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

To: Chisy who wrote (12448)	6/28/1999 6:34:00 PM
From: MGV	Read Replies (2) \| Respond to of 27311

If one ever were inclined to short a stock, provided below, in the company's own language, is ample reason from the company to consider doing just that here: In addition, to achieve broad commercialization of our products, we will need to reduce manufacturing costs of our battery systems. Our batteries may not be able to be manufactured in commercial quantities to the performance specifications demanded by customers. Even if our current research and development activities result in the design of batteries with commercially desirable characteristics, we will still have to be able to competitively manufacture these batteries. Our current manufacturing technology must be further developed before we will be able to manufacture our batteries in commercial quantities. Any failure to achieve acceptable yields of commercial quality batteries in commercial quantities, and thereby reduce unit manufacturing costs, could have a material adverse effect on our business, results of operations and financial condition. Page S-5 WE ARE IN THE EARLY STAGE OF MANUFACTURING, AND IF WE ARE UNABLE TO DEVELOP MANUFACTURING CAPABILITY COST EFFECTIVELY, WE WILL NOT BE ABLE TO GENERATE PROFITS; MANUFACTURING RISKS; POTENTIAL CAPACITY CONSTRAINTS AND RISKS OF PROPOSED EXPANSION. To date, we have not manufactured batteries on a commercial scale. Any failure to achieve acceptable yields of commercial quality batteries in commercial quantities, and thereby to reduce our unit manufacturing costs, could have a material adverse effect on our business, results of operations and financial condition. Until recently, our batteries have been only manufactured on our pilot manufacturing line, which is able to produce prototype cells in quantities sufficient to enable customer sampling and testing and product development. We are currently in the early stages of transitioning production to an automated high volume production line that will work with our newest battery technology in our manufacturing facility in Mallusk, N.I. The redesign and modification of the manufacturing facility, including its customized manufacturing equipment, will continue to require substantial engineering work and expenses and is subject to significant risks, including risks of cost overruns and significant delays. In addition, in order to rapidly scale up the manufacturing capacity, we will need to begin fabrication of a second automated production line before completing full qualification of the first line. In automating, redesigning and modifying the manufacturing processes, we have been and will continue to be dependent on several developers of automated production lines, which have limited experience in producing equipment for the manufacture of batteries. A key determinant of our current and future production capacity and profitability is the production yield of our manufacturing process. The redesign and modification of our manufacturing facility and the development and implementation of automated production lines will entail significant risks and will require a substantial investment of our capital. As part of our manufacturing ramp-up, we will need to hire and train a substantial number of new manufacturing workers. The availability of skilled and unskilled workers in Northern Ireland, the site of our manufacturing facility, is limited due to a relatively low unemployment rate. We may not successfully develop improved processes, design required production equipment, enter into acceptable contracts for the fabrication of such equipment, obtain timely delivery of such equipment, implement multiple production lines or successfully operate the Mallusk facility. We may not be able to successfully automate our production on a timely basis or at all, and such automation may not result in greater manufacturing capacity or lower manufacturing costs than our pilot production line. Customer relationships could be damaged if we fail to begin volume manufacturing on a timely basis. Such failure could cause lost opportunities and have a material adverse effect on our business, results of operations and financial condition. WE ARE EXPERIENCING DELAYS IN QUALIFYING OUR MANUFACTURING FACILITIES. We have been unable to meet our prior schedules regarding delivery, installation, de-bugging and qualification of the Northern Ireland production equipment. As most of the production equipment is being specially manufactured for us, further problems may develop and cause further delay in our current schedules. We are improving and bringing many of the manufacturing processes that we are implementing in this production equipment up to date for the first time from our laboratory scale prototype work. We may need to further refine the improved processes, which could cause substantial delays in the qualification and use of this equipment. Furthermore, if we are able to refine our process, we may not be able to produce the required amount of qualification samples to potential customers. From our discussions with potential customers, Page S-6 we expect that customers will require an extensive qualification period once the customer receives its first commercial product off a production line.

To: Chisy who wrote (12448)	6/28/1999 7:11:00 PM
From: I. N. Vester	Read Replies (2) \| Respond to of 27311

CC remarks about moving into the black: I'm trying to remember exactly how this was expressed and get the right quarter. Fellow CC listeners, please correct me if I don't remember this quite correctly (did not take any notes as I expected to be able to hear the replay via vcall). I believe that Roy Wright stated that they would be in the red for 2 more quarters (i think this refered to the quarter ending in June and the quarter ending in Sept) getting into the black. I also believe that the statement was that the Hanil and Alliant orders alone would be enough to get them into the black by the quater ending in December. I believe that this was a very clear statement indicating the strength of their business even without any new orders. I am also very relieved because one of the largest risk factors has been the reliance on Lev Dawson alone. If Lev had died in a plane crash 3 months ago, it probably would have meant a 3-6 month setback. It sounds to me that Roy Wright and the rest of the management team are now on board and the programs are in place enough that even if Lev dies in a plane crash tomorrow, the company will survive and thrive pretty much on the present course. I am more confident than ever that the shorts and net bullshitters can blow smoke up their asses all they want, but they cannot make the US Government approved Valence batteries disappear! The next CC in 6 weeks might be too soon for the real fun to begin, but after that they are going to be more and more enjoyable.