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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 1999
REGISTRATION NO. 333-69309
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
VALENCE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 77-0214673
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) No.)
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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.
--------------------------
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Stock $.001 par value................ 4,535,261 shares $8.625 $39,116,626 $10,875
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(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. The Registration Statement does not cover an indeterminate
number of shares due to floating conversion prices.
(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 (MARCH 15, 1999)
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PROSPECTUS
VALENCE TECHNOLOGY, INC.
1,790,083 SHARES
COMMON STOCK
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THE SELLING CC Investments, LDC is selling 1,702,583 shares of Valence common
STOCKHOLDERS: stock issuable to CC Investments upon the conversion of preferred
stock and exercise of a warrant issued to CC Investments in a
private financing.
Gemini Capital, L.L.C. is selling 87,500 shares of Valence common
stock issuable to Gemini Capital upon the exercise of a warrant
issued to Gemini Capital in connection with the private
financing.
Valence is not selling any shares of its common stock under this
prospectus, and will not receive any of the proceeds from the
sales by CC Investments and Gemini Capital.
OFFERING PRICE: CC Investments and Gemini Capital may sell the shares of Valence
common stock they are offering in a number of different ways and
at varying prices. We provide more information about how they may
sell their shares of Valence common stock in the section titled
"Plan of Distribution."
TRADING MARKET: Our common stock is listed on the Nasdaq National Market under
the symbol "VLNC." On March 11, 1999, the closing sale price
of a share of our common stock, as reported on the Nasdaq
National Market, was $7.00.
RISKS: Investing in Valence common stock involves a high degree of risk.
See "Risk Factors."
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The shares of Valence common stock 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 DATE OF THIS PROSPECTUS IS , 1999.
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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 currently located at 301 Conestoga Way,
Henderson, Nevada 89015 and the telephone number is (702) 558-1000.
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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 have derived
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. 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."
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Our Recent Financing......... In July 1998 and December 1998, we raised a total of
$17,500,000 in a debt and equity financing, which ultimately
may raise up to $25,000,000. The financing comprised:
-- the sale, for $15,000,000, of 7,500 shares of our Series
A Preferred Stock, 7,500 shares of our Series B Preferred
Stock and warrants to purchase 895,522 shares of our
common stock, to CC Investments, an institutional
investor, and
-- a loan of $2,500,000 from Baccarat Electronics, an
affiliate of a director of Valence.
Baccarat's loan agreement with Valence for an additional
$7,500,000 remains in place. We issued to Baccarat in
connection with the draw down of the $2,500,000 loan to us a
warrant to purchase 149,254 shares of our common stock. We
will issue additional warrants to Baccarat in the amount of
447,761 shares of our common stock multiplied by the
fraction equal to the dollar amount of additional loans
actually made to us divided by $7,500,000.
In connection with the financing, we issued to Gemini
Capital, the placement agent in the financing, as a portion
of its compensation warrants to purchase 175,000 shares of
our common stock. See "Additional Information--Our Recent
Financing" for more details on the terms of this financing.
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK 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 OUR COMMON STOCK
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We Are A Development Stage Company
With No 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 solely from a
research and development contract with Delphi Automotive
Systems Group, which we completed in May 1998. We
presently have no products available for sale, although
we have developed working prototypes of our batteries.
These factors raise substantial doubt 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, and such adjustments,
if necessary, could be substantial.
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
$145,264,000 as of December 27, 1998, the end of our
third 1999 fiscal quarter. We cannot assure you that we
will ever achieve or sustain significant revenues or
profitability in the future. We have negative working
capital and have sustained recurring losses related
primarily to the development and marketing of our
products. We will need to secure additional financing in
order to continue operations past 1999 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 Capital, 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. Although we have implemented certain capital
equipment reductions and are actively pursuing capital
grant advances from the Northern Ireland Industrial
Development Board, such advances are contingent on us
achieving cumulative revenues from the sale of batteries
of $4 million. We may not achieve such cumulative
revenue 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
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 have a material adverse effect on our
business, financial condition and results of operations.
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 were to exercise all of the warrants
it holds and convert all of the shares of preferred
stock it owns, as of February 10, 1999 it would have
acquired approximately 3,434,608 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 our
preferred stock into shares of 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 will 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.
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POSSIBLE VARIABLE CONVERSION OF SERIES B PREFERRED
STOCK. After July 27, 1998, the Series B Preferred
Stock may become convertible into more shares than
otherwise if our common stock trades at a price below
$6.03 in six out of ten consecutive trading days. For
example, if on July 28, 1999 our common stock in the
previous ten trading days had been trading at or above
$6.03, the 7,500 shares of Series B Preferred Stock
would be convertible into approximately 1,289,000 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 a lower price, then the Series B Preferred Stock
would have converted into a greater number of shares.
The following table illustrates this effect:
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<CAPTION>
NUMBER OF SHARES INTO WHICH THE 7,500 SHARES OF
AVERAGE PRICE SERIES B PREFERRED WOULD CONVERT
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<S> <C> <C>
$ 6.03 1,288,966
$ 5.00 1,539,102
$ 4.00 1,923,878
$ 3.00 2,565,170
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The effect of this variable conversion rate, if it
becomes applicable, will be to depress further the
market price of our common stock and to dilute further
your holdings in our common stock. See "Additional
Information--Our Recent Financing."
We No Longer 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. Although we have held discussions with original
equipment manufacturers (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 cannot assure you that we will be able to
enter into any such alliances. We must rely on alliances
for our development, product design, volume purchase and
manufacturing and marketing expertise.
There is a risk that even if we could collaborate with a
desirable partner, the partnership may not be
successful. The success of any strategic alliance is
dependent upon, among other things, the general business
condition of the partner, its commitment to the
strategic alliance and the skills and experience of its
employees.
Because Our Batteries Are Only Sold
When Incorporated Into Other
Products, We Will Need To Rely
On Original Equipment
Manufacturers To Commercialize
Our Products.................... To be successful, our batteries must gain broad market
acceptance. We must configure our 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 we 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, an element used in our
batteries, will impede acceptance of our batteries by
OEMs or end users.
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We Do Not Yet Have The Sales
Staff, Support Capabilities And
Distribution Channels To
Distribute Our Products On A
Commercial Scale................ To implement our strategy successfully, we will have to
develop a sizeable sales staff and product support
capabilities, as well as third party and direct
distribution channels. We cannot assure you that we will
be able to establish sales and product support
capabilities, or be successful in our sales and
marketing efforts.
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. Even if our current research and development
activities result in the design of batteries with
commercially desirable characteristics, we will still
have to be able to competitively manufacture these
batteries. Our current manufacturing technology must be
further developed before we will be able to manufacture
our batteries in commercial quantities. See "Additional
Information--Status of Our Facilities."
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 production
equipment, due to unforeseen problems. As most of the
production equipment is being specially manufactured for
us, further unforeseen problems may develop and cause
further delay in our current schedules. We are improving
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 improved
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. To date, we have not
provided any such commercial product to any potential
customer, and therefore, have not started any product
qualification period.
If We Sell Our Batteries In
Commercial Quantities And They
Do Not Perform As Expected, Our
Reputation Could Be Damaged..... If we do manufacture our batteries in commercial
quantities and they fail to perform as expected, our
reputation could be severely damaged, which would have a
material adverse effect on our ability to market our
batteries even if the defect were corrected.
Political Instability In Northern
Ireland May Delay Progress In
Our Northern Ireland Facility... The current political instability in Northern Ireland,
which to date has had no negative impact on our
manufacturing plant, could cause delays in completing
our manufacturing capability or in manufacturing our
batteries. Such delays could cause us to miss
significant sales and marketing opportunities, as such
delays will force our potential customers to find other
vendors to meet their needs.
Our Competitors May Develop
Batteries Similar Or Superior To
Ours Or Otherwise Compete More
Successfully Than We Do......... 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.
Although we believe that our batteries will compete in
most segments of the rechargeable battery market, there
is a risk that other companies may develop batteries
similar or superior to our batteries. In addition, in
the rechargeable battery market there are a variety of
competing
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technologies. The capabilities of many of
these competing technologies have
improved over the past year, which has
resulted in a customer perception that
our technology may not offer as many
advantages as previously anticipated. See
"Additional Information--Competition in
the Battery Industry."
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............ 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. Nevertheless,
such 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, notwithstanding our efforts to protect our
intellectual property, 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. In addition, we may not be able to
effectively protect our intellectual property rights in
certain countries. 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,
or 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 Material, Which Could
Expose Us To Liability.......... Battery technologies vary in relative safety as a result
of their differing chemical compositions. Most battery
technologies incorporate a liquid that, if leaked, may
be dangerous. In addition, in the event of a short
circuit or other physical damage to the battery, the
liquid 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. We have designed
our batteries to avoid this risk, but if we are
unsuccessful, we could be exposed to product liability
litigation.
Our products will incorporate potentially dangerous
materials, including lithium ions. While these materials
are less reactive than other potentially dangerous
materials found in other types of batteries such as
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. 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 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
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condition. We expect that our customers will have
to use such circuitry.
We Have Not Completed Safety
Testing Our Batteries And
Will Not Be Able To
Commercially Sell Our
Batteries Until We
Successfully Complete The
Safety Tests.................... 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 batteries using other 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 and have caught fire. Such results were
generally expected, and until we have completed
testing we cannot make a valid 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 would prevent commercial
introduction.
Safety Risks In Our Facilities
Could Create Delays............. We incorporate safety policies designed to minimize
safety risks in our research and development activities and
will do so in our manufacturing processes. There is a risk,
however, 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 resulting from injuries, which would adversely
affect our operations and financial condition.
The Strict Regulatory Environment
In Which We Operate May Delay
Shipments And Impose Additional
Costs On Us..................... Prior to the commercial introduction of our batteries
into a number of markets, we may need to seek approval
of our products by one or more of the organizations
engaged in testing product safety and/or agencies
regulating transportation. There is a risk that such
agencies would not permit our batteries to be shipped or
used by the general public, and that changes in
regulations, or in their enforcement, will impose costly
requirements or otherwise impede the transport of
lithium. If we are able to obtain such approvals, they
could require significant time and resources from our
technical staff and delays in shipments and, if redesign
were necessary, could result in further delays in the
introduction of our products. Because of the risks
generally associated with the use of lithium, we expect
rigorous enforcement.
Federal, state and local regulations impose various
environmental and health and safety 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 environmental regulations will impose
costly equipment or other requirements. Any failure by
us to adequately control the discharge of hazardous
wastes could also subject us to future liabilities. See
"Additional Information--Governmental Regulation."
We Are Involved In Lawsuits Which
Could Negatively Impact Our
Business........................ We are subject to litigation arising from time to time
in the course of 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
our violation of federal securities laws and
seeking unspecified damages. The second involves a
claim by a manufacturer of one of our pieces of
manufacturing equipment that we owe it approximately
$2,500,000, and in which we have filed a
counterclaim
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against the manufacturer seeking damages to be
determined at trial. The third is a contract claim
we instituted against several parties, in which one
party filed a counterclaim against us others
claiming damages of approximately $900,000 based on
breach of a contract, and which is presently stayed
pending settlement discussions. These lawsuits are
more fully described in "Additional
Information--Legal Proceedings." Although we
believe that we have meritorious defenses to these
suits, if any of them is resolved unfavorably to us
it could have a material adverse effect on our
financial condition.
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 the 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 and have obtained some responses. Based on the
information we currently have, all mission critical
systems appear to be "Year 2000" compliant. We are
currently contacting major vendors and customers to
obtain "Year 2000" compliance certificates. 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.
If The Issuance Of Our Preferred
Stock Was In Violation Of
Nasdaq's Listing Maintenance
Requirements, Or We Otherwise
Fail To Continue To Meet
Nasdaq's Listing Maintenance
Requirements, Nasdaq May Delist
Our Common Stock................ In late January 1999, Nasdaq released its guidance on
"future priced securities" and the necessity of the
issuer to comply with Nasdaq's listing maintenance
requirements in issuing these securities. We believe
that the issuances of our Series A Preferred Stock and
Series B Preferred Stock do not violate these criteria,
and that we are in compliance with Nasdaq's listing
maintenance criteria. However, in the event that Nasdaq
were to determine that the issuance of our Series A
Preferred Stock and/or Series B Preferred Stock was in
violation of the Nasdaq listing maintenance
requirements, or if we are otherwise unable to continue
to meet Nasdaq's listing maintenance requirements,
Nasdaq may delist us. Such delisting could 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
requirements on an ongoing basis.
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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, including under "Risk Factors," and in the documents
incorporated by reference in this prospectus.
ADDITIONAL INFORMATION
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 our common stock, to CC
Investments, an institutional investor, and
-- a loan of $2,500,000 from Baccarat Electronics, an affiliate of a
director of Valence.
In December 1998, CC Investments 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 our common stock.
Baccarat's loan agreement with Valence for an additional $7,500,000 remains
in place. We issued to Baccarat in connection with the draw down of the
$2,500,000 loan to us a warrant to purchase 149,254 shares of our common stock.
We will issue additional warrants to Baccarat in the amount of 447,761 shares of
our common stock multiplied by the fraction equal to the dollar amount of
additional loans actually made to us divided by $7,500,000.
In connection with the July portion of the financing, we issued to Gemini
Capital, 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 to Gemini Capital in connection with the December portion of the
financing.
The following are the conversion rates for the preferred stock:
- Each share of Series A Preferred Stock is convertible into a number of
shares of our 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 our 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 of the Series B Preferred Stock
will be the lower of $6.03 and 101% of the average of the six (6) lowest of the
closing bid prices of our common stock for a period of 10 consecutive trading
days ending on the trading day immediately preceding the conversion date.
Therefore, from and
10
<PAGE>
after July 28, 1999, if our common stock trades below $6.03, the number or
shares into which the Series B Preferred Stock converts will increase as the
market price of our common stock decreases.
Except with respect to certain redemption rights of us for the Series A
Preferred Stock and Series B Preferred Stock, there is no cap on the number of
shares of our common stock that we may issue. In addition, the number of shares
of our 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, which are incorporated by reference in this prospectus.
STATUS OF OUR FACILITIES
At 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. However, further development of manufacturing technology may be
delayed pending further research and development activities by us and others.
In September 1993, we signed an agreement to open an automated manufacturing
plant in Mallusk, Northern Ireland. We, with our equipment suppliers, have
designed and constructed a high volume, automated assembly and packaging lines
for the Northern Ireland facility. However, we designed our high volume
manufacturing equipment specifically for use with our previous battery
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 such redesign and
modifications may not work or be cost effective. If we cannot effectively
redesign and modify all or some of the equipment in Northern Ireland, we will
have to acquire 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.
COMPETITION IN THE BATTERY INDUSTRY
In the rechargeable battery market, the there are a number of competitive
technologies currently marketed. The capabilities of many of these competing
technologies have improved over the past year, which has resulted in a customer
perception that our technology may not offer as many advantages as previously
anticipated. Most of our competitors produce multiple battery products using one
or more of these technologies, and some have joint ventures with other entities
to produce additional battery products. Our potential major battery competitors
include:
- Sanyo Electric Co., Ltd.;
- Matsushita Industrial Co., Ltd.;
- Delphi Automated Systems Group;
- Johnson Controls;
- Eveready;
- Toshiba;
- Sony; and
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<PAGE>
- RayOVac.
One type of specialized battery technology, referred to as liquid
electrolyte lithium ion, offers significant advantages in energy density and
cycle life over the principal rechargeable battery technologies currently in use
and we expect it to be the emerging technology most competitive to our
technology. Sony or other manufacturers are offering batteries using this
technology 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 their 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
technology similar to technology that we are researching and have. 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 batteries similar and competitive to
ours, and had announced plans to begin commercial shipments in 1998. Ultralife
announced in December 1998 that it has entered into a venture with PGT Energy
Corp. for the manufacture of polymer rechargeable batteries in Taiwan. We
believe that other research and development activities on lithium polymer
batteries are taking place at W. R. Grace & Co., 3M, Battery Engineering Inc.
and Ray O Vac in the U.S. and at other companies in Japan, Malaysia, Korea and
Canada. Major battery competitor announcements include the following:
- Thomas and Betts announced in December 1998 the shipment of polymer
rechargeable batteries to a telecommunications company in Korea. The cells
are made by its High Energy Technologies affiliate in Illinois. They
claimed production capacity of 200,000 cells per year.
- In January, 1999, Matouphita Battery Industrial Co., Ltd. (MBI) of Osaka,
Japan announced it has started production of a small lithium polymer cell
for mobile phones. The cell, which has a cobalt dioxide cathode, has an
annual production capacity according to MBI of 300,000 cells per month.
- In January, 1999, Sony announced it has developed and will begin marketing
a lithium ion polymer battery. It stated it will start shipping samples in
March 1999 and expects to produce 1 million cells per year by the end of
1999.
We also believe that research is underway on additional technologies. There is a
risk that such companies are developing batteries similar to or superior to our
batteries.
GOVERNMENTAL REGULATION
The regulations of the United States Department of Transportation require
a permit to transport lithium across state lines. The International Air
Transport Association similarly regulates the international shipment of
lithium. At this time, our lithium ion batteries, because they contain no
metallic lithium, are not subject to these regulations and are being freely
shipped. The Department of Transportation has indicated that it is reviewing
this position primarily for larger electric vehicle lithium ion prototypes.
There is a risk that both the Department of Transportation and the
International Air Transport Association will decide to regulate the shipment
of lithium ion batteries in the future. While, in such an event, we believe
that the Department of Transportation has granted permits for, and the
International Air Transport Association has allowed, the transport of
rechargeable lithium-based batteries in the past, there is a risk that either
such agency 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, both agencies' 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. We may
encounter difficulties in complying with applicable health and safety
regulations because historically, lithium battery manufacturers have suffered
significant damage and losses to equipment, facilities and production from fires
and other industrial accidents.
12
<PAGE>
LEGAL PROCEEDINGS IN WHICH WE ARE INVOLVED
We are subject to litigation arising from time to time in the course of our
business. We currently have three substantial lawsuits in which we are involved,
as follows:
- We have been sued in a class action lawsuit by a class of persons who
purchased our common stock between May 7, 1992 and August 10, 1994. The
complaint alleged violations of the federal securities laws against us and
certain others, claiming that we 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 complaint
seeks unspecified compensatory and punitive damages, attorney's fees and
costs. Although we have obtained rulings in our favor on all claims, the
plaintiffs have appealed and the case is pending before the United States
Court of Appeals for the Ninth Circuit.
- In September 1998, a manufacturer of one of our pieces of manufacturing
equipment filed suit against us 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. In January 1999 we filed a
counterclaim against it based on a variety of legal reasons seeking
damages to be determined at trial.
- 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 breach of a
contract. In September 1998, Powell filed a cross-complaint against us and
others claiming damages of approximately $900,000 based on breach of a
contract. The matter is presently stayed pending settlement discussions.
Although we believe that we have meritorious defenses to these suits, if any of
them is resolved unfavorably to us it could have a material adverse effect on
our financial condition. The details of each of these suits is reported in
greater detail in our periodic reports filed under the Securities Exchange Act
of 1934 with the Securities and Exchange Commission.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock by
CC Investments or Gemini Capital.
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<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>
HIGH LOW
----- ---
<S> <C> <C>
FISCAL 1997
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 ended December 27, 1998................................................ 10 7/8 4 1/8
Quarter ending March 28, 1999 (through March 11, 1999)......................... 8 9/16 6 1/8
</TABLE>
The approximate number of record holders of our common stock as of February
5, 1999, was 716.
DIVIDEND POLICY
Valence has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future.
14
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of our common stock
owned by each of CC Investments and Gemini Capital as of the date of this
prospectus and the number of shares of our common stock which may be offered
pursuant to this prospectus. The information is based up information provided by
or on behalf of CC Investments and Gemini Capital. CC Investments and Gemini
Capital may offer all, some or none of their shares of our common stock.
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. Percentage calculations are
based upon 26,704,073 shares of our common stock outstanding as of February
5, 1999. Except for Castle Creek Partners LLC, as the investment advisor to
CC Investments, LDC, that has voting control and investment discretion over
the securities held by CC Investments, the persons named in the table have
sole voting and investment power with respect to all shares of our common
stock shown as beneficially owned by them. Beneficial ownership after the
offering assumes that each of CC Investments and Gemini Capital sells all of
the shares of our common stock that they may sell using this prospectus.
<TABLE>
<CAPTION>
BENEFICIALLY
COMMON STOCK BENEFICIALLY COMMON STOCK OWNED
NAME OWNED PRIOR TO OFFERING OFFERED AFTER OFFERING PERCENT
- ------------------------------------------ ------------------------- -------------- ----------------- -----------
<S> <C> <C> <C> <C>
CC Investments, LDC....................... 1,375,919 1,702,583 1,375,919 4.9%
Gemini Capital, L.L.C..................... 175,000 87,500 87,500 *
</TABLE>
- ------------------------
* Less than 1%.
ADDITIONAL INFORMATION REGARDING THE SHARES BEING OFFERED BY CC INVESTMENTS
CC Investments owns 7,500 shares of our Series A Preferred Stock and 7,500
shares of our Series B Preferred Stock, plus warrants to purchase up to 895,522
shares of our common stock at a price of $6.78 per share.
LIMITATIONS ON CONVERSION AND EXERCISE. Pursuant to the terms of our
preferred stock and warrants, CC Investments cannot convert or exercise any
portion of our preferred stock or exercise our warrants if such conversion or
exercise would increase CC Investments' beneficial ownership of our common stock
to be in excess of 4.9% of our outstanding common stock. Absent such
limitations, the number of shares of our common stock issuable upon conversion
of the preferred stock and exercise of the warrants held by CC Investments, as
of February 10, 1999, would have been 3,434,608 shares, which would constitute
approximately 11.4% of the outstanding shares of our common stock.
VARIABILITY OF CONVERSION RATES. Because the number of shares of our common
stock that will ultimately be issued upon conversion of our Series A Preferred
Stock and Series B Preferred Stock is dependent 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 the lowest six of
the ten closing bid prices of our common stock prior to conversion, the number
of shares of our common stock issuable to CC Investments (and therefore the
number of shares of our common stock being offered by this prospectus) cannot be
determined at this time. See "Additional Information--Our Recent Financing" and
"Risk Factors--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--Possible Variable Conversion Of Series B Preferred Stock."
THE SHARES OFFERED BY THIS PROSPECTUS. The shares of our 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
our common stock issued to CC Investments in connection with the issuance of the
Series B Preferred Stock. The shares are being registered by us pursuant to an
agreement between us and CC Investments. The shares of our common stock issuable
to CC Investments pursuant to the conversion of the Series A Preferred
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<PAGE>
stock and upon exercise of the warrant to purchase 447,761 shares of our
common stock issued in connection with the issuance of the Series A Preferred
Stock are registered under a separate registration statement.
ADDITIONAL INFORMATION REGARDING THE SHARES BEING OFFERED BY GEMINI CAPITAL
Gemini Capital acted as placement agent in the private placement of Series A
Preferred Stock and Series B Preferred Stock of Valence, for which it received
commissions of $750,000 and warrants to purchase 175,000 shares of our common
stock at an exercise price of $4.9375 per share. Of the 175,000 shares of our
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 our common stock offered by this prospectus may be sold from
time to time by CC Investments and Gemini Capital to purchasers directly by
either of them 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 with such sales.
Either of CC Investments and Gemini Capital may from time to time offer
shares of our 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 stockholder and the
purchasers of the shares for whom they may act as agent. Each of CC Investments
and Gemini Capital will be responsible for payment of commissions, concessions
and discounts of underwriters, dealers or agents. The aggregate proceeds to CC
Investments and Gemini Capital from the sale of the shares of our common stock
offered by them will be the purchase price of such shares less discounts and
commissions, if any. Each of CC Investments and Gemini Capital 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 CC Investments and Gemini Capital may sell all or a portion
of the shares of our common stock beneficially owned by them and offered from
time to time on any exchange on which the securities are listed on terms to be
determined at the times of such sales. CC Investments and Gemini Capital may
also make private sales directly or through a broker or brokers.
From time to time, CC Investments and Gemini Capital 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 our
common stock will decrease as and when they take such actions. The plan of
distribution for shares sold under this prospectus will otherwise remain
unchanged, except that the transferees, pledgees, donees or other successors
will be selling stockholders under this prospectus and may sell their shares in
the same manner as CC Investments and/or Gemini Capital.
A selling stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the shares
of our common stock in the course of hedging the positions they assume with such
selling stockholder, including in connection with distribution of the shares of
our common stock by such broker-dealers. In addition, the selling stockholder
may, from time to time, sell short the shares of our common stock, and in such
instances, this prospectus may be delivered in connection with such short sales
and the shares offered 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 our 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 has agreed that on any day it will not sell our 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 our common stock sold on the
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<PAGE>
Nasdaq National Market during such trading day, and (iii) 15% of the average
daily trading volume on the Nasdaq 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 our common stock to be sold may be issued upon conversion of the
Series B Preferred Stock in accordance with its terms or upon exercise of
warrants, or in other transactions with Valence involving the Series B Preferred
Stock and warrants, including issuance of shares of our common stock in exchange
for shares of Series B Preferred Stock, or in settlement of claims with respect
to rights of holders of Series B Preferred Stock.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of the shares of our common stock offered by
this prospectus 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 in this prospectus, and any selling stockholder
may transfer, devise or gift such securities by other means not described in
this prospectus.
If necessary, the specific shares of our 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. We
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 us to register the underlying shares of our 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 our common stock, including
liabilities under the Securities Act, and to contribute to payments the parties
may be required to make in respect thereof.
We will pay substantially all of the expenses incurred by the selling
stockholders and us incident to the offering and sale of the shares of our
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 our common stock offered by this prospectus
has been 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 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.
17
<PAGE>
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 Accounting
Corporation, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
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;
- 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
- 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.
18
<PAGE>
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- --------------------------------------------------------------------------------
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 VALENCE. 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 BY THIS 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 NOR ANY SALE MADE UNDER THIS 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 OR IMPLY THAT INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 2
Risk Factors.............................................................. 4
Disclosure Regarding Forward-Looking Statements........................... 10
Additional Information.................................................... 10
Use of Proceeds........................................................... 13
Price Range of Common Stock............................................... 14
Dividend Policy........................................................... 14
Selling Stockholders...................................................... 15
Plan of Distribution...................................................... 16
Legal Matters............................................................. 17
Experts................................................................... 17
Where You Can Get More Information........................................ 18
</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 placement agent
fees, 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 acts 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 Valence 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, other than in
connection with the class action lawsuit disclosed in the Prospectus.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
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 (previously filed).
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
23.3 Consent of Samil Accounting Corporation.
24.1 Power of Attorney. See signature page to initial filing.
</TABLE>
- ------------------------
(1) Incorporated by reference to the indicated exhibit to Valence'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, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the
II-2
<PAGE>
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a 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 Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Henderson, State of Nevada on March 15, 1999.
<TABLE>
<S> <C> <C>
VALENCE TECHNOLOGY, INC.
By: /s/ LEV M. DAWSON
-----------------------------------------
Lev M. Dawson
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board,
Chief Executive Officer
/s/ LEV M. DAWSON and President (Principal
- ------------------------------ Executive Officer and March 15, 1999
Lev M. Dawson Principal Financial and
Accounting Officer)
*
- ------------------------------ Director March 15, 1999
Carl E. Berg
*
- ------------------------------ Director March 15, 1999
Alan F. Shugart
*
- ------------------------------ Director March 15, 1999
Bert C. Roberts, Jr.
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ LEV M. DAWSON
-------------------------
Lev M. Dawson
ATTORNEY-IN-FACT
</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 (previously filed).
23.1 Consent of PricewaterhouseCoopers, LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
23.3 Consent of Samil Accounting Corporation.
24.1 Power of Attorney. See signature page to initial filing.
</TABLE>
- ------------------------
(1) Incorporated by reference to the indicated exhibit to Valence's Current
Report on Form 8-K, File No. 0-20028, filed December 21, 1998.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 2 to 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
June 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
March 15, 1999
<PAGE>
EXHIBIT 23.3
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 Amendment No. 2 to Form S-3 of our report, which includes
an explanatory paragraph regarding Hanil Valence Co. Ltd.'s ability to
continue as a going concern, dated May 11, 1998, on our audits of the
consolidated financial statements of Hanil Valence Co., Ltd. as of March 31,
1998, and for the year then ended, which report is included in the Company's
annual report on Form 10-K.
SAMIL ACCOUNTING CORPORATION
Seoul, Korea
March 15, 1999
