Your number for Gross Profit for selling "processors" is Grossly overstated.
"That would result in a gross profit for each processor sold of $7 million"
I don't know where you got that $1 Million cost from, perhaps what is on the books now for "Construction-in-process". That would represent the incurred cost on the equipment currently at a fabricator.
Cost..
Whatever is at the fabricator is only part of the solution. Whatever they sell, it has to be customized for the client site and that means Engineering and Construction work. Based on my experience the cost breakdown on any job in the process industries are roughly as follows:
- Construction - 20%
- Equipment - 20%
- Engineering - 30%
- Project management - 10%
- Commissioning -20%
Of that, JBI is only going to be able to do a portion of it. They are not a Construction company, so can't do that. They are most likely an equipment supplier. In the last financial statement it was revealed that they have a set of drawings to support installation of their equipment. They would not do Commissioning, but would probably provide consulting. They would also provide Project management and Engineering.
We have the comment from Heddle that the processors are "75% Complete". The only thing that makes sense, given the number on the books for Construction-in-process, would be that he is talking about the status of the fabricated equipment alone. That is to say, they are 75% complete on the "Equipment - 20%" component.
The SAIC Study supports this. Their figure was 8.5 Million with an OOM estimate complete (according to the document). An OOM estimate is worth 5% of the total budget. That is an industry standard. That gives a total cost of 9 Million for a 3-processor cluster, with about 400k already spent. The rest of the figures they give, which is a further 2 Million for Engineering, jive with industry standards. A FEL2 estimate is worth 10%, a FEL3 (final detailed) estimate is worth 15% of the budget. That results in the 30% Engineering cost.
Now the SAIC study was done on Processor #2, and things have been improved. #3 is more modular and has some drawings (Engineering work) associated with it. OK, modularization is worth about 10% cost reduction in Construction. The drawings mean more Engineering has been done.
The SAIC study was for a 3-processor cluster.
So, based on that, the cost of an individual unit would have to be between 3-4 Million. The incurred cost to-date makes sense then.
Furthermore, if JBI is only an Equipment Supplier with their hand in other pots, I would further reduce that to 2-3 Million per processor. That fits with the over 1 Million they have on the books now.
Your 1 Million figure is completely unrealistic.
Revenue...
8 or 9 Million per processor? I am not even going to argue against it... there is no business justification for that kind of number...
Profit...
JBI make be able to make a $500k - Million or so, if the price you are quoting is cut in half. I don't even think that a processor is worth that much , based on what potential profitability there is. The above is based on a 20-30% markup, which is reasonable.
