To: NightOwl who wrote (77728 ) 8/19/2001 4:53:27 PM From: Zeev Hed Read Replies (1) | Respond to Slow down, too much flowery prose out there. Right now, they have $2.5 MM in cash, their last report cites about $7.5 in sales and and $12 MM in expenses, best case scenario (I presume COGS is included, since their non COGS expenses are running at about $7 Mm and their "gross margins are under 50%, so on $7.5 MM COGS would be $4 MM, give or take, mind you if at $2.5 MM in sales they need $10 MM in inventories, how much will they need to more than double that sales rate?. Best case scenario is thus a shortfall of $4.5, thus the balance sheet will be poorer by $4.5 MM, not improved. Frankly, it seems to me that about $7.5 MM in inventories may have to be "taken off", and increase of sales to $7.5 MM will require financing additional inventory as well as accounts receivable, maybe another $4.5 MM? Thus the shortage in cash by the end of this quarter will be closer to $9 MM. The way the balance sheet can be improved is by injection of liquidity either through debt or equity. Equity will go at $2 or lower, and they will not go through the trouble of getting equity for just one quarter. At $2 (if the price stays there), thus you are talking about at least 4 MM share, just to survive another quarter. To get to break even, assuming generous gross margins of 50%, they will need to generate at least $16 MM in sales quarterly, or double the current quarter's forecast, that means raising working capital by at least another $2.5 MM, before they even see positive cash flow. Typically, a company does not go to the well quarterly (the cost is too high), so if you assume they need to go for at least two quarters of operational cash (unless they sell some of this IFX stock) they'd better go for some $20 MM, or 10 MM shares. If you feel this scenario does not make sense, please tell me what of these assumptions are wrong.
