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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Larry Brubaker who wrote (9723)	3/22/1999 11:01:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 27311

Larry, until manufacturing equipment is actually put into production, I do not think it can be depreciated, so the depreciation is probably relating to non manufacturing equipment and thus no major impact there. However, I calculate the cash flow from operational expenses in the last quarter of $7.9 MM (I am excluding the $3.5 MM for raising money since it is not a cash item). If they bought any additional manufacturing equipment it will show as an increase in property, plant and equipment which at Dec 27 stood at $36 MM, if you have the figure for Sep 27, you can find how much additional equipment was brought in. Unless they have cut markedly on their R&D costs of close to $6 MM, I do not see how they could have a burn rate much smaller than $7.5 MM. If they also had to pay for inventories of raw materials, the burn rate might even be higher. By the way, the R&D cost probably include what later will be manufacturing costs, but until product is sold, these people much be charged to R&D. I hope that clarifies things. By the way, if you assume that they will ship let say $30 MM in the next quarter, the cash drain should actually increase by about $10 MM at least, since they will need this much at least, as working capital (inventories and accts receivable). Since they need to quarantine product for 30 days prior to shipment, the financing of inventories will be a challenge. Of course, the $40 MM from IDB and $7.5 MM from Berg should help once they ship. Zeev