My observations on the 10-Q:
Capital expenditure is way down, r&D is also down, travel expenses are up, Financing is not a problem for another month, the company is no longer a development stage company. Specific observations:
1. On the subject of deferred revenue/ revenue:
From the Qtrly:
As a "Development Stage" company, sales invoices principally related to joint venture partners have not been recorded as revenue but have been recorded as a reduction to expense. Sales recorded as a reduction of expenses totaled $233,000 for materials and batteries shipped through June 27, 1999. All remaining portions of these purchase orders
will be shipped and invoiced during the second quarter of fiscal year 2000. It is anticipated that the Company will start recording sales invoices as revenue during the second quarter of fiscal year 2000.
From the Annual concerning deferred revenue:
Deferred revenue relates to payments received from the Company's joint venture partner in Hanil Valence Co., Ltd. This amount will be recognized as income once significant product shipments commence from the joint venture. The Company does not anticipate recognizing this deferred revenue in fiscal 2000.
My conclusion is that the $233K is from Alliant. Hanil has already paid for $2.5M of material, it just has not been recognized as yet, thus it remains as a liability. If the $233K was a shipment to Hanil, it should have reduced the liability by that amount. It did not, thus it has to be the value of the shipment to Alliant.
2. Capital investment dropped to ~$600K this past quarter from a previous rate that has averaged over $3M the past two years. I'm sure that they would have spent more to get the third line on-line if they had the funds. I concluded that they are trying to sell product from the first two lines and will get more product off the third line as funds from the IDB kick in.
3. R&D dropped from $7.57M to $6.4M from last quarter. General also dropped from $2.64M to $1.29M. If you take out the $233K revenue then R&D was $6.67M this quarter, still a $1M reduction. The drop in development and expense cutting has lowered the burn rate by $2.5M. Valence only needs $2M per month at this rate. the filing clearly states that no new funding is needed until Mid-September.
4. Marketing expenses shot up from $30,000 to $60,000. Most notably for travel and international travel expenses related to marketing. Draw your own conclusions.
5. IDB terms have changed. First, the limit has gone up from 4.035 million pounds to 4.080. A minor change of 45,000 pounds. Note that the additional 45,000 was not released. In addition, 500,000 pounds are available when $1.5M in sales and another 500,000 when $2.5M is reached. Also yesterday's announcement releases another 1.86M pounds for expansion.
6.Depreciation was $2.2M. Zeev, given that depreciation is now higher than capital investment, the book value of the plant is going down. However, we added $.6M in capital assets so the drop should have only been $1.6M, not the $2.4M drop from $34.1M to 32.7M we see in the filing. Still a little bit of mystery, but nothing that concerns me.
7. Fully diluted shares went up from 25.871M to 26.736M, an increase of 865,000 shares. Valence only received $105K from the issuance of shares or exercise of warrants, so I'm not sure where the big increase in shares is coming from. Any ideas ?
9. Over a million dollars of in-progress construction was completed and brought on-line. Look at the the march filing:
The major components of construction in progress with their estimated costs and start dates are as follows: mixing, coating, etching, laminating and slitting equipment, $2,481,000, March 1997; assembly equipment, $9,918,000, March 1994; extraction, packaging, and conditioning equipment, $855,000, August 1993; and factory improvements and miscellaneous equipment, $700,000, June 1997. The
estimated completion date for these major categories of construction in progress is the end of the third quarter of fiscal 2000.
and the latest filing:
The major components of construction in progress with their estimated costs and start dates are as follows: mixing, coating, etching, laminating and slitting equipment, $2,126,000, March 1997; assembly equipment, $8,953,000, March 1994; extraction, packaging, and conditioning equipment, $862,000, August 1993; and factory improvements and miscellaneous equipment, $717,000, June 1997. The
estimated completion date for these major categories of construction in progress is the end of the second quarter of fiscal 2000.
It will be interesting to see if in fact the bulk of this equipment is brought on-line by the end of September. Moving up the completion date to just one month ahead is bold and tells me that they are probably already finished tweaking the lines. Perhaps 2 lines are totally and completely operational and the the third line needs the expansion space.
CONCLUSION
Look like all systems are go for a PO. We should see a major one before the end of September. |
