Li, there are two issues here, the accounts payable are quite high (relative to accounts receivable, typically, accounts payable would be lower that accounts receivable), so I am not sure how the paying of these accts are times, but they will decrease cash by about $5 MM or so, bringing cash under $20 MM. If they meet the $24 Mm in sales, under the best conditions (IMHO), the best you can expect is $12 MM contribution to cash flow, but to support these $24 MM you probably will have to increase working capital by some $5 to $8 MM, let say $6 MM, thus your net cash contribution will be only $6 MM. Since the burn rate is still around $35 MM annually, so you have a net negative cash flow for FY 2001 of about $29 MM. The IDE would probably advance inventories and account receivable (the $6 MM stated above), so this back of the envelope calculation indicates to me a negative cash flow of about $23 MM, just barely making it on current cash, and if the $6 MM in accts payable need to be paid (and not replaced by other sizeable accts receivable), there is a shortage of cash.
I also think that assuming so early in the game a gross profits of 50% (as I have done) is extremely optimistic, so the cash situation may require either greater advances from IDE or issuing more stock.
Zeev |
