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As filed with the Securities and Exchange Commission on December 21, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VALENCE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0214673
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
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301 CONESTOGA WAY
HENDERSON, NV 89015
(702) 558-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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LEV M. DAWSON
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
VALENCE TECHNOLOGY, INC.
301 CONESTOGA WAY
HENDERSON, NV 89015
(702) 558-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
ANDREI M. MANOLIU, ESQ.
BRETT D. WHITE, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(650) 843-5000
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Series B $.001 par value 4,535,261 shares $8.625 $39,116,626 $10,875
</TABLE>
(1) Pursuant to rule 416 of the Securities Act of 1933, this Registration
Statement also covers such indeterminable additional shares as may
become issuable as a result of any future stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act
of 1933, based on the average of the high and low prices of the
Valence Technology, Inc. common stock as reported on the Nasdaq
National Market on December 14, 1998.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION (DECEMBER 21, 1998)
PROSPECTUS
VALENCE TECHNOLOGY, INC.
2,400,932 SHARES
COMMON STOCK
Selling stockholders identified in this prospectus are selling 2,400,932
shares of common stock of Valence Technology, Inc. These shares are issuable
to the selling stockholders upon the conversion of preferred stock and
exercise of warrants issued to them in a private financing. Valence will not
receive any of the proceeds from the sale of shares by the selling
stockholders. Valence's common stock is listed on the Nasdaq National Market
under the symbol "VLNC." On December 18, 1998, the closing sale price of the
common stock, as reported on the Nasdaq National Market, was $7 5/8.
INVESTING IN VALENCE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
The Valence shares offered or sold under this prospectus have not been
approved by the SEC or any state securities commission, nor have these
organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The selling stockholders may sell the shares of Valence common stock
described in this prospectus in public or private transactions, on or off the
Nasdaq National Market, at prevailing market prices, or at privately
negotiated prices. The selling stockholders may sell shares directly to
purchasers or through brokers or dealers. Brokers or dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders. More information is provided in the section titled
"Plan of Distribution" on page 14.
The Company's address and telephone number is: Valence Technology, Inc., 301
Conestoga Way, Henderson, NV 89015, (702) 558-1000
THE DATE OF THIS PROSPECTUS IS , 1998.
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WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read
and copy these reports, proxy statements and other information at the SEC's
public reference rooms in Washington, DC, New York, NY and Chicago, IL. You
can request copies of these documents by writing to the SEC and paying a fee
for the copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference rooms. Our SEC
filings are also available at the SEC's web site at "http://www.sec.gov." In
addition, you can read and copy our SEC filings at the office of the National
Association of Securities Dealers, Inc. at 1735 "K" Street, Washington, DC
20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
- - Annual Report on Form 10-K for the year ended March 29, 1998, filed June
29, 1998;
- - Current Report on Form 8-K, dated July 27, 1998 and filed August 4, 1998;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended June 28, 1998,
filed August 11, 1998;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended September 27,
1998, filed November 12, 1998;
- - Current Report on Form 8-K, dated December 18, 1998 and filed December 21,
1998; and
- - The description of the common stock contained in Valence's Registration
Statement on Form 8-A filed with the SEC under the Securities Exchange Act
of 1934.
You may request a copy of these filings at no cost, by writing,
telephoning or e-mailing us at the following address:
Valence Technology, Inc.
301 Conestoga Way
Henderson, NV 89015
(702) 558-1000
http://www.valence-tech.com
This prospectus is part of a Registration Statement we filed with the
SEC. You should rely only on the information incorporated by reference or
provided in this prospectus and the Registration Statement.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this prospectus contains forward-looking statements
that involve risks and uncertainties. Those statements include words such as
"anticipate," "estimate," "project," "intend," and similar expressions which
we have used to identify these statements as forward-looking statements.
These statements appear throughout this prospectus and are statements
regarding our intent, belief, or current expectations, primarily with respect
to the operations of Valence or related industry developments. You are
cautioned that any such forward-looking statements do not guarantee future
performance and involve risks and uncertainties, and that actual results
could differ materially from those discussed here and in the documents
incorporated by reference in this prospectus.
SUMMARY
Valence Technology, Inc. was incorporated in Delaware in March 1989
under the name Ultracell, Inc. It changed its name to Valence Technology,
Inc. in March 1992. Our executive offices are currently located at 301
Conestoga Way, Henderson, Nevada 89015 and the telephone number is (702)
558-1000.
OUR BUSINESS
We are engaged in research and development to produce advanced
rechargeable batteries based upon lithium ion and polymer technologies. Our
objective is to become a leading provider of rechargeable batteries. In July
1995, we announced that we had a license to a plastic lithium battery
technology from Bell Communications Research, Inc. Since that time, we have
been working to integrate the Bell Communications technology with our own
lithium polymer battery technology. At the same time, we have continued the
redesign and modifications to our manufacturing equipment in Northern Ireland
to support the potential future commercial introduction of this new battery
design.
THE MARKET FOR OUR BATTERIES. Widespread use of a variety of portable
consumer electronics such as portable computers, cellular telephones,
camcorders and handheld power tools, as well as continued demand from
conventional applications such as automobiles, have resulted in large markets
for rechargeable batteries. These new and conventional applications are
placing growing demands on existing battery technologies to deliver
increasing amounts of electricity through smaller and lighter batteries. In
some cases, current battery capabilities are a major limitation to the
introduction of enhanced electronic products.
OUR STAGE OF DEVELOPMENT. We are a development stage company whose
primary activities to date have been acquiring and developing technology,
implementing a production line, manufacturing limited quantities of prototype
batteries, recruiting personnel and obtaining capital. However, our current
research prototype batteries meet some of the exacting specifications
demanded by the marketplace. Except for insubstantial revenues from limited
sales of prototype lithium polymer batteries, we derive substantially all of
our revenues from a completed research and development contract with the
Delphi Automotive Systems Group of General Motors Corporation, and we
presently have no products available for sale. We completed our agreement
with Delphi in March 1998, and we do not expect further revenues from the
Delphi collaboration after August 1998. Prior to commencing volume
production, we do not expect to receive any significant revenues from the
sale of our products. To achieve profitable operations, we must successfully
develop, manufacture and market our products. There is a risk that we will
not develop or manufacture our products at an acceptable cost or with
appropriate performance characteristics, and that we will not be able to
successfully market such products or that such products will achieve market
acceptance.
We have negative working capital and have sustained recurring losses
related primarily to the development and marketing of our products. We have
and will continue to devote a significant amount of management time in fiscal
1999 to obtaining financing. These factors raise substantial doubt about our
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. The effects of any such adjustments, if necessary, could be
substantial.
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OUR RECENT FINANCING
In July 1998, we raised $10,000,000 in the first installment of a debt
and equity financing, which ultimately may raise up to $25,000,000. The
first installment comprised the sale, for $7,500,000, of 7,500 shares of our
Series A Preferred Stock and a warrant to purchase 447,761 shares of Valence
common stock, to a single institutional investor, and a loan of $2,500,000
from Baccarat Electronics, an affiliate of a director of the Company. In
December 1998 the investor completed the equity portion of the financing by
purchasing, for $7,500,000, 7,500 shares of our Series B Preferred Stock and
a warrant to purchase 447,761 shares of Valence common stock. Baccarat's loan
agreement with the Company for an additional $7,500,000 remains in place. The
Company issued to Baccarat in connection with the draw down of the $2,500,000
loan to the Company a warrant to purchase 149,254 shares of Valence common
stock. The Company will issue additional warrants to Baccarat in the amount
of 447,761 shares the Company's Common Stock multiplied by the fraction equal
to the dollar amount of additional loans actually made to the Company divided
by $7,500,000. In connection with the July portion of the financing, we
issued to the placement agent in the financing as a portion of its
compensation a warrant to purchase 87,500 shares of our common stock. We
issued another such warrant in connection with the December portion of the
financing.
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF VALENCE COMMON STOCK BEING OFFERED BY
THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD NOT MAKE SUCH AN
INVESTMENT IF YOU CANNOT AFFORD THE LOSS OF YOUR ENTIRE INVESTMENT. IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CONSIDER
CAREFULLY THE FOLLOWING FACTORS IN EVALUATING VALENCE AND ITS BUSINESS BEFORE
PURCHASING ANY SHARES OF THE VALENCE COMMON STOCK.
DEVELOPMENT STAGE COMPANY; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY; GOING CONCERN
We commenced operations in 1989 and are a development stage company. We
have derived our revenues solely from a research and development contract
with Delphi Automotive Systems Group, which we completed in May 1998. We
have generally incurred operating losses since inception and have had an
accumulated deficit as of September 27, 1998, the end of our second 1999
fiscal quarter, of $137,254,000. We presently have no products available for
sale, although we have developed working prototypes of our lithium polymer
batteries. We cannot anticipate when, or if, we will generate significant
revenues in the future. There is a risk that we will not achieve or sustain
significant revenues or profitability in the future. We have devoted a
significant amount of management time in fiscal 1999 to obtaining financing.
These factors raise substantial doubt about our ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. The effects of any such
adjustments, if necessary, could be substantial.
ADDITIONAL FINANCING NEEDS; ACCESS TO CAPITAL
We have negative working capital and have sustained recurring losses
related primarily to the development and marketing of our products. In July
and December 1998, we raised an aggregate of $17,500,000 in a debt and equity
financing. We will need to secure additional financing in order to continue
operations past 1999 unless we begin to generate significant operating
revenue, or secure additional financing. We have implemented certain capital
equipment reductions and are actively pursuing capital grant advances from
the Northern Ireland Industrial Development Board ("IDB"). IDB financing is
contingent on us achieving cumulative revenues from sale of batteries of $4
million. There is a risk that we will not achieve this level of revenue over
the short term, or at all. If we are unable to achieve profitability and we
are unable to secure additional financing on acceptable terms, we will be
unable to continue to fund our operations. In addition, we will be unable to
implement our business strategy and will be required to further delay, scale
back or eliminate certain of our research and product development programs,
or to license to third parties rights to commercialize products or
technologies that we would otherwise seek to develop ourselves. The
unavailability of adequate funds in the near future would have a material
adverse effect on the Company's business, financial condition and results of
operations.
DILUTION AS A RESULT OF CONVERSION OF PREFERRED STOCK AND EXERCISE OF
WARRANTS
One of the selling stockholders holds 7,500 shares of our Series A
Preferred Stock and 7,500 shares of our Series B Preferred Stock, which are
convertible into Valence common shares. See "Selling Stockholders" on page 13
and "Summary--Our Recent Financing" on page 4.
Each share of Series A Preferred Stock is convertible into a number of
shares of Valence common stock equal to the quotient obtained by dividing (i)
one thousand plus the product of 60x(N/365), where N is equal to the number
of days from July 27, 1998 to, and including, the date of conversion, by (ii)
a conversion price which is $6.03 per share.
Each share of Series B Preferred Stock is convertible into a number of
shares of Valence common stock equal to the quotient obtained by dividing (i)
one thousand plus the product of 60x(N/365), where N is equal to the number
of days from December 18, 1998 to, and including, the date of conversion, by
(ii) a conversion price which is $6.03 per share, until July 27, 1999. After
July 27, 1999, the conversion price will be the lower of $6.03 and 101% of
the average of the six (6) lowest of the closing bid prices of Valence common
stock for a period of 10 consecutive trading days ending on the trading day
immediately preceding the conversion date. Therefore, from and after July 28,
1999 the number of shares of Valence common stock issuable upon conversion of
the Series B Preferred Stock will be inversely proportional to the market
price of the Valence common stock at the time of conversion at any time when
the market price is less than $6.03 (i.e., the number or shares will increase
as the market
5.
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price of the Valence common stock decreases). We have issued warrants to
purchase Valence common stock in connection with the issuance of Series A
Preferred Stock and Series B Preferred Stock, and have and will continue to
issue warrants to purchase Valence common stock in connection with the loans
from Baccarat. See "Summary--Our Recent Financing" on page 4. Except with
respect to certain redemption rights of us for the Series A Preferred Stock
and Series B Preferred Stock and the limitation under Nasdaq National Market
regulations which limit the aggregate number of shares of Valence common
stock that we may issue at a discount from market price upon conversion of
the Series A Preferred Stock and Series B Preferred Stock and exercise of the
warrants without stockholder approval (which stockholder approval we have
agreed to request), there is no cap on the number of shares of Valence common
stock that we may issue. In addition, the number of shares of Valence common
stock issuable upon the conversion of the Series A Preferred Stock and Series
B Preferred Stock and the exercise of the warrants is subject to adjustment
upon the occurrence of certain dilutive events. For a further description of
the rights of holders of Series A Preferred Stock and Series B Preferred
Stock, see our Current Reports on Form 8-K, File No. 0-20028, filed August 4,
1998 and December 21, 1998, including the exhibits attached to such reports.
The selling stockholders hold outstanding warrants to acquire 1,219,776
shares of Valence common stock, of which 535,261 shares of Valence common
stock are covered by the registration statement containing this prospectus
and the remainder are covered by another registration statement. If the
selling stockholders exercise the warrants or convert the Series A Preferred
Stock and Series B Preferred Stock and sell the resulting shares of Valence
common stock into the market, such sales could have a significant negative
effect on the market price of the Valence common stock and could materially
impair our ability to raise capital through the future sale of equity
securities.
DEPENDENCE ON OUTSIDE PARTIES
We expect to rely on a limited number of alliances for development
funds, products design and development, volume purchase orders and
manufacturing and marketing expertise. We have received substantially all
our revenues to date from a research and development agreement with Delphi
Automotive Systems Group, which we completed in May 1998. Although we have
held discussions with OEMs in the portable consumer electronics and
telecommunications markets about possible strategic relationships as a means
to accelerate introduction of its batteries into these markets, there is a
risk that we will not be able to enter into any such alliances. Even if we
successfully initiate alliances, there is a risk that the strategic alliances
will not achieve their goals. The success of any strategic alliance is
dependent upon the general business condition of the partner, its commitment
to the strategic alliance and the skills and experience of its employees
responsible for the strategic alliance.
UNCERTAINTY OF MARKET ACCEPTANCE
To be successful, our batteries must gain broad market acceptance.
There is a risk that such market acceptance will not be achieved. In
addition, we must configure lithium polymer batteries to the requirements of
each application. To determine such requirements, we will be dependent upon
OEMs into whose products our batteries will be incorporated. There is a risk
that the Company will not receive adequate assistance from OEMs to
successfully commercialize our products. Furthermore, there is a risk that
the perceived safety risks associated with lithium will impede acceptance of
our batteries by OEMs or end users. In addition, to implement successfully
our strategy, we will have to develop a sizeable sales staff and product
support capabilities, as well as third party and direct distribution
channels. There is a risk that we will not be able to establish sales and
product support capabilities, or be successful in its sales and marketing
efforts.
UNCERTAINTY REGARDING ABILITY TO DEVELOP COMMERCIAL MANUFACTURING CAPABILITY
To be successful, we must manufacture commercial quantities of high
quality products at competitive costs. We produced our research prototype
battery using thin film laminate technology. The cathode and anode matrix
layers, and separator matrix layer are manufactured utilizing coating
techniques. These matrix layers may be either cut or stamped out into
various engineered configurations, which are then laminated together to form
cells. These cells can then be stacked and connected to form a functional
battery, which is finally packaged and tested.
Even if our current research and development activities result in the
design of batteries with commercially desirable characteristics, to be
successful we will have to manufacture in commercial quantities products with
appropriate performance characteristics at competitive costs. At
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present, we have, at our Henderson, Nevada facility, manual and
semi-automated coating, laminating, assembly and packaging lines that produce
small quantities of prototype batteries for internal testing and customer
sampling. For coating the matrix layers, we are adapting existing
manufacturing technologies and processes. However, further development of
manufacturing technology may be delayed pending further research and
development activities by us and the definition of manufacturable
specifications with OEM customers.
In September 1993, we signed an agreement to open an automated
manufacturing plant in Mallusk, Northern Ireland. We currently occupy 80,000
square feet, and may add 50,000 square feet at some point in the future. We,
with our equipment suppliers, have designed and constructed a high volume,
automated assembly and packaging lines for the Northern Ireland facility. We
designed our high volume manufacturing equipment specifically for use with
our prior metallic lithium anode technology. We are working with our
equipment suppliers to redesign and modify this equipment to work with our
newest battery technology. The amount of redesign and modification that is
required is substantial and there is a risk that such redesign and
modifications will not work and will not be cost effective. If we cannot
effectively redesign and modify all or some of the equipment in Northern
Ireland, we will have to procure new equipment at considerable expense and
loss of time.
We have delivered the first automated assembly lines to the Northern
Ireland facility. De-bugging of the lines has proceeded more slowly than
expected. The lines' reliability and yield are predictably low, although we
believe that we will eventually reach our production goals. We expect this
line to complete safety testing in the first quarter of calendar 1999 but
there is a risk as to the timing or even the success of this safety-testing
process. Upon successful safety testing of the lines, we expect to send
product samples to potential customers for evaluation. We have started the
first line initially to produce our larger portable-computer cell format
(approximately four inches by four inches) battery.
We have been unable to meet our prior schedules regarding delivery,
installation, de-bugging and qualification of the Northern Ireland production
equipment, due to unforeseen problems. As most of the production equipment
is being custom manufactured for us, there is a risk that further unforeseen
problems will develop and cause delay in our current schedules. We are
scaling up many of the manufacturing processes that we are implementing in
this production equipment up for the first time from our laboratory scale
prototype work. It is likely that some of these scaled up processes will
require refinement, adjustment or redesign. Any of these possibilities could
cause substantial delay in the qualification and/or production start-up of
this equipment. In addition, the current political instability in Northern
Ireland, which to date has had no negative impact on our manufacturing plant,
could cause unforeseen delays in the future. Such delays could cause us to
miss significant sales and marketing opportunities, as potential lithium
polymer battery customers are forced to find other vendors to meet their
needs. Additionally, even if we are able to qualify production equipment in
this calendar year, the reliability and/or production yields may not allow us
to provide sufficient qualification samples to potential customers.
From our discussions with potential customers, we expect that customers
will require an extensive qualification period once the customer receives its
first commercial product off a production line. To date, we have not provided
any such commercial product to any potential customer, and therefore, have
not started any product qualification period.
INTENSE COMPETITION
Competition in the battery industry is intense. The industry consists
of major domestic and international companies, most of which have financial,
technical, marketing, sales, manufacturing, distribution and other resources
substantially greater than those that we have. We believe that our lithium
polymer batteries will compete in most segments of the rechargeable battery
market.
In the rechargeable battery market, the principal competitive
technologies currently marketing are NiCad batteries, lead acid batteries,
nickel metal hydride batteries and liquid electrolyte lithium ion batteries.
Eveready, Sanyo Electric Co., Ltd., and Matsushita Industrial Co., Ltd.,
among others, currently manufacture NiCad batteries. Major lead acid
manufacturers include Delphi Automotive Systems Group, Johnson Controls,
Exide Corp., Portable Energy Products, Inc., Hawker Energy Products and Yuasa
Battery Co., Ltd. Manufacturers of nickel metal hydride batteries include
Matsushita Industrial Co., Ltd., Toshiba, Eveready, Sanyo Electric Co. and
Sony. Sony produces a liquid electrolyte lithium ion battery used in Sony's
products and sold to OEMs. Toshiba has a joint venture with
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Asahi Chemical Industry Company to manufacture liquid electrolyte lithium ion
batteries. In addition, Saft American Inc., Ray O Vac, PolyStor Corp.,
Matsushita Industrial Co., Ltd., Moli Energy and Sanyo Electric Co., Ltd.
have developed liquid electrolyte lithium ion batteries. The capabilities of
many of these competing technologies have improved over the past year, which
has resulted in a customer perception that our lithium polymer technology may
not offer as many advantages as previously anticipated. Sony has consistently
been improving the energy density of its lithium ion battery over the last
several years.
Liquid electrolyte lithium ion batteries offer significant advantages in
energy density and cycle life over the principal rechargeable battery
technologies currently in use and we expect them to be the emerging
technology most competitive to our technology. Sony or other manufacturers
are offering liquid electrolyte lithium ion batteries in the marketplace and
to OEMs in substantial volumes prior to our commencement of volume
production. As OEMs frequently require extensive lead times to design new
batteries into our products, the availability of liquid electrolyte lithium
ion batteries could materially adversely affect the demand for, and market
acceptance and penetration of, our products.
In addition to currently marketed technologies, a number of companies
are undertaking research in rechargeable battery technologies, including work
on lithium polymer technology. Reportedly, as many as eleven other companies
have taken licenses to Bell Communication's battery technology, although
their identities have not been announced. Ultralife Batteries, Inc., which
acquired Dowty Battery Company in the United Kingdom in 1994, has announced
shipment of prototype lithium ion polymer batteries, and has announced plans
to begin commercial shipments in 1998. Hydro-Quebec in Canada has signed an
agreement with Yuasa Battery Co., Ltd., of Japan for technology transfer and
the manufacture of lithium ion polymer batteries. Recently, Hydro-Quebec and
Yuasa have announced the introduction of such a rechargeable lithium polymer
battery. We believe that other research and development activities on lithium
polymer batteries are taking place at W. R. Grace & Co., 3M, and Ray O Vac in
the U.S. and at other companies in Japan and Malaysia. In May 1995, Moltech
Corp. announced that it expected to begin production shipments of its lithium
polymer batteries in mid-to-late 1996. This was subsequently modified to
1998. In October 1992, the United States Advanced Battery Consortium
("USABC") awarded the first $6,300,000 of a three-year $24,500,000 contract
to a group consisting of W. R. Grace & Co., Johnson Controls and affiliated
laboratories to develop a thin-film lithium polymer bipolar battery utilizing
solid polymer electrolytes. At that time, the USABC also awarded a three-year
$17,300,000 contract to Saft America Inc. to pursue a bipolar form of the
lithium iron disulfide battery first developed at the Argonne National
Laboratory. In December 1993, the USABC announced the grant of a two-year
$33,000,000 contract to a partnership formed by 3M, Hydro-Quebec and Argonne
for the development of lithium polymer batteries for electric vehicles, for
which a second phase was announced in February 1996, for $27,400,000. We
also believe that research is underway on zinc air, aluminum air, sodium
sulfur, zinc bromine and nickel zinc battery technology. There is a risk that
such companies are developing batteries similar or superior to the Company's
lithium polymer batteries.
UNCERTAINTY REGARDING PROTECTION OF INTELLECTUAL PROPERTY
Our ability to compete effectively will depend in part on our ability to
maintain the proprietary nature of our technology and manufacturing processes
through a combination of patent and trade secret protection, non-disclosure
agreements and cross-licensing agreements.
As of September 27, 1998, we held 185 United States patents and had 55
patent applications pending in the United States. We are preparing 86
additional patent applications for filing in the United States.
Additionally, we are actively pursuing foreign patent protection in countries
of interest to us. As of September 27, 1998, we have been granted 21 foreign
patents and had 101 patent applications pending in foreign countries.
Patent applications in the United States are maintained in secrecy until
patents issue, and since publication of discoveries in the scientific or
patent literature tends to lag behind actual discoveries by several months,
we cannot be certain that we were the first creator of inventions covered by
pending patent applications or the first to file patent applications on such
inventions. There is a risk that our pending patent applications will not
result in issued patents and that any of our issued patents will not afford
protection against a competitor. In addition, patent applications filed in
foreign countries are subject to laws, rules and procedures that differ from
those of the United States, and thus there is a risk that foreign patent
applications related to issue
8.
<PAGE>
United States patents will not issue. Furthermore, if these patent
applications issue, some foreign countries provide significantly less patent
protection than the United States.
The status of patents involves complex legal and factual questions and
the breadth of claims allowed is uncertain. Accordingly, there is a risk
that patent applications filed by the Company will result in patents being
issued and that our patents, and any patents that may be issued to us in the
future, will afford protection against competitors with similar technology.
In addition, there is a risk that patents issued to us will be infringed upon
or designed around by others and that others will obtain patents that we
would need to license or design around. If existing or future patents
containing broad claims are upheld by the courts, the holders of such patents
could require companies to obtain licenses. If we are found to be infringing
third party patents, there is a risk that licenses that products might
require would not be available on reasonable terms, if at all.
In addition to potential patent protection, we rely on the laws of
unfair competition and trade secrets to protect our proprietary rights. Our
attempts to protect our trade secrets and other proprietary information
through agreements with customers and suppliers, proprietary information
agreements with employees and consultants and other security measures.
Although we intend to protect our rights vigorously, there is a risk that
these measures will not be successful.
EXPOSURE TO LIABILITY DUE TO ACCIDENTS OCCURRING FROM USE OF BATTERIES
Battery technologies vary in relative safety as a result of their
differing chemical compositions. Most battery technologies incorporate a
liquid electrolyte that, if leaked, may be dangerous. In addition, in the
event of a short circuit or other physical damage to the battery, the liquid
electrolyte may be free to flow to the reaction site and produce a continuous
chemical reaction. This reaction may result in excess heat or a gas release
and, if not properly released, may be explosive. Our lithium polymer battery
technology appears to avoid these risks, because the liquid electrolyte in
our current research prototypes is held in the solid polymer matrix and
should not be free to leak or freely flow to a reaction site.
We have not fully completed safety testing and do not know whether the
advantages inherent in our technology will make the battery as safe or safer
than other battery technology. As part of our safety testing program,
prototype batteries of various sizes, designs and chemical formulations are
subject to abuse testing, where the battery is subjected to conditions
outside the expected normal operating conditions of the battery. While some
prototype batteries have survived these tests, others have vented gases
containing vaporized solvents from the electrolyte, which have caught fire.
Such results were generally expected and, until the testing is completed, we
cannot make a valid determination as to the safety envelope in which the
battery must be operated. Additionally, each new battery design requires new
safety testing. Therefore, there is a risk that safety problems will develop
with respect to the Company's battery technology that would prevent
commercial introduction.
Our products will incorporate materials containing lithium ions. While
these materials are less reactive than metallic lithium, which is known in
its metallic form to cause explosions and fires if not properly handled, it
is possible that these materials will require special handling. Although we
believe that our research prototype batteries designed for portable
electronics applications do not present safety risks substantially different
from those inherent in currently marketed non-lithium batteries or other
liquid electrolyte lithium ion batteries, there is a risk that safety
problems will develop in the future. We are aware that if the amounts of
active materials in the anode and cathode are not properly balanced and the
charge/discharge regime is not properly managed, metallic lithium may be
plated within the battery packaging. The plating of lithium in a lithium ion
battery is a dangerous situation, and other lithium ion battery manufacturers
include special safety circuitry within the battery to prevent such a
condition. We expect that our customers will have to use such circuitry.
We are currently conducting research to determine whether our lithium
polymer battery technology poses increased risks when used in larger sized
batteries because of the greater amount of ionic lithium contained in the
battery and the increased amount of energy stored in the battery.
We incorporate safety policies in our research and development
activities and will do so in our manufacturing processes, designed to
minimize safety risks, although there is a risk that an accident in our
facilities will occur. Any accident, whether with the use of a battery or in
our operations, could result in significant delays or claims for damages
9.
<PAGE>
resulting from injuries, which would adversely affect our operations and
financial condition.
UNCERTAINTY ARISING FROM REGULATION
Prior to the commercial introduction of our batteries into a number of
markets, we may seek to obtain approval of our products by one or more of the
organizations engaged in testing product safety. Such approvals could require
significant time and resources from our technical staff and, if redesign were
necessary, could result in a delay in the introduction of our products.
The regulations of the United States Department of Transportation
("DOT"), required a permit to transport lithium across state lines. The
International Air Transport Association ("IATA") similarly regulates the
international shipment of lithium. At this time, lithium ion batteries,
because they contain no metallic lithium, are not subject to these
regulations and are being freely shipped. However, due to recent safety
incidents, including fires, with the shipment of lithium-ion batteries
produced by other manufacturers, the DOT has indicated that it is reviewing
this position, and there is a risk that DOT or IATA will decide to regulate
the shipment of lithium ion batteries in the future. While, in such an
event, we believe that DOT has granted permits for, and IATA has allowed, the
transport of rechargeable lithium-based batteries in the past, there is a
risk that DOT and IATA would not permit our batteries to be shipped or used
by the general public, and that changes in such regulations, or in their
enforcement, will impose costly requirements or otherwise impede the
transport of lithium. In addition, the DOT and IATA approval processes would
require significant time and resources from our technical staff and if
redesign were necessary, could delay the introduction of our products.
The Nevada Occupational Safety and Health Administration and other
regulatory agencies have jurisdiction over the operation of our Henderson,
Nevada manufacturing facilities, and similar regulatory agencies have
jurisdiction over our Mallusk, Northern Ireland manufacturing facilities.
Because of the risks generally associated with the use of lithium, we expect
rigorous enforcement. There is a risk that we will encounter difficulties in
complying with applicable health and safety regulations. Historically,
lithium battery manufacturers have suffered significant damage and losses to
equipment, facilities and production from fires and other industrial
accidents. There is a risk that we too will sustain such damage and losses.
Federal, state and local regulations impose various environmental
controls on the storage, use and disposal of certain chemicals and metals
used in the manufacture of lithium polymer batteries. Although we believe our
activities conform to current environmental regulations, there is a risk that
changes in such regulations will impose costly equipment or other
requirements. Any failure by us to adequately control the discharge of
hazardous wastes could also subject it to future liabilities.
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 us and
certain of our present and former officers and directors. These lawsuits
were consolidated, and in September 1994 the plaintiffs filed a consolidated
and amended class action compliant. 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 October 1995. The complaint alleges
violations of the federal securities laws against us, certain of our present
and former officers and directors, and the underwriters of our public stock
offerings, claiming that the defendants issued a series of false and
misleading statements, including in filings with the Securities and Exchange
Commission, with regard to business and future prospects. The plaintiffs seek
to represent a class of persons who purchased Valence common stock between
May 7, 1992 and August 10, 1994. The complaint seeks unspecified compensatory
and punitive damages, attorney's fees and costs.
On January 23, 1996, the court dismissed, with prejudice, all claims
against the underwriters of our public stock offering, and one claim against
us and our present and former officers and directors. On April 29, 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, we and the
individual defendants filed motions for summary judgement, which the
plaintiffs opposed. In November 1997, the court granted our motion for
summary judgment and entered a judgment in favor of all defendants.
Plaintiffs have appealed and the case is pending before the United States
Court of Appeals for the Ninth Circuit.
10.
<PAGE>
In September 1998, Klockner Bartelt/Medipak, Inc. d/b/a/ Klockner Medipak
filed suit against us in the United States District Court for the Middle
District of Florida (File No. 98-1844-Civ-7-24E) alleging breach of contract
by us with respect to an agreement for the supply of battery manufacturing
equipment, and claims damages of approximately $2,500,000. Although we
believe that we have meritorious defenses to this suit, if it is resolved
unfavorably to us it could have a material adverse effect on our financial
condition.
In June 1998, we filed a lawsuit in the Superior Court of California,
Santa Clara County, against L&I Research, Inc., Powell Electrical Manufacturing
Company and others seeking relief based on rescission and damages for breach
of a contract. In September 1998, Powell filed a cross-complaint against us
and others (File No. CV 7745534) claiming damages of approximately $900,000.
The cross-complaint alleges breach of written contract, oral modification of
written contract, promissory estoppel, fraud, quantum meruit, and quantum
valebant. In October 1998, we filed a demurrer to the third cause of action
for oral modification and fifth cause of action for fraud in the
cross-complaint and Powell demurred to the complaint. On December 10, 1998,
we filed a first amended complaint. On December 18, 1998, the Court
sustained our demurrer to the fifth cause of action for fraud and overruled
the demurrer to the third cause of action for oral modification. The Court
also denied Powell's demurrer as moot. Although we believe that we have
meritorious defenses to the cross complaint, if it is resolved unfavorably to
us it could have a material adverse effect on our financial condition.
11.
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of Valence common
stock by the selling stockholders.
PRICE RANGE OF COMMON STOCK
Since May 7, 1992, Valence's stock, par value $0.001, has been traded on
the Nasdaq National Market under the symbol "VLNC." A summary of the high and
low closing sales prices during each quarter for Valence common stock on the
Nasdaq National Market follows:
<TABLE>
<CAPTION>
FISCAL 1997 HIGH LOW
- ------------------------------------------------------------ ------- -------
<S> <C> <C>
Quarter ended June 30, 1996 $7-5/15 $4-1/8
Quarter ended September 29, 1996 6-1/6 3-5/8
Quarter ended December 29, 1996 5-7/8 4-1/8
Quarter ended March 30, 1997 7 4-3/16
FISCAL 1998
Quarter ended June 29, 1997 $10 $5-3/4
Quarter ended September 28, 1997 9-1/8 6-7/8
Quarter ended December 28, 1997 9 4-1/4
Quarter ended March 29, 1998 6-1/2 4-1/4
FISCAL 1999
Quarter ended June 28, 1998 $6-1/8 $4-21/32
Quarter ended September 27, 1998 5-3/4 3-7/16
Quarter ending December 27, 1998 (through December 18, 1998) 10-7/8 4-1/8
</TABLE>
The approximate number of record holders of the Company's Common stock as
of November 1, 1998, was 712.
DIVIDEND POLICY
Valence has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future.
12.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders, the
number of shares of Valence common stock owned by each of them as of the date of
this prospectus and the number of shares of Valence common stock which may be
offered pursuant to this prospectus. The information is based up information
provided by or on behalf of the selling stockholders. The selling stockholders
may offer all, some or none of their shares of Valence common stock.
<TABLE>
<CAPTION>
Common Stock Beneficially Common Stock Beneficially Owned
Name Owned Prior to Offering (1) Offered Hereby After Offering (2) Percent(2)
--------------------------- -------------- ------------------- ----------
<S> <C> <C> <C> <C>
CC Investments, LDC (3) 1,321,598 2,313,432 1,321,598 4.9%
Gemini Capital, L.L.C. (4) 175,000 87,500 87,500 *
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as otherwise indicated by footnote, and
subject to community property laws where applicable, the persons named in the
table have sole voting and investment power with respect to all shares of
Valence common stock shown as beneficially owned by them.
(2) Assumes the sale of all shares offered by this prospectus. Percentage
calculations are based upon 25,649,800 shares of Valence common stock
outstanding as of November 1, 1998.
(3) CC Investments, LDC owns 7,500 shares of Series A Preferred Stock and 7,500
shares of Series B Preferred Stock of Valence, plus warrants to purchase up to
895,522 shares of Valence common stock at a price of $6.78 per share. Castle
Creek Partners LLC, as the investment advisor to CC Investments, LDC, has voting
control and investment discretion over the securities held by CC Investments,
LDC. Pursuant to the terms of the Series A Preferred Stock, Series B Preferred
Stock and such warrants, CC Investments, LDC cannot convert or exercise any
portion of such Series A Preferred Stock, Series B Preferred Stock or exercise
the warrants if such conversion or exercise would increase CC Investments, LDC's
beneficial ownership of Valence common stock to in excess of 4.9%. Absent such
limitations, the number of shares of Valence common stock issuable upon
conversion of the Series A Preferred Stock and Series B Preferred Stock and
exercise of the warrants held by CC Investments, LDC, as of December 18, 1998,
would have been 3,414,366 shares, which would constitute 11.7% of the
outstanding shares of Valence common stock.
Because the number of shares of Valence common stock that will ultimately be
issued upon conversion of the Series A Preferred Stock and Series B Preferred
Stock is dependent, subject to certain limitations, upon the length of time such
stock is held and certain antidilution adjustments and, in the case of the
Series B Preferred Stock after July 27, 1999, the average of six of the ten
closing bid prices of the Valence common stock prior to conversion (see "Risk
Factors-- Dilution as a Result of Conversion of Preferred Stock and Exercise of
Warrants" on page 5), the number of shares of Valence common stock issuable to
CC Investments, LDC (and therefore the number of shares of Valence common stock
offered hereby) cannot be determined at this time. Pursuant to the regulations
of the National Association of Securities Dealers, in the absence of stockholder
approval, the aggregate number of shares of Valence common stock issuable at a
discount from market price upon conversion of the Series A Preferred Stock and
Series B Preferred Stock and exercise of the warrants may not exceed 19.99% of
the outstanding shares of Valence common stock. Unless stockholder approval is
obtained to issue Valence common stock in excess of the maximum amount set forth
above, CC Investments will not be entitled to acquire more than such maximum
amount. Any Series A Preferred Stock or Series B Preferred Stock which may not
be converted because of such limitation may be redeemed by the Company.
The shares of Valence common stock offered by this prospectus are the shares
issuable upon conversion of the Series B Preferred Stock and upon exercise of
the warrant to purchase 447,761 shares of Valence common stock issued to CC
Investments, LDC in connection with the issuance of the Series B Preferred
Stock. The shares are being registered by Valence pursuant to an agreement
between Valence and CC Investments. The shares of Valence
13.
<PAGE>
common stock issuable to CC Investments, LDC pursuant to the conversion of
the Series A Preferred stock and upon exercise of the warrant to purchase
447,761 shares of Valence common stock issued in connection with the issuance
of the Series A Preferred Stock are registered under a separate registration
statement.
(4) Gemini Capital, L.L.C. acted as placement agent in the private placement of
Series A Preferred Stock and Series B Preferred Stock of the Company, for which
it received commissions of $750,000 and warrants to purchase 175,000 shares of
Valence common stock at an exercise price of $4.9375 per share. Of the 175,000
shares of Valence common stock issuable to Gemini Capital, 87,500 shares are
being offered pursuant to this prospectus and the remaining 87,500 shares are
registered for resale under a separate registration statement.
PLAN OF DISTRIBUTION
The shares of Valence common stock offered by this prospectus may be sold
from time to time by the selling stockholders to purchasers directly by any of
the selling stockholders in one or more transactions at a fixed price, which may
be changed, or at varying prices determined at the time of sale or at negotiated
prices. Such prices will be determined by the holders of such securities or by
agreement between such holders and underwriters or dealers who may receive fees
of commissions in connection therewith.
Any of the selling stockholders may from time to time offer shares of
Valence common stock beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the selling stockholders and the purchasers of
the shares for whom they may act as agent. Each selling stockholder will be
responsible for payment of commissions, concessions and discounts of
underwriters, dealers or agents. The aggregate proceeds to the selling
stockholders from the sale of the shares of Valence common stock offered by them
hereby will be the purchase price of such shares less discounts and commissions,
if any. Each of the selling stockholders reserves the right to accept and,
together with their agents from time to time to reject, in whole or in part, any
proposed purchase of shares to be made directly or through agents. Valence will
not receive any of the proceeds from this offering. Alternatively, the selling
stockholders may sell all or a portion of the shares of Valence common stock
beneficially owned by them and offered hereby from time to time on any exchange
on which the securities are listed on terms to be determined at the times of
such sales. The selling stockholders may also make private sales directly or
through a broker or brokers. Transactions through broker-dealers may, including
block trades in which brokers or dealers will attempt to sell the shares of
Valence common stock as agent but may position and resell the block as principal
to facilitate the transaction, or one or more underwritten offerings on a firm
commitment or best effort basis.
From time to time, the selling stockholders may transfer, pledge, donate or
assign shares of Valence common stock to lenders or others and each of such
persons will be deemed to be a "selling stockholder" for purposes of the
prospectus. The number of the selling stockholders' shares beneficially owned
by a selling stockholder who transfers, pledges, donates or assigns shares of
Valence common stock will decrease as and when they take such actions. The plan
of distribution for selling stockholders' shares sold hereunder will otherwise
remain unchanged, except that the transferees, pledgees, donees or other
successors will be selling stockholders hereunder.
A selling stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the
shares of Valence common stock in the course of hedging the positions they
assume with such selling stockholder, including, without limitation, in
connection with distribution of the shares of Valence common stock by such
broker-dealers. In addition, the selling stockholder may, from time to time,
sell short the shares of Valence common stock, and in such instances, this
prospectus may be delivered in connection with such short sales and the
shares offered hereby may be used to cover such short sales. The selling
stockholders may also enter into option or other transactions with
broker-dealers that involve the delivery of the shares of Valence common
stock to the broker-dealers, who may then resell or otherwise transfer such
shares. The selling stockholders may also loan or pledge the shares to a
broker-dealer and the broker-dealer may sell the shares as loaned or upon a
default may sell or otherwise transfer the pledge shares.
CC Investments, LDC has agreed that on any day it will not sell Valence
common stock on a public trading market in excess of the greatest of (i)
30,000 shares, (ii) 15% of the total number of shares of Valence common stock
sold on the Nasdaq National Market during such trading day, and (iii) 15% of
the average daily trading volume on the Nasdaq
14.
<PAGE>
National Market for the five consecutive trading days immediately preceding
such sale, unless such shares are sold at a price in excess of $12.00 per
share.
Shares of Valence common stock to be sold hereunder may be issued upon
conversion of the Series A Preferred Stock and/or Series B Preferred Stock in
accordance with their terms or upon exercise of warrants, or in other
transactions with Valence Company involving the Series A Preferred Stock and/or
Series B Preferred Stock and warrants, including, without limitation, issuance
of shares of Valence common stock in exchange for shares of Series A Preferred
Stock and/or Series B Preferred Stock, or in settlement of claims with respect
to rights of holders of Series A Preferred Stock and/or Series B Preferred
Stock.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of the shares of Valence common stock offered
hereby may be deemed to be underwriters within the meaning of the Securities Act
of 1933, and any discounts, commissions or concessions received by them and any
provided pursuant to the sale of shares by them might be deemed to be
underwriting discounts and commissions under the Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. There is no
assurance that any selling stockholder will sell any or all of the shares of
Valence common stock described herein, and any selling stockholder may transfer,
devise or gift such securities by other means not described herein.
To the extent required, the specific shares of Valence common stock to
be sold, the names of the selling stockholders, the respective purchase
prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement
or, if appropriate, a post-effective amendment to the registration statement
of which this prospectus is a part. Valence entered into a registration
rights agreement in connection with the private placement of the shares of
Series A Preferred Stock and Series B Preferred Stock which required it to
register the underlying shares of Valence common stock under applicable
federal and state securities laws under certain circumstances and at certain
times. The registration rights agreement provides for cross-indemnification
of the selling stockholders and Valence and their respective directors,
officers and controlling persons against certain liabilities in connection
with the offer and sale of the shares of Valence common stock, including
liabilities under the Securities Act, and to contribute to payments the
parties may be required to make in respect thereof.
Valence will pay substantially all of the expenses incurred by the selling
stockholders and Valence incident to the offering and sale of the shares of
Valence common stock underlying the Series A Preferred Stock, Series B Preferred
Stock and warrants, excluding any underwriting discounts or commissions.
LEGAL MATTERS
The validity of the shares of Valence common stock offered hereby will be
passed upon for Valence by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of March 29, 1998 and March 30, 1997 and
the consolidated statements of operations, shareholders' equity (deficit), and
cash flows for the period from March 3, 1989 (date of inception) to March 29,
1998 and for each of the years ending March 29, 1998, March 30, 1997 and March
31, 1996 incorporated by reference in this registration statement, have been
incorporated herein in the reliance on the report, which includes an explanatory
paragraph regarding the Company's ability to continue as a going concern, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
15.
<PAGE>
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE NOTES OR CONVERSION SHARES OFFERED HEREBY, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES OR
CONVERSION SHARES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR IMPLY THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION.....................................2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.........................3
SUMMARY.................................................................3
RISK FACTORS............................................................5
USE OF PROCEEDS........................................................12
PRICE RANGE OF COMMON STOCK............................................12
DIVIDEND POLICY........................................................12
SELLING STOCKHOLDERS...................................................13
PLAN OF DISTRIBUTION...................................................14
LEGAL MATTERS..........................................................15
EXPERTS................................................................15
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee. $ 10,875
NASD filing fee -
Nasdaq listing fee. -
Blue sky qualification fees and expenses. -
Printing and engraving expenses -
Legal fees and expenses 5,000
Accounting fees and expenses. 5,000
Transfer agent and registrar fees -
Miscellaneous 1,125
Total $ 22,000
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the Registrant has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act of
1933, as amended ("Securities Act"). The Registrant's Bylaws also provide that
the Registrant will indemnify its directors and executive officers and may
indemnify its other officers, employees and other agents to the fullest extent
permitted by Delaware law.
The Registrant's Restated Certificate of Incorporation ("Restated Certificate")
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to the Registrant and its
stockholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for act or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
The Registrant has entered into agreements with its directors and officers that
require the Company to indemnify such persons to the fullest extent authorized
or permitted by the provisions of the Restated Certificate and Delaware law
against expenses, judgements, fines, settlements and other amounts actually and
responsibly incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director,
officer, employee or other agent of the Registrant or any of its affiliated
enterprise. Delaware law permits such indemnification, provided such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder. In addition,
the Registrant maintains director and officer liability insurance which, subject
to certain exceptions and limitations, insures directors and officers for any
alleged breach of duty, neglect, error, misstatement, misleading statement,
omission or act in their respective capacities as directors and officer of the
Registrant.
II-1
<PAGE>
At present, there is no pending litigation or proceeding involving a director or
officer of the Registrant as to which indemnification is being sought nor is the
Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ------------------------------------------------------------------
<S> <C>
4.1 Amended and Restated Securities Purchase Agreement, dated December
11, 1998.(1)
4.2 Amended and Restated Registration Rights Agreement, dated December
11, 1998.(1)
4.3 Certificate of Designation of Series B Convertible Preferred
Stock, as filed with the Delaware Secretary of State on December
17, 1998.(1)
4.4 Form of Warrant to CC Investments, LDC.(1)
4.5 Form of Warrant to Gemini Capital, L.L.C.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
(1) Incorporated by reference to the indicated exhibit to the Company's Current
Report on Form 8-K, File No. 0-20028, filed December 21, 1998.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of periodic
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") containing information required to be
included in a post-effective amendment that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
The undersigned Registrant hereby undertakes to file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration
Statement to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
The undersigned Registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 14 or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suite or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
II-2
<PAGE>
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining any
liability under the Securities Act, the information omitted from the form of
prospectus as filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contained a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Henderson, State of Nevada on December 18, 1998.
VALENCE TECHNOLOGY, INC.
By: /s/ Lev M. Dawson
-------------------------------
Lev M. Dawson
Chairman of the Board, Chief
Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lev M. Dawson his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form S-3, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Lev. M. Dawson
----------------------------- Chairman of the Board, Chief Executive December 18, 1998
Lev M. Dawson Officer and President(Principal
Executive Officer and Principal
Financial and Accounting Officer)
/s/ Carl E. Berg
----------------------------- Director December 18, 1998
Carl E. Berg
/s/ Alan F. Shugart
----------------------------- Director December 18, 1998
Alan F. Shugart
/s/ Bert C. Roberts, Jr.
----------------------------- Director December 18, 1998
Bert C. Roberts, Jr.
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ------------------------------------------------------------------
<S> <C>
4.1 Amended and Restated Securities Purchase Agreement, dated December
11, 1998.(1)
4.2 Amended and Restated Registration Rights Agreement, dated December
11, 1998.(1)
4.3 Certificate of Designation of Series B Convertible Preferred
Stock, as filed with the Delaware Secretary of State on December
17, 1998.(1)
4.4 Form of Warrant to CC Investments, LDC.(1)
4.5 Form of Warrant to Gemini Capital, L.L.C.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
(1) Incorporated by reference to the indicated exhibit to the Company's Current
Report on Form 8-K, File No. 0-20028, filed December 21, 1998.
II-5
<PAGE>
EXHIBIT 5.1
December 18, 1998
Valence Technology, Inc.
301 Conestoga Way
Henderson, NV 89015
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Valence Technology, Inc. (the "Company") of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission, including a prospectus (the
"Prospectus"), covering the offering of 4,535,261 shares of the Company's
Common Stock, with a par value of $0.001 (the "Shares"), to be sold by
certain stockholders as described in the Registration Statement. Such Shares
may be issued by the Company pursuant to the conversion of Series B
Convertible Participating Preferred Stock of the Company ("Series B
Preferred") and exercise of Warrants to purchase the Company's Common Stock
(the "Warrants"), in each case issued pursuant to an Amended and Restated
Securities Purchase Agreement by and between the Company and CC Investments,
LDC, dated December 11, 1998 and a Letter Agreement between the Company and
Gemini Capital, L.L.C. dated December 11, 1998. Defined terms used herein
shall have the meanings attributed to such terms in the Registration
Statement unless otherwise stated herein.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation, as amended, the Company's By-laws, as amended, and the
originals or copies certified to our satisfaction of such documents, records,
certificates, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
We have assumed the genuineness and authenticity of all documents submitted
to us as originals, the conformity to originals of all documents submitted to
us as copies thereof, and the due execution and delivery of all documents
where due execution and delivery are a prerequisite to the effectiveness
thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when issued in accordance with the terms of the Series B
Preferred and Warrants, will be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters"
in the Prospectus included in the Registration Statement and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Andrei Manoliu
-----------------------------
Andrei M. Manoliu
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Valence Technology, Inc. (a company in the development stage)
(the "Company") on Form S-3 of our report, which includes an explanatory
paragraph regarding the Company's ability to continue as a going concern,
dated May 8, 1998, on our audits of the consolidated financial statements of
the Company as of March 29, 1998 and March 30, 1997, and for the period from
March 3, 1989 (date of inception) to March 29, 1998 and for each of the years
ending March 29, 1998, March 30, 1997 and March 31, 1996, which report is
included in the Company's annual report on Form 10-K.
PricewaterhouseCoopers LLP
San Jose, California
December 18, 1998
