Direct sales strategy, page-13

Hi Gralynchett,

I don't have a copy of the fee structure of the GE distribution agreement. This is an inference I've made based on a combination of comments I've heard in an analyst briefings, the forecasts of broker reports and some other statements in broker reports. An example of the comments that suggest NAN has not been getting the full margin on ongoing sale of consumables is provided in a Canaccord in the report which said that "We believe that, for direct sales, the gross margin of trophon will increase from approximately US $2,500 to around US$7,000, and the margin on the Sonex consumables will increase from approximately US$40 per bottle to around US$90 per bottle."

If it was simply the case that GE Healthcare could only profit from the initial sale of the one trophon unit - and then NAN could supply and capture the full margin of all the consumables and replacement units from then on -  why would the analysts be discussing the prospect of the increase in margins from consumables? Clearly this is not the case, and GE have been capturing a margin of the recurring sales from consumables, otherwise none of the brokers would have cared to focus on this.