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

To: wm sharp who wrote (2532)	4/5/1998 8:51:00 PM
From: Mark Adams	Read Replies (2) \| Respond to of 27311

I've been looking over VLNC again- considering a small position. One thing concerns me- that they appear to be on the brink of requiring additional financing. Per their 10Q- they had 5mill on hand 12/97 and a burn rate of 3 mill per qtr. They stated their 2mill line of credit expired March 98. They anticipated adequate capital to fund operations through FY98-, which if I'm reading correctly is March 31, 98. So are they about out of cash/working capital?

To: wm sharp who wrote (2532)	4/8/1998 10:46:00 PM
From: wm sharp	Read Replies (1) \| Respond to of 27311

Revised numbers for initial line potential. A newer spec sheet is available, dated 11/97 and featuring laptop cells in three thicknesses: 4, 6,and 8mm. A copy appeared in a colleague's new investor packet. After reviewing the information and comparing notes with another investor familiar with the line capacities, it appears that my revenue estimates for Line 1 in the earlier post may be conservative by a factor of three. Assuming three 6mm cells per finished laptop battery in the CD bay, at 17.5 Whr per cell, we get 52 Whr total. Using $1.75 per Whr (conservative, in my view, due to the uniqueness of the product) we get $91 of gross revenue per finished battery. In the earlier post, I used 1.25M batteries/year as a median output for Line 1 (starting at 0 and ramping to 2.5M/year.) Assuming a 50% yield, we get 0.15M batteries per Q. That's about $13.5M in gross revenues per quarter from just the first (slower) line at startup, using conservative yield and shift numbers (50% and 2, respectively.) At that rate, Valence would easily meet the IDB's $4M criteria in the first quarter or two of operation. Perhaps more importantly, Street analysts - when they're finally allowed into the plant - will not easily ignore the potential numbers from just one Valence line. (Four 6mm cells - or three 8mm - might even fit in the ROM space, boosting the Whr significantly.) If anyone knows of additional factors or corrections that should be applied to the above estimates, please post.