Valence Technology Reports Second Quarter Fiscal 2006 Results; Company Grows Revenue By 89 Percent Over Same Period Last Year

Valence Technology Inc. (Nasdaq:VLNC), provider of
Saphion(R) technology, the industry's first commercially available,
safe, large-format lithium-ion rechargeable battery technology, today
reported results for the quarter ended September 30, 2005.
   Highlights for the second quarter of fiscal year 2006 include the
following:

   --  Record quarterly revenue of $5.5 million, versus $2.9 million
        in the same quarter of fiscal year 2005 and $3.4 million in
        first quarter of fiscal 2006.

   --  Record revenue for large-format battery systems, representing
        a 168 percent growth over the first quarter of fiscal year
        2006.

   --  Gross margin improvement of 23 percentage points over first
        quarter of fiscal year 2006.

   --  Reduced Selling General & Administration (SG&A) expenses by 18
        percent versus first quarter of fiscal year 2006.

   --  Announced new motive customer, Oxygen, makers of electric
        scooters for commercial and personal use.

   "The company remains focused on efficient execution across all
business functions, especially those that lead to lower production
costs," said Dr. James R. Akridge, president and chief executive
officer of Valence Technology Inc. "A number of changes were made
during the second quarter to our processes, products and staff. We
expect that the results of these changes will begin to pay off for us
over the next few quarters with increased production capacity,
improved gross margins and new customer orders."

   Financial Results

   Valence Technology reported revenue for the second quarter of
fiscal year 2006 of $5.5 million, an increase of 89 percent over
second quarter of 2005, which was $2.9 million, and an increase of 62
percent over first quarter of fiscal year 2006, which was $3.4
million. Large-format systems represented 63 percent of total revenue
for the second quarter, up 168 percent over first quarter of fiscal
year 2006. This marks the second quarter of strong revenue for the
company's large-format products. The principal contributor to the
growth of the large-format sales resulted from Valence's continued
relationship with Segway Inc.
   The company reported a net loss available to common stockholders
of $8.1 million, or nine cents per basic and diluted share. This
compares to a net loss available to common stockholders of $7.2
million, or nine cents per basic and diluted share, in the second
quarter of fiscal year 2005, and a net loss of $8.2 million, or nine
cents per basic and diluted share, in the first quarter of fiscal year
2006.

   Conference Call

   The company will discuss its quarterly results during a conference
call today at 5:00 P.M. EST (2:00 P.M. PST). The broadcast will be
hosted on the company's web site: www.valence.com. Participants should
allow approximately 15 minutes prior to the call's start time to visit
the site and download any streaming media software needed to listen to
the internet broadcast. The company will make an online archive of the
broadcast and it will remain available on the Valence Technology web
site for 30 days following the live call.

   About Valence Technology, Inc.

   Valence Technology develops and markets 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, and Suzhou and Shanghai, China. Valence 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

   This press release contains forward-looking statements within the
meaning of the Private Securities 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 June 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.
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               VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS
          (in thousands, except share and per share amounts)


                                  September 30, 2005   March 31, 2005
                                  ------------------   --------------
ASSETS
 Total current assets             $          20,378    $       7,448
                                   -----------------    -------------
 Total assets                     $          23,633    $      10,231
                                   =================    =============

LIABILITIES, PREFERRED STOCK AND
 STOCKHOLDERS' DEFICIT
Current liabilities:
 Total current liabilities        $          10,175    $       9,099
                                   -----------------    -------------
 Total liabilities                          74,703           56,291
                                   -----------------    -------------

Redeemable convertible preferred
 stock                                        8,603            8,582
                                   -----------------    -------------

Total stockholders' deficit                 (59,673)         (54,642)
                                   -----------------    -------------

 Total liabilities, preferred
  stock and stockholders'
  deficit                         $          23,633    $      10,231
                                   =================    =============


               VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
                          COMPREHENSIVE LOSS
               (in thousands, except per share amounts)


                           Three Months Ended     Six Months Ended
                              September 30,         September 30,
                          --------------------- ---------------------

                             2005       2004        2005        2004
                           -------    -------    --------    --------
Total revenues            $ 5,518    $ 2,915    $  8,923    $  5,752


Operating loss              6,698     (5,945)    (13,958)    (13,946)


Net loss available to
 common stockholders      $(8,053)   $(7,170)   $(16,250)   $(16,389)
                           =======    =======    ========    ========


Net loss per share
 available to common
 stockholders             $ (0.09)   $ (0.09)   $  (0.18)   $  (0.21)
                           =======    =======    ========    ========
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