Bioring SA produces niche-specific rings for cardiac valve repair. It has its main office in Lonay (CH) and maintains a small manufacturing and assembly plant in Lonay, Switzerland. Its products are to be sold through single or multiple distributors.
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The following chart illustrates highlights of our financial performance as projected for the next three years. Sales and profits should continue to grow.
Bioring SA addresses the surgical repair techniques which are implemented in open heart surgery. This business is based on a product owned by the company, which is a cardiac implant more precisely called “Kalangos Biodegradable Ring.”
We intend to make enough profit to generate a fair return for our investors and finance continued growth and development in quality products. We also maintain a friendly, fair, and creative work environment, which respects diversity, new ideas, and hard work.
The keys to success in this business are:
Bioring SA Company develops and manufactures cardiac biodegradable annuloplasty devices designed to restore a normal heart function. Its customers are cardiac surgery clinics who want prostheses that accomplish useful tasks with as little expenditure of time and money as possible. The company was incorporated in Switzerland in , after three years of previous developments.
Bioring SA is a privately-owned Swiss operation. Raymond Andrieu, Bioring’s founder, is the majority owner. Several members of the board of directors also hold minority stock positions. The initial $642,500 share capital is increased by another $100,000 in April .
Our start-up expenses come to $258,500, which are mostly equipment, legal costs, patent costs and expenses associated with opening our first office and manufacturing facilities. Another $384,000 is required in start-up assets. The start-up costs are to be financed by direct owners’ investment. The assumptions are shown in the following table and chart.
Start-up Requirements Start-up Expenses Legal $43,000 Stationery etc. $3,000 Brochures $0 Consultants $10,000 Insurance $20,000 Rent $25,000 Research and development $95,000 Other $62,500 Total Start-up Expenses $258,500 Start-up Assets Cash Required $29,000 Start-up Inventory $75,000 Other Current Assets $0 Long-term Assets $280,000 Total Assets $384,000 Total Requirements $642,500 Start-up Funding Start-up Expenses to Fund $258,500 Start-up Assets to Fund $384,000 Total Funding Required $642,500 Assets Non-cash Assets from Start-up $355,000 Cash Requirements from Start-up $29,000 Additional Cash Raised $0 Cash Balance on Starting Date $29,000 Total Assets $384,000 Liabilities and Capital Liabilities Current Borrowing $0 Long-term Liabilities $0 Accounts Payable (Outstanding Bills) $0 Other Current Liabilities (interest-free) $0 Total Liabilities $0 Capital Planned Investment Investor 1 $110,000 Investor 2 $110,000 Investor 3 $110,000 Investor 4 $93,750 Investor 5 $93,750 Investor 6 $62,500 Investor 7 $62,500 Other $0 Additional Investment Requirement $0 Total Planned Investment $642,500 Loss at Start-up (Start-up Expenses) ($258,500) Total Capital $384,000 Total Capital and Liabilities $384,000 Total Funding $642,500Headquarters are located in an office of approximately 4,000 square feet at Chemin d’Etraz 2, CH- Lonay, Switzerland.
The present office space is small. As we add employees, we will have to take on additional space. We expect space to be available in our present building. The office space will have assembly space on site and be equipped to handle shipping.
Bioring SA addresses the surgical repair techniques which are implemented in open heart surgery. This business is based on a patented product owned by the company, which is the Kalangos Biodegradable Ring cardiac implant.
The Bioring biodegradable valvular heart ring (Kalangos mitral or tricuspid ring) has been developed and designed to diminish or reinforce the valvular orifices of the heart. The ring allows a normal growth of the valve in newborn and babies, avoiding stenosis and multiple surgical procedures.
The ring is dimensioned to the size and natural geometry of the valve, and it is manufactured with a specially designed biodegradable polymer called polydioxanone. Once implanted, through the regular absorption of the ring inside the endomyocardiac tissue by simple hydrolysis, the body creates (by reaction) a scar along the ring, characterized by fibrotic tissue presenting an improved resistance to elongation. Once the ring has been completely biodegraded, the rigidity of the fibrotic tissue of the scar is maintaining the valvular orifice at the desired dimension.
As the residual scar is made of the proper biologic tissues of the patient, there is no predisposition to infection, and furthermore, the scar is able to grow normally during the growth process of the newborn.
The Kalangos mitral ring is available in 11 dimensions, covering all phases of development and all adult sizes. The Kalangos tricuspid ring is also available in 11 dimensions. Sizers have been designed to help the surgeon surgeon to choose the right ring dimension.
As of June , Bioring SA has 44 products to sell:
There are already existing heart rings on the market: Duran, Carpentier, Puig-Masada, Cosgrove, but none of them produce a biodegradable ring. The major benefits of Kalangos rings when compared to existing products available on the market are:
And moreover, the ring is attached to a suture-needle system which makes the surgical procedure easier and faster.
Bioring advertisements and sales literature are under development.
Bioring is registered on the Web page of the Chambre Vaudoise du Commerce et de l’Industrie. The company intends to have its own presenting page on the Web once the products have been CE marked.
Bioring SA manufactures its own products, using its in-house development process. The raw materials are provided by a major chemical supplier, which delivers to Bioring SA a customized polymer.
An injection molding press has been specially designed and installed to inject the polymer into the proprietary molds.
All operations, including the packaging of the final product, are done in a controlled environment: class 100 clean room.
The list of suppliers is considered as proprietary information, which is not disclosed here.
Bioring Kalangos biodegradable rings have been internationally protected by patent. A Swiss patent application has been filed in , followed by a worldwide PCT application filed in . Copies are available.
A trademark application is in progress.
The Kalangos biodegradable rings have ben developed following a market need and demand in pediatric surgery. Moreover the present existing rings are subject to very restrictive applications in neonate surgery in USA. This is due to the used material. As a result of this situation, a collaboration between a Swiss cardiac surgeon and a Swiss biomedical engineer led to the creation of Bioring SA. Together, they conceived a new concept which opens new perspectives in the field of cardiovascular surgery. This concept was tested as a prototype, and the achieved results motivated the partners to create the company in order to patent, develop, manufacture and commercialize the new cardiac implant. The long term strategy at five years is to penetrate 35% of the newborn market (40,000) and 10% of the adult market (200,000). All together, this means around 35,000 biodegradable rings implanted per year.
The development of the biodegradable polymer may meet other very promising applications in the fields of cardiac and vascular surgery. We are presently in the process of writing the extension of the initial patent and testing the very first prototypes of new implants. No information can be given at this stage.
The market for annuloplasty rings is worth an estimated $250 million at end-user value in , and is projected to grow at 3% per year according to professional forecasts published in specialized issues in . Sources included The European Heart Institute and The National Center for Health Statistics in the USA.
Market leaders are Edwards Laboratories, Sulzer Medica, Medtronic. However, the industry is highly concentrated. The 10 major companies account for 95% of the total market.
The rings for annuloplasty belong to the heart valve repair industry.
We prefer a segmentation by addressed patients. This incorporates some of the product type differences, but in a more practical sense:
The following sections outline Bioring SA’s target market segment strategy.
We understand that our target market needs more than just standard rings covered with a polyester mesh. The need grew out of the special needs of neonate cardiac surgery. Our target customer wants to have this new possibility which they consider as a major improvement. There is a need for a high-quality prostheses which solves patient and surgeon problems. We don’t just sell a ring, we sell a new concept and a new surgical procedure.
Our market has finally grown towards more sophisticated technics of valve repair, where the surgeon will try to repair a portion a faulty valve. In the past years, he would have replaced the total valve. Fine repair of cardiac valve is the new trend.
According to The European Heart Institute, (Cardiovascular Device Update, August 98, page 2) the number of congenital heart defects treated in Europe in represented 24,400 procedures, which represent a rate of 48 surgical procedures per million. In , it is projected to perform 28,000 surgical procedures (50 procedures per million). This market is growing at a annual rate of 1.9%.
According to the same source, the heart valve surgery market has accounted 66,700 procedures in (131 procedures per million). In , it is projected to amount 84,000 procedures (150 per million), which represent an annual growth rate of 3%.
A recent article published in Cardiovascular Device Update, (December ), shows that the European and the U.S. market are practically the same size. The same issue of this paper indicated that the present potential U.S. market for cardiac abnormalities repair amounted $215 million per year, and that the congenital heart defects repair amounted for $149 million per year.
The major players in this industry are international companies. It is a concentrated industry in which there are a few major players.
We are mentioning: Baxter Corporation (U.S.), Boston Scientific (U.S.), Cryolife (U.S.), Edwards Corporation (U.S.), Guidant (U.S.), Medtronic (U.S.), St Jude Medical (U.S.), Sulzer Medica (Switzerland).
Distribution channels are of two types:
The cost of marketing a new class III device is becoming a serious barrier to enter a market. For bioring type of company, the best choice is to deal through national dealers in Europe and a major company in USA.
In the high-end specialty market, particularly in our niche, features are very important. Our target customer is not making selections based on price. The high-tech, innovative aspect, the easy-to-implant aspect, the reduced time of procedure, the anatomical shape, the physiological process and the clinical results are more important than pricing.
In the field of cardiac surgery prostheses, the general trend is to develop anatomical and physiological mimetic implants. The ergonomy of the implant is also important.
In the field of pediatric surgery, as previously mentioned, there is no real competitor. Therefore the strategy of the company is to enter the market together with a well-known market leader, to avoid to be considered as a weak company by the market leaders.
In the field of adult surgery, the company will benefit of the presence on the market of the chosen distributors for pediatric surgery. In this field, our main competitors are: Edwards Laboratories, Sulzer Medica, Medtronic.
Our strategy is based on serving niche markets well. What begins as a customized product, tailored to the needs of a local pediatric cardiac surgeon, can eventually become a niche product that will fit the needs of the pediatric cardiac surgeons worldwide. Our marketing infrastructure is built to reach our customers across broad geographic lines. Our products are designed to fit the need of the international cardiac pediatric surgeons community, as the market presence requires to fulfill with regulatory rules which are quite costly.
Our marketing strategy is based on:
We intend to participate in May in the 3rd World Congress of Pediatric Cardiology and Cardiac Surgery in Toronto, Canada, where we are showing our product for the first time to the world community.
In September, we intend to participate to the joint meeting of the European Association of Cardio Throracic Surgeons and the European Society for Thoracic Surgery where our consulting surgeon, Dr. Kalangos, is publishing clinical data.
For discriminating pediatric cardiac surgeons who want to benefit from the latest advances with polymer technology, Bioring offers superb anatomical design combined with state-of-the-art technology. For surgeons addressing cardiac adult surgery, unlike other non-biodegradable rings covered with polyester mesh. The Kalangos biodegradable ring, made of polydioxanone, offers an excellent resistance to infection. Polyester mesh is known to be an excellent support for bacterial growth.
In the high-tech products market, pricing is based on the level of other similar products, already on the market. The European end-user market price for a standard cardiac ring is around $1,250. We intend to introduce Kalangos biodegradable ring at the same level of price. Price to distributor is $625, which provides the distributor enough margin to take care of its national market.
The long-range goal is to create enough visibility to achieve the best penetration possible on the different markets.
We are intending to do it through:
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The distribution strategy is to:
Our most important marketing program is CE mark approval. Philippe Le Goff is in charge of it, assisted by Raymond Andrieu and A. Kalangos. This program should be completed for the 1st of June . This program will allow us to sell our ring in Europe. Achievement should be measured by receiving a CE number, which has to be printed on all packaging of the products.
Another key marketing program is the European distribution network. Raymond Andrieu is in charge of it, and most of European distributors should be appointed for July . Achievement should be measured by signed agreements in the different countries.
The next important milestone is the FDA approval process. Raymond Andrieu will be in charge of it, with a budget of $ 200,000 and a milestone date of the 1st of December . Achievement should be measured by receiving the official FDA approval document. This process is intended to be done in close collaboration with the U.S. company in charge of distributing the product in USA.
The sales strategy has been forecasted as follows:
Sales in Europe
In each European country a distributor has been chosen. By signing a distribution agreement, he has to order a minimum quantity of products to be sold in his country. This quantity is to be reviewed each year. He will at first develop the pediatric market, then the adult market. Each distributor is supposed to have a team of salesmen or saleswomen who are in charge of visiting cardiac surgeons in the country. Each salesperson is in charge of several hospitals in one area of the country. In a country like Germany, the distributor should have five or six salesmen or women to cover the country. The distributor should have enough products on the shelves to serve the needs of the country. The salespeople would sell products to public and private hospitals and clinics where cardiac surgery, either pediatric or adult, is performed. Large countries like Germany or France should have around 400 rings permanently on the shelves of the distributor. Invoicing to hospital, delays of payment of hospitals, shipment to hospitals, rings freely deposited in hospitals are under the management of the distributor.
Sales in USA
Once the U.S. distribution channel is chosen, the sales strategy will be discussed together with the U.S. company. It does not differ fundamentally from Europe. The major difference is the the U.S. sales team may belong to the U.S. distributor, or be independent from the U.S. distributor.
Sales in Other Parts of the World
It is intended to act as in Europe: nominate a local distributor who is able to have easy access to the cardiac surgeons community of his country.
Our sales forecast assumes no change in costs or prices, which is a reasonable assumption for the last few years.We are expecting to increase sales from $2.5 million (4,000 rings) to $10 million (16,000 rings) the second year. The growth forecast is very high, but we are developing new products. We expect growth of the pediatric market, where the product is really needed. We are not projecting significant change in the product line, or in the proportion between different lines.
Sales Forecast Year 1 Year 2 Year 3 Unit Sales K. Biodegradable Ring 4,000 16,000 24,000 Other 0 0 0 Total Unit Sales 4,000 16,000 24,000 Unit Prices Year 1 Year 2 Year 3 K. Biodegradable Ring $625.00 $625.00 $625.00 Other $0.00 $0.00 $0.00 Sales K. Biodegradable Ring $2,500,000 $10,000,000 $15,000,000 Other $0 $0 $0 Total Sales $2,500,000 $10,000,000 $15,000,000 Direct Unit Costs Year 1 Year 2 Year 3 K. Biodegradable Ring $35.00 $35.00 $35.00 Other $0.00 $0.00 $0.00 Direct Cost of Sales K. Biodegradable Ring $140,000 $560,000 $840,000 Other $0 $0 $0 Subtotal Direct Cost of Sales $140,000 $560,000 $840,000The company will mainly sell outside Switzerland, which is representing a very small market. It intends to develop persistent efforts to generate the distribution through major names in each country.
It intends to hire a marketing and sales executive, and a clinical director by . Both positions will support international sales, by training the sales team, assisting them with key customers, and participating in international meetings.
We have been contacted by several major U.S. companies, (Medtronic, St Jude), who are interested with our product line. In case they would wish to distribute the products worldwide, we would have to negotiate a fair fee for international exclusive distribution (U.S. $2 million), as well as the different involvements of both parties concerning regulatory affairs, marketing, clinical studies.
We would need to understand the real interest of these companies: do they wish to buy Bioring on a middle-term plan? At what price? What do they intend to do with Bioring’s manufacturing facility? The board is of the opinion that a fair offer from one of these companies should be seriously studied.
The accompanying table shows specific milestones, with responsibilities assigned, dates, and budgets. We are focusing, in this plan, on a few key milestones that should be accomplished.
Milestones Milestone Start Date End Date Budget Manager Department Initial Swiss Patent Deposit 7/1/ 7/1/ $0 Andrieu Management Setting up manufacturing facility 5/1/ 3/1/ $450,000 Andrieu/LeGoff Managment PCT extension of the patent 9/1/ 11/1/ $10,000 Le Goff R & D Hiring of production staff 10/1/ 10/1/ $0 Andrieu Production Product technical development 5/1/ 3/1/ $0 Andrieu/Le Goff R & D CE mark approval 4/1/ 6/1/ $15,000 Le Goff R & D European distribution network 5/1/ 7/1/ $0 Andrieu Management FDA approval process 10/1/ 12/1/ $200,000 Andrieu Management USA distribution network 6/1/ 12/1/ $0 Andrieu Management ROW distribution network 9/1/ 3/1/ $200,000 Andrieu Management Totals $875,000Bioring SA is slow to hire new people, and very loyal to those who are hired.
Immediate personnel plans call for increases from five to seven people two years from now. The increase is needed to support the effort to move on a real international base.
Management style reflects the participation of the owners. The company respects its community of co-workers and treats all workers well. We attempt to develop and nurture the company as a community.
Raymond Andrieu, president, is responsible for overall business management.
Philippe Le Goff, consultant, is responsible for product development, quality insurance and CE mark approval. He closely collaborates with Raymond Andrieu.
Afksendiyos Kalengos, cardiac surgeon, is responsible for the final presentation of the product, its adequation to the clinical needs, and clinical studies. He closely collaborates with Raymond Andrieu and Philippe Le Goff.
Danielle Collomb, assistant to the president, is responsible for relations with furnisher, orders to furnisher and all administrative current workload.
Marlyse Bertholet and Marie-José Raposo are producing the products. They report directly to Raymond Andrieu.
The company is managed by:
Raymond Andrieu: chairman of the board, CEO, and founder. He has been working for 25 years in sales and marketing with international companies after a first experience in manufacturing vaccines. He has been acting as production engineer, sales manager, clinical director, marketing executive and president of several international companies including Roger Bellon Laboratories, (Rhône Poulenc), Edwards Laboratories, American Hospital Supply Corporation, Ausonics Corporation (Nucleus Group), Dornier Medizintechnik GmbH, Cardicorp SA, Cambridge Biotech Corporation, Hancock Jaffe Laboratories, Bioracs SA. He owns an MSc in Biochemistry and is graduated biomedical engineer. He is a 52 years old Swiss citizen, married, three children.
Afksendiyos Kalengos: assistant pediatric and adult cardiac surgeon in Geneva University Hospital. He has also been nominated professor in foreign universities. He is presently following an MBA program during his free hours. He is considered as the reference surgeon in pediatric cardiac surgery in Switzerland. He developed the original idea together with the founder. He has a Ph.D., is 41 years old, a Swiss citizen, married and has two children.
Philippe Le Goff: chemical engineer, has a Ph.D. from Polytechnique School in Paris, where he ranked second and his wife as the “major” (first rank). He participated to the final development of the polymer synthesis. He is consultant to major pharmaceutical companies, where he is mainly in charge of the approval of the new synthesis pilot production for drugs by the regulatory authorities (CE and FDA). He is also in charge of developing industrial production based on pilot production and approval by authorities. He is a 38 years old French citizen, with Swiss residence approval, married with two children.
There are two gaps in the planning process:
The personnel plan has been projected to cover the production needs over the considered period.
Two production people, working eight hours a day, five days a week, are able to manufacture up to 25,000 rings a year. If we add another team of two people, the production capacity reaches 50,000 rings a year.
The personnel table assumes 5% per annum pay raises. We already have a strong benefits policy with fully paid medical insurance for employees. We therefore expect very low turnover. A stock option plan is under study by our auditing company for Mr. Philippe Le Goff.
Salaries are generally in line with market pay for Lausanne and Geneva area, although our benefits are above standard market level, so we ultimately pay a bit more for our people than what might be considered industrial standard in the area. However, we are at the same level in our industrial area that local medical companies and biotech companies.
Personnel Plan Year 1 Year 2 Year 3 Production Personnel M. Bertholet $7,605 $36,000 $38,500 M.J. Raposo $7,125 $34,200 $36,000 Name or title $0 $0 $0 Other $0 $0 $0 Subtotal $14,730 $70,200 $74,500 Sales and Marketing Personnel R. Andrieu 80% $58,500 $78,000 $0 D. Collomb 20% $6,750 $0 $0 Clinical Director $0 $0 $60,000 Marketing Executive $0 $0 $81,250 Other $0 $0 $40,000 Subtotal $65,250 $78,000 $181,250 General and Administrative Personnel R. Andrieu 20% $0 $0 $102,000 D. Collomb 80% $27,000 $47,000 $50,000 CE mark consulting fees $0 $15,500 $2,000 FDA consulting fees $0 $0 $200,000 Other $2,115 $3,000 $5,000 Subtotal $29,115 $65,500 $359,000 Other Personnel P.Le Goff $0 $90,000 $100,000 Name or title $0 $0 $0 Name or title $0 $0 $0 Other $0 $0 $0 Subtotal $0 $90,000 $100,000 Total People 0 0 0 Total Payroll $109,095 $303,700 $714,750The financial picture is quite encouraging. Sales are projected to start slowly, but this is due to the necessity of receiving CE mark. We need a second round of financing in April to start the sales on the market. The company has financed all machinery and tools and does not have any credit line. The original investors have been financing the development.
We want to finance growth mainly through cash flow. Collection days is very important. We do not want to let our average collection days get above 45 under any circumstances. We must maintain gross profit margins of 90% at the least, and hold marketing costs to no more than 5%. We are planning to receive tax exemption from the Canton of Vaud, which means that only federal tax is due to payment on net profit (around 10%) in FY. In the following years the total tax rate will be 25%
The financial plan depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
The following chart shows changes in key financial indicators: sales, gross margin, operating expenses, collection days, and inventory turnover.
Our Break-even Analysis is based on running costs, the “burn-rate” costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Between payroll, rent, utilities, and basic marketing costs, we think the number shown in the table is a good estimate of fixed costs.
The Break-even Analysis shows that Bioring has a good balance of fixed costs and sufficient sales strength to remain healthy. The essential insight here is that our sales level seems to be running comfortably above break-even.
Break-even Analysis Monthly Units Break-even 38 Monthly Revenue Break-even $23,710 Assumptions: Average Per-Unit Revenue $625.00 Average Per-Unit Variable Cost $35.00 Estimated Monthly Fixed Cost $22,382We expect sales to hit $2,500,000 for this year. It should increase to $10 million by the second year of this plan, as net earnings increase steadily. Our high sales volume has lowered our cost of goods and increased our gross margin. This increase in gross margin is important to profitability.
Pro Forma Profit and Loss Year 1 Year 2 Year 3 Sales $2,500,000 $10,000,000 $15,000,000 Direct Cost of Sales $140,000 $560,000 $840,000 Production Payroll $14,730 $70,200 $74,500 Other $0 $0 $0 Total Cost of Sales $154,730 $630,200 $914,500 Gross Margin $2,345,270 $9,369,800 $14,085,500 Gross Margin % 93.81% 93.70% 93.90% Operating Expenses Sales and Marketing Expenses Sales and Marketing Payroll $65,250 $78,000 $181,250 Advertising/Promotion $0 $35,000 $50,000 Travel $6,000 $24,000 $35,000 Miscellaneous $13,500 $20,000 $30,000 Total Sales and Marketing Expenses $84,750 $157,000 $296,250 Sales and Marketing % 3.39% 1.57% 1.98% General and Administrative Expenses General and Administrative Payroll $29,115 $65,500 $359,000 Sales and Marketing and Other Expenses $0 $0 $0 Depreciation $72,000 $96,000 $96,000 Patent fees for PCT $10,000 $70,000 $70,000 Utilities $3,150 $5,400 $6,000 Insurance $9,000 $12,000 $13,000 Rent $33,300 $444,400 $45,000 Payroll Taxes $27,274 $75,925 $178,688 Other General and Administrative Expenses $0 $0 $0 Total General and Administrative Expenses $183,839 $769,225 $767,688 General and Administrative % 7.35% 7.69% 5.12% Other Expenses: Other Payroll $0 $90,000 $100,000 Consultants $0 $0 $0 Royalties Dr. A.Kalangos $0 $125,000 $493,750 Total Other Expenses $0 $215,000 $593,750 Other % 0.00% 2.15% 3.96% Total Operating Expenses $268,589 $1,141,225 $1,657,688 Profit Before Interest and Taxes $2,076,681 $8,228,575 $12,427,813 EBITDA $2,148,681 $8,324,575 $12,523,813 Interest Expense $0 $0 $0 Taxes Incurred $207,668 $822,858 $1,449,911 Net Profit $1,869,013 $7,405,718 $10,977,901 Net Profit/Sales 74.76% 74.06% 73.19%We expect to manage cash flow over the next three years with $100,000 of new investment in April . This additional financing resources are required to finance the working capital.
Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash Received Cash from Operations Cash Sales $625,000 $2,500,000 $3,750,000 Cash from Receivables $1,414,063 $6,117,188 $10,328,125 Subtotal Cash from Operations $2,039,063 $8,617,188 $14,078,125 Additional Cash Received Sales Tax, VAT, HST/GST Received $0 $0 $0 New Current Borrowing $0 $0 $0 New Other Liabilities (interest-free) $0 $0 $0 New Long-term Liabilities $0 $0 $0 Sales of Other Current Assets $0 $0 $0 Sales of Long-term Assets $0 $0 $0 New Investment Received $100,000 $0 $0 Subtotal Cash Received $2,139,063 $8,617,188 $14,078,125 Expenditures Year 1 Year 2 Year 3 Expenditures from Operations Cash Spending $109,095 $303,700 $714,750 Bill Payments $333,104 $2,128,248 $3,167,861 Subtotal Spent on Operations $442,199 $2,431,948 $3,882,611 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 Principal Repayment of Current Borrowing $0 $0 $0 Other Liabilities Principal Repayment $0 $0 $0 Long-term Liabilities Principal Repayment $0 $0 $0 Purchase Other Current Assets $0 $0 $0 Purchase Long-term Assets $0 $100,000 $200,000 Dividends $0 $0 $0 Subtotal Cash Spent $442,199 $2,531,948 $4,082,611 Net Cash Flow $1,696,864 $6,085,240 $9,995,514 Cash Balance $1,725,864 $7,811,104 $17,806,618As shown in the balance sheet in the following table, we expect a healthy growth in net worth. The monthly projections are in the appendix.
Pro Forma Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash $1,725,864 $7,811,104 $17,806,618 Accounts Receivable $460,938 $1,843,750 $2,765,625 Inventory $19,250 $77,000 $115,500 Other Current Assets $0 $0 $0 Total Current Assets $2,206,051 $9,731,854 $20,687,743 Long-term Assets Long-term Assets $280,000 $380,000 $580,000 Accumulated Depreciation $72,000 $168,000 $264,000 Total Long-term Assets $208,000 $212,000 $316,000 Total Assets $2,414,051 $9,943,854 $21,003,743 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities Accounts Payable $61,038 $185,123 $267,111 Current Borrowing $0 $0 $0 Other Current Liabilities $0 $0 $0 Subtotal Current Liabilities $61,038 $185,123 $267,111 Long-term Liabilities $0 $0 $0 Total Liabilities $61,038 $185,123 $267,111 Paid-in Capital $742,500 $742,500 $742,500 Retained Earnings ($258,500) $1,610,513 $9,016,231 Earnings $1,869,013 $7,405,718 $10,977,901 Total Capital $2,353,013 $9,758,731 $20,736,632 Total Liabilities and Capital $2,414,051 $9,943,854 $21,003,743 Net Worth $2,353,013 $9,758,731 $20,736,632Our ratios look healthy and solid. Gross margin is projected to stay above 95%, and return on assets and return on equity are very sound. Debt and liquidity ratios also look very good, with debt to net worth running at respectively 0,34, 0,05 and 0,02. The projections, if we make them, are those of a very solid company. Industry profile ratios based on the Standard Industrial Classification (SIC) code , Surgical Appliances and Supplies, are shown for comparison.
Ratio Analysis Year 1 Year 2 Year 3 Industry Profile Sales Growth 0.00% 300.00% 50.00% 6.10% Percent of Total Assets Accounts Receivable 19.09% 18.54% 13.17% 25.00% Inventory 0.80% 0.77% 0.55% 15.90% Other Current Assets 0.00% 0.00% 0.00% 38.00% Total Current Assets 91.38% 97.87% 98.50% 78.90% Long-term Assets 8.62% 2.13% 1.50% 21.10% Total Assets 100.00% 100.00% 100.00% 100.00% Current Liabilities 2.53% 1.86% 1.27% 37.60% Long-term Liabilities 0.00% 0.00% 0.00% 20.20% Total Liabilities 2.53% 1.86% 1.27% 57.80% Net Worth 97.47% 98.14% 98.73% 42.20% Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 93.81% 93.70% 93.90% 47.70% Selling, General & Administrative Expenses 19.05% 31.98% 31.76% 28.20% Advertising Expenses 0.00% 0.35% 0.33% 1.60% Profit Before Interest and Taxes 83.07% 82.29% 82.85% 4.90% Main Ratios Current 36.14 52.57 77.45 2.03 Quick 35.83 52.15 77.02 1.35 Total Debt to Total Assets 2.53% 1.86% 1.27% 57.80% Pre-tax Return on Net Worth 88.26% 84.32% 59.93% 5.70% Pre-tax Return on Assets 86.02% 82.75% 59.17% 13.40% Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 74.76% 74.06% 73.19% n.a Return on Equity 79.43% 75.89% 52.94% n.a Activity Ratios Accounts Receivable Turnover 4.07 4.07 4.07 n.a Collection Days 56 56 75 n.a Inventory Turnover 3.15 11.64 8.73 n.a Accounts Payable Turnover 6.46 12.17 12.17 n.a Payment Days 27 20 25 n.a Total Asset Turnover 1.04 1.01 0.71 n.a Debt Ratios Debt to Net Worth 0.03 0.02 0.01 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a Liquidity Ratios Net Working Capital $2,145,013 $9,546,731 $20,420,632 n.a Interest Coverage 0.00 0.00 0.00 n.a Additional Ratios Assets to Sales 0.97 0.99 1.40 n.a Current Debt/Total Assets 3% 2% 1% n.a Acid Test 28.28 42.19 66.66 n.a Sales/Net Worth 1.06 1.02 0.72 n.a Dividend Payout 0.00 0.00 0.00 n.aIt's no secret. better products help you give better care to your patients. And when those high-quality products come from a single source, it will save you time and let you work more efficiently.
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