Revenue Question and Answer
from Yahoo board post #511
From: Alan Dail
Date: Sat Nov 22, 2003 1:27 pm
Subject: Re: [EXTIhead] New poster revenue question.
John,
My understanding is this:
EXTI has received a total of $1.5 million from XenoTech. Of this,
$800k was for the right to negotiate distribution rights for
therapeutic proteins and is being recognized over 7 years. Part or all
of the rest was for prepayments of a portion of the first period
minimum royalties. The word portion is key here too - some royalties
were prepaid, with royalty payments yet to come.
Alan
On Nov 22, 2003, at 2:00 PM, jsd726 wrote:
> I have only been following this company since it signed the
> agreement with Xenotech, LLC in August. I have purchased from .12
> on up and then back down again. I now have a decent size investment
> in this company. I very much appreciate all of the research and
> technical analysis on Webby's sight,on this board, and prior to this
> board, on the raging bull board.
>
> My revenue question comes from the 10QSB issued on 10/17/2003. The
> paragraph that I am referring to is under the notes to the financial
> statements - Note 2 Revenue Recognition:
>
> "The Company received an $800,000 payment as part of the agreement
> with Xenotech during the quarter. This is a non-refundable payment
> for the right to negotiate with Nosan Inc. for distribution rights
> in the Asian Pacific Rim for therapeutic proteins should they be
> developed. The Company has agreed to negotiate in good faith for
> the rights over a ninety day period. Management cannot estimate the
> exact time it will take to develop these proteins and begin the
> negotiations with Nosan. Therefore, the Company has chosen to
> regognize these revenues over a life of the Xenotech Agreement which
> is seven years. The royalty prepayment associated with this
> agreement, which is part of the first period minimum, will be
> recognized over the first period of the contract, which is sixteen
> months from the date it was signed."
>
> I'm not sure if this is just a poorly written paragraph or I'm just
> struggling with it. I believe, as Alan stated, that this $800,000
> is in addition to the $18m minimum royalty agreement. This
> paragraph states that this revenue will be recognized "over a(?)
> life of the Xenotech Agreement which is seven years." The last
> sentence states, however, that it is a royalty prepayment and is
> part of the first period minimum, which will be recognized over the
> first period of the contract, which is sixteen months from the date
> that it was signed.
>
> The body of the financial statements show that $100,000 of this
> payment is recorded as revenue and the other $700,000 is recorded as
> deferred revenue. This, to me, indicates that the $800,000 will be
> recorded as revenue over 16 months and that the agreement was signed
> in July of 2003.
>
> I bring this up because I believe that the minimum revenue recorded
> for the quarter ending November 30, 2003 will be $642,287($18m
> divided by 7 years, divided by 4 quarters) plus $150,000($800,000
> divided by 16 months times 3).
>
> The unknown, for the current quarter, is what the expenses will be.
> I do believe that the company will show a profit for the current
> quarter of between $300,000 and $500,000. A profit of $400,000
> would yield an EPS of 1.5 cents.
>
> Other than this company, I have zero experience with penny stocks,
> however I believe that a profitable company with growth potential is
> worth much more than the current market cap.
>
> I would apprecaite any comments/rebuttals, and thanks again for all
> of the great posts.
>
> John
AI
