Chemalite, Inc.

(B): Cash Flow Analysis

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Exhibit 1 1992 Pro-forma Financial Statements

Balance Sheet as at December 31, 1991 and 1992

December 31, 1991 December 31, 1992

(Actual) (Pro-forma)
Assets

Cash $113,000.00 $9,490.00

Accounts receivable 69,500 139,530
Inventories-raw materials 55,000 75,450
Inventories-finished goods — 104,680a
Prepaid insurance — 65,000

Property, plant and equipment 212,500 1,120,000

Accumulated depreciation -10,625 -$56,000.00
Land — 250,000
Patent 100,000 75,000

Total assets $539,375.00 $1,783,150.00

Liabilities and Owners' Equity

Taxes payable 10,900 9,950
Short term debt — 200,000
Deferred income taxes — 26,730
Notes payable (10%) — 425,000
Long-term debt (10%) — 510,000
Dividends payable 10,000 12,000
Common stock 500,000 500,000
Retained earnings 18,475 125,470
Treasury stock — -26,000

Total liabilities and owners' equity $539,375.00 $1,783,150.00

Income Statement for the years ended Dec. 31,1991 and 1992

December 31, 1991 December 31, 1992

(Actual) (Pro-forma)
Sales $754,500 $1,886,250
Material (195,000) -452,700
Labor -275,000 -660,000
Rent -50,000 -25,000
Utilities -30,000 -82,000
Depreciation -10,625 -61,625
Gross margin 193,875 604,925
Advertising -22,500 (70,000)
Research and development — (63,250)
Insurance — -32,500
Amortization of patent -25,000 -25,000
Selling and administration expenses -75,000 -195,750
Gain on sale of equipment — 24,250
Interest expense -750 -58,750
Prototypes -23,750 —
Legal fees -7,500 —
Income before taxes 39,375 183,925
Income taxes -10,900 -64,930
Net income $28,475 $118,995

a
Finished goods inventory includes $5,000 of depreciation
Cash flow from operating activities
net Income before taxes $183,925.00
Add epreciation and amortization $86,625.00
Add interest expense $58,750.00

Income Tax paid -$64,930.00

Adjustment for changes in WCC

Accaounts recievables -$70,030.00
Raw materail inventory $20,450.00
$104,680.00

Cash flow from investing activities

Cash flow from financing activities