Valence Technology, Inc. (NASDAQ:VLNC), developers of Saphion(R)
technology, the first commercially available safe, phosphate-based
lithium-ion battery technology, today reported financial results
for its fiscal fourth quarter and year ended March 31, 2006.
Highlights for fiscal year 2006 include the following: -- Increased
revenue by 61.4 percent to $17.2 million. This represents the
highest annual revenue in the Company's history. -- Large-format
battery systems sales represented 62.4 percent of the sales mix,
compared to 11.2 percent for the prior year. -- Volume shipments of
Segway, LLC battery packs. -- Announced and began shipments of new
U-Charge XP and RT product lines. -- Reduced operating expenses by
12.1 percent year-over-year. Excluding a one-time charge cost
decreased by 23.3 percent year-over-year. -- Finalized engineering
and manufacturing transition to China. -- Hired Dr. James (Jim)
Akridge as president and chief executive officer, Thomas Mezger as
chief financial officer and Dr. ChunTai Guo as president of Asia
Pacific operations. Jim Akridge, president and chief executive
officer, stated, "Valence is executing on a strategy to grow
revenues in multiple markets with new products while also reducing
costs in all areas. We are entering fiscal year 2007 with a strong
management team, a focus on our four strategic priorities, and an
increase in market momentum." Financial Results Revenues for fiscal
year 2006 were $17.2 million, up 61.4 percent from $10.7 million in
fiscal year 2005. The company reported a net loss for fiscal year
2006 of $32.9 million, or $0.37 per basic and diluted share,
compared to $32.2 million or $0.40 per basic and diluted share for
fiscal year 2005. Operating expenses were $19.4 million, down 12.1
percent from $22.1 million for fiscal year 2005. Gross margin loss
as a percentage of revenue was 47.9 percent for fiscal 2006 and
53.2 percent for fiscal 2005. Excluding $3.8 million cost for
production scrap, gross margin would have been negative 25.8
percent for fiscal year 2006. For the fourth quarter of fiscal
2006, the company reported revenue of $3.5 million, up 46.7 percent
from $2.4 million for the fourth quarter of fiscal 2005. The
company reported a net loss of $9.6 million, or $0.11 per basic and
diluted share, compared to $9.2 million, or $0.11 per basic and
diluted share, for the fourth quarter of fiscal 2005. Fiscal Year
2006 Financial Results Conference Call and Webcast The Valence
management team will host a conference call and live webcast to
discuss fiscal year 2006 financial results beginning at 4:00 p.m.
ET on Thursday, June 29, 2006. Investors and other interested
parties may participate in the call by dialing 800-310-6649 at
least fifteen minutes prior to the call and entering pass code
7514681, or by listening to the live webcast, which can be accessed
on the investor relations section of Valence's Web site,
www.valence.com. A replay will be available by phone from 6:00 p.m.
ET on Thursday, June 29, 2006, through 12:59 p.m. ET on Wednesday,
July 5, 2006. To access the replay, please dial 719-457-0820 and
enter pass code 7514681. About Valence Technology, Inc. Valence
Technology develops and markets intelligent battery systems using
its Saphion(R) technology, the industry's first commercially
available, safe, large-format Lithium-ion rechargeable battery
technology. Valence Technology holds an extensive, worldwide
portfolio of issued and pending patents relating to its Saphion
technology and lithium-ion rechargeable batteries. The company has
facilities in Austin, Texas, Las Vegas, Nevada, Mallusk, Ireland
and Suzhou and Shanghai, China. Valence Technology is traded on the
NASDAQ Capital Market under the symbol VLNC and can be found on the
Internet at www.valence.com. Safe Harbor Statement Litigation
Reform Act of 1995, including our statements that we are positioned
to realize better execution, improve gross margins, continue to
reduce production costs and expenses, realize a strong year in both
customer orders and revenue and our financial guidance. Actual
results may vary substantially from these forward-looking
statements as a result of a variety of factors. Among the important
factors that could cause actual results to differ are: the impact
of our limited financial resources on our ability to execute on our
business plan and the need to raise additional debt or equity
financing to execute on that plan; our uninterrupted history of
quarterly losses; our ability to service our debt, which is
substantial in relationship to our assets and equity values; the
pledge of all of our assets as security for our existing
indebtedness; the rate of customer acceptance and sales of our
products; the continuance of our relationship with a few existing
customers, which account for a substantial portion of our current
and expected sales in the upcoming year; the level and pace of
expansion of our manufacturing capabilities; the level of direct
costs and our ability to grow revenues to a level necessary to
achieve profitable operating margins in order to achieve break-even
cash flow; the level of our selling, general and administrative
costs; any impairment in the carrying value of our intangible or
other assets; our execution on our business strategy of moving our
operations to Asia and our ability to achieve our intended
strategic and operating goals; the effects of competition; and
general economic conditions. These and other risk factors that
could affect actual results are discussed in our periodic reports
filed with the SEC, including our Annual Report on Form 10-K for
the year ended March 31, 2005 and our Quarterly Report on Form 10-Q
for the quarter ended December 31, 2005, and the reader is directed
to these statements for a further discussion of important factors
that could cause actual results to differ materially from those in
the forward-looking statements. Financial Tables to Follow -0- *T
VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (in thousands, except share amounts) March 31, 2006 March
31, 2005 --------------- -------------- Assets Current assets: Cash
and cash equivalents $612 $2,500 Trade receivables, net of
allowance of $99 and $115, respectively 2,376 1,464 Inventory 2,738
2,564 Prepaid and other current assets 2,566 920 ---------------
-------------- Total current assets 8,292 7,448 Property, plant and
equipment, net 3,052 2,383 Intellectual property, net 288 400
--------------- -------------- Total assets $11,632 $10,231
=============== ============== Liabilities and Stockholders'
Deficit Current liabilities: Convertible notes payable to
stockholder $6,000 $- Accounts payable 1,599 3,251 Accrued expenses
4,479 4,607 Deferred revenue 464 1,241 ---------------
-------------- Total current liabilities 12,542 9,099 Long-term
interest payable to stockholder 15,580 12,536 Long-term debt, net
of debt discount 17,942 - Long-term debt to stockholder, net of
debt discount 33,170 34,656 --------------- -------------- Total
liabilities 79,234 56,291 --------------- --------------
Commitments and contingencies Redeemable convertible preferred
stock, $0.001 par value, 1,000 shares authorized, 861 issued and
outstanding at March 31, 2006 and 2005, respectively, liquidation
value $8,610 8,610 8,582 Stockholders' deficit: Common stock,
$0.001 par value, 200,000,000 shares authorized; 89,883,539 and
87,061,639 shares issued and outstanding as of March 31, 2006 and
2005, respectively 90 87 Additional paid-in capital 426,878 415,745
Deferred compensation (133) (89) Notes receivable from stockholder
(5,164) (5,164) Accumulated deficit (494,224) (461,328) Accumulated
other comprehensive loss (3,659) (3,893) ---------------
-------------- Total stockholders' deficit (76,212) (54,642)
--------------- -------------- Total liabilities, preferred stock
and stockholders' deficit $11,632 $10,231 ===============
============== VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in
thousands, except per share amounts) Year Ended
--------------------------------- March 31, March 31, March 31,
2006 2005 2004 ---------- ---------- ----------- Revenue: Battery
and system sales $16,490 $10,274 $8,483 Licensing and royalty
revenue 724 391 963 ---------- ---------- ----------- Total
revenues 17,214 10,665 9,446 Cost of sales 25,454 16,341 15,923
Gross margin loss (8,240) (5,676) (6,477) Operating expenses:
Research and product development 5,112 7,682 8,638 Marketing 2,163
4,292 4,880 General and administrative 11,794 12,933 11,416
Depreciation and amortization 722 884 2,109 Gain on disposal of
assets (445) (5,257) (21) Asset impairment charge 170 87 13,660
Restructuring charge - - 926 Contract settlement charge, INI - 957
3,046 Contract settlement charge, other (108) 499 - ----------
---------- ----------- Total operating expenses 19,408 22,077
44,654 ---------- ---------- ----------- Operating loss (27,648)
(27,753) (51,131) Minority interest in joint venture - - 69 Cost of
warrants - - (181) Interest and other income 475 585 345 Interest
expense (5,551) (4,262) (4,059) ---------- ---------- -----------
Net loss (32,724) (31,430) (54,957) Dividends on preferred stock
172 171 162 Preferred stock accretion 28 578 940 ----------
---------- ----------- Net loss available to common stockholders,
basic and diluted $(32,924) $(32,179) $(56,059) ==========
========== =========== Other comprehensive loss: Net loss $(32,724)
$(31,430) $(54,957) Change in foreign currency translation
adjustments 234 148 121 ---------- ---------- -----------
Comprehensive loss $(32,490) $(31,282) $(54,836) ==========
========== =========== Net loss per share available to common
stockholders $(0.37) $(0.40) $(0.77) ========== ==========
=========== Shares used in computing net loss per share available
to common stockholders, basic and diluted 89,298 81,108 73,104
========== ========== =========== VALENCE TECHNOLOGY, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (in
thousands) Additional Common Stock Paid-in Deferred Shares Amount
Capital Compensation --------- ------ ---------- ------------
Balances, March 31, 2003 71,723 $72 $366,518 $(181) Sale of stock
to private investors 3,664 4 12,991 Exercise of stock options at
$0.63 to $4.94 per share 247 416 Conversion of preferred stock 327
1,391 Issuance of common stock warrants 1,132 Issuance of warrants
(940) Stock compensation 36 693 Modification of stock option 738
(738) Interest receivable from stockholder Payment of accrued
interest on note receivable from stockholder Dividends on preferred
stock Net loss Change in translation adjustment --------- ------
---------- ------------ Balances, March 31, 2004 75,961 $76
$382,282 $(226) --------- ------ ---------- ------------ Sale of
stock to private investors 10,243 10 31,890 Issuance of stock to
INI 539 1 1,915 Exercise of stock options at $0.63 to $4.56 per
share 319 - 571 Accretion of preferred stock (578) Stock
compensation 108 (305) Modification of stock option (443) 442
Interest receivable from stockholder Payment of accrued interest on
note receivable from stockholder Dividends on preferred stock Net
loss Change in translation adjustment --------- ------ ----------
------------ Balances, March 31, 2005 87,062 $87 $415,745 $(89)
--------- ------ ---------- ------------ Sale of stock to private
investors 2,260 2 5,899 Exercise of stock options at $0.63 to $4.56
per share 562 1 789 Issuance of common stock warrants 2,037
Extension of expiring common stock warrants 2,215 Accretion of
preferred stock (28) Stock compensation 287 Modification of stock
option (66) (44) Interest receivable from stockholder Payment of
accrued interest on note receivable from stockholder Dividends on
preferred stock Net loss Change in translation adjustment ---------
------ ---------- ------------ Balances, March 31, 2006 89,884 $90
$426,878 $(133) ========= ====== ========== ============ Accumu-
lated Notes Other Receivable Compre- from Accumulated hensive
Stockholder Deficit Loss Totals ------------- ----------- --------
--------- Balances, March 31, 2003 $(5,161) $(374,604) $(4,162)
$(17,518) Sale of stock to private investors 12,995 Exercise of
stock options at $0.63 to $4.94 per share 416 Conversion of
preferred stock (1) 1,390 Issuance of common stock warrants 1,132
Issuance of warrants (940) Stock compensation 729 Modification of
stock option - Interest receivable from stockholder (277) (277)
Payment of accrued interest on note receivable from stockholder 277
277 Dividends on preferred stock (162) (162) Net loss (54,957)
(54,957) Change in translation adjustment 121 121 -------------
----------- -------- --------- Balances, March 31, 2004 $(5,161)
$(429,724) $(4,041) $(56,794) ------------- ----------- --------
--------- Sale of stock to private investors 31,900 Issuance of
stock to INI 1,916 Exercise of stock options at $0.63 to $4.56 per
share 571 Accretion of preferred stock (578) Stock compensation
(197) Modification of stock option (1) Interest receivable from
stockholder (304) (304) Payment of accrued interest on note
receivable from stockholder 301 301 Dividends on preferred stock
(174) (174) Net loss (31,430) (31,430) Change in translation
adjustment 148 148 ------------- ----------- -------- ---------
Balances, March 31, 2005 $(5,164) $(461,328) $(3,893) $(54,642)
------------- ----------- -------- --------- Sale of stock to
private investors 5,901 Exercise of stock options at $0.63 to $4.56
per share 790 Issuance of common stock warrants 2,037 Extension of
expiring common stock warrants 2,215 Accretion of preferred stock
(28) Stock compensation 287 Modification of stock option (110)
Interest receivable from stockholder (281) (281) Payment of accrued
interest on note receivable from stockholder 281 281 Dividends on
preferred stock (172) (172) Net loss (32,724) (32,724) Change in
translation adjustment 234 234 ------------- ----------- --------
--------- Balances, March 31, 2006 $(5,164) $(494,224) $(3,659)
$(76,212) ============= =========== ======== ========= *T
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