Unemon Unemon

Subject:

VLTC - I am a seller at >$8 ... and a buyer at <$3 ... Going to be Dead Money for the
Next 3 years

1. VLTC is a shitty company. The Value of the Ongoing Operating Business is 0.

2. VLTC tangible assets are IMO worthless (see balance sheet)
3. Only Value in VLTC are the NOLs (Total of $477.80m)
As of December 31, 2014, we had federal and state NOLs of $410.3 million and $67.5 million, respectively, that begin
to expire in 2019 for U.S. federal income tax purposes and in the current year for state income tax purposes.
Currently Shares Outstanding approx. 9,063,358 (after Feb 27 addl).
At end of Q1, Total Preferred Shares Nominal Value approx $41.5m
Current Value of NOLs in case of No-Ownership Change and assuming a Tax Rate of 35% (Just theoretical
since the company on its own will never be able to take advantage of it)
NOLs FV = $477.80m x 35% = $167.23m
PPS FV = ($167.23m $41.50m Preferred Shares Value) / 9.063m Shares OUT = $13.87
Problem is that this company will never generate any profit so that it will never be able to take advantage of this
NOLs. In the unlikely scenario the Company would be able to turn to profit and take advantage of this NOLs in 5
years from now, Assuming a Discount Rate of 15% p.a. the Current Fair Value per Share would be approx.
<$6.89

Is the NOLs Value Attractive for a Potential Buyer? - Not Really, It will be a valuable Target only for Icahn
but not earlier than 3 years from now Section 382 of the Internal Revenue Code (Section 382) Limits the Maximum Annual NOLs that can be
utilized by the Buyer.
Section 382 severely restricts the buyer's use of acquired NOL following a change in ownership, limiting the annual
use of such NOL to:

Purchase price of target's stock IRS long-term tax-exempt rate

IRS long term tax-exempt rate is currently at 2.47% (http://www.irs.gov/pub/irs-drop/rr-15-08.pdf)
VLTC MCAP is now at $78.6m A change of Control at Current Prices would limit the annual use of NOLs to
2.47% * $78.6m = $1.941m
Assuming an Tax Rate of 35%, the Total Tax Saving the buyer could realize are limited to $0.679m/year
The FV of VLTC NOLs for a Potential Acquirer would therefore be (Discount Rate 10%, not Considering NOLs
expirations):

The total Value of VLTC is $13.01m Net Assets Value of $6.743m (Total Assets Total Liabilities as of
12/31/2014) + $6.27m FV of Tax Savings for a possible acquirer (assuming a purchase price of 78.3m).
NO ONE OTHER THAN ICHAN WOULD EVER BE INTERESTED IN ACQUIRING VLTC FOR ITS
NOLs.

Key is therefore to determine whether or not a change of Ownership as defined under Section 382 is likely to occur:
Asection382"ownershipchange"generallyoccursifthepercentageofthestockofthe"losscorporation"ownedby
oneormore"5percentshareholders"hasincreasedbymorethan50percentagepointsoverthelowestpercentage
ofstockofthelosscorporationownedbysuchshareholdersatanytimeduringtherelevant"testingperiod."I.R.C,
382(g)(1).
The"testingperiod"isgenerallythe3yearperiodendingonthe"testingdate."I.R.C.382(i)(l).

RecentstakeincreasebyIcahnEnterprisesdoesnotconstituteaChangeofOwnership.
SinceQ12012tillMarch30,2015Icahnowned0.678mVLTCshares(14.42%atitslowerspoint).Hisposition
increasedbyapprox.4.061m(52.29%ownership).
Representinga37.87percentagepointsincrease(<50percentagePoints)andthereforenotconstitutingaChangeIn
ControlasdefinesinSection382.

TotakeAdvantageoftheNOLs,Icahnneedstowait3years(meaningtillMarch30,2018)beforelaunchingatender
offerforalltheremainingoutstanding47.31%shares.

Companywillgeneratemorelossesforthenext3years(addingsomeNOLs)buttheValuereduction(loss)
willoutsizetheNOLscreationeffect(weignorebotheffects)
SomeNOLsatstateLevelstarttoexpirethisyear(weassumetheyneverexpire)
PreferredSharesValuewouldbeinthemagnitudeof>$50mby2018

2018NOLs=$477.8mwithImpliedTaxSavingof$167.23m.Assuminga20%ReturnonInvestmentsaBuyer
wouldvaluetheNOLsat$133.78m.
LessthePreferredSharesValue=$83.78m

AssumingnofurtherDilution(CurrentLiquidityof$10mwillbeenoughonlyifCoCeasesalltheOperations)anda
DiscountRateof15%,theNPVofthe2018NOLs(toIcahn)is$55.08m($6.08pershare).