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

To: Dennis V. who wrote (22259)	11/12/2000 12:40:52 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 27311

Dennis, royalties run all over the place, for drugs for instance these can run as high as 8% (in rare cases even higher). For products like batteries, the best equivalent I can find is the GM/Sumitomo lock on Nd-Fe magnets which revolutionized the small motors industry. They charge 3% of sales (sales defined as "wholesale", or first arm length transaction). I would say that a lock on the Li polymer technology should be probably at this level (on end product). If the licensee also uses VLNC's patented powders acquired from a licensed third party, the third party manufacturing the powders probably will pay licensing fees on its product, or have a "profit sharing" type agreement with VLNC. I doubt that the total royalties would be in excess of 5% of end product sold. Since Lev suggested that within two three years the Li-polymer technology will capture $1 B of the total $8 B of that market, you get a pretax potential of about $50 MM annually. For valuations purposes you probably want to take only 65% of that since after few years of such profits, the tax status of VLNC will be "normalized", and the market sets valuations based on after tax earnings. Of course, VLNC will have to persuade the existing licensees that the non Telecordia technology owned by VLNC justifies changing existing agreements (I think that royalties rates in the Telecordia agreement were depending on the size of the upfront payment and were in the range of 1% to 2%, but that is from memory, maybe someone here knows more details on the Telecordia licenses). Zeev

To: Dennis V. who wrote (22259)	11/12/2000 4:46:08 PM
From: Richard M. Jimmink	Read Replies (1) \| Respond to of 27311

Dennis, You have named many of the factors for licensing. Without trying to put a dollar amount or percentage number, the fundamentals of licensing, is the percentage of royalty payments. They will vary with the degree of the up front money. The larger the down payment, the lower the percentage per unit. Having developed many licensing programs, I found it was essential to put down all of the factors you can identify, in a matrix format. Giving weighted numbers or percentage, to each factor. The weighted scale, then becomes a management tool for the decision making process. Maybe Valence should hire me as a consultant!!!! Dick

To: Dennis V. who wrote (22259)	11/12/2000 10:55:49 PM
From: P. Ramamoorthy	Respond to of 27311

Dennis, You missed a few: (1) 3%(?) of sales from battery manufacturers (2) Add license fee their two powder suppliers (spinel and proprietary spinel) (3) film sale (lowest cost producer), (4) own NI plant production - either joint bidding with a licensee or sole supplier for an oem (5) machinery sale, design, startup fees, for automated production No one has posted this: Lev has set up three companies and mirror companies that will be foreign subsidiary outside USA: (1) sell materials (powder + film) (2) licensing and royalty fees collection and (3) NI plant with new OEM. The mirror companies are set up to alleviate the foreign tariff requirements. Asian manufacturers would be interested in dealing with the mirror companies for the 17% tariff (I need to check this?) incentive. Ram