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Non-Tech : Enamelon (ENML) - Does anyone follow this? -- Ignore unavailable to you. Want to Upgrade?

To: Harpo who wrote (761)	2/11/1999 1:52:00 AM
From: Q.	Read Replies (1) \| Respond to of 863

Here's my take on the earnings Firstly, it is strange that I can't find a co. news release with the earnings. Just Reuters and S&P. Relying solely on Reuters condensed financials, it appears that they reduced operating expenses 30% sequentially, and this accounts for eps coming in much less negative than before. I would guess this reduced operating expenses means they were spending less on marketing, since that accounted for 80% of operating expenses the previous quarter. A reduced spending on marketing is a bit of a problem because revenues aren't high enough to come close to breakeven. They have a devilish choice to make: (1) either they take big losses and now with marketing expenses to get brand recognition (2) or they never get to a critical mass to become profitable. Last quarter they were on the track #2. The two previous quarters they were on track #1. Revenues were up very little sequentially, from $4.9 to $5.3 M. This has got to be a sign of some kind of problem, maybe the reduced advertised expenses. I'm not sure what Fox is doing. Maybe he's getting worried about his cash and holding back on the marketing spending. Reuter's and S&P don't have any useful balance sheet info. If I can trust the post with a report from the LA Times two posts back, here's what I get: It looks like the net cash burn was $7 M, based on $20 M cash in Sept. - $18 M cash in Dec. + $5 M private placement. There's no way of knowing at this time how much of that went into operations. So let's figure out when they will next run out of cash: With $18 M on Dec. 31 and a $7 M per quarter burn, they run out of cash by late July 1999 . Based on this, I would look for another private placement in the next couple of months. His cash burn is somewhere around an annual rate of 40% of market cap. This is so high that I don't think it can be sustained by private placements. 10 - 20% market cap per year going into discounted convertibles is sustainable, but not 40%.