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7.1 Funding Requirements, Ownership & Exit Strategy

The initial seed capital for this venture is to be raised by a contribution of 500,000 DM ($295,000) from the founders, along with 1,000,000 DM ($590,000) from the venture capitalist. The venture capitalist will hold 40% of Eurosky LLC. Each of the founders will hold a stake of 15% of the company.

Eurosky's founder team will lead the business through the first five years of operation. At the end of year five, the founding members may sell their stake in a private placement.

7.2 Financial Management

A comprehensive analysis projects the financial performance of Eurosky LLC for the first five years of operation. Appendix 8.1 provides the Pro-fonna Financials, including Income Statement, Balance Sheet, Cash Flow Statement and Cost of Goods Sold & Pricing worksheet. The statements for the fully owned subsidiary Eurosky Management LLC have been consolidated into the statements of Eurosky LLC. As Aircraft LLP is a separate legal entity it is not considered in the financial statements of Eurosky LLC.

The actual aircraft will be purchased by Aircraft LLP. It will be financed by a direct loan of 5,570,000 DM ($3.3m) provided by Aero Finanz to Aircraft LLP. The interest is set at 6-month FIBOR plus 250 basis points (currently 5.91%) and is to be paid by Aircraft LLP. For each share sold, Eurosky LLC will retire one fourth (1.392.500 DM or $820,000) of that loan. Aircraft LLP will thus be fully equity financed upon selling the fourth share in the company.

The Balance Sheet represents the desired mode of financing. At the time of incorporation, Eurosky LLC will have fully paid-in equity of 1,500,000 DM ($885,000). A further 1,000,000 DM ($590,000) loan is provided by the federal state of Bavaria as a public financing aid. This is a loan from the European Recovery Program, and is free of interest during the first two years. There will be no dividend payout during the first five years of operation, and all profits will be held as retained earnings. The financial model includes a cash management module that invests up to 95% of monthly excess balances.

7.3 Financial Performance

Assuming the base scenario, Eurosky will break even in month 8 of the first year of operations and will show positive retained earnings in month 11 of the same year. The terminal value in year 5, using a P/E ratio of 13 will be 55.4m DM ($32.5m). The venture capitalist's investment will thus yield an annual return of 86%.

During the first five years of operations, the return on equity improves from 10% in year 1 to 284% in year 5. By the same token, return on sales improves from 13% in the first year to 23% in year 5. Eurosky's sales are projected to be 1.2m DM ($0.7m) in the first year of operation. Sales increase by about 74% each year to reach 19m DM ($11. lm) in year 5. Note that the income derived from the sale of aircraft interests (i.e. equity sale in Aircraft LLP) is not included in these sales figures. In the first year, net proceeds from share sales are 730,000 DM ($430,000). In year 5 Eurosky LLC will have made a profit on the sale of aircraft interests of about 3.4m DM ($2.0 m).

The Cost of Goods Sold, on the other hand, grow at an annual rate of only 68%, thus increasing the gross margin by 98% each year. In the first year of operation, Eurosky will generate a positive net income of 156,000 DM ($92,000). Growing at an annual rate of 94%, the net income in year 5 will reach 4.3m DM ($2.5m). This demonstrates the dramatic growth potential of future Cash Flows for Eurosky LLC. The development of sales and net income is shown in Exhibit 14.

As can be seen in the detailed Scenario & Ratio Analysis in Appendix 8.1.7, Eurosky's terminal value is most sensitive to changes in prices. A one percent change in prices results in a 2.6 percent change in the terminal value. In the best case scenario, the terminal value increases by 116% to 119.8m DM ($70.4m), yielding an annual rate of return of 117% of the venture capitalist's investment. The worst case scenario shows a terminal value of 5.8m DM ($3.4m), a deviation of 90% from the base case. The annual yield in that case will be 19%.

Given the profitable business opportunity and the tremendous growth prospects demonstrated in this business plan, the founding members of Eurosky invite you to participate in its prosperous future.

Table of ContentsAppendices
1. Executive Summary
2. Market Analysis
3. Products
4. Company
5. Marketing and Sales
6. Operations
7. Financials
Pro-forma Financials
Resumes of the Founder Team
Board of Advisors
Key Advisors
The information and ideas herein are the confidential,
proprietary, sole, and exclusive property of Eurosky's founders.