EX-99
2
exhibit_99-1.txt


                                                                    Exhibit 99.1

VALENCE TECHNOLOGY, INC.


COMPANY CONTACTS:
Lynette Holsapple                                Emilie Harris
Pierpont Investor Relations                      Lois Paul & Partners
Investor Relations Manager                       Media Relations Account Manager
(214) 557-9717                                   (512) 638-5321

            VALENCE TECHNOLOGY REPORTS FISCAL 2006 FOURTH QUARTER AND
                           YEAR-END FINANCIAL RESULTS

AUSTIN, TEXAS - JUNE 29, 2006 - 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:

     o    Increased revenue by 61.4 percent to $17.2 million. This represents
          the highest annual revenue in the Company's history.

     o    Large-format battery systems sales represented 62.4 percent of the
          sales mix, compared to 11.2 percent for the prior year.

     o    Volume shipments of Segway, LLC battery packs.

     o    Announced and began shipments of new U-Charge XP and RT product lines.

     o    Reduced operating expenses by 12.1 percent year-over-year. Excluding a
          one-time charge cost decreased by 23.3 percent year-over-year.

     o    Finalized engineering and manufacturing transition to China.

     o    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







                    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, 2006 March 31, 2005 March 31, 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) Notes Accumulated Additional Receivable Other Common Stock Paid-in Deferred from Accumulated Comprehensive Shares Amount Capital Compensation Stockholder Deficit Loss Totals -------- ------- ---------- ------------- ----------- ----------- ------------ ------- Balances, March 31, 2003 $1,723 $ 72 $ 366,518 $ (181) $ (5,161) $ (374,604) $(4,162) $(17,518) Sale of stock to private investors 3,664 4 12,991 12,995 Exercise of stock options at $0.63 to $4.94 per share 247 416 416 Conversion of preferred stock 327 1,391 (1) 1,390 Issuance of common stock warrants 1,132 1,132 Issuance of warrants (940) (940) Stock compensation 36 693 729 Modification of stock option 738 (738) - 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 75,961 $ 76 $ 382,282 $ (226) $ (5,161) $ (429,724) $ (4,041) $(56,794) -------- ------- ---------- ------------- ----------- ----------- ------------ ------- Sale of stock to private investors 10,243 10 31,890 31,900 Issuance of stock to INI 539 1 1,915 1,916 Exercise of stock options at $0.63 to $4.56 per share 319 - 571 571 Accretion of preferred stock (578) (578) Stock compensation 108 (305) (197) Modification of stock option (443) 442 (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 87,062 $ 87 $ 415,745 $ (89) $ (5,164) (461,328 $ (3,893) (54,642) -------- ------- ---------- ------------- ----------- ----------- ------------ ------- Sale of stock to private investors 2,260 2 5,899 5,901 Exercise of stock options at $0.63 to $4.56 per share 562 1 789 790 Issuance of common stock warrants 2,037 2,037 Extension of expiring common stock warrants 2,215 2,215 Accretion of preferred stock (28) (28) Stock compensation 287 287 Modification of stock option (66) (44) (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 89,884 90 $ 426,878 (133) (5,164) (494,224) $ (3,659) $(76,212) ======== ======= ========== ============= =========== =========== ============ =======

The following information was filed by Valence Technology Inc (VLNC) on Thursday, June 29, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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