Rich, I would submit that VLNC would need much more than $4 million to carry them through to positive cash flow, even if they started selling batteries tomorrow.
First of all, they started 1999 with negative working capital of $2.5 million. While they had $7.5 million of cash, they had $10 million of short-term liabilities. By now, at your conservative burn rate of $2 million per month, their working capital would be at negative $12.5 million. Say Berg gave them the remaining $7.5 million of the working capital line of credit (and I don't see how they could still be operating if he hadn't). Then they are still at negative $5 million, with $10 million worth of debt from Berg to service.
Then, presuming they do start production, their burn rate should increase. Materials, shipping, staffing for production, etc., should all cause expenses to increase.
Then, once they do start production, it is probable that it will take several months/quarters/years? before cash flow becomes positive (unless you are expecting VLNC to be the unique manufacturing company that is profitable with a new product right off the bat).
I'd guess the company will need a minimum of $20 million to tide them over until cash flow becomes positive, and I'd guess that is being generous. The positive is the IDB grants that await once they've shipped $4 million, I believe. |
