Computer Forensics is going through a rapid expansion phase as it ramps up for
maximum service delivery. Due to the high demand for such services we will not have direct
competition for some time. Once new entrants become plentiful, we anticipate that this will
change.

One of the advantages to operating in this market is that clients tend to be relatively price
insensitive as long as they get a professional and satisfying experience. Therefore we expect to
be able to charge a significant profit margin.

5.0 Strategy and Implementation Summary

Electronic Detectives' overall strategy is to capitalize on client's buying patterns of demanding

top-quality work with an emphasis on thoroughness in investigations to reputable companies.

We intend to create industry standards of excellence that will be leveraged into a significant
brand image and name that will provide us with a highly defensible market position. This will
allow us to have a higher profit margin than our competitors.

5.1 Sales Strategy

Initially, sales will be dealt with by Mr. Radcliffe and Mr. Orcott, as they have the most number
of contacts in the industry. Mrs. Walters will handle the administrative side of sales to our
clients including customer service and billing. As the company grows, we expect to add to our
staff a permanent sales force to handle all aspects of our sales strategy.

In the majority of cases, we anticipate that the entire project will last about ten days from the
time we have permission to go on site. This will insure good turnaround and customer
satisfaction. We intend to have close customer relations by having each job developed, scoped,
sold, and fulfilled by the same people.

5.1.1 Sales Forecast

Sales are based on the various contract projects we anticipate acquiring in the various market
segments. Revenues are based on average costs per project based on estimated time and
complexity of project plus an undisclosed profit margin. The company does not have any
significant direct costs of sales.

Table: Sales Forecast

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 Electronic Detectives Inc.

11 12
10 Month
9 Month
Sales Forecast

8Month
Year 1 Year 2 Year 3

7 Month
Sales

6 Month
Malpractice lawsuits $64,000 $100,000 $135,000
Corporate/business lawsuits $72,000 $156,000 $225,000

5 Month
Intellectual property lawsuits $14,000 $60,000 $120,000
General practice lawsuits $30,000 $75,000 $100,000

4 Month
Environmental lawsuits $35,000 $90,000 $135,000
Total Sales $215,000 $481,000 $715,000

3 Month
Direct Cost of Sales Year 1 Year 2 Year 3

2 Month
Row 1 $0 $0 $0
Other $0 $0 $0

1 Month
Subtotal Direct Cost of Sales $0 $0 $0

Month
Month
Chart: Sales Monthly

Sales Monthly

$32,000

$28,000
Malpractice lawsuits
$24,000
Corporate/business lawsuits
$20,000
Intellectual property lawsuits
$16,000
General practice lawsuits
$12,000
Environmental lawsuits
$8,000

$4,000

$0

5.2 Marketing Strategy

In order to attract clients, Electronic Detectives will offer free consultations or an initial contract
at reduced prices to promising firms. These promotions will build our reputation. In addition, Mr.
Radcliffe and Mrs. Walters will be traveling to six trade shows and conventions across the
Midwest and Western part of the country where we will have booths to advertise our services.
Finally, we will be setting up cold calls to potential clients and have half and full page
advertisements in such publications as Nation Law Journal, The Journal of Corporate Law, and
Eisley's Law Review.

Page 10
 Electronic Detectives Inc.

6.0 Management Summary

The company will have four officers including our president, Mr. David Radcliffe. Our heart of
operations will include an operations chief, Mr. Brad Rinke, plus two other forensics analysts.
Legal issues will be handled by our in-house lawyer, Mr. Orcott, and finances and general admin
by Mrs. Walter.

The company plans to hire additional computer forensic analysts as we begin to get large
numbers of contracts.

6.1 Personnel

Mr. David Radcliffe is a former special agent of the FBI. During his twenty years with the bureau,
Mr. Radcliffe worked in a variety of different departments, but starting in 1981 he transferred to
and eventually headed the FBI's electronic information investigation branch. In 1985 Mr.
Radcliffe received an MBA in information systems from the University of Washington.

Mr. Brad Rinke graduated from Penn State University with a bachelors degree in forensic
sciences in 1975. From 1978-1988 Mr. Rinke worked with the California State Patrol as a
forensic investigator. In 1992 Mr. Rinke received a masters degree in computer science from the
University of Southern California. For the past ten years Mr. Rinke has worked with Symantec,
Inc. identifying and developing computer programs to fight viruses and worms.

Mr. William Orcott is a graduate of the Stanford School of Law. For the past eight years Mr.
Orcott has worked with White, Curley, & Pineda, a top law firm in Los Angeles specializing in
intellectual property lawsuits. Mr. Orcott will serve as the legal advisor for Electronic Detectives
and will also be the senior evidence custodian, maintaining the evidence locker inventory.

Table: Personnel

Personnel Plan
Year 1 Year 2 Year 3
Mr. Radcliffe - President $36,000 $45,000 $60,000
Mrs. Walters - CFO $36,000 $45,000 $60,000
Mr. Rinke - Operations Manager $36,000 $45,000 $45,000
Mr. Orcott - Law Consultant $36,000 $45,000 $45,000
Computer Forensics Analyst $36,000 $40,000 $45,000
Computer Forensics Analyst $36,000 $40,000 $45,000
Computer Forensics Analyst $0 $40,000 $40,000
Computer Forensics Analyst $0 $0 $0
Total People 0 0 0

Total Payroll $216,000 $300,000 $340,000

7.0 Financial Plan

Our financial plan anticipates two years of negative profits as we gain sales volume. We have
budgeted enough investment to cover these losses and have an additional credit line of
$60,000 available if sales do not match predictions.

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 Electronic Detectives Inc.

7.1 Important Assumptions

We are assuming approximately 75% sales on credit and average interest rates of 10%. These
are considered to be conservative in case our predictions are erroneous.

Table: General Assumptions

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Break-even Analysis

Our break-even analysis is based on the assumptions that our gross margin is 100%. In other
words, we will have insignificant direct cost of sales. Since each project will be of different
scope, length, and complexity, it is difficult to assign and average per unit revenue figure.
However, it is conservatively believed that during the first three years, average profitability will
be about $5,000. This is because we will be dealing with smaller companies at first that have
smaller projects. We expect that about six projects per month will guarantee a break-even
point.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $25,483

Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $25,483

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 Electronic Detectives Inc.

Chart: Break-even Analysis

Break-even Analysis
$20,000

$15,000

$10,000

$5,000

$0

($5,000)

($10,000)

($15,000)

($20,000)

($25,000)
$0 $8,000 $16,000 $24,000 $32,000 $40,000
$4,000 $12,000 $20,000 $28,000 $36,000 $44,000

7.3 Projected Profit and Loss

The following table itemizes our revenues and associated costs. We expect to be paying higher
costs in marketing and advertising than other companies as we attempt to build sales volume.
As the reader can see, we expect monthly profits to begin in November 2003 and yearly profits
to occur in 2005.

Chart: Profit Monthly

Profit Monthly

$3,000

$0

($3,000)

($6,000)

($9,000)

($12,000)

($15,000)

($18,000)

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

Month 2 Month 4 Month 6 Month 8 Month 10 Month 12

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 Electronic Detectives Inc.

Chart: Profit Yearly

Profit Yearly

$120,000

$90,000

$60,000

$30,000

$0

($30,000)

($60,000)

($90,000)

($120,000)
Year 1 Year 2 Year 3

Chart: Gross Margin Monthly

Gross Margin Monthly

$30,000

$27,000

$24,000

$21,000

$18,000

$15,000

$12,000

$9,000

$6,000

$3,000

$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

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 Electronic Detectives Inc.

Chart: Gross Margin Yearly

Gross Margin Yearly

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0
Year 1 Year 2 Year 3

Page 15
 Electronic Detectives Inc.

Table: Profit and Loss

Pro Forma Profit and Loss

Year 1 Year 2 Year 3
Sales $215,000 $481,000 $715,000
Direct Cost of Sales $0 $0 $0
Other Costs of Sales $15,800 $25,000 $65,000
Total Cost of Sales $15,800 $25,000 $65,000

Gross Margin $199,200 $456,000 $650,000

Gross Margin % 92.65% 94.80% 90.91%

Expenses
Payroll $216,000 $300,000 $340,000
Sales and Marketing and Other Expenses $30,000 $50,000 $50,000
Depreciation $2,400 $2,500 $2,500
Rent $24,000 $24,000 $28,000
Utilities $6,000 $6,000 $6,000
Insurance $12,000 $14,000 $15,000
Travel $8,200 $12,000 $12,000
Payroll Taxes $0 $0 $0
Other $7,200 $10,000 $10,000

Total Operating Expenses $305,800 $418,500 $463,500

Profit Before Interest and Taxes ($106,600) $37,500 $186,500

EBITDA ($104,200) $40,000 $189,000
Interest Expense $17,000 $15,150 $11,450
Taxes Incurred $0 $6,705 $52,515

Net Profit ($123,600) $15,645 $122,535

Net Profit/Sales -57.49% 3.25% 17.14%

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 Electronic Detectives Inc.

7.4 Projected Cash Flow

The following is our cash flow chart and diagram. We do not expect to have any short-term cash
flow problems even though we will be operating at a loss for the first two years. Our short-term
SBA loan of $50,000 will be repaid in two equal payments in 2004-2005. Our $120,000 long-
term loan will be paid off in ten years.

Table: Cash Flow

Pro Forma Cash Flow

Year 1 Year 2 Year 3
Cash Received

Cash from Operations

Cash Sales $53,750 $120,250 $178,750
Cash from Receivables $111,075 $298,673 $481,641
Subtotal Cash from Operations $164,825 $418,923 $660,391

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
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 $13,000 $0
Subtotal Cash Received $164,825 $431,923 $660,391

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $216,000 $300,000 $340,000
Bill Payments $150,401 $163,019 $242,805
Subtotal Spent on Operations $366,401 $463,019 $582,805

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $25,000 $25,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $12,000 $12,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $366,401 $500,019 $619,805

Net Cash Flow ($201,576) ($68,096) $40,586

Cash Balance $139,974 $71,878 $112,464

Page 17
 Month
2
Electronic Detectives Inc.

MonthMonth
1
Chart: Cash

Cash
$280,000

$240,000

$200,000

$160,000
Net Cash Flow
$120,000
Cash Balance
$80,000

$40,000

$0

($40,000)

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 Electronic Detectives Inc.

7.5 Projected Balance Sheet

The following is the projected balance sheet for Electronic Detectives.

Table: Balance Sheet

Pro Forma Balance Sheet

Year 1 Year 2 Year 3
Assets

Current Assets
Cash $139,974 $71,878 $112,464
Accounts Receivable $50,175 $112,252 $166,861
Other Current Assets $0 $0 $0
Total Current Assets $190,149 $184,130 $279,325

Long-term Assets
Long-term Assets $128,000 $128,000 $128,000
Accumulated Depreciation $2,400 $4,900 $7,400
Total Long-term Assets $125,600 $123,100 $120,600
Total Assets $315,749 $307,230 $399,925

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities
Accounts Payable $13,549 $13,385 $20,545
Current Borrowing $50,000 $25,000 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $63,549 $38,385 $20,545

Long-term Liabilities $120,000 $108,000 $96,000

Total Liabilities $183,549 $146,385 $116,545

Paid-in Capital $297,000 $310,000 $310,000

Retained Earnings ($41,200) ($164,800) ($149,155)
Earnings ($123,600) $15,645 $122,535
Total Capital $132,200 $160,845 $283,380
Total Liabilities and Capital $315,749 $307,230 $399,925

Net Worth $132,200 $160,845 $283,380

7.6 Business Ratios

We have included industry standard ratios from the detective agency industry to compare with
ours. As this is a new sub market of the overall industry, we expect some significant differences
especially in sales growth, financing ratios, long-term asset investments and net worth.
However, our projections indicate a healthy company that will be able to obtain and retain long-
term profitability.

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 Electronic Detectives Inc.

Table: Ratios

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth n.a. 123.72% 48.65% 7.51%

Percent of Total Assets

Accounts Receivable 15.89% 36.54% 41.72% 29.53%
Other Current Assets 0.00% 0.00% 0.00% 41.06%
Total Current Assets 60.22% 59.93% 69.84% 74.47%
Long-term Assets 39.78% 40.07% 30.16% 25.53%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 20.13% 12.49% 5.14% 34.85%

Long-term Liabilities 38.00% 35.15% 24.00% 17.54%
Total Liabilities 58.13% 47.65% 29.14% 52.39%
Net Worth 41.87% 52.35% 70.86% 47.61%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 92.65% 94.80% 90.91% 100.00%
Selling, General & Administrative Expenses 165.21% 100.95% 78.76% 82.58%
Advertising Expenses 0.00% 0.00% 0.00% 1.75%
Profit Before Interest and Taxes -49.58% 7.80% 26.08% 1.21%

Main Ratios
Current 2.99 4.80 13.60 1.73
Quick 2.99 4.80 13.60 1.38
Total Debt to Total Assets 58.13% 47.65% 29.14% 2.33%
Pre-tax Return on Net Worth -93.49% 13.90% 61.77% 60.48%
Pre-tax Return on Assets -39.14% 7.27% 43.77% 5.91%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin -57.49% 3.25% 17.14% n.a
Return on Equity -93.49% 9.73% 43.24% n.a

Activity Ratios
Accounts Receivable Turnover 3.21 3.21 3.21 n.a
Collection Days 55 82 95 n.a
Accounts Payable Turnover 8.87 12.17 12.17 n.a
Payment Days 37 30 25 n.a
Total Asset Turnover 0.68 1.57 1.79 n.a

Debt Ratios
Debt to Net Worth 1.39 0.91 0.41 n.a
Current Liab. to Liab. 0.35 0.26 0.18 n.a

Liquidity Ratios
Net Working Capital $126,600 $145,745 $258,780 n.a
Interest Coverage -6.27 2.48 16.29 n.a

Additional Ratios
Assets to Sales 1.47 0.64 0.56 n.a
Current Debt/Total Assets 20% 12% 5% n.a
Acid Test 2.20 1.87 5.47 n.a
Sales/Net Worth 1.63 2.99 2.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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 Appendix

Table: Sales Forecast

Sales Forecast
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales
Malpractice lawsuits 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $5,000 $7,000 $7,000 $9,000 $9,000 $9,000
Corporate/business lawsuits 0% $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $5,000 $5,000 $5,000 $9,000 $11,000 $13,000
Intellectual property lawsuits 0% $0 $0 $0 $0 $0 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
General practice lawsuits 0% $0 $0 $0 $0 $2,000 $2,000 $3,000 $4,000 $4,000 $5,000 $5,000 $5,000
Environmental lawsuits 0% $0 $0 $0 $0 $0 $0 $5,000 $6,000 $6,000 $6,000 $6,000 $6,000
Total Sales $7,000 $7,000 $7,000 $7,000 $9,000 $11,000 $20,000 $24,000 $24,000 $31,000 $33,000 $35,000

Direct Cost of Sales Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Row 1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Page 1
 Appendix

Table: Personnel

Personnel Plan
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Mr. Radcliffe - President 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mrs. Walters - CFO 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mr. Rinke - Operations Manager 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Mr. Orcott - Law Consultant 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000
Computer Forensics Analyst 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Computer Forensics Analyst 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000

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 Appendix

Table: General Assumptions

General Assumptions
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

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 Appendix

Table: Profit and Loss

Pro Forma Profit and Loss

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Sales $7,000 $7,000 $7,000 $7,000 $9,000 $11,000 $20,000 $24,000 $24,000 $31,000 $33,000 $35,000
Direct Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Costs of Sales $500 $500 $500 $500 $500 $600 $700 $1,000 $2,000 $2,000 $2,000 $5,000
Total Cost of Sales $500 $500 $500 $500 $500 $600 $700 $1,000 $2,000 $2,000 $2,000 $5,000

Gross Margin $6,500 $6,500 $6,500 $6,500 $8,500 $10,400 $19,300 $23,000 $22,000 $29,000 $31,000 $30,000
Gross Margin % 92.86% 92.86% 92.86% 92.86% 94.44% 94.55% 96.50% 95.83% 91.67% 93.55% 93.94% 85.71%

Expenses
Payroll $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000
Sales and Marketing and Other $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Expenses
Depreciation $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Rent $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Utilities $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500
Insurance $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
Travel $600 $0 $600 $1,000 $1,000 $0 $1,000 $0 $1,000 $1,000 $1,000 $1,000
Payroll Taxes 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600

Total Operating Expenses $25,400 $24,800 $25,400 $25,800 $25,800 $24,800 $25,800 $24,800 $25,800 $25,800 $25,800 $25,800

Profit Before Interest and Taxes ($18,900) ($18,300) ($18,900) ($19,300) ($17,300) ($14,400) ($6,500) ($1,800) ($3,800) $3,200 $5,200 $4,200
EBITDA ($18,700) ($18,100) ($18,700) ($19,100) ($17,100) ($14,200) ($6,300) ($1,600) ($3,600) $3,400 $5,400 $4,400
Interest Expense $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417 $1,417
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Net Profit ($20,317) ($19,717) ($20,317) ($20,717) ($18,717) ($15,817) ($7,917) ($3,217) ($5,217) $1,783 $3,783 $2,783
Net Profit/Sales -290.24% -281.67% -290.24% -295.95% -207.96% -143.79% -39.58% -13.40% -21.74% 5.75% 11.46% 7.95%

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 Appendix

Table: Cash Flow

Pro Forma Cash Flow

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

Cash from Operations

Cash Sales $1,750 $1,750 $1,750 $1,750 $2,250 $2,750 $5,000 $6,000 $6,000 $7,750 $8,250 $8,750
Cash from Receivables $0 $175 $5,250 $5,250 $5,250 $5,300 $6,800 $8,475 $15,100 $18,000 $18,175 $23,300
Subtotal Cash from Operations $1,750 $1,925 $7,000 $7,000 $7,500 $8,050 $11,800 $14,475 $21,100 $25,750 $26,425 $32,050

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $1,750 $1,925 $7,000 $7,000 $7,500 $8,050 $11,800 $14,475 $21,100 $25,750 $26,425 $32,050

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

Expenditures from Operations

Cash Spending $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000
Bill Payments $44,054 $9,097 $8,537 $9,130 $9,517 $9,487 $8,653 $9,693 $9,083 $11,017 $11,017 $11,117
Subtotal Spent on Operations $62,054 $27,097 $26,537 $27,130 $27,517 $27,487 $26,653 $27,693 $27,083 $29,017 $29,017 $29,117

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $62,054 $27,097 $26,537 $27,130 $27,517 $27,487 $26,653 $27,693 $27,083 $29,017 $29,017 $29,117

Net Cash Flow ($60,304) ($25,172) ($19,537) ($20,130) ($20,017) ($19,437) ($14,853) ($13,218) ($5,983) ($3,267) ($2,592) $2,933

Page 5
 Appendix
Cash Balance $281,246 $256,074 $236,538 $216,408 $196,391 $176,954 $162,101 $148,883 $142,899 $139,633 $137,041 $139,974

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 Appendix

Table: Balance Sheet

Pro Forma Balance Sheet

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Assets Starting Balances

Current Assets
Cash $341,550 $281,246 $256,074 $236,538 $216,408 $196,391 $176,954 $162,101 $148,883 $142,899 $139,633 $137,041 $139,974
Accounts Receivable $0 $5,250 $10,325 $10,325 $10,325 $11,825 $14,775 $22,975 $32,500 $35,400 $40,650 $47,225 $50,175
Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Current Assets $341,550 $286,496 $266,399 $246,863 $226,733 $208,216 $191,729 $185,076 $181,383 $178,299 $180,283 $184,266 $190,149

Long-term Assets
Long-term Assets $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000 $128,000
Accumulated Depreciation $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400
Total Long-term Assets $128,000 $127,800 $127,600 $127,400 $127,200 $127,000 $126,800 $126,600 $126,400 $126,200 $126,000 $125,800 $125,600
Total Assets $469,550 $414,296 $393,999 $374,263 $353,933 $335,216 $318,529 $311,676 $307,783 $304,499 $306,283 $310,066 $315,749

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

Current Liabilities
Accounts Payable $43,750 $8,813 $8,233 $8,813 $9,199 $9,199 $8,329 $9,393 $8,716 $10,649 $10,649 $10,649 $13,549
Current Borrowing $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $93,750 $58,813 $58,233 $58,813 $59,199 $59,199 $58,329 $59,393 $58,716 $60,649 $60,649 $60,649 $63,549

Long-term Liabilities $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000 $120,000
Total Liabilities $213,750 $178,813 $178,233 $178,813 $179,199 $179,199 $178,329 $179,393 $178,716 $180,649 $180,649 $180,649 $183,549

Paid-in Capital $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000 $297,000
Retained Earnings ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200) ($41,200)
Earnings $0 ($20,317) ($40,033) ($60,350) ($81,067) ($99,783) ($115,600) ($123,517) ($126,733) ($131,950) ($130,167) ($126,383) ($123,600)
Total Capital $255,800 $235,483 $215,767 $195,450 $174,733 $156,017 $140,200 $132,283 $129,067 $123,850 $125,633 $129,417 $132,200
Total Liabilities and Capital $469,550 $414,296 $393,999 $374,263 $353,933 $335,216 $318,529 $311,676 $307,783 $304,499 $306,283 $310,066 $315,749

Net Worth $255,800 $235,483 $215,767 $195,450 $174,733 $156,017 $140,200 $132,283 $129,067 $123,850 $125,633 $129,417 $132,200

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Appendix

Page 1