Zif Medical Devices Financial Statements Licensing, Option #1 Income Statement ($000) Year 1 2 3 4 5 6 Unit Sales (million units) - 8.3 17.7 28.3 125 248.8 Revenues ($.030 Royalty) - 248 530 850 3,750 7,463 S&A Expense 250 220 100 110 121 133 R&D 140 - - - - - Amortization - 1 1 1 1 1 Operating Earnings (390) 27 429 739 3,628 7,329 Income Tax - - 146 251 1,234 2,492 Net Earnings (390) 27 283 488 2,394 4,837

Cash Flow Statement ($000)
Year	1	2	3	4	5	6
Net Income	(390)	27	283	488	2,394	4,837
Amortization	-	1	1	1	1	1
Net Cash from Operations	(390)	28	284	489	2,395	4,838
Net Investment / Patent	(10)	-	-	-	-	-
Equity Investments	400	-	-	-	-	-
Total Change in Cash	-	28	284	489	2,395	4,838
Cash - Beginning of Yr	-	-	28	311	800	3,196
Cash at End of Year	-	28	311	800	3,196	8,034

Balance Sheet ($000)
Year	1	2	3	4	5	6
Cash & Current Assets	-	28	311	800	3,196	8,034
Patent	10	10	10	10	10	10
Less Accum. Amortization		1	2	3	4	5
Total Assets	10	37	319	807	3,202	8,039
Current & L.T. Liabilities	-	-	-	-	-	-
Equity Investment	400	400	400	400	400	400
Retained Earnings	(390)	(364)	(81)	407	2,802	7,639
Total Owners Equity	10	37	319	807	3,202	8,039
Total Liabilities & OE	10	37	319	807	3,202	8,039
Return on Equity	n/a	73%	89%	60%	75%	60%

(Manufacture, Option #2)

Balance Sheet ($000)
Year	1	2	3	4	5	6
Cash	-	120	227	373	1,667	3,320
Short Term Securities	-	251	510	0	2,632	9,751
Accounts Recievable	-	200	189	311	1,389	2,767
Inventories	-	13	24	40	180	359
Current Assets	-	584	950	725	5,867	16,196
Equipment & Intellectual Prof	10	1,110	1,110	2,340	2,340	2,340
Less Accum.Depreciation	0	(113)	(226)	(467)	(708)	(945)
Total Assets	10	1,581	1,834	2,598	7,499	17,591
Accounts Payable	-	108	102	168	750	1,494
Bank Loan: short term	-	-	-	105	-	-
Current Liabilities	-	108	102	273	750	1,494
Long Term Debt	-	-	-	-	-	-
Total Liabilities	-	108	102	273	750	1,494
Capital Invested	400	1,870	1,870	1,870	1,870	1,870
Retained Earnings	(390)	(397)	(138)	455	4,879	14,227
Total Owner's Equity	10	1,473	1,732	2,325	6,749	16,097
Total Liabilities + OE	10	1,581	1,834	2,598	7,499	17,591
Return on Equity		0%	15%	26%	66%	58%
Debt to Equity	0%	0%	0%	5%	0%	0%

Assumptions:

Price/units	$0.16
Cost/unit	$0.07
Distribution mark-up	20% Sales Price
A/R period	30 days
A/P period	30 days
Bank Loan Interest	10%
Cash	10% Sales

(Manufacture, Option #2)

Income Statements ($000)
Year	1	2	3	4	5	6
Units Sold (millions)	-	9	17	28	125	249
Net Sales	-	1,200	2,267	3,733	16,667	33,200
Cost of Goods Sold	-	648	1,224	2,016	9,000	17,928
Depreciation		113	113	241	241	237
Gross Profit	-	439	930	1,476	7,426	15,035
S&A Expenses	250	370	407	448	492	542
Product Liab. Insurance	-	50	100	100	200	300
R&D	140	30	30	30	30	30
Operating Earnings	(390)	(11)	393	899	6,703	14,163
Interest Expense	-	-	-	-	-	-
Earnings Before Tax	(390)	(11)	393	899	6,703	14,163
Income Tax	-	(4)	134	306	2,279	4,816
Net Earnings	(390)	(7)	259	593	4,424	9,348

Statements of Cash Flows ($000)
Year	1	2	3	4	5	6
Operating Activity
Net Income	(390)	(7)	259	593	4424	9348
Adj: A/R	-	(200)	11	(122)	(1078)	(1378)
A/P	-	108	(6)	66	582	744
Depreciation	-	113	113	241	241	237
Inventory Change	-	(13)	(12)	(16)	(140)	(179)
Net Cash fm Operations	(390)	1	366	762	4030	8772
Investing Activity
Purchase of Equipment	(10)	(1100)	-	(1230)	-	-
Short Term Securities	-	(251)	(259)	615	(2736)	(7119)
Financing Activity
Equity Investments	400	1,470	-	-	-	-
Acquired Short Term Debt	-	-	-	-	-	-
Acquired Long Term Debt	-	-	-	-	-	-
Total Change in Cash	-	120	107	147	1,293	1,653
Cash fm Begin. of Year	0	-	120	227	373	1,667
Cash at End of Year	-	120	227	373	1,667	3,320

Depreciation Schedules ($000)
Description	Cost	Depr Life	2	3	4	5-11
Phase I&II
Patent Costs	10	10	1	1	1	1
48 Cavity Barrel Mold	200	10	20	20	20	20
48 Cavity Plunger Mold	180	10	18	18	18	18
48 Cavity Sheath Mold	200	10	20	20	20	20
Spring Winding	250	10	25	5	25	25
Special Assemb. Equip	255	10	25.5	25.5	25.5	25.5
Office Equipment	15	4	3.75	3.75	3.75	3.75
Phase III
48 Cavity Barrel Mold	200	10			20	20
48 Cavity Plunger Mold	140	10			14	14
48 Cavity Sheath Mold	200	10			20	20
Spring Winding	250	10			25	25
Special Assemb. Equip	255	10			25.5	25.5
Total			113	113	218	218

Product Development Budget ($000)
Options #1 & #2
Year	1	2	3	4	5	6
Patent Costs	10	-	10	-	-	-
FDA Application	10	-	10	-	-	-
Prototype Molding	120	-	120	-	-	-
Field Testing	10	-	10	-	-	-
Total	150	-	150	-	-	-

S&A budgets ($000)
Option #1 - License
Year	1	2	3	4	5	6
Professional Compensation	100	120	90	100	111	123
Sales-force (4 reps at $30,000)	120	80	-	-	-	-
Expenses	20	20	10	10	10	10
Promotion Materials	10	-	-	-	-	-
Total	250	220	100	110	121	133
Options #2 - Manufacture
Professional Compensation	100	200	210	210	210	210
Sales-force (4 reps at $30,000)	120	132	145	160	176	193
Expenses	20	22	24	7	29	32
Promotion Materials	10	16	28	52	77	107
Total	250	370	407	448	492	542

Five Year Unit Sales Forecast
Year	Segment	Unit Potential	Partners Required1	Partnership Market Reach2	Conversion3 Rate	Unit Sales
1	Psychiatric	145 Million	14	36 Million	25%	8 Million
2	Psychiatric	145 Million	18	43 Million	35%	15 Million
	Nuclear	20 Million	9	20 Million	10%	2 Million
	Total	165 Million	27	63 Million	27%	17 million
3	Psychiatric	145 Million	23	55 Million	40%	22 Million
	Nuclear	20 Million	9	20 Million	30%	6 Million
	Total	165 Million	32	75 Million	37%	28 Million
4	Psychiatric	145 Million	25	60 Million	40%	24 Million
	Nuclear	20 Million	9	20 Million	50%	10 Million
	Family	640 Million	67	160 Million	25%	38 Million
	Hospital	1200 Million	125	300 Million	17%	51 Million
	Total	2005 Million	226	540 Million	24%	125 Million
5	Psychiatric	145 Million	40	95 Million	40%	38 Million
	Nuclear	20 Million	9	20 Million	50%	10 Million
	Family 1	640 Million	133	320 Million	25%	80 Million
	Hospital	1200 Million	250	600 Million	20%	120 Million
	Total	2005 Million	432	1035 Million	23%	248 Million

1 Assumes each distribution partner has a network of 100 hospitals
2 Utilizes figure of 1200 syringes used per hospital per bed to calculate
3 Conversion Rate is based on superior product
4 Assumes no growth