<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OR THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1997.
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-20028
VALENCE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0214673
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 Conestoga Way, Henderson, Nevada 89015
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(Address of principal executive offices including zip code)
(702) 558-1000
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(Registrant's telephone number, including area code)
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No (2) Yes X No
----- ----- ----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $0.001 par value 23,382,093 shares
- ------------------------------------- ---------------------------------
(Class) (Outstanding at November 3, 1997)
VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 28, 1997
1
<PAGE>
INDEX
PAGES
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
September 28, 1997 and March 30, 1997. . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the period from March 3, 1989 (date of inception)
to September 28, 1997 and for each of the three and six
month periods ended September 28, 1997 and
September 29, 1996 . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the period from March 3, 1989 (date of inception)
to September 28, 1997 and for each of the six month periods
ended September 28, 1997 and September 29, 1996. . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders. . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 11
SIGNATURES
2
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
_____
September 28, March 30,
1997 1997
------------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 22,096 $ 27,832
Short-term investments 1,424 5,556
Accounts receivable 1,169 431
Interest receivable 108 126
Prepaids and other current assets 115 120
--------- ---------
Total current assets 24,912 34,065
Investments - 4,000
Property, plant and equipment, net 22,835 17,191
Investments in Joint Venture 1,766 -
Other assets 279 270
--------- ---------
Total assets $ 49,792 $ 55,526
--------- ---------
--------- ---------
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 685 $ 1,433
Accounts payable 960 1,949
Accrued expenses 7,296 7,317
Accrued compensation 1,198 1,261
--------- ---------
Total current liabilities 10,139 11,960
Deferred revenue 2,500 -
Long-term debt, less current portion 5,005 5,217
--------- ---------
Total liabilities 17,644 17,177
--------- ---------
Contingencies (Note 3).
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value:
Authorized: 10,000 shares;
Issued and outstanding: none
Common stock, $0.001 par value:
Authorized: 50,000 shares;
Issued and outstanding: 23,289 and 21,745
shares at September 28, 1997 and
March 30, 1997, respectively 146,186 140,580
Deficit accumulated during the development stage (114,861) (103,526)
Cumulative translation adjustment 823 1,295
--------- ---------
Total stockholders' equity 32,148 38,349
--------- ---------
Total liabilities and stockholders' equity $ 49,792 $ 55,526
--------- ---------
--------- ---------
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
-----
<TABLE>
<CAPTION>
Period from
March 3, 1989
(date of
inception) Three Months Ended Six Months Ended
through ----------------------------- -----------------------------
September 28, September 28, September 29, September 28, September 29,
1997 1997 1996 1997 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Research and
development
contracts $ 21,605
Costs and expenses:
Research and
development 77,511 $ 4,427 $ 2,682 $ 8,462 $ 5,240
Marketing 2,927 129 56 250 123
General and
administrative 35,160 1,462 1,309 2,798 2,427
Purchase of
in-process
technology 8,212 - - - -
Investment in Danish
subsidiary 3,489 - - - -
Special charges 18,872 - - - -
----------- --------- --------- ---------- ---------
Total costs and
expenses 146,171 6,018 4,047 11,510 7,790
----------- --------- --------- ---------- ---------
Operating loss (124,566) (6,018) (4,047) (11,510) (7,790)
Interest income 14,500 321 779 774 1,453
Interest expenses (4,061) (148) (161) (299) (286)
Equity in earnings (losses) of
Joint Venture (734) (150) - (300) -
Net loss $ (114,861) $ (5,995) $ (3,429) $ (11,335) $ (6,623)
----------- --------- --------- ---------- ---------
----------- --------- --------- ---------- ---------
Net loss per share $ - $ (0.26) $ (0.16) $ (0.51) $ (0.31)
----------- --------- --------- ---------- ---------
----------- --------- --------- ---------- ---------
Shares used in computing
net loss per share - 22,721 21,672 22,263 21,671
----------- --------- --------- ---------- ---------
----------- --------- --------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
(unaudited)
------
<TABLE>
<CAPTION>
Period from
March 3, 1989 Six Months Six Months
(date of inception) Ended Ended
through September 28, September 29,
September 28, 1997 1997 1996
------------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (114,861) $ (11,335) $ (6,623)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 20,601 756 2,125
Write-off of equipment 14,792 - -
Write-off of in-process technology 6,211 - -
Compensation related to stock options 2,136 554 26
Noncash charge related to acquisition
of Danish subsidiary 2,245 - -
Equity in (Earnings) Losses of Joint Venture 734 300 -
Changes in assets and liabilities:
Accounts receivable (80) (738) (90)
Interest receivable (99) 18 274
Notes receivable (66) 78 188
Prepaid expenses and other current assets (1,068) 5 (45)
Accounts payable 859 (989) (344)
Accrued liabilities 207 (86) (933)
Deferred revenue 0 0 0
---------- ---------- ---------
Net cash used in operating activities (68,389) (11,437) (5,422)
---------- ---------- ---------
Cash flows from investing activities:
Purchase of long-term investments (635,097) (156,869) (149,839)
Maturities of long-term investments 629,429 165,001 164,857
Capital expenditures (46,088) (6,836) (915)
Other (222) - -
---------- ---------- ---------
Net cash provided by (used in)
investing activities (51,978) 1,296 14,103
---------- ---------- ---------
Cash flows from financing activities:
Property and equipment grants 4,419 - 5
Borrowings of long-term debt 15,502 - -
Payments of long-term debt:
Product development loan (482) - -
Shareholder and director (6,173) - -
Other long-term debt (11,494) (958) (1,074)
Proceeds from issuance of common stock,
net of costs 142,390 4,891 -
---------- ---------- ---------
Net cash provided by (used in) financing
activities 144,612 3,933 (1,069)
---------- ---------- ---------
Effect of foreign exchange rates on cash and cash
equivalents (823) 472 (373)
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents 22,096 (5,736) 7,239
Cash and cash equivalents, beginning of period 0 27,832 24,569
---------- ---------- ---------
Cash and cash equivalents, end of period $ 22,096 $ 22,096 $ 31,808
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
(unaudited)
_____
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These interim condensed consolidated financial statements are unaudited but
reflect, in the opinion of management all normal recurring adjustments
necessary to present fairly the financial position of Valence Technology,
Inc. and Subsidiaries (the Company) as of September 28, 1997 and March 30,
1997, its consolidated results of operations and cash flows for the period
from March 3, 1989 (date of inception) to September 28, 1997 and for each of
the three-month and six-month periods ended September 28, 1997 and September
29, 1996. Because all the disclosures required by generally accepted
accounting principles are not included, these interim condensed consolidated
financial statements should be read in conjunction with the audited financial
statements and notes thereto in the Company's Annual Report on Form 10-K as
of and for the year ended March 30, 1997. The year end condensed
consolidated balance sheet data as of March 30, 1997 was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
The Company's current research prototype batteries do not meet all of the
specifications demanded by the marketplace, and the Company presently has no
products available for sale. To achieve profitable operations, the Company must
successfully develop, manufacture and market its products. There can be no
assurance that any products can be developed or manufactured at an acceptable
cost and with appropriate performance characteristics, or that such products
will be successfully marketed.
The results of operations and cash flows for the three and six-month periods
ended September 28, 1997 are not necessarily indicative of results of operations
and cash flows for any future period.
2. NET LOSS PER SHARE
The computation of net loss per share is based on the weighted average number of
common shares outstanding during the period. Common stock options and warrants
have not been included in the computation since their inclusion would be
antidilutive.
3. CONTINGENCIES
LITIGATION:
In May 1994, a series of class action lawsuits was filed in the United States
District Court for the Northern District of California against the Company and
certain of its present and former officers and directors. These lawsuits were
consolidated, and in September 1994 the plaintiffs filed a consolidated and
amended class action complaint. Following the Court's orders on motions to
dismiss the complaint, which were granted in part and denied in part, the
plaintiffs filed an amended complaint in June 1996 ("Complaint"). The Complaint
alleges violations of the federal securities laws against the Company, certain
of its present and former officers and directors, and the underwriters of the
Company's public stock offerings, claiming that the defendants issued a series
of false and misleading statements, including filings with the Securities and
Exchange Commission, with regard to the Company's business and future prospects.
The plaintiffs represent a class of persons who purchased the Company's common
stock between May 7, 1992 and August 10, 1994. The Complaint seeks unspecified
compensatory and punitive damages, attorney's fees and costs. In January 1996,
the Court dismissed, with prejudice, all claims against the underwriters of the
Company's public stock offerings, and one claim against the Company and its
present and former officers and directors. In April 1996, the Court dismissed
with prejudice all remaining claims against a present director and limited
claims against a former officer and director to the period when that person was
an officer. In December 1996, the Company and the remaining individual
defendants filed motions for summary judgment, which the plaintiffs opposed.
In November 1997, the Court granted the Company's motion for summary judgment
and filed a judgment in favor of all defendants. The plaintiffs have the
right to appeal.
6
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4. RECENT ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE"
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 specifies the computation, presentation and disclosure requirements for
earnings per share. SFAS 128 supersedes Accounting Principles Board Opinion No.
15 and is effective for financial statements issued for periods ending after
December 15, 1997. Also, SFAS 128 requires restatement of all prior-period
earnings per share data presented after the effective date.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.130, "REPORTING COMPREHENSIVE
INCOME"
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as " the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners." SFAS
130 is effective for fiscal years beginning after December 15, 1997, and
reclassification of financial statements for earlier periods provided for
comparative purposes is required. SFAS 130 is not expected to have a material
impact on the Company's financial position, results of operations or cash flows.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.131, "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION"
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 generally supersedes Statement of
Financial Accounting Standards No. 14, "Financial Reporting for Segments of a
Business Enterprise." Under SFAS 131, operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that is used internally.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997, and restatement of comparative information for earlier years
is required. However, SFAS 131 is not required to be applied to interim
financial statements in the initial year of application. SFAS 131 will not have
a material impact on the Company's financial position, results of operations or
cash flows.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion and analysis below, and throughout this report, contains forward
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Such forward
looking statements involve a number of risks and uncertainties including, but
not limited to, market acceptance, changing economic conditions, risks in
product and technology development, effect of the Company's accounting policies
and other risk factors detailed in the Company's Securities and Exchange
Commission filings. Actual results could differ materially from those
projected or suggested in the forward looking statements as a result of the risk
factors set forth herein and in the Company's Annual Report on Form 10-K as of
and for the year ended March 30, 1997.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying condensed
consolidated financial statements and notes thereto contained herein and the
Company's consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K as of and for the year ended March 30,
1997. The results for the three and six month period ending September 28, 1997
are not necessarily indicative of the results to be expected for the entire
fiscal year ending March 29, 1998.
OVERVIEW
The Company was founded in 1989 to develop and commercialize advanced
rechargeable batteries based on lithium and polymer technologies. Since its
inception, the Company has been a development stage company primarily engaged in
acquiring and developing its initial technology, manufacturing limited
quantities of prototype batteries recruiting personnel, and acquiring capital.
To date, other than insubstantial revenues from limited sales of prototype
batteries, the Company has not received any significant revenues from the sale
of products. 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 $114,861,000
from its inception to September 28, 1997.
RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 28, 1997 (SECOND QUARTER AND
FIRST HALF OF FISCAL 1998) AND SEPTEMBER 29, 1996 (SECOND QUARTER AND FIRST
HALF OF FISCAL 1997)
During the three and six month periods ended September 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 six 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 $300,000 was recognized during the second quarter and first half
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.
Research and development expenses were $4,427,000 and $8,462,000 during the
three and six month periods ended September 28, 1997, respectively, as
compared to $2,682,000 and $5,240,000 during the same periods of fiscal 1997.
The increase between comparable periods was primarily due to costs incurred
to proceed with manufacturing product in the first quarter of calendar year
1998.
Marketing expenses were $129,000 and $250,000 for the second quarter and
first half of fiscal year 1998, respectively, as compared to $56,000 and
$123,000 during similar periods of fiscal year 1997. The comparative
increase is the result of an increase in personnel and travel expenses.
8
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General and administrative expenses increased to $1,462,000 and $2,798,000
during the second quarter and first half of fiscal year 1998, respectively,
up from $1,309,000 and $2,427,000 during the fiscal year 1997 comparable
periods. The increase results from legal fees associated with the
shareholder class action lawsuit.
Interest income decreased to $321,000 and $774,000 during the second quarter and
first half of fiscal 1998, respectively, as compared to $779,000 and $1,453,000
during the prior fiscal year's same periods. The difference is a result of a
decline in funds available for investment purposes, which decline resulted from
increased expenses.
Interest expense was $148,000 and $299,000 during the second quarter and first
half of fiscal 1998, respectively, as compared to $161,000 and $286,000 during
the prior fiscal year's comparable periods.
Joint venture expenses were $150,000 and $300,000 for the second quarter and
first half of fiscal year 1998, respectively, as compared to nil for the
second quarter and first half of fiscal year 1997. Joint venture expenses
represent 50% of the start up costs associated with the Hanil Valence
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $11,437,000 net cash for operating activities during fiscal
year 1998's first six months whereas it used $5,422,000 during the first six
months of fiscal year 1997, an increase between comparable periods of
$5,583,000. This increase primarily resulted from a payment to Bell
Communications Research, Inc. ("Bellcore") of a $2,000,000 royalty payment
under the Company's technology license agreement with Bellcore; an increase
in accounts receivable of $738,000; a reduction in depreciation of
$1,369,000; and increased costs to commercialize a product.
During the six months ended September 28, 1997, the Company provided
$1,296,000 net cash from investing activities compared to $14,103,000
provided during the first six months of fiscal year 1997, a decrease of
$12,807,000 between comparable periods. The decrease primarily was a result
of maturities of investments being reclassified to cash and cash equivalents
partially offset by an increase in operating funds required, as well as
capital equipment purchases.
The Company provided $3,933,000 net cash from financing activities during
fiscal year 1998's first six months versus using $1,069,000 during the first
six months of fiscal year 1997. The increase of $5,002,000 was primarily the
proceeds of common stock issuance pursuant to the exercising of expiring
warrants and stock option exercises.
As a result of the above, the Company had a net decrease in cash and cash
equivalents of $5,736,000 during the fiscal year 1998's first six months,
whereas it had a net increase of $7,239,000 during the same period of fiscal
year 1997.
During fiscal year 1994, the Company through its Dutch subsidiary, signed an
agreement with the Northern Ireland Industrial Development Board (IDB) to open
an automated manufacturing plant in Northern Ireland in exchange for capital and
revenue grants from the IDB. The Company has also received offers from the IDB
to receive additional grants. The grants available under the agreement and
offers, for an aggregate of up to L27,555,000, generally becomes available over
a five year period through October 31, 2001. As of September 28, 1997, the
Company had received grants aggregating L4,035,000 reducing remaining grants
available to L23,520,000 (US. $37,867,000 as of September 28, 1997).
As a condition to receiving funding from the IDB, the subsidiary must maintain a
minimum of L12,000,000 in debt or equity financing from the Company. Aggregate
funding under the grants is limited to L4,035,000 until the Company has
recognized $4,000,000 in aggregate revenue from the sale of its batteries
produced in Northern Ireland. Given that the Company has no agreements to
supply batteries using its current technology, there are no assurances that the
Company will be able to meet the agreement's revenue test.
The amount of the grants available under the agreement and offers is primarily
dependent on the level of capital expenditures made by the Company.
Substantially all of the funding received under the grants is repayable to the
IDB if the subsidiary is in default under the agreement and offers, which
includes the permanent cessation of business in Northern Ireland. Funding
received under the grants to offset capital expenditures is repayable if related
equipment is sold, transferred or otherwise disposed of during a four year
period after the date of grant. In addition, a portion of funding received
under the grants may also be repayable if the subsidiary fails to maintain
specified employment levels
9
<PAGE>
for the two year period immediately after the end of the five year grant
period. The Company has guaranteed the subsidiary's obligations to the IDB
under the agreement. There can be no assurance that the Company will be able
to meet the requirements necessary for it to receive and retain grants under
the IDB agreement and offers.
At September 28, 1997, the Company's working capital was $14,773,000. The
Company expects that its existing funds as of September 28, 1997, together
with the interest earned thereon, will be sufficient to fund the Company's
operations through the end of calendar year 1997. The Company anticipates
that it may need substantial additional funds in the future for capital
expenditures, research and product development, marketing and general and
administrative expenses and to pursue joint venture opportunities. The
Company's cash requirements, however, may vary materially from those now
planned because of changes in the Company's operations, including changes in
OEM relationships or market conditions. There can be no assurance that funds
for these purposes, whether from equity or debt financing agreements with
strategic partners or other sources, will be available on favorable terms, if
at all. The Company's $2,000,000 working capital line of credit is available
through March, 1998. The working capital line collateralizes outstanding
letters of credit, which reduce borrowings otherwise available under the
line. As of September 28, 1997, there was one outstanding letter of credit
in the amount of $25,000.
Forward looking statements involve a number of risks and uncertainties
including, but not limited to, market acceptance, changing economic
conditions, risks in product and technology development, effect of the
Company's accounting policies and other risk factors detailed in the
Company's Securities and Exchange Commission filings.
10
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PART II - OTHER INFORMATION
The discussion and analysis below, and throughout this report, contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected or suggested in the
forward-looking statements as a result of the risk factors set forth herein and
in the Company's Annual Report on Form 10-K as of and for the year ended March
30, 1997.
ITEM 1. LEGAL PROCEEDINGS
In May 1994, a series of class action lawsuits was filed in the United States
District Court for the Northern District of California against the Company and
certain of its present and former officers and directors. These lawsuits were
consolidated, and in September 1994 the plaintiffs filed a consolidated and
amended class action complaint. Following the Court's orders on motions to
dismiss the complaint, which were granted in part and denied in part, the
plaintiffs filed an amended complaint in June 1996 ("Complaint"). The Complaint
alleges violations of the federal securities laws against the Company, certain
of its present and former officers and directors, and the underwriters of the
Company's public stock offerings, claiming that the defendants issued a series
of false and misleading statements, including filings with the Securities and
Exchange Commission, with regard to the Company's business and future prospects.
The plaintiffs represent a class of persons who purchased the Company's common
stock between May 7, 1992 and August 10, 1994. The Complaint seeks unspecified
compensatory and punitive damages, attorney's fees and costs. In January 1996,
the Court dismissed, with prejudice, all claims against the underwriters of the
Company's public stock offerings, and one claim against the Company and its
present and former officers and directors. In April 1996, the Court dismissed,
with prejudice, all remaining claims against a present director and limited
claims against a former officer and director to the period when that person was
an officer. In December 1996, the Company and the remaining individual
defendants filed motions for summary judgment, which the plaintiffs opposed.
In November 1997, the Court granted the Company's motion for summary judgment
and filed a judgment in favor of all defendants. The plaintiffs have the
right to appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of the stockholders of the Company was held on October 3,
1997.
Company's stockholders elected the Board's nominees as directors by the votes
indicated:
Nominee Votes For Votes Withheld
------- --------- --------------
Calvin L. Reed 20,017,712 1,151,718
Carl E. Berg 20,014,827 1,154,603
Alan F. Shugart 20,016,768 1,152,662
The selection of Coopers & Lybrand as the Company's independent auditors was
ratified with 20,954,375 votes in favor, 83,970 against and 131,085 abstentions.
The proposal to amend the 1990 Stock Option Plan to increase the aggregate
number of shares of common stock authorized for issuance by 1,000,000 shares was
ratified with 18,114,753 votes in favor, 2,521,208 against and 139,575
abstentions.
The proposal to amend the 1996 Non-Employee Directors' Stock Option Plan to
increase the aggregate number of shares of common stock authorized for issuance
by 90,000 shares was ratified with 18,741,010 votes in favor, 2,300,892 against
and 127,528 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit 11.1 Statement of Calculation of Net Loss Per Share
b. REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended
September 28, 1997.
11
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EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT PAGE NUMBER
- --------------------------------------------------------------------------------
11.1 Statement of Calculation of Net Loss Per Share 14
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
VALENCE TECHNOLOGY, INC.
(Registrant)
Date: November 12, 1997 By: /s/ David Archibald
--------------------------------
David Archibald
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE>
Exhibit 11.1
VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
STATEMENT OF CALCULATION OF NET LOSS PER SHARE
(in thousands, except per share amounts)
-----
Three Months Ended Six Months Ended
---------------------- ---------------------
September September September September
28, 1997 29, 1996 28, 1997 29, 1996
---------------------- ---------------------
Actual weighted average
shares of common stock
outstanding for the period 22,721 21,672 22,263 21,671
Net loss for period $(5,995) $ (3,429) $(11,335) $ (6,623)
Net loss per share for period $ (0.26) $ (0.16) $ (0.51) $ (0.31)
Dilutive common stock warrants and stock options have not been included in the
calculations of common and common equivalent shares to calculate net loss per
share, as their inclusion would be antidilutive.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> JUN-30-1997
<PERIOD-END> SEP-28-1997
<CASH> 22,096
<SECURITIES> 1,424
<RECEIVABLES> 1,169
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,310
<PP&E> 40,696
<DEPRECIATION> (17,861)
<TOTAL-ASSETS> 49,792
<CURRENT-LIABILITIES> 10,139
<BONDS> 5,005
0
0
<COMMON> 146,186
<OTHER-SE> (114,861)
<TOTAL-LIABILITY-AND-EQUITY> 49,792
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (6,018)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (148)
<INCOME-PRETAX> (5,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,995)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
