The Pharma Biotech Corporation spent several years working on developing a DHA product that can be used to provide a "fatty acid" supplement to a whole variety of food products. DHA stands for docsahexaenoic acid, an omega-3 fatty acid found naturally in cold water fish. The benefits of fatty fish oil have been cited in studies of the brain, eyes, and the immune system. Unfortunately, it is both difficult to consume enough fish to get the benefits of DHA and most individuals might be concerned about the taste consequences associated with adding fatty fish oil to eggs, ice cream, or chocolate candy. To counter these constraints, Pharma Biotech and several competitors have been able to grow algae and other plants that are rich in DHA. The resulting chemical compounds then are used to enhance a variety of food products. Pharma Biotech's initial DHA product was designed as additives to dairy products and yogurt. For example, the venture's DHA product was added to cottage cheese and fruit- flavored yogurts to enhance the health benefits of those products. After the long product development period, Pharma Biotech began operations in 2009. Income statement and balance sheet results for 2010, the first full year of operations, have been prepared. Pharma Biotech, however, is concerned with forecasting its financial statements for next year because it is uncertain as to the amount of additional financing of assets that will be needed as the venture ramps up sales next year. Pharma Biotech expects to introduce a DHA product that can be added to chocolate candies. Not only will consumers get the satisfaction of the taste chocolate candies they will benefit from the DHA enhancement. Since this is expected to be a "block buster" new product, sales are expected to increase 50 percent next year (2011) even though the new product will come on line in mid-year. An additional 80 percent increase in sales is expected the following year (2012). Pharma Biotech Corporation Income Statement for December 31, 2010 (Thousands of Dollars) Sales $25,000 Operating expenses -13,000 EBIT 12,000 Interest 400 EBT 11,600 Taxes (40%) -4640 Net income 6960 Cash dividends (40%) -2.784 Added to retained earnings $4176