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Biotech / Medical : IMAT - ultrafast tomography for coronary artery disease -- Ignore unavailable to you. Want to Upgrade?

To: WHL who wrote (2763)	11/13/1998 11:44:00 AM
From: Bruce Rozenblit	Read Replies (1) \| Respond to of 3725

My friends we have problems. There is no pricing power in the scanner. There's no margin. When a low volume-state of the art-high tech product is is being sold at only 23% margin, those are sales of desperation. A normal, more reasonable margin would be 50%. When pricing power has eroded from the get go, future customers will expect the same deal and it is very hard to get anyone to buy at the higher margin. At the current cash burn rate, the company will be out of cash before the month is over. Now they will have to margin assets at high interest, or issue an IPO, or make a private placement, or sell off a portion of the company to an outside interest at very value. When you are desperate, you can't pick your price, you take what you can get. Any of these solutions will negatively affect the share price and maybe strongly. HeatScan is still generating about one million in revenues per quarter. It has been stuck at that level for two years with little movement. That further shows it is failed concept and demonstrates why Lifetest can't get the bank to sign over the loan. The machine costs too much to make. Solutions to make it cheaper: 1. Have the heavy iron cast in Mexico. Also have the major electronic assemblies made there and just do final assembly and check in San Francisco. The home office should just do product development and marketing. 2. If Mexico is still too expensive, go to China. 3. Move the operation to the midwest. South San Francisco has the most expensive labor and overhead in the country. This could easily save 20% in overhead costs alone. That's why most factories are located in small town America in the midwest and the south. 4. They should develop a low cost, stripped down machine that just images the heart. The current device is a big monster that images the whole body. They need an entry level machine similar to these portable mammogram machines that pop up in shopping centers. Maybe something you can stand up against. 5. Finally, look at the use of alternative structural materials like synthetics, square steel tubing and alloys instead of traditional heavy iron castings. If you need weight, you can always fill a hollow structure with sand in the field. Even if they adopted any of these design ideas, they don't have the money to implement them. I am very concerned.