[FILED PURSUANT TO RULE 424(B)(5)
FILE NO. 333-76589]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 12, 1999
2,133,333 SHARES
VALENCE TECHNOLOGY, INC.
COMMON STOCK
$15.00 PER SHARE
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We are offering 2,133,333 shares of our common stock to an institutional
investor pursuant to this prospectus supplement and the accompanying prospectus.
The common stock will be purchased at a negotiated purchase price of $15.00 per
share for a total purchase price of $32,000,000. Our common stock is listed on
the Nasdaq National Market under the symbol "VLNC." On December 20, 1999, the
last reported sale price of our common stock on the Nasdaq National Market was
$19-11/16 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-3 OF THE PROSPECTUS SUPPLEMENT AND ON PAGE S-3 OF THE ACCOMPANYING
PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is December 21, 1999
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TABLE OF CONTENTS
PAGE
Prospectus Supplement Summary.............................................S-3
Risk Factors..............................................................S-3
Disclosure Regarding Forward-Looking Statements..........................S-14
Dividend Policy..........................................................S-14
Use Of Proceeds..........................................................S-14
Price Range Of Common Stock..............................................S-15
Plan Of Distribution.....................................................S-15
Legal Matters............................................................S-16
Experts..................................................................S-16
Where You Can Find More Information......................................S-16
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As used in this prospectus supplement and the accompanying prospectus, the terms
"we," "us," "our," the "Company" or "Valence" mean Valence Technology, Inc. and
its subsidiaries (unless the context indicates a different meaning), and the
term "common stock" means our common stock, $.001 par value per share.
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PROSPECTUS SUPPLEMENT SUMMARY
Valence Technology, Inc. was incorporated in Delaware in March 1989
under the name Ultracell, Inc. We changed our name to Valence Technology,
Inc. in March 1992. Our executive offices are located at 301 Conestoga Way,
Henderson, Nevada 89015, and our telephone number is (702) 558-1000.
THE OFFERING
Shares offered ................ We are offering all of the 2,133,333 shares
being offered hereby (the "Offering").
Shares outstanding
after this offering ........... Following this Offering, there will be
34,583,170 shares of our common stock
outstanding based upon the number of shares
outstanding on December 17, 1999. This
number does not include shares that may be
issued pursuant to the exercise of stock
options and warrants currently outstanding
or which may be granted under our stock
option plans, or upon the conversion of
preferred stock outstanding.
Use of proceeds ............... For general corporate purposes, including:
- acquiring raw materials and building
inventory of finished goods;
- financing capital expenditures; and
- working capital.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD NOT
MAKE 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 OUR COMMON STOCK.
WE HAVE AN IMMEDIATE NEED FOR ADDITIONAL CAPITAL.
We have an immediate need for additional capital. If we don't obtain additional
capital, it would cause us to reduce our developmental efforts and impair our
ability to commercialize our products. At September 26, 1999, we had cash and
cash equivalents of $3,212,000. Subsequent to September 26, 1999 and as of
December 17, 1999, we obtained an additional $6.5 million of equity financing
from an institutional investor and $1.5 million of debt financing from a
stockholder. We cannot assure you that if this Offering does not close we would
then be able to raise funds, whether from equity or debt financing agreements,
on favorable terms, if at all. These factors raise substantial doubts about our
ability to continue as a going concern. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The
effects of these adjustments, if necessary, could be material. If we complete
this Offering, after taking into account the proceeds from this Offering,
projected revenues and receipt of funds from other sources, we will
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need to raise a minimum of $50 million in debt or equity financing through
fiscal 2001 to complete funding of planned capital expenditures, research and
product development, marketing and general and administrative expenses and to
pursue joint venture opportunities. Our cash requirements, however, may vary
materially from those now planned because of changes in our operations,
including changes in original equipment manufacturer (OEM) relationships or
market conditions. There can be no assurance that additional funds for these
purposes, whether from equity or debt financing agreements, will be available on
favorable terms, if at all. If we cannot raise additional funds, further
development and production of our batteries may be delayed, we may not be able
to increase personnel in our sales and marketing departments or otherwise
execute our business plan, all of which may have a material adverse effect on
our operations and financial condition. In addition, if any of the risks
described in "Risk Factors" do occur, such as additional costs resulting from an
adverse judgment or settlement of litigation, we may need to obtain additional
funds to enable us to continue operations and execute our business plan beyond
the first quarter of 2001.
WE ARE A DEVELOPMENT STAGE COMPANY WITH A LIMITED QUANTITY OF PRODUCTS CURRENTLY
AVAILABLE FOR SALE.
We are a development stage company and cannot anticipate when, or if, we will
ever have significant revenues from a product. We have derived our revenues
primarily from a research and development contract with Delphi Automotive
Systems Group, which we completed in May 1998. We presently have limited
quantities of commercially developed and manufactured products available for
sale. If we cannot rapidly increase our production capabilities to make
commercially acceptable product, we may not be able to fulfill existing purchase
orders in a timely manner or at all, and we may not be able to procure
additional purchase orders, in which event, our business and financial condition
would be materially adversely affected.
OUR CURRENT AVAILABLE CAPITAL AND FUTURE REVENUES, IF ANY, WILL NOT BE
SUFFICIENT TO MEET OUR FUTURE OPERATING NEEDS.
We have generally incurred operating losses since inception in 1989 and had an
accumulated deficit of $171,959,000 as of September 26, 1999. We may never
achieve or sustain significant revenues or profitability in the future. We have
negative working capital and have sustained recurring losses related primarily
to the research and development and marketing of our products. We expect to
incur significant losses in the future, as we continue our product development,
begin to build inventory and continue our marketing efforts. We will need to
secure additional financing in order to continue operations and execute our
business plan, including planned capital expenditures beyond the first quarter
of fiscal 2001, unless we begin to generate significant operating revenue. We
will have to continue to devote a significant amount of management time to
obtaining financing.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING, IN WHICH CASE WE WOULD NEED
TO REDUCE DEVELOPMENTAL EFFORTS AND MAY NOT BE ABLE TO COMMERCIALIZE OUR
PRODUCTS.
If we are unable to achieve profitability or we are unable to secure additional
financing on acceptable terms, we will be unable to continue to fund our
operations. We are parties to an agreement pursuant to which we are entitled to
capital grant advances from the Northern Ireland Industrial Development Board
once we obtain cumulative revenues from the sale of batteries of $4 million. We
may not achieve these cumulative revenues over the short-term, or at all.
Additionally, a lack of capital may require us to license to third parties
rights to commercialize products or technologies that we might otherwise seek to
develop ourselves, and to scale back or eliminate our research and product
development programs. The unavailability of adequate funds would preclude us
from
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continuing to redesign and modify our manufacturing facility, ramp up our
sales and marketing staff and otherwise execute our business plan, all of which
would have a material adverse effect on our business, financial condition, and
results of operations.
WE ARE INVOLVED IN LAWSUITS THAT COULD NEGATIVELY IMPACT OUR BUSINESS.
We currently have three substantial lawsuits in which we are involved. The first
is a class action lawsuit by a class of persons who purchased our common stock
between May 7, 1992 and August 10, 1994, alleging that we violated federal
securities laws and seeking unspecified compensatory and punitive damages,
attorneys' fees and costs for claimed misstatement of our stock price in the
public offering and open market purchases of stock during that period. The
complaint names the Company as a defendant as well as some of our present and
former officers and directors, asserting that the Company and those individuals
violated federal securities laws by misrepresenting and failing to disclose
certain information about the Company's business during the class period. The
second involves a claim by a manufacturer of one of our pieces of manufacturing
equipment that we owe it approximately $2.5 million; in this action, we have
filed a counterclaim against the manufacturer seeking damages to be determined
at trial. The third is a contract claim that we instituted against several
parties; one party has filed a counterclaim against us and third parties
claiming damages of approximately $900,000 based on breach of a contract, and
this matter is presently stayed pending settlement discussions. Although we
intend to defend vigorously the claims against us in each of these lawsuits, if
any of them is resolved unfavorably to us we may be required to pay substantial
monetary damages which would have a material adverse effect on our financial
condition, results of operations and cash flows. In addition, our defense of
these actions has, and may continue to, result in substantial costs to us, as
well as requiring the significant dedication of management resources. If we
choose to settle any of these lawsuits, the settlement costs could also have a
significant effect on our cash resources and our financial condition.
WE MAY NOT BE ABLE TO COST-EFFECTIVELY MANUFACTURE OUR BATTERIES.
To be successful, we must manufacture commercial, high-quality quantities of our
products at competitive costs. To date, we have produced limited quantities of
prototype and production quality products that we believe have performance
characteristics that are suitable for a broad market. However, additional
development will be required to enable us to produce battery systems with these
characteristics from our manufacturing line. In addition, to facilitate broad
commercialization of our products, we will need to reduce our manufacturing
costs. Our batteries may not be manufacturable in long-run commercial quantities
to the performance specifications demanded by customers. We must still be able
to competitively manufacture these batteries. Our current manufacturing
technology will need to be more fully developed before we will be able to
manufacture our batteries in commercial quantities. We must be able to
substantially raise yields of commercial quality batteries in commercial
quantities in order to cost effectively produce our batteries. Failure to
achieve substantially increased yields of our batteries and reduce
unit-manufacturing costs will preclude us from offering our batteries at a
competitive price to the public and therefore cause a material adverse effect on
our business, results of operations and financial condition. If we manufacture
our batteries in commercial quantities and they fail to perform as expected, our
reputation could be severely damaged, and we could lose existing or potential
future business, which would have a material adverse effect on our ability to
market our batteries even if the defect were corrected.
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BECAUSE OUR BATTERIES ARE ONLY SOLD WHEN INCORPORATED INTO OTHER PRODUCTS, WE
RELY ON ORIGINAL EQUIPMENT MANUFACTURERS TO COMMERCIALIZE OUR PRODUCTS.
To be successful, our batteries must gain broad market acceptance. In addition,
our success will depend significantly on our ability to meet OEM customer
requirements by developing and introducing on a timely basis new products and
enhanced or modified versions of our existing products. OEMs often require
unique configurations or custom designs for battery systems, which must be
developed and integrated in the OEM's product well before the product is
launched by the OEM. Thus, there is often substantial lead-time between the
commencement of design efforts for a customized battery system and the
commencement of volume shipments of the battery system to the OEM. If we are
unable to design, develop and introduce products that meet OEMs' and other
customers' exacting requirements on a timely basis, we may not be able to
fulfill our obligations under existing purchase orders, we may lose
opportunities to enter into additional purchase orders and our reputation may be
damaged, all of which would have a material adverse effect on our business,
results of operations and financial condition. In addition, to determine the
requirements of each specific application, we will be dependent upon OEMs and
other intermediaries such as battery pack designers into whose products our
batteries will be incorporated. We may not receive adequate assistance from OEMs
to successfully commercialize our products.
WE MUST EXPAND OUR SALES STAFF, SUPPORT CAPABILITIES AND DISTRIBUTION CHANNELS
TO DISTRIBUTE OUR PRODUCTS ON A COMMERCIAL SCALE.
To implement our strategy successfully, we will have to increase our staff,
including personnel in sales and marketing, engineering, development and product
support capabilities, as well as third party and direct distribution channels.
We may not be able to sufficiently increase our staff or product support
capabilities, or be successful in our sales and marketing efforts. Failure in
any of these areas could have a material adverse effect on our business and
results of operations.
WE ARE IN THE EARLY STAGE OF MANUFACTURING, AND IF WE ARE UNABLE TO DEVELOP
MANUFACTURING CAPABILITIES IN A COST EFFECTIVE MANNER, WE WILL NOT BE ABLE TO
GENERATE PROFITS.
To date, we have not manufactured batteries on a commercial scale. Until
recently, our batteries only have been manufactured on our pilot manufacturing
line, which is able to produce prototype cells in quantities sufficient to
enable customer sampling and testing and product development. We are currently
in the early stages of transitioning production to an automated high volume
production line that will work with our newest battery technology in our
manufacturing facility in Mallusk, Northern Ireland. The redesign and
modification of the manufacturing facility, including its customized
manufacturing equipment, will continue to require substantial engineering work
and capital expenses and is subject to significant risks, including risks of
cost overruns and significant delays. In addition, in order to rapidly scale up
the manufacturing capacity, we will need to begin fabrication of a second
automated production line before completing full qualification of the first
line. In automating, redesigning and modifying the manufacturing processes, we
have been, and will continue to depend on, several developers of automated
production lines, which have limited experience in producing equipment for the
manufacture of batteries. A key determinant of our current and future production
capacity and profitability is the production yield of our manufacturing process.
To date, we have not achieved production yields sufficient to sustain commercial
production of our batteries. In 1993, we entered into a purchase order for $100
million of our batteries, which incorporated a previous technology, that we were
unable to fulfill due to our inability to commercially produce our batteries
pursuant to the customer's specifications. We must be able to substantially
raise yields of commercial quality batteries in commercial quantities in order
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to cost effectively produce our batteries. Any failure to achieve substantially
increased yields of our batteries and reduce unit-manufacturing costs could have
a material adverse effect on our business, results of operations and financial
condition. As part of our manufacturing ramp-up, we will need to hire and train
a substantial number of new manufacturing workers. The availability of skilled
and unskilled workers in Northern Ireland, the site of our manufacturing
facility, is limited due to a relatively low unemployment rate. We may not
successfully develop improved processes, design required production equipment,
enter into acceptable contracts for the fabrication of such equipment, obtain
timely delivery of such equipment, implement multiple production lines or
successfully operate the Mallusk facility. We may not be able to successfully
automate our production on a timely basis, if at all, and such automation may
not result in greater manufacturing capacity or lower manufacturing costs than
our pilot production line. Customer relationships could be damaged if we fail to
begin volume manufacturing on a timely basis or at all. Such failure could cause
lost opportunities and have a material adverse effect on our business, results
of operations and financial condition.
WE ARE EXPERIENCING DELAYS IN QUALIFYING OUR MANUFACTURING FACILITIES.
We have been unable to meet our prior schedules regarding delivery,
installation, de-bugging and qualification of the Northern Ireland facility
production equipment. As most of the production equipment is being specially
manufactured for us, further problems may develop and cause further delay in our
current schedules. We are modifying and bringing many of the manufacturing
processes that we are implementing in this production equipment up to date for
the first time from our laboratory scale prototype work. We may need to further
refine the processes, which could cause substantial delays in the qualification
and use of this equipment. Furthermore, if we are able to refine our process, we
may not be able to produce the required amount of 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.
WE DEPEND ON SOLE OR LIMITED SOURCE SUPPLIERS FOR CERTAIN KEY RAW MATERIALS TO
DEVELOP AND MANUFACTURE OUR BATTERIES.
We depend on sole or limited source suppliers for certain key raw materials used
in our products. We generally purchase sole or limited source raw materials
pursuant to purchase orders placed from time to time and have no long-term
contracts or other guaranteed supply arrangements with our sole or limited
source suppliers. Our suppliers may not be able to meet our requirements
relative to specifications and volumes for key raw materials, and we may not be
able to locate alternative sources of supply. We may not be able to purchase raw
materials at an acceptable cost. In addition, the raw materials which we utilize
must be of a very high quality, and we have in the past experienced delays in
product development due to the delivery of nonconforming raw materials from our
suppliers. If we are unable to obtain high quality raw materials in sufficient
quantities and on a timely basis, our production of batteries may be delayed
which will have a material adverse effect on our business and results of
operations.
OUR BATTERIES MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN MARKET ACCEPTANCE.
To achieve market acceptance, our batteries must offer significant performance
advantages at a cost effective rate as compared to other current and potential
alternative battery technologies in a broad range of applications. Our batteries
may not be able to achieve or sustain these advantages. Even if our batteries
provide meaningful price or performance advantages, there is a risk our
batteries may
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not be able to achieve or maintain market acceptance in any potential market
application. The success of our products also will depend upon the level of
market acceptance of OEMs' and other customers' end products that incorporate
our batteries, a circumstance over which we have little or no control. If our
batteries do not achieve and maintain significant performance advantages at a
cost effective rate over other technologies and achieve significant and
sustained market acceptance, or if customers' applications which incorporate our
products do not achieve lasting market acceptance, our business, results of
operations and financial condition could be materially adversely affected.
THERE HAS BEEN, AND CONTINUES TO BE, A RAPID EVOLUTION OF BATTERY TECHNOLOGIES.
The battery industry has experienced, and is expected to continue to experience,
rapid technological change. Various companies are seeking to enhance traditional
battery technologies, such as lead acid and NiCad, and other companies have
recently introduced or are developing batteries based on nickel metal hydride
("NiMH"), lithium and other emerging and potential technologies. While these
competitors are engaged in significant development work on these various battery
systems, we believe that much of this effort is focused on achieving higher
energy densities for low power applications such as portable electronics. One or
more new, higher energy rechargeable battery technologies could be introduced
which could be directly competitive with, or be superior to, our technology. The
capabilities of many of these competing technologies have improved over the past
several years, which have resulted in a customer perception that our technology
may not offer as many advantages as previously anticipated. Competing
technologies that outperform our batteries could be developed and successfully
introduced and, as a result, there is a risk that our products may not be able
to compete effectively in our targeted market segments.
OUR COMPETITORS MAY DEVELOP BATTERIES SIMILAR OR SUPERIOR TO OURS OR OTHERWISE
COMPETE MORE SUCCESSFULLY THAN WE DO.
Competition in the rechargeable 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 ours. There is a risk that other companies
may develop batteries similar or superior to ours. In addition, many of these
companies have name recognition, established positions in the market, and long
standing relationships with OEMs and other customers. We believe that our
primary competitors are existing suppliers of lithium ion, competing polymer
and, in some cases, NiMH batteries. These suppliers include Matsushita
Industrial Co., Ltd., Sony, Toshiba, SAFT America, Inc. and PolyStor Corp. All
of these companies are very large and have substantial resources and market
presence. We expect that we will compete against manufacturers of other types of
batteries in our targeted application segments, which include laptops, cellular
phones and personal digital assistance products, on the basis of performance,
cost and ease of recycling. There is also a risk that we may not be able to
compete successfully against manufacturers of other types of batteries in any of
our targeted applications.
OUR SUCCESS DEPENDS HEAVILY ON OUR SENIOR MANAGEMENT PERSONNEL AND ON OUR
ABILITY TO ATTRACT AND RETAIN KEY EMPLOYEES.
Our success is highly dependent upon the active participation of our senior
management personnel. We do not have written employment contracts with any key
employees and do not maintain key man life insurance policies for any of our
employees. We believe that our future success will depend in large part on our
ability to attract and retain highly skilled technical, managerial and marketing
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personnel who are familiar with and experienced in the battery industry as well
as skilled personnel to operate our facility in Northern Ireland. Competition
for personnel, in particular for product development and product implementation
personnel, is intense, and we compete in the market for personnel against
numerous companies, including larger, more established competitors with
significantly greater financial resources than us. The availability of skilled
and unskilled workers in Northern Ireland is limited due to a relatively low
unemployment rate. From time to time we experience difficulty in recruiting
qualified personnel, and we cannot be certain that we will be successful in
attracting and retaining skilled personnel. If we are unable to attract and
retain other qualified personnel, we may not be able to staff our manufacturing
facility to operate at full capacity, which could delay our production of
batteries and cause us to breach our obligations under existing or new purchase
orders. Also, if we cannot attract and retain experienced sales and marketing
personnel, we may not achieve the visibility in the marketplace that we need to
obtain purchase orders, which would have a material adverse effect on our
financial condition.
WE FACE A RISK THAT OUR PENDING PATENT APPLICATIONS WILL NOT RESULT IN ISSUED
PATENTS AND THAT OUR ISSUED PATENTS WILL NOT PROVIDE PROTECTION AGAINST
COMPETITORS.
Our ability to compete successfully will depend on whether we can protect our
proprietary technology and manufacturing processes. We rely on a combination of
patent and trade secret protection, non-disclosure agreements, and
cross-licensing agreements. These measures may not be adequate or safeguard the
proprietary technology underlying our batteries. In addition, employees,
consultants, and others who participate in the development of our products may
breach their non-disclosure agreements with us, and we may not have adequate
remedies for any such breach. Moreover, our competitors may be able to develop
products that are equal or superior to our products without infringing on any of
our intellectual property rights. We intend to pursue enforcement and defense of
our patents and our other proprietary rights. We could incur significant
expenses in preserving our proprietary rights and these costs could have a
material adverse effect on our financial condition. In addition, we may not be
able to effectively protect our intellectual property rights outside of the
United States. 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 we may not be able to obtain licenses to such products on reasonable terms,
if at all. Our failure to protect our proprietary technology may materially
adversely affect our financial condition and results of operations. 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.
Therefore, our pending patent applications may not result in issued patents and
any of our issued patents may not afford protection against a competitor.
OUR BATTERIES CONTAIN POTENTIALLY DANGEROUS MATERIALS, WHICH COULD EXPOSE US TO
LIABILITY.
In the event of a short circuit or other physical damage to a battery, a
reaction may result with excess heat or a gas being released and, if not
properly released, may be flammable or potentially even explosive. Our
batteries, based on an earlier (and since abandoned) technology, have smoked,
caught fire and vented gas in the past, and we have attempted to design our
current batteries to reduce this risk; if we are unsuccessful in these efforts,
we could be exposed to product liability litigation. In addition, our batteries
incorporate potentially dangerous materials, including lithium. While we believe
the materials in our batteries are less reactive than other potentially
dangerous
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materials found in other types of batteries, it is possible that these materials
will require special handling. It is possible that safety problems may develop
in the future. We are aware that if the amounts of active materials in our
batteries are not properly balanced and if the charge/discharge system is not
properly managed, a dangerous situation may result. Other battery manufacturers
using technology similar to ours include special safety circuitry within the
battery to prevent such a condition. We expect that our customers will have to
use this type of circuitry.
WE HAVE NOT COMPLETED SAFETY TESTING OUR BATTERIES AND MAY NOT BE ABLE TO MAKE
COMMERCIAL SALES OF OUR BATTERIES UNTIL WE SUCCESSFULLY COMPLETE SUCH TESTS.
We have conducted safety testing of our batteries and have submitted batteries
to Underwriters Laboratories for certification, which is required by many OEMs
prior to placing a purchase order with the Company. We cannot assure you that
Underwriters Laboratories will certify our batteries. 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 and have caught fire. These results were
generally expected, and until we have completed testing we cannot make a
complete determination as to the conditions in which the battery must be
operated. Additionally, each new battery design requires new safety testing.
Therefore, safety problems may develop with respect to our battery technology
that could prevent or delay commercial introduction.
SAFETY RISKS IN OUR FACILITIES COULD DELAY PRODUCTION AND ADVERSELY AFFECT
OPERATIONS.
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 manufacturing delays or claims for damages resulting from injuries,
which would adversely affect our operations and financial condition.
WE DO NOT FULLY CONTROL OUR JOINT VENTURE OPERATIONS, STRATEGIES AND FINANCIAL
DECISIONS AND WE CANNOT ASSURE YOU THAT OUR PRODUCTS WILL BE MARKETED
SUCCESSFULLY THROUGH THESE VENTURES.
We do not control or manage either of our operating joint ventures.
Consequently, we are required to depend on the management of our venture
partners to successfully operate these ventures. There is a risk that our joint
venture partners may have economic, business or legal interests or goals that
conflict with ours or that we may be required to fulfill obligations of our
joint venture partners if they are unable to meet their obligations. Any
significant disagreements with our venture partners could have a material
adverse effect on our ventures. Also, we depend to a significant degree on local
partners in our joint ventures to provide us with regulatory and marketing
expertise and familiarity with the local business environment. Any disruption in
our relationship with these parties could make it more difficult to market our
products in the geographic regions or to the customers to which the joint
venture relates. Also, if these ventures are not successful, they could
significantly damage our reputation, which will make it more difficult to obtain
purchase orders for our batteries.
WE DO NOT HAVE A COLLABORATIVE PARTNER TO ASSIST US IN DEVELOPMENT OF OUR
BATTERIES, WHICH MAY LIMIT OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR
PRODUCTS.
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. The Delphi agreement was for joint development in the automotive
market. Although we have held discussions with
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OEMs in the portable consumer electronics and telecommunications markets about
possible strategic relationships as a means to accelerate introduction of our
batteries into these markets, we may not be able to enter into any such
alliances. The use of alliances for our development, product design, volume
purchase and manufacturing and marketing expertise can reduce the need for
development and use of internal resources. Further, even if we could collaborate
with a desirable partner, there is a chance that the partnership may not be
successful. The success of any strategic alliance that we may enter into depends
on, among other things, the general business condition of the partner, its
commitment to the strategic alliance and the skills and experience of its
employees.
A STRICT REGULATORY ENVIRONMENT MAY DEVELOP WHICH MAY DELAY SHIPMENTS AND IMPOSE
ADDITIONAL COSTS ON US.
At the present time, neither the storage, use or disposal of the component parts
of our batteries nor the transport of our batteries is regulated by federal,
state or local law. However, we expect that laws and regulations may be enacted
in the future which could impose environmental, health and safety controls on
the storage, use, and disposal of certain chemicals and metals used in the
manufacture of lithium polymer batteries as well as regulations governing the
transport of our batteries. Satisfying any future laws or regulations could
require significant time and resources from our technical staff and possible
redesign which may result in substantial expenditures and delays in the
production of our product, all of which could have a material adverse effect on
our business.
THE FAILURE OF OUR KEY SUPPLIERS AND CUSTOMERS TO BE YEAR 2000 COMPLIANT COULD
NEGATIVELY IMPACT OUR BUSINESS.
We use a number of computer software programs and operating systems in our
internal operations, including applications used in financial business systems
and various administration functions. To the extent that these software
applications contain source code that is unable to appropriately interpret the
upcoming calendar year "2000," some level of modification or even possible
replacement of such source code or applications will be necessary. Given our
current information, we currently do not anticipate that such "Year 2000" costs
will have a material impact upon us. We have requested information regarding
"Year 2000" compliance from suppliers and providers of all of our mission
critical software systems. Based on the information we currently have, we
believe that substantially all our mission critical systems are "Year 2000"
ready. We have contacted major vendors to obtain "Year 2000" compliance status
and, to date, substantially all our major vendors have indicated "Year 2000"
readiness. The failure of any of our key suppliers or customers to be "Year
2000" compliant could have a material adverse effect on our business, financial
condition and results of operations. In addition, any power outage in Northern
Ireland could adversely affect our operations at our facility in Northern
Ireland and have a material adverse effect on our manufacturing capabilities and
on our financial condition and results of operations.
POLITICAL INSTABILITY IN NORTHERN IRELAND MAY DELAY PROGRESS IN OUR NORTHERN
IRELAND FACILITY.
Despite the recent peace accord in Northern Ireland, we cannot assure you that
instabilities will not continue in the future. Any political instability in
Northern Ireland could delay our manufacturing of batteries. Any delays could
also cause us to lose sales and marketing opportunities, as potential customers
would find other vendors to meet their needs.
S-11.
<PAGE>
CORPORATE INSIDERS OR AFFILIATES WILL BE ABLE TO EXERCISE SIGNIFICANT CONTROL
OVER MATTERS REQUIRING STOCKHOLDER APPROVAL.
As of December 17, 1999, our officers, directors, and their affiliates as a
group beneficially owned approximately 21.4% of our outstanding common stock. As
a result, these stockholders will be able to exercise significant control over
all matters requiring stockholder approval, including the election of directors
and the approval of significant corporate transactions.
ANTI-TAKEOVER PROVISIONS IN OUR CORPORATE CHARTER OR THOSE WHICH APPLY TO US BY
VIRTUE OF THE APPLICATION OF DELAWARE GENERAL CORPORATION LAW WILL MAKE IT MORE
DIFFICULT FOR A THIRD PARTY TO ACQUIRE A MAJORITY INTEREST OF OUR OUTSTANDING
VOTING STOCK.
Our Board of Directors has the authority to issue up to 50 million shares of
undesignated preferred stock and to determine the price, rights, preferences,
and privileges of those shares without any further vote or action by the
stockholders. As of October 31, 1999, holders of the Series A Preferred Stock
had converted all outstanding shares of the Series A Preferred Stock. The rights
of the holders of our capital stock are subject to the rights of the holders of
the Series B Preferred Stock, 3,500 shares of which currently are outstanding,
and will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. The issuance of
additional shares of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock. In addition, we are subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits us from engaging in
a "business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of Valence. Furthermore, our classified Board of
Directors and certain other provisions of our Certificate of Incorporation may
have the effect of delaying or preventing changes in control or management,
which could adversely affect the market prices of our common stock and Series B
Preferred Stock.
IF THE ISSUANCE OF OUR PREFERRED STOCK VIOLATED THE NASDAQ STOCK MARKET'S
LISTING MAINTENANCE REQUIREMENTS, OR IF WE OTHERWISE FAIL TO CONTINUE TO MEET
THE NASDAQ STOCK MARKET'S LISTING MAINTENANCE REQUIREMENTS, THE NASDAQ STOCK
MARKET MAY DELIST OUR COMMON STOCK.
In late January 1999, The Nasdaq Stock Market released its guidance on "future
priced securities" and the necessity of the issuer to comply with The Nasdaq
Stock Market's listing maintenance requirements in issuing these securities. In
the event that The Nasdaq Stock Market determined that the issuance of our
Series A Preferred Stock and/or Series B Preferred Stock was in violation of
these listing maintenance requirements, or if we are otherwise unable to
continue to meet its listing maintenance requirements, The Nasdaq Stock Market
might delist us. Delisting would have a material adverse effect on the price of
our common stock and on the levels of liquidity currently available to our
stockholders. We may not be able to satisfy these listing requirements on an
ongoing basis.
CONVERSION OF PREFERRED STOCK AND SALES OF COMMON STOCK BY CC INVESTMENTS MAY
DEPRESS THE PRICE OF OUR COMMON STOCK AND SUBSTANTIALLY DILUTE YOUR STOCK.
If CC Investments, a 4.9% stockholder of Valence, were to exercise all of the
warrants it holds and convert all of the shares of preferred stock it owns, as
of December 17, 1999 it would have acquired
S-12.
<PAGE>
approximately 1,510,684 shares of our common stock. The number of shares into
which the preferred stock converts increases at 6% per year. If CC Investments
exercises the warrants or converts its preferred stock into shares of our common
stock and sells the shares into the market, such sales could have a negative
effect on the market price of our common stock and would dilute your holdings in
our common stock. Additionally, dilution or the potential for dilution could
materially impair our ability to raise capital through the future sale of equity
securities.
VARIABLE CONVERSION OF SERIES B PREFERRED STOCK.
CC Investments holds all of our outstanding Series B Preferred Stock. The
conversion price of our Series B Preferred Stock is variable and may depress the
price of our common stock and substantially dilute your stock. Since July 27,
1999, our Series B Preferred Stock is convertible into a larger amount of shares
when our common stock trades at a price below $6.03 in six out of ten
consecutive trading days. For example, if on December 17, 1999 our common stock
in the previous ten trading days had been trading at or above $6.03, the
remaining 3,500 shares of Series B Preferred Stock held by CC Investments would
have been convertible into approximately 615,162 shares of our common stock. If,
however, on that date the average of the lowest six closing bid prices of our
common stock over the previous ten trading days (referred in the table below as
the "average price") had been lower than $6.03, then the Series B Preferred
Stock would have converted into a greater number of shares.
The following table illustrates this effect:
<TABLE>
<CAPTION>
NUMBER OF SHARES INTO WHICH
3,500 SHARES OF SERIES B PREFERRED
AVERAGE PRICE WOULD CONVERT
If our common stock trades at a
price below $6.03 in six out of ten
consecutive trading days
<S> <C>
$6.03...................... 615,162
$5.00...................... 741,885
$4.00...................... 927,356
$3.00...................... 1,236,475
</TABLE>
The effect of this variable conversion rate, if applicable, will be to depress
further the market price of our common stock and to dilute further stockholder
holdings in our common stock.
OUR STOCK PRICE IS VOLATILE.
The market price of the shares of our common stock has been and is likely to
continue to be highly volatile. Factors such as the fluctuation in our operating
results, announcements of technological innovations or new commercial products
by us or our competitors, failure to achieve operating results projected by
securities analysts, governmental regulation, developments in our patent or
other proprietary rights or our competitors' developments, our relationships
with current or future collaborative partners, and general market conditions may
have a significant effect on the market price of our common stock. We do not
pay, or expect to pay, dividends to the holders of our common stock. We have
never paid any cash dividends and do not anticipate paying cash dividends on our
common stock in the foreseeable future.
S-13.
<PAGE>
YOU MAY EXPERIENCE DILUTION.
The offering of shares of common stock in connection with the Offering may
result in an adjustment to the exercise or conversion price of certain warrants
and other convertible securities. If an adjustment is made, you will experience
dilution.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this prospectus supplement and in the prospectus
contains forward-looking statements that involve risks and uncertainties. Those
statements include words such as "anticipate," "believe," "estimate," "project,"
"intend," and similar expressions, which we have used to identify these
statements as forward-looking statements. These statements appear throughout
this prospectus supplement and 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, including under "Risk Factors," and in the documents
incorporated by reference in this prospectus supplement and in the prospectus.
DIVIDEND POLICY
Valence has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future. The terms of our
Series B Preferred Stock prohibit the payment of cash dividends without the
prior consent of the holder.
USE OF PROCEEDS
The net proceeds to us from this Offering will be $30,360,000. We plan to
use the net proceeds for general corporate purposes, including:
- acquiring raw materials and building inventory of finished goods;
- financing capital expenditures; and
- working capital.
Pending use of the net proceeds for any of these purposes, we may invest
the net proceeds in short-term investment grade instruments, interest-bearing
bank accounts, certificates of deposit, money market securities, U.S. government
securities or mortgage-backed securities guaranteed by federal agencies. See
also discussion herein at page S-3, "Risk Factors: We have an immediate need for
additional capital," and page S-4, "Risk Factors: Our current available capital
and future revenues, if any will not be sufficient to meet our future operating
needs." In addition, we have covenanted to use the proceeds from this Offering
consistent with the terms of an agreement between the Company and the investor.
S-14.
<PAGE>
PRICE RANGE OF COMMON STOCK
Since May 7, 1992, our common stock 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 our common stock on the Nasdaq National Market
follows:
<TABLE>
<CAPTION>
FISCAL 1998 HIGH LOW
- ----------------------------------------------- ---- ---
<S> <C> <C>
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 ended December 27, 1998 10-7/8 4-1/8
Quarter ended March 28, 1999 8-9/16 6-1/8
FISCAL 2000
Quarter ended June 27, 1999 8-7/16 6-1/2
Quarter ended September 26, 1999 7-3/8 4-3/8
Quarter ending December 26, 1999 (through 18-1/4 4-17/32
December 17, 1999)
</TABLE>
On December 17, 1999, the last reported sales price of our common shares
on the Nasdaq National Market was $16.75 per share.
As of December 17, 1999, and before the issuance of shares pursuant to
this prospectus supplement, we have 32,449,837 shares of common stock
outstanding.
The approximate number of record holders of our common stock as of
December 17, 1999, was 734.
PLAN OF DISTRIBUTION
We are selling the shares being offered hereby directly to one investor.
In connection with this sale, we are paying a fee to CIBC World Markets Corp. in
the amount of approximately $1,600,000, in consideration of its services as a
finder in connection with the sale. In addition, we have agreed to reimburse
CIBC World Markets Corp. for its expenses, including expenses of its counsel, in
an amount not to exceed $40,000. CIBC World Markets Corp. may be deemed to be an
underwriter as defined in the Securities Act in connection with the placement of
the shares.
The Company has agreed to indemnify CIBC World Markets Corp. against
certain liabilities, including liabilities under the Securities Act.
S-15.
<PAGE>
We estimate that the total expenses of the Offering, including the
finder's fee and legal and accounting fees, will be approximately $1,670,000.
LEGAL MATTERS
The validity of the shares of our common stock offered by this prospectus
has been passed upon for Valence by Cooley Godward LLP, Palo Alto, California.
Pillsbury Madison & Sutro LLP, Palo Alto, California, is acting as counsel for
the placement agent in connection with selected legal matters relating to the
shares of common stock offered by this prospectus supplement and the
accompanying prospectus.
EXPERTS
The financial statements as of March 28, 1999 and March 29, 1998 and for
the period from March 3, 1989 (date of inception) to March 28, 1999 and for each
of the three years in the period ending March 28, 1999 incorporated by reference
in this prospectus have been so incorporated in reliance on the report (which
includes an explanatory paragraph regarding substantial doubt about Valence's
ability to continue as a going concern) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND 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 28, 1999, filed
June 28, 1999;
- - Current Report on Form 8-K, dated June 30, 1999 and filed July 6, 1999;
- - Current Report on Form 8-K, dated August 2, 1999 and filed August 5,
1999;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended June 27,
1999, filed August 11, 1999;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended September
26, 1999, filed November 10, 1999;
S-16.
<PAGE>
- - Amendment to Quarterly Report on Form 10-Q, for the fiscal quarter
ended June 27, 1999, filed November 15, 1999; 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.
ATTENTION: JAY L. KING, CHIEF FINANCIAL OFFICER
301 CONESTOGA WAY, HENDERSON, NV 89015
TEL -- (702) 558-1000; EMAIL -- [email protected]
This prospectus supplement 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. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.
S-17.
<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
SUPPLEMENT OR PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY VALENCE.
THIS PROSPECTUS SUPPLEMENT OR 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 BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, 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 SUPPLEMENT OR PROSPECTUS NOR ANY SALE MADE UNDER
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF VALENCE SINCE THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR IMPLY THAT INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------------
<PAGE>
VALENCE TECHNOLOGY, INC.
BY THIS PROSPECTUS, WE MAY OFFER UP TO $50,000,000 OF OUR
COMMON STOCK
PREFERRED STOCK
WARRANTS
Our common stock is listed on the Nasdaq National Market under the symbol
"VLNC." On May 10, 1999 the closing sale price of a share of our common stock,
as reported on the Nasdaq National Market, was $7.09.
The securities 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.
---------------------------
We will provide the specific terms of the securities offered in a
supplement to this Prospectus. You should read this Prospectus and the
supplements carefully before you invest.
---------------------------
This investment involves a high degree of risk. See "Risk Factors" in the
supplement to this prospectus.
---------------------------
We may offer the securities directly or through underwriters, agents or
dealers. The supplement will describe the terms of that plan of distribution.
"Plan of Distribution" below also provides more Information on this topic.
THE DATE OF THIS PROSPECTUS IS MAY 12, 1999.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
About this Prospectus...................................2
Where You Can Get More Information......................2
About Valence...........................................4
Risk Factors............................................5
Use of Proceeds.........................................5
General Description of Securities.......................5
Description of Preferred Stock..........................5
Description of Common Stock.............................6
Description of Warrants.................................7
Plan of Distribution....................................8
Legal Matters...........................................9
Experts.................................................9
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
from time to time offer up to $50,000,000 in the aggregate of (a) shares of
common stock, $0.001 par value per share, of Valence, (b) shares of preferred
stock, $0.001 par value per share, of Valence, in one or more series, (c)
warrants to purchase shares of common stock or preferred stock or (d) any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each at prices and on terms to be determined at the
time of sale. The common stock, preferred stock and warrants are collectively
referred to herein as "securities." The securities offered pursuant to this
prospectus may be issued in one or more series of issuances and the aggregate
offering price of the securities will not exceed $50,000,000 (or its equivalent
(based on the applicable exchange rate at the time of the sale) in one or more
foreign currencies, currency units or composite currencies as shall be
designated by Valence).
Each time we offer these securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering.
The registration statement that contains this prospectus (including
exhibits to the registration statement) contains additional information about
our company and the securities offered under this prospectus. The registration
statement can be read at the SEC web site or at the SEC offices mentioned under
the heading "Where You Can Get More Information." This prospectus may not be
used to consummate sales of Securities unless accompanied by a prospectus
supplement.
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
2.
<PAGE>
"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;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended December 27,
1998, filed February 10, 1999;
- - Quarterly Report on Form 10-Q/A, for the fiscal quarter ended September 27,
1998, filed February 24, 1999; and
- - Current Report on Form 8-K, dated May 5, 1999 and filed May 5, 1999; 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. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
3.
<PAGE>
ABOUT VALENCE
OUR BUSINESS
We are engaged in research and development to produce advanced
rechargeable batteries based upon specialized technologies, which are referred
to in the industry as lithium ion and polymer technologies. Our objective is to
become a leading provider of rechargeable batteries. In July 1995, we announced
that we obtained a license to a related specialized 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 presently
have no products available for sale. 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 not achieve market acceptance. See "Risk Factors."
4.
<PAGE>
RISK FACTORS
An investment in our securities involves a high degree of risk. You should
carefully consider the information contained under the heading "Risk Factors" in
the applicable supplement to this prospectus before investing in our securities.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, the
net proceeds from the sale of securities offered hereby will be used for general
corporate purposes. We expect from time to time to evaluate the acquisition of
products, businesses and technologies for which a portion of the net proceeds
may be used. Currently, however, we do not have any understandings, commitments
or agreements with respect to any material acquisitions for which a portion of
the net proceeds may be used.
GENERAL DESCRIPTION OF SECURITIES
We may offer under this prospectus shares of common stock, shares of
preferred stock, warrants to purchase common stock or preferred stock or any
combination of the foregoing, either individually or as units consisting of one
or more securities. The aggregate offering price of securities offered by us
under this prospectus will not exceed $50,000,000. If securities are offered as
units, the terms of the units will be set forth in a prospectus supplement.
Certain of the securities to be offered hereby involve a high degree of risk.
Such risks will be set forth in the prospectus supplement relating to such
security.
DESCRIPTION OF PREFERRED STOCK
GENERAL
Our Amended and Restated Certificate of Incorporation, as amended,
authorize the board of directors of Valence, without further shareholder action,
to provide for the issuance of up to 10,000,000 shares of preferred stock, in
one or more series, and to fix the designations, terms, and relative rights and
preferences, including the dividend rate, voting rights, conversion rights,
redemption and sinking fund provisions and liquidation values of each of these
series. We may amend from time to time our restated certificate to increase the
number of authorized shares of preferred stock. Any amendment like this would
require the approval of the holders of a majority of the common stock, without a
vote of the holders of preferred stock or any series thereof unless a vote of
any such holder is required pursuant to the restated certificate or certificates
of designations establishing a series of preferred stock. As of the date of this
prospectus, we have 15,000 shares of preferred stock outstanding, 7,500 shares
of which are Series A Preferred Stock and 7,500 shares of which are Series B
Preferred Stock.
The particular terms of any series of preferred stock being offered by us
under this shelf registration will be described in the prospectus supplement
relating to that series of preferred stock. Those terms may include:
- the title and liquidation preference per share of the preferred stock
and the number of shares offered;
- the purchase price of the preferred stock;
5.
<PAGE>
- the dividend rate (or method of calculation), the dates on which
dividends will be paid and the date from which dividends will begin to
accumulate;
- any redemption or sinking fund provisions of the preferred stock;
- any conversion provisions of the preferred stock;
- the voting rights, if any, of the preferred stock; and
- any additional dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions of the
preferred stock.
If the terms of any series of preferred stock being offered differ from
the terms set forth in this prospectus, those terms will also be disclosed in
the prospectus supplement relating to that series of preferred stock. The
summary in this prospectus is not complete. You should refer to our restated
certificate establishing a particular series of preferred stock, which will be
filed with the Secretary of State of Delaware and the SEC in connection with the
offering of the preferred stock.
The preferred stock will, when issued, be fully paid and nonassessable.
The preferred stock will bear no dividends.
DIVIDEND RIGHTS
The preferred stock will be preferred over the common stock as to payment
of dividends. Before any dividends or distributions (other than dividends or
distributions payable in common stock) on the common stock shall be declared and
set apart for payment or paid, the holders of shares of each series of preferred
stock will be entitled to receive dividends when, as and if declared by the
board of directors of Valence. We will pay those dividends either in cash,
shares of common stock or preferred stock or otherwise, at the rate and on the
date or dates set forth in the prospectus supplement. With respect to each
series of preferred stock, the dividends on each share of the series will be
cumulative from the date of issue of the share unless some other date is set
forth in the prospectus supplement relating to the series. Accruals of dividends
will not bear interest.
RIGHTS UPON LIQUIDATION
The preferred stock will be preferred over the common stock as to assets
so that the holders of each series of preferred stock will be entitled to be
paid, upon our voluntary or involuntary liquidation, dissolution or winding up
and before any distribution is made to the holders of common stock, the amount
set forth in the applicable prospectus supplement. However, in this case the
holders of preferred stock will not be entitled to any other or further payment
unless otherwise specified in the applicable prospectus supplement. If upon any
liquidation, dissolution or winding up our net assets are insufficient to permit
the payment in full of the respective amounts to which the holders of all
outstanding preferred stock are entitled, our entire remaining net assets and
funds legally available for distribution to the preferred stock shall be
distributed ratably among such shares in proportion to the ratio that the
liquidation preference payable on each such share bears to the aggregate
liquidation preference payable on all such shares.
6.
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REDEMPTION
All shares of any series of preferred stock will be redeemable to the
extent set forth in the prospectus supplement relating to the series. All shares
of any series of preferred stock will be convertible into shares of common stock
or into shares of any other series of preferred stock to the extent set forth in
the applicable prospectus supplement.
VOTING RIGHTS
Except as indicated in the prospectus supplement, the holders of preferred
stock shall have no voting power whatsoever except as provided by law.
DESCRIPTION OF COMMON STOCK
As of the date of this prospectus, we are authorized to issue up to
50,000,000 shares of common stock of which 7,000,000 shares are reserved solely
for the purpose of effecting the conversion of the preferred stock. As of May
10, 1999, we had 26,736,292 shares of common stock issued and outstanding and
had reserved 8,250,000 additional shares of common stock for issuance under our
various stock and compensation incentive plans.
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DIVIDENDS
The holders of common stock are entitled to receive dividends when, as and
if declared by the board of directors of Valence, out of funds legally available
for their payment.
VOTING RIGHTS
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders.
RIGHTS UPON LIQUIDATION
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of common stock will be entitled to share equally in any
of our assets available for distribution after the payment in full of all debts
and distributions and after the holders of all series of outstanding preferred
stock have received their liquidation preferences in full.
MISCELLANEOUS
The outstanding shares of common stock are fully paid and nonassessable.
The holders of common stock are not entitled to preemptive or redemption rights.
Shares of common stock are not convertible into shares of any other class of
capital stock. Boston EquiServe is the transfer agent and registrar for our
common stock.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred stock or common stock.
Warrants may be issued independently or together with preferred stock or common
stock and may be attached to or separate from any offered securities. Each
series of warrants will be issued under a separate warrant agreement to be
entered into between us and a bank or trust company, as warrant agent. The
warrant agent will act solely as our agent in connection with the warrants and
will not assume any obligation or relationship of agency or trust for or with
any registered holders of warrants or beneficial owners of warrants. This
summary of some provisions of the warrants is not complete. You should refer to
the warrant agreement, including the forms of warrant certificate representing
the warrants, relating to the specific warrants being offered for the complete
terms of the warrant agreement and the warrants. That warrant agreement,
together with the terms of warrant certificate and warrants, will be filed with
the SEC in connection with the offering of the specific warrants.
The particular terms of any issue of warrants will be described in the
prospectus supplement relating to the issue. Those terms may include:
- - the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights) of
the series of preferred stock purchasable upon exercise of warrants to
purchase shares of preferred stock and the price at which such number of
shares of preferred stock of such series may be purchased upon such
exercise;
- - the number of shares of common stock purchasable upon the exercise of
warrants to purchase shares of common stock and the price at which such
number of shares of common stock may be purchased upon such exercise;
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- - the date on which the right to exercise the warrants will commence and the
date on which the right will expire;
- - United States Federal income tax consequences applicable to the warrants;
and
- - any other terms of the warrants.
Warrants for the purchase of preferred stock and common stock will be
offered and exercisable for U.S. dollars only. Warrants will be issued in
registered form only. The exercise price for warrants will be subject to
adjustment in accordance with the applicable prospectus supplement.
Each warrant will entitle its holder to purchase the number of shares of
preferred stock or common stock at the exercise price set forth in, or
calculable as set forth in, the applicable prospectus supplement. The exercise
price may be adjusted upon the occurrence of certain events as set forth in the
prospectus supplement. After the close of business on the expiration date,
unexercised warrants will become void. We will specify the place or places
where, and the manner in which, warrants may be exercised in the applicable
prospectus supplement.
Prior to the exercise of any warrants to purchase preferred stock or
common stock, holders of the warrants will not have any of the rights of holders
of the preferred stock or common stock purchasable upon exercise, including the
right to vote or to receive any payments of dividends on the preferred stock or
common stock purchasable upon exercise.
PLAN OF DISTRIBUTION
We may sell the securities through underwriters, agents or dealers or
directly to purchasers. A prospectus supplement will set forth the terms of each
specific offering, including the name or names of any underwriters or agents,
the purchase price of the securities and the proceeds to us from such sales, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
prospectus supplement. Unless otherwise set forth in the prospectus supplement,
the underwriters will be obligated to purchase all the securities if any are
purchased.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters also may impose a penalty bid, under which selling concessions
allowed to syndicate members or other broker-dealers for the securities they
sell for their account may be reclaimed by the syndicate if the syndicate
repurchases the securities in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
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securities then offered, which may be higher than the price that might otherwise
prevail in the open market, and, if commenced, may be discontinued at any time.
We may sell the securities directly or through agents we designate from
time to time. Any agent involved in the offer or sale of the securities covered
by this prospectus will be named, and any commissions payable by us to an agent
will be set forth, in a prospectus supplement relating thereto. Unless otherwise
indicated in a prospectus supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If dealers are used in any of the sales of securities covered by this
prospectus, we will sell those securities to dealers as principals. The dealers
may then resell the securities to the public at varying prices the dealers
determine at the time of resale. The names of the dealers and the terms of the
transactions will be set forth in a prospectus supplement.
We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act
with respect to any sale thereof. The terms of any such sales will be described
in a prospectus supplement.
If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. These contracts will be
subject only to those conditions set forth in the prospectus supplement, and the
prospectus supplement will set forth the commission payable for solicitation of
such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with us to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services on our behalf.
LEGAL MATTERS
The validity of any securities offered by this prospectus or any
supplement 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, stockholders' 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 prospectus, have been
incorporated in the reliance on the report, which includes an explanatory
paragraph regarding Valence'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.
The balance sheet as of March 31, 1998, and the statements of operations
and accumulated deficit and cash flows for the year ended March 31, 1998, and
incorporated by reference in this prospectus, have been incorporated in the
reliance on the report, which includes an explanatory paragraph regarding Hanil
Valence Co., Ltd.'s ability to continue as a going concern, of Samil
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Accounting Corporation, independent accountants, given on the authority of that
firm as experts in accounting and auditing.
