<PAGE>

                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC  20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended September 29, 1996.

Or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR 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 incorporation             (I.R.S. Employer
          or organization)                               Identification No.)


                     301 Conestoga Way, Henderson, Nevada 89015
           -----------------------------------------------------------
           (Address of principal 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                21,671,993 shares
     ----------------------------------      ---------------------------------
                  (Class)                    (Outstanding at November 1, 1996)


                                                                   Page 1 of 14
<PAGE>

                     VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
                       (companies in the development stage)

                                     FORM 10-Q

                     FOR THE QUARTER ENDED SEPTEMBER 29, 1996


                                      INDEX

                                                                       PAGES
                                                                       -----
PART I.   FINANCIAL INFORMATION

  Item 1.   Financial Statements:

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

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

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

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

  Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . . . .      8


PART II.  OTHER INFORMATION

  Item 5.   Other Information. . . . . . . . . . . . . . . . . . . .     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)

                                    -----

                                                     September 29,    March 31,
                                                         1996          1996 
                                                     -------------    ---------
                                   ASSETS
Current assets:
    Cash and cash equivalents                         $  31,808       $  24,569
    Short-term investments                               14,229          26,492
    Accounts receivable                                     635             545
    Interest receivable                                     171             444
    Prepaids and other current assets                       346             299
                                                      ---------       ---------

         Total current assets                            47,189          52,349

Investments                                               3,034           5,790
Property, plant and equipment, net                       10,621          11,752
Other assets                                                168             356
                                                      ---------       ---------

              Total assets                            $  61,012       $  70,247
                                                      ---------       ---------
                                                      ---------       ---------

                                LIABILITIES
Current liabilities:
    Current portion of long-term debt                 $   1,974       $   2,277
    Accounts payable                                        906           1,251
    Accrued expenses                                      5,071           6,180
    Accrued compensation                                  1,537           1,360
                                                      ---------       ---------

         Total current liabilities                        9,488          11,068

Long-term debt, less current portion                      5,372           6,169
                                                      ---------       ---------

              Total liabilities                          14,860          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:  21,672 and 21,665 
     shares at September 29, 1996 and March 31, 
     1996, respectively                                 140,334         140,307
Deficit accumulated during the development stage        (94,261)        (87,638)
Cumulative translation adjustment                            79             341
                                                      ---------       ---------

         Total stockholders' equity                      46,152          53,010
                                                      ---------       ---------

              Total liabilities and stockholders' 
               equity                                 $  61,012       $  70,247
                                                      ---------       ---------
                                                      ---------       ---------


   The accompanying notes are an integral part of these condensed 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)           Three Months Ended               Six Months Ended
                                 through       -----------------------------   -----------------------------
                               September 29,   September 29,   September 24,   September 29,   September 24,
                                   1996            1996            1995            1996             1995
                               -------------   -------------   -------------   -------------   -------------
<S>                            <C>             <C>             <C>             <C>             <C>
Revenue: 
  Research and 
   development contracts       $   21,605
                               ----------
Costs and expenses:
  Research and development         63,464       $   2,682        $   2,117       $   5,240      $   4,168
  Marketing                         2,595              56               79             123            293
  General and administrative       28,622           1,309            1,109           2,427          2,482
  Purchase of in-process
   technology                       8,212               -            6,064               -          6,064
  Investment in Danish
   subsidiary                       3,489               -                -               -              -
  Special charges                  18,872               -                -               -              -
                               ----------       ---------        ---------       ---------      ----------
  Total costs and
   expenses                       125,254           4,047            9,369           7,790         13,007
                               ----------       ---------        ---------       ---------      ----------
    Operating loss               (103,649)         (4,047)          (9,369)         (7,790)       (13,007)
                 
Interest income                    12,622             779              955           1,453          1,730
Interest expenses                  (3,234)           (161)            (264)           (286)          (544)
                               ----------       ---------        ---------       ---------      ----------
    Net loss                   $  (94,261)     $   (3,429)       $  (8,678)      $  (6,623)     $ (11,821)
                               ----------       ---------        ---------       ---------      ----------
                               ----------       ---------        ---------       ---------      ----------
Net loss per share             $        -      $    (0.16)       $   (0.43)      $   (0.31)     $   (0.59)
                               ----------       ---------        ---------       ---------      ----------
                               ----------       ---------        ---------       ---------      ----------
Shares used in computing
 net loss per share                     -          21,672           20,128          21,671         20,120
                               ----------       ---------        ---------       ---------      ----------
                               ----------       ---------        ---------       ---------      ----------
</TABLE>

  The accompanying notes are an integral part of these condensed 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
                                             (date of inception)     Six Months       Six Months  
                                                   through             Ended            Ended     
                                                September 29,       September 29,    September 24,
                                                    1996                1996             1995     
                                             -------------------    -------------    -------------
<S>                                          <C>                    <C>              <C>
Cash flows from operating activities:  
  Net loss                                       $  (94,261)          $  (6,623)      $  (11,821)
  Adjustments to reconcile net loss to net 
   cash used in operating activities: 
    Depreciation and amortization                    18,434               2,125            1,929
    Write-off of equipment                           14,767                   -           (1,085)
    Write-off of in-process technology                8,212                   -            8,065
    Compensation related to stock options             1,447                  26                -
    Noncash charge related to acquisition
     of Danish subsidiary                             2,245                   -                -
    Changes in assets and liabilities: 
      Accounts receivable                               454                 (90)             (48)
      Interest receivable                              (164)                274             (672)
      Notes receivable                                   45                 188             (157)
      Prepaid expenses and other current 
       assets                                        (1,303)                (45)             127
      Accounts payable                                  806                (344)          (1,574)
      Accrued liabilities                            (1,679)               (933)            (613)
                                                 -----------          ----------      -----------
        Net cash used in operating 
         activities                                 (50,997)             (5,422)          (5,849)
                                                 -----------          ----------      -----------

Cash flows from investing activities:  
  Purchase of in-process technology                  (2,001)                  0           (2,001)
  Purchase of long-term investments                (546,928)           (149,839)         (93,627)
  Maturities of long-term investments               529,663             164,857           95,525
  Capital expenditures                              (36,788)               (915)            (374)
  Other                                                (222)                  -                -
                                                 -----------          ----------      -----------
        Net cash provided by (used in)
         investing activities                       (56,276)             14,103             (477)
                                                 -----------          ----------      -----------

Cash flows from financing activities:  
  Property and equipment grants                       4,299                   5              322
  Maturities of restricted cash                           -                   -                -
  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                             (9,813)             (1,074)          (1,491)
  Proceeds from issuance of common stock,
   net of costs                                     136,511                   -              163
                                                 -----------          ----------      -----------
        Net cash provided by (used in) 
         financing activities                       139,844              (1,069)          (1,006)
                                                 -----------          ----------      -----------
Effect of foreign exchange rates on cash 
 and cash equivalents                                  (763)               (373)            (282)
                                                 -----------          ----------      -----------
Increase (decrease) in cash and cash 
 equivalents                                         31,808               7,239           (7,614)
Cash and cash equivalents, beginning 
 of period                                                0              24,569           16,602
                                                 -----------          ----------      -----------
Cash and cash equivalents, end of period         $   31,808           $  31,808       $    8,988
                                                 -----------          ----------      -----------
                                                 -----------          ----------      -----------
</TABLE>

    The accompanying notes are an integral part of these condensed 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 September 29, 1996 and March 31, 1996, its
results of operations for the period from March 3, 1989 (date of inception) to
September 29, 1996 and for each of the three-month and six-month periods ended
September 29, 1996 and September 24, 1995 and its cash flows for the period from
March 3, 1989 (date of inception) to September 29, 1996 and for each of the six-
month periods ended September 29, 1996 and September 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 and cash flows for the three-month and six-month
periods ended September 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 was 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 that person was an officer.  The Company believes that 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.

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

                                       6
<PAGE>

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 Company's fiscal year 1997.  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 Company's 
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".  The Company plans to adopt SFAS
No. 123 during fiscal 1997 utilizing the disclosure alternative.

5.   OTHER DEVELOPMENTS

In July, 1996, the Company, through its Dutch subsidiary, and Hanil Telecom Co.,
Ltd. ("Hanil Telecom") signed an agreement to establish a joint venture company
in Korea to manufacture, package and distribute advanced rechargeable solid
polymer electrolyte batteries utilizing the Company's solid polymer technologies
for the Korean markets.  Hanil Telecom is a subsidiary of Hanil Cement Mfg. Co.,
Ltd., a major conglomerate in Korea producing a wide variety of products for the
Korean market.  Hanil Valence Co., Ltd. ("Hanil Valence Co."), the joint venture
company, will be located in a Korean facility and has an initial capitalization
of $5 million, to be increased to $10 million within one year.  All funds are to
be provided to the joint venture by Hanil Telecom.  Hanil Telecom and the
company, through its Dutch subsidiary, each hold a 50% stake of the company. 
Additionally, Hanil Telecom will provide $40 million in loan guarantees to Hanil
Valence Co.  It is anticipated that the Company will supply Hanil Valence Co.
with its proprietary laminates, from which Hanil Valence Co. will manufacture
batteries for the Korean market.  Additionally, Valence will supply the
technology, initial equipment and product designs  and technical support out of
its Northern Ireland facility.

The Company and Alliant Techsystems ("Alliant") signed an agreement on 
October 7, 1996 to establish a joint venture company utilizing the Company's 
battery technology and technology obtained under the Company's Bellcore 
license to develop and manufacture batteries for its military customers in 
the United States and international military markets.  Alliant / Valence, 
L.L.C. ("Alliant / Valence"), the joint venture company, will operate a 
battery fabrication facility at Alliant's Power Sources Center in Horsham, 
Pennsylvania.  The Company is expected to supply the electrode laminate 
materials that are key to manufacturing high performance batteries.  
Alliant's Power Sources Center is a major producer of military and aerospace 
batteries.

                                       7
<PAGE>

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


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 $94,261,000
from its inception to September 29, 1996.

The discussion and analysis below contains trend analysis and other forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.  Actual results
could differ materially from those projected in the forward-looking statements
as a result of the risk factors set forth herein and in the Company's Annual
Report on Form 10-K as of and for the year ended March 31, 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 SIX MONTHS ENDED SEPTEMBER 29, 1996 (SECOND QUARTER AND FIRST HALF OF
FISCAL 1997) AND SEPTEMBER 24, 1995 (SECOND QUARTER AND FIRST HALF OF FISCAL
1996)

During the three and six months ended September 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 first three and six months
of fiscal 1997 and 1996.

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 $300,000
was recognized during the second quarter and first half 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 $2,682,000 and $5,240,000 during the
three and six months ended September 29, 1996 as compared to $2,117,000 and
$4,168,000 during the same period of fiscal 1996.  The increase between
comparable periods was primarily due to costs incurred to proceed with
manufacturing product in the first quarter of calendar year 1997.

Marketing expenses were $56,000 and $123,000 for the second quarter and first
half of fiscal year 1997, as compared to $79,000 and $293,000 during similar
periods of fiscal year 1996.  The comparative decrease is the result of a
decrease in headcount and relocation expenses.

                                       8
<PAGE>

General and administrative expenses decreased to $2,427,000 during fiscal 1997's
first half, down from $2,482,000 during the first half of fiscal 1996.  The year
to year decrease primarily reflects a reduction in legal and relocation
spending. For the second quarter, general and administrative increased to
$1,309,000 from $1,109,000 last year primarily as a result of increased legal
expenses.

Interest income decreased to $779,000 and $1,453,000 during the second quarter
and first half of fiscal 1997, respectively, as compared to $955,000 and
$1,730,000 during the prior fiscal year's same periods.  The difference is a
result of fewer funds available for investment purposes.

Interest expense was $161,000 and $286,000 during the second quarter and first
half of fiscal 1997, respectively, as compared to $264,000 and $544,000 during
the prior fiscal year's comparable periods.  This decrease is a result of
reduction in long-term debt outstanding as well as one-off adjustments to the
IDB loan.

LIQUIDITY AND CAPITAL RESOURCES

The Company used $5,422,000 net cash for operating activities during fiscal year
1997's first six months whereas it used $5,849,000 during the first six months
of fiscal year 1996, a decrease between comparable periods of $427,000.  This
net decrease primarily resulted from a reduction in technology acquisition
charges substantially offset by an increase in costs associated with the
commercialization activities.

During the six months ended September 29, 1996, the Company provided $14,103,000
net cash from investing activities compared to $477,000 used during the first
six months of fiscal year 1996, an increase of $14,580,000 between comparable
periods.  The increase primarily was a result of maturities of investments being
reclassified to cash and cash equivalents.

The Company used $1,069,000 net cash from financing activities during fiscal
year 1997's first six months versus using $1,006,000 during the first six months
of fiscal year 1996.  This decrease essentially resulted from lower grant
levels.

As a result of the above, the Company had a net increase in cash and cash
equivalents of $7,239,000 during the fiscal year 1996's first six months,
whereas it had a net decrease of $7,614,000 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
September 29, 1996, there are no outstanding letters of credit.

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 L27,555,000, generally become available over a
five year period through October 31, 1998.  As of September 29, 1996, the
Company had received grants aggregating L3,978,050 reducing remaining grants
available to L23,576,950 (US. $36,851,000 as of September 29, 1996).

As a condition to receiving funding from the IDB, the subsidiary must maintain a
minimum of L12,000,000 in debt or equity financing from the Company.  Aggregate
funding under the grants is limited to L4,035,000 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 September 29, 1996, 
together with the interest earned thereon, will be sufficient to fund the 
Company's operations through the end of fiscal year 1997.  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 statements involve a number of risks and uncertainties 
including, but not limited to, market acceptance, changing economic 
conditions, risks in product and technology development, effect of the 
Company's accounting policies and other risk factors detailed in the 
Company's 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 Company's fiscal year 1997.  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 Company's 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 Company's fiscal year 1997.

OTHER DEVELOPMENTS

In July, 1996, the Company, through its Dutch subsidiary, and Hanil Telecom 
Co., Ltd. ("Hanil Telecom") signed an agreement to establish a joint venture 
company in Korea to manufacture, package and distribute advanced rechargeable 
solid polymer electrolyte batteries utilizing the Company's solid polymer 
technologies for the Korean markets.  Hanil Telecom is a subsidiary of Hanil 
Cement Mfg. Co., Ltd., a major conglomerate in Korea producing a wide variety 
of products for the Korean market.  Hanil Valence Co., Ltd. ("Hanil Valence 
Co."), the joint venture company, will be located in a Korean facility and 
has an initial capitalization of $5 million, to be increased to $10 million 
within one year.  All funds are to be provided to the joint venture by Hanil 
Telecom.  Hanil Telecom and the company, through its Dutch subsidiary, each 
hold a 50% stake of the company. Additionally, Hanil Telecom will provide $40 
million in loan guarantees to Hanil Valence Co.  It is anticipated that the 
Company will supply Hanil Valence Co. with its proprietary laminates, from 
which Hanil Valence Co. will manufacture batteries for the Korean market.  
Additionally, Valence will supply the technology, initial equipment and 
product designs and technical support out of its Northern Ireland facility.

The Company and Alliant Techsystems ("Alliant") signed an agreement on 
October 7, 1996 to establish a joint venture company utilizing the Company's 
battery technology and technology obtained under the Company's Bellcore 
license to develop and manufacture batteries for its military customers in 
the United States and international military markets.  Alliant / Valence, 
L.L.C. ("Alliant / Valence"), the joint venture company, will operate a 
battery fabrication facility at Alliant's Power Sources Center in Horsham, 
Pennsylvania.  The Company is expected to supply the electrode laminate 
materials that are key to manufacturing high performance batteries.  
Alliant's Power Sources Center is a major producer of military and aerospace 
batteries.

                                      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 Act of
1933 and Section 21E of the Securities 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 Company's
Annual Report on Form 10-K as of and for the year ended March 31, 1996.

ITEM 5.   OTHER INFORMATION

The Company and Alliant Techsystems ("Alliant") signed an agreement on October
7, 1996 to establish a joint venture company utilizing the Company's battery
technology and technology obtained under the Company's Bellcore license to
develop and manufacture batteries for its military customers in the United
States and international military markets.  Alliant / Valence, L.L.C. ("Alliant
/ Valence"), the joint venture company, will operate a battery fabrication
facility at Alliant's Power Sources Center in Horsham, Pennsylvania.  The
Company is expected to supply the electrode laminate materials that are key to
manufacturing high performance batteries.  Alliant's Power Sources Center is a
major producer of military and aerospace batteries.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     a.   EXHIBITS

          Exhibit 11.1   Statement of Calculation of Net Loss Per Share

          Exhibit 10.39  Joint Venture Agreement between the Company and Alliant
                         Techsystems.
          
          Exhibit 10.40  License and Support Agreement between the Company and
                         Alliant / Valence, L.L.C.
          
          Exhibit 10.41  Battery Laminate Supply Agreement between the Company
                         and Alliant / Valence, L.L.C.

     b.   REPORTS ON FORM 8-K

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

                                      11
<PAGE>

                                EXHIBIT INDEX

EXHIBIT                                                             SEQUENTIAL
NUMBER     EXHIBIT                                                 PAGE NUMBER
--------------------------------------------------------------------------------
11.1       Statement of Calculation of Net Loss Per Share                14

10.39(*)   Joint Venture Agreement between the Company and 
           Alliant Techsystems.                                          15

10.40(*)   License and Support Agreement between the Company and 
           Alliant / Valence, L.L.C.                                     26

10.41(*)   Battery Laminate Supply Agreement between the Company
           and Alliant / Valence, L.L.C.                                 36



--------------------------------------------------------------------------------
(*)  PORTIONS OF THE TEXT HAVE BEEN OMITTED.  A SEPARATE FILING OF THE OMITTED
TEXT HAS BEEN MADE WITH THE COMMISSION AS PART OF REGISTRANT'S APPLICATION FOR
CONFIDENTIAL TREATMENT.

                                      12
<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: November 13, 1996        By: /s/ David Archibald
                                   ------------------------------------
                                   David Archibald
                                   Vice President, Chief Financial Officer
                                   (Principal Financial and Accounting Officer)



                                      13