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RE:RE:Breakeven or Cash Crunch in 2019?

[SunnyShadow]

Wong,
 
I agree with you about the meaning of breakeven and, clearly, I meant the earnings breakeven.  I have used as cost the $33,000 price paid to Getinge for the 230 returned VP4s without taking into account GK's creative accounting of applying against the inventory the unearned portion of the deferred revenue, thereby reducing the accounting cost per unit to about $8,000 plus upgrade cost.  On that count, the sale of 120 sterilizers at a price of $75,000 would yield a gross profit of $7.8 million instead of $4.8 million.  That would be a $2 million loss in 2019 and still not a break-even in 2019.   A break-even in mid-year coupled with a loss for the full year only occurs when volume grows during the year, which was not the case here as an average monthly sale was assumed.
 
At that gross margin on equipment sales, a volume of 15 per month would likely result into a break-even unless Getinge's commissions represent a large portion of the gross margin.  Unfortunately, the commissions are likely quite costly on sales for backlog items and to existing customers and probably still significant on sales to Getinge's funnel customers.
 
Also, I am not sure where you picked the selling price of $25 to $30 on consumables, and I have not seen data allowing to assume a gross margin on consumables larger than 75%.  But at this point, this is a moot issue since in the short run, profits will come from equipment sales as the installed base is not yet large enough to produce large recurring revenues.