Summary of results for fiscal 2009 third quarter compared to fiscal 2008 third quarter:

Gross margin improved to a positive $250,000 compared to a negative $35,000.

Operating expenses declined to $4.1 million compared to $4.3 million.

Operating loss improved to $3.8 million compared to a loss of $4.3 million.

Summary of results for fiscal 2009 nine months compared to fiscal 2008 nine months:

Revenue was $21.5 million compared to $13 million.

Gross margin was $52,000 compared to $1.2 million.

Operating expenses were $13.5 million compared to $11.9 million.

Operating loss was $13.5 million compared to a loss of $10.7 million.

Net loss available to common shareholders was $17 million or $0.14 per share, compared to a loss of $15 million or $0.14 per share.

Despite the global economic slowdown, we are being sought out by customers for our industry leading products driven by their own interest in accelerating roll-out of various types of applications, including demonstration vehicle fleets, said Robert L. Kanode, president and chief executive officer of Valence Technology. Development of electric and hybrid vehicles in Europe appears to be moving at a faster pace than in the U.S. However, selection of platforms and the associated energy storage systems is a gradual process as OEMs conduct their extensive due diligence. We believe that our products, engineering capability, vast intellectual property and experience will fulfill their immediate needs. Both commercial and passenger vehicles are well-suited to be powered by our energy storage solutions and while opportunities are ample in Europe, we are now seeing increased interest from potential U.S. customers as well.

Third Quarter Financial Results:

For the third quarter of fiscal 2009, gross margin improved to a positive $250,000 compared to a negative $35,000 last year mainly due to higher sales.

Total operating expenses declined to $4.1 million from $4.3 million in last year’s quarter due to lower depreciation and amortization, marketing, and general and administrative costs slightly offset by higher research and product development costs. The company’s operating loss improved to $3.8 million compared to $4.3 million for the same period last year due to higher revenue and gross margin and lower operating costs.

Nine Month Financial Results:

For the nine-month period ended December 31, 2008, the company reported total revenue of $21.5 million compared to $13 million for the same period last year, or a 65% increase. This was mainly due to new customer shipments of energy storage systems and qualification packs. Gross margin declined to $52,000 compared to $1.2 million for the same period last year. The nine-month period ended December 31, 2008 included inventory adjustments which increased cost of sales and reduced gross margin. This included a $2.2 million adjustment related to the previously announced plans to discontinue the N-Charge product line and focus on higher margin large-format energy solutions.

The overall operating expenses rose to $13.5 million from $11.9 million compared to the same period last year in order to facilitate the anticipated ramp in the current fiscal year revenues. The net loss available to common stockholders was $17.0 million or $0.14 per share, compared to a net loss of $15 million or $0.14 per share, for the same period last year.