<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997.
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 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 23,125,993 shares
----------------------------- -------------------------------
(Class) (Outstanding at August 1, 1997)
Page 1 of 14
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
FORM 10-Q
FOR THE QUARTER ENDED JUNE 29, 1997
INDEX
PAGES
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
June 29, 1997 and March 30, 1997. . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the period from March 3, 1989 (date of inception)
to June 29, 1997 and for each of the three months
ended June 29, 1997 and June 30, 1996 . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the period from March 3, 1989 (date of inception)
to June 29, 1997 and for each of the three months
ended June 29, 1997 and June 30, 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 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)
_____
June 29, March 30,
1997 1997
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 18,274 $ 27,832
Short-term investments 5,923 5,556
Accounts receivable 493 431
Prepaids and other current assets 156 246
--------- ---------
Total current assets 24,846 34,065
Investments 2,000 4,000
Property, plant and equipment, net 21,144 17,191
Investment in Joint Venture 1,916 -
Other assets 781 270
--------- ---------
Total assets $ 50,687 $ 55,526
--------- ---------
--------- ---------
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 1,019 $ 1,433
Accounts payable 1,597 1,949
Accrued expenses 5,380 7,317
Accrued compensation 1,360 1,261
--------- ---------
Total current liabilities 9,356 11,960
Deferred Revenue 2,500 -
Long-term debt, less current portion 5,195 5,217
--------- ---------
Total liabilities 17,051 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: 21,893 and 21,745
shares at June 29, 1997 and March 30, 1997,
respectively 140,814 140,580
Deficit accumulated during the development stage (108,866) (103,526)
Cumulative translation adjustment 1,688 1,295
--------- ---------
Total stockholders' equity 33,636 38,349
--------- ---------
Total liabilities and stockholders' equity $ 50,687 $ 55,526
--------- ---------
--------- ---------
The accompanying notes are an integral part of
these 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
through -----------------------
June 29, June 29, June 30,
1997 1997 1996
-------------- -------- --------
<S> <C> <C> <C>
Revenue:
Research and
development
contracts $ 21,605 $ - $ -
---------
Costs and expenses:
Research and
development 73,084 $ 4,035 2,558
Marketing 2,798 121 67
General and
administrative 33,699 1,336 1,118
Purchase of
in-process
technology 8,212 - -
Investment in
Danish
subsidiary 3,489 - -
Special charges 18,872 - -
---------- -------- --------
Total costs and
expenses 140,154 5,492 3,743
---------- -------- --------
Operating loss (118,549) (5,492) (3,743)
Interest income 14,180 453 674
Interest expense (3,913) (151) (125)
Equity in earnings (losses) of
Joint Venture (584) (150) -
---------- -------- --------
Net loss $ (108,866) $ (5,340) $ (3,194)
---------- -------- --------
---------- -------- --------
Net loss per share $ - $ (0.24) $ (0.15)
---------- -------- --------
---------- -------- --------
Shares used in
computing net loss per share - 21,805 21,669
---------- -------- --------
---------- -------- --------
</TABLE>
The accompanying notes are an integral part of
these 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 Three Months Three Months
(date of inception) Ended Ended
through June 29, June 30,
June 29, 1997 1997 1996
------------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (108,866) $ (5,340) $ (3,194)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 20,218 373 1,270
Write-off of equipment 14,792 - -
Write-off of in-process technology 6,211 - -
Compensation related to stock options 1,655 234 26
Noncash charge related to acquisition
of Danish subsidiary 2,245 - -
Equity in (Earnings) Losses of Joint Venture 584 150 -
Changes in assets and liabilities:
Accounts receivable 596 (62) 94
Interest receivable (64) 53 110
Notes receivable (105) 39 25
Prepaid expenses and other current assets (1,151) (78) 43
Accounts payable 1,594 (254) 870
Accrued liabilities (1,644) (1,937) (1,007)
--------- --------- ---------
Net cash used in operating activities (63,935) (6,822) (1,763)
--------- --------- ---------
Cash flows from investing activities:
Purchase of long-term investments (481,347) (3,119) (32,632)
Maturities in long-term investments 469,378 4,950 38,157
Capital expenditures (42,991) (3,739) (317)
Other (222) - -
--------- --------- ---------
Net cash provided by (used in)
investing activities (55,182) (1,908) 5,208
--------- --------- ---------
Cash flows from financing activities:
Property and equipment grants 4,419 - (283)
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 (10,971) (435) (532)
Proceeds from issuance of common stock,
net of costs 136,784 - -
--------- --------- ---------
Net cash provided by (used in)
financing activities 139,079 (435) (815)
--------- --------- ---------
Effect of foreign exchange rates on cash and cash
equivalents (1,688) (393) (102)
Increase (decrease) in cash and cash equivalents 18,274 (9,558) 2,528
Cash and cash equivalents, beginning of period - 27,832 24,569
--------- --------- ---------
Cash and cash equivalents, end of period $ 18,274 $ 18,274 $ 27,097
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of
these 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 June 29, 1997 and March 30, 1997,
its consolidated results of operations and cash flows for the period from
March 3, 1989 (date of inception) to June 29, 1997 and for each of the
three-month periods ended June 29, 1997 and June 30, 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-month periods ended
June 29, 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 January 1997, the Court appointed a Special Master to hear the defendants'
motions for summary judgment and submit recommendations to the Court with
respect to their disposition. In March 1997, the Special Master held a
hearing on the defendants' motions for summary judgment. While the Court had
set a September 1997 trial date, the
6
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Court has vacated that trial date pending submission and review of the
Special Master's recommendations. The plaintiffs have requested a jury trial
and are expected to ask for a substantial sum in damages. If the plaintiffs
prevail in their demands, damages awarded by the jury may exceed the assets
of the Company. Although, the Company believes that it has meritorious
defenses and intends to defend the lawsuit vigorously, there can be no
assurance that the Company will prevail or that the plaintiffs will not be
awarded damages.
The ultimate outcome of these actions cannot presently be determined.
Accordingly, no provision for any liability or loss that may result from
adjudication or settlement thereof has been made in the accompanying
consolidated financial statements.
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 form 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 month period ending June 29, 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 $108,866,000 from its inception to June 29, 1997.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996.
During the three months ended June 29, 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 months
of both fiscal 1998 and fiscal 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 was recognized during the first three months of both fiscal 1997 and
fiscal 1996, 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 $4,035,000 during the three months
ended June 29, 1997 as compared to $2,558,000 during the same period 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 $121,000 for the first quarter of fiscal year 1998,
as compared to $67,000 during the similar period of fiscal year 1997. The
comparative increase is the result of an increase in headcount.
8
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General and administrative expenses increased to $1,336,000 during the first
quarter of fiscal year 1998, up from $1,118,000 during the fiscal year 1997
comparable period. The increase results from legal fees associated with the
shareholder class action lawsuit.
Interest income decreased to $453,000 during the first quarter of fiscal year
1998, as compared to $674,000 during the prior fiscal year's same period.
The difference is a result of a decline in funds available for investment
purposes.
Interest expense was $151,000 during the first quarter of fiscal year 1998,
as compared to $125,000 during the prior fiscal year's comparable period.
This increase is a result of recalculation of principal and change in
amortization by lender.
Joint venture expenses were $150,000 for the first quarter of fiscal year
1998 as compared to nil for the first quarter 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 $6,823,000 net cash for operating activities during fiscal
year 1998's first three months compared $1,763,000 during the first three
months of fiscal year 1997, an increase between comparable periods of
$5,060,000. This increase primarily resulted from a payment to Bellcore of
$2,000,000; a reduction in accounts payable of $1,124,000; a reduction in
depreciation of $897,000; and increased costs to commercialize a product.
During the three months ended June 29, 1997, the Company used $1,908,000 net
cash from investing activities compared to $5,208,000 provided during the
first three months of fiscal year 1997, an increase of $7,116,000 between
comparable periods. The increase primarily was a result of an increase in
operating funds required, as well as capital equipment purchases.
The Company used $435,000 net cash from financing activities during fiscal
year 1998's first three months compared to $815,000 during the first three
months of fiscal year 1997. This decrease resulted from lower grant levels.
As a result of the above, the Company had a net decrease in cash and cash
equivalents of $9,559,000 during the fiscal year 1998's first three months,
whereas it had a net increase of $2,528,000 during the same period of fiscal
year 1997.
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
June 29, 1997, there was one outstanding letter of credit in the amount of
$25,000.
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
become available over a five year period through October 31, 2001. As of
June 29, 1997, the Company had received grants aggregating L4,035,000
reducing remaining grants available to L23,520,000 (US. $39,090,000 as of
June 29, 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
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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.
The Company expects that its existing funds as of June 29, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128),
which 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. SFAS 128 requires restatement of all
prior-period earnings per share data presented after the effective date.
SFAS 128 will not have a material impact on the Company's financial
position, results of operations and cash flows.
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 form 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.
10
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PART II - OTHER INFORMATION
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 January 1997, the Court appointed a Special Master to hear the defendants'
motions for summary judgment and submit recommendations to the Court with
respect to their disposition. In March 1997, the Special Master held a
hearing on the defendants' motions for summary judgment. While the Court had
set a September 1997 trial date, the Court has vacated that trial date
pending submission and review of the Special Master's recommendations. The
plaintiffs have requested a jury trial and are expected to ask for a
substantial sum in damages. If the plaintiffs prevail in their demands,
damages awarded by the jury may exceed the assets of the Company. Although,
the Company believes that it has meritorious defenses and intends to defend
the lawsuit vigorously, there can be no assurance that the Company will
prevail or that the plaintiffs will not be awarded damages.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit 11.1 Statement of Calculation of Net Loss Per Share
Exhibit 27.17 Financial Data Schedule
b. REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended
June 29, 1997.
11
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT PAGE NUMBER
- -----------------------------------------------------------------------------
11.1 Statement of Calculation of Net Loss Per Share 14
27.17 Financial Data Schedule 15
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: August 11, 1997 By: /s/ DAVID ARCHIBALD
------------------------------------------
David Archibald
Vice President and 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
-----------------------
June 29, June 30,
1997 1996
-------- --------
Actual weighted average shares of common stock
outstanding for the period 21,805 21,669
Net loss for period $(5,340) $(3,194)
Net loss per share for period $(0.24) $(0.15)
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
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-30-1997
<PERIOD-END> JUN-29-1997
<CASH> 18,274
<SECURITIES> 5,923
<RECEIVABLES> 493
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,846
<PP&E> 38,798
<DEPRECIATION> (17,654)
<TOTAL-ASSETS> 50,687
<CURRENT-LIABILITIES> 9,356
<BONDS> 5,195
0
0
<COMMON> 140,814
<OTHER-SE> (108,866)
<TOTAL-LIABILITY-AND-EQUITY> 50,687
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (5,492)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (151)
<INCOME-PRETAX> (5,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,340)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
