The company reported a net loss available to common stockholders of $4.8 million, compared to a net loss available to common stockholders of $8.1 million in the second quarter of fiscal 2006, and a net loss of $5.7 million, in the first quarter of fiscal 2007.

I am pleased with our cost reduction programs and enhanced manufacturing processes, as well as the momentum we are experiencing for our large-format Saphion batteries. We will remain focused on cost control, quality processes and products, improved productivity and higher revenue, while diligently working to bring the Company to profitability.

Battery technology improvements are slow processes because of the technologically intense and complex issues involved in developing battery chemistry. The market changes slowly from legacy technology to new technology. Valence is continuing development of its Saphion II technology. This represents the next uptick in energy density for Valence over the Saphion I technology...It will take time before it is ready for production. Prototypes for manufacturing will begin before calendar year end.

—Dr. James R. Akridge, President and CEO

Saphion I (iron phosphate) technology has some room to grow in energy density mainly through improvements in assembly processes and in coating and binding technology. Saphion II offers an uptick in voltage to 3.6V compared to the 3.2V of Saphion I technology.

Saphion II also offers additional capacity mainly due to “how we squeeze out the remaining capacity over and above the voltage advantage by cell design and binding and those types of factors,” according to Akridge.