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

To: Jacques Tenzel who wrote (25620)	10/12/2002 10:35:59 AM
From: Rich Wolf	Read Replies (1) \| Respond to of 27311

re Delphi 'vs' USABC The 'Delphi/Valence relationship' was 'mutually' terminated in 1997, as you know. However, Delphi is still a potential licensee for both the Saphion technology and the lithium-polymer battery production technology (which may or may not fall under the 'Saphion' umbrella... I think it does, but in truth I see two independent aspects, potentially separble). The original agreement between Delphi and Valence allowed both sides to use the co-developed technology in the respective areas of automotive (Delphi) and consumer electronics (Valence). If I remember right, after 5 years the restrictions come down, so Valence could sell products and/or license anything developed during the D/V relationship period (through '97) into the automotive market. That may be part of the reason for the timing of the onset of the USABC review of the Valence technology, or it may merely be coincidence. I believe Valence and Delphi parted ways not because the lithium polymer technology developed as an extension of the original Bellcore process was unworkable (the N-charge product should finally be proving the viability), but because there was some internal dispute as to which other technology co-developments should be shared. Delphi may have wanted to tap into future developments w/o being required to pay royalties, and Valence may have thought that the small sums being spent by Delphi to support Valence were insufficient given the potential royalty streams that would extend far into the future. But this is sheer speculation. I simply note that Delphi continued the development and testing of lithium-polymer cells for the automotive market, and still holds it front-and-center as part of their business plan. In the past we continued to look for capex spending by Delphi towards a production facility, but didn't find it in th eUS, suggesting the market penetration was some time away yet. Now I am inclined to believe that the production will come from overseas facilities, and have no idea as to the state of any investment there (and initially would expect production to involve less-than-fully automated techniques, given the low labor costs). My current interpretation of the timing of the separation of Delphi and Valence is that Delphi would NOT have to pay royalties for the manganese spinel development, but would have to pay royalties for any lithium-polymer production that involves techniques since patented by Valence, as well as for use of the phosphate-based materials. The USABC is explicitly interested in the Saphion technology, which certainly includes the phosphate materials but ultimately may or may not involve the use of the lithium-polymer technology (at this point I believe it does), as these materials could be used in place of cobalt-based cathode materials for liquid-electrolyte cells (resulting in cells that are 'safe,' i.e., not explosive or flammable under impact, etc, while current 'li-ion' cells are not safe for use in vehicles, IMHO). Valence appears to have passed the first tier of technology review, and now USABC is interested in obtaining some number of cells (the PO you refer to) for additional testing. Actual use in commercial fleets is likely a few years away, and certainly any sizeable revenue is further out still. However, the interest from the USABC is long overdue. If I recall correctly, other firms promoting lithium-ion cells that were not cobalt-based have had modest funding from USABC for some time (I'm thinking it was LITH, who claimed an alternative to the Bellcore process). One also wonders why Delphi has not had or accepted funding from USABC for promoting their 'LiPoTek' technology... perhaps suggesting they were not interested in developing any production technology upfront? At this point, Valence shareholders are thirsting for ANY good news even remotely suggestive of interest from the commercial marketplace. This can't hurt, and modest revenue from limited production runs can't hurt, either. However, this is just a first step and not a guarantee. Valence shares are still just a lottey ticket, priced like an undated option on potential success some years down the road. There's going to still be losses for many Qs to come, and additional dilution, until recurring POs arrive ('if ever,' the shorts will say... hence the reason I stated the 'lottery' nature of the share value). Maybe a small relief rally will ensue here.

To: Jacques Tenzel who wrote (25620)	11/11/2002 6:10:05 PM
From: P. Ramamoorthy	Respond to of 27311

>>Is this USABC business independent of our relationship with Dephi (which I assume is still ongoing)? Or are the two very much intertwined?<< Jacques, I had a few minutes to check on this. From the SEC filings, it appears that the large format Saphion technology based battery production (patents and manufacturing know-how in NI) commenced well after Delphi agreement was terminated in 1998. We do not know the terms of their joint development contract. The Company, not the message boards, can give a better answer to your question on Delphi-VLNC intellectual property issues. Stephan needs to clarify whether the Saphion technology falls under the lithium polymer battery technology in the Delphi agreement. I recall Lev issuing a press release after VLNC got the phosphate patent. Ram CONFORMED PERIOD OF REPORT: 12/28/1997 FILED AS OF DATE: 02/11/1998 Substantially all revenues to date have been derived from a research and development contract with the Delphi Automotive Systems Group ("Delphi," formerly the Delco Remy Division), and operating group of the General Motors Corporation. The Company has incurred cumulative losses of $119,824,000 from its inception to December 28, 1997. RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED DECEMBER 28, 1997 AND DECEMBER 29, 1996 (THIRD QUARTER AND FIRST NINE MONTH PERIODS OF FISCAL 1998 AND FISCAL 1997, RESPECTIVELY). During the three and nine month periods ended December 28, 1997, the Company continued development activities under a research and development agreement with Delphi. Payments were generally made in accordance with the achievement of certain milestones. No revenues were recognized during the first three and nine month periods of fiscal 1998 and 1997. In September, 1994 the Company and Delphi signed a new five year agreement to combine efforts in developing the Company's rechargeable solid state lithium polymer battery technology. Under the agreement, Delphi and the Company combined their research and development activities in a new facility in Henderson, Nevada. The new facility is owned by the Company, with Delphi paying a fee of $50,000 per month over the five year term of the new agreement for access to the Company's research and development (of which $150,000 and $450,000 were recognized during the third quarter and first nine months of fiscal 1998, and fiscal 1997, respectively, as an offset to research and product development expenses). In addition, Delphi is paying a majority of the facility's operating costs over the term of the new five year agreement. The Company is treating both of these payments as an offset to research and development expense. ============================= CONFORMED PERIOD OF REPORT: 06/28/1998 FILED AS OF DATE: 08/11/1998 RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 28, 1998 AND JUNE 29, 1997. During the three months ended June 28, 1998, the Company continued development activities under a research and development agreement with Delphi. Payments were generally made in accordance with the achievement of certain milestones. No revenues were recognized during the first three months of both fiscal 1999 and fiscal 1998. In September, 1994 the Company and Delphi signed a new five year agreement to combine efforts in developing the Company's rechargeable solid state lithium polymer battery technology. Under the agreement, Delphi and the Company combined their research and development activities in a new facility in Henderson, Nevada. The new facility is owned by the Company, with Delphi paying a fee of $50,000 per month over the five year term of the new agreement for access to the Company's research and development (of which $150,000 was recognized during the first three months of both fiscal 1998 and fiscal 1997, as an offset to research and product development expenses). In addition, Delphi is paying a majority of the facility's operating costs over the term of the new five year agreement and is anticipated to do so through August 1998. The Company is treating both of these payments as an offset to research and development expense. In May 1998, the Company and Delphi announced the completion of their collaboration on lithium polymer battery development. Delphi will retain a license to use Company-developed lithium polymer technology for vehicular and stationary load leveling / peak shaving applications. The Company will retain a license to use Delphi-developed lithium polymer technology in all other applications. After September 1998, the Company anticipates that it will receive no further payments as a result of the Joint Research and Development agreement with Delphi. It is anticipated that Delphi will continue to pay $50,000 per month through August 1998.......... =============================================================================