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Table of ContentsTable of Contents1 - Executive Summary.................................................................................................................. 4

2 - Industry Overview.....................................................................................................................5

3 - Introduction to Store at Your Door...........................................................................................5

4 - Mission..................................................................................................................................... 5

4.1 - Long Term Goals................................................................................................................6

4.2 - Short Term Goals...............................................................................................................6

5 - Marketing Plan..........................................................................................................................6

5.1 - Products and Services........................................................................................................6

5.2 - Produce and Protein..........................................................................................................6

5.3 - Delivery Service................................................................................................................. 7

6 - Essential Criteria.......................................................................................................................7

6.1 - Convenience...................................................................................................................... 7

6.2 - Freshness...........................................................................................................................8

6.3 - Price...................................................................................................................................8

6.4 - Customers..........................................................................................................................8

7 - The Market............................................................................................................................... 8

7.1 - Market Size........................................................................................................................8

7.2 - Target Markets.................................................................................................................. 8

7.3 - Overall..............................................................................................................................10

8 - Competitive Analysis...............................................................................................................10

8.1 - Competitors.....................................................................................................................10

9 - Specific Considerations...........................................................................................................11

9.1 - Prices............................................................................................................................... 11

9.2 - Range of Products............................................................................................................11

9.3 - Quality of Products..........................................................................................................12

9.4 - Impact on Competitors....................................................................................................12

9.5 - Alternate Responses to Competition...............................................................................12

10 - Channels of Distribution.......................................................................................................12

11 - Sales and Profit Objectives...................................................................................................13

12 - Pricing Policy.........................................................................................................................13

12.1 - Everyday Pricing.............................................................................................................14

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12.2 - Discounts....................................................................................................................... 14

13 - Selling and Advertising..........................................................................................................14

13.1 - Advertising.....................................................................................................................14

13.2 - Website.........................................................................................................................14

13.3 - Electronic Media (Facebook, Twitter, Blogs).................................................................15

13.4 - Traditional Print Advertising..........................................................................................15

13.5 - Public Transit................................................................................................................. 16

14 - Operating Plan......................................................................................................................16

14.1 - Legal Structure...............................................................................................................16

15 - Business Operations and Floor Plan......................................................................................17

15.1 - Business Operations.......................................................................................................17

15.2 - Floor Plan.......................................................................................................................18

15.3 - Regulations.................................................................................................................... 19

15.4 - Capital Budget................................................................................................................20

15.5 - Facility location..............................................................................................................21

15.6 - Information Technology.................................................................................................22

15.7 - Website interface.......................................................................................................... 23

15.8 - Order flow diagram........................................................................................................24

15.9 - Start Up Equipment.......................................................................................................25

15.10 - Inventory Supplies.......................................................................................................27

15.11 - Suppliers...................................................................................................................... 27

15.12 - Quality Control.............................................................................................................28

15.13 - Customer Satisfaction..................................................................................................28

15.14 - Performance Review....................................................................................................29

15.15 - Potential Future Changes.............................................................................................29

16 - Human Resources.................................................................................................................29

16.1 - Job Descriptions - Shareholders.....................................................................................29

16.2 – Job Descriptions - Operational staff..............................................................................30

16.3 - Recruitment Process......................................................................................................31

16.4 - Compensation................................................................................................................31

16.5 - Performance management............................................................................................31

17 - Financial Plan........................................................................................................................32

17.1 - Contribution Margin......................................................................................................32

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17.2 - Revenues....................................................................................................................... 32

17.3 - Operating Expenses.......................................................................................................33

17.4 - Financing of our Operations..........................................................................................34

17.5 - Financial Ratios and Decision Making............................................................................34

17.6 - Project Feasibility...........................................................................................................35

17.7 - Risk Analysis...................................................................................................................36

17.8 - Risk Management..........................................................................................................36

17.9 - Contingency Plans..........................................................................................................37

20 - Conclusion............................................................................................................................ 38

Appendix 1: Forecasted Financial Statement Assumptions.........................................................39

Income Statement Assumptions..............................................................................................39

Revenues:................................................................................................................................ 39

Expenses:................................................................................................................................. 39

Balance Sheet Assumptions.....................................................................................................41

Appendix 2: Five Year Projected Income Statement....................................................................43

Appendix 3: Five Year Projected Balance Sheet...........................................................................45

Appendix 4: Five Year Projected Statement of Cash Flows..........................................................46

Schedule 1: Projected Revenues..................................................................................................47

Schedule 2: Projected Cost of Sales.............................................................................................47

Schedule 3: Projected Operating Expenses..................................................................................48

Schedule 4: Capital Cost Breakdown...........................................................................................49

Schedule 5: Accounts Payable Breakdown..................................................................................50

Schedule 6: Using the Effective Interest Rate Method to Value Bank Loan.................................51

Schedule 7: Using the Effective Interest Rate Method to Finance Delivery Vans........................51

Schedule 8: Ratio Analysis........................................................................................................... 52

Schedule 9: Project Feasibility - Shareholders Perspective..........................................................54

Schedule 10: Project Feasibility - Angel Equity Investors' Perspective........................................55

Schedule 11: Critical Risk Variables and Sensitivity Analyses.......................................................55

Schedule 12: Break Even Analysis................................................................................................58

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1 - Executive SummaryA team of professionals, consisting of a lawyer, chartered accountant, agriculturalist, and IT specialist discovered an untapped market of individuals with limited access to the grocery store. As such, we have combined our expertise to start up Store at Your Door, a grocery delivery service. With our limited resources, we have chosen to focus primarily on the Vancouver Downtown area and the affluent West Vancouver neighborhood. Our goal is to raise enough debt and equity financing to open a warehouse in Vancouver, BC for our business. The intended opening date is October 2011 as this is when the weather begins to turn poor and more of our target market will be more receptive to our business idea as they are more reluctant to go purchase groceries.

SAYD key success factors are:

Inventory monitoring and management as achieved through the following:

o Financial and operational goals of maintaining adequate levels of inventories

o Tracking and reviewing inventory levels using various computer generated

reports and through feedback from clients

High quality fresh produce as achieved through the following:

o Extensive staff training provided in house to access produce and meat freshness

o Expertise of our agriculturalist

o Strict adherence to ISO 22000. For details, see operational plan section

Sales volume targets as achieved through the following:

o Aggressive marketing campaign in the first year of SAYD’s launch

o Blue ocean strategy – being the first to offer this type of service to the

Vancouver population

o Ensuring high customer satisfaction by following up with feed back

o Maintaining high quality products

o Maximizing the convenience for our customers

Based on the financial analysis that has been performed, it is expected that the rate of return that will be realized, under the base case scenario, will exceed a required rate of return of 30%. This information provides that the investment opportunity is viable and will be successful under reasonable conditions.

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2 - Industry OverviewThe food distribution industry is already well established. However, the option for grocery delivery has not yet been introduced to the Vancouver market. Players in food distribution generally have low margins, but extensive selection of products, ranging from fresh produce and meats, to preserved goods, dairy and baked goods. A clear majority of shoppers go to mega chains such as Safeway, Superstore and the like.

In order to succeed in the traditional food distribution industry, substantial initial investment is required to establish a facility as well as a work force. Furthermore, success is dependent upon the extensive supplier networks.

The upside of our venture is the lower initial investment as well as lower inventory holding costs. Furthermore, we will only cater to a specific market, thereby reducing the risk of holding slow moving products.

However, in order to succeed, it is imperative we establish a reputation for reliable service and high quality foods that is easy to access.

SAYD primarily targets individuals living in Vancouver who have limited mobility. These include busy professionals between the ages of 24 to 44, and those over 65. We estimate that out of the 299,000 Vancouver individuals meeting this description, 1% will immediately see the value of our service.

3 - Introduction to Store at Your DoorThe focus of SAYD is to purchase fresh produce and meats from wholesalers and local farmers and then deliver them within a day to our customers. Our target markets are those individuals who find it difficult to travel to a grocer due to time constraints and physical limitations, so SAYD’s premise is to service these individuals’ needs by brining the store to them and giving them the option of doing other more enjoyable activities in their free time or the choice of staying at home on a rainy day.

4 - MissionTo earn the loyalty of our customers through quality products, a unique shopping experience and a customer focus.

SAYD is not a one stop shop. We do not carry all of the things a grocery store might. But the essentials are there – fresh produce, meat and perishables. Other things we do not have are inventory shortages, long line ups and no parking.

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4.1 - Long Term Goals4.1 - Long Term GoalsSAYD will strive to achieve the following long term goals within 5 years of starting operations.

Long Term Goal #1: SAYD aims to repay our investors by increasing the share of our target market from 1% to 2% at the end of 5 years.

Long Term Goal #2: To achieve steady growth while maintaining a loyal customer base

Long Term Goal #3: To establish an image as the go-to online grocer for our target market

4.2 - Short Term Goals4.2 - Short Term Goals SAYD aims to achieve these short term goals within one year of start up:

Short Term Goals #1: Maintain a just-in-time volume of inventory to service our customers’ needs while maintaining its freshness by keeping a small volume of inventory

Short Term Goal #2: To achieve customer satisfaction of 90%, measured through various customer surveys. This will help in our marketing plans as satisfied customers are likely to pass on our services through word of mouth.

5 - Marketing Plan5.1 - Products and Services5.1 - Products and ServicesStore at your door offers two things to its customers: the groceries itself and the convenience of having it delivered to your door.

5.2 - Produce and Protein5.2 - Produce and ProteinSAYD will provide fresh, high quality food which falls into three categories. The main emphasis will be on produce (vegetables and fruit) and meat – the staples of every grocery basket. Additionally however, it had been indicated that grocery lists also often consist of supplemental products that are fast and easy to prepare. As such, SAYD will respond to this by offering non- perishable items such as canned goods.

By narrowing our product offering, SAYD will reduce the risk of stocking unsuccessful products, and any resulting spoilage as well as the risk of passing on expired goods to the consumer. While perishable goods may seem secondary, there is little risk in holding the items as expiration dates for such foods is generous, and the benefit of being able to provide it is appreciated.

Omitted from the shelves are items such as condiments, detergents and other household cleaners that would normally be found in chain food distributors. The rationale for this is that

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these items are not purchased with enough frequency to warrant the increase in inventory holding costs.

5.3 - Delivery Service5.3 - Delivery ServiceWhile SAYD provides a selection of food to its consumers, its differentiating factor is its ability to reliably deliver the products to the consumer. In effect, SAYD eliminates the inconvenience of making trips to the grocery store when strapped for time, or when other circumstances prevent. Furthermore, this feature eliminates the unpleasantness associated with grocery shopping, whether it be in transportation, lining up, or carefully inspecting food to find one that is free of defects.

To enhance convenience, SAYD will offer three options for delivery:1) Home Delivery with an individual to receive2) Home Drop Off – groceries will be delivered in cardboard boxes (bagged in the event of

inclement weather) and left at your doorstep.3) Delivery to a location of the customer’s choice – Some patrons who live in high traffic

areas with a higher potential for theft if the groceries were left on the door steps, or no drop off point will appreciate being able to receive the groceries at alternative locations such as their office.

Another facet of convenience is knowing when your groceries will be delivered. As such, SAYD will make daily deliveries between the hours of four to seven pm.

6 - Essential Criteria6.1 - Convenience6.1 - ConvenienceOur market survey has shown that customers value convenience, freshness and price. As convenience is rather subjective, SAYD has narrowed down the definition so it encompasses three points:

1) Hours of Operations – For busy professionals in particular, grocery shopping is often deferred until late after work when the freshest selections may already be gone or on weekends, when individuals would rather spend their time doing other things. As such, there are a limited number of hours in the day when these professionals are able to shop.

2) Proximity to Home – While customers are more likely to shop at stores closer to their homes, it becomes difficult for those with limited mobility. Those experiencing physical limitations or have no vehicle will find it difficult to make large purchases, or to go regularly as most time will be spent in transit.

3) Availability of Products – This can be further broken down into the following categories:a. Range of Products – SAYD’s selection is limited in comparison to large grocery

chains, but is larger than produce-only stores such as Kin’s Market. However, with time and capacity permitting, more products will be introduced. This will not be within the next two years however.

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b. Stock Availability – Another aspect of availability is how often orders are made and shelves restocked. SAYD utilizes a just in time inventory system, and as such, supply will always meet demand.

6.2 - Freshness6.2 - FreshnessTo support our commitment to freshness, SAYD will utilize a just in time inventory system, which will facilitate moving products with a short shelf life. Furthermore, SAYD packagers will only accept produce that has not yet spoiled from its suppliers. By rejecting those that are about to expire, SAYD will only pass on high quality, undamaged produce to its consumers.

6.3 - Price6.3 - PriceWhile SAYD is able to offer the first two, customers will have to pay a small premium for the combined service. There is little that can be done to mitigate this as convenience and freshness are tradeoffs with price. However, considering the high quality of the SAYD product, the slight increase in prices is reasonable.

6.4 - Customers6.4 - Customers Our service will appeal to any individual who finds it difficult or inconvenient to shop for groceries, whether due to time constraints or other mobility restrictions.

Under ideal conditions people will shop on an as needed basis, sometimes purchasing just enough for one meal to ensure freshness. More often, however, we expect trips to be around two to three times a week. For our product, we expect two orders per customer per week with expenditures being $25 each order. These purchases will be facilitated through our online grocery store, thus increasing the convenience of shopping. However, grocery deliveries cannot happen on the same day, but the next day, as SAYD operates on a just in time basis.

Sales will typically come from repeat customers with the above identified needs.

7 - The Market7.1 - Market Size7.1 - Market SizeBased on the most recent census, Vancouver has a total population of 640,000 individuals. Of these, 33% are between the ages of (25-44), and 13% are over the age of 65, meaning 46% of Vancouver’s total population is within our target market. SAYD will focus on these two markets as we are aiming to solve the problem of inconvenience.

7.2 - Target Markets7.2 - Target Markets As the category of “inconvenienced individual” is quite broad, we have narrowed our target market to two demographics for which we will focus our marketing efforts: Young Professionals and Retirees.

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Young Professionals (33% of market)Common characteristics and values of these individuals are:

Focused on career building Located in downtown, either by virtue of office location, or residence Minimal recreational time, and as a result has an interest in maximizing their free time

and not spending weekends performing chores such as grocery shopping Health conscious and therefore unwilling to continually eat fast food and preserved

foods Discretional income varies based on career and stage of career, but there is still more

funds than time Technologically savvy, and will therefore be comfortable with online shopping – SAYD’s

“store front”

This segment is our larger customer base and is most likely to utilize our services due to their hectic lifestyles. As such, this would be our most profitable market. Furthermore, advertising costs for efforts aimed at this market will be minimal as we will be heavily utilizing internet advertising, which is more efficient in terms of reaching a larger base at a lower cost as compared to traditional methods (See Advertising Program below for further details).

Furthermore, as compared to Retirees who are less willing to use an alternative method for such a normal occurrence such as shopping, young professionals offer the greatest sales potential. Unfortunately, this target group also comes with a higher risk level as they are more likely to switch providers if competitors enter the market.

Affluent Retirees in West Vancouver (13%)Common characteristics of these individuals are:

More time, but less mobile, either due to physical limitations or lack of vehicle Due to physical constraints, less able to purchase large amounts of groceries in one trip More price sensitive than young professionals Less need to go on the internet

It is anticipated that not as many retirees will initially respond to our service. For most of these individuals’ lives, they have purchased groceries through traditional means. Furthermore, they are less likely to be on the computer and less open to purchasing online. Furthermore, they (more than others) are less likely to trust another individual to choose their produce for them as they would want to inspect the quality for themselves. However, these individuals are less likely to go out for groceries in poor weather conditions and would therefore enjoy SAYD’s services.

While this group will be difficult to penetrate a first, we expect to increase our hold as the technically savvy baby boomers age into this group. Furthermore, once SAYD establishes a reputation for its high quality and reliability, these retirees will be more willing to try our services.

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7.3 - Overall7.3 - OverallEach target group has its advantages and disadvantages, but on the whole, the entire SAYD experience is more geared towards young professionals. These individuals are adept with technology and more willing to try new things. Furthermore, they have very little time and are less price-sensitive. As such, there is a better fit between SAYD and young professionals. We expect to reach 1% of the two target markets, combined.

8 - Competitive Analysis8.1 - Competitors8.1 - CompetitorsWhile there are a number of grocers within Vancouver, SAYD does not compete directly with any of them as these local grocers have a storefront operation, and draw in customers who have the time and ability to shop. SAYD, on the other hand, provides a delivery service in addition to its produce. At this point in there is no company that offers a similar product.

However, there are a number of indirect competitors such as supermarkets that offers a wider variety of goods. Available to our target markets are food supermarkets ranging from Thrifty Foods, Canada Safeway, to Superstore. The mega stores are located throughout Vancouver and are accessible to anyone in need of groceries. Another formidable competitor is the Public Market in Granville Island, which also features fresh produce grown by local BC farmers, as well as fresh meat. As no others are currently offering our services, the entire market is currently serviced through a variety of grocers as seen in Exhibit 1 below. Additionally, due to the busy schedule of our target market, many restaurants and fast food joints are being used as a source of food.

The greatest strength of these operations is their ability to meet the broad tastes of consumers in one setting. Furthermore, these operations are already well established and require little marketing efforts to draw in more consumers.

However, in assessing their overall strength compared to SAYD, additional factors must be considered. The below value curve rates SAYD’s major competitors in terms of five essential features, and shows how SAYD performs in comparison. Of note is that while SAYD cannot compete on certain areas such as product offerings, we do outperform most competitors in the areas which our target market find important.

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9 - Specific Considerations9.1 - Prices9.1 - PricesAs previously mentioned, SAYD’s prices will be slightly higher than its competitors. Due to its size, we are unable to benefit from any economies of scale. Furthermore, higher contribution margins will be needed to cover the costs of the gasoline needed for deliveries.

9.2 - Range of Products9.2 - Range of ProductsInitially, only the fresh produce, meat and dried goods will be available at SAYD. However, once SAYD establishes a greater ability to forecast demands and gains a familiarity with operations, SAYD will introduce more products. Furthermore, with increases in offerings, it is expected that demand will also increase. As such, more staff will be required to handle this increase in offerings.

On its website, SAYD will have informal polls that will elicit the feedback of customers in terms of products they will like to see SAYD carry in the future. Based on this data, SAYD will be able to develop its future inventories.

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Exhibit 1: Value Curve comparing SAYD to its indirect competitors based on the following value propositions: price, proximity, freshness, hours of operations, range of products, and stock availability.

9.3 - Quality of Products9.3 - Quality of ProductsWe find that consumers are now more health conscious and are beginning to seek healthy alternatives. While it may be convenient to eat at restaurants, there is also a vested interest in preparing your own food with fresh groceries. SAYD’s products fit in directly with this shift in mind set, and as such we will be able to capitalize on this change.

9.4 - Impact on Competitors9.4 - Impact on CompetitorsThe main thing that will attract consumers to SAYD is our delivery service, which will speak to those who do not have the time or the ability to shop. As such, the impact on our competitors is minimal as our target market would not have been able to visit their stores during their hours of operations.

The barriers of entry in this new market are low as most capital costs can be minimized through leasing opportunities. Furthermore, it is not expected that any large grocery stores will be able to enter this market as it would require a change in operations in terms of installing the correct technical infrastructure and hiring drivers. Duplication will likely come from grocery stores that are small and already successful.

9.5 - Alternate Responses to Competition9.5 - Alternate Responses to CompetitionIt is possible to form alliances with local grocers instead of seeking out other suppliers. However, this may affect our ability to price our own products favourably as the grocers would expect a share in the profits. If an alliance is made, a suitable partner would need to be selected that shares the same values as SAYD.

10 - Channels of DistributionSAYD will sell directly to the customers, with no intermediary. We will place the order with a preferred supplier and deliver to the customer’s door step the day following purchase.

This method of distribution is typical within the industry for most food retailers. The difference however is in how the product is presented to the customer. Due to SAYD’s unique product, we will operate solely out of our warehouse and deliver our product to our customers. In the early stage, it is important to be able to control all aspects of operations. As such, this channel is the only one available to us.

More traditional is the use of a store front that draws in customers. There is a safety in that system in that there is little need to actively pursue customers. In essence, the storefront acts as advertising. This is a disadvantage to SAYD in that we will need to actively build our customer base. In contrast however, SAYD will incur less fixed costs and will therefore enjoy a greater net profit margin.

As SAYD’s main link to its customers is through its website, there we will require greater technical support to ensure the website and online shopping system will always be available.

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Furthermore, there will need to be integration between our inventory levels and our purchasing system.

Of advantage however is our decreased reliance on sales staff to sell our product. However this introduces the challenge of communicating our product to our customers as they are not actually able to see what they are buying before they do. Some customers enjoy the ability to pick their own foods. As such, we need to ensure consistent high quality in the foods we accept from suppliers and deliver to customers.

11 - Sales and Profit Objectives Our profit objective is to be able to repay our investors by the end of five years, and at the same time generate enough returns to entertain the idea of an expansion. In order to achieve these goals, we will need to capture 1% of our target market by the end of the first year, and at least 2% of our target market by the end of the five years.

Based on preliminary market surveys, it is estimated that an individual shopping for one will spend $50 - 55 per week on groceries. Pairing this with our targeted levels we will meet our profit objective.

A limitation to growth however is our capitalization level. The warehouse being used as well as the number of staff and trucks available may not be able to meet a large spike in demand without making tradeoffs with quality.

12 - Pricing Policy There is little ability to vary our prices for different markets, or even within a single market. For the most part, prices offered will depend on the negotiation skills of management with the suppliers. As such we expect no cost savings that could be passed onto customers. Furthermore, as a non traditional grocer, SAYD will incur expenses that are not typical with many store front operations. Grocery chains generally have high fixed costs and labour costs associated with warehousing and employing individuals. SAYD on the other hand do not need many employees to keep shelves stocked. Therefore, SAYD will need to price its product so to be able to cover the cost of fuel. Typical food delivery services provided in other cities charge customer’s a flat delivery fee which can be as much as one third of the total cost. However, this additional charge is so hefty in comparison to the product being ordered that many consumers are turned off and forced to find other alternatives. SAYD on the other hand will not charge a separate fee. Instead, products will have a small mark up that will not fluctuate with current fuel prices.

12.1 - Everyday Pricing12.1 - Everyday PricingGenerally, however, our prices will be fairly competitive with non-discount grocery chains (ie. Superstore). Unfortunately due to our operating system there will not be much opportunity to price products at a discount or for clearance, as these are tactics used to push goods that are

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nearing expiry. With the just in time inventory system these events will be at a minimum, if at all.

Though there is no plan to increase mark ups on products from the current level, it should be noted that the price of produce often fluctuate due to seasonality. For example, summer fruit would be much more expensive in spring and autumn as there is less supply. These increases however will move in tandem with competitors.

12.2 - Discounts12.2 - DiscountsFrom time to time, especially in the first year of operations there will be many discounts. This will be necessary in order to gain exposure.

13 - Selling and Advertising 13.1 - Advertising13.1 - AdvertisingAs we aim to capture 1% of our target market by the end of the first year, it is important to advertise effectively to our market. As such, SAYD will release two advertising programs in order to reach the two different target market. For example, young professionals who are comfortable with technology will respond readily to online advertising efforts. In contrast, retirees are more likely to still use print material such as newspapers. Additionally, young professionals can be found in busier high traffic areas, while retirees are more likely to be found in quieter places such as libraries. Despite this, there are some common threads as well.

Our advertising efforts will aim to promote our image as a high quality grocer and a convenience provider. However, we will communicate this without the use of sales staff. As this operation does not require a high visibility of SAYD’s staff, it is unlikely people will respond to personal attributes. Furthermore, our target markets are less likely to be reached through this medium due to their time constraints arising from their hectic schedules and inability to travel to the stores.

13.2 - Website13.2 - WebsiteA central component to communicating our products will be through our website. Not only will this be the end point to searches made online, it is also the place where customers will be placing their orders. As such our website will be professionally developed, with many pictures to create a positive shopping experience and brand image. Furthermore, payment can be made via credit card through a secured site or through a third party such as PayPal.

13.3 - Electronic Media (Facebook, Twitter, Blogs)13.3 - Electronic Media (Facebook, Twitter, Blogs)Before customers can arrive at our website, they need to be prompted. As such, SAYD will utilize social media tools such as Facebook and Twitter. A page will be developed on Facebook where recent visitors can express their opinion on our service, which will also help us improve.

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As well, gaining a group of followers will allow us to communicate any new product offerings (ie. arrival of seasonal fruit) at a minimal cost.

As well, a Twitter account will be set up to maximize our presence on the internet. The account will function similarly as Facebook, but with it, we can advertise any coupons that may be released.

In addition to these, a blog will be created by our staff and linked to our website. SAYD will feature recipes which our products can be used for, but also any important information such as product recalls that would apply to the industry as a whole.

13.4 - Traditional Print Advertising13.4 - Traditional Print AdvertisingPrint advertising will be in the form of inserts in The Province (newspaper). Delivery will be for ten weeks and will take place on Sunday, which has the highest circulation (circulated to 197,575 houses) as compared to any other day of the week (166,302). An insert showing the products will be included, just as normally delivered by other grocery stores announcing sale items for the week.

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13.5 - Public Transit13.5 - Public TransitSAYD will put advertisements both on the inside and the outside of buses for one month on ten buses. Furthermore, nine skytrains will also bear our advertisements. Our market research indicates that many of our target market use the train, regardless of their age. Therefore, this will have the highest reach for our customers.

Marketing BudgetAdvertisingWebsite Advertising (SEO) (internal) 300

Social Networking Sites(10% off coupons)

Free -

Advertising on the side of a bus$650 for 4 weeks x 8 buses

5,200

Advertising on the side of a bus$650 x 4 weeks x 9 trains

5,850

Advertising on inside of bus150 x 4 weeks x 10 buses

1,500

Newsprint – The Vancouver Sun – 10 Sundays (Sunday delivery)

10,000

Billboard

Business Cards 200TOTAL 29,550

14 - Operating Plan14.1 - Legal Structure14.1 - Legal StructureStore @ Your Door will be incorporated as a CCPC as there are many tax benefits conferred to CCPC that are not available to other incorporated structures such as the small business deduction tax rate of 17%. Additionally, under this structure, the 4 owners will contribute share capital of $25,000 each, totaling $100,000.

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Exhibit 2: Breakdown of SAYD’s Marketing budget for Year 1

15 - Business Operations and Floor Plan15.1 - Business Operations15.1 - Business OperationsOur daily operation schedule is catered around our target demographic. One of which is the busy professional. As the busy professionals spend most of their day at work, we are scheduling delivery in the evenings. Rather than making multiple deliveries a day, we will schedule our deliveries around that time even for our other demographics, those that are older than 65 years old.

Our business hours will be from 8am to 7pm from Monday to Saturday, and the following is a breakdown of our daily activities for the 3 packing staff employed:

8am – 12pm: receiving daily inventory

12:30 – 3:00 pm: packing orders

3pm-3:30pm: load the orders onto the trucks

3:30pm – 4:30pm: cleaning the warehouse

We will employ 4 part-time truck drivers/deliverers, and they will start at 4pm and deliver the orders until 7pm. Management including a VP of Operations, VP of Marketing and IT, VP of Finance, and VP of purchasing will in the office from 730am to 3pm.

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15.2 - Floor Plan15.2 - Floor Plan

Exhibit 3: Proposed floor plan for Store @ Your Door Sorting Facility

With grocery sorting and food preparation, cleanliness is of utmost importance. Vegetables and meats are separated on either side of the building in its individual refrigerators. In the centre of the room is a storage area for the dry goods and other packing materials. Appropriate items must be kept in coolers to be preserved. The coolers will be kept at a constant 4oC.

The floor plan for SAYD maximizes functionality with the available 10,000 sq ft in the warehouse.

Loading docks are wide enough to accommodate both the suppliers’ trucks and SAYD’s delivery trucks

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Work rollers/bench is situated around the room as a ‘U’ shaped to allow packers to move the packages from one station to another without having to life the box off the ground. This minimizes the strain on the packers should the packages be heavy.

Storage area in the middle allows dry products and packing materials to be stored in an easily accessible area within the middle of the ‘U’ work benches.

Refrigeration systems on either side of the room keep products that require cool temperatures to be refrigerated

Office space allows VP and others to manage the operations of the corporation and complete day-to-day tasks

Server room is needed to maintain computers that will keep our website functional

15.3 - Regulations15.3 - Regulations Store @ Your Door plans to adopt ISO 22000, which is an international standard that unifies the existing national and industry standards. It is a framework for food safety management, communication along the food supply chain, and control of food safety hazards.

Included within ISO 22000 is HACCP (Hazard Analysis of Critical Control Points) which is a risk management system that identifies, evaluates, and controls hazards related to food safety throughout the supply chain. It is beneficial for SAYD to adopt HACCP as it is a widely recognized program that will assure our suppliers and buyers that we are taking every reasonable precaution to assure food safety. It will also assist in minimizing contamination-related food losses and improve the design of new food products and is a uniformly auditable standard.

A HACCP plan contains 7 Food Safety Management Systems (FSMS) principles:1. Identification of food hazards and the necessary risk control measures. 2. Identification of the food safety Critical Control Points.3. Determination of the critical limits for each CCP4. Establish monitoring procedures for CCPs 5. Plan and take corrective action when critical limits6. Establish verification procedures for the HACCP FSMS system7. Establish documentation and record keeping for the HACCP FSMS

Lastly, SAYD will also ensure that our organic line will receive Organic Certification from QMI Organic Inc. QMI is an accredited organic certifying body with trained inspectors and a certification committee of experts in the organic industry. They can certify that our produce and meats are guaranteed organic.

The above 3 systems will be adopted and the benefit to SAYD is that it will provide our customers an assurance of the quality of the produce they are purchasing and will help reduce the probability that a successful suit will be filed against us in the future as these standards will help ensure that we are following the proper food handling measures and these food regulation bodies will attest, through annual audits of our procedures to ensure we are following ISO 22000 such that we have not been in breach of any of the terms.

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15.4 - Capital Budget15.4 - Capital Budget The building we are operating out of is leased as operating lease, and our delivery vans are obtained through financing.

The following is our expected capital costs.

Capital costs

Freezer/Fridgerators - 61 cubic feet $ 20,000$4,000/fridge * 5 required

Pallet Jacks $ 300$150/jack * 2 required

Adjustable Roller Tables $ 2,000$400/table * 5 required

Other Warehousing Equipment $ 5,000

Office Equipment - Hardware & Software $ 10,000

Office - Furniture $ 5,000

Sum of capital costs $ 42,300

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15.5 - Facility location15.5 - Facility location

Exhibit 4: Aerial view of proposed location in Vancouver

Located on the corner on East Kent Ave S and Fraser Street, in the heart of South Vancouver’s industrial area, the building will allow us to receive supplies from our different suppliers within the lower mainland, package/brand them as our own products, and send the final packages to our end users within the targeted Vancouver and West Vancouver areas. This area, although more costly to operate as compared to locations outside the Vancouver region, will provide a benefit of proximity to our target market in order to maintain freshness of the product and decrease our delivery costs.

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Store @ YourDoor

15.6 - Information Technology15.6 - Information TechnologyStore @ Your Door is committed to making the online experience as seamless as possible for the end user as well as packing staff. Our main operations will rely heavily on our information technology to manage our sales, customer relations, inventory management, financials and payroll. We have chosen an established package offered by OpenERP.com.

The OpenERP software package was selected to minimize the likelihood of potential problem areas. The flexible and modular nature of the system allows for the ability to scale our business during initial years of public adoption and growth. An open sourced software package was chosen as it is user focused. The developer creates a base program and upgrades its product based on feedback regarding the feature set and code of the software package.

This software package is offered as an online service, so it may be accessed anywhere there is an internet connection. We have decided to not use the free version of OpenERP as that offering does not include any backup or maintenance mode.

Data security and integrity will be the key to the ERP system’s success. While the software package is updated externally, update packages will need to go through an internal review to determine whether it will compromise our data’s integrity or security before it is rolled out throughout our facility. With open sourced software, the code driving the software package can be easily obtained and reviewed. Other measure to ensure data security and integrity will be to only issue authorized computers and other mobile devices to certain individuals. A virtual private network will be in place to provide additional security when data is communicated via the internet. Individuals will only have access to the data they need to conduct their day-to-day activities (e.g. drivers will have access to customer address and sales information but will have no access to accounting, purchasing or inventory data).

The following lists the different modules provided by the ERP system:

1. Customer Relations ManagementThe CRM module allows us to track leads and opportunities with regard to sales orders. This will give us accurate forecast sales targets to properly direct our marketing campaigns through paper mail and/or email.

2. AccountingAllows us to properly generate financial information for management to review on a daily, weekly, monthly and annual period and operates on a real-time basis. It will also manage our accounts payable and receivables to ensure that suppliers are paid on time.

3. Point of saleOur point of sales services will be integrated with our online system. It will allow us to manage our prices based on what suppliers can provide us. The easy access to this

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system will allow SAYD to easily respond to abrupt difference in market demand and/or competition.

4. Warehouse managementAllows SAYD to track our inventory and manage the amount of stock we need from our suppliers for our customers. This perpetual system allows for full traceability and integration with our accounting and finances. Reports generated from this module will aid receivers to determine what they will be expecting from which department. Packers/receivers personnel will have full access to this system.

5. Human resourcesAllows SAYD to track timesheets, expenses and allows for projected costs. It allows management to track each employee’s performance evaluations and records to determine the amount of raise they will get on an annual basis.

6. PurchasingTrack suppliers, Manage AP, track costs, back orders, and stock levels.

15.7 - Website interface15.7 - Website interface

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Exhibit 5: Print screen of SAYD’s website interface. This is the appearance of the website that consumers will see when placing their orders.

15.8 - Order flow diagram15.8 - Order flow diagram

Exhibit 6: Work flow diagram, depicting the flow of information and demand determined by the customer until the final delivery of the product to the end user

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15.9 - Start Up Equipment15.9 - Start Up EquipmentBased on the proposed floor plans, the following start-up materials have been sourced. http://www.qmi.com/information_center/literature/FoodSafetyBrochure.pdf

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Five 61 cubic feet industrial grade refrigerators will line the walls. Two will hold produce only and another 2 will hold meat products. This will prevent any cross contamination from the meat to the produce. The final refrigerator will be used to store orders that have been packed for the day and awaiting delivery later in the day.Source: www.nextag.com

Five adjustable roller conveyors were purchased and will be placed in the center of the warehouse for ease of access. Their heights and lengths are both adjustable. The height ranges from 24” to 39 ¾” and the length stretches from 24” to 58”. Source: amazon.ca

One pallet jack is purchased for receiving the stock in the morning and transferring them to the appropriate fridges for storage. Source: ABC Docks, LLP

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Four of these heavy duty shelves will be purchased to store dry goods including canned goods and other dried goods. They will be placed in the center of the roller conveyor. Source: ecplaza.net

Four office desks will be purchased – one for each of the VP’s. These will be placed in the office. Source: Ikea

Four office chairs will be purchased for the above office desks. Source: Ikea

Each VP will have their own computers to conduct daily operational duties as well as to track orders. An additional one will be placed on the work bench in the warehouse. Therefore 5 laptops will be purchased Source: Best Buy

15.10 - Inventory Supplies15.10 - Inventory SuppliesAs our inventory consists of perishable goods (meat and produce), initially we will depend on our market research to determine the level of inventory we have on hand. Also, because our brand will not be well known in the beginning, sales will be slow in the onset. Therefore, for the first month of operations until business has steadied, we will only have enough perishable goods for one day’s worth of orders. Hence, we will use a Just-in-Time system as inventory will arrive in the morning, packaged and then delivered to the customers in the evening. This will ensure that the groceries received by the customers will be fresh.

As business steadies, we intend on purchasing enough inventory to last 2-3 days. This will allow SAYD to take advantage of economies of scale while still guaranteeing freshness.

Canned and dried goods will be stocked at high enough levels to last for one month. Again, this is to achieve economies of scale. As well, these goods are not perishable; therefore, a larger quantity can be purchased without the fear of expiry.

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A printer/scanner/fax machine will be leased from Canon and will serve the entire office’s document needs. Source: Canon

A work bench will be placed at the loading dock with a computer, and stock received will be updated into the inventory system as soon as they are received. Source: Ikea

Two cafeteria tables will be placed in the lunch room. Each table has 4 seats, and we have 7 staff that works full time in warehouse; therefore 2 will be required. Source: www.integrityfurniture.com

15.11 - Suppliers15.11 - Suppliers A variety of suppliers will be used to ensure the prices we are being quoted are the most competitive.

SAYD has sourced the following suppliers for our organic line of produce, meats and non-perishables:

Horizon Distributors specialize in the distribution of organic foods Local BC produce farms such as the Snow Farm in Surrey, BC and Origin Organic in

Langley, BC Local BC organic meat farms – Vale Farms and Sumas Mountain Farms

For our non-organic division, we will order from the following distributors: Produce: Van-Whole Produce and Associated Grocers Meats: Trimpac Distributors and MacDonald’s Poultry and Meats Supplies

15.12 - Quality Control15.12 - Quality ControlIn support of our vision to guarantee freshness to our customers, our VP of Purchasing will selectively sample each shipment to ensure that goods received each day is of an acceptable quality. We will return any products that do not meet our standards of freshness. Possessing a degree in agricultural sciences, our VP of Purchasing will have the expertise the assess the quality of the foods received.

We will also ensure that all of our employees follow the strict guidelines set out by ISO 22000 and HACCP. This will be accomplished by providing training courses for all new employees on what these standards entail and ensuring that they pass a test to ascertain knowledge on the principles of these standards.

We also ask that each employee sign off on the packages they prepared, and the VP of Purchasing will selectively sample the prepared food packages to ensure that they have all been prepared correctly (i.e. no items are missing or added unintentionally). The VP of Purchasing will also do weekly rounds to observe the packers are following the food handling guidelines set out by ISO 22000 and HACCP.

Any employees in breach of these guidelines will be issued a warning, and after 3 violations, SAYD hold the right to terminate their employment as food safety is a primary concern to us.

15.13 - Customer Satisfaction15.13 - Customer SatisfactionAs we are a start-up company, customer satisfaction is of utmost importance to us as we will cater the evolution of our company according to our customers’ needs and wants. To achieve this goal, we will include an URL address on each of our customers’ receipts inviting them to complete an online survey. We are also including a link on the web page where orders are placed to the surveys page to remind our customers to provide feedback when they are ordering. As a significant portion of our target market is busy professionals, we felt this was the

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best alternative to get feedback rather than interrupting our clients’ schedules with a phone interview.

The result of the surveys will enable us to determine what additional products they would like SAYD to carry as well as any other areas they feel we can improve with our services.

15.14 - Performance Review15.14 - Performance ReviewIn order to assess our performance, SAYD will perform monthly evaluations in each of the following areas:

Financial: An ongoing budget will be maintained by the VP of operations, and financial statements will be prepared at each month end. The 4 VPs will have monthly meetings to determine whether the sales goals have been met and whether any adjustments to the expenses are required to be made to ensure profitability.

Competitors: VP of Operations will monitor the products and prices that our competitors’ are offering to ensure that we remain our customers’ number one choice.

Goals and Objectives: The VPs of SAYD will meet every quarter to discuss whether it is meeting its short- and long-term goals. If we are not, remedial actions must be taken immediately to ensure that our goals will be met. Alternatively, SAYD may need to assess whether our goals will have to be altered as our company changes.

15.15 - Potential Future Changes15.15 - Potential Future ChangesIncrease in Product Lines: SAYD may increase its products selection to cater to our customers’ needs depending on the results of the survey. Increase in Staff: As SAYD’s business grows, we will have to hire more staff to meet the growing demand in orders. Additionally, we will have to purchase more fixed assets such as delivery vans and refrigeration units to meet the growing need.

16 - Human Resources16.1 - Job Descriptions - Shareholders16.1 - Job Descriptions - ShareholdersChris Kwan, Janelle Ng, Karmen Ko, and Saba Malik will be the owners of the operation. Each individual will initially invest $25,000 within the operation which will result in an equal stake of the company. Below are the break-down of each individual’s responsibilities within the company:

Common dutieso Hold weekly open forum style staff meetings to allow all levels of staff to voice

their suggestions/concerns about SAYD or related topicso Ensure business targets are met

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o Manage customer issueso Be the main contact for customer whom call our facilities

VP Buyer and Quality Controlso Will oversee inventory and supplieso Ensures staff delivers quality product through continual training and monitoringo Manages cost and quantity of supplies purchased

VP Financeo Ensures financial results are up-to-dateo Draft financial statements for creditors and other stakeholderso Review bank reconciliationso Ensure AP and AR are managedo Bookkeeping duties

VP Marketing and Public Relationso Manages public perception through traditional and internet based marketing

planso Expand clientele through targeted marketing initiativeso Maintain ERP and website systemso Promote SAYD brand through social media by engaging members of the Twitter

and Facebook communityo Work with VP finance to determine contests to drive word-of-mouth

advertisement. VP Operations

o Ensure proper scheduling of staff memberso Oversee employee hiring, discipline and dismissalo Work with VP finance to ensure proper budgeting of business financeso Work with VP buyer to ensure proper suppliers are choseno Oversee payroll and other employment benefits provided by SAYDo Ensure proper licenses are maintained (e.g. class 5 driving, health inspection,

insurance, etc)o Determine human resource needs

16.2 – Job Descriptions - Operational staff16.2 – Job Descriptions - Operational staffSAYD will employ 4 part time drivers and 3 full-time packers/receivers. In the fourth year, our growth will likely increase the work load to the point that we will require an additional packer/receiver. No permanent sales staff is needed unlike a traditional retail operation as our clients will directly interact with our online systems to fulfill their shopping needs. Customer service will be provided by our VP’s (depending on who is on duty). Should the load of customer visits and calls exceed VP’s capacity, we will consider hiring a full time office staff member at that time. All operational staff members will report directly to the VP’s. Individual duties are as follows.

Drivero Deliver products to end user within the guaranteed time-frame

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o Promote SAYD awareness by cross selling products and services to end users (e.g. Will say “For your next order, you may consider our fresh selection of _____ to be included in your grocery list.”)

Packer/Receivero Maintain quality control of products leaving our facilitieso Packs and sorts products from suppliers into our branded boxeso Daily sanitary and maintenance of facilityo Confirm supplies have been received based on agreed upon quality and quantity

16.3 - Recruitment Process16.3 - Recruitment ProcessSAYD will advertise available positions. We will target individuals with previous truck driving experience to minimize the learning curve and chance for accidents when driving a larger vehicle. For packers/receivers, we will target those that are physically fit to minimize work related accidents. All new hires will be required to have training in operating pallet jacks and other equipment within the facility. Food safe certification will be required for both drivers and packers/receivers to ensure that the chance for food cross-contamination will be minimized.

16.4 - Compensation16.4 - CompensationFor each of the shareholders/VP, a compensation consisting of $60,000 per year will be provided. Excess profits will be distributed by the means of dividends. Packers/receivers and drivers are budgeted to for $10/hour. However, based on annual review for performance, we have included a budget of $1/hour wage increase in each of the subsequent years.

16.5 - Performance management16.5 - Performance managementEach of the operation staff will be reviewed on a monthly basis to ensure that they are operating in a safe, efficient and clean manner. Feedback will be given on an ongoing basis to ensure quality and speed of delivery. Completed performance reviews will be filed and will become the basis of an annual raise review.

Categories for each review will be as follows: Productivity: Completes all work assignments thoroughly and accurately. Accomplishes

all work assignments in an efficient and timely manner. Works well independently and finds work when not busy. Achieves expected level of productivity and contributes to department objectives.

Job Knowledge: Understands and is able to effectively perform all job responsibilities. Has completed all required training programs and applies learned skills. Demonstrates basic knowledge of policies and procedures.

Interaction with Others: Treats co-workers and treats others with respect. Communicates effectively with others. Willing accepts work direction and constructive feedback. Works effectively in a team environment. Regularly updates management on appropriate issues.

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Work Habits: Reports to work and "clocks in" on time, contacts management if delayed, and returns promptly from breaks. Wears proper work outfit. Practices proper safety habits and takes appropriate action to remedy unsafe conditions. Promptly notifies management of serious issues. Respects company assets and property. Demonstrates flexibility in scheduling and work assignments.

Problem Solving & Initiative: Identifies problems/issues and resolves them efficiently and appropriately. Exercises sound judgment when making decisions and solving problems. Voluntarily seeks methods to innovate and improve processes and procedures.

Performance levels will be as follows:Outstanding Consistently exceeded expectations in all areas of performance

category/position. An exceptionally well rounded and world class performance. Multiple examples must be given to support rating.

Above expectations Frequently exceeded expectations in many areas of performance category/position. An excellent performance that clearly stands out. Multiple examples must be given to support rating.

Meets expectations Met all the expectations in most areas of the performance category/ position. A solid performance. Examples must be given to support rating.

Below expectations Met some, but not all of the expectations in the performance category/position. Improvement is needed within a prescribed period of time in order to meet all expectations of the position.

Unacceptable Unacceptable for the position and requires substantial improvement. Immediate corrective action is required within prescribed time frame.

17 - Financial Plan17.1 - Contribution Margin17.1 - Contribution Margin17.2 - Revenues17.2 - RevenuesOur target market consists of working professionals and persons with limited mobility, as described above. We are expecting our customers to purchase $55/week/person. This translates to revenues as shown below. Refer to Appendix 1 for additional assumptions regarding revenues and cost of sales.

2012 2013 2014 2015 2016Estimated Revenues ($) 8,551 10,689 12,827 14,965 17,103

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Estimated Cost of Sales ($) 7,696 9,620 11,544 13,468 15,393Contribution Margin ($) 855 1,069 1,283 1,496 1,710

Exhibit 8: Five Year Forecasted Contribution Margins (000’s)

Cost of Sales and Contribution Margins

SAYD is expected to have an average contribution margin of 10%, and our cost of sales has been computed to give us this desired contribution margin.

The following is detailed breakdown of the expected contribution margin for each of our product lines:

Product Category Contribution MarginOrganic Produce 12%Organic Meat 12%Organic non-perishable 11%Non-organic Produce 9%Non-organic Meat 9%Non-organic non-perishable 8%

Exhibit 9: Detailed Contribution Margins per Product Line

The contribution margins for organic products are expected to be higher as consumers are willing to pay a premium for organic products. Non-perishable goods have the lowest contribution margins as customers will not be willing to pay more for these products. For simplicity purposes, our projected financial statements are created using an average 10% contribution margin.

17.3 - Operating Expenses17.3 - Operating Expenses A breakdown of our most significant operating expenses for the five years forecasted is shown

below. Refer to appendices for additional operating expenditures, and assumptions underlying

our forecasted expenses.

2012 2013 2014 2015 2016Rent 498 498 498 498 498Delivery Vans - Operating Costs 48 53 58 624 67Depreciation 37 37 37 37 37Interest 31 28 24 20 16ERP System Costs 6 7 7 8 8Management Salaries 240 240 240 240 240

Wages and Benefits 15

6 169 182 230 246

Administration and Marketing 50 36 38 40 42

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Insurance and Utilities 36 37 375 38 39Professional Fees 23 19 20 21 22Share Repurchase 50 50 50 50 50Operating Expenditures 1,175 676 1,031 1,308 767

Exhibit 10: Detailed Breakdown of Operating Expenses (000’s)

17.4 - Financing of our Operations17.4 - Financing of our OperationsTo finance our operations, we will need a term loan of $250,000 from the bank (assumed to be a 10 year term loan, at an interest rate of prime + 5%, to reflect the riskiness of our venture). In addition, at inception, all four shareholders make an equity investment of $25,000 each, and angel investors make an equity investment of $50,000.

The term loan is accounted for in our financial statements using the effective interest rate method. Please refer to Schedule 6.

Our angel equity investors will receive a $300,000 payout in year 5, as a return for the $50,000 initial investment in year 1. We will be issuing Class A common shares worth $100,000 to our four owner-managers. Class A shares will be voting. We will be issuing Class B common shares worth $50,000 to our angel investors; these shares will be non-voting in nature.

The initial shareholders – the four owner managers – will receive a salary, and dividends which will be declared based on the company’s profitability. We have not shown any dividend payments to shareholders in our Statement of Retained Earnings, attached in our appendix.

17.5 - Financial Ratios and Decision Making17.5 - Financial Ratios and Decision MakingKey financial information for our company includes the ratios described in our appendices:

- Current ratio as a proxy for monitoring liquidity- Total asset turnover as a proxy for monitoring investment utilization- Debt to equity ratio as a proxy for measuring solvency- Return on equity as a proxy for measuring profitability.

2012 2013 2014 2015 2016Current Ratio 1.42 0.33 1.98 5.14 12.56Total Asset Turnover 31.56 73.45 61.85 39.57 45.00Debt to Equity Ratio -2.59 -1.53 -1.99 -12.14 0.67Return on Equity Ratio 1.88 0.38 -0.30 -5.20 1.37

Exhibit 11: Forecasted Key Financial Ratios

Our financial ratios for all four metrics described above are positive in year 5, and had our statements been projected past 5 years, our ratios would continue to increase; up until another capital investment would need to be made (we estimate this to be in year 7).

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As we are showing net losses up until year 2, and retained deficits up until year 4, our debt to equity and return on equity ratios are negative for the certain years. However, at the end of year 5, after three years of reporting net incomes, we have forecasted for retained earnings instead of a deficit. This has resulted in positive debt to equity and return on equity ratios in year 5. Schedule 8 shows detailed explanations of our ratios.

Our management will be provided with financial statements and ratio analyses, similar to those presented in our appendices, on a quarterly basis in order to facilitate relevant and timely decision making.

17.6 - Project Feasibility17.6 - Project FeasibilityThe feasibility of our project is described in two ways: from the shareholders’ perspective (this refers to the 4 owner managers who have each put in $25,000 at inception), and from the equity investors’ perspective (this refers to the angel investors, who have contributed $50,000 at inception, to get a return of $300,000 in year 5).

2012 2013 2014 2015 2016Shareholders' Perspective

Cash Flows Incl Terminal Value $(232,660) $(16,727) $125,009 $237,775 $1,304,794

Initial Investment $(100,000)

Net Present Value: $53,813Internal Rate of Return: 49.01%

Venture Capitalists’ Perspective

Cash Outflow in Year 5 $300,000 Initial Investment in Yr 1 ($50,000)

Net Present Value: $20,066Internal Rate of Return: 56.50%

Exhibit 12: Project Feasibility

The return on equity used in computing the Net Present Value for the shareholders is 40%. The high return on equity reflects the riskiness of our business (first time venture, riskier due to the nature of operations – internet sales, etc). Refer to Schedule 9 for a more detailed analysis of shareholder returns.

Based on the rate of returns described, we believe we will be able to obtain financing from both the bank at a rate of prime + 5%, and angel investors, who will be earning a rate of return of 56.5% on their investment. Additionally, as shown above and in schedule 9 and 10, the calculated Net Present Values are positive for the shareholders (using a required return on

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equity of 40%) and for the equity investors (using a range of returns from 20 to 40%). Our project is therefore assessed as being feasible.

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17.7 - Risk Analysis17.7 - Risk AnalysisOur critical risk variables include:

- Revenues – if our increase in market share is not what we expect (i.e.- we are forecasting a 0.25% increase every year), our revenues, and therefore our overall earnings will suffer. Alternatively, if we capture the % of the market that we want, but our target market does not order the level that we have predicted ($55/person/week), our revenues will also suffer. Refer to the Exhibit 13 below for our analysis. More detailed sensitivity and break even analyses can be found in Schedule 11 and 12 in the appendices.

- Bank debt – currently, we are expecting to receive a bank loan at a rate of prime plus 3% (assumed to be 8%). If the interest rate charged by the bank is higher (as we are a startup company), this will greatly affect our earnings.

- Salaries and wages – if the wages demanded by our employees are higher than what we have predicted, or if additional employees are required to keep up with increasing business, our overall expenses will increase and our earnings will suffer.

We have assessed revenues to be our most critical risk variable. The following, and a more detailed analysis in the appendix, shows a break even analysis of the market share percentage and the weekly groceries our customers will have to purchase in order for us to break even in each of the five forecasted years.

Yearly Increase in Revenues Scenario NPV

0.25% Base $53,8130.50% Best $4,416,984

0.125% Worst $(1,913,486)0.23% Break Even $0

$ Purchases/Week Scenario NPV$55 Base $53,813$75 Best $ 6,251,720$25 Worst $ (8,885,904)$54 Break Even $0

Exhibit 13: Sensitivity and Break Even Analysis

17.8 - Risk Management17.8 - Risk ManagementRevenuesAs we are a start-up company, establishing a brand name and presence is vital for us to capture the % of the market we are after. Our biggest risk management strategy regarding revenues is risk avoidance, and as such, we are planning on investing $30,000 in our marketing campaign in

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the first year of operations. In subsequent years, marketing expense will be maintained at $15,000. We are estimating that our target market will spend $55/person/week on purchasing groceries from us. We do not believe this estimate is aggressive.

Bank DebtIf the interest rate on the $250,000 we require from the bank increases beyond the 8% we have estimated, our interest expense will increase and therefore our earnings will suffer. However, due to the increase in revenues we have projected, an interest rate higher than the 8% may result in us generating net incomes in year 4 or 5 rather than the year 3 we have projected. Our profitability may be delayed, but we will still expect to be profitable and generate returns on shareholders’ investments.

Additionally, we have added a 3% premium to the expected prime rate of 5%, to account for the fact that we are a start-up company. In addition, we fully expect to be able to pay the loan back within 10 years. We therefore do not believe that obtaining a bank loan at 8% will be overly difficult.

Salaries and WagesOur salaries and wages are our largest expense. If we need additional employees beyond the numbers estimated in our income statement, or if our employees want higher wages, our net income will be affected. However, as was the case with bank debt, although this may delay our profitability, we will still be able to generate high return on investments.

We have accounted for another packer being added in year 4, in answer to the increased revenues we are forecasting over the five years. We believe the addition of one full time employee will be sufficient.

17.9 - Contingency Plans17.9 - Contingency PlansAs revenues are our most critical risk factor, if our revenues are not above the break-even point calculated in the appendices, we will be in financial trouble. This is shown in the “worst case” scenarios for calculations of NPV in the appendix.

If we are not able to generate the revenues we are forecasting, we will immediately downsize operations in order to reduce costs. This will be done by moving to a smaller warehouse and through potential layoffs of staff. In future years, we may return to a larger facility and increase the scope of our operations if demand for our products increases.

Our ‘stopping point’ – the point at which we cease operations, will depend on what covenants the bank has imposed on us regarding the $250,000 we will borrow. Barring covenants, if we are not able to generate a return on our angel investors’ initial investment by year 5, we may be in financial trouble. Consistent net losses up to year 5 will therefore be our stopping point.

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20 - ConclusionSAYD is depending on two primary success factors namely:

Ability to provide fresh produce, meats and canned goods Through the offering of a convenient shopping experience that will allow their groceries

to be delivered to their doors

SAYD is also capitalizing on a market that has to date been untouched by other competitors. We therefore hope our blue ocean strategy will bring in innumerable profits. The operational and financial goals of the company have been carefully designed to monitor performance on these key success factors.

According to the financial projections, it appears that the key financial goals will be achieved even under the base case scenario, and the achievement will be made under reasonable conditions and a return on investment of approximately 50% for the shareholders and 57% for the venture capitalists will be realized which exceeds the required rates of return.

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Appendix 1: Forecasted Financial Statement AssumptionsIncome Statement AssumptionsIncome Statement AssumptionsRevenues:Revenues:

- Per the 2006 census conducted, Vancouver’s population is 650,000. Of this total, we are targeting the busy young professionals (the 25-44 age category), and the elderly (65+ age category in the latest census). Collectively, these two categories make up 46% of Vancouver’s population.

o We have estimated the weekly grocery budget to be $55 per person. o As food is a necessity, we believe that our target market will order from us year

round; therefore, we are using 52 weeks to calculate our revenue projections. o We believe that we can tap 1% of our target market as described above in our

first year of operations. With increased marketing expenditures, brand recognition, and building up a customer base, we expect the % to increase to 1.25% in year 2, 1.5% in year 3, 1.75% in year 4, and 2% in year 5.

Expenses:Expenses: - Cost of sales

o To calculate cost of sales, we looked at the largest fruits and vegetables supplier’s (Dole Food Company) financial statements for the past three years (2008 to 2010). Dole’s reported gross margins for the three years were 11.81%, 13.25% and 11.84% for the years 2008 to 2010. Dole has economies of scale and brand recognition that our company does not yet have, therefore we have estimated our gross margin for each of the first 5 years of operations to be 10%. Our cost of sales figure has been calculated accordingly.

- Delivery truckso We have financed four Ford delivery vans with built in refrigerated storage space

with a retail cost of $40,000. Assuming a 6.75% interest rate (rate based on similar vehicles, obtained from the Ford website) and a lease term of 5 years, we estimate our financing costs to be $9,690 per delivery van, per year. We have used the effective interest rate method to calculate interest expense and included it in our projected income statement. Refer to Schedule 7 for delivery van effective interest schedule.

o Gas usage for delivery trucks is estimated to be $1,000 per month per truck, and is expected to increase by $100 per truck per month in each subsequent year

o Our depreciation expense for vans is expected to be 5 years, straight line

- Other Depreciation Expenses

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o Depreciation for pallet jacks and roller tables, from Schedule 4 – Capital Cost, is expected to be 5 years, straight line

o Depreciation for Fridges/Freezers and Other Warehouse Equipment, from Schedule 4 – Capital Cost, is expected to be 10 years, straight line

o Depreciation for Computers- Hardware and Software (includes laptops, scanners, printers, etc) from Schedule 4 – Capital Cost, is expected to be 5 years, straight line

o Depreciation for Office Equipment from Schedule 4 – Capital Cost, is expected to be 5 years, straight line

- Enterprise Resource Planning Expenseo We are expecting to license an Enterprise Resource Planning system, to take care

of our invoicing and billing, payroll, and customer and supplier resource management functions at a cost of $6,000 in the first year. This cost is expected to increase by $500 in each subsequent year.

- Payroll Expenseo We are expecting management salaries for the four key managers to be $60,000

a year. All other compensation will be in the form of dividends, which will be paid out based on the company’s profitability.

o We have hired four drivers at $10/hour, and expect them to work 4 hours a day (based on our business model) and 6 days a week for 50 weeks in a year. The wages are expected to increase at $1/hr each subsequent year.

o We have hired 3 employees to act as packers/loaders at $10/hour, and expect them to work 8 hours a day and 6 days a week for 50 weeks in a year. Wages are expected to increase at $1/hr each subsequent year. We have budgeted for hiring an additional packer in year 4, at year 4’s wages, to deal with our increased demand.

o We have estimated our benefits expense (including employer CPP and EI payments, overtime for the weekend day worked, sick and vacation pay), to be 10% of total salaries and wages expense

- Administration Expenseo We have budgeted our administration expense (includes website maintenance

costs, security system fees, cleaning fees, general office expenditures, etc) to be $20,000 in year 1, with an increase of 5% for each subsequent year.

- Marketing Expenseo We have budgeted our marketing expense to be $30,000 in year 1 (higher

expense incurred to establish a customer base), $15,000 in year 2, with a 5% increase year 3 onwards. Please refer to our marketing plan for further detail.

- Rent and Insurance Expenses

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o We have chosen to lease a 10,000 square foot warehouse, as we believe this will meet our needs as described in our business model. For the area we have chosen, our rent is estimated to be $4.15/square foot.

o Our insurance costs are estimated to be $500/month, expected to increase at 2% per year.

- Utilities and Other Expenseso Our electricity bill is estimated to be $2,000 per month, with a 2% increase every

year. o Our heating bill is estimated to be $500 per month, with a 2% increase ever year.

- Professional Feeso Our fees for lawyers and other professionals are estimated at $1,500 per montho Additional fees pertaining to incorporation, etc are estimated at $5,000 in the

first year

- Interest Expense on Bank Loano Our interest expense on bank loan comes from our loan amortization schedule

(Schedule 6), in which the $250,000 loan we have obtained from the bank at prime + 5% is amortized using the effective interest rate method.

- Share Repurchase Expenseo To fund our operations, we will need an initial investment of $50,000 from

venture capitalists. In return, we will provide them a return of 6 times their initial investment (therefore, $300,000) at the end of our fifth year of operations.

o We will issue common shares of $50,000 to investors in year 1, and buy back shares in year 5 at $300,000. The $250,000 excess will be a share repurchase expense, that we are recognizing in our income statement at $50,000 for each of the five forecasted years.

Balance Sheet AssumptionsBalance Sheet Assumptions- We are assuming that our prepaid balance at the end of every year is $nil, as our

prepaid rent and insurance expenses will get used up by the end of the year. - We are not expecting any accounts receivable balance at any year end, as our customers

purchase their groceries online before we make our deliveries. - We hold a minimal amount of inventory (non-perishables, and a small quantity of

perishables that are most frequently purchased by customers). This is in line with our business model, as we are practicing a Just in Time Inventory Management System. We have added a nominal inventory amount of $1,000 in our balance sheet to represent the inventory held.

- The accounts payable figure is calculated assuming that we are not able to make a down payment on our capital costs of $42,300, per Schedule 4 – Capital Cost Schedule. Therefore, the entire amount of $42,300 will be financed at an estimated rate of prime

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plus 3%. The accounts payable is calculated accordingly. I have also assumed that one month’s worth of heat and electricity expense are in the accounts payable and accrued liabilities account at the end of every year, to represent December’s expenses not yet paid.

- The balance sheet amounts for our financing of delivery vans, and the bank loan payable come directly from our loan tables (refer to appendices).

- Our share repurchase obligation is increased by $50,000 every year to correspond with the share repurchase expense, and is paid out during year 5. Our venture capitalists therefore get a return of $300,000 on their initial $50,000 investment.

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Appendix 2: Five Year Projected Income Statement2012 2013 2014 2015 2016

Revenues 8,551,400 10,689,250 12,827,100 14,964,950 17,102,800

Expenses

Cost of Sales 7,696,260 9,620,325 11,544,390 13,468,455 15,392,520

Gross Margins 855,140 1,068,925 1,282,710 1,496,495 1,710,280

Operating Expenditures

Delivery Vans - Gas Usage 48,000 52,800 57,600 62,400 67,200Interest expense on Delivery vans - from Eff Int Schedule 10,800 8,913 6,898 4,747 2,451Van Depreciation - 5 years, SL 32,000 32,000 32,000 32,000 32,000

Depreciation - Rollers and Jacks - 5 yrs, SL 460 460 460 460 460Depreciation - Other Warehouse Equip - 10 yrs, SL 2,500 2,500 2,500 2,500 2,500Depreciation - Computers - Hardware and Software - 5 yrs, SL 2,000 2,000 2,000 2,000 2,000Depreciation - Office Equipment- 10 years, SL 500 500 500 500 500

ERP system costs 6,000 6,500 7,000 7,500 8,000

Salaries expenseManagement Salaries 240,000 240,000 240,000 240,000 240,000Wages - Drivers 48,000 52,800 57,600 62,400 67,200Wages - Packers/Loaders 72,000 79,200 86,400 124,800 134,400

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Benefits Expense 36,000 37,200 38,400 42,720 44,160

Administration Expense 20,000 21,000 22,050 23,153 24,310

Marketing expense 30,000 15,000 15,750 16,538 17,364

Warehouse Rent 498,000 498,000 498,000 498,000 498,000Warehouse Insurance 6,000 6,120 6,242 6,367 6,495

BC Hydro (Electricity) 24,000 24,480 24,970 25,469 25,978Heat 6,000 6,120 6,242 6,367 6,495

Lawyers and Other Professional Fees 18,000 18,900 19,845 20,837 21,879Additional Costs (Incorporation, etc). 5,000

Interest Expense on Bank Loan 20,000 18,619 17,128 15,518 13,779

Share Repurchase Expense 50,000 50,000 50,000 50,000 50,000

Total Expenditures 1,175,260 1,173,112 1,191,586 1,244,276 1,265,171

Net Income - 320,120 - 104,187 91,124 252,219 445,109

Taxes Payable (assumed to be 30%) - 27,337 - 75,666 - 133,533

Net Income after Taxes - 320,120 - 104,187 63,787 176,553 311,576

Five Year Projected Statement of Retained Earnings

RE, bgn of year - - 320,120 - 424,307 - 360,520 - 183,966

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Net Income (Loss) - 320,120 - 104,187 63,787 176,553 311,576Dividends - - - -RE, end of yr - 320,120 - 424,307 - 360,520 - 183,966 127,610

Appendix 3: Five Year Projected Balance SheetAssets 2012 2013 2014 2015 2016

Cash 105,163 17,157 116,462 324,774 364,074Prepaids - - - - -Accounts receivable - - - - -Inventory 1,000 1,000 1,000 1,000 1,000

Vehicles 128,000 96,000 64,000 32,000 -Warehouse Equipment 24,340 21,380 18,420 15,460 12,500Office Equipment 4,500 4,000 3,500 3,000 2,500Office Hardware & Software 8,000 6,000 4,000 2,000 -

271,003 145,537 207,382 378,234 380,074

Liabilities & Equity

Accounts Payable & Accrued Liabiliites 26,342 3,550 3,601 3,653 3,706Loan Payable - Current 18,638 20,129 21,739 23,479 25,357Delivery Vans Financing - Current 29,849 31,864 34,015 36,311 -

Share Repurchase Obligation 50,000 100,000 150,000 200,000 -Loan Payable - Non Current 214,105 193,976 172,236 148,758 123,401Delivery Vans Financing - Non Current 102,189 70,325 36,311 - -

Common stock 150,000 150,000 150,000 150,000 100,000Retained earnings - 320,120 - 424,307 - 360,520 - 183,966 127,610

271,003 145,537 207,382 378,233 380,074

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Appendix 4: Five Year Projected Statement of Cash Flows

2012 2013 2014 2015 2016

Cash Flow from Operations

Net Income - 320,120 - 104,187 63,787 176,553 311,576

Add Back Non-Cash Items:Depreciation Expense - Delivery Vans 32,000 32,000 32,000 32,000 32,000Depreciation Expense - Roller Tables & Jacks 460 460 460 460 460Depreciation Expense - Other Warehouse Equipment 2,500 2,500 2,500 2,500 2,500Depreciation - Computers - Hardware and Software 2,000 2,000 2,000 2,000 2,000Depreciation - Office Equipment 500 500 500 500 500Share Repurchase Expense 50,000 50,000 50,000 50,000 50,000

Changes in working capitalAP 26,342 - 22,792 51 52 53Inventory - 1,000 - - - -Cash Flow from Operations - 207,318 - 39,519 151,298 264,065 399,089

Cash Flow from Investing

Purchase of PPE - from the Capital Cost Summary - 42,300 - - - -Cash Flow from Investing - 42,300 - - - -

Cash Flow from FinancingIssuance of common shares to owners 100,000 - - - -Issurance of common shares to VC's 50,000 - - - -Dividend payment to owners - - - -Repayment of shares to VC - - - - - 300,000Loan principal 250,000 - - - -

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Repayment of principal - 17,257 - 18,638 - 20,129 - 21,739 - 23,479Repayment of principal of trucks - 27,962 - 29,849 - 31,864 - 34,015 - 36,311Cash Flow from Financing 354,781 - 48,487 - 51,993 - 55,754 - 359,789

Cash, Bgn of Year - 105,163 17,157 116,462 324,774Change in Cash 105,163 - 88,006 99,305 208,311 39,300Cash, End of Year 105,163 17,157 116,462 324,774 364,074

Schedule 1: Projected Revenues 2012 2013 2014 2015 2016

Total population of Vancouver 650,000 650,000 650,000 650,000 650,000% of population that fits our target demographic 46% 46% 46% 46% 46%% market share 1.00% 1.25% 1.50% 1.75% 2.00%Amount ordered per person/week $ 55 $ 55 $ 55 $ 55 $ 55

Total Revenues $ 8,551,400 $ 10,689,250 $ 12,827,100 $ 14,964,950 $ 17,102,800

Schedule 2: Projected Cost of Sales 2012 2013 2014 2015 2016

Total Revenues, from above $ 8,551,400 $ 10,689,250 $ 12,827,100 $ 14,964,950 $ 17,102,800Average Expected Contribution Margin (%) 10% 10% 10% 10% 10%Average Expected Contribution Margin ($) $ 855,140 $ 1,068,925 $ 1,282,710 $ 1,496,495 $ 1,710,280

Estimated Cost of Sales ($) $ 7,696,260 $ 9,620,325 $ 11,544,390 $ 13,468,455 $ 15,392,520

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Schedule 3: Projected Operating Expenses 2012 2013 2014 2015 2016

Delivery Vans - Gas Usage $ 48,000 $ 52,800 $ 57,600 $ 62,400 $ 67,200# of Vans 4 4 4 4 4Estimated Monthly Gas Usage $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000Monthly Gas Usage Increase (compared to year 1) $ - $ 100 $ 200 $ 300 $ 400

ERP System Costs $ 6,000 $ 6,500 $ 7,000 $ 7,500 $ 8,000Yearly Estimated Increase (compared to year 1) $ - $ 500 $ 1,000 $ 1,500 $ 2,000

Management Salaries $ 240,000 $ 240,000 $ 240,000 $ 240,000 $ 240,000# of Owner/Managers 4 4 4 4 4Yearly Salary/Person $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000

Wages - Drivers $ 48,000 $ 52,800 $ 57,600 $ 62,400 $ 67,200# of Drivers 4 4 4 4 4# of Hours Worked Each Day 4 4 4 4 4# of Days Worked Per Week 6 6 6 6 6# of Weeks Worked Per Year 50 50 50 50 50Hourly Wage $ 10 $ 11 $ 12 $ 13 $ 14

Wages - Packers/Loaders $ 72,000 $ 79,200 $ 86,400 $ 124,800 $ 134,400# of Packers 3 3 3 4 4# of Hours Worked Each Day 8 8 8 8 8# of Days Worked Per Week 6 6 6 6 6# of Weeks Worked Per Year 50 50 50 50 50Hourly Wage $ 10 $ 11 $ 12 $ 13 $ 14

Benefits Expense $ 36,000 $ 37,200 $ 38,400 $ 42,720 $ 44,160Total Salaries and Wages $ 360,000 $ 372,000 $ 384,000 $ 427,200 $ 441,600Benefits Expense As An Estimated % of Total 10% 10% 10% 10% 10%

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Administration Expense $ 20,000 $ 21,000 $ 22,050 $ 23,153 $ 24,310Estimated Increase per Year 5% 5% 5% 5%

Marketing expense $ 30,000 $ 15,000 $ 15,750 $ 16,538 $ 17,364Estimated Increase per Year 5% 5% 5%

Warehouse Insurance $ 6,000 $ 6,120 $ 6,242 $ 6,367 $ 6,495Estimated Increase per Year 2% 2% 2% 2%

BC Hydro (Electricity) $ 24,000 $ 24,480 $ 24,970 $ 25,469 $ 25,978Estimated Increase per Year 2% 2% 2% 2%

Heat $ 6,000 $ 6,120 $ 6,242 $ 6,367 $ 6,495Estimated Increase per Year 2% 2% 2% 2%

Lawyers and Other Professional Fees $ 18,000 $ 18,900 $ 19,845 $ 20,837 $ 21,879Estimated Increase per Year 5% 5% 5% 5%

Schedule 4: Capital Cost Breakdown

Capital costs

Freezer/Fridgerators - 61 cubic feet $ 20,000$4,000/fridge * 5 required

Pallet Jacks $ 300$150/jack * 2 required

Adjustable Roller Tables $ 2,000$400/table * 5 required

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Other Warehousing Equipment $ 5,000

Office Equipment - Hardware & Software $ 10,000

Office - Furniture $ 5,000

Sum of capital costs $ 42,300

Schedule 5: Accounts Payable Breakdown2012 2013 2014 2015 2016

Assumption regarding capital costs:Total capital costs: $ 42,300Downpayment we can make upon purchase: $ -Remaining amount to be financed: $ 42,300Interest rate (prime of 3% + 5% premium) 8%Term of loan: 24 monthsTotal interest expense on amount financed $ 3,384Monthly payments (amount financed + interest) $ 1,904AP of capital costs at year end (12 mo outstanding) $ 22,842

Electricity & Heat - one month accrued $ 2,500 $ 2,550 $ 2,601 $ 2,653 $ 2,706Purchase of inventory in December, not paid for $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000

Total Accounts Payable $ 26,342 $ 3,550 $ 3,601 $ 3,653 $ 3,706

** Accounts payable at year end are calculated under the assumption that rent and insurance payments are made at the start of every month, therefore at December 31 20XX, there is no AP pertaining to rent or insurance

Schedule 6: Using the Effective Interest Rate Method to

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Value Bank Loan** The interest rates used in our analyses below are nominal, and therefore take inflation into account

Assumptions:Amount of loan:Interest rate (assuming prime + 5% for our company, and prime at 3%):Term of loan:Yearly cash payments (computed using online loan calculator):

Amount, bgn Cash Outlay Interest Principal

2012 $ 250,000 $ 37,257 $ 20,000.00 $ 17,2572013 $ 232,743 $ 37,257 $ 18,619.41 $ 18,6382014 $ 214,105 $ 37,257 $ 17,128.37 $ 20,1292015 $ 193,976 $ 37,257 $ 15,518.05 $ 21,7392016 $ 172,236 $ 37,257 $ 13,778.90 $ 23,4792017 $ 148,758 $ 37,257 $ 11,900.62 $ 25,3572018 $ 123,401 $ 37,257 $ 9,872.08 $ 27,3852019 $ 96,016 $ 37,257 $ 7,681.25 $ 29,5762020 $ 66,439 $ 37,257 $ 5,315.16 $ 31,9422021 $ 34,497 $ 37,257 $ 2,759.78 $ 34,498

Schedule 7: Using the Effective Interest Rate Method to Finance Delivery Vans

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Assumptions:

Retail cost of one van with a built-in refrigerator: $ 40,000

Interest rate we can obtain for financing: 6.75%Term of loan: 5 years

Yearly cash payments per truck (computed using online loan calculator): $ 9,690

Amount, bgn Cash Outlay Interest Principal Amount, end

2012 $ 160,000 $ 38,762 $ 10,800.00 $ 27,962 $ 132,038

2013 $ 132,038 $ 38,762 $ 8,912.59 $ 29,849 $ 102,189

2014 $ 102,189 $ 38,762 $ 6,897.78 $ 31,864 $ 70,325

2015 $ 70,325 $ 38,762 $ 4,746.97 $ 34,015 $ 36,311

2016 $ 36,311 $ 38,762 $ 2,450.98 $ 36,311 $ -

Schedule 8: Ratio Analysis

Based on our operations, key ratios used by our management in decision making, for each of the five years, are:

2012 2013 2014 2015 2016

1) Liquidity Ratio - allows us to determine whether we have a sufficent level of current assets to pay off our current liabilities

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Current Ratio (current assets/current liabilities) 1.42 0.33 1.98 5.13 12.56

** decrease in current ratio from 2012 to 2013 is a result of the change in cash being negative for 2013, as per the Cash Flow Statement** increase in current ratio from 2014 onwards is due to the change in cash increasing every subsequent year, as a result of positive cash flows from operations

2) Investment Utilization Ratio - allows us to determine how effectively we are using our assets

Total Asset Turnover (sales/total assets) 31.55 73.45 61.85 39.57 45.00

** increase from 2012 to 2013 is due to increased sales, and decreased total assets as a result of the decreased cash balance described above** decrease 2014 onwards is due to increased cash balances as described above

3) Solvency Ratio - allows us to determine what mix of debt and equity we are using to fund our operations

Debt to Equity ratio (total liabilities/total equity) -2.59 -1.53 -1.99 -12.14 0.67

** our debt to equity ratios are negative for the first four years, due to the retained deficit in our financial statements. In the fifth year, our retained defict becomesa retained earnings figure, and our debt to equity figure becomes positive

4) Profitability Ratio - allows us to measure the financial performance of our company

Return on Equity ratio (net profit/total equity) 1.88 0.38 -0.30 -5.20 1.37

** our return on equity ratios are positive in the first two years, as we have both a net loss and a negative equity due to a retained deficit. In years 3 and 4, we are producing net incomes,but due to retained deficits, have negative return on equity ratios. In year 5, we have both a net income and a retained earnings balance, leading to a positive debt to equity ratio

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Schedule 9: Project Feasibility - Shareholders Perspective

2012 2013 2014 2015 2016

Change in cash flow, from Cash Flow Statement $ (320,120) $ (104,187) $ 91,124 $ 252,219 $ 445,109

Add back sum of non cash items, from Cash Flow Statement $ 87,460 $ 87,460 $ 87,460 $ 87,460 $ 87,460

Cash Flows Before Tax $ (232,660) $ (16,727) $ 178,584 $ 339,679 $ 532,569

Assumed Tax rate of 30% $ 53,575 $ 101,904 $ 159,771

After Tax Cash Flows $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 372,798

Terminal Value (calculated assuming that 2016 after tax cash flows are maintable, and using rate of 40%) $ 931,996

Cash Flows Including Terminal Value $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 1,304,794

Initial investment of shareholders $ (100,000)

Net Present Value: $ 53,813

Internal Rate of Return: 49.7%

** The 'Change in Cash Flows' includes the initial cash inflow of $50,000 from investors (year 1), and the payout of $300,000 we make to the angel investors (year 5)

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Schedule 10: Project Feasibility - Angel Equity Investors' Perspective

Cash flow to be received in year 5: $ 300,000Initial cash investment in year 1: $ (50,000)

NPV, assuming discount rate of 20% $78,897NPV, assuming discount rate of 25% $58,304NPV, assuming discount rate of 30% $42,337NPV, assuming discount rate of 35% $29,867NPV, assuming discount rate of 40% $20,066

Internal Rate of Return 56.5%

Schedule 11: Critical Risk Variables and Sensitivity Analyses

Our three most important critical risk variables are as follows:

Variable Importance(1=high, 3=low)

Revenues 1** As revenues is assessed to be the most important, a two-fold sensitivity analysis on revenues is performed below

Interest on Debt 2Salaries & Wages 2

Sensitivity Analysis on Revenues2012 2013 2014 2015 2016

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Base case assumptions:Total population of Vancouver $ 650,000 $ 650,000 $ 650,000 $ 650,000 $ 650,000% of population that fits our target demographic 46% 46% 46% 46% 46%% market share 1% 1.25% 1.50% 1.75% 2%Amount ordered per person/week $55 $55 $55 $55 $55

Total Revenues $ 8,551,400 $ 10,689,250 $ 12,827,100 $ 14,964,950 $ 17,102,800

NPV under base case, from Appendix 10 $ 53,813

Scenario A: If % Market Share Varied

Worst Case Scenario - our increase in market share is half of what we predict (i.e.- 0.125% increase every year, rather than 0.25%)

2012 2013 2014 2015 2016% of market share 1% 1.125% 1.250% 1.375% 1.500%Total Revenues $ 8,551,400 $ 9,620,325 $ 10,689,250 $ 11,758,175 $ 12,827,100Decrease in revenues from base case: $ - $ 1,068,925 $ 2,137,850 $ 3,206,775 $ 4,275,700

Base case cash flow incl terminal value (from Appndx 10): $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 1,304,794Cash flows adjusted for worst case scenario: $ (232,660) $ (1,085,652) $ (2,012,841) $ (2,969,000) $ (2,970,906)

NPV under worst case: $ (1,913,486)

Best Case Scenario - our increase in market share is double of what we predict (i.e.- 0.50% increase every year, rather than 0.25%)

2012 2013 2014 2015 2016% of market share 1% 1.5% 2.0% 2.5% 3%Total Revenues $ 8,551,400 $ 12,827,100 $ 17,102,800 $ 21,378,500 $ 25,654,200Increase in revenues from base case: $ - $ 2,137,850 $ 4,275,700 $ 6,413,550 $ 8,551,400

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Base case cash flow incl terminal value (from Appndx 10): $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 1,304,794Cash flows adjusted for best case scenario: $ (232,660) $ 2,121,123 $ 4,400,709 $ 6,651,325 $ 9,856,194

NPV under best case: $ 4,416,984

Scenario B: If $ of Purchases Varied

Worst Case Scenario - if our customers only purchased $25/week in groceries from us

2012 2013 2014 2015 2016Amount ordered per person/week $25 $25 $25 $25 $25Total Revenues $ 3,887,000 $ 4,858,750 $ 5,830,500 $ 6,802,250 $ 7,774,000Decrease in revenues from base case: $ 4,664,400 $ 5,830,500 $ 6,996,600 $ 8,162,700 $ 9,328,800

Base case cash flow incl terminal value (from Appndx 10): $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 1,304,794Cash flows adjusted for worst case scenario: $ (4,897,060) $ (5,847,227) $ (6,871,591) $ (7,924,925) $ (8,024,006)

NPV under worst case: $ (8,885,904)

Best Case Scenario - if our customers purchased $75/week in groceries from us

2012 2013 2014 2015 2016Amount ordered per person/week $75 $75 $75 $75 $75Total Revenues $ 11,661,000 $ 14,576,250 $ 17,491,500 $ 20,406,750 $ 23,322,000Increase in revenues from base case: $ 3,109,600 $ 3,887,000 $ 4,664,400 $ 5,441,800 $ 6,219,200

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Base case cash flow incl terminal value (from Appndx 10): $ (232,660) $ (16,727) $ 125,009 $ 237,775 $ 1,304,794Cash flows adjusted for best case scenario: $ 2,876,940 $ 3,870,273 $ 4,789,409 $ 5,679,575 $ 7,523,994

NPV under best case: $ 6,251,720

Schedule 12: Break Even Analysis

** Consistent with sensitivity analysis above, break even has been performed two-fold on revenues

Scenario A: The % of our target market we would need to capture in order to produce $0 in net income

2012 2013 2014 2015 2016Total Expenses - from Income Statement $ 1,175,260 $ 1,173,112 $ 1,191,586 $ 1,244,276 $ 1,265,171Total Cost of Sales - from Income Statement $ 7,696,260 $ 9,620,325 $ 11,544,390 $ 13,468,455 $ 15,392,520Total Revenues Required $ 8,871,520 $ 10,793,437 $ 12,735,976 $ 14,712,731 $ 16,657,691

% market share necessary to break even 1.04% 1.26% 1.49% 1.72% 1.95%% market share expected - base case 1.00% 1.25% 1.50% 1.75% 2.00%

Scenario B: The weekly amount our customers will have to spend on groceries to produce $0 in net income

2012 2013 2014 2015 2016Total Expenses - from Income Statement $ 1,175,260 $ 1,173,112 $ 1,191,586 $ 1,244,276 $ 1,265,171Total Cost of Sales - from Income Statement $ 7,696,260 $ 9,620,325 $ 11,544,390 $ 13,468,455 $ 15,392,520Total Revenues Required $ 8,871,520 $ 10,793,437 $ 12,735,976 $ 14,712,731 $ 16,657,691

Weekly budget ($) to break even $ 57.06 $ 55.54 $ 54.61 $ 54.07 $ 53.57

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Weekly budget expected - base case $ 55.00 $ 55.00 $ 55.00 $ 55.00 $ 55.00

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