TS03 Inc Trust Units TSTIF

RE:Financing

[Drrwong]

@screamer:  there are a lot of moving parts to TSO3's cash balance, so everyone will have to make their assumptions to see if they need financing on their path to profitability.  Here are some things to think about:
-  They have $14.8mm USD in cash right now
-  They spent $3.76mm last quarter, with a roughly 55/45 split between SG&A and R&D.  R&D will come down in 2H18 assuming they don't need to do more work for the duo approval, while SG&A could be flattish (higher sales cost offset by lowering assembly headcount)
-  Consumables in 4Q17 was roughly $750k, which indicates gross profits of $625-650k.  This should go up as their installed base increase, but everyone has a different rate of ramp assumption
-  I don't expect any VP4 sales revenue in Q1, which mean the company would burn $3mm in that quarter.  Q2 could be slightly better with a couple of internal generated VP4 sales.  
-  New VP4 sales/installs by TSO3:  recall the acquisition cost is only $33k, and the typical retail price is $135k.  So TSO3 can make $100k USD for every VP4 they sell themselves.  However, we would not likely see any meaningful sales until Q3 due to the long sale cycle for sterilizers
-  New Getinge deal:  this is extremely important for 2019, and maybe 2018:
   -  Assuming they get a new deal done, the biggest item to watch is the size of the 2019 PO from Getinge.  In the 4Q17 call, RR/GK mentioned they expected the contract to get back on track in 2019 (vs. previous projection) that will require them to do its US manufacturing expansion in 2019.  We know Quebec has a 200 unit/yr capacity, which means they expect a Getinge PO of >200 units in 2019.  If this is the case, then cash balances should not be drawn down in 2019
   -  I also believe there is a good chance Getinge could buy 10-15% of TSO3 stock in a long term exclusive agreement.  This is very common in the pharma/biotech world for inlicensing, and it gives Getinge an avenue for long-term appreciation and some blocking rights for any hostile takeover for TSO3. On the flipside, TSO3 could use this timely cash injection to expand their own commercial operations, which in turn will help Getinge's own efforts due to increased industry/hospitals awareness

At the end, I believe TSO3 should be able to get to profitability without another financing, but the margin of error has decreased.  The most crucial item is to resign Getinge and secure a 2019 PO.  TSO3 internal sales generation is also very important, but we won't see any results of that (good or bad) until 2H18.