Allhistorical information remains the same (through Year X-1).

Usethis new set of assumptions:

• Revenue growth:

30% YearX E

30% Year X + 1 E

• 1% improvement in Gross Margin for Year X E (from yearX-1).No further change in the GrossMargin for Year X+1.
• 1% improvement in Sellingin Year X E.Same level in Year X+1 E.
• G&A remains constanton a common size basis.
• $10,000 increase in R&D in X E.
• Same R&D level in Year X+1 E.
• BasicShares outstanding - 3,000,000.
• A new section of the existing plant isconstructed for $300,000.This newconstruction is depreciated over 30 years using the straight line method.All other depreciation remains the same forthe years X E and X+1 E.
• The plant is financed with a $300,000 10 year bondwith a fixed interest payment of 10% annually.
• The Company, for the first time, grants 500,000 options to variousmembers ofmanagement with an exercise price of $1.00. These options aregranted on the first day of Year X E.
• There are no other options, warrants or convertible securities.
• The average stock price for Year X E and YearX+1 E is projected to be $5.00.
• Allother interest payments, interest income and tax rates remain the same.

Year X - 1 Year X E

Revenue $1,440,000 100.0%

Cost of Goods Sold 921,600 64.0%

Gross Profit 518,400 36.0%

Selling 158,400 11.0%

General and Administrative 108,000 7.5%

Research and Development 40,000 2.8%

Depreciation and Amortization 30,000 2.1%

Total Operating Expenses 336,400 23.4%

Operating Income 182,000 12.6%

Interest costs 5,000 0.3%

Interest income 4,000 0.3%

Pre-Tax Income 181,000 12.6%

Tax (35%) 63,350 4.4%

Net Income $117,650 8.2%

Earnings Per Share - Basic $0.04

Earnings Per Share - Diluted

Shares Outstanding 3,000,000

Shares For Diluted

A Options 500,000

Ex Price $1.00

Stock Price $5.00

Proceeds

New Share structure

Buy Back Shares

Shares for Diluted Calculations