The market and related entry strategy mentioned earlier in this Business Plan is reflected in the assumptions used to build the financial model and corresponding pro-forma financial statements.The management of OSS Telecom Technology, Inc. believes these projections to be on the conservative side and, therefore, very attainable.
The income statement presented here demonstrates the projected results of operations for the period FY 1999 through FY 2004 on a consolidated basis for OSS Telecom Technology and OSS Telecom Technology Taiwan.
Sources & Uses of Funds
There are two sources and uses of funds presented:
There are two balance sheets presented which accompany the two above mentioned sources and uses of funds statements.
The following chart focuses on the key financial indicators of the company.
The following chart and table illustrate the break-even requirements for the company.
The income statement presented here demonstrates the projected results of operations for the period FY 2001 through FY 2003 on a consolidated basis for OSS Telecom Technology and OSS Telecom Technology Taiwan.
License revenues consist of license fees for the company's software. Service revenues consist of fees for customer-defined customization, installation, and product support services. In addition, other lesser service revenues are for maintenance fees and training fees. After establishing the necessary infrastructure in the first two years, Net Profit/Sales will grow in FY 2003.
Revenue recognition for the various sources of fees is as follows:
Revenues are projected to grow significantly from FY 1999 that ends on March 31, 1999, through FY 2003. This represents a comfortable growth rate through FY 2003. Revenues are broken down into two major classifications:
License revenues are classified as new license sales and upgrade license sales. These are further broken down between current Customer Care and Billing (CCB) solutions and planned new products of Prepaid IN and Short Message Service.
Cost of Goods Sold (COGS) consists primarily of salaries and related labor loadings associated with installation, customization, and product support activities. It also includes third party costs associated with system integrators and, to a lesser extent, costs related to providing software maintenance and end-user training to customers. COGS are expected to be a decreasing percentage of revenues in FY 2000 through FY 2003 as the number of subscribers per license sale grows and there is a corresponding decrease in the cost per subscriber.
Gross margin is projected to stay high from FY 1999 onward and grow in FY 2003 as the company attains economy of scale. The compound annual growth rate for gross margin in FY 2004 will outpace revenue growth.
Other Income and Expense are associated with debt service, amortization of excess acquisition costs and interest income.
The primary assumption on the Sources and Uses Statement is that cash would be raised in an initial private placement.
The Balance Sheet presented accompanies the above mentioned sources and uses of funds statement, with the assumption of a projection of a $20 million private placement occurring in the first quarter of FY 2001. This represents a company able to meet projections based upon its planned growth targets.
The following is a summarized list of key business ratios for the company. The final column of the table, Industry Profiles, shows important ratios from the communications services industry, as defined by the Standard Industry Classification (SIC) Index code 4899, Communications Services, NEC (not elsewhere classified).