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

To: Greg Smith who wrote (5722)	12/2/1998 1:21:00 PM
From: kolo55	Read Replies (1) \| Respond to of 27311

No, these are not additional shares. You wrote: My understanding is that these 2.5 mil shares are on top of the 5+ million already allotted for the purpose of conversion. I think these 7.5 mil shares are the maximum the company can currently provide for conversion. Note that the 8-K requires the company to seek shareholder approval ASAP (i.e. at the annual meeting) to issue EVEN MORE shares to satisfy potential conversion of both preferred stock and warrants (increasing dilution further). My response: This is a highly confusing issue, complicated by the multiple amendments to the original S-3. From reading the original 8-K, there were terms in the Agreement reached with Castle Creek that required registration of the new shares with the SEC so that these share could be sold on the open market. On this, you are correct, and I made a mis-leading post regarding this yesterday, which I corrected later on. Ever since the original S-3 issued in August, Castle Creek has been able to convert the preferred at $6.03 and sell the stock. They haven't been able to also exercise all their warrants, because of limitations on how many of the outstanding shares can be issued in a private placement of this type. The proposal on the ballot for the annual meeting will allow Castle Creek to exercise all their warrants, if they wish, and also allow the full variable convertibility agreed to in the agreement announced last July. I have read all the S-3s, and compared the share numbers used. Its clear from the numbers in the S-3s, that these are not additional shares (on top of the original 5+ million). The share total for Castle Creek is now only 2.35M shares (page 12 of latest S-3A), which apparently only includes shares from converting the first and second tranches of preferred shares, and the warrants issued with these two tranches. This is down from Castle Creek's share total of 5.5M on the last S-3A filed 10/26 (also on page 12). I believe the difference is that the prior filing used a stock price of $3.72 and the variable conversion clause of the preferred, and that the prior filing included the third tranche shares and warrants. Now the stock price is above the $6.03 conversion price, so this price should be used in calculating the shares. And the third tranche shares do not seem to be included in the filing. This is consistent with Lev's comments on the conference call, that the third tranche probably won't be necessary. All in all, the higher market price for VLNC shares means less dilution. Paul