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

To: Rich Wolf who wrote (11287)	5/21/1999 9:35:00 PM
From: john t. brice	Read Replies (1) \| Respond to of 27311

Rich> There is one thing left out of your timeline that might make it more difficult for us to see behind the curtain. I distinctly remember Lev saying in a CC over a year ago that the way these programs work is that once the customer agrees to work with VLNC on a battery project and the design and prototype phases are completed, the customer receives a shipment of production run batteries for them to test. Once the testing is satisfactorily completed the customer receives the second shipment for which there is no charge. It is not until the third shipment that there will actually be any revenue generated, come to think of it, this could allow the SEC filings to be correct (no batteries for sale) quite a way into the program. At any rate, this could extend the time out significantly before revenues start showing up some where or being announced. duckster

To: Rich Wolf who wrote (11287)	5/22/1999 12:43:00 AM
From: Larry Brubaker	Read Replies (2) \| Respond to of 27311

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.