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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Larry Brubaker who wrote (12972)7/9/1999 10:31:00 AM
From: FMK  Read Replies (2) of 27311
 
Larry, The "Deferred revenue" comment regarding Hanil likely means that it is expected that Hanil will become profitable sometime in year 2000. Under the terms of the joint venture agreement, Valence will share 50% of the profits from the joint venture. If you recall, Valence has put up essentially zero capital to build the plant or to purchase the equipment for Hanil. 50% of their profits is payback for Valence's years of R&D that have gone into the Laminate, cell assembly and manufacturing techniques. This payback has been described as "deferred revenue".

For Hanil to have built the plant just last year and to become profitable next year speaks well for the technology. For example, what is Valence's % return on investment on $250,000 in travel expenses after they receive $10 million next year of Hanil's perhaps $20 million profit? Hanil's profits depend on many factors, of course, but would they have built the plant if they weren't confident about making a profit? Remember also the Alliant Tech joint venture is structured similarly. Is there is money to be made supplying the Government and military with high tech batteries?

As you can see, there is much more to the formula than can be found in the SEC documents, and in the least, much more to the picture than you choose to acknowledge.
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