More Vino Ltd.

Wine Retailer and Wholesaler

Established 2005

Managed by Christian & David Stone

Marketing Analysis

Product

Business divided into wholesale, bar & restaurant, retail, and delivery.

Unexpectedly, bar makes up majority of sales Popular with young professionals on the way

home from work Restaurant added in response to demand Owners want to sell wine accessories

Wholesale efforts relatively unsuccessful

Product Market

Sales up 101% from 2006-2007 Anticipated 40% and 20% sales growth in the

next two years if expansion is made Market for wine estimated at $48 million circa 2005,

with high growth anticipated due to rising incomes Strong economic growth in Trinidad Booming tourism industry Limited competition from specialists

Place

More Vino operates out of a location in Port of Spain, the political and economic capital of Trinidad & Tobago

Located on Ariapita Avenue, nearby many of the island's best restaurants

Includes bar and retail center, along with warehouse and extensive display space

Large garden area that can be renovated to accommodate growing demand

Delivery service

Price

Wine is higher priced relative to local alcoholic beverages

More Vino offers lower prices than other competitors

High COGS (77% 2006, 65% 2007) Planned 30% increase in price in response to 10-

15% rise in costs would bring MV's prices up to its competitor's levels

Promotion

Excellent location More Vino uses customer service practices

from developed economies Provides on-site entertainment for customers Plans to increase marketing efforts to promote

(tentative) new expansion Owners considering wine-tasting events, wine

club, and other promotional efforts

Operations Analysis

Asset Utilization

More Vino distributes wine on both the wholesale and retail level.

Heavy investment in inventory In 2007, inventory made up 66% of assets In 2008, inventory made up 33% of assets 96% of current assets consist of inventory

Asset Utilization

Total Asset Turnover

Fixed Asset Turnover

BreakdownTAT rose 40%FAT fell 1%Sales up 101%Assets rose only 4%

47.5% fall in current assets

107% rise in fixed assets

2006 2007

2.01 2.82

2006 2007

5.84 5.78

Why?

More Vino drew down inventories by 48% to meet growing sales demand.

Investment in fixed assets increased both due to rising sales as well as the need to restructure to accommodate the bar's growing popularity.

Average Collection Period

Fell by 78% A/R decreased 56% A/R balance was never large due to nature of

business

2006 2007

2.15 .47

Inventory Days

Fell by 70% Too much initial inventory

Reduced by 48%; COGS up 69% More Vino needed cash in 2007

2006 2007

148.85 45.89

Human Resources

Managed by Christian & David Stone Degrees in Business Administration and

Economics (respectively) Familiar with business practices in developed

economies First time business owners Partners with Arthur Greenway, vice president

of a beverage firm & Ross Moore, his investment partner

Financial Analysis

Cash Flows: Operations

2005 - 2006 2006 - 2007

Net Income (2,015,034) (987,122)

Amortization 88,888 232,104

Accounts Receivable

(25,380) 14,316

Inventory (1,359,144) 650,160

Accounts Payable 391,932 817,134

Net Flow (2,918,738) 726,592

Cash Flows: Investments

Fixed Assets 2005 - 2006 2006 – 2007

Automobile (85,242) (31,884)

Furniture & Fixtures (254,904) (355,024)

Equipment (194,202) (235,736)

Leasehold Improvements

(293,520) (368,868)

Total (827,868) (911,512)

Cash Flows: Financing

2005 - 2008 2006 – 2007

Bank Credit 1,518,678 67,850

CLTD 74,388 4,396

Bank Loan 260,426 (79,506)

Loan Payable 1,200,000 (400,000)

Shareholder's Loan 0 666,000

Common Stock 720,000 0

Dividends 0 0

Net Flow 3,773,492 258,740

Cash Flows: Summary

2005 - 2006 2006 - 2007

Operations (2,918,738) 726,592

Investing (827,868) (991,512)

Financing 3,773,492 258,740

Total 26,886 (6,180)

Beginning Cash 0 26,886

Ending Cash 26,886 20,706

Cash Flows: Summary

2005 – 2006, More Vino used extensive short and long term debt, along with equity raised through stock issue to fund both investments and operations.

2006 – 20087, More Vino reduced current asset accounts, delayed payments to suppliers, and used shareholder loans to fund further investments.

Operating accounts used to avoid further debt

Liquidity

Ratio 2006 2007

Current 0.71 0.26

Quick 0.03 0.01

AP Days 42.92 78.25

CFL -1.46 .26 Declining current assets, especially inventory, along with a 45% increase in

current liabilities reduced current and quick ratios. A/P balance increased 208% against a 69% rise in COGs; showing More

Vino is choosing to delay payment to bolster cash. Cash generated by both causes CFL to increase 82%

Leverage

Ratio 2006 2007

Debt to Equity -2.66 -1.98

Debt to Common Stock

4.78 6.28

TIE -3.6 -0.4

Cash Interest Coverage

-5.66 2.03

Debt to Equity increased by 26% even though total liabilities increased 31% because losses reduced total equity by 76%.

Interest coverage improved due to reduced losses, even though interest increased 60%.

Profitability: Common Size

Selected Item 2006 2007

Sales 100% 100%

COGS 77.22% 65.1%

Gross Margin 22.78% 34.9%

Rent 15.16% 6.00%

Wages 18.39% 10.64%

Operating Margin -36.53% -3.64%

Interest 10.16% 8.12%

Net Profit Margin -46.69% -11.4%

Profitability

More Vino increased contribution margins, possibly through higher prices, increasing gross profits by 207%

Higher sales helped cover fixed costs, most significantly rent, wages, and interest, improving operating profit (80%) and net profit (50%)

Rent fell absolutely by 20%, indicating More Vino negotiated a better rate

Profitability: DuPont Analysis

2006 2007

RoE 155.6% 42.35%

RoA -93.71% -44.8%

NPM -46.69% -11.4%

TAT 2.01 3.87

D to E -2.66 -1.98

Return on Equity is positive because both net income and total equity are negative

RoE “fell” by 73%

Change in RoE driven by net income: “Fall” in D2E of 26% due

to negative net income Cost controls improved

net income margin by 76%

These two factors overwhelmed the sales-driven 93% improvement in TAT

Summary: Strengths

Improving contribution margin due to higher prices

Strong sales growth over the past two years– Improved ability to cover fixed costs

Successful in negotiating better terms with leaseholder and suppliers

Unique value proposition

Summary: Weakness

More Vino has yet to generate positive net income

High amount of debt combined with high interest charges

Negative equity balance Problems with excess inventory and under-

pricing in the past

Renovation?

Cash flow problems indicate More Vino will require additional financing to support projected increases in inventory and fixed assets other than leasehold improvements

Need long-term credit What rate?

Increased operating margins will bring More Vino close to break even point next year

Further sales expansion will help cover fixed costs, in particular interest, rent, and wages

Careful attention to operating costs will be important Will rent and wages display same fixed cost pattern?