Replies to post #43001 on Drinks Americas Holdings, Ltd. (DKAM)

[Speedster900]

Yea, many said 500k was crazy talk. Well its official forcast not more than 1.5m year. Previous report said 1.2. So say 450k per Q, what is the estimate of per Q breakeven on say 30% margin. I used 40% but can be used for conservative.
Would like to hear from financial specialist.

[Toxic Avenger]

25% gross margin on $20 million yields $5 million gross revenues so with total expenses running $5 million you'd be at breakeven.

With the new model however (as I understand it from the PRs - I wasn't on the cc, so if I missed additional info, please correct) the company gets a fee for each case of liquor sold. There's a "schedule A" that details the fees, but it wasn't disclosed (again, as far as I can tell, though Damiana was specified as $10/case).

COGS doesn't enter into the money DA gets except that
"d. Efficiencies. On each anniversary of the Effective Date, Mexcor and DA will review any cost savings with respect to the production of the Products (including component parts) that have been realized during the previous twelve (12) month period measured against the cost-of-goods-sold (COGS) set forth in Schedule A on the Effective Date.. Such cost savings are anticipated to occur as a result of Mexcor assuming the production responsibilities with respect to the Products. Fifteen percent (15%) of the gross production savings, measured against the COGS set forth in the original Schedule A, will be added to the Drinks Fees otherwise payable to DA under Section 10.a, which addition will accrue promptly with respect to sales of Products commencing the day after such anniversary date.

For example, if Old Whisky River Bourbon’s Drinks Fee is ten dollars ($10) dollars per case or case equivalent and the production costs related to Old Whiskey River were reduced over the first year of the Agreement from the current $73.25 to $63.25 (a net saving of $10.00), the Drinks Fee with respect to this Product would be increased by 15% of $10, or $1.50, resulting in a revised Drinks Fee of $11.50. If during the second year of the Agreement, the productions costs increased from $63.25 to $73.25 (a net increase from the first year, but no net increase or decrease when measured against the COGS on the Effective Date), to the extent not counterbalanced by a pricing increase, the Drinks Free for this Product will return to $10.00.

e. DA acknowledges that the COGS set forth in Schedule A were provided by DA to Mexcor, and represents that those COGS are true and correct. In the event that actual COGS vary from that set forth in Schedule A by more than 5%, Schedule A shall be appropriately amended."

So against the new cost structure, you have a new revenue model (payment per case sold). Since this is for domestic distribution, I don't know how Israel, Russia or other foreign deals figure in - they may still have cost structures and revenue models following the "old" way.

It's going to be pretty hard to calculate breakeven without knowing the fees DA gets from Mexcor IMHO. Domestic sales will be nice to know, but not directly translatable into DA revenues any longer.

To answer the earlier question about the income statement, producers report sales less COGS, which usually include the components of the items sold. The remainder is called gross profit. Then "overhead" expenses are subtracted, sometimes called "Selling, General and Administrative (SG&A)" which is all other costs except sometimes interest, taxes, depreciation and amortization.
Usually service companies simply report revenues (from fees, commissions or other sources) since they have no COGS, then subtract overhead and other costs to arrive at profit or loss.