Report - Leeds School of Business



Business Plan, 2000

®

COMMUNITY… COMMERCE… CONTENT…

This business plan is intended solely for informational purposes to assist in determining if you wish to do a due-diligence investigation of this project. This document is not an offering for sale of any securities of . The information contained herein is believed to be reliable, but the management team makes no representations or warranties with estimates based on extensive research and on assumptions considered reasonable, but they are of course not guaranteed. The contents of this plan are confidential and are not to be disclosed, distributed, or reproduced without the express written consent of .

Contact:

Ron Polacek

P.O. Box 20505

BOULDER, CO 80308-3505

Email Address: rpolacek@

Office: 720.839.7688

Copy # ______

NON-DISCLOSURE AGREEMENT

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Confidential information shall not include information previously known to me, the general public, or previously recognized as standard practice in the field.

I agree that for a period of five years, I will hold all confidential and proprietary information in confidence and will not use such information except as may be authorized by and will prevent its unauthorized dissemination. I acknowledge that unauthorized disclosure could cause irreparable harm and significant injury to . I agree that upon request, I will return all written or descriptive matter, including the business plan and supporting documents to .

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LLLP

Attn: Business Planning Dept.

P.O. Box 20505

Boulder, CO 80308-3505

Table of Contents

EXECUTIVE SUMMARY 5

COMPANY OVERVIEW 7

INTRODUCTION 7

MISSION STATEMENT 7

HISTORY AND CURRENT STATUS 7

MARKETS, PRODUCTS AND SERVICES 8

OBJECTIVES 8

PRODUCT AND SERVICE DESCRIPTION 9

PRODUCTS AND SERVICES 9

MARKET COMPARISON 10

PROPRIETARY RIGHTS 11

STAGE OF DEVELOPMENT 11

INDUSTRY AND MARKETPLACE ANALYSIS 12

INDUSTRY ANALYSIS 12

MARKETPLACE ANALYSIS 13

CUSTOMER ANALYSIS 14

COMPETITOR ANALYSIS 15

MARKETING STRATEGY 18

TARGET MARKET STRATEGY 18

PRODUCT/SERVICE STRATEGY 19

PRICING STRATEGY 19

ADVERTISING AND PROMOTION STRATEGY 20

MARKETING AND SALES FORECASTS 21

OPERATIONS 22

OPERATIONS OVERVIEW 22

OPERATIONS STRATEGY 22

OPERATIONS IMPLEMENTATION 23

ONGOING OPERATIONS 25

REVENUE SHARING 25

OPERATING EXPENSES 26

DEVELOPMENT 27

DEVELOPMENT STRATEGY 27

DEVELOPMENT TIMELINE 27

FUTURE DEVELOPMENT 28

MANAGEMENT 29

COMPANY ORGANIZATION 29

CURRENT MANAGEMENT TEAM 29

FUTURE MANAGEMENT TEAM ADDITIONS 31

ADMINISTRATIVE EXPENSES 32

SUMMARY OF FINANCIALS 32

FINANCIAL ASSUMPTIONS 33

FINANCIAL FORECASTS 33

REVENUE, EXPENSE, AND INCOME PROJECTIONS 33

CASH FLOW PROJECTIONS 34

CAPITAL REQUIREMENTS 34

VALUATION OF BUSINESS 35

INVESTMENT REQUIREMENTS 35

EXIT STRATEGY 35

VALUATION OF BUSINESS 35

OFFER 36

APPENDICES 37

TABLE OF APPENDICES 37

SOURCES OF INFORMATION 38

ENDNOTES 39

EXECUTIVE SUMMARY

BUSINESS CONCEPT: COMMUNITY… COMMERCE… CONTENT…

® LLLP, located in Boulder, Colorado, is poised to become the focal point, the industry portal, for the community of global floral consumers, floral professionals, and all those who just love flowers. The company will generate significant revenue and profit (commerce) by becoming the premier national and global provider of floral products and gifts. The rich, varied content (services, products, information) on our web site will support the community and commerce segments of the business. We will leverage our global name recognition in our marketing efforts.

STATEMENT OF MISSION: Our goal is to establish as the premier national and global brand by marketing and delivering incomparable floral products and gifts at competitive prices with responsive customer service. Additionally, as the industry’s first community portal, we will provide unique services, products and content to the global community of consumers and floral professionals with the intent of capturing significant advertising revenues and converting visitors into customers.

MANAGEMENT: Kirt and Brigitte Ohler, the founders, bring a background of successful enterprise development with a combined 25 years of experience in the floral industry. The founders have augmented the management team by adding key personnel who have extensive business and Internet expertise/experience.

MARKET POTENTIAL: Estimated sales for the year 2001 in the retail floral industry are $16.5 billion for the United States, and $41.5 billion globally. The U.S. market has significant growth potential since the U.S. ranks only 13th in the world in per capita flower consumption.

PRODUCTS & SERVICES: Customers are offered over 150 products on the website, including seasonal floral bouquets and arrangements, dried arrangements, specialty gifts and gift baskets. For those consumers who desire to arrange their own bouquets with the freshest flowers available, will provide flowers direct from the grower. , as the floral industry’s first community portal, will serve floral professionals and floral product consumers by providing many valuable community-building features, including: industry trend information, an online magazine, educational products and services, bulletin boards, chat software, contests, classified advertising, and links to other sites of interest.

MARKETING & SALES STRATEGY: will build a nationally recognized brand by using low-cost, content-based Internet promotional techniques, such as its online newsletter, online postcards, contests, classified advertising, etc. Traditional media advertising strategies will augment the Internet promotion as soon as funds are obtained.

COMPETITION: Our primary competitors are 1-800., Gerald Stevens, , and . Though competes with these companies in the floral ecommerce market, is the industry’s first community portal.

.

STAGE OF DEVELOPMENT: launched its ecommerce web site, , in February 2000, initially focusing on the generation of revenues from product sales. Our focus in the first half of 2000 is enhancements to our community features and expanding the operations structure as the business grows.

OPERATIONS: Ongoing operations will include taking orders through the customer interaction center and website, and relaying the orders to an established preferred network of brick-and-mortar florists. These florists, located throughout the world, will fulfill and deliver orders according to specifications. They serve as our fulfillment system, thereby assuring we do not require any inventory.

FINANCIALS: conservatively projects more than doubling its sales each year for the first three years, beginning with 100,000 orders generating $3.x million in the first year at an average product price of $49. By year three, orders will exceed 540,000, resulting in annual revenues in excess of $12 million.

FUNDS SOUGHT & EXIT STRATEGY: We are seeking experienced financial partners to provide $9.5 million in investment capital in two stages. Seed capital of $1.5 million is required to establish and staff the customer interaction center, perform initial marketing activities, and provide initial operating capital to hire key personnel and for capital expenditures. The second funding of $8.0 million is for marketing activities, moving our web site with technical support in-house, and to provide additional operating capital. Our exit strategy will be to execute an IPO in year three with an estimated market capitalization of $xx million. Discounting this year three value back to the present using the 50 percent discount rate yields a current valuation for of $xx million. Alternatively, we will consider solicitations to sell the business if sufficiently attractive terms are offered.

Company Overview

Introduction

, located in Boulder, Colorado, is an Internet and telephone marketer of floral products and specialty gifts. The company also uniquely serves as the industry portal to the global floral community. A Limited Liability Limited Partnership, the company was founded by a private, close group to sell products and services directly to consumers through its web site and its 1.888.4U.FLORAL toll-free telephone number.

Mission Statement

Our goal is to establish as the premier national brand by marketing and delivering We incomparable floral products at competitive prices with responsive customer service. Additionally, as the sole industry portal we will provide unique services and content to the global community of consumers and floral professionals with the intent of capturing significant advertising revenues and converting visitors into customers.

History and Current Status

Kirt and Brigitte Ohler, with a combined twenty-five years of experience in the floral industry, founded in 1992 in conjunction with their retail store, Floral Design of Europe. Floral Design of Europe has successfully positioned itself in Boulder and the Front Range as a provider of distinctive contemporary and European designed floral products and gifts. Brigitte Ohler, company co-founder and vice-president of product development, enjoys the status of being the number- one recommended wedding florist by the Hotel Boulderado, the Estes Park Stanley Hotel, Traditions Catering, and Colorado Brides’ Magazine. During the past six months a team of highly trained and experienced business and technical professionals has been assembled to develop ’s world-class web site. The company is now poised to leverage the industry expertise and artistic creativity of its founders and the expertise of the new management team to become the leading provider of floral products and gifts.

Markets, Products and services

Floral Design of Europe™ and ™ ’s e-commerce web site addresses the needs of usersfloral product consumers, both at home and in business. The primary focus is on customers wishing to send the most innovative designed floral products and gifts to recipients throughout the world. Our in-house designers create our unique, branded products along with content, services and products for our community portal. Customers are offered a large selection of products on our web site, including seasonal floral bouquets and arrangements, specialty gifts, gift baskets, and a selection of products and services from our partners and strategic alliances. A secondary focus is on customers who desire to arrange their own bouquets with the freshest flowers available. To address this market segment will market flowers direct from the grower. provides delivery of floral orders anywhere in North America and also has excellent international service for delivering products worldwide. et sites

Additionally, is the industry’s community portal, the gathering place, for the global community of consumers, floral designers, and all those who appreciate the beauty of flowers. Through its unique community portal, will deliver industry-leading services, products and content, such as a magazine, newsletters, classes, books, videos, etc.

Objectives

will utilize its floral design expertise, knowledge of the floral industry, and Internet experience to build demand for its branded products. It anticipates the rapidly escalating use of the Internet for shopping and information, and will grow its business in tandem with that expansion. The exit strategy will be to execute an IPO after three years of operation with an estimated market capitalization of $93.7 million. Alternatively, it will consider solicitations to sell the business if sufficiently attractive terms are offered.

Product and Service description

products and services

Mother’s Day, Valentine’s Day, birthdays, holidays, anniversaries, new babies, love for a friend … these are just a few occasions when one wants to show one’s feelings for a loved one. provides the products to allow one to express love and affection toward friends and relatives.

Customers purchase products from via the telephone or the Internet paying for their purchase with a credit card. Internet shoppers will find our site easy to use and navigate with over 150 product offerings organized and searchable by occasion, category or price. In addition to national marketing and brand recognition, our site’s superior merchandise, unique domain name and ease of use will contribute to increasing sales. By selecting , customers are assured complete satisfaction with their shopping experience.

specializes in the selling of perishable floral products, including arrangements of quality fresh cut flowers, plants, gift baskets, dried and silk floral arrangements, specialty gifts, and a variety of other unique gift items. These products reflect internationally recognized floral artistry, with emphasis on the highest quality and design standards. These products are unsurpassed in design, yet competitive in price. utilizes its proprietary database and order fulfillment system to relay the customer’s order to a preferred florist in the recipient’s city for product creation and delivery. These preferred florists are selected from leading floral wire-service companies, who adhere to the highest design and service standards in the industry.

also provides grower-direct selections of Ecuadorian roses, tropical flowers, and mixed assorted flowers; providing the freshest flowers available… just picked from the grower’s field. For these grower-direct orders, relays the customer’s order to our select importer(s), who fill(s) the order and FedEx’s the product to the recipient.

A significant benefit of having products created and delivered by our preferred suppliers is no inventory of goods is necessary.

’s unique industry portal presence will serve floral professionals and consumers by providing valuable community-building features, including: industry trend information, an online magazine, educational products and services, bulletin boards, chat software, contests, classified advertising, and links to other sites of interest. is the first in our industry to provide these services.

Market Comparison

’s solutions address two markets: the e-commerce segment providing floral products for sale, and the industry portal presence providing information and services to the global floral community.

While there are many successful Internet florists, there are no current industry community portals. is the first in the industry to provide this service. Because of this opportunity, will be able to anticipates capturinge a sizeable share of advertising revenues and community services/products revenue. ’s enticing evocative domain name will attract the floral community to our site. Visitors to the site’s chat room will find a community of enthusiastic amateurs as well as professionals exchanging ideas and information. Online classes and a monthly online newsletter will assist people who desire to learn more about “floral design” and keep abreast of current industry trends. These and other community building features, e.g. weekly articles featuring floral industry news, and design and care tips, will encourage repeat traffic and increase customer awareness of ’s brand.

The e-commerce market has many competitors, most notably 1-800-, , Gerald Stevens, and . The primary advantages we have over these competitors are our domain name, our incomparable products and our unique industry portal presence.

Whether customers are seeking globally inspired designed products, or the finest quality domestic designs, the name will attract shoppers to our products and services that will exceed their expectations and provide outstanding value. products are competitively priced, but of superior design, because our network of preferred filling florists are selected for their artistry, workmanship, and training.

Proprietary Rights

® is a registered trademark international class 35, patent # 5.924.090. Additionally, has the rights to the telephone number 1.888.4U.FLORAL, and the Internet URL, .

Stage of Development

is in the process of completing its innovative, in-house developed web site, and anticipates launching in early 2000. The products to be offered online have already been created, photographed and catalogued for easy dissemination to filling florists via e-mail, phone or fax. The web site is built for scalability, with an eye towards exploding growth in traffic. In the weeks before opening to the public, the site will be listed on the major North American and European search engines.

Industry and Marketplace Analysis

industry analysis

DESCRIPTION: The primary market segments within the floral industry are growers, importers, wholesalers, distributors, the traditional retail markets (florist shops, grocery stores with floral departments, home improvement/hardware stores), nurseries, and the emerging Internet marketers. The floral industry is large, mature, fragmented, and there are no national brands.

Estimated sales for year 2001 in the retail floral industry are $16.5 billion for the United States, and $41.5 billion globally. Continued growth in this industry is demonstrated by U.S. sales of $14 billion in 1997 and $15 billion in 1998.[i] In 1998 traditional florists sold $7.8 billion, while grocery stores and home improvement/hardware stores (mass marketers) sold $7.2 billion.[ii] Of these sales 48% represent outdoor bedding/garden plants, 28% cut flowers, 15% flowering houseplants, and 9% green plants.[iii] Industry leaders project 5% growth will be the norm in the coming years. The U.S. market has significant growth potential since the U.S. ranks only 13th in the world in per capita flower consumption (according to the Floral Marketing Association). The per capita floral item expenditure continues to rise, with the 1998 figure reaching $55.56.[iv]

TRENDS: Despite the fact that the floral industry is a mature industry, several trends are dramatically changing its profile. (1) Online sales via the Internet are rapidly increasing. (2) Branding has become a new marketing tool for the floral industry, with mass marketers as well as wholesalers vying for consumer recognition. These mass marketers will soon be utilizing the brand power of produce giants Dole Foods and Sunkist to market fresh flower products. It is anticipated that these internationally recognized brands will encourage more frequent floral purchases. (3) Increased sales of floral items in grocery stores, as well as the introduction of super home improvement stores selling flowers, have shifted floral product revenues. (4) Technology and improved communication are also impacting the industry, allowing a reduction in the distribution layers, thereby reducing costs and delivering a fresher product to the consumer.

OPPORTUNITIES: The above trends combine to indicate an excellent opportunity for aggressive companies who operate efficiently on the Internet and can supply a quality product with global appeal and create a brand presence that captures customer loyalty.

The floral industry enjoys the advantage of repeatedly selling perishable products to loyal customers along with a consistently growing demand for quality products. As long as there are birthdays, holidays, and special occasions, there will be a perpetual, thriving market for floral products.

Marketplace analysis

participates in the e-commerce Internet market segment of the floral industry, providing floral products to worldwide consumers. As highlighted earlier, electronic commerce is one of the most important trends in the floral industry.

FLOWER & GIFT SALES INCREASING: Favorite product categories for online shopping include audio CDs, personal computers, travel service and flowers.[v] During the past 10 years flowers have accounted for approximately 25% of online sales on the leading Internet services, and it is projected that online flower and gift sales will have increased over 1,500% by the year 2000.[vi] A rapidly increasing user base, increased competition, and better selection should push online sales of gifts and flowers from $311 million last year to an estimated $563 million by the end of 1999, an 81% increase.[vii] Data from Forrester Research, Inc. indicates U.S. online flower and gift sales are projected to grow from $700 million in 1999 to $4.7 billion by the end of 2004, an increase of over 570%.[viii]

INTERNET EXPLOSION: Internet usage continues to rise, with worldwide Web users estimated at 142.2 million in 1998 and growing to 502.4 million by 2003, a 353% growth. Growing in tandem with Internet usage, e-commerce spending was estimated to be $50.4 billion in 1998 and projected to reach $1.3 trillion by 2003, an increase of 2,579%. The World Wide Web is also truly becoming worldwide as non-U.S. citizens outnumber the U.S. Internet users. The ratio of U.S. users to non-U.S. users is predicted to change from 44:56 in 1998 to 35:65 by 2003. [ix]

U.S. MARKET GROWTH: There is significant opportunity to increase customer demand, especially in the U.S. Americans lag far behind in global per-capita floral product consumption, ranking 13th in the world.[x] Research indicates that only 25% of Americans purchase flowers regularly, compared to 60% of Europeans.[xi]

COMMUNITY PORTAL APPEARANCE: The emergence of industry-specific portals is just occurring. In the early years of the Internet (1995-1999) general portals (e.g. , eBay, Yahoo!, etc.) were where consumers searched for products. In the near future, industry-specific portals with a clearly recognizable brand name will supplant the general portals for consumer shopping preferences. is positioned to become the global floral community portal.

Customer Analysis

Women make 81% of the purchases of fresh cut flowers, flowering houseplants, green plants and bedding/garden plants. Buyers shopping for themselves make 64% of the purchases, with gifts for others accounting for the remaining 36%. For cut flowers only, the male purchasing percentage increases to 33%, with purchases for self at 31% and gifts for others at 69%. Most floral purchases, 85%, are made for non-calendar related occasions. Holidays such as Mother’s Day, Christmas, Chanukah, Easter, Passover, Valentine’s Day and Thanksgiving account for the remaining 15% of purchases.[xii] Age demographics are also important for understanding floral product customers. In markets where the predominant consumer age is 35-44, including a high percentage of employed females, floral sales are higher than average.[xiii]

It is easy to understand why Internet floral product purchasing is growing at such a rapid rate. According to Nielsen Media Research the increase in Internet adoption by consumers is being driven, for the first time, by women. The number of female consumers online jumped 80 percent in nine months, and has now passed the 10 million mark, according to Mark Resch, Executive VP of CommerceNet. The Nielsen study found that the proportion of women among online buyers increased from 29% to 38% last summer.[xiv] Indeed, a recent (January 2000) report from Jupiter Communications as reported on CNBC News indicates that women are now 49% of Internet users.[xv]

The profile of Internet users continues to evolve, with more diverse and less affluent people logging on in increasing numbers, ensuring a growing customer base. Products that offer quality and value will appeal to customers of all income levels. Companies that have a global message stand to benefit from the fact that 30% of traffic to U.S. site originates internationally, of which 36% is European, 28% Asian, 26% Canadian, and 6% Latin American.[xvi]

Customers who shop online for floral products are looking for a selection of bouquets, gifts, and gift baskets at a variety of prices. The convenience of shopping from home, and availability of shopping beyond workplace hours are very important to the customer. The web site must be easily navigated and provide good search options, such as searches organized by category, occasion, and price. Some sites offer additional features such as e-mail occasion reminders, quotes to use on gift tags, and floral care tips. Causes of customer dissatisfaction include orders not arriving on time, delivered floral arrangements not looking like the item selected online, and poor product longevity.

Competitor Analysis

This section will focus on the retail floral sales market segment, and specifically on competitors who utilize the Internet to generate sales or who engage in a marketing strategy that includes product branding. The traditional U.S. retail florist market is fragmented, with over 27,000 florist shops competing with 23,000 supermarkets.[xvii] Florists can sell products outside of their local market by utilizing networks of florists who fulfill orders all over the world. In flower-by-wire transactions, the originating florist retains 20% of the sales price and an additional service fee, then forwards 80% of the sales price to a wire service provider. The wire service provider retains approximately 7% of the sales price, forwarding the balance (approximately 73%) to the local florist who actually creates the floral arrangement and delivers it to the customer. The average floral order through an Internet/telephone transaction in 1999 was $55.99. revenue data for the twelve months ended March 31, 1999 were total revenues of $42.8 million with 764,382 orders.[xviii] During the Holiday season in December, 1999, the reported spending per buyer among the most-visited web sites had 1-800- ranked 3rd with an average amount of $173 spent when visiting the site.[xix]

Several giant floral retailers are setting new trends in the industry. Four companies have registered with the SEC for stock offerings this year: 1-800-, PC Flowers & Gifts, and filed for IPOs; Gerald Stevens issued a secondary offering.[xx]

The largest floral company is 1-800-, with 1999 (June 1998-June 1999) revenues of $295.9 million. The company owns or franchises about 120 stores in major metropolitan areas and has about 1,500 partner shops. The success of this company can be partially attributed to its name, easily remembered and synonymous with the product. 1-800- sells its products primarily by telephone, but its Internet sales department, the Interactive Services Division, has a growth rate of 100% per year. This division predicted it would generate 12-15% of the company’s annual revenue, or approximately $40 million in 1999.[xxi] The company is looking at expanding their product offerings on their website as a means of future growth.[xxii] 1-800- is in the process of repositioning itself as a global player. New advertising campaigns will feature flowers coming from Europe and Africa.[xxiii] The company is heavily dependent upon general portals to drive its Internet business[xxiv] at a significant cost.

Gerald Stevens, Inc. is making rapid gains on 1-800-. 1998 sales were only $16.2 million, but sales for 1999 were $110.6 million. The company recently merged with Florafax International, Inc., one of the U.S. flowers-by-wire providers. It has also acquired Calyx & Corolla, a pioneer in the direct-from-grower delivery business whose 1999 sales exceeded $20 million (a 500% increase from the previous year). Gerald Stevens currently has 232 retail stores in 28 markets and 10 hub facilities in which a call center, a delivery service, and an expert designer are coordinated for the most efficient and reliable production service. It plans to have 1,000 retail stores within 5 years, including 500 supermarket locations. The company focuses on customized quality and service, and plans to utilize Florafax International’s sales and marketing expertise to create a national brand known for its design and product. Additionally, their strategy of acquiring brick-and-mortar shops is aimed at capturing the 80% of the floral order that is retained by the filling florist and wire service provider, thus becoming the ‘Main Street” presence which captures the local retail walk-in market. In addition to retail locations, Gerald Stevens is integrating operations throughout the floral supply chain. They recently completed a strategic marketing alliance with Lycos.

FTD Corporation, through its subsidiary Florists’ Transworld Delivery, links more than 20,000 florists belonging to the FTD Association in the U.S. and Canada, and is affiliated with 32,000 additional florists in 140 other countries. 1999 sales for FTD were $213.4 million, with an additional $49.6 million generated by , of which FTD owns 99%. Flowers can be purchased from FTD by visiting FTD florists, using its toll free number, or visiting the site. is not one site, but thousands of sites, hosting over 2000 web sites for local FTD florists as well as co-branded sites. FTD advertising encourages customers to ask for FTD by name to assure highest quality, artistry and dependability.

One of the oldest online flower merchants, PC Flowers & Gifts, recently merged with Fingerhut, one of the largest direct marketers in the United States. 1998 sales revenues for PC Flowers & Gifts were $1.7 million, with growth evidenced by 1999 third quarter sales of $1 million. Fingerhut predicts that within 5 years Internet retailing may be half of its business.[xxv] PC Flowers & Gifts has broadened its offerings to include flowers shipped directly from growers, as well as their FTD branded floral products and Fingerhut gift items.[xxvi] On Oct. 4th the company announced that it is joining forces with . will compete with Internet auction/shopping sites, such as eBay, Yahoo!, and , etc.[xxvii]

, which launched its site a year ago, offers direct-from-growers flowers. Orders entered on the Web go straight to the grower and FedEx. A dozen American-grown roses from cost $29.95, plus $5.95 shipping. Traditional florists’ pricing for the same order would cost $54.95, plus $6.95 shipping. The competitive strategy of its low pricing is working well, as proven by monthly revenues in excess of $1 million as of last May.[xxviii] Much of Proflowers success can be attributed to its relationship with Blue Mountain Arts, which offers free electronic greeting cards and receives about 12 million visits a month. Blue Mountain Arts excels in online community building, and is responsible for about 20% of Proflower’s traffic.

These competitors clearly understand the huge potential of Internet marketing and are attempting to win customers with brand and quality image, as well as e-commerce solutions. There appear to be some gaps, however. While high quality and design are often advertised, there is little emphasis on the full spectrum of Floral Design. Indeed, our competitors have removed the phrase “floral design” from their web sites so as not to potentially brand . There is a new demand for products reflecting true Floral Design, creating choice and educating the consumer, resulting in value. The current floral designs mirror a movement towards more balance in life, a trend largely led by women.[xxix] It is also a reflection of European influence as more Americans have flowers in the home as part of everyday life. There is a new demand for products reflecting true floral design, products which are not just a bunch of flowers or “roundy moundy” arrangements. is in the enviable position of having already created an unmatched line of products.

While competitor sites offer a variety of arrangements and price points, as well as other features, such as advice and floral care tips, there are no sites that offer a true sense of community, though this community already exists. will fill this void as the unique community portal providing services, content and products. Some competitors also depend heavily on general portals to generate traffic to their sites. New studies question the future power of general portals in e-commerce. One study shows that as consumers gain Internet experience, they are more likely to bypass general portals and head directly to specialized e-commerce sites. For specialized products marketers will be more interested in hooking up with a specialized portal than with a general-interest portal. According to Peggy O’Neill, director of analytical services at Nielsen NetRatings, big-name portals currently rule simply because there aren’t enough vertical portals to compete, yet.[xxx]

Marketing Strategy

® will build brand awareness by utilizing proven Internet marketing techniques and traditional national advertising and promotional strategies. Significantly, ’s evocative and registered trademarked domain name will attract customers by name alone. Competitors promote the demand for “floral design” by using this term in their advertising. Once customers visit our site, they will choose to purchase from because they will find the experience easy and pleasant, with the products and features they desire at competitive prices. The community section will be rich with content of interest to both casual customers and professional floral designers.

Target Market strategy

sells floral products and gifts primarily via the Internet and telephone.

is initially targeting customers in two floral markets: the general flowers-by-wire market and the specialized flowers-direct-from-the-grower market. The demand for flowers-by-wire has been shown by continual support of this market since FTD’s entry in 1910. In the last decade other competitors have successfully entered this arena. The demand for flowers-direct-from-the-grower has just been exploited in the last decade. Most of the competition offers American grown products in this category. will focus on bringing top quality roses from Ecuador, the recognized leader in premium rose production. Fresh flowers “just picked from the field and delivered to your home” are a critical customer requirement. The North American market is still untapped and the use of the Internet to reach this market is just starting to explode.

The number of Internet consumers is rapidly growing, as is the revenue generated by online flower sales. The trend toward branding floral products will raise customer expectations for quality, and will differentiate products that have heretofore been generic. will exploit these converging factors by introducing distinctive, branded floral products for online consumers. While competitively priced, our products will be unmatched in design due to the extensive training and experience of our floral designers.

Product/Service Strategy

Since 1993, the founders of have been manufacturing and delivering superior products and service with outstanding value to their customers through their retail store, Floral Design of Europe. has utilized this knowledge and experience to create a wide variety of distinctive floral arrangements for online sale. utilizes a network of specially selected florists to fulfill orders, and communicates with those florists by fax, e-mail, and phone to assure correct reproduction of the designs. This florist network has been developed with the highest floral design standards as the sole participation requirement, and has not been influenced by fees or memberships. ’s customers know that when they purchase a branded product from , exceptional artistry and careful attention to detail is guaranteed.

’s web site is accessible, fun, and easy to navigate for computer users of all experience levels. The site is “grandmother friendly”; novice computer users of all ages find it a pleasure to shop at . will differentiate itself from competitors not only by delivering contemporary and European designed floral products, but also with its community features. adds value for its customers by becoming the source of information about floral products, providing links to other websites of interest, and by building a sense of community with its online chat room, bulletin boards, care and tips features, classified ads, and online magazine.

Our customer interaction center and online help staff will receive training to be effective in answering customer’s questions and concerns to increase sales closure.

Pricing Strategy

The products offered at ’s Internet site are competitively priced with products offered on competitor sites. Customers do not have to pay a premium for a higher quality of design because better technique does not cost more. In fact, the designs offered by utilize raw materials more effectively due to the superior training and experience of its designers, thereby keeping product cost down. Prices for online products range from $25 to $250.

The direct-from-grower products are also price-competitive and targeted at those customers who desire to arrange their own bouquets. To encourage impulse buying, “specials” will continually be available.

Advertising and Promotion Strategy

’s initial advertising and promotional focus is on attracting customers who are searching the World Wide Web. Soon after funding, will employ traditional broadcast and print media advertising in addition to continuing the proven Internet promotional and advertising techniques. was featured in an article in the industry magazine, Floral Management, in the fourth quarter of 1999.

The Internet marketing strategy, developed by experienced in-house staff, will begin by creating brand awareness with low cost content-based marketing tools, such as the online newsletter, online postcards, a Web based contest, bi-weekly surveys, a bulletin board, and a classified section. ’s Web pages will be submitted to all of the major domestic and European search engines and domestic Website directories. Meta language use will be optimized and crawler pages created to aid search engine spiders. Newsgroups and mailing lists will be monitored and contacted in order to create an awareness of ’s products, and to establish as experts in the floral industry. Strategic links with online purveyors of goods and services of interest to customers will be established. Website related press releases will be sent to pre-selected media outlets. ’s chat room will provide a meeting place for designers and consumers for the exchange of ideas and information. This will serve to promote and ’s brand names and images, as well as generating repeat traffic. Customers will receive an e-mail thank-you and order-confirmation note after every order, which will serve to put ’s domain name in front of the customer again and offer further service.

The second tier of Internet advertising activities includes banner ad planning, development, testing, and will continue on to placement on prime portals. Mailing lists will be developed by to notify customers of special promotional offers. will offer its customers the opportunity to register in order to receive targeted e-mail advertising and/or participate in automatic gift giving plans.

will utilize the services of marketing consultants and advertising agencies to perform conventional advertising. The traditional print and broadcast media advertising will focus on the top 100 markets in North America utilizing select radio stations and major city newspapers. National newspapers, such as USA Today and the NY Times, will be utilized. Popular national magazines will also be targeted, with a focus on the female readership. Additional media will be utilized as appropriate, such as Yellow Pages advertising, highway billboards, bus/transit, etc.

Marketing and Sales Forecasts

Assuming a successful Internet and conventional marketing and promotional deployment, conservatively projects attracting 100,000 orders by the end of year one. Of these orders, we project 57000 will be online orders, 41000 will be from phone orders, and 2000 orders will be received via mail. Advertising revenue and community services revenue will be conservative in year one with an estimated $xx in revenues. Revenue from the direct-from-grower segment is expected to be $1.0 million in year one. By year three, the online/phone/mail orders are projected to be xxxxx, with advertising and community services revenue increasing to xxxx and xxxx, respectively. Direct-from-grower revenue should be approximately $x.x million.

|Revenue |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |

|Gross Website Revenue |2,793,000 |8,379,000 |16,758,000 |33,516,000 |50,274,000 |

|Net Website Revenue |558,600 |1,675,800 |3,351,600 |6,703,200 |10,054,800 |

|Service Charge Revenue |398,430 |1,195,290 |2,390,580 |4,781,160 |7,171,740 |

|Gross Phone Revenue |2,009,000 |6,027,000 |12,054,000 |24,108,000 |36,162,000 |

|Net Phone Revenue |401,800 |1,205,400 |2,410,800 |4,821,600 |7,232,400 |

|Service Charge Revenue |409,590 |1,228,770 |2,457,540 |4,915,080 |7,372,620 |

|Gross Mail Order Revenue |98,000 |294,000 |588,000 |1,176,000 |1,764,000 |

|Net Mail Order Revenue |19,600 |58,800 |117,600 |235,200 |352,800 |

|Service Charge Revenue |19,980 |59,940 |119,880 |239,760 |359,640 |

|Net Bonus Revenue |96,000 |96,000 |96,000 |96,000 |96,000 |

|Direct Grower Gross Rev. |1,000,000 |3,000,000 |6,000,000 |12,000,000 |18,000,000 |

|Direct from Grower Net Rev . |250,000 |1,050,000 |2,100,000 |4,200,000 |6,300,000 |

|Banner Ad Rev. "click thrus" |394,320 |1,182,960 |2,365,920 |4,731,840 |7,097,760 |

|Banner Ad Rev. "Impressions" |159,000 |477,000 |954,000 |1,908,000 |2,862,000 |

|Industry Portal Advertiser(s) |0 |1,000,000 |4,000,000 |4,000,000 |4,000,000 |

|Online Classes Revenue |198,750 |596,250 |3,339,000 |6,678,000 |10,017,000 |

|Total Gross Revenue |7,576,070 |23,536,210 |51,122,920 |98,149,840 |145,176,760 |

|Total Net Revenue |$2,906,070 |$9,826,210 |$23,702,920 |$43,309,840 |$62,916,760 |

Operations

Operations OVERVIEw

’s operations are dependent upon products and services provided by our business affiliates, as well as services provided by our company. The in-house operations components are:

• An e-commerce website, , and a toll-free number 1.888.4U.FLORAL, which are the customers interface with the company to select and buy floral products.

• A web operations/customer interaction center to relay customer orders to the filling florists/importer, and to provide responsive, industry-leading customer service.

The operations components provided by our business affiliates are:

• A global, preferred network of retail filling florists supplying and delivering the purchased product to the customer.

• A relationship with leading wire-service provider(s) to provide designs of products to display on our website; to provide accounting services to assure the product revenue is distributed among our company, the filling florists, and the wire-service provider(s); and to guarantee delivery of the product in the unlikely case our preferred network of florists cannot fill the order.

• A relationship with grower(s)/importer(s) to supply and deliver direct-from-grower products to the customer.

Operations Strategy

Website Strategy: is committed to using the latest electronic commerce technology and services to deliver the most original products to its customers while providing an intuitive, creative, user friendly, dynamic website.

Customer Interaction Center Strategy: will establish and manage a customer interaction center to handle the incoming orders from our toll-free number, process orders received via mail, interact with online customers via real-time chat sessions to increase closure of sales, and provide additional industry-leading customer service. The customer interaction center will be staffed with temporary personnel as required to handle the volume of service requests. Customer service management will be employees of .

Flower-by-wire Strategy: will utilize the services of leading flower-by-wire companies to assure delivery of our products. If necessary, will utilize multiple flower-by-wire services.

Direct-from-Grower Strategy: will utilize the services of direct-from-grower companies (growers, importers) to provide the freshest possible products to our customers. If necessary, multiple companies will be used.

Filling Florists Strategy: will select each filling florist to be included in our network based upon the expertise of the florist in European design principles and their ability to handle significant number of deliveries on a daily basis.

Operations implementation

Website Operations: ’s website has already been created and will be maintained and enhanced by highly experienced in-house experts. The site is built for scalability, utilizing cutting edge technology, with an eye towards rapidly increasing traffic. The emphasis is on making the site intuitive for users of all experience levels. Careful attention to layout ensures that the Web pages follow an intuitive logic, without distracting clutter. This true, full-service, online floral design site incorporates industry-leading features such as:

• Innovative graphical interface to highlight our corporate strategies: the shopping site for purchasing our unparalleled products, and the community site for our unique industry portal presence

• Expandable SQL database to support current and future functionality

• Latest in shopping cart technology in a secure shopping environment, certified by VeriSign

• An electronic catalog of our products

’s website is hosted by Denver-based HostWorks, Inc. running on an NT server using Microsoft Internet Information Server 4.0 connected straight into a T-1 line. HostWorks, Inc. is a Colorado ISP offering hosting and design service from small to large size businesses. The site will continue to be outsourced until it is cost effective to move the website to premises.

Community Portal: will educate consumers and the floral professional community about elements and trends in international floral design by offering information, services and products, and an online magazine, Visions, in the community section of the website. Visitors can also catch up with the latest in floral industry news, chat with other floral enthusiasts, or check out the classifieds. Community content is produced by multi-media staff as well as collected from independent sources, such as floral design training institutions.

The Customer’s View of the Website: Imagine stepping into a flower shop where every bouquet has the unique design and special touches that make it a display of floral art, not just a bunch of flowers. Visitors to the website of are able to see over 150 different floral and plant arrangements more easily than in a physical flower shop. Shoppers are able to choose from a variety of occasion choices, categories of floral products, and price points. Express lane ordering will cater to the needs of online shoppers who need to quickly complete the selection and purchase of a product. With each online order, the customer will receive a confirmation e-mail and order number.

Phone Ordering: For telephone orders, operators assist the customer in a purchase selection, entering required purchase information into the web site. Order fulfillment then occurs exactly as an online order. A higher service fee is charged to the customer to offset the additional labor required to input phone orders.

Order Fulfillment: After online and telephone customers purchase products, orders are automatically relayed to select fulfilling florists in the recipient’s destination city. These florists then build the floral arrangement and deliver the product to the customer. Florists selected by are highly trained and capable of understanding the design mechanics that maximize floral presentation. Faithful reproduction of designs is assured because participating florists receive detailed instructions with each order via e-mail, phone or fax. The designs offered by have maximum artistic impact, but conserve raw material costs.

Our unique order fulfillment process further illustrates ’s technological advantage. does not require filling florists to have catalogs of our product offerings. Instead, ’s automated order fulfillment process emails or faxes a “DesignDoc” with every order so that the preferred filling florist has immediate access to the customer selection without having to find a catalog and look up the product specifications. Our “DesignDoc” specifies exactly how the product is to be constructed and includes a photograph or line drawing. This process allows to easily expand, update and improve its unique offerings in response to customer feedback and industry trends.

Customer Service: In the rare instance a customer is not satisfied with the delivered product, the customer can call ’s toll-free service number. The order number provided at the time of purchase will be used to assist customer service. will then contact the delivering florist for product replacement, or will refund the customer’s money via credit card credit.

Ongoing Operations

Customers will be able to shop online and place online orders from our web site 24 hours a day, 7 days a week. Initially, customers will be able to place telephone orders from 9:00am-5:00pm Mountain Standard Time, Monday through Friday. When the business needs demand it, the customer interaction center will receive incoming phone orders on a continuous basis during two shifts covering the hours of 6:00am until 10:00pm MST, Monday through Saturday. Phone ordering support will expand to 24 hours per day, seven days per week when required. Regional centers will be established as necessary.

Orders are relayed by e-mail, telephone or fax to the filling florists in the destination cities. It is expected that within one year of commencing business most of the order information will be relayed automatically using Internet services.

There will be one lead operator for every eight customer-service operators. A customer service manager, a employee, will oversee the order processing, supervise the hourly and lead operators, and provide quality control and customer service support. Part-time and temporary employees will be utilized as needed to meet seasonal requirements.

revenue sharing

Flower-by-Wire: When customers purchase products that are not direct-from-grower selections, retains 20% of the sale price plus a service charge ($6.99 Internet or $9.99 telephone service charge). The remaining 80% of the sale price is forwarded to a flower-by-wire service that handles payment to the filling florist and maintains transaction records. The wire service provider’s fee for this service is typically 7% of the sales price, resulting in 73% of the purchase price being retained by the filling florist. derives a cash flow benefit by utilizing a flower-by-wire service because the wire service bills 30-45 days after has received the customer order and payment.

Direct-from-Grower: For direct-from-the-grower purchases, will initially retain 25% of the sale price, increasing to 35% after the relationship is well established. The remaining 75% of the sale price (65% in the future) plus shipping and handling charges are forwarded to the grower/importer.

Operating Expenses

Operating expenses include advertising, office lease, computer equipment, office supplies, ISP hosting charges, bank transaction fees, telephone and utility services for the customer interaction center, and additional office space and telephone service as needed. Salaries will be paid to the management team, which currently includes the company president, chief operating officer, chief technology officer, vice-president of product development, vice-president of creative development, and vice-president of customer service. A marketing manager, a multi-media manager, and additional customer service and technical personnel will be added in year one. Hourly wages will be paid to the customer interaction center staff.

|Cost of Goods and Services |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |

|Total phone charges |31,290 |84,240 |137,400 |215,040 |236,520 |

|Total Operator wages |138,930 |266,110 |555,360 |1,157,000 |1,804,920 |

|Total Center Ops Expenses |170,220 |350,350 |692,760 |1,372,040 |2,041,440 |

|Total Lead Operator Expenses |26,000 |54,000 |84,000 |174,000 |270,000 |

|Total Direct Costs |196,220 |404,350 |776,760 |1,546,040 |2,311,440 |

|Total Indirect Costs |756,002 |1,039,810 |1,611,266 |2,583,264 |3,709,620 |

|Total Cost of Goods & Services |$952,222 |$1,444,160 |$2,388,026 |$4,129,304 |$6,021,060 |

DEVELOPMENT

will create and maintain a world-class e-commerce solution. As the business grows, additional market segments, such as the local retail market and the outdoor plant and bedding market will be targeted.

Development Strategy

will become the premier provider of floral products and gifts by offering customers unprecedented value and by utilizing the most forward reaching technology in every aspect of its operations and marketing. The company will use proven Internet and traditional marketing strategies to create brand awareness for its products. will grow the U.S. market by creating additional demand, as consumers become better educated about floral design and incorporate more floral purchases into their daily lives. As the demand for floral products and gifts increases, will continually improve and expand its products and services.

Development Timeline

The website will be operational in early 2000. Since the design and images of ’s product line have already been completed, the primary focus will be on fine-tuning the site, perfecting the visual layout, and comprehensive testing of the website. will begin building a nationally recognized brand by instituting low-cost, content-based Internet promotional techniques, such as its online magazine, newsletter, educational features, contests, classified advertising, etc. In the weeks leading up to the launch, the site will be registered with the major U.S. and European search engines. Traditional media advertising strategies will augment the Internet promotion as soon as funds are available.

Phase two development plans include additional web site content to increase advertising and product revenue; real-time online credit card verification and automated order processing to reduce operations personnel and improve the order filling process; an Occasions reminder service in conjunction with an Occasions Calendar to encourage repeat visits and hence repeat sales; “Express Lane” ordering; additional direct-from-grower selections to expand revenue opportunities and assure we remain competitive; “Favorite Charities” support; and live online customer support to convert traffic into sales. Target completion for phase two is six months after initial launch date.

Future development

Future plans include the addition of “Direct from ” products, which will include high-profit dried wreaths, and other non-perishable goods manufactured to specifications. Additional floral-theme products will become available as relationships are established with leading vendors. A special corporate service section will also be added. will capitalize on its brand recognition by opening retail outlets in supermarkets/grocery stores. These store-in-stores will be operated by employees and will provide a higher level of floral design and service than currently provided. Customers will be offered contemporary and European designed products, not the bunches of flowers currently sold. Expansion into Europe and Asia is a strategic objective for the company.

As the Internet business becomes firmly established, will evaluate undertaking a brick-and-mortar acquisition strategy in order to capture the 73% of floral product revenues that are currently sent to the filling florist who delivers the product locally. Only well established stores and chains in major markets with proven expertise in innovative floral design will be considered for acquisition. Also under consideration is the installation of computer kiosks in high traffic areas, which would enable customers to easily place orders when away from home. As becomes the premier nationally recognized brand for indoor floral design, it will expand its product line to introduce “Floral Design Outdoors,” targeting the robust outdoor plant and bedding market.

Management

Company Organization

is a Limited Liability Limited Partnership. Its management team includes its founders, who bring a background of successful enterprise development and artistic training, with a combined 25 years of experience in the industry and are considered experts and leading visionaries in the industry. The other team members provide extensive business and Internet experience and expertise. Future organization will reflect the needs of a growing corporation and will include experienced managers from the disciplines of marketing, customer service, multi-media operations, finance, human resources, and law.

CURRENT Management Team

Kirt Ohler President and CEO

Kirt Ohler attended Pepperdine University, where he studied math, architecture and hotel/restaurant management. As the California/Nevada territory Regional Manager of the Footlocker Division of Kinney Shoes from 1980-1983, he was responsible for the opening and development of numerous stores. From 1983-1992 he was executive chef at the Moonshadows Restaurant in Malibu, Ca., the Palm Beach Country Club, Palm Beach, Fl., and Casa Marina, Key West, Fl. As executive chef he was responsible for the overall operations of the restaurants and supervised approximately 60 employees. All three establishments enjoyed significantly increased sales revenues and reduced food costs under his leadership. During this period, Kirt found it more lucrative to work on a consulting basis and had the opportunity to work with many of the industry leaders in the Hotel/Restaurant industry. From 1992-1999 he founded and was President of Floral Design of Europe, Inc. and utilized his expertise in the perishables industry, along with his operations and leadership skills, to build the premier floral company in the Rocky Mountain region. Recently he negotiated the successful sale and separation of Floral Design of Europe, Inc and , retaining the rights to the trade name ‘Floral Design of Europe’. He has transformed the start-up business, , into an Internet break-through model.

Ron Polacek Chief Operating Officer

Ron Polacek attended the University of Missouri where he studied mathematics and computer science. A 16-year veteran of IBM, Ron brings people management and business expertise to the executive team. A graduate of the IBM Management Institute, he has managed technical organizations involved in operating systems development. He also has extensive experience in customer service/relations as a service manager for IBM’s mid-range systems software. Additionally, his experience at IBM Division Headquarters broadened his skills to include strategy development and management of a customer solution that spanned numerous contentious IBM divisions. Ron also has small business experience acquired from managing his numerous real estate investments.

Matthew Etling Chief Technology Officer

Matthew Etling is an Internet “native”. He has been developing applications on the Internet and implementing e-commerce solutions since the beginning days of the Internet. He has taken business opportunities from “thought to finish”… from designing web sites to establishing web sites that produce significant revenues. Starting his Internet experience with a small catalog company in Boulder, Colorado, he grew the business through his expert knowledge of responsive customer service and leading edge Internet marketing techniques. More recently, Matthew has been the web architect for a mid-sized scientific software manufacturer. His expertise has significantly enhanced the performance and ROI of the company’s web site in excess of 400%. Matthew coined the phrase “object oriented HTML programming” and continues to build web sites that are easily administered by both HTML experts as well as non-technical personnel.

Brigitte Ohler Vice President of Product Development

Brigitte Ohler earned certification in Floral Design in 1986 in Switzerland from the Schweizerische Eidgenossenschaft for Floral Design after completing three years study. She has illustrated and designed numerous books in the Floral Design industry. She was the florist at the prestigious Palacehotel in St. Moritz from 1989-1992. In 1992 she co-founded Floral Design of Europe, Inc. and has been creating, designing, and leading the industry with her artistic expertise, achieving world recognition with her vision. She will continue to provide the artistic direction and product development for .

Jennifer Etling Vice President of Creative Development

Jennifer Etling graduated with a BFA at the Kansas City Art Institute and an AA at the Otis Art Institute of Parsons School of Design. She is a published print media illustrator and has been featured in various magazines and newspapers. Her specialty lies in web technologies and web design. Working closely with various Fortune-500 companies, she has designed many state of the art web sites and managed their development from start to finish. Jennifer brings the visual appeal to life and directs the movement as well as the layout of the web site. With her expertise, has become one of the most visually appealing of all the sites in the floral industry.

Future Management Team Additions

Our success requires our continued ability to attract experienced marketing, operations and management talent. To complement its initial management team as soon as funding is acquired, will add a marketing manager, a community services manager, and a customer interaction center manager.

Marketing Manager

This person will have extensive conventional and Internet marketing, advertising, and operations experience. S/he will be responsible for coordinating traditional media advertising and promotional strategies with the Internet marketing strategies.

COMMUNITY SERVICES manager

This person will be have expertise in all aspects of Internet content management, including publishing, editing, and interactive features. S/he will develop new content for the community portal.

Customer interaction center Manager

This individual will have customer service, supervisory, administrative, and operations experience. S/he will be responsible for the ongoing customer interaction center operations, including overseeing hourly employees, managing customer service issues, and monitoring quality control.

Administrative Expenses

Based on the revenues projected in the sales and marketing forecast, we anticipate the following administrative expenses:

|Administration Expenses |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |

|Sales & Marketing |7,683,250 |3,724,762 |7,874,694 |14,941,573 |22,009,439 |

|Research & Development |88,750 |94,060 |104,775 |110,927 |123,551 |

|Website Development |413,050 |582,304 |701,078 |823,935 |962,599 |

|Finance |99,500 |107,110 |115,309 |124,644 |135,165 |

|General and Administration |508,470 |458,148 |483,671 |516,135 |555,685 |

|Total Admin Expenses |$8,793,020 |$4,966,384 |$9,279,528 |$16,517,213 |$23,786,439 |

Summary of Financials

is poised to take advantage of the convergence of several highly beneficial market conditions. The growth of Internet sales, and specifically the widespread usage of the Internet for floral sales, provides an excellent opportunity for . We consider the following projections to be conservative.

Financial Assumptions

assumes that Internet usage for shopping will continue to grow, and that online floral sales will continue to rise with the increase in Internet users. assumes that it can provide a higher level of quality and design by utilizing only highly trained florists, and that it can do so at competitive prices. It also assumes that the increasingly global nature of Internet commerce will be to its advantage because it will offer global delivery of its products, and market its products to an international standard.

Financial Forecasts

will be profitable the second year, and continue to more than double its revenues for the first three years. At the same time, its profit margins are expected to increase from 18.3% the second year to 42.7% in year five.

Revenue, Expense, and Income Projections

|Income Summary |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |

|Net Revenues |2,906,070 |9,826,210 |23,702,920 |43,309,840 |62,916,760 |

|Cost of Goods Sold |952,222 |1,444,160 |2,388,026 |4,129,304 |6,021,060 |

|Gross Profit |1,953,848 |8,382,050 |21,314,894 |39,180,536 |56,895,700 |

|Total Operating Expenses |8,793,020 |4,966,384 |9,279,528 |16,517,213 |23,786,439 |

|Earnings from Operations |(6,839,172) |3,415,666 |12,035,366 |22,663,323 |33,109,261 |

|Net Earnings after Taxes |($6,839,172) |$3,415,666 |$8,246,148 |$12,691,461 |$18,541,186 |

Cash Flow Projections

The cash flow projections shown here are determined using the income and expense statements summarized above, and assuming no investment.

|Operating Cash Flow |Begin |Year 1 |Year 2 |Year 3 |Year 4 |Year 5 |

|Net Cash From Operations |(6,804,909) |3,287,207 |7,802,527 |11,823,048 |17,673,693 |

|Cash for Plant & Equipment | |(548,300) |(117,600) |(104,400) |(129,000) |(126,300) |

|Increase/Decrease in Cash | |646,791 |3,169,607 |7,698,127 |11,694,048 |17,547,393 |

|Cash at Beginning of Year | |1,500,000 |2,146,791 |5,316,398 |13,014,524 |24,708,572 |

|Cash at End of Year |$1,500,000 |$2,146,791 |$5,316,398 |$13,014,524 |$24,708,572 |$42,255,965 |

Capital Requirements

This cash flow projection demonstrates that will be unable to implement its plans to develop its website and initiate a national advertising campaign without an infusion of new capital. The ending operating cash deficits of $7.7 million at the end of year one indicate that must seek $9.5 million in start-up capital if it is to realize its plans. With an infusion of $9.5 million in two stages ($1.5 million in immediate seed capital, and $8.0 million after 3 months of operations), ’s cash position remains positive for the five-year planning horizon.

Valuation of Business

Investment Requirements

is seeking an experienced financial partner to provide $9.5 million in investment capital to begin marketing activities and to provide operating capital. This investment will occur in two stages: $1.5 million initially to establish and staff the customer interaction center, hire key management and provide operating capital; an additional $8.0 million approximately 3 months later will be used primarily for marketing/promotional activities. In addition to capital resources, the ideal partner will be able and willing to assist in developing business relationships with Internet advertisers and other useful business contacts. The ideal financial partner will also be experienced in working with high-potential rapid-growth Internet and consumer-oriented companies, and will recognize the unique problems and opportunities they confront.

exit strategy

Assuming successful operations and favorable financial market considerations, plans to tender an initial public offering of its stock after two to four years of operations as it meets its financial projections and begins to show a significant profit. The purpose of the offering will be to secure capital for future growth, and to provide a harvest opportunity for early investors. Alternatively, may consider seeking a merger with or sale to a strategic partner in the same time frame.

Valuation of Business

The valuation of was determined using the venture capital method. An annual discount rate of 50 percent was used, reflecting the inherent uncertainty and risk surrounding any new business venture.

Venture Capital Method. The venture capital method assumes that a company will tender an initial public offering of stock at some known date in the future. The earnings of the company on that date are multiplied by an appropriate price/earnings multiple to determine the future market value of the company. intends to initiate a public offering of its stock after 2 to 4 years of operations – we assume here that this will occur at the end of year three. Projected profits in the third year are forecast to be $8.2 million. Using a conservative price/earning ratio of 20, the market capitalization of at the time of its IPO is projected to be $165 million.

Offer

For an initial investment of $9.5 million from an appropriate financial partner, we are offering a 20 percent ownership stake in in the form of commom stock. We anticipate that the value of this investment will grow to $33 million at the time of ’s IPO in three years, representing an internal rate of return of approximately 51 percent annually.

Appendices

Table of Appendices

Financial Statements

• Income Statement [5 years]

• Balance Sheets [5 years]

• Cash Flow Statements [5 years]

• Other supporting financial statements

Web Page Examples

Sources

Endnotes

Sources of information

Sources not included in endnotes.

The 1997 American Internet User Survey, .

CyberAtlas: Traffic Patterns, .

Cyber Dialogue Free Data, .

David R. Truog, Internet Commerce: The open Market Solution, Open Market, Inc. Nov. 14, 1997.

Emarketer, .

Encyclopedia of American Industries, Vol.2 Service and Non-Manufacturing Industries, Scott Heil and Terrance W. Peck (editors), 1998, SIC 5992, pages 824-826.

Hoover’s Company Capsules, .

The Industry Standard, Feb.8, 1999.

InfoDial Electronic Commerce Web Hosting, .

Internet Best Practices, .

Kristin Young, “Gerald Stevens, Inc.: Why Florafax?” Floral Management, Feb. 1999, page 36.

The Society of American Florists, .

Standard and Poor’s Industry Surveys, Retailing: Specialty, Vol. 166, No. 40, Sect. 1, Oct.1, 1998, pages 11-12.

endnotes

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[i] Doug Tsuruoka, “Will Consumers Say It With Flowers Over The Web?” Investor’s Business Daily, , Dec. 22, 1998, page A9.

[ii] Flowers, Jan. 1999, page 48.

[iii] Society of American Florists, Industry Snapshot, , accessed Feb. 2, 1999.

[iv] Flowers, Jan. 1999, page 47.

[v] USA Today, June 17, 1997, page 9E.

[vi] PCFlowers & Gifts Partner Network, , accessed March 2, 1999.

[vii] Michelle V. Rafter, “Internet Flower Sellers See Rosy Valentine’s Day,” Yahoo! News, , Feb. 5 1999, accessed Feb. 16, 1999.

[viii] Mary Modahl, Vice President of Research, Forrester Research Inc., Now or Never, How Companies Must Change Today to Win the Battle for Internet Consumers, Harper Collins Publishers, 2000, page xvi.

[ix] , accessed Sept. 29, 1999.

[x] Jane Goldman, “War of the Roses”, The Industry Standard, Aug. 9, 1999.

[xi] Beth Berselli, “U.S.A. Floral Unveils Plan to Buy a Top Flower Importer,” The Washington Post, Aug. 14, 1998, page G01.

[xii] Society of American Florists, Industry Snapshot, , accessed Oct. 6, 1999.

[xiii] Tom Prince and Tim Prince, “Who’s Growing? Who’s Not?” Floral Management, Jan. 1999, page 27.

[xiv] “Females Lead Online Growth Spurt,” , accessed Oct. 5, 1999.

[xv] CNBC News report based on Jupiter Communications survey, January 5, 2000.

[xvi]Ann Handley, “Forrester Forum: Making Internet Marketing Pay Off, Day1,” http//, Oct. 5, 1998, accessed Feb. 27, 1999.

[xvii] Society of American Florists, Industry Snapshot, , accessed Oct. 5, 1999.

[xviii] , accessed Oct. 4, 1999.

[xix] “E-Commerce Spotlight: Hard Numbers on e-Christmas 1999”, The Industry Standard, Jan. 31, 2000.

[xx] Jane Goldman, “War of the Roses”, The Industry Standard, Aug. 9, 1999.

[xxi] “E-Commerce Business is in Full Bloom at 1-800-Flowers,” PR Newswire, Nov. 11, 1998.

[xxii] “Flower Power”, The Herald, Aug. 2, 1999.

[xxiii] “1-800-Flowers Goes Global in New Campaign,” ADWEEK Eastern Edition, Oct. 12, 1998.

[xxiv] Chet Dembeck & Andy Wang, “1-800- Delivered to ,” E-Commerce Times, Oct. 11, 1999, .

[xxv] “Fingerhut Executive Views Internet as Route to Expand, Save on Postage,” Saint Paul Pioneer Press, Aug. 1998.

[xxvi] About PCF&G, , accessed Feb. 16, 1999.

[xxvii] “Shop “Till You Drop with and PC Flowers,” PR Newswire, Oct. 4, 1999.

[xxviii] G.Beato, “Fire on the Mountain,” Business2.0, , Sept., 1999.

[xxix]“Seeking Simplicity: Lifestyle Trends of the 90’s,” Society of American Florists, , accessed Oct. 5, 1999.

[xxx] Maryanne Jones Thompson, “Portal Spotlight: Exerting Influence on E-Commerce Sites,” The Industry Standard, Sept. 20, 1999.

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