This document summarizes financial projections for a company that produces and sells polysensors and sensor cartridges from 2008-2010. It projects increasing sales but declining operating margins over this period. Key metrics like ROE, sales to book value, EPS are provided. The document also outlines an investment strategy for the company that includes providing both equity and debt financing with terms like interest rates, required sales and ROE benchmarks. Manufacturing costs and assumptions about expenses, depreciation, tax rates and R&D spending are defined.

1. SALES SCHEDULE 2008 2009 2010
Rate of Growth for Polysense 0.20 0.20
Price 187.50 187.50 187.50
Rise in Cost (125 $) 0.10 0.10
Sensor sale Per Polysense 12 11 10
Rise in Cost (10 $) 0.10 0.10
SALES SCHEDULE 2008 2009 2010
Projected Sales (Units) 1000 1200 1440
PolySense Selling Price 187.50 187.50 187.50
PolySense Cost 125.00 137.50 151.25
Polysense Revenues 187500 225000 270000
COGS 125000 165000 217800
Operating Margin 62500 60000 52200
Catridge 12000 26400 40040
Sensor Cartridge Selling Price 9 7.50 7
Sensor Cartridge Cost Price 3.00 3.30 3.63
Sensor Cartridge Revenues 108000 198000 280280
COGS 36000 87120 145345
Operating Margin 72000 110880 134935
Total Operating Margin 134500 170880 187135
Investment in Assets (% of GP) 8% 8% 8%
New Assets 5322 13670 14971
Assets 1250 14608 25927
Depreciation 313 3652 6482
Net Assets 938 10956 19445
PROFIT AND LOSS STATEMENT (in USD) 2008 2009 2010
REVENUES
Sale of Polysense + Sensors 295,500 423,000 550,280
EXPENSES
Cost of Goods Sold 161,000 252,120 363,145
Gross Profit 134,500 170,880 187,135
Sales and General Administration Exp 32,200 50,424 72,629
R&D Expenses 29,550 42,300 55,028
Depreciation 313 3652 6482
Other Expenses 5910 8460 11006
Operating Profit 66,528 66,044 41,990
Other Income 0 0 0
Profit before Interest and Tax 66,528 66,044 41,990
Interest 0 0 0
Profit Before Tax 66,528 66,044 41,990

2. Provision for Tax 23285 23115 14697
Profit After Tax 43,243 42,929 27,294
Provision for Dividend 313 313 313
Retained Earnings 42,930 42,616 26,981
BALANCE SHEET (in USD) 2008 2009 2010
SOURCES OF FUND
Shareholder's Fund
Share Capital - Promoters 2,500 2,500 2,500
Share Capital - VC 1,071 1,071 1,071
Share Premium 26,929 26,929 26,929
Reserves and Surplus 42,930 42,616 26,981
Net Worth 72,359 72,045 56,410
Loans Funds
TOTAL LIABILITIES 72,359 72,045 56,410
APPLICATION OF FUNDS
Fixed Assets
Gross block 1,250 14,608 25,927
Accumulated Depreciation 313 3652 6482
Net Fixed assets 938 10956 19445
Investments 0 0 0
Current Assets
Sundry Debtors 59,100 84,600 110,056
Cash in Hand & Bank 44521 26913 -462
Current Liabilities
Sundry Creditors 32,200 50,424 72,629
Net Current Assets 71,421 61,089 36,965
TOTAL ASSETS 72,359 72,045 56,410
Ratio Analysis 2008 2009 2010
ROE 59.33% 59.15% 47.83%
Sales/ Book Value 4 7 15
EPS assumin 1 share of 1$ 12.02 11.93 7.55
Operating Margin 46% 40% 34%
Overhead Expenses to Opeating Exp 46% 56% 72%
Gross Profit/ Net Profit 32% 25% 14%
Return on Net Assets 60% 70% 73%
Current Ratio 3.22 2.21 1.51
Cash to Net Assets 62% 44% -1%
Break Even Analysis 2008 2009 2010
Sales 295,500 423,000 550,280
Variable cost 161,000 252,120 363,145
Semi- Variable Cost 38,110 58,884 83,635
Contribution 96,390 111,996 103,500
Contribution Per Unit 96 93 72
Fixed Cost 29,863 45,952 61,510

3. Break Even (Units) 310 492 856

4. Assumptions 2008 2009 2010
Growth 20% 20%
Selling Price would not increase 187.5 187.5 187.5
Rise in COGS (%) 0% 10% 10%
Sensor Sale per Machine would decrease in years 12 11 10
Rise in COGS of Sensor (%) 0% 10% 10%
Sales Projection on Realistic basis 1000 1200 1440
Selling Price of Cartridge (it would kep reducing) 9 7.5 7
COGS of Sensor would increase 0% 10% 10%
We assume that investment in miscelleaneus assets on % of GP 8% 8% 8%
Depreciation WDV 25% 25% 25%
Valuation Pre Investment 2008 2009 2010
PAT 43,243 42,929 27,294
Depreciation 313 313 313
Cash Flow 43,555 43,241 27,606
Year 1 2 3
Discounting Rate 0.12 0.12 0.12
Discounting Factor 0.89 0.8 0.71
PV of Cash Flows 38888.73 34471.55 19649.63
Other expenses are taken as percentage of sale @2% 2%
Sum Of Present Values 93009.91
Purchase 30%
Value - Equity Err:502

5. Investment Strategy 2008 2009 2010
Equity 28000
Debt Commitment (with conditions) @10 % 50000 50000 75000
Rate of Interest 10% PLR+2.25% PLR+2.25%
We would embed a real option into the debt converting debt into equity within
a period of two years from the date of debt given but only till Dec 2011 as last
Valuation of company for converting debt into equity would be
Years 2008 2009 2010
Increment for Valuation in future years 40% 60% 80%
Valuation of Company for these years 130667 149333 168000
Example
Date of loan given Dec-08 Nov-09 Mar-10
Debt given 50000 50000 50000
Rate of Interest 10% PLR+2.25% PLR+2.25%
Exercising Right Valid Till Dec-10 Nov-11 Dec-11
Debt conversion in the following years 50000 40000 40000
Equity 38% 27% 24%
UPPER Cap on VC shareholding would not be more than 60% at any point of time
Investment Plan 2008 2009 2010
Equity 28000
Debt Commitment 50000 50000 75000
Key Benchmarks to achieve
Sales of minimum
Machines 800 960 1100
Sensors 6400 14080 22880
Minimum Level of ROE 30% 30% 30%
R&D expenses
Both the Products are to be evalued and stage of development would be considered
Rating of UNICEF would be takeninto consideration
Equity Dilution
Any stake dilution would not be permisible without the consent of VC
The VC would have "First right of Refusal"
THe Promoter cannot engage in any other business with the same kind of research
Any dealings with Bhat Bio- Tech India Pvt Ltd would have to be cleared from the director of VC

7. Cost of Manufacturing
Annual Increase in Cost of Goods Sold* 10%
Sales & General Expenses as proportion of Cost of Goods
Sold 20%
Sundry Debtors as % of Sales 20%
Sundry Creditors as % of Cost of Goods sold 20%
Initial Assets (Testing Eqpt and Electrode Mfg Eqpt) 50000
Annual Rate of Depreciation 25%
Reducing Balance Method used for Depreciation
Tax Rate (Corporate tax) 35%
R& D Investment as % of Sales 10%
Interest Rates
Long term Debt 10%
Provision for dividend (Including CDT) 12.50%