Financial Analysis

An investment of USD $228,000 has already been done by the founders while US $77 million capital will be raised via IAGON’s planned Token Sale to execute this plan.

Financial Assumptions

The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses and disclosure of contingent revenue and expenses at the date of the financial statements during the reporting periods. Estimates may include those pertaining to accruals and going concern assumptions. Actual results could materially differ from those estimates.

The table below presents the major assumptions made during this business plan, that are important to highlight. According to tradeeconomics.com, inflation rate in Norway (consumer price) is recorded 1.1 percent year-on-year in November 2017 from 1.2 percent in the previous month, missing market expectations of 1.2 percent. It was the lowest rate since February 2013. In the course of this business plan, we have assumed average 2.5% inflation rate throughout the next 5 years9. Norway’s corporate income tax rate is 24% in 2017 (reduced from 25% in 2016)10. Therefore, tax rate was assumed as 24% of the revenue throughout the next five years projections. We have assumed 8% interest rate on debt financing for the next five years. The central bank of Norway left its key policy rate unchanged at a record low of 0.5 percent on December 14th, 2017. Policymakers said that inflation is expected to remain below 2.5 percent in the next years, although a higher rate is possible due to a weaker Krone. In addition, the upturn in the economy continues, the output gap is narrower than projected and wage growth is likely to edge up. Interest rate in Norway averaged 4.21% from 1991 until 2017, reaching an all-time high of 11 percent in September of 1992 and a record low of 0.5% in March of 2016. In this business plan we have assumed 0.5% interest rate throughout next five years.

Capital Expenditures

The table below outlines the start-up needs of the IAGON. The founders of the company invested 190,000 Euros (228,0000 USD) as a startup funding. IAGON will be owned by its 3 founders. The issuing of IAGON tokens will raise the necessary capital for its operation. The total capital to be raised is 77 Million USD, via IAGON’s planned token sale.

Revenue Projections

IAGON will charge commission of 10% in IAGON tokens from every transaction that the users carry out to utilize the miners’ storage and processing capacities. The commission will be charged from the tokens transferred from users to miners, which are tradable and can be converted into fiat money. In FY-1, $10.5 million in revenues will be generated, whereas up to FY-5 gross revenues will reach to $147 million. Five years financial projections are depicted in the following table:

Revenue Projection FY-1 FY-2 FY-3 FY-4 FY-5
No of Transmitted Tokens 300,000,000 600,000,000 1,050,000,000 2,100,000,000 4,200,000,000
Book Value of each Token $0.11 $0.11 $0.11 $0.11 $0.11
Total Transaction Value $33,000,000 $66,000,000 $115,500,000 $231,000,000 $462,000,000
Transaction Fee 10% 10% 10% 10% 10%
Revenue from Transaction Fee $3,300,000 $6,600,000 $11,550,000 $23,100,000 $46,200,000

Five years Profit And Loss Projections

The Market analysis, competitive analysis and business model of the company reveals that IAGON is a unique business model and its target market has sufficient potential to achieve its financial goals. As presented in the graph above, revenues and net profits of the company will increase every year. Up to fifth year of expanding the operation, the company will be able to secure more than $147 million revenues and $85 million net profits. The complete 5 years profit and loss projections are in the table below. Monthly Profit and Loss projection are at Annex Table 10.1 and Quarterly Profit and Loss Projections are at Annex Table 10.2.

Five years Profit And Loss Projection

Profit and Loss Projections FY-1 FY-2 FY-3 FY-4 FY-5
Gross Revenue $3,300,000 $6,600,000 $11,550,000 $23,100,000 $46,200,000
Direct Cost (10%) $330,000 $660,000 $1,155,000 $2,310,000 $4,620,000
Operating Income $2,970,000 $5,940,000 $10,395,000 $20,790,000 $41,580,000
Gross Margin (%) 90.00% 90.00% 90.00% 90.00% 90.00%
Expenses
Payroll $500,000 $600,000 $700,000 $1,000,000 $1,200,000
R&D Expenses $1,000,000 $1,500,000 $2,500,000 $4,000,000 $6,000,000
Marketing Expenses $330,000 $528,000 $577,500 $924,000 $1,386,000
Professionals/Consultants Fzes $250,000 $300,000 $350,000 $400,000 $500,000
Insurance Costs $30,000 $35,000 $40,000 $50,000 $60,000
Management and Operational Cost 165,000 330,000 577,500 924,000 1,848,000
Depreciation/Amortization of Assets $25,000 $35,000 $50,000 $70,000 $90,000
Misc. Expenses $200,000 $250,000 $300,000 $500,000 $750,000
Total Operating Cost $2,500,000 $3,578,000 $5,095,000 $7,868,000 $11,834,000
EBIT $470,000 $2,362,000 $5,300,000 $5,300,000 $29,746,000
EBIT Margin (%) 14,24% 35,79% 45,89% 55,94% 64,39%
Taxes (24%) $112,800 $566,880 $1,272,000 $3,101,280 $7,139,040
Interest Expense $0 $0 $0 $0 $0
Net Profit $357,200 $1,795,120 $4,028,000 $9,820,720 $22,606,960
Net Profit Margin (%) 10,82% 27,20% 34,87% 42,51% 48,93%

Projected Cash Flow

The business will have sufficient cash coming from commission fees to meet its operational requirements. The company will have sufficient cash every year to meet its operational expenses. Five-year projected cash flow of the company depicted in the table below.

Pro Forma Cash Flow FY-1 FY-2 FY-3 FY-4 FY-5
Cash from Operations $2,970,000 $5,940,000 $10,395,000 $20,790,000 $41,580,000
Cash from receivables $0 $0 $0 $0 $0
Operating Cash Flows> $2,970,000 $5,940,000 $10,395,000 $41,580,000 $41,580,000
Other Cash Flow
Equity Investment $848,000 $0 $0 $0 $0
Debt Financing $0 $0 $0 $0 $0
Sales of Business Assets $0 $0 $0 $0 $0
A/P Increases $0 $0 $0 $0 $0
Total Other Cash Inflows $848,000 $0 $0 $0 $0
Total Cash Inflows $3,818,000 $5,940,000 $10,395,000 $20,790,000 $41,580,000
Cash outflows
Repayment of principal $0 $0 $0 $0 $0
Cash Spent on operations $2,500,000 $3,578,000 $5,095,000 $7,868,000 $11,834,000
Payment of Interest and Taxes $112,800 $566,880 $1,272,000 $3,101,280 $7,139,040
Startup Costs $848,000 $0 $0 $0 $0
Total Cash Outflows $3,460,800 $4,144,880 $6,367,000 $10,969,280 $18,973,040
Net Cash Balance $357,200 $1,795,120 $4,028,000 $9,820,720 $22,606,960
Accumulated Cash Balance $357,200 $2,152,320 $6,180,320 $16,001,040 $36,608,000

Break-Even Analysis

Breakeven Sale Year 1 Year 2 Year 3 Year 4 Year 5
Expected Sales $3,300,000 $6,600,000 $11,550,000 $23,100,000 $46,200,000
Yearly Break-even Sales $2,777,778 $3,975,556 $5,661,111 $8,742,222 $13,148,889
Monthly Breakeven Sale $231,481 $331,296 $471,759 $728,519 $1,095,741
Breakeven Percentage 84% 60% 49% 38% 28%