Avid Bioservices Inc (CDMO)

[cjgaddy]

How much Cash needed to elim. Going-Concern Clause?

Cash at 1-31-10 was $16.8mm + $11.7mm raised 2/1/10-6/21/10 via ATM Sales – that’s ~$28.5mm to start with…

Less Op-Burn (was $5.5mm for 9mos. ended 1-31-10 = ~$1.8/qtr) at say $2.5mm for q/e 4-30-10.

That should put Cash at next CC ~7-13-10 in the vicinity of $23-24mm – all things being equal and assuming no more ATM Sales between now and July13.

I’m thinking $23mm looks pretty good for 2 years Op-Burn, and thus (hopefully) removal of Going-Concern by the auditors. [Note: I’m assuming that FFox is right in his 6-22-10 #52135 statement, “PD-- You are correct. Money raised between today and the day the CPA firm signs their cover letter that accompanies PPHM's filing with the SEC of its year-end financials on approx. July 10, is money that counts toward the "going concern" determination.”]

IF YOU SEE ANYTHING WACKY ABOUT MY CALCS OR ASSUMPTIONS, LET ME KNOW!

My logic: Op-Burn for last 9 mos. ending 1-31-10 = $5.5mm, annualized to about $8mm. So, let’s start with $16mm Op.Burn ($7mm cushion) for next 2 yrs. and adjust as logical…

AVID(Non-Gov’t) revs grew +29.7% for Q1-Q3 FY10 vs. FY09 ($8.0mm to $10.3mm), so let’s cut Avid growth in half to 15%/yr. and say $13.5mm FY10 moves to $15.5mm for FY11 & $17.9mm for FY12. Net gain over next 2 years of $4.0mm Avid (again, these are non-Govt) revs.

DTRA revs for next 2 yrs. s/b down, since 1st 2 yrs of 7/2008 contract was $22mm, but last 3 yrs. of 5-yr contract is also for $22mn – so, $7mm/yr. Govt revs for July’10-July’13 (next 3 yrs) vs. $11mm/yr for July’08-July’10 (1st 2 yrs). That’s net loss over next 2 years of $8.0mm Gov’t revs.

So my (conservative) EST. of Avid & Gov’t Revs chg. for next 2 years is +$4mm - $8mm = -$4mm. I don’t see how that could add more than $2mm to the Burn over the next 2 years (I don’t think the margins on this business exceeds 50%), so let’s add $2mm to the burn over the next 2 years due to Avid & Govt.

That still leaves us a cash cushion of $5.0mm to cover any other increases to Op-Burn over the next 2 yrs. Will the new trials and other expenses INCREASE op-burn over $5mm for next 2 yrs vs. last 2 yrs?

I’ll guess we’ll let Ernst & Young hash it out, and let us know what they think around July 13th.

Again, just throwing out some numbers – trying to be conservative. If you see any major flaws, let me know and I’ll adjust.

= = = = = =
Latest 10K 4-30-09 iss. 7-14-09: http://tinyurl.com/nvk7xo PR: http://tinyurl.com/nt4zql (cash 4-30-09 $10.0mm)
Latest 10Q 1-31-10 iss. 3-11-10: http://tinyurl.com/yfyfm8l PR: http://tinyurl.com/y958fhs (cash 1-31-10 $16.8mm)
ALL SEC filings for PPHM: http://tinyurl.com/6d4jw8
AVID BIOSERVICES:
...Avid Total Services for 12mos. ended 1-31-10: 15.3/CMO + 8.3/Govt + 8.8/PPHM = $32.4mm http://tinyurl.com/yale4mv
3-11-10 PPHM's Revs & Burns By Qtr Table, updated thru FY'10/Q3 (q/e 1-31-10): http://tinyurl.com/yf6hg6m