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

To: Larry Brubaker who wrote (9729)	3/23/1999 1:08:00 AM
From: Rich Wolf	Read Replies (2) \| Respond to of 27311

Larry, I'm curious about the math regarding the money taken in from the sale of the preferreds and warrants. According to the first S-3 back on 8/24/98, Valence received $7.5M from Castle Creek (less costs). In exchange CC received 7500 preferred shares ('with a par value of $1000 each') and warrants to purchase up to an additional 447,761 shares of Common Stock "at a price of $6.03 per share." (See footnote #3). The tables which then indicate how many shares of common the preferred convert to show about 1.289M shares for the fixed conversion, after one year, including the 6% inflation factor. from the S-3: --------------- " (3) Includes warrants to purchase 71,129 shares of Common Stock at a price of $6.03 per share and 1,243,781 shares issuable upon conversion of shares of Series A Preferred Stock. Pursuant to the terms of the Series A Preferred Stock and such warrants, no holder thereof can convert or exercise any portion of such Series A Preferred Stock or the warrants if such conversion would increase such holder's beneficial ownership of Common Stock to in excess of 4.9%. Absent such limitation, the number of shares of Common stock issuable upon exercise of the warrants would have been 447,761, which, together with the shares issuable upon conversion of Series A Preferred Stock held by CC Investments, LDC, would constitute 6.2% of the outstanding shares of Common Stock. " ---------------------------- This clearly indicates that they must pay $420,000 more ($6.03 * 71,129) just to exercise warrants for 71,129 shares. Now, do they still only pay $420k more for the entire set of 447,761 warrant shares (i.e., $1 apiece), or are they still at the rate of $6.03, like the original common from the preferred? Either way, this wording indicates that they have to pay for the warrants, on top of the $7.5M paid for 1.289M common (share count expected as of July 27, 1999 for the series A, for example). Since the warrants for the second tranche of financing also amount to 447,761, that makes almost 900,000 warrants at $6 apiece, for nearly $4.5M. Then, Carl Berg has additional warrants "to purchase up to 149,254 shares of Common Stock at an exercise price of $6.7838 per share." (See footnote 5.) I realize you're trying to back things out from the balance sheet, but from what others have told me, there's a lot of hidden 'gotchas' when going that route. Of course, the phrasing that they've raised 'up to $25M' is also confusing, and seems in contradiction to the extract I pointed out above. The saga continues, I'm afraid.