Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Jinsong Du from Credit Suisse. Please proceed.
Jinsong Du - Credit Suisse
First of all, about the FISH business you shared with us earlier, just make sure that I get the numbers right so we’ll sell 40 units in June in terms of microscope and how many after, into the month after that? That’s one.
Number two, could you share with us in terms of the margins, the gross margins and net margins for the business? That’s for FISH.
Also, in terms of tax rate, if you could just be more clear in terms of the tax rates going forward. So we have about 15%?
Sam Tsang
Referring first to the FISH expectation, we expect we will at least fulfill 40 units of microscope orders in this month. We have received over 100 orders for microscopes and FISH equipment, and so the remaining orders we expect to fulfill in the following month, that is July.
Gross margin for equipment, as we explained, is lower than FISH probes, which we expect is around 40%. But the recurring sales from the FISH probes we expect the gross margin to be about 50%. As you know, in the first year or the second year, the major revenue stream of FISH will be the equipment sales but the following recurring sales from FISH probes will of course become a significant revenue stream in the following years, just like our ECLIA operation.
For the tax rate, the new income tax rate effective January 2008 is 25% but we are qualified as a hi-tech enterprise under the current regulations. We believe we should be able to continue the qualification of hi-tech enterprise and so if we are qualified under this status, the applicable tax rate should be 15%, which is the same tax rate we expect to pay after the expiration of our income tax concession by the end of this year.
Is that clear?
Jinsong Du - Credit Suisse
By the end of ’08, calendar year ’08?
Sam Tsang
That means from January 2008, we expect to pay income tax rate at 15%.
Jinsong Du - Credit Suisse
Yes, but if we just -- in case we don’t get the approval to qualify as hi-tech --
Sam Tsang
Because the details of the implementation of the 25% has not been announced, we expect in normal practice, there will be some kind of transitional approach. That means that may not be 25% if we don’t qualify as a hi-tech enterprise in the first year. There may be some transitional income tax rate during the first five years to reach 25%, as some tax professionals expect. But we don’t comment on the actual tax rate which may be known to us later this year.
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