TAU-CHEM s.r.o.

Overview

October 2007

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EXECUTIVE SUMMARY

• TAU-CHEM Ltd. is one of the Slovak’s leading manufacturers of Fine Chemicals that find applications in a broad spectrum of market sectors. Currently the firm is looking to expand its facilities and launch new streams of business.

• The company was founded in 1994 by partners with extensive experience in organic synthesis and technology. With a team of highly skilled organic chemists, including 3 PhDs, Tau-Chem specializes in the heterocyclic chemistry as well as in the more conventional fields of organic synthesis. Fully equipped quality control laboratories ensure that the manufacture complies at all stages with the highest quality standards. Within its existence the company acquired number of business partners along with a distinguished position on the market. One year ago we started close cooperation with German company Axxence GmbH. The result is a new area in our production ability „ AROMATICS“ comprising 11 natural flavors and fragrances. Database of more than 12 000 compounds with the complete literature research, the product catalogue containing 400 compounds accomplished with the technology documentation prove the sound functionality and abilities of the company resulting into an annual average growth of revenues 45%.

• In early 2004 the company owners and managers started to pursue a new strategic plan to expand the reactor capacity, improve the working environment, and to implement ecologically suitable solutions to the complex waste liquidation; while continually increasing quality of services to customers, introducing modern technologies including biotechnology, chiral synthesis.. All this activities created a unique position at the time of the entry of Slovakia to the European Union.

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CONTENTS

• Business Model

• History of the Company and the Team

• Performance

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BUSINESS MODEL

TAU-CHEM produces fine chemicals in small quantities, which are highly specific and used as active ingredients in pharmaceutical, food, agricultural, and other industries. Production is based either on TAU-CHEM’s existing knowledge or as a custom synthesis, i.e. specific research and production for a customer. Both types of products can be order directly by end-user or through an intermediary (a catalogue firm).

Catalogue Firms

(Intermediariesreselling chemicalcompounds)

End-users

• Pharmaceutical companies

• Food industry• Producers of

perfumes• Agricultural• Crop protection• University

research centers• Others

Production of fine chemicals based on accumulated

know-how or new research

• Literature research• Experiments• Production• Building of internal

know-how • Active pharmaceutical

ingredient for early stage of drug discovery

• Pheromones• Food additives • Aromatics• Research chemicals

Examples:

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Compounds:

• Epoxides• Heterocycles

• Furans and Benzofurans• Imidazoles • Pyridines• Thiophenes• Others

• Aromatics• Benzenes• Various Chiral compounds

PRODUCTS

Type of chemical reactions:

• Epoxidation including Sharples and Jacobsen methodology

• Reduction up to 120 bars pressure• Organometalic reaction• Low temperature reaction down to

-90º C • Nitration• Halogenation• Chloromethylation• Homogeny and heterogenic

catalytic process• Arylation• Others

TAU-CHEM has developed ability to perform a wide range of complex and challenging chemical reactions. Over the years it has acquired a vast know-how resulting into ability to produce more than 400 hundred compounds. In addition the company regularly performs customer specific research a produces new compounds (custom synthesis).

Custom synthesis:

• Target molecule required by a customer synthesised in the required quantity.

For detailed list of chemical

compounds Product list

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Production over several 10s kg is done in Asia at low costs

MARKET AND COMPETITION

• There is a global market in fine chemicals in every stage of product life cycle

• Factors influencing growth of the early stage segments:

• Catalogue firms increase their offer by ~7% every year

• Increasing outsourcing in early stages of new development of new pharmaceuticals

• Technological research in connection of production of generics

• There is a number of players in Slovakia supporting the education and the industry. Other Slovak players:

• CMS s.r.o• VUP Prievidza• VUCHT• Synkola• Georganics• Acros

Discovery and description in literature Volume of production [units]

mg – 10s kg 10s kg – 100s kg 100s kg – tons

Margin [%]

CONCEPTUAL

Product life-cycle

The competition consists of a number of small firms, research facilities, and university laboratories

Production in large quantities is realized in product specific facilities

TAU-CHEM’s ability

TAU-CHEM’s potential ability

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COMPETITIVE ADVANTAGE

• Large codified know-how readily applicable by a strong team with combined more than 100 years of experience

• Flexibility and ability to pick profitable products in demand and to produce wide range of products form few milligrams up to hundreds of kilograms (products in early phase of their life cycle: after discovery and description in the literature, however before mass production)

• Long operational experience resulting to high revenues per person i.e., ability of fewer number of PhDs to lead complex synthesis “managing less experienced” synthetics using codified knowledge (database of products)

• High quality manufacturing

• Attractive economics with high gross margins

• Established player on the market with credibility with main global catalogue firms such as Acros, Lancaster, Aldrich ,and with some of the most important end-users such as Novartis, Merck, Krka, etc. Established relationship with agents in China, Japan, South Korea.

• Uniquely wide range of licenses and permissions: manipulation and manufacturing of drug precursors; manipulation, transport, storage of the waste; etc.

• TAU-CHEM is very well positioned on an attractive niche market of early life cycle of organic chemical compounds (1s mg – 100s kg).

• It can exploit this position exceptionally well due to its accumulated knowledge and operational experience.

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Analytical Control Instrumentation

• NMR • GC Varian 350• GCMS Varian Saturn 2100T• HPLC Varian 9012/9065• Titration unit• Melting point unit• CHN elementary analysis • UV and IR specrophotometry (FTIR) • Mass spectrometry (GC/MS)

EQUIPMENT

TAU-CHEM currently possess fully equipped laboratories for research, lab-scale, kilo-scale and pilot-plant production. Fully equipped quality control laboratories ensure that the manufacture complies at all stages with the agreed customer standards. A certificate of analysis and safety data sheet accompanies shipments.

Vessels:

• Stills in glass 100 l and 25 l

• Rotatory film evaporator

• Molecular Distillation Apparatus (20 Pa)

• 200 l stainless reactor

• 250 l glass lined reactor

• Büchi high pressure reactor

• 100 l Jahndorf high pressure reactor

• Rotatory evaporator Heidolph Laborota 20

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Future

• TAU-CHEM has acquired a former chemical laboratory building in the same complex in late 2003

• After finishing a major reconstruction, the building should serve as main premises of the company from late 2008

• TAU-CHEM also acquired adjacent incinerator facility, another smaller building, and storage space

FACILITIES

1995 – 2008

• Since 1995, TAU-CHEM has rented premises within industrial complex of Istrochem, a.s.

• The complex was established at the end of 19th century by Alfred Nobel group, and Alfred Nobel personally supervised the rise up. During the 1970s, about 8,000 were employed within the complex in a large chemical company.

• Currently the complex serves as an industrial park with a number of small companies

TAU-CHEM has acquired significant fixed assets which will help it to move from rented facility, to own premises equipped with top technology and thereby significantly contribute to performance improvement.

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CONTENTS

• Business Model

• History of the Company and the Team

• Performance

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HISTORY OF THE COMPANY

•Established by four university schoolfellows: Dr. Marian Ježek, Dipl. Ing. Juraj Ďuris, Dr. Jan Hrabovsky, and Dr. Vladimir Žvak

•Start of production in November, 1995

•Dipl. Ing. Juraj Ďuris left company •Dr. Marian Ježek died in car accident

•Acquisition of analytical laboratory GC/MS and HPLC•Start of a pilot plant

•Revenues over EUR 1 million•New building acquired

•Successful chiral synthesis such as HKR and Sharpless epoxidation•Recession on the global market with chemicals in combination with

investment commitments led to surge of short-term financing

•Close cooperation with company Axxence Aromatic GmbH. to manufacture the fragrances and the flavors

•1994

•1995

•1998

•2001

•2003

•2004

•2007

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THE TEAM – KEY MEMBERS

Dr. Zvak (CEO, co-owner)• 1975 (graduation)• 1980 (PhD)• 1985 University Paris IX 6 months post doc

stage, • 25 years academic research (7 patents, 18

publications, teaching at Slovak Technical University)

• 1995 Tau-chem Ltd.

Prof. Povazanec (Advisor) • Professor at Slovak Technical University• Transfer of know-how from academia to

production• Experience Many years of experience in

cooperation with industry

Dipl. Ing. Skrovina (Head of laboratory)• 1982 (graduation) • 1990 -2001 Microchem technical director • 2007 Tau-chem Ltd.

Dr. Cepec (Quality Control Manager) • 1978 (graduation) • 1983 (PhD)• Research and analytical work at Wood

protection institute • 1999 Tau-chem Ltd.

Dr. Fiedler (Head of Laboratory)• 1977 graduation• 1979 Dr.• 1977 Research Institud of Chemical Technology• 2005 Award of J. Bahýľ, the best invention of the

year• More than 10 patents• 2006 Tau-chem Ltd.

Dipl Ing. Kovac (Head of Laboratory)• 1995 (graduation)• 2000 (post gradual study)• 2000 Tau-chem Ltd.

Dipl. Ing. Rybár (marketing and sales director• 1974 (graduation)• 1985 two years Iraq, built-up rafinerry• 1990-2001 director and co-owner Microchem• 2007 Tau-chem Ltd

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CONTENTS

• Business Model

• History of the Company and the Team

• Performance

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PROFIT AND LOSS STATEMENT

• TAU-CHEM grew fast in the period 2001 – 2003 with very attractive margins and profitability.

• In 2004, the recession on the global market together with focus of the management on previous investment commitments caused revenues temporarily fall dawn in 2004.

• Revenues are coming back on track already in 2005, despite the required level of management focus on new investment (new buildings, and incinerator facility).

SKK, thousands

Profit and Loss statement 2002 2003 2004 2005 2006

Revenues (Turnover) 25867 38289 16426 27477 31112

COGS 12227 15876 10817 12456 12002

Gross margin 13640 22413 5609 15021 19110

Personnel expenses 6319 9012 6933 6726 7733

EBIT 6228 10324 674 4979 9041

               

Net income 3616 7232 525 3169 6351