VALENCE TECHNOLOGY (VLNC) Message Board

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Technology Stocks : VALENCE TECHNOLOGY (VLNC)

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To: mooter775 who wrote (16935)	12/11/1999 9:05:00 PM
From: Zeev Hed	Read Replies (2) of 27311

Mooter, the current annual burn rate is $35 MM, and that is without actual production, how can $40 MM annual sales be break even? That would mean gross margins of 87.5%. This is impractical even at 100% yield, gosh, just depreciation should be of the order of $5 MM plus yearly. Since the equipment was not in production so far, depreciation charges on the capital expenditure (about $30 MM plus) are not taken yet. Furthermore, on a cash flow basis, you need to bring to the bottom line at least 30% of sales just to support increased inventories and receivable. Thus even if $40 MM annually is break even, you still need another $15 MM or so just to support growth in working capital. I am not even talking about capital expenditures required to raise production levels to meet what is expected to be vibrant demand. It does not make much sense to set up expectation that are too optimistic, it is not even necessary to support the price, since the market accepts a good 12 to 18 months from start of shipments to break even point and even longer to positive cash flow. Zeev

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