<PAGE>
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC 20549

                                      FORM 10-Q

(Mark One)

[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
       EXCHANGE ACT OF 1934

For the quarterly period ended December 29, 1996

Or

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
       EXCHANGE ACT OF 1934

For the transition period from          to         
                               --------    --------


Commission file number 0-20028

                                VALENCE TECHNOLOGY, INC.
                (Exact name of registrant as specified in its charter)

            Delaware                                   77-0214673
------------------------------------     ---------------------------------------
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)


                 301 Conestoga Way, Henderson, Nevada 89015
       --------------------------------------------------------------
         (Address of prinicpal executive offices including zip code)



                               (702) 558-1000
       --------------------------------------------------------------
            (Registrant's telephone number, including area code)



       --------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

       (1) Yes  X    No                      (2) Yes  X    No    
               ---      ---                          ---      ---

Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of the latest practicable date.

       Common Stock $0.001 par value                    21,713,793 shares
--------------------------------------------   ---------------------------------
                 (Class)                       (Outstanding at February 3, 1997)

<PAGE>
                       VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                          (COMPANIES IN THE DEVELOPMENT STAGE)

                                       FORM 10-Q

                        FOR THE QUARTER ENDED DECEMBER 29, 1996




                                        INDEX

                                                                           Pages
                                                                           -----
PART I.    FINANCIAL INFORMATION

  Item 1.  Financial Statements:

           Condensed Consolidated Balance Sheets as of
           December 29, 1996 and March 31, 1996..............................3

           Condensed Consolidated Statements of Operations
           for the period from March 3, 1989 (date of inception)
           to December 29, 1996 and for each of the three months and nine
           months ended December 29, 1996 and December 24, 1995..............4

           Condensed Consolidated Statements of Cash Flows
           for the period from March 3, 1989 (date of inception)
           to December 29, 1996 and for each of the nine months
           ended December 29, 1996 and December 24, 1995.....................5

           Notes to Consolidated Financial Statements........................6

  Item 2.  Managements Discussion and Analysis of Financial
           Condition and Results of Operations...............................8


PART II.   OTHER INFORMATION

  Item 4.  Submission of Matters to a Vote of Security Holders..............11

  Item 6.  Exhibits and Reports on Form 8-K.................................11


SIGNATURES

                                         2
<PAGE>
                   VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                     (COMPANIES IN THE DEVELOPMENT STAGE)

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                   (in thousands, except per share amounts)
                                  (unaudited)
                                     -----
<TABLE>
<CAPTION>
                                                                          December 29,                  March 31,
                                                                              1996                        1996
                                                                        ----------------              -------------
<S>                                                                    <C>                           <C>

                            ASSETS
Current assets:
  Cash and cash equivalents                                                 $ 32,900                    $ 24,569
  Short-term investments                                                       6,420                      26,492
  Accounts receivable                                                            577                         545
  Interest receivable                                                            254                         444
  Prepaids and other current assets                                              214                         299
                                                                            --------                    --------

      Total current assets                                                    40,365                      52,349

Investments                                                                    4,000                       5,790
Property, plant and equipment, net                                            12,385                      11,752
Other assets                                                                   1,087                         356
                                                                            --------                    --------

        Total assets                                                        $ 57,837                    $ 70,247
                                                                            --------                    --------
                                                                            --------                    --------

                         LIABILITIES

Current liabilities:
  Current portion of long-term debt                                         $  1,851                    $  2,277
  Accounts payable                                                             1,629                       1,251
  Accrued expenses                                                             5,279                       6,180
  Accrued compensation                                                         1,658                       1,360
                                                                            --------                    --------

      Total current liabilities                                               10,417                      11,068

Long-term debt, less current portion                                           5,091                       6,169
                                                                            --------                    --------

        Total liabilities                                                     15,508                      17,237

Contingencies (Note 3).

                    STOCKHOLDERS' EQUITY

Preferred stock, $0.001 par value:
  Authorized:  10,000 shares;
  Issued and outstanding:  none

Common stock, $0.001 par value:
  Authorized:  50,000 shares;
  Issued and outstanding: 21,673 and 21,665 shares at
  December 29, 1996 and March 31, 1996, respectively                         140,338                     140,307
Deficit accumulated during the development stage                             (99,063)                    (87,638)
Cumulative translation adjustment                                              1,054                         341
                                                                            --------                    --------

      Total stockholders' equity                                              42,329                      53,010
                                                                            --------                    --------

        Total liabilities and stockholders' equity                          $ 57,837                    $ 70,247
                                                                            --------                    --------
                                                                            --------                    --------
</TABLE>

       The accompanying notes are an integral part of these consolidated 
                             financial statements

                                         3
<PAGE>
                   VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                     (COMPANIES IN THE DEVELOPMENT STAGE)

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)
                                  (unaudited)
                                     -----
<TABLE>
<CAPTION>

                                  Period from
                                 March 3, 1989
                              (date of inception)
                                    through                    Three Months Ended                       Nine Months Ended
                                                        --------------------------------       --------------------------------
                                  December 29           December 29,        December 24,       December 29,        December 24,
                                      1996                  1996                1995               1996                1995
                            -----------------------     ------------        ------------       ------------        ------------
<S>                        <C>                         <C>                 <C>                <C>                 <C>

Revenue:
  Research and development
    contracts                     $  21,605               $     0             $     0            $      0            $      0
                                  ---------               -------             -------            --------            --------

Costs and expenses:
  Research and development           67,034               $ 3,570               1,363            $  8,810               5,531
  Marketing                           2,624                    29                  90                 152                 383
  General and administrative         30,317                 1,695               1,439               4,122               3,921
  Purchase of in-process
    technology                        8,212                     -                   -                   -               6,064
  Investment in Danish
    subsidiary                        3,489                     -                   -                   -                   -
  Special charges                    18,872                     -                   -                   -                   -
                                  ---------               -------             -------            --------            --------

    Total costs and expenses        130,548                 5,294               2,892              13,084              15,899
                                  ---------               -------             -------            --------            --------

      Operating loss               (108,943)               (5,294)             (2,892)            (13,084)            (15,899)

Interest income                      13,253                   631                 912               2,084               2,642
Interest expense                     (3,737)                 (139)               (172)               (425)               (716)
                                  ---------               -------             -------            --------            --------

        Net loss                  $ (99,063)              $(4,802)            $(2,152)           $(11,425)           $(13,973)
                                  ---------               -------             -------            --------            --------
                                  ---------               -------             -------            --------            --------

Net loss per share                $       -               $ (0.22)            $ (0.11)           $  (0.53)           $  (0.69)
                                  ---------               -------             -------            --------            --------
                                  ---------               -------             -------            --------            --------

Shares used in computing
  net loss per share                      -                21,673              20,134              21,672              20,160
                                  ---------               -------             -------            --------            --------
                                  ---------               -------             -------            --------            --------
</TABLE>

       The accompanying notes are an integral part of these consolidated 
                             financial statements

                                         4
<PAGE>
                   VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                     (COMPANIES IN THE DEVELOPMENT STAGE)

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (in thousands, except per share amounts)
                                  (unaudited)
                                     -----
<TABLE>
<CAPTION>
                                                           Period from
                                                          March 3, 1989               Nine Months             Nine Months
                                                       (date of inception)             Ended                   Ended
                                                             through                  December 29,            December 24,
                                                        December 29, 1996                1996                    1995
                                                     -----------------------         ------------            -------------
<S>                                                 <C>                             <C>                     <C>
Cash flows from operating activities:
  Net loss                                                 $ (99,063)                 $ (11,425)              $ (13,973)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization                             18,927                      2,618                   2,900
    Write-off of equipment                                    14,767                          -                  (1,085)
    Write-off of in-process technology                         8,212                          -                   8,064
    Compensation related to stock options                      1,451                         30                       -
    Noncash charge related to acquisition of
      Danish subsidiary                                        2,245                          -                       -
    Changes in assets and liabilities:
      Accounts receivable                                        512                        (32)                   (280)
      Interest receivable                                       (246)                       192                       1
      Notes receivable                                           115                        258                    (146)
      Prepaid expenses and other current assets               (2,157)                      (899)                     85
      Accounts payable                                         1,528                        378                  (1,431)
      Accrued liabilities                                     (1,350)                      (604)                 (1,270)
                                                           ---------                  ---------               ---------

        Net cash used in operating activities                (55,059)                    (9,484)                 (7,135)
                                                           ---------                  ---------               ---------

Cash flows from investing activities:
  Purchase of in-process technology                           (2,001)                         0                  (2,001)
  Purchases of long-term investments                        (685,348)                  (288,259)               (126,082)
  Maturities of long-term investments                        676,061                    311,255                 134,296
  Capital expenditures                                       (38,913)                    (3,040)                   (441)
  Other                                                         (222)                         0                       0
                                                           ---------                  ---------               ---------

        Net cash provided by (used in)
          investing activities                               (50,423)                    19,956                   5,772
                                                           ---------                  ---------               ---------

Cash flows from financing activities:
  Property and equipment grants                                4,322                         28                     675
  Borrowings of long-term debt                                15,502                          -                       -
  Payments of long-term debt:
    Product development loan                                    (482)                         -                       -
    Shareholder and director                                  (6,173)                         -                       -
    Other long-term debt                                     (10,244)                    (1,505)                 (2,503)
  Proceeds from issuance of common stock, 
    net of costs                                             136,511                          0                     179
                                                           ---------                  ---------               ---------

        Net cash provided by (used in)
          financing activities                               139,436                     (1,477)                 (1,649)
                                                           ---------                  ---------               ---------

Effect of foreign exchange rates on cash and cash
  equivalents                                                 (1,054)                      (664)                   (321)

Increase (decrease) in cash and cash equivalents              32,900                      8,331                  (3,333)
Cash and cash equivalents, beginning of period                     0                     24,569                  16,602
                                                           ---------                  ---------               ---------
Cash and cash equivalents, end of period                   $  32,900                  $  32,900               $  13,269
                                                           ---------                  ---------               ---------
                                                           ---------                  ---------               ---------
</TABLE>
       The accompanying notes are an integral part of these consolidated 
                             financial statements

                                         5
<PAGE>



                   VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                     (COMPANIES IN THE DEVELOPMENT STAGE)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                   (in thousands, except per share amounts)
                                  (unaudited)
                                     -----

1.  Interim Condensed Consolidated Financial Statements
    ---------------------------------------------------

These interim condensed consolidated financial statements are unaudited but 
reflect, in the opinion of management all normal recurring adjustments 
necessary to present fairly the financial position of Valence Technology, 
Inc. and Subsidiaries (the Company) as of December 29, 1996 and March 31, 1996, 
its consolidated results of operations and cash flows for the period 
from March 3, 1989 (date of inception) to December 29, 1996 and for each of 
the three-month and nine-month periods ended December 29, 1996 and December 
24, 1995. Because all the disclosures required by generally accepted 
accounting principles are not included, these interim condensed consolidated 
financial statements should be read in conjunction with the audited financial 
statements and notes thereto in the Company's Annual Report on Form 10-K as 
of and for the year ended March 31, 1996. The year end condensed consolidated 
balance sheet data as of March 31, 1996 was derived from audited financial 
statements, but does not include all disclosures required by generally 
accepted accounting principles.

The results of operations for the three-month and nine-month periods and the 
cash flows for the nine-months ended December 29, 1996 are not necessarily 
indicative of results of operations and cash flows for any future period.

2.  Net Loss Per Share
    ------------------

The computation of net loss per share is based on the weighted average number 
of common shares outstanding during the period. Common stock options and 
warrants have not been included in the computation since their inclusion 
would be antidilutive.

3.  Contingencies
    ------------

LITIGATION

In May 1994, a series of class action lawsuits were filed in the United 
States District Court for the Northern District of California against the 
Company and certain of its present and former officers and directors. These 
lawsuits were consolidated, and in September 1994 the plaintiffs filed a 
consolidated and amended class action complaint. Following the Court's Orders 
on motions to dismiss the complaint, which were granted in part and denied in 
part, the plaintiffs filed an amended complaint in October 1995 
("Complaint"). The Complaint alleges violations of the federal securities 
laws against the Company, certain of its present and former officers and 
directors, and the underwriters of the Company's public stock offerings, 
claiming that the defendants issued a series of false and misleading 
statements, including filings with the Securities and Exchange Commission, 
with regard to the Company's business and future prospects. The plaintiffs 
seek to represent a class of persons who purchased the Company's common stock 
between May 7, 1992 and August 10, 1994. The Complaint seeks unspecified 
compensatory and punitive damages, attorney's fees and costs. On January 23, 
1996, the Court dismissed, with prejudice, all claims against the 
underwriters of the Company's public stock offerings, and one claim against 
the Company and its present and former officers and directors. On April 29, 
1996, the Court dismissed with prejudice all remaining claims against a 
present director and limited claims against a former officer and director to 
the period when the person was an officer. The Company believes it has 
meritorious defenses and intends to defend the lawsuit vigorously.

The ultimate outcome of these actions cannot presently be determined. 
Accordingly, no provision for any liability or loss that may result from 
adjudication or settlement thereof has been made in the accompanying 
consolidated financial statements.

                                      6

<PAGE>
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)


4.  Recent Accounting Pronouncements
    --------------------------------

During March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires the Company to review for impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  In certain situations, an
impairment loss would be recognized.  It will be effective for the Companys
fiscal year 1996.  The Company has studied the implications of the statement,
and based on its initial evaluation, does not expect it to have a material
impact on the Companys financial condition or results of operations.

During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation, which
establishes a fair value based method of accounting for stock-based compensation
plans.  The Company is currently following the requirements of APB Opinion No.
25, Accounting for Stock Issued to Employees while it studies the implications
of SFAS No. 123 and evaluates the effect, if any, on the financial condition and
results of operations of the Company.  SFAS No. 123 will be effective for the
Companys fiscal year 1996.

                                      7

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

In addition to the historical information contained herein, the following 
discussion contains forward looking statements that involve risk and 
uncertainties.  The Companys actual results may differ materially from those 
discussed herein.  Factors that could cause or contribute to such differences 
include, but are not limited to, those discussed in this section of the 
Companys Annual Report on Form 10-K for the year ended March 31, 1996.

OVERVIEW

The Company was founded in 1989 to develop and commercialize advanced
rechargeable batteries based on lithium and polymer technologies.  Since its
inception, the Company has been a development stage company primarily engaged in
acquiring and developing its initial technology, manufacturing limited
quantities of prototype batteries recruiting personnel, and acquiring capital. 
To date, other than insubstantial revenues from limited sales of prototype
batteries, the Company has not received any significant revenues from the sale
of products.  Substantially all revenues to date have been derived from a
research and development contract with the Delphi Automotive Systems Group
(Delphi, formerly the Delco Remy Division), and operating group of the General
Motors Corporation.  The Company has incurred cumulative losses of $99,063,000
from its inception to December 29, 1996.

This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying condensed
consolidated financial statements and notes thereto contained herein and the
Company's consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K as of and for the year ended March 31,
1996.

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED DECEMBER 29, 1996 AND DECEMBER 24, 1995 (THIRD
QUARTER AND FIRST NINE MONTHS OF FISCAL 1997 AND FISCAL 1996, RESPECTIVELY).

During the three and nine months ended December 29, 1996, the Company 
continued development activities under a research and development agreement 
with Delphi. Payments were generally made in accordance with the achievement 
of certain milestones.  No revenues were recognized during the third quarter 
and first nine months of fiscal 1997.

In September, 1994 the Company and Delphi signed a new five year agreement to 
combine efforts in developing the Company's rechargeable solid state lithium 
polymer battery technology.  Under the agreement, Delphi and the Company 
combined their research and development activities in a new facility in 
Henderson, Nevada.  The new facility is owned by the Company, with Delphi 
paying a fee of $50,000 per month over the five year term of the new 
agreement for access to the Company's research and development (of which 
$150,000 and $450,000 were recognized during the third quarter and nine 
months of fiscal 1997, respectively, as an offset to research and product 
development expenses).  In addition, Delphi is paying a majority of the 
facility's operating costs over the term of the new five year agreement.  The 
Company is treating both of these payments as an offset to research and 
development expense.

Research and development expenses were $3,570,000 and $8,810,000 during the 
three and nine months ended December 29, 1996 as compared to $1,363,000 and 
$5,531,000 during the same periods of fiscal 1996.  The increase between 
comparable periods was primarily due to costs incurred to proceed with 
manufacturing product in the first half of calendar year 1997. 

Marketing expenses were $29,000 and $152,000 for the third quarter and nine 
months of fiscal year 1997, respectively, as compared to $90,000 and $383,000 
during similar periods of fiscal year 1996.  The comparative decrease is the 
result of a reduction in headcount, relocation and travel expenses.

General and administrative expenses increased to $4,122,000 during fiscal 
1997s first nine months, up from $3,921,000 during the first nine months of 
fiscal 1996.  The year to year change primarily reflects an increase in 
payroll and professional services spending.  For the third quarter, general 
and administrative expenses increased to 

                                      8

<PAGE>

$1,695,000 from $1,439,000 last year primarily as a result of increased legal 
expenses and reduction in other income associated with the liquidation of our 
Danish subsidiary in fiscal 1996.

Interest income decreased to $631,000 and $2,084,000 during the third quarter
and nine months of fiscal year 1997, respectively, as compared to $912,000 and
$2,642,000 during the prior fiscal year's same periods.  The difference is a
result of fewer funds available for investment purposes.

Interest expense was $139,000 and $425,000 during the third quarter and nine
months of fiscal year 1997, respectively, as compared to $172,000 and $716,000
during the prior fiscal year's comparable periods.  This decrease is a result of
reduction in long-term debt outstanding.

LIQUIDITY AND CAPITAL RESOURCES

The Company used $9,484,000 net cash for operating activities during fiscal year
1997's first nine months whereas it used $7,135,000 during the first nine months
of fiscal year 1996, an increase between comparable periods of $2,349,000.  This
net increase primarily resulted from costs associated with the product
commercialization activities.

During the nine months ended December 29, 1996, the Company provided $19,956,000
net cash from investing activities compared to $5,772,000 provided during the
first nine months of fiscal year 1996, an increase of $14,184,000 between
comparable periods.  The increase primarily was a result of shortened investment
maturities, resulting in reclassification to cash and cash equivalents.

The Company used $1,477,000 net cash from financing activities during fiscal
year 1997's first nine months versus using $1,649,000 during the first nine
months of fiscal year 1996.  This decrease resulted from lower grant levels and
reduced debt repayments.

As a result of the above, the Company had a net increase in cash and cash
equivalents of $8,331,000 during the fiscal year 1997's first nine months,
whereas it had a net decrease of $3,333,000 during the same period of fiscal
year 1996.

The Company's $2,000,000 working capital line of credit is available through
March, 1997.  The working capital line collateralizes outstanding letters of
credit, which reduce borrowings otherwise available under the line.  As of
December 29, 1996, there are outstanding letters of credit in the amount of
$1,375,000 to assure delivery of raw materials for product commercialization.

During fiscal year 1994, the Company through its Dutch subsidiary, signed an
agreement with the Northern Ireland Industrial Development Board (IDB) to open
an automated manufacturing plant in Northern Ireland in exchange for capital and
revenue grants from the IDB.  The Company has also received offers from the IDB
to receive additional grants.  The grants available under the agreement and
offers, for an aggregate of up to 27,555,000, generally become available over a
five year period through October 31, 1998.  As of December 29, 1996, the Company
had received grants aggregating 3,978,050 reducing remaining grants available to
23,576,950 (US. $39,885,000 as of December 29, 1996).  The Company is in the
process of negotiating an extension to the October 31, 1998 committment date
from the IDB.

As a condition to receiving funding from the IDB, the subsidiary must maintain a
minimum of 12,000,000 in debt or equity financing from the Company.  Aggregate
funding under the grants is limited to 4,035,000 until the Company has
recognized $4,000,000 in aggregate revenue from the sale of its batteries
produced in Northern Ireland.  Given that the Company has no agreements to
supply batteries using its current technology, there are no assurances that the
Company will be able to meet the agreement's revenue test.

The amount of the grants available under the agreement and offers is 
primarily dependent on the level of capital expenditures made by the Company. 
Substantially all of the funding received under the grants is repayable to 
the IDB if the subsidiary is in default under the agreement and offers, which 
includes the permanent cessation of business in Northern Ireland.  Funding 
received under the grants to offset capital expenditures is repayable if 
related equipment is sold, transferred or otherwise disposed of during a four 
year period after the date of grant.  In addition, a portion of funding 
received under the grants may also be repayable if the subsidiary fails to 
maintain

                                      9

<PAGE>

specified employment levels for the two year period immediately after the end 
of the five year grant period.  The Company has guaranteed the subsidiary's 
obligations to the IDB under the agreement.

There can be no assurance that the Company will be able to meet the requirements
necessary for it to receive and retain grants under the IDB agreement and
offers.

The Company expects that its existing funds as of December 29, 1996, together
with the interest earned thereon, will be sufficient to fund the Company's
operations through the end of fiscal year 1997 and into fiscal 1998.  The
Company anticipates that it may need substantial additional funds in the future
for capital expenditures, research and product development, marketing and
general and administrative expenses and to pursue joint venture opportunities. 
The Company's cash requirements, however, may vary materially from those now
planned because of changes in the Company's operations, including changes in OEM
relationships or market conditions.  There can be no assurance that funds for
these purposes, whether from equity or debt financing agreements with strategic
partners or other sources, will be available on favorable terms, if at all.

Forward looking statments involve a number of risks and uncertaintites
including, but not limited to, market acceptance, changing economic conditions,
risks in product and technology development, effect of the Companys accounting
policies and other risk factors detailed in the Companys Securities and Exchange
Commission filings.

RECENT ACCOUNTING PRONOUNCEMENTS

During March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires the Company to review for impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  In certain situations, an
impairment loss would be recognized.  It will be effective for the Companys
fiscal year 1996.  The Company has studied the implications of the statement,
and based on its initial evaluation, does not expect it to have a material
impact on the Companys financial condition or results of operations.

During October 1995, the Financial Accounting Standards Board issued Statement
No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation, which
establishes a fair value based method of accounting for stock-based compensation
plans.  The Company is currently following the requirements of APB Opinion No.
25, Accounting for Stock Issued to Employees while it studies the implications
of SFAS No. 123 and evaluates the effect, if any, on the financial condition and
results of operations of the Company.  SFAS No. 123 will be effective for the
Companys fiscal year 1997.

                                       10

<PAGE>

                          Part II - OTHER INFORMATION


The discussion and analysis below, and throughout this report, contains forward
looking statements within the meaning of Section 27A of the Securities and
Exchange Act of 1934.  Actual results could differ materially from those
projected or suggested in the forward looking statements as a result of the risk
factors set forth herein and in the Companys Annual Report on Form 10-K as of
and for the year ended March 31, 1996.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

An annual meeting of the stockholders of the Company was held on January 31, 
1997.

Companys stockholders elected the Boards nominees as directors by the votes
indicated:

         Nominee                  Votes For                 Votes Withheld
         -------                  ---------                 --------------

         Calvin L. Reed           18,048,277                   1,286,457
         Carl E. Berg             18,046,110                   1,288,624
         Alan F. Shugart          18,047,477                   1,287,257
                                  

The selection of Coopers & Lybrand as the Companys independent auditors was 
ratified with 18,976,410 votes in favor, 199,048 against and 159,276 
abstentions.

The proposal to amend the 1990 Stock Option Plan to increase the aggregate
number of shares of common stock authorized for issuance by 750,000 shares and
to add provisions with respect to Section 162(m) of the Internal Revenue Code of
1986, as amended was ratified with 16,598,945 votes in favor, 2,285,725 against
and 206,014 abstentions.

The proposal to adopt the 1996 Non-Employee Directors Stock Option Plan and the
issuance of 250,000 shares of common stock under the plan was ratified with
15,021,733 votes in favor, 3,827,938 against and 241,013 abstentions.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     a.  Exhibits
         --------

         Exhibit 11.1   Statement of Calculation of Net Loss Per Share

         Exhibit 10.42  1990 Stock Option Plan

         Exhibit 10.43  1996 Non-Employee Directors Stock Option Plan

     b.  Reports on Form 8-K
         -------------------

         The Company filed no reports on Form 8-K during the quarter ended
         December 29, 1996.

                                       11

<PAGE>
                                    SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.


                               VALENCE TECHNOLOGY, INC.
                               (Registrant)





Date: February 7, 1997         By: /s/ David Archibald
                                  ------------------------------------------
                                  David Archibald
                                  Vice President and Chief Financial Officer
                                  (Principal Financial and Accounting Officer)


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