Figure 7-3

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					                           Figure 7-2


            Annual Revenues, Expenses and Cash Flows of Ink Magazine
                            at Various Circulation Levels
                               (all figures in thousands)
Number of Subscribers                       0           250      400      550
Revenues
  Subscriptions                            $0         $3,750   $6,000     $8,250
  Advertising                              $0         $2,250   $4,650     $7,350
     Total                                 $0         $6,000  $10,650    $15,600
Expenses
  Variable Expenses                        $0         $5,500   $9,175    $12,625
  Fixed Expenses                         $2,700       $2,700   $2,700     $2,700
    Total                                $2,700       $8,200  $11,875    $15,325
Income
  Operating Income                      ($2,700)     ($2,200) ($1,225)    $275
  Taxes (40%)                           ($1,080)      ($880)   ($490)     $110
    Net Income                          ($1,620)     ($1,320)  ($735)     $165
Cash Flows
  Net Income                            ($1,620)     ($1,320)  ($735)     $165
  Depr. - non-recurring                   $650         $650     $650      $650
investments
  Depr. – recurring investments            $0          $250     $300      $350
  Capital Replacement                      $0         ($250)   ($300)    ($350)
    Net Cash Flow                        ($970)       ($670)    ($85)     $815
                                   Figure 7-3

       Net Income and Cash Flow Contribution Margins of Ink Magazine
                           At Various Circulation Levels
Number of Subscribers (thousands)                  250    400        550

Average Over All Subscribers
Revenue per Subscription
  Subscriptions                                 $15.00   $15.00    $15.00
  Advertising                                    $9.00   $11.63    $13.36
    Total                                       $24.00   $26.63    $28.36
Expenses per Subscription
  Variable Expenses                             $22.00   $22.94    $22.95

Contribution to Net Income                      $2.00     $3.69     $5.41

Average Over Increment of Subscribers           0-250    250-400   400-550

Revenue per Subscription
  Subscriptions                                 $15.00   $15.00    $15.00
  Advertising                                    $9.00   $16.00    $18.00
    Total                                       $24.00   $31.00    $33.00
Expenses per Subscription
  Variable Expenses                             $22.00   $24.50    $23.00

Contribution to Net Income                      $2.00     $6.50    $10.00
Figure 7-5

                  Ink Magazine Scenario Analysis


  Subscription     Variable          Advertising   Projected Cash
  Growth Rate1      Cost2             Revenue3       Shortfall4
                                    High Revenue
                  High Cost
                                    Low Revenue
      High                          High Revenue
                 Expected Cost
     Growth                         Low Revenue
                                    High Revenue     $375,000
                   Low Cost
                                    Low Revenue
                                    High Revenue
                  High Cost
                                    Low Revenue
    Expected                        High Revenue      $750,000
                 Expected Cost
     Growth                         Low Revenue      $2,250,000
                                    High Revenue
                   Low Cost
                                    Low Revenue
                                    High Revenue
                  High Cost
                                    Low Revenue     $3,250,0005
      Low                           High Revenue
                 Expected Cost
     Growth                         Low Revenue
                                    High Revenue
                   Low Cost
                                    Low Revenue
Figure 7-7

                                 NewCompany Simulation Results for Alternative Financing Decisions
                                    (In each case, results are based on 500 iterations of the model.)

                                          Scenario 1:               Scenario 2:               Scenario 3:               Scenario 4:
Financing Scenario                    $3 million of initial     $2 million of initial     $1 million of initial      $500 thousand of
Description/                         investment capital in     investment capital in     investment capital in       initial investment
Simulation Results                     the form of equity        the form of equity        the form of equity      capital in the form of
                                                                                                                            equity
 Number of iterations where         Total = 4                 Total = 87                Total = 202               Total = 481
additional financing is needed      Development not           Development not           Development not           Development not
to cover operations through         complete = 4              complete = 56             complete = 61             complete = 58
month 78                            Net income still          Net income still          Net income still          Net income still
                                    negative = 0              negative = 6              negative = 22             negative = 65
                                    High-growth = 0           High-growth = 15          High-growth = 119         High-growth = 127
Number of iterations where          Total = 496               Total = 413               Total = 298               Total = 19
additional financing is not         Development not           Development not           Development not           Development not
needed to cover operations          complete = 51             complete =7               complete = 0              complete = 0
through month 78                    Net income still          Net income still          Net income still          Net income still
                                    negative = 65             negative = 57             negative = 50             negative = 4
Average minimum level of            $1.86 million             $.94 million              $.17 million              $.08 million
surplus cash
Earliest “out of cash” point for    Month 76                  Month 61                  Month 38                  Out of cash by month
no-development or slow-                                                                                           25 or sooner in 25
development iterations                                                                                            iterations

				
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posted:10/1/2012
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