Financial Plan and Projections
Funds Required and Their Use ePower seeks a financial partner to provide $3.5 million In financing to implement the company's strategy. Due to the extremely high margins involved in ePower services, the company will realize incrementally growing cash inflow from existing clients. The primary need for capital is for technological development and promotion. Long-Range Financial Strategies and Investor Harvest ePower is committed to long term value creation, expanding our customer base, technology, breadth of service, and underlying value. As business grows, so grows the attractiveness to a strategic buyer. There are two scenarios, in particular, which could drive this attractiveness: EBPP Industry Consolidation - As electronic transactions increase, the potential for this market will become more evident, market share and subscriber volume will become a critical success factor for companies operating in this industry. As a result, we expect consolidation as large institutions strive to buy subscribers. End to End Solution Provider - Currently, the EBPP market is very fragmented with companies competing in different industry sub-segments (in house software, Frontend Providers or Back-end Providers). As competition increases, a movement towards complete proprietary solutions will likely emerge. ePower will be positioned as an attractive target that offers a complete solution in the utility market. Financial Projections Financial projections were created to model the effects of certain assumptions of our business model. Through our due diligence, we discovered broad estimates for the cost of traditional preparing and presenting bills. Estimates ranged from $1.60 to 2.00; however, we believe that a conservative $1.75 cost is reasonable and sustainable given the rising costs of paper, and postage over the life of the projection. ePower's revenue model includes two parts, a $5,000 monthly subscription fee and a $0.40 per transaction fee. The fees are charged for system space, web presence, speeding receivable collection, targeted marketing and other customer care benefits of the system. Total Clients
1999 2000 2001 2002 2003 Jan 0 Feb 0 Mar 0 Apr 0 May 0 Jun 0 1 1 2 3 3 3 11 12 14 16 18 20 34 36 38 40 42 44 58 60 62 64 66 68
ePower Systems
Jul
0
4 4 4 5 8 10
22 24 26 28 30 32
46 48 50 52 54 56
70 72 74 76 78 80
Aug 0 Sep 0 Oct 0 Nov 0 Dec 0
The company achieves positive cash flow in Q2 2001, and the cumulative cash draw down peaks at $3.5 million dollars. Expenses Bank Fee The bank that executes the ACH transfer for ePower will collect $0.06 per transaction. We anticipate this rate will decline as banks compete for this space and volume increases. Technical Development Line items referring to the technology, include the technical staff which is the salary budget for the firm on the income statement as well as the PPE expenditures on the cash flow statement. These expenditures on PPE will be used to purchase needed hardware and software to develop ePower's CustomerDirect service. The funds budgeted will be used to finance the growing technology needs within the firm as it begins to service more clients. SGA -Marketing and Salaries This includes a $800,000 annual marketing expense for implementation of the program. In addition, minimal salaries for management (who will be compensated primarily through an equity participation program), customer support and sales forces are included in this number. We believe that marketing and strong sales leads will be based primarily on relationships with key decisions makers within targeted organizations. Other Expenses - Rent & Contract Advice Rent is projected at $3,000 per month and will not grow dramatically until years three and four where expanded facilities will be required. The majority of the other expenses will be used to contract system design consulting and legal expertise at a $ 150 per hour rate.