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

To: John Curtis who wrote (3440)	7/19/1998 4:09:00 PM
From: FMK	Respond to of 27311

John, thanks for your comments- You seem still stuck on the financing issue. Again, let me remind you that $20 million is available from a shareholder if they elect not to use other means. The company has repeatedly indicated that they don't consider financing a problem. Regarding risk, over the last few months I have compared notes with some large shareholders. With information available the risk of failure was thought to be extremely low. After the conference call the percentage risk is thought to have diminished from there. I'm glad you are "..just about as bullish as bullish can be regarding VLNC"! Just remember there is a limit to how many laptop batteries the market may be ready for. Valence may have to settle for lower profit margins on some other products as they bring lines 3-6 up to speed. Regards, FMK

To: John Curtis who wrote (3440)	7/19/1998 4:41:00 PM
From: FMK	Respond to of 27311

John, just read your post again- My line1 numbers were for multi-shift operation based on 4 mln cells annually. We may have to settle for that as far as line 1 is concerned and should allow time, of course, to ramp up to that rate. The capacity of the high-speed Italian machines, however, is another matter.

To: John Curtis who wrote (3440)	7/19/1998 6:20:00 PM
From: FMK	Respond to of 27311

To all - Post #3442 revised -Some thoughts to help refocus on the value of our investments. My apologies for crowding the cyberspace but I felt obligated to correct this post with some updated numbers. As I have understood for some time, it wasn't necessary for the company to do anything about financing until they needed it. We know from reading the 10k that a large shareholder has $20 million available if the company elects not to finance via other means. I contend that a reasonable person should find it highly unlikely that Valence would have placed three additional assembly lines on order for September/October delivery if they had any idea they wouldn't be able to pay for them. In fact, I find it almost impossible to believe that a company starting high-volume production of rechargeable batteries that hold 20-80% more energy than currently used in millions of portable devices, and has been selling volumes of samples that exceed customer specs to at least 12 potential customers, should have any problem borrowing money. Enough about financing? My own calculations indicate that the first and slowest assembly line, now in operation in NI, should easily be able to earn a profit all by itself by turning out the company's stated design capacity of 1.2 million laptop batteries per year(for their thinnest 4mm version) that their customers will likely pay about $75 each for. (1.2 x $75 = $90 million in revenue). If they sold them at a low price of $60 and made only a million of them, revenue should total $60 million. A low 40% profit should then contribute $24 million toward a "burn rate" of $5 million/quarter before even taking into consideration the approximately $37 million rebate that should begin flowing from the Irish Government. For anyone really concerned, I invite them to do their own computations from their own notes on just line 1's earning power alone. My notes indicate that at design capacity, the company expects that assembly line1 can produce about 1.2 million laptop batt/yr. From the 10k, stockholders equity dropped about $13 million last year, roughly indicating a burn rate of just over $4 mln per quarter. Please work the numbers and you should feel much better. You may even get rather excited about your investments! I recommend you go back and check your own notes and make your own assumptions. My revised calculations for line 1 can be found at: Message 5243575 Remember that the joint-venture partners worked similar numbers before putting up 100% of the capital for the ventures and agreed to split profits 50/50 with Valence. At half Valence's expected % profit, they still considered it a worthwhile investment. This implies that as Valence shareholders, we should anticipate twice the joint-venture partner's expected rate of return on batteries Valence produces independently of the joint ventures. Remember also that when you finished these computations, the numbers represent revenue for only the first and slowest of the assembly lines in Northern Ireland. Other lines are expected to turn out higher volumes but products such as cellphone batteries will be less profitable. Have a good weekend!

To: John Curtis who wrote (3440)	7/19/1998 11:02:00 PM
From: kolo55	Read Replies (1) \| Respond to of 27311

I agree the terms of the financing will be revealing. Fred has posted that the 10K shows a shareholder willing to loan $20M; I don't believe this true. I just read the entire 10K again on Friday, planning to prepare a post on the financing. Unfortunately SEC Edgar was down yesterday, and doesn't seem to be functioning properly yet today, so I can't cut and paste the relevant sections. But the company has had an outstanding loan offer for some time from a shareholder to the tune of $10M, and this offer is good until 2002. The interest rate was 8.5%, about one percent above that shareholder's credit line. Furthermore, they have a $2M credit line that hadn't been drawn on as of March 31, 1998. They should have received $2.5M from Delphi in June, so I add up about $14.5M in available funds, with no dilutive impact. It will be interesting to see the terms of the financing, but I'm feeling more and more that my conservative estimate of 20% dilution is too high, and wouldn't be surprised to see the dilution at less than 10%. Financing seems to be an big issue with many, so if the dilution is less than 10%, then I wouldn't be surprised to see a 20-30% pop in the stock price upon announcement of the financing terms. After the financing announcement, we should get the JunQ earnings report and probably another conference call by August 14 at the latest. Has anyone heard when Valence plans to announce the JunQ earnings? Paul