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Biotech / Medical : Eclipse Surgical Tech (ESTI) -- Ignore unavailable to you. Want to Upgrade?

To: Pullin-GS who wrote (51)	10/20/1998 8:54:00 PM
From: Nevada	Read Replies (1) \| Respond to of 103

A message I posted on A Goldfinger's thread that got no response. ESTI; I am short ESTI. I have spent the last day going over the latest earnings report. Unless I am missing something, this company is running out of cash fast. Conservatively, they appear to be burning cash at the rate of about 1.5 mm per month. They only have at Sept 30th, 2.0 mm in cash with 3.2 in receivables and 5.0 in current liabilities. There are two kickers, more like caveats, to my analysis- first the long term investment of 14 mm. You really need a cash flow statement and notes to the financial statements to figure this one. I have no cash flow statement for the quarter ended 9/30 so I went back to 6/30. The company bought and sold roughly the same amount, 10 mm, in long term marketable securities during the quarter ended 6/30/98. This leads one to believe the amounts are highly liquid and available. Why they are classified as long term is the puzzlement. (I am a CPA and know the rules- they just make it more of an enigma). If you take the total current assets and add the long term investments at 9/30, you get 26,181. Subtract the current liabilities of 6,093 and you have an adjusted net working capital of 20,088. At 6/30 these numbers were 32,410 less 5990, or 26,420. Ergo, the company's liquidity has decrease by 6332. Seems to be burning liquidity at over 2 mm per month. The second kicker is the amount spent on R&D. This is huge and usually a sign of a growing forward looking company. However, the 6/30 10 Q says that the figure includes the cost of the required FDA trials. I wonder how much is that and how much is true R&D? Fianlly, the company has little or no long term debt. This is a possible source of future funds, but who will loan a company burning cash at this rate without a substantial piece of the potential pie. To make the analysis complete, we need someone who knows the technology and the FDA to comment.