Trembling Cups

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Espresso Equipment
Today, no coffee shop is completely without espresso drinks. Your customers won't just want drip coffee -- they'll want lattes, espresso shots, americanos and cafe mochas. To provide these you will need an espresso machine, a device specifically designed to force hot water through espresso shots. Additional equipment includes a special grinder to grind espresso beans. Espresso grinding is a delicate procedure unlike grinding standard beans. A tamp will be needed to push the espresso into place and you will also need demitasse cups or shot glasses to hold the shots before you pour them into the drink. Metal jugs are often used to hold milk before, during and after steaming.

Coffee Equipment
The coffee brewers used in commercial coffee shops barely resemble the Mr. Coffee that you use at home. Your business needs coffee brewers designed to make and store the large amounts of coffee that your customers will buy. Give your shop an extra touch of class with good coffee mugs for customers who want to drink their coffee in the shop. Grinders designed to grind large amounts of coffee will allow you to grind your coffee quickly, as well as sell it to customers who do not have a grinder at home.

Furniture
Some coffee shops are strictly "to-go" affairs. In this case you will need nothing other than counter space for preparing coffee. If you want people to sit down and enjoy coffee at your shop, you will need lots of comfortable seating and tables. Outdoor seating is popular at coffee shops, so having outdoor furniture can be as important as having indoor furniture.

Electrical and Plumbing Needs

While not "equipment," strictly speaking, no coffee shop can open without being fitted for the right electrical and plumbing requirements. Espresso machines have special electrical needs more akin to a fridge or a stove than your coffee maker at home. Espresso machines must also be directly connected to a water source to fulfill their water needs. Drainage is also required. Water softeners in the water line will prevent mineral build up in the machines, one of the biggest sources of problems with espresso makers.

ETHICAL STANDARDS

Do the Right Thing

Since our founding in 2010, Trembling Cups employees have been motivated by principles and values that have allowed them to work toward mutual goals. These principles and values remain as constant and as critical to our success as ever. The core of these values, which still inspire Trembling Cups employees today, is that Trembling Cups is a company of honesty, quality, and integrity. This legacy is fundamental to our ability to attract and retain the best employees, gain and keep the trust of our customers, create shareholder value, support the communities in which we operate, and protect our reputation. Maintaining our reputation is more important than ever as a result of the many laws that regulate our business and the high expectations of our customers and general public about how we do business. It has always been and continues to be our policy to conduct business in compliance with all applicable laws and regulations and in accordance with the highest ethical standards. We continue to expect that Trembling Cups employees will comply with these principlesThese requirements may seem to be detailed and extensive, but they are all based around the expectation that our employees will "Do the Right Thing." Ask yourself if the action you are considering might embarrass you if you had to explain it to a close friend or family member or to a reporter on television. If the answer is "yes," then it probably is not the "Right Thing" and is likely prohibited by the Trembling Cups Code of Business Conduct. When anyone within our organization fails to live up to the expectations outlined in the Trembling Cups Code of Business Conduct, we could all suffer by losing the loyalty of our customers, our employees, and our communities, and damaging our reputation. Any employee, regardless of his or her position in the Company, who violates our Code of Business Conduct, may be subject to discipline or other consequences.

Code of Business Conduct for Employees

Highlights of the Trembling Cups Code of Business Conduct This information highlights certain key points from the Trembling Cups Code of Business Conduct. Refer to the full text of this policy for more complete information and for other key points about how the Company and its employees work together to "Do the Right Thing." The Trembling Cups Code of Business Conduct sets forth standards of conduct for all Trembling Cups employees. Additional guidelines are set forth in detail in other Company policies, programs and statements and in various laws and regulations. The Trembling Cups Code of Business Conduct provides guidance on our legal and ethical responsibilities and assists employees in making the right decision. In particular, it sets forth and reinforces our responsibilities for:

Compliance with all applicable laws, rules and regulations; Fair, ethical and courteous treatment of our employees, shareholders, customers and communities; Honest and ethical conduct, including the avoidance of actual or apparent conflicts of interest (and handling conflicts of interest that cannot be avoided); Protection of our assets and accurate record-keeping; Compliance with our policies and internal controls; Fair, full, accurate, timely and understandable reporting and disclosure of information to parties entitled to that information; and reporting violations of the Trembling Cups Code of Business Conduct.

If any aspect of the Trembling Cups Code of Business Conduct is unclear to employees, or if employees ever have any questions about legal or ethical compliance, it is their personal responsibility to communicate this concern to the Company. Employees may use any available channel to communicate their concern to the Company. Employees who communicate concerns to the Company are supported, and should do so without fear of retaliation or retribution. Non-compliance with the Trembling Cups Code of Business Conduct and other business conduct policies of Trembling Cup could result in disciplinary action including termination and could subject the employee and the Company to civil and/or criminal liability. Employees may be required to execute written certifications of compliance with the Trembling Cups Code of Business Conduct. Waivers from compliance with the Trembling Cups Code of Business Conduct may be granted in very limited circumstances and only by authorized personnel.

Policy
We comply with the Trembling Cups Code of Business Conduct. We manage our business in compliance with all applicable laws and regulations and in accordance with our Company's high standards of business conduct. All employees are expected to comply with the Trembling Cups Code of Business Conduct, which is essential to maintaining our reputation for honesty, quality, and integrity. It is also each employee's responsibility to report to the Company any situation where our standards or the laws are being violated. Any employee disclosing, in good faith, violations or suspected violations of legal requirements or Trembling Cups business standards will not be subjected to retaliation or retribution. Likewise, failure to comply with the provisions of the Trembling Cups Code of Business Conduct will not be tolerated. In summary, we "Do the Right Thing." The details of the Trembling Cups Code of Business Conduct are set forth in this policy memorandum.

Financial Plan
Trembling Cup will capitalize on the strong demand for high-quality gourmet coffee. The owners have provided the company with sufficient start-up capital. With successful management aimed at establishing and growing a loyal customer base, the company will see its net worth doubling in two Months. Trembling Cup will maintain a healthy 65% gross margin, which combined with reasonable operating expenses, will provide enough cash to finance further growth.

7.1 Important Assumptions

General Assumptions Plan Month Month 1 1 Month 2 2 10.00% 10.00% 25.00% 0 Month 3 3 10.00% 10.00% 25.42% 0

Current Interest Rate 10.00% Long-term Interest Rate 10.00% Tax Rate Other 25.42% 0

7.2 Projected Cash Flow

As the chart and table below present, the company will maintain a healthy cash flow position, which will allow for timely debt servicing and funds available for future development.

Pro Forma Cash Flow Month 1 Cash Received Cash from Operations Cash Sales Subtotal Cash from Operations Additional Cash Received Sales Tax New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received Expenditures Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Sales Tax P584,000 P584,000 P0 P0 P0 P0 P0 P0 P0 P584,000 Month 1 P124,600 P327,865 P452,465 P0 P642,400 P642,400 P0 P0 P0 P0 P0 P0 P0 P642,400 Month 2 P143,800 P388,715 P532,515 P0 P3,300 P0 P3,585 P0 P706,640 P706,640 P0 P0 P0 P0 P0 P0 P0 P706,640 Month 3 P155,144 P420,945 P576,089 P0 P3,300 P0 P3,961 P0 Month 2 Month 3

Principal Repayment of Current Borrowing P3,300 Other Liabilities Principal Repayment P0 Long-term Liabilities Principal Repayment P0 Purchase Other Current Assets P0

Purchase Long-term Assets Dividends Subtotal Cash Spent Net Cash Flow Cash Balance

P0 P0 P455,765 P128,235 P195,358

P2,000 P0 P541,400 P101,000 P296,358

P2,000 P0 P585,350 P121,290 P417,648

7.3 Key Financial Indicators

7.4 Break-even Analysis

With average monthly fixed costs of P20,300 in Month 1 and an average margin of 65%, Trembling Cup's break-even sales volume is around P31,300 per month. As shown further, the company is expected to generate such sales volume from the out start.

Break-even Analysis Monthly Revenue Break-even P31,247 Assumptions: Average Percent Variable Cost 35% Estimated Monthly Fixed Cost P20,311

7.5 Projected Profit and Loss

Annual projected sales of P584,000 in Month 1 translate into P254.00 of sales per square foot, which is in line with the industry averages for this size of coffee bar. Overall, as the company gets established in the local market, its net profitability increases from 17.06% in Month 1 to 17.63% in Month 3. The table below outlines the projected Profit and Loss Statement for Month 1-3.

Pro Forma Profit and Loss Month 1 Sales Direct Cost of Sales Other Total Cost of Sales Gross Margin Gross Margin % Expenses P584,000 P204,400 P0 P204,400 P379,600 65.00% Month 2 P642,400 P224,840 P0 P224,840 P417,560 65.00% P143,800 P27,600 P5,500 P52,800 P6,000 P6,424 P9,500 P21,570 P0 P273,194 P144,366 P149,866 P2,326 P35,510 P106,530 16.58% Month 3 P706,640 P247,324 P0 P247,324 P459,316 65.00% P155,144 P31,000 P5,500 P52,800 P6,000 P7,066 P10,000 P23,272 P0 P290,782 P168,534 P174,034 P1,618 P42,424 P124,491 17.62%

Payroll P124,600 Sales and Marketing and Other Expenses P25,800 Depreciation Rent Rent Maintenance Utilities/Phone Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales P5,400 P48,400 P6,000 P5,840 P9,000 P18,690 P0 P243,730 P135,870 P141,270 P2,821 P33,740 P99,308 17.00%

7.6 Projected Balance Sheet

The company's net worth is expected to increase from approximately P212,000 by the end of Month 1 to approximately P443,000 in Month 3. The table below summarizes the projected balance sheets for this period.

Pro Forma Balance Sheet Month 1 Assets Current Assets Cash Inventory Other Current Assets Total Current Assets Long-term Assets P195,358 P296,358 P417,648 P21,175 P23,293 P25,622 P0 P0 P0 P216,533 P319,651 P443,270 P61,170 P10,900 P63,170 P16,400 Month 2 Month 3

Long-term Assets P59,170 Accumulated Depreciation P5,400 Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities

P53,770 P50,270 P46,770 P270,303 P369,921 P490,040 Month 1 P31,974 P6,700 P0 Month 2 P31,947 P3,400 P0 P35,347 P16,415 Month 3 P34,836 P100 P0 P34,936 P12,454

Subtotal Current Liabilities P38,674 Long-term Liabilities P20,000 Total Liabilities Paid-in Capital Retained Earnings Earnings

P58,674 P51,762 P47,390 P140,000 P140,000 P140,000 (P27,680) P71,628 P178,159 P99,308 P106,530 P124,491

Total Capital P211,628 P318,159 P442,650 Total Liabilities and Capital P270,303 P369,921 P490,040 Net Worth P211,628 P318,159 P442,650

7.7 Business Ratios

The table below outlines the company's business ratios. The last column represents industry average business ratios for Specialty Eating Places (SIC 5812).

Ratio Analysis Sales Growth Percent of Total Assets Inventory Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Month 1 Month 2 Month 3 Industry Profile 0.00% 10.00% 10.00% 7.60% 7.83% 0.00% 80.11% 19.89% 100.00% 14.31% 7.40% 21.71% 78.29% 6.30% 0.00% 86.41% 13.59% 100.00% 9.56% 4.44% 13.99% 86.01% 5.23% 0.00% 90.46% 9.54% 100.00% 7.13% 2.54% 9.67% 90.33% 3.60% 35.60% 43.70% 56.30% 100.00% 32.70% 28.50% 61.20% 38.80%

Percent of Sales Sales Gross Margin

100.00% 65.00%

100.00% 65.00% 48.47% 2.18% 22.47% 9.04 8.38 13.99% 44.64% 38.40%

100.00% 65.00% 47.37% 2.26% 23.85% 12.69 11.95 9.67% 37.71% 34.06%

100.00% 60.50% 39.80% 3.20% 0.70% 0.98 0.65 61.20% 1.70% 4.30% n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a

Selling, General & Administrative Expenses 47.94% Advertising Expenses 2.26% Profit Before Interest and Taxes Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets Additional Ratios Net Profit Margin Return on Equity Activity Ratios Inventory Turnover Accounts Payable Turnover Payment Days Total Asset Turnover Debt Ratios Debt to Net Worth Current Liab. to Liab. Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth Dividend Payout 23.27% 5.60 5.05 21.71% 62.87% 49.22%

Month 1 Month 2 Month 3 17.00% 16.58% 17.62% 46.93% 10.91 11.25 27 2.16 0.28 0.66 P177,858 48.16 0.46 14% 5.05 2.76 0.00 33.48% 10.11 12.17 30 1.74 0.16 0.68 P284,304 62.07 0.58 10% 8.38 2.02 0.00 28.12% 10.11 12.17 29 1.44 0.11 0.74 P408,334 104.13 0.69 7% 11.95 1.60 0.00