Telecommunications Business Plan

TeleSpace, Inc. seeks a seed round of equity capital to initiate corporate operations, secure office and engineering space, hire the executive staff and initial employees, and initiate billing and customer service for the core MyLine customers. The company seeks start-up equity financing to accelerate market penetration through a multi-media national advertising campaign, hire additional sales, marketing, customer service and engineering personnel, and upgrade the operational hardware and software capability of the existing MyLine system. There is also a need to invest over the next year in hardware infrastructure. This capital investment will be sufficient to take the company to profitability and ongoing positive cash flow until the acquisition of the company, or initial public offering of common stock.

The company is offering 20% of its fully-diluted common stock, on a post-funding basis, for this investment, which can be Series A convertible preferred stock or any reasonable form the investor prefers. The company has also reserved one seat on its Board of Directors for the investor(s) or his representative.

The financial exit strategy would preferably be through acquisition by a public competitor or potential competitor. The company plans to be generating sales at a “high run rate” within three years, with comenserate gross margins and net margins. We should be an attractive stock acquisition for a large company contemplating the time and cost of competing against an established brand and experienced and successful management team. Management will naturally assess the viability of the public stock markets with its investment banker and will take the company public through an initial offering of its common stock if that vehicle offers superior returns to our investors at that time.

The following financial plan details the staffing plan and pro forma income statement, cash flow, balance sheet and other financial analysis over the next three years. Management assumes that its present owner, AmericomUSA, Inc., will pay all costs and expenses through 1999. The sale of the company is assumed to be effective January 1, 2000. Profitability should be achieved by June, 2000 and positive cash flow by September, 2000.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown below. The key underlying assumptions are:

• A stable U.S. and world economy, with no worse than an average cyclical recession in the next year.
• As unified messaging technology continues to evolve, no new proprietary technology obsolesces the MyLine technology.
• The federal government does not significantly alter the regulatory climate and continues to allow the evolution of telecommunications into a more competitive industry.

7.2 Key Financial Indicators

The key financial performance measures for TeleSpace are:

• Sales growth: The company must demonstrate steady and accelerating growth to establish market presence in this huge marketplace.
• Gross margins must remain high to provide the internal growth capital needed.
• Productivity as measured by sales per employee must be at least $130,000 by the end of the first year and should approach $1 million by the end of year three.

7.3 Break-even Analysis

The break-even analysis shows that the company has a good balance of steadily increasing operating costs and sales, and where the break-even point will be reached in monthly sales.

7.4 Projected Profit and Loss

Profitability will be reached in June, 2000 resulting in a loss for the first year. Consistent high gross profit margins and net margins will be achieved within one year.

7.5 Projected Cash Flow

Management expects that equity capital will be required to take the company to permanent positive cash flow by September, 2000.

7.6 Projected Balance Sheet

The balance sheet projects substantial growth in net worth by the end of fiscal year 2002.

7.7 Business Ratios

Standard financial ratios are shown below and indicate a plan for manageable yet aggressive growth. Industry profile ratios based on the Standard Industrial Classification (SIC) code 4899, Communications Services, nec., are shown for comparison.