American Solar Network
Finance and Industry

FINANCIAL SUMMARY AND USE OF FUNDS

Volume purchasing power is required to obtain the significant OEM discounts that will result in an unprecedented manufacturing cost of under $500 for our most popular system. This will occur when monthly manufacturing volumes exceed 4,000 units per month. These low manufacturing costs allow for very attractive factory pricing while providing ASN with a healthy profit margin. ASN is committed to a high level of service and quality control and has factored these costs into its budget and capital needs.

ANNUAL PROJECTIONS BY YEAR 5 (WITH INVESTMENT):

Post Capitalization

Investment Units Prod. Revenues $Profit/Loss Cumulative Position

$3 000 000 268,200 $125,370,000 $28,417,356 $4,,127,405

The projected total capitalization required to go into high volume production is $3,000,000. There are three stages of capitalization proposed. A startup round of $400,000 would be used for a one year preparation period. It would pay officer and technical personnel salaries as well as rent and support costs allowing for: Start up advertising, video and installation presentations, detailed strategic and marketing planning, writing of proposals, refinement of manufacturing techniques, facilities planning, and moving costs and, most significantly, international expansion. A second round of $1,600,000 to fund the second growth level would be followed by the remaining $1,000,000. An important point is that even if funding is delayed after the initial $400,000 investment, profitability can be achieved and maintained by reducing marketing and factory/facility improvement expenses. However, growth and long term profitability will not be as great, obviously as it would be with total funding.

ASN expects to gross over $125 million per year by the fifth year with net income in excess of $28 million. It is anticipated that new equity investors will receive a minimum of 40% of the company and should be able to receive a minimum of five to 10 times their initial investment after five years when the company plans to issue Xs first public stock offering. ASN is open to various combinations of investment plans, and to structuring an exit strategy favorable to investors

HOW FlRST ROUND FUNDS WILL BE USED:

1. FUNDING FOR ADVERTISING MATERIALS NATIONAL & INTERNATIONAL MARKETING

To achieve rapid growth of sales for ASN, an effective international ad campaign in trade journals and appropriate magazines needs to be initiated. About $9,000 is needed for professional ads to be made and $90,000 for good sized ads in targeted magazines and targeted international marketing programs and shows for a year. (Total: $99,000)

To complement our National and International ad campaign, quality advertising materials are needed. ASN needs to update its brochures and literature. Good sales videos will be powerful sales tool. Our installation manual needs to be redone along with an installation video. New brochures and literature will cost about $15,000, a sales video about $ó,000, the installation manual will cost about $ó,000 and an installation video about $4,000 for a materials budget of $31,000. (Total:$130,000).

2. FUNDING FOR ASN FACILITY UPGRADES, LISTINGS, CERTIFICATIONS, INVENTORY DISCOUNTS

ASN needs a modest amount of new manufacturing equipment and assembly tables to meet 1995/96 goals. As a result of the highly successful $100,000 DOE Energy Related Inventions Grant (ERIP), ASN has new products and configurations to be Listed and Certified. It also needs funding for volume purchases that will allow it to get more favorable pricing.

Funds needed are: $64,000 to start the development of planned low cost thermosyphon and batch heating systems for the international market, $42,000 to make the ASN UP44T storage system and other new designs production ready, as well as $7,000 for Listings and Certifications, $63,000 for inventory and $94,000 for operating capital. (Total: $400 000}

THE INDUSTRY

The international solar thermal water heating industry is a vibrant industry. There are over one million solar water heaters in the city of Tokyo, Japan alone. Countries like Israel require solar on new construction and they are on virtually every home

Between 1979 and 1985, over one million systems were installed in the United States alone. U.S. consumers were motivated by fuel shortages, startling utility rate increases, and federal and state tax credits that essentially halved the cost of solar systems. The ASN system will cost significantly less than previous systems even after tax credits are taken into consideration