mexico deal..the real numbers

MEXICO

Stop looking at the goddam charts..and lets discuss:

As per yesterday's announcement:

"A significant distribution partner to SBL, Express Diagnostics, has been working with the Mexican
government where it is intended that OraLine IV will be used for testing programs
being implemented in the Mexican schools system"

Now lets's try and put some realistic numbers behind this ONE potential contract:

1. There are currently 5.8 million kids in Mexican High schools. Let's assume this is split out over 5 years and a constant number of yearly enrolments. This gives us a yearly enrolment of 1.16 million potential junkies that require mandatory testing per annum.

2. This is a JV between SBL (owned by HGR) and Express Diagnostics. ED have the customer (Mexican government) & HGR have the product. (http://drugtestscreen.com/files/pdf/Oraline_THC_Graph.pdf). Let's assume its a 50/50 JV for simplicity reasons.

3. Oraline IV retails at $8.97US per single test. We should discount this by say 50% for bulk provision.

So a Mexican government schools contract should give the JV revenue of 1,160,000 x $8.47US x 0.6 = $5,895,120US per annum

Therefore HGR revenue should be $2,947,560 million US per annum

Now for the operating cost, cost of production, cost of shipping/distribution etc, we should discount revenue by around 60%.

This gives us a net profit before tax of almost $1.8million US per annum or $2.2MILLION AUSSIE.

Okay..these figures aren't as high as some of those banded about by some of the ramp brigade, but they still are pretty damn good for a company with a market cap of around $20million.

What this gives HGR is excellent cashflow during these testing credit times, to expand their business. Also what has to be considered is that one contract with the Mexican goverment can lead to others in Mexico as drug use in Mexico is endemic across all institutions.

Oh..and then there is the US and Canada/Europe would probably follow;)

All in all, this company provides a superb opportunity to buy into a company in the embryonic stage of its life cycle.