<SUBMISSION>
<ACCESSION-NUMBER>0000032878-05-000104
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20050930
<FILING-DATE>20051109
<DATE-OF-FILING-DATE-CHANGE>20051109
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ENERGY CONVERSION DEVICES INC
<CIK>0000032878
<ASSIGNED-SIC>3690
<IRS-NUMBER>381749884
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-08403
<FILM-NUMBER>051191180
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2956 WATERVIEW DRIVE
<CITY>ROCHESTER HILLS
<STATE>MI
<ZIP>48309
<PHONE>248-293-0440
</BUSINESS-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ENERGY CONVERSION LABORATORIES INC
<DATE-CHANGED>19710603
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>form10q_093005-1q06.htm
<DESCRIPTION>QUARTERLY REPORT FOR PERIOD ENDED SEP30-05
<TEXT>
<HTML>
<HEAD>
<TITLE> </TITLE>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>UNITED STATES</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>SECURITIES AND EXCHANGE COMMISSION</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>WASHINGTON, D.C. 20549</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>FORM 10-Q</font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>(Mark One)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="97%" style=' margin-left:5.4pt;border-collapse:collapse'>
    <tr>
        <td width="6%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:6.0pt;text-align:left;margin-top:0pt;margin-bottom:1.5pt'><font SIZE=2><u>
&nbsp;X&nbsp;</u></font></p> </td>
        <td width="93%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:1.5pt'><font size=2>QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005.</font>
</p> </td> </tr>
    <tr>
        <td width="6%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.5pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="93%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td> </tr>
    <tr>
        <td width="6%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:1.5pt'>&nbsp;&nbsp;<u>
&nbsp;&nbsp;&nbsp;&nbsp;</u> </p> </td>
        <td width="93%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.5pt;margin-bottom:0pt'><font size=2>TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
</font><font size=2>______________</font><font size=2>.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:7.69%; text-indent:-7.69%;text-align:justify;'><font size=2>&nbsp;
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Commission File Number: </font><u><font size=2>
&nbsp;&nbsp;1-8403&nbsp;&nbsp;</font></u><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>


    <tr>
        <td width="100%" valign=top align=center> <font size=2>ENERGY CONVERSION DEVICES, INC.</font> <br>
        <HR noshade width="100%"  color="gray" size="1"> </td></tr>
     <tr>
        <td width="100%" valign=top align=center> <font size=2>(Exact name of registrant as specified in its charter)</font></td>
</tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="97%" style=' margin-left:5.4pt;border-collapse:collapse'>
    <tr>
        <td width="50%" valign=bottom style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:1.0pt'><font SIZE=2>DELAWARE
</font></p> </td>
        <td width="49%" valign=bottom style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:1.0pt'><font size=2>
38-1749884</font></p> </td>
</tr>

    <tr>
        <td valign=top style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'>
<HR noshade width="100%"  color="gray" size="1"> </td>
        <td valign=top style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'>
<HR noshade width="100%"  color="gray" size="1"> </td>
</tr>

    <tr>
        <td width="50%" valign=top style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(State or other jurisdiction of
incorporation)</font></p> </td>
        <td width="49%" valign=top style='padding:0in 5pt 0in 5pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(I.R.S.
Employer Identification No.)</font></p> </td>
</tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="97%" style=' margin-left:5.4pt;border-collapse:collapse'>
    <tr>
        <td width="64%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:1.5pt'><font size=2>2956
Waterview Drive, Rochester Hills, Michigan</font></p> </td>
        <td width="35%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:1.5pt'><font size=2>48309
</font></p> </td> </tr>
    <tr>
        <td valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'>
<HR noshade width="100%"  color="gray" size="1"> </td>
        <td valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'>
<HR noshade width="100%"  color="gray" size="1"> </td> </tr>
    <tr>
        <td width="64%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(Address of
principal executive offices)</font></p> </td>
        <td width="35%" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:1.5pt;margin-bottom:0pt'><font size=2>(Zip
Code)</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Registrant's telephone number, including area code
</font><u><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;(248)
293-0440&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>

    <tr>
        <td width="100%" colspan=2 valign=top > <HR noshade width="100%" color="gray" size="1"> </td> </tr>

    <tr>
        <td width="8%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="91%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Former
name, former address and former fiscal year, if changed since last report.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>






<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>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.   </font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>
<font size=2>Yes&nbsp;&nbsp;&nbsp;[ X ]</font><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-indent:7.69%; text-align:justify;'><font size=2>Indicate by check mark whether
the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Yes&nbsp;&nbsp;&nbsp;[ X ]</font><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-indent:7.69%; text-align:justify;'><font size=2>Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Yes&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</font><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;&nbsp;[ X ]</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-indent:7.69%; text-align:justify;'><font size=2>As of November 4, 2005, there
were 29,426,203 shares of ECD's Common Stock outstanding.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<HR size=2 width="100%" align=center>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Page 1 of 43 Pages</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<P ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></P>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>CONSOLIDATED FINANCIAL STATEMENTS<BR><BR>TABLE OF CONTENTS<BR></font></u></P>


<TABLE WIDTH=600 cellspacing=3>

<TR VALIGN="BOTTOM">
     <TH WIDTH=3%></TH>
     <TH WIDTH=5%></TH>
     <TH WIDTH=85%></TH>
     <TH WIDTH=7%></TH></TR>

<TR VALIGN="TOP">
     <TD WIDTH=100% COLSPAN=4><font SIZE=2><U>PART I&nbsp;&nbsp;&#151;&nbsp;&nbsp;FINANCIAL INFORMATION</U></font></TD>
</TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD COLSPAN=2><font SIZE=2>Item 1.</font>&nbsp;&nbsp;&nbsp;<font SIZE=2>Financial Statements</font></TD>
     <TD align=right><font SIZE=2>3</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>

     <TD><font SIZE=2>Consolidated Statements of Operations</font></TD>
     <TD align=right><font SIZE=2>3</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>Consolidated Balance Sheets - Assets</font></TD>
     <TD align=right><font SIZE=2>4</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>Consolidated Balance Sheets - Liabilities and Stockholders' Equity</font></TD>
     <TD align=right><font SIZE=2>5</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>Consolidated Statements of Cash Flows</font></TD>
     <TD align=right><font SIZE=2>6</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE A&nbsp;&nbsp;-&nbsp;&nbsp;Summary of Accounting Policies</font></TD>
     <TD align=right><font SIZE=2>8</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE B&nbsp;&nbsp;-&nbsp;&nbsp;Settlement Agreement</font></TD>
     <TD align=right><font SIZE=2>17</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE C&nbsp;&nbsp;-&nbsp;&nbsp;Accounts Receivable</font></TD>
     <TD align=right><font SIZE=2>18</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE D&nbsp;&nbsp;-&nbsp;&nbsp;Inventories</font></TD>
     <TD align=right><font SIZE=2>19</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE E&nbsp;&nbsp;-&nbsp;&nbsp;Joint Ventures and Investments</font></TD>
     <TD align=right><font SIZE=2>19</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE F&nbsp;&nbsp;-&nbsp;&nbsp;Liabilities and Line of Credit</font></TD>
     <TD align=right><font SIZE=2>24</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE G&nbsp;&nbsp;-&nbsp;&nbsp;Commitments</font></TD>
     <TD align=right><font SIZE=2>25</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE H&nbsp;&nbsp;-&nbsp;&nbsp;Nonrefundable Advance Royalties</font></TD>
     <TD align=right><font SIZE=2>25</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE I&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;Product Sales, Royalties, Revenues from Product
Development<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreements and
License and Other Agreements</font></TD>
     <TD align=right><font SIZE=2>26</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE J&nbsp;&nbsp;-&nbsp;&nbsp;Business Segments</font></TD>
     <TD align=right><font SIZE=2>27</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE K&nbsp;&nbsp;-&nbsp;&nbsp;Other Comprehensive Income (Loss)</font></TD>
     <TD align=right><font SIZE=2>29</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE L&nbsp;&nbsp;-&nbsp;&nbsp;Capital Stock</font></TD>
     <TD align=right><font SIZE=2>29</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD>&nbsp;</TD>
     <TD><font SIZE=2>NOTE M&nbsp;&nbsp;-&nbsp;&nbsp;Subsequent Event</font></TD>
     <TD align=right><font SIZE=2>29</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD colspan=2><font SIZE=2>Item 2.&nbsp;&nbsp;&nbsp;Management's Discussion and Analysis of Financial
Condition and<br>
                    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Results of Operations
</font></TD>
     <TD align=right><font SIZE=2>30</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD colspan=2><font SIZE=2>Item 3.&nbsp;&nbsp;&nbsp;Quantitative and Qualitative Disclosures about
Market Risk</font></TD>
     <TD align=right><font SIZE=2>40</font></TD></TR>

<TR VALIGN="TOP">
     <TD>&nbsp;</TD>
     <TD colspan=2><font SIZE=2>Item 4.&nbsp;&nbsp;&nbsp;Controls and Procedures</font></TD>
     <TD align=right><font SIZE=2>41</font></TD></TR>

<TR VALIGN="TOP">
     <TD colspan=4><font SIZE=2><U>PART II&nbsp;&nbsp;&#151;&nbsp;&nbsp;OTHER INFORMATION</U></font></TD>
</TR>

<TR VALIGN="TOP">
     <TD></TD>
     <TD colspan=2><font SIZE=2>Item 6.&nbsp;&nbsp;&nbsp;Exhibits and Reports on Form 8-K</font></TD>
     <TD align=right><font SIZE=2>42</font></TD></TR>

<TR VALIGN="TOP">
     <TD colspan=3><font SIZE=2>SIGNATURES</font></TD>
     <TD align=right><font SIZE=2>43</font></TD></TR>

<TR VALIGN="TOP">
     <TD></TD>
     <TD></TD>
     <TD></TD>
     <TD></TD></TR>
</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>2</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><U><font SIZE=2>PART I - FINANCIAL INFORMATION</font></U></p>


<table border="0" cellspacing=3 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >

            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u>
<font size=2>Item 1
</font></u><font size=2>.</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Financial
Statements</font></u></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>CONSOLIDATED STATEMENTS OF
OPERATIONS</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>(Unaudited)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>



<TABLE CELLPADDING="0" CELLSPACING="3" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="6"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended <BR>
  September 30,</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     </TR>
<TR VALIGN=Bottom>
     <TD WIDTH="58%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>REVENUES</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     </TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  19,266,801</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  14,046,142</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,183,170</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,578,973</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,896,874</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,794,449</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with related parties
</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>415,263</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,117,614</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD ALIGN="LEFT" VALIGN="TOP"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
revenues from product development agreements</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,312,137</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,912,063</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Revenues from license and other agreements
</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>258,095</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>238,095</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other revenues</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>21,460</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>199,256</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other revenues from related parties</FONT>
</TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>205,873</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>117,337</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD ALIGN="LEFT" VALIGN="TOP"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other
operating revenues</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>227,333</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>316,593</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL REVENUES</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>23,247,536</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>22,091,866</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>EXPENSES</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>15,859,451</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>13,323,851</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development
agreements</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,871,302</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,611,184</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT>
</TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,504,612</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,047,946</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Patents</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>606,306</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>709,172</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative (net)
</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,190,028</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,512,873</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL EXPENSES</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>30,031,699</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>28,205,026</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>LOSS FROM OPERATIONS</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,784,163</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,113,160</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>OTHER INCOME (EXPENSE)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest income</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>796,554</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>77,178</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest expense</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(163,946</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(236,427</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Distribution from joint venture</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,000,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other nonoperating income (expense)</FONT>
</TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(56,699</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,907</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL OTHER INCOME (EXPENSE)
</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>575,909</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>7,846,658</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET INCOME (LOSS) FROM CONTINUING OPERATIONS</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,208,254</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,733,498</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Loss from discontinued operations</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(257,559</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(385,546</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN="Bottom">
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET INCOME (LOSS)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,465,813</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,347,952</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        </TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD COLSPAN="7" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Basic net income (loss) per share</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.21</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.07</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Basic net income (loss) per share</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.22</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        </TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD COLSPAN="7" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Diluted net income (loss) per share</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.21</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.07</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Diluted net income (loss) per share</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.22</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        </TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>See notes to consolidated financial statements.
</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>3</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>CONSOLIDATED BALANCE SHEETS
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><U><font SIZE=2>ASSETS</font></U></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<BR>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<BR>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH></TR>


<TR VALIGN=Bottom>
     <TH ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH></TR>


<TR VALIGN=Bottom>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>CURRENT ASSETS</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cash, including cash equivalents of
$84,659,000 at<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005 and
$83,964,000 at June 30, 2005</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   88,661,890</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   84,295,571</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Short-term investments</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>11,840,526</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accounts receivable (net of allowance for
uncollectible<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts of approximately
$437,000 at September 30,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005 and $412,000 at June 30,
2005)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>16,758,665</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>19,112,613</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accounts receivable due from related
parties</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>209,618</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>419,862</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>19,549,134</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>18,066,876</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Assets held for sale</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>130,825</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>131,797</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,978,574</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>960,128</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL CURRENT
ASSETS</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>127,288,706</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>134,827,373</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>





<TR VALIGN=Bottom>
     <TD COLSPAN="7" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>PROPERTY, PLANT AND EQUIPMENT</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Land and land improvements</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>267,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>267,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Buildings and improvements</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>14,814,644</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>14,804,999</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Machinery and other equipment (including
construction<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in progress of approximately
$12,566,000 at September<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30, 2005 and $1,930,000 at June
30, 2005)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>76,413,979</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>65,784,810</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Capitalized lease equipment</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,000,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,000,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>101,495,623</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>90,856,809</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Less accumulated depreciation and
amortization</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(31,898,950</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(29,920,832</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL
PROPERTY, PLANT AND EQUIPMENT</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>69,596,673</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>60,935,977</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD COLSPAN="7" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>INVESTMENT IN AND ADVANCES TO JOINT VENTURES</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Ovonyx</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cobasys</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>OTHER ASSETS</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,363,540</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,300,083</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL ASSETS
</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  199,248,919</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT">
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  198,063,433</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


</TABLE>



<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>See notes to consolidated
financial statements.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>4</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>CONSOLIDATED BALANCE SHEETS
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><U><font SIZE=2>LIABILITIES AND STOCKHOLDERS' EQUITY</font></U>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>

<TR VALIGN=Bottom>
     <TH WIDTH=60%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<br>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH WIDTH=3%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></TH>
     <TH WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<br>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TH WIDTH=60%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT></TH>
     <TH WIDTH=3%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></TH>
     <TH WIDTH=12><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH></TR>
</table>

<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>CURRENT LIABILITIES</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   15,462,823</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   15,914,518</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Salaries, wages and amounts withheld from employees</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,898,089</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,368,205</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Deferred revenues under business agreements</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>895,324</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,288,268</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=BOTTOM>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Current portion of deferred patent license fee</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>952,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>952,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Current installments on long-term liabilities</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>378,501</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>369,010</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL CURRENT LIABILITIES</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>20,587,117</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>22,892,381</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>LONG-TERM LIABILITIES</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,180,597</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,203,772</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>LONG-TERM DEFERRED PATENT LICENSE FEE</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>7,857,145</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,095,240</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NONREFUNDABLE ADVANCE ROYALTIES</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,142,946</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,151,679</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL LIABILITIES</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>39,767,805</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>42,343,072</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>COMMITMENTS (NOTE G)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>STOCKHOLDERS' EQUITY</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Capital Stock</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A Convertible Common Stock,</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;par value $0.01 per share:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized - 500,000 shares</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued &amp; outstanding &#151; 219,913 shares</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;at June 30, 2005</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,199</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class B Convertible Common Stock,</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;par value $0.01 per share:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized, issued and outstanding - 430,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares at June 30, 2005</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,300</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, par value $0.01 per share:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized - 50,000,000 shares</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued and outstanding &#151; 29,331,113 shares at</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005 and 28,232,970 shares</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;at June 30, 2005</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>293,311</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>282,330</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>450,760,422</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>440,577,239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accumulated deficit</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(291,657,166</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(285,191,353</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>84,547</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>211,586</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Unearned compensation on Class B Convertible</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(165,940</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL STOCKHOLDERS' EQUITY</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>159,481,114</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>155,720,361</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL LIABILITIES &amp; STOCKHOLDERS' EQUITY</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  199,248,919</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  198,063,433</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt; text-align:left;'><font size=2>See notes to consolidated
financial statements.</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>5</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>CONSOLIDATED STATEMENTS OF
CASH FLOWS</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(Unaudited)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>


<TR VALIGN=Bottom>
     <TH WIDTH=67%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN=CENTER COLSPAN=6><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended <BR>
  September 30,</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH WIDTH=67%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN=CENTER COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH ALIGN=CENTER COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     </TR>

<TR VALIGN=Bottom>
     <TD WIDTH=67% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>OPERATING ACTIVITIES:</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) from continuing
operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  (6,208,254</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,733,498</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income
(loss) to net cash</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provided by (used in) operating
activities:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,982,345</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,016,821</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
on discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>19,190</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt
expense</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>24,614</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>31,767</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
of deferred nonrefundable patent license fee</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(238,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in
nonrefundable advance royalties</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(8,733</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(1,135,369</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock and
stock options issued for services rendered</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>999,199</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>185,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on sale
of equipment</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>729</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,898</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement
liability</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>75,084</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>83,136</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss from
discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(257,559</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(385,546</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Changes in working capital:</FONT>
</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
receivable</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,329,334</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>185,356</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts and
note receivable due from related parties</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>210,244</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>795,360</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(1,482,258</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,413,036</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(1,081,902</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(359,241</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
portion of deferred nonrefundable patent license fee</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>952,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
payable and accrued expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(1,921,811</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(2,713,411</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
revenues under business agreements</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(392,944</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(931,295</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
nonrefundable patent license fee</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,809,525</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET CASH PROVIDED BY (USED IN) OPERATIONS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(5,970,007</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,707,355</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>INVESTING ACTIVITIES:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Purchases of property, plant and
equipment</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(10,642,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(403,538</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from maturities of
investments</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>11,840,526</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of property, plant
and equipment</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,005</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,197,726</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(401,533</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>FINANCING ACTIVITIES:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Principal payments under short-term
and long-term debt</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;obligations and capitalized
lease obligations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(88,768</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(80,192</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock
options</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>9,354,407</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>11,440</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>9,265,639</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(68,752</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>EFFECT OF EXCHANGE RATE CHANGES ON CASH AND</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;CASH EQUIVALENTS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(127,039</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(20,151</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>NET INCREASE IN CASH AND CASH EQUIVALENTS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,366,319</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,216,919</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>84,295,571</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>13,826,537</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>CASH AND CASH EQUIVALENTS AT END OF PERIOD</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  88,661,890</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  24,043,456</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>See notes to consolidated financial statements.
</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>6</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2><u>CONSOLIDATED STATEMENTS OF
CASH FLOWS</u></font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(Unaudited)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>



<TABLE CELLPADDING=1 CELLSPACING=1 BORDER=0 WIDTH=85%>

<TR VALIGN=Bottom>
     <TH WIDTH=43%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN=CENTER COLSPAN=6><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended <BR>
  September 30,</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH WIDTH=43%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN=CENTER COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH ALIGN=CENTER COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     </TR>


<TR VALIGN=Bottom>
     <TD WIDTH=43% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>SUPPLEMENTAL DISCLOSURES OF</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CASH FLOW
INFORMATION:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 227,855</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 236,427</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>707,302</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>See notes to consolidated financial statements.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>7</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>








<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2><u>NOTE A &#151; Summary of
Accounting Policies</u></font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Basis of Presentation</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of the
consolidated financial statements for the interim periods have been included.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the Securities and Exchange Commission&#146;s rules and regulations.  The Company believes that the
disclosures are adequate to make the information presented not misleading.  It is suggested that these condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the
Company&#146;s latest annual report on Form 10-K (which is available on the Company&#146;s website www.ovonic.com).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Nature of Business</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Energy Conversion Devices, Inc.
(ECD) is a technology, product development and manufacturing company engaged in the invention, engineering, development and
commercialization of new materials, products and production technology in the fields of alternative energy and information
technologies.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Financial Statement Presentation, Principles of
Consolidation and Equity Accounting</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The consolidated financial
statements include the accounts of ECD and its 100%-owned manufacturing and sales subsidiaries United Solar Ovonic Corp. and
United Solar Ovonic LLC (jointly referred to as &#147;United Solar Ovonic&#148;) and its approximately 91%-owned subsidiary Ovonic
Battery Company, Inc. (Ovonic Battery) (collectively the "Company").  No minority interest related to Ovonic Battery is recorded
in the consolidated financial statements because there is no additional funding requirement by the minority shareholders. The
Company has a number of strategic alliances and, as of September 30, 2005, has two major investments accounted for using the
equity method: (i) Cobasys LLC, a joint venture between Ovonic Battery and a subsidiary of Chevron Corporation, Chevron Technology
Ventures LLC, (Chevron), each having 50% interest in the joint venture and (ii) Ovonyx, Inc., a 41.7%-owned
joint venture with Mr. Tyler Lowrey, Intel Capital and other investors.  See Note E for discussions of all of the Company&#146;s
major joint ventures.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>8</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Discontinued Operations</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In June 2005, the Company, as
part of its restructuring plan, decided to sell the assets of Ovonic Battery's metal hydride materials manufacturing business.
The Company is currently in negotiations with a third party to sell these assets.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>At June 30, 2005, the Company
reclassified the current net book value of these fixed assets (it does not anticipate any loss on this sale) as assets held for
sale and has ceased depreciating these assets.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>For each of the two quarterly
periods ended September 30, the Company has recorded the following results of its metal hydride materials manufacturing business as a
discontinued operation in accordance with Statement of Financial Accounting Standards (SFAS) No. 144:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>



<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=70%>
<TR VALIGN=Bottom>
     <TH WIDTH=40%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR SIZE="1" WIDTH="80%" ALIGN="Center" NOSHADE="Noshade"></TH>
     <TH WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR SIZE="1" WIDTH="80%" ALIGN="Center" NOSHADE="Noshade"></TH></TR>
<TR VALIGN=Bottom>
     <TH WIDTH=40%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   30,194</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   59,924</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Costs and expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>287,753</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>445,470</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net loss from discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> (257,559</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> (385,546</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>

</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Use of Estimates</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires
management to make estimates and assumptions that affect amounts reported therein.  Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may be based upon amounts that differ from those estimates.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Reclassifications</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Certain prior year amounts have
been reclassified to conform with fiscal year 2006 presentation.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Short-Term Investments</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has evaluated its
investment policies consistent with SFAS No. 115, &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148;
and determined that all of its investment securities are classified as available-for-sale.  Available-for-sale securities are
carried at fair value, with the unrealized gains and losses reported in Stockholders&#146; Equity under the caption
&#147;Accumulated other comprehensive income.&#148;  The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity.  Such amortization and accretion are included in interest income.  Realized gains
and losses and declines in value judged to be other than temporary on available-for-sale securities are included in other
nonoperating income (expense).  The cost of securities sold </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>9</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are included in interest income.  Short-term investments
consist of corporate notes which mature 91 days or more from date of acquisition.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following schedule
summarizes the contractual maturities and unrealized gains and losses on the Company's short-term investments (in thousands):
</font></p>
<br>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>

    <tr valign=top>
        <td width="33%"></TD>
        <TD colspan="4" width="60%" align=center><font size=2><b>June 30, 2005</b></font><HR noshade width="95%" size="1"></td></tr>

    <tr valign=top>
        <td width="33%"> <font size=1>&nbsp;</font></td>
        <td width="15%"> <font size=1>&nbsp;</font></td>
        <td width="30%" align=center colspan="2"> <font size=2><br>Gross Unrealized</font><HR noshade width="100%" size="1"></td>
        <td width="15%"> <font size=2></font></td> </tr>

    <tr valign=bottom>
        <td width="33%"> <font size=1>&nbsp;</font> </td>
        <td width="15%"> <font size=2>Cost</font> </td>
        <td width="15%"> <font size=2>Gains</font> </td>
        <td width="15%"> <font size=2>(Losses)</font></td>
        <td align=center width="15%"> <font size=2>Estimated <br>Fair Value</font></td></tr>

    <tr valign=top>
        <td width="33%"> <font size=1>&nbsp;</font></td>
        <td width="60%" colspan="4"> <HR noshade width="100%" size="1"> </td> </tr>

    <tr valign=top>
        <td width="33%"> <font size=2>Due within one year or less</font> </td>
        <td width="15%"> <font size=1>&nbsp; </font> </td>
        <td width="15%"> <font size=1>&nbsp; </font> </td>
        <td width="15%"> <font size=1>&nbsp; </font> </td>
        <td width="15%"> <font size=1>&nbsp; </font></td> </tr>

    <tr valign=top>
        <td width="33%"> <font size=2>Corporate notes</font></td>
        <td width="15%"> <font size=2>$&nbsp;&nbsp;11,841 </font> </td>
        <td width="15%"> <font size=2> $&nbsp;&nbsp;&nbsp;&#151; </font> </td>
        <td width="15%"> <font size=2>$&nbsp;&nbsp;&nbsp; &#151;</font> </td>
        <td width="15%"> <font size=2>$&nbsp;&nbsp;&nbsp;&nbsp;11,841</font></td> </tr>

</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>At September 30, 2005, the Company had no
short-term investments.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Capitalized Interest</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Interest on debt is capitalized
during active construction periods of equipment.  During the three months ended September 30, 2005, the Company incurred total
interest costs of $225,560, of which $61,614 was capitalized as part of the new 25MW manufacturing equipment currently under
construction.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Overhead and Operating, General and Administrative
Allocations</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company allocates overhead
and operating, general and administrative expenses to product development and research expenses and to cost of revenues from
product development agreements based on a percentage of direct labor costs.  For cost of revenues from product development
agreements, this allocation is limited to the amount of revenues, after direct expenses, under the applicable agreements.
Overhead is allocated to cost of product sales through the application of overhead to inventory costs.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following is a summary of
the gross operating, general and administrative expenses and the aforementioned allocations:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=7><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended, <BR> September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Gross Expenses</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  6,983,000</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  5,922,000</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Less&nbsp;&nbsp;-&nbsp;&nbsp;allocations to product development and research</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(3,512,000</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT>
     </TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(2,594,000</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;allocations to cost of revenues from product<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;development agreements</FONT></TD>

     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(281,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(815,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Remaining Expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  3,190,000</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  2,513,000</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR>
     <TD ALIGN=LEFT VALIGN=TOP><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD></TR>

</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>10</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Distribution from Joint Venture</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In July 2004, Cobasys made an
$8,000,000 special distribution to each of Ovonic Battery and Chevron for partial reimbursement of legal expenses paid on behalf
of Cobasys for litigation with Matsushita Electric Industrial Co. Ltd. (MEI) and related companies (see Note B).   </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Stock-Based Compensation</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>As of September 30, 2005, the
Company had established a number of stock option plans as discussed in more detail below. Prior to fiscal 2006, the Company
applied the intrinsic value method as outlined in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB No. 25") and related interpretations in accounting for stock options granted under these programs. Under the
intrinsic value method, no compensation expense was recognized if the exercise price of the Company's employee stock options
equaled the market price of the underlying stock on the date of the grant. Accordingly, no compensation cost was recognized in the
accompanying consolidated statements of earnings prior to fiscal year 2006 on stock options granted to employees, since all
options granted under the Company's stock option plans had an exercise price equal to the market value of the
underlying common stock on the date of grant.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Effective July 1, 2005, the
Company adopted SFAS No. 123(R), "Share-Based Payment" ("SFAS No. 123(R)"). This statement replaces SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") and supersedes APB No. 25. SFAS No. 123(R) requires that all stock-based compensation
be recognized as an expense in the financial statements and that such cost be measured at the fair value of the award. This
statement was adopted using the modified prospective method of application, which requires us to recognize compensation expense on
a prospective basis. Therefore, prior period financial statements have not been restated. Under this method, in addition to
reflecting compensation expense for new share-based awards, expense is also recognized to reflect the remaining service period of
awards that had been included in pro-forma disclosures in prior periods. SFAS No. 123(R) also requires
that excess tax benefits (none for ECD due to tax losses) related to stock option exercises be reflected as financing cash inflows
instead of operating cash inflows. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>With the adoption of SFAS No.
123(R), the Company is required to record the fair value of stock-based compensation awards as an expense. In order to determine
the fair value of stock options on the date of grant, the Company applies the Black-Scholes option-pricing model. Inherent in this
model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. While the
risk-free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public
sources, the expected stock-price volatility, forfeiture rate and option life assumptions require a greater level of judgment which make them
critical accounting estimates.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>11</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company uses an expected stock-price volatility
assumption that is based on historical implied volatilities of the underlying stock which is obtained from public data sources.
There were no stock option grants during the three months ended September 30, 2005.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>With regard to the
weighted-average option life and forfeiture rate assumptions, the Company considers the behavior of past grants and models the pattern of
aggregate exercises and forfeitures. Patterns are determined on specific criteria of the aggregate pool of optionees.  There were no stock option
grants during the three months ended September 30, 2005. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In October 2005, the Financial
Accounting Standards Board issued FASB Staff Position (FSP) No. FAS 123(R)-2, "Practical Accommodation to the Application of Grant
Date as defined in FASB Statement No. 123(R)," to provide guidance on determining the grant date for an award as defined in SFAS
No. 123(R). This FSP stipulates that assuming all other criteria in the grant date definition are met, a mutual understanding of
the key terms and conditions of an award to an individual employee is presumed to exist upon the award's approval in accordance
with the relevant corporate governance requirements, provided that the key terms and conditions of an award (a) cannot be
negotiated by the recipient with the employer because the award is a unilateral grant, and (b) are expected to be communicated to
an individual recipient within a relatively short time period from the date of approval. The Company
has applied the principles set forth in this FSP upon its adoption of SFAS No. 123(R).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD has common stock reserved
for issuance as follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=93%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=7><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Number of Shares</FONT><HR COLOR="Black" SIZE="1" WIDTH="100%"></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30, 2005</FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30, 2005</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     </TR>

<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Conversion of Class A Convertible Common Stock</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>219,913&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Conversion of Class B Convertible Common Stock</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>430,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Stock options</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,936,256&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,410,476&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Warrants</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,790,892&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,790,892&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Convertible Investment Certificates</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,210</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,210</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>






<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="70%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="70%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
</TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>TOTAL RESERVED SHARES</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,732,358&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,856,491&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="70%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="70%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
</TR>


</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has two shareholder-approved
plans, the 1995 Non-Qualified Stock Option Plan (1995 Stock Option Plan) pursuant to which 2,000,000 shares were reserved for grant and the
2000 Non-Qualified Stock Option Plan (2000 Stock Option Plan) pursuant to which 3,000,000 shares were reserved for grant.  The plans
authorize the granting of stock options at such exercise prices and to such employees, consultants and other persons as the Compensation
Committee appointed by the Board of Directors (the &#147;Compensation Committee&#148;) shall determine.  The 1995 Stock Option Plan provides that no option shall be granted after January 26, 2005.
The 2000 Stock Option Plan provides that no option shall be granted after January 25, 2010.


</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The purchase price and number of
shares covered by the options are subject to adjustment under certain circumstances to protect the optionholders against dilution.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>12</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The exercise period for stock
options generally may not exceed ten years from the date of grant. Stock option grants to individuals generally become exercisable
with 40% of the shares vesting one year after the date of grant and 20% after each of the second, third and fourth years of grant.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In September 1993, ECD&#146;s
Compensation Committee authorized the Company to cancel stock options to purchase 94,367 and 49,630 shares of Common Stock held by
Stanford R. Ovshinsky and Dr. Iris M. Ovshinsky, respectively, which previously had been granted under the Company&#146;s Amended
and Restated Stock Option Plan and to grant stock options to purchase 150,000 (adjusted to 528,088 as of June 30, 2005) and
100,000 (adjusted to 342,643 as of June 30, 2005) shares of Common Stock to Mr. and Dr. Ovshinsky, respectively, which were
subsequently granted to them pursuant to Stock Option agreements dated November 1993 (the &#147;Agreements&#148;).  The weighted
average exercise price of the outstanding stock options is $14.99 per share at September 30, 2005.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>A summary of the transactions
during the three months ended September 30, 2005 with respect to the above plan follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-<br>Average<br>Exercise<br>Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2">Aggregate<BR>Intrinsic<BR>Value <SUP>(1)</SUP><BR>(in millions) </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at June 30, 2005</FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>870,731</FONT></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;14.99</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Granted at fair value</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercised</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Expired</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Forfeited</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=1 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at September 30, 2005</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>870,731</FONT></td><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;14.99</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       26.0</FONT></TD>
        <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(2)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercisable at September 30, 2005</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>870,731</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;14.99</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       26.0</FONT></TD>
        <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(2)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

</TABLE>
<HR WIDTH=30% SIZE=2 COLOR=BLACK NOSHADE align=left>

            <p style='margin-left:17.25pt;text-indent:-17.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
(1)&nbsp;The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the
exercise price of the option.</font></p>
<p style='margin-left:17.3pt;text-indent:-17.3pt;text-align:left;margin-top:.15pt;margin-bottom: 0in'><font size=2>(2)&nbsp;Twelve
months after termination of employment other than voluntary termination.</font></p>

            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>




<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In June 2005, the Agreements
were amended by deleting the antidilution protection adjustment provision.  No further options will be granted to Mr. and Dr.
Ovshinsky under the Agreements.  In consideration of the approvals by Mr. and Dr. Ovshinsky to such amendment, ECD&#146;s
Compensation Committee approved the grant of options to Mr. Ovshinsky (100,000 shares) and Dr. Ovshinsky (65,000 shares) under the
Company&#146;s 2000 Non-Qualified Stock Option Plan.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>13</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>On January 15, 1999, ECD entered
into a Stock Option Agreement with Robert C. Stempel that granted Mr. Stempel an option to purchase up to 300,000 shares of Common
Stock at an exercise price of $10.688 per share, the fair market value of the Common Stock as of the date of the Stock Option
agreement.  The option, which is not subject to vesting requirements, may be exercised from time to time, in whole or in part,
commencing as of the date of the Stock Option Agreement and ending on the tenth anniversary of such date.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>A summary of the transactions
during the three months ended September 30, 2005 with respect to the above plan follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-<br>Average<br>Exercise<br>Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2">Aggregate<BR>Intrinsic<BR>Value <SUP>(1)</SUP><BR>(in millions) </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at June 30, 2005</FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>300,000</FONT></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;10.688</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Granted at fair value</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercised</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Expired</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Forfeited</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
<TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=1 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at September 30, 2005</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>300,000</FONT></TD>
<TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;10.688</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       10.3</FONT></TD>
        <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3.29</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercisable at September 30, 2005</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>300,000</FONT></TD>
<TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;10.688</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       10.3</FONT></TD>
        <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3.29</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD align=center WIDTH=12%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR align=center WIDTH=50% SIZE=3 COLOR=BLACK NOSHADE></TD></TR>

</TABLE>
<HR noshade align="LEFT" width="30%" size="2">





            <p style='margin-left:17.25pt;text-indent:-17.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
(1)&nbsp;The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the
exercise price of the option.</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Total net stock-based
compensation expense is attributable to the granting of and the remaining requisite service periods of stock options previously
granted. Compensation expense attributable to net stock-based compensation in the three months ended September 30, 2005 was
$500,000, increasing both basic and diluted loss $0.02 per share. As of September 30, 2005, the total unrecognized compensation
cost related to nonvested stock awards was $2.1 million and the related weighted-average period over which it is expected to be
recognized is approximately 1.19 years.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Prior to the Company's adoption
of SFAS No. 123(R), SFAS No. 123 required that the Company provide pro forma information regarding net earnings and net earnings
per common share as if compensation cost for the Company's stock-based awards had been determined in accordance with the fair
value method prescribed therein. The Company had previously adopted the disclosure portion of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," requiring quarterly SFAS No. 123 pro forma disclosure. The pro forma charge
for compensation cost related to stock-based awards granted was recognized over the service period. For stock options, the service
period </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>14</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>represents the period of time between the date of
grant and the date each option becomes exercisable without consideration of acceleration provisions.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following table illustrates
the effect on net earnings per common share as if the fair value method had been applied to all outstanding awards for the three
months ended September 30, 2004 (unaudited):</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=90%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=75% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net earnings, as reported</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;1,347,952</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Deduct:<br>
&nbsp;&nbsp;&nbsp;Total stock-based compensation expense determined under<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;fair value method for all awards</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>376,739</FONT><HR WIDTH=65% SIZE=1 COLOR=BLACK NOSHADE></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Pro forma net earnings</FONT></td>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;971,213</FONT><HR WIDTH=65% SIZE=3 COLOR=BLACK NOSHADE></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Earnings per common share:</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net earnings per common share &#151; Basic and diluted, as reported</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .05</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net earnings per common share &#151; Basic and diluted, pro forma</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .04</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>A summary of the transactions
during the three months ended September 30, 2005 with respect to ECD's Stock Option Plans follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=3 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Shares</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-<br>Average<br>Exercise<br>Price</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2">Aggregate<BR>Intrinsic<BR>Value <SUB>(1)</SUB><BR>(in millions) </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=25% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at June 30, 2005</FONT></TD>
     <TD align=RIGHT WIDTH=10%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,268,635&nbsp;&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;19.23</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Granted at fair value</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD><TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercised</FONT></TD>
     <TD align=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>474,220&nbsp;&nbsp;</FONT></TD>
<TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;20.89</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Expired</FONT></TD>
     <TD align=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD><TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Forfeited</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>800&nbsp;&nbsp;</FONT></TD><TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;10.40</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Outstanding at September 30, 2005</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,793,615&nbsp;&nbsp;</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;18.80</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       46.8</FONT></TD>
        <TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>        6.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exercisable at September 30, 2005</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,297,325&nbsp;&nbsp;</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;20.08</FONT></TD>
     <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$       32.2</FONT></TD>
        <TD ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5.12</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
</TABLE>
<HR noshade align="LEFT" width="30%" size="2">

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

            <p style='margin-left:17.25pt;text-indent:-17.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
(1)&nbsp;The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the
exercise price of the option.</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>There were no stock option
grants in the three months ended September 30, 2005 and 2004.  The total intrinsic value of stock options exercised during the
three months ended September 30, 2005 and 2004 was $6.6 million and $4,101, respectively.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The total fair value of shares
vested during the three months ended September 30, 2005 and 2004 was $.5 million and $49,771, respectively.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>A summary of the status of the
Company's nonvested shares as of September 30, 2005, and changes during the three months ended September 30, 2005, is presented
below:</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>15</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=90%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Nonvested Shares</FONT><HR WIDTH=90% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Shares</FONT><HR WIDTH=85% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted-Average<br>Grant-Date<br>Fair Value</FONT><HR WIDTH=90% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Nonvested at July 1, 2005</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>548,290</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.24</FONT></TD>
     <TD WIDTH=2% ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Granted</FONT></TD><TD ALIGN=LEFT>
     <FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Vested</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>51,200</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.13</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Cancelled</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>800</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.40</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="80%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="80%" ALIGN="right" NOSHADE="Noshade"></TD></TR>

<TR VALIGN=Bottom>

     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Nonvested at July 1, 2005</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>496,290</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.26</FONT></TD>
     <TD WIDTH=2% ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="80%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="80%" ALIGN="right" NOSHADE="Noshade"></TD></TR>




<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
</TABLE>




<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Basic and Diluted Net Income (Loss) Per Share
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Basic net income (loss) per
common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding.  ECD uses
the treasury stock method to calculate diluted earnings per share.  Potential dilution exists from stock options and warrants.
Weighted average number of shares outstanding and basic and diluted net income (loss) per share for the three months ended
September 30 are computed as follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=80%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH WIDTH=4%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH> </TH>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD WIDTH=60% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Weighted average number of shares outstanding:<BR></FONT></TD>
     <TD WIDTH=1.5% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1.5% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1.5% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1.5% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
</TR>

<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;- for basic net income (loss) per share</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>29,016,006</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>25,173,150</FONT></TD>
     <TD> </TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;- for diluted net income (loss) per share</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>29,016,006</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>25,425,464</FONT></TD>
     <TD> </TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net income (loss) from continuing operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,208,254</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,733,498</FONT></TD>
     <TD> </TD>

        </TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Loss on discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(257,559</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(385,546</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
</TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net income (loss)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,465,813</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,347,952</FONT></TD>
     <TD> </TD>        </TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD COLSPAN=8 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Basic net income (loss) per share<BR></FONT></TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
        <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.21</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.07</FONT></TD>
     <TD> </TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.01</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.02</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>

</TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Basic net income (loss) per share</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.22</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.05</FONT></TD>
     <TD> </TD>
</TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD COLSPAN=8 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Diluted net income (loss) per share<BR></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.21</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.07</FONT></TD>
     <TD> </TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>
<TR>
     <TD></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD>
</TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.01</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.02</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Diluted net income (loss) per share</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(.22</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>.05</FONT></TD>
     <TD> </TD>
</TR>
<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Due to the Company&#146;s net
loss, the 2005 weighted average shares of potential dilutive securities of 2,132,838 were excluded from the calculations of
diluted net loss per share, as inclusion of these securities would have been antidilutive to the net loss per share.  Additional securities of 247,025 were
excluded from the 2004 calculation of weighted average shares of potential dilutive securities.  Because of the relationship
between the exercise prices and the average market price of ECD&#146;s Common Stock during this period, these securities would
have been antidilutive regardless of the Company&#146;s net income or loss. </font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>16</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE A &#151; Summary of Accounting Policies
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>



<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Recent Pronouncements</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In November 2004, the FASB
issued SFAS No. 151, &#147;Inventory Costs.&#148;  This standard clarifies the accounting for abnormal amounts of idle facility
expenses, freight, handling costs and wasted material spoilage and is effective for fiscal years beginning after June 15, 2005.
The Company adopted this standard on July 1, 2005 and it did not have a material effect on the Company's financial position or
results of operations.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In December 2004, the FASB
issued SFAS No. 153, &#147;Exchanges of Nonmonetary Assets.&#148; This standard clarifies the accounting for nonmonetary
transactions that do not have commercial substance and is effective for fiscal years beginning after June 15, 2005.  The Company
adopted this standard on July 1, 2005 and it did not have a material effect on the Company's financial position or results of
operations.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In May 2005, the FASB issued
SFAS No. 154, "Accounting Changes and Error Corrections."  This standard changes the requirements for accounting for and reporting
of a change in accounting principle and is effective for fiscal years beginning after December 15, 2005.  It is anticipated that
the adoption of this standard will not have a material effect on the Company's financial position or results of operations.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE B &#151; Settlement
Agreement</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In July 2004, ECD announced that
it and Cobasys had entered into a settlement agreement with MEI, Panasonic EV Energy Co., Ltd. (PEVE), and Toyota Motor
Corporation with respect to patent infringement disputes and counterclaims involving nickel metal hydride (NiMH) batteries before
the International Chamber of Commerce, International Court of Arbitration. Under the terms of the settlement, no party admitted
any liability.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>As part of the settlement, ECD
and its subsidiary, Ovonic Battery, received a $10 million license fee from MEI and PEVE.  This fee was recorded as a deferred
patent license fee in July 2004 and is being amortized to income over 10.5 years.  The Company recognized $238,095 as revenues
from license and other agreements in both of the three months ended September 30, 2005 and 2004 in connection with the
amortization of this fee.  In addition, Cobasys received a $20 million license fee from MEI, PEVE and Toyota, of which $4 million
was placed in escrow for a next-generation NiMH battery development project plan.  Upon receipt of the license fee, Cobasys, in
September 2004, made an $8 million distribution each to Ovonic Battery and Chevron representing a partial reimbursement of legal expenses.  The Company
recorded this $8 million as a distribution from joint venture in the three months ended September 30, 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>17</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE C &#151; Accounts Receivable</font></U></p>



<table width=95%>

<tr>
<th  ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></th>
<th  colspan=2 ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<br>2005</font><HR SIZE="1" WIDTH="100%" NOSHADE="Noshade"></th>
<th  ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></th>
<th  colspan=2 ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<br>2005</font><HR SIZE="1" WIDTH="100%" NOSHADE="Noshade"></th>
</tr>

<tr>
<td width=55% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Long-term contracts not accounted for under<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percentage-of-completion accounting</font></td>
<td width=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></td>
<td  width=7%></td>
<td width=3%></td>
<td width=1%></td>
<td width=7%></td>

</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts earned principally on U.S. Government<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;contracts which are billed in the subsequent month</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>639,708&nbsp;</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>741,605&nbsp;</font></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts billed</font></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Government</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>483,776&nbsp;</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,073,548&nbsp;</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sub-total</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,123,484&nbsp;</font></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,815,153&nbsp;</font></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Amounts unbilled for other than long-term contracts</font></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial customers</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,291,803&nbsp;</font></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,401,579&nbsp;</font></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Amounts billed for other than long-term contracts</font></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial customers</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>13,780,378&nbsp;</font></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>14,307,881&nbsp;</font></td>
</tr>

<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Allowance for uncollectible accounts</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(437,000)</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(412,000)</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>16,758,665&nbsp;</font><HR SIZE="3" WIDTH="100%" ALIGN="LEFT" NOSHADE="Noshade"></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>19,112,613&nbsp;</font><HR SIZE="3" WIDTH="100%" NOSHADE="Noshade"></td>
</tr>

</table>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Accounts Receivable Due from Related Parties</font></u></p>


<table width=95%>

<tr>
<th  ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></th>
<th  colspan=2 ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<br>2005</font></th>
<th  ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></th>
<th  colspan=2 ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<br>2005</font></th>
</tr>

<tr>
<td width=55% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Amounts earned which are billed in the subsequent<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;month on long-term contracts &#151; Cobasys</font></td>
<td width=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td width=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>52,567&nbsp;</font></td>
<td width=3%></td>
<td width=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td width=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>62,460&nbsp;</font></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Amounts billed on long-term contracts &#151; Cobasys</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>77,866&nbsp;</font></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>296,085&nbsp;</font></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Other unbilled &#151; Ovonyx</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>72,965&nbsp;</font></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>30,469&nbsp;</font></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Other billed</font></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,220&nbsp;</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
<td></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>30,848&nbsp;</font><HR SIZE="1" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
</tr>


<tr>
<td ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>209,618&nbsp;</font><HR SIZE="3" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
<td></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</font></td>
<td ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>419,862&nbsp;</font><HR SIZE="3" ALIGN=LEFT WIDTH="100%" NOSHADE="Noshade"></td>
</tr>




</table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>18</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE D &#151; Inventories
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Inventories of raw materials,
work in process and finished goods for the manufacture of solar cells and nickel hydroxide are valued at the lower of cost (first
in, first out) or market.  Cost elements included in inventory are materials, direct labor and manufacturing overhead.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Inventories (substantially all
for United Solar Ovonic) are as follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=500>
<TR VALIGN=Bottom>
     <TH ><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<BR>2005</FONT><HR SIZE="1" ALIGN=CENTER WIDTH="100%" NOSHADE="Noshade"></TH>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<BR>2005</FONT><HR SIZE="1" ALIGN=CENTER WIDTH="100%" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Finished products</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  4,762,390</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  5,104,043</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Work in process</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,872,264</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,150,529</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Raw materials</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,914,480</FONT><HR SIZE="1" ALIGN=CENTER WIDTH="100%" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>9,812,304</FONT><HR SIZE="1" ALIGN=CENTER WIDTH="100%" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 19,549,134</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 18,066,876</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=2%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>

</TABLE>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE E &#151; Joint Ventures
and Investments</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Joint Ventures</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Cobasys</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In July 2001, Ovonic Battery and
Chevron formed a strategic alliance (Cobasys LLC).  Chevron invested $160,000,000 to match the Company's technological
contribution in the venture.  Cobasys is owned 50% by Ovonic Battery and 50% by Chevron. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In December 2004, as part of its
focus on its core businesses, ECD entered into a series of agreements with Chevron and Cobasys to expand the scope of licenses
granted to Cobasys at the time of the restructuring of the joint venture in July 2001.  In consideration of the expanded licenses,
ECD received an option to purchase 4,376,633 shares, exercisable at $4.55 per share, of ECD Common Stock then owned by Chevron.
The transaction increased ECD's revenue and decreased additional paid-in capital in the year ended June 30, 2005 by $79,532,000
based upon the value of this option using the Black-Scholes valuation model.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In July 2004, ECD and Cobasys
entered into a settlement agreement with MEI, PEVE, and Toyota with respect to patent infringement disputes and counterclaims
involving NiMH batteries before the International Chamber of Commerce, International Court of Arbitration. Under the terms of the
settlement, no party admitted any liability.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company recorded revenues
from Cobasys of $415,000 and $475,000 for the three months ended September 30, 2005 and 2004, respectively, for services performed
on behalf of Cobasys (primarily for advanced product development and market development work).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>19</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>NOTE E &#151; Joint Ventures and Investments
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company also recorded
revenues from Cobasys of $45,000 for the three months ended September 30, 2004 for rent of a portion of one of the Company&#146;s
facilities.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following sets forth certain
financial data regarding Cobasys that are derived from its financial statements:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>COBASYS LLC AND SUBSIDIARY</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(A Development Stage Enterprise)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><U><font SIZE=2>STATEMENTS OF OPERATIONS</font></U></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(Unaudited)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<br>September 30, 2005</FONT><HR SIZE="1" WIDTH="100%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>July 17, 2001<BR>(date of inception) to<BR>September 30, 2005</FONT><HR SIZE="1" WIDTH="100%" ALIGN="LEFT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenue</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2%> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Product and prototype revenues</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>       90,974</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    4,007,366</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Contract research revenue</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>120,188</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,834,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Licensing revenue</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>476,190</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,380,952</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Other revenues</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>50,103</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>84,809</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenue</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>737,455</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>12,307,779</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Expenses</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Cost of product and prototype revenues</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,850,216</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>26,850,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Research and development costs</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,722,623</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>87,716,862</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Sales and marketing costs</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>842,379</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>9,616,565</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Operating, general and administrative costs</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,600,519</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>20,929,279</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Loss on asset impairment and disposal</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>16,060</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,825,247</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Loss on impairment of cost-basis investments</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,000,000</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Depreciation and amortization</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>834,235</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,117,498</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;Interest expense</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>595,203</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>759,264</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,461,235</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>164,815,215</FONT><HR SIZE="1" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net Loss</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   (9,723,780)</FONT><HR SIZE="3" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
     <TD ALIGN=left><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Deficit accumulated during the development stage</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> (152,507,436)</FONT><HR SIZE="3" WIDTH="90%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
     <TD ALIGN=left><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
</TR>
</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>20</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>NOTE E &#151; Joint Ventures and Investments
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>COBASYS LLC AND SUBSIDIARY</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(A Development Stage Enterprise)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><U><font SIZE=2>BALANCE SHEET</font></U><font SIZE=2>S</font></p>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=90%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30, 2005</FONT></TH>
     <TH></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30, 2005</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=2%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Unaudited)</FONT></TH>
     <TH></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(Audited)</FONT></TH></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Assets</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Current Assets:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents (of which $1,068,159</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and $1,050,604 is restricted as of September 30,</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005 and  June 30, 2005, respectively)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   2,682,768</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   2,375,677</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment securities (restricted)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,994,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,994,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable (net of allowance of $2,750</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and $10,577 as of September 30, 2005 and</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;June 30, 2005, respectively)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>890,446</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,516,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories, net</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,356,527</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,540,791</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>440,405</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>249,729</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Assets</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>10,364,146</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>9,676,231</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net Property, Plant and Equipment</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>37,747,763</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>35,902,091</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Assets held for sale</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>565,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>565,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash surrender value of life insurance</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>625,625</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>567,511</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  49,303,034</FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  46,711,333</FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Liabilities and Members' Capital</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Current Liabilities:</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,180,287</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   2,379,324</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable, related party</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>301,713</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,575,518</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,161,399</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenues &#151; current portion</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,069,986</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current installments of obligations under capital lease</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>14,944</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>13,513</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Liabilities</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,840,735</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,005,949</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue - noncurrent</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>15,812,860</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>16,295,219</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Redeemable preferred interest &#151; related party</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>33,879,542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>20,135,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Obligations under capital lease, net of current portion</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>28,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>33,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other noncurrent liabilities</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,248,481</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,024,837</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>57,810,470</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>45,494,989</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Members' Interest</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(8,507,436)</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,216,344</FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities and Members' Interest</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  49,303,034</FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  46,711,333</FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>




<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>21</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>NOTE E &#151; Joint Ventures and Investments
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Ovonyx</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>As of September 30, 2005, ECD
owned 41.7% of Ovonyx, Mr. Tyler Lowrey and his colleague owned 41.7% of Ovonyx, and Intel Capital and other investors owned the
remainder of the shares outstanding without giving effect to the exercise of outstanding stock options and warrants.  ECD has
contributed intellectual property and licenses for its interest in Ovonyx.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In October 2002, ECD, through a
newly formed company, Ovonic Cognitive Computer, Inc., which is owned 95% by ECD and 5% by Ovonyx, made a capital contribution of
$1,000,000 in Ovonyx in exchange for technology previously contributed by ECD to Ovonyx and an exclusive, royalty-bearing license,
which requires annual minimum royalty payments in order to maintain its exclusivity.  ECD made a $50,000 minimum royalty payment
in November 2003 and a $100,000 payment in December 2004.  ECD recorded its $1,150,000 investment in Ovonyx and accounts for this
investment on the equity method and recognized its proportionate share of Ovonyx losses to the extent of its $1,150,000
investment. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD recorded revenues from
Ovonyx of $164,000 and $69,000, respectively, for the three months ended September 30, 2005 and 2004 representing services
provided to this joint venture.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>Ovonic Hydrogen Systems</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In October 2000, ECD and
ChevronTexaco (now Chevron) formed Texaco Ovonic Hydrogen Systems.  Chevron funded the initial product and market development for
this joint venture, the primary use of which has been to fund a contract from Texaco Ovonic Hydrogen Systems to ECD to further
develop the Ovonic hydrogen storage technology.  In December 2004, Chevron transferred to ECD its interest in Texaco Ovonic
Hydrogen Systems (renamed Ovonic Hydrogen Systems LLC by ECD).  In accordance with SFAS 141, "Business Combinations," we wrote
down the assets and liabilities of Ovonic Hydrogen Systems to zero in December 2004.  ECD received $4,675,000 from Chevron for
payment of restructuring fees.  The $4,675,000 received from Chevron was $2,263,000 (net of tax) in excess of restructuring costs.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>As of December 2, 2004, Ovonic
Hydrogen Systems is wholly owned by ECD.  It is funded by ECD at a reduced level and is included in the Company's consolidated
financial statements.  Ovonic Hydrogen Systems is focusing on continuing to commercialize compact portable hydrogen storage
canisters that have current and near-term market applications while continuing to develop and commercialize ECD's proprietary
reversible solid metal hydride-based low-pressure hydrogen storage system for longer-term stationary, transportation and
infrastructure applications. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>22</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>NOTE E &#151; Joint Ventures and Investments
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-indent:7.69%;text-align:justify;'><font size=2>During the three months ended September 30, 2004,
the Company recorded revenues of $2,643,000 for services provided to this joint venture, primarily for market development and
advanced product development work.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Investments in Rare Earth Ovonic</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>During the year ended June 30,
2000, ECD and Ovonic Battery signed agreements with Rare Earth High-Tech of Inner Mongolia, China.  The agreements called for the
creation of three joint ventures for manufacturing and licensing of advanced NiMH battery technology, alloy powders, and
production equipment, all for certain battery applications for NiMH batteries.  ECD and Ovonic Battery initially contributed
technology for their 19% interest in each of these joint ventures.  In February 2002, ECD and Ovonic Battery jointly made a
proportionate $1,710,000 cash investment in the Rare Earth Ovonic joint ventures and maintained their 19% interest in these
entities.  All of these joint ventures are being accounted for using the cost method of accounting.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>At December 31, 2004, the
Company reviewed its revenue and cost estimates for its Rare Earth Ovonic joint ventures in connection with its investment
($1,710,000) in Rare Earth Ovonic.  Based upon these estimates, the Company recorded an impairment charge of $1,710,000 as of
December 31, 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Ovonic Battery has three
contracts totaling $63,600,000 for supplying equipment and technology to its Rare Earth Ovonic joint ventures in China.  As of
September 30, 2005, Ovonic Battery has received payments totaling $59,484,000 under the three contracts.  In December 2004, the
Company reviewed its estimates to complete the equipment under the Rare Earth Ovonic contracts.  As a result of this review and
the changes in estimates, the Company has reduced its estimated margin from 12% to 8%.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company recorded revenues
related to the above equipment contracts from Rare Earth Ovonic of $398,000 and </font><font size=2>$1,070,000 for the three
months ended September 30, 2005 and 2004, respectively.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>23</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE F &#151; Liabilities and
Line of Credit</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Warranty Liability</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company estimates the
liability for product warranty costs based upon its past experience and best estimate of future warranty claims.  The following is
a summary of the changes in the product warranty liability during the three months ended September 30, 2005 and 2004:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=90%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=7><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended <br>September 30,</FONT></TH>
     </TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     <TH ALIGN="CENTER" COLSPAN="3"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR COLOR="Black" SIZE="1" WIDTH="90%"></TH>
     </TR>


<TR VALIGN=Bottom>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Liability beginning of the period</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  1,635,532</FONT></TD>
     <TD WIDTH=1% ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  1,945,934</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Amounts accrued for as warranty costs</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT" WIDTH="8%"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(27,618</FONT></TD>
     <TD ALIGN=left><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)*</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>65,633</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Warranty claims</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT" WIDTH="8%"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(77,108</FONT></TD>
      <TD ALIGN=left><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(251,722</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="85%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>

     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="85%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
</TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Liability at September 30</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN="RIGHT" WIDTH="8%"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  1,530,806</FONT></TD>
     <TD ALIGN=right><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  1,759,845</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="85%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>

     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="85%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
</TR>


<TR VALIGN=Bottom>
     <TD COLSPAN=8 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;During the three months ended September 30, 2005, United Solar Ovonic LLC revised its warranty liability, based upon its recent
    experience, and recorded a reduction in this liability.
</FONT></TD></TR>
</TABLE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Warranty liability is recorded
at the time that the product is sold (for sales of photovoltaic products) or at the time that revenue is recognized (for
machine-building and equipment sales).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Government Contract Reserve</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company&#146;s contracts
with the U.S. Government and its agencies are subject to audits by the Defense Contract Audit Agency (DCAA).  DCAA has audited the
Company&#146;s indirect rates, including its methodology of computing these rates, for the years through June 30, 2003.  In its
reports, DCAA has questioned the allowability of and the allocability of certain costs as well as the Company&#146;s methodology
for allocating independent research and</font><font size=2> </font><font size=2>development to its indirect cost pools.  In
addition, DCAA has stated that there could be penalties imposed.  The Company is in the process of discussing each of these items
in detail with DCAA.  Management believes that some of these DCAA assertions are without merit.  The Company has recorded a
reserve of $2,305,000 and $2,294,000 at September 30, 2005 and June 30, 2005, respectively, related to these issues.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Business Loan Agreement</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has a business loan
agreement with LaSalle Bank in the amount of $4,000,000.  This business loan agreement is used to provide a mechanism for the
issuances of letters of credit and entering into foreign currency exchange transactions.  The business loan agreement expires on August 31,
2006.  This agreement contains certain covenants, including a minimum $20 million liquidity covenant.  At September </font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>24</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE F &#151; Liabilities and Line of Credit
(Continued)</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>30, 2005, the Company had outstanding letters of
credit of $2,551,000 against the business loan agreement.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE G &#151; Commitments
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company, in the ordinary
course of business, enters into purchase commitments for raw materials.  The Company also enters into purchase commitments for
capital equipment, including subcontracts for the purchase of components for the new 25MW solar manufacturing equipment being
installed in Auburn Hills, Michigan.  The Company's total obligations under purchase commitments at September 30, 2005, were
$40,507,000 ($39,592,000 of which was due within one year and $915,000 thereafter).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE H &#151; Nonrefundable
Advance Royalties</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>At September 30 and June 30,
2005, the Company deferred recognition of revenue relating to nonrefundable advance royalty payments, which consist of the
following:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=67% align=center>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>September 30,<br>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>June 30,<BR>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Battery</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   435,902</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1%> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   435,902</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Optical memory</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>707,044</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>715,777</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD WIDTH=1%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 1,142,946</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 1,151,679</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>



</TABLE>




<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Creditable royalties earned and
recognized as revenue were:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=25% align=center>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TH>
     <TH ><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=7% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,733</FONT></TD>
        <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=7% ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$&nbsp;&nbsp;1,135,369</FONT></TD></TR>
</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Included in creditable royalties
in the quarter ended September 30, 2004 is $1,125,000 related to an advance royalty payment made by a licensee to the Company in
1993 associated with a license agreement under which the licensee no longer has a contractual obligation to make payments.</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>There are no obligations in
connection with any of the advance royalty agreements which require the Company to incur any additional costs.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>25</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE I &#151; Product Sales,
Royalties, Revenues from Product Development Agreements and License and Other Agreements</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has product sales
and business agreements with third parties and with related parties for which royalties and revenues are included in the
consolidated statements of operations.  Product sales include photovoltaic products, revenues related to machine-building and
equipment sales contracts and nickel hydroxide.  Revenues related to machine-building and equipment sales contracts are recognized
on the percentage-of-completion method of accounting using the costs incurred to date as a percentage of the total estimated
costs.  All other product sales are recognized when the product is delivered to the customer.  Most products are shipped FOB
shipping point.  Some foreign customers are shipped under Delivered Duty Paid (DDP) terms where customers take delivery at the
point of destination.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>A summary of all of the
Company&#146;s revenues follows.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font></p>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=80%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH>
</TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Product sales</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  18,146,740</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  12,976,318</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Machine building and equipment sales</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>397,580</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,069,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nickel hydroxide</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>722,481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(65</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>




<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Total product sales</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  19,266,801</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  14,046,142</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Royalties</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transportation</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     704,989</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     100,180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>425,600</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,465,793</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>*</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optical memory</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>46,323</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>11,840</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ovonic Unified Memory</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,258</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,160</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Total royalties</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,183,170</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,578,973</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues from product development agreements</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,421,461</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   2,178,613</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optical memory</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>163,402</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>130,357</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solid hydrogen storage systems</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>84,222</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>24,732</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Manufacturing technology for OLEDs</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>205,377</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>460,747</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fuel cell technology</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>22,412</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,896,874</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,794,449</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues from product development agreements - related parties</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>415,263</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>474,907</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solid hydrogen storage systems</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,642,707</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>415,263</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,117,614</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Total revenues from product development agreements</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   2,312,137</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   5,912,063</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>License and other agreements</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     258,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     238,095</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="76%" ALIGN="lefT" NOSHADE="Noshade"></TD>

     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="lefT" NOSHADE="Noshade"></TD></tr>


<TR>
     <TD COLSPAN=7><HR NOSHADE COLOR=#000000 SIZE=1 width=12% align=left></TD></TR>
</TABLE>

           <p style='margin-left:0pt;text-indent:5.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*
Includes $1,125,000 related to an advance royalty payment made to the Company by a licensee in 1993 associated with a license
agreement under which the licensee no longer has an obligation to make payments (see Note H).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>26</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font SIZE=2>NOTE I</font><font size=2> &#151; </font>
<font size=2>Product Sales, Royalties, Revenues from Product Development Agreements and License and Other Agreements (Continued)
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following table presents
revenues by country based on the location of the customer:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>



<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=50%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT></TH></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD></tr>


<TR VALIGN=Bottom>
     <TD WIDTH=33% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>United States</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  9,435,433</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 13,174,526</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Germany</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8,712,886</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,213,475</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>China</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,207,227</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,146,642</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Japan</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,295,408</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,733,745</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Other Countries</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,596,582</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,823,478</FONT></TD>
        </TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD></tr>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 23,247,536</FONT></TD>
      <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 22,091,866</FONT></TD>
        </TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD colspan=2 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="right" NOSHADE="Noshade"></TD></tr>



</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE J &#151; Business Segments
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has three business
segments: United Solar Ovonic, Ovonic Battery and the parent company, ECD.  United Solar Ovonic is involved in manufacturing and
selling photovoltaic products.  Ovonic Battery is involved in developing and licensing Ovonic NiMH consumer battery technology and
manufacturing of nickel hydroxide materials.  ECD is involved in developing microelectronics, fuel cells, hydrogen storage,
catalysis, photovoltaics technologies and machine building.  Some general corporate expenses have been allocated to Ovonic
Battery.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>27</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE J &#151; Business Segments (Continued)</font>
</u></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:left;'><font size=2>The Company's operations by
business segments were as follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>Financial Data by Business Segment</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(in thousands)</font></p>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>United Solar<BR>Ovonic</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>ECD</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Ovonic Battery</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Consolidating<BR>Entries</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Consolidated</FONT></TH>
</TR>


<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="88%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="88%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="88%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD COLSPAN=3 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="88%" ALIGN="right" NOSHADE="Noshade"></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="88%" ALIGN="right" NOSHADE="Noshade"></TD></tr>




<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenues*</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> &nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     </TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   19,359
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   11,115
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    2,964
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  (10,190
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   23,248
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
15,092</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
4,073</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
3,351</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(424</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
22,092</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Operating Income (Loss)*</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    1,680
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   (7,592
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     (724
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     (148
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   (6,784
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(632</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(4,776</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(1,082</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>377
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(6,113</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;Interest Income</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>       15
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    1,545
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD>
        <TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(763</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>797</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>8
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>768
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(699</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense**</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>      927
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT>
</TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(763</FONT>
</TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>164</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>935
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(699</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>236</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;Depreciation Expense</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    1,376
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>      520
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>       86
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,982</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> </FONT>
</TD>
             <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
1,335</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>572
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>129
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,036</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;Capital Expenditures</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   10,285
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>      295
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>      229
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>     (166
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   10,643
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>240
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>60
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>104
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=center><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>404</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;Identifiable Assets</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2005</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  100,438
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  221,553
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    5,011
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> (127,753
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT>
</TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  199,249
</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2004</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
79,176</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
140,783</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
5,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
(106,027</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT>
</TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;
</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
119,821</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>
<TR>
     <TD COLSPAN=16><HR NOSHADE COLOR=#000000 SIZE=1 width=12% align=left></TD></TR>
</TABLE>

            <p style='margin-left:0pt;text-indent:3.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
*&nbsp;&nbsp;&nbsp;Excludes discontinued operations (Ovonic Battery)</font></p>

            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>
**&nbsp;&nbsp;Excludes intercompany interest between ECD and Ovonic Battery.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.31%;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2></font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>28</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Notes to Consolidated Financial Statements</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2><u>NOTE K &#151; Other Comprehensive Income (Loss)</u>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company's total
comprehensive income (loss) was as follows:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=85%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=7><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT></TH></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="100%" ALIGN="RIGHT" NOSHADE="Noshade"></TD>
</TR>

<TR VALIGN=Bottom>
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net Income (Loss)</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,465,813</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=1% > </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,347,952</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD colspan=8 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>OTHER COMPREHENSIVE INCOME (LOSS) (net of taxes):</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Net unrealized gains (losses) on investments</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&#151;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT>
     <FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Foreign currency translation adjustments</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(127,039</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(20,151</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>
<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="83%" ALIGN="CENTER" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="83%" ALIGN="CENTER" NOSHADE="Noshade"></TD>
</TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>COMPREHENSIVE INCOME (LOSS)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> (6,592,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  1,327,801</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR valign=top>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="83%" ALIGN="CENTER" NOSHADE="Noshade"></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD COLSPAN=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="83%" ALIGN="CENTER" NOSHADE="Noshade"></TD>
</TR>

</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>There were no realized or
unrealized holding gains on investments arising during the three months ended September 30, 2005 and 2004.  There were no
reclassification adjustments for gains realized in net income for the three months ended September 30, 2005 and 2004.  The
accumulated income (expense) balances of currency translation adjustments, net of taxes, were $84,547 and $211,586 at September
30, 2005 and June 30, 2005, respectively.  The effect from foreign currency transactions was a loss of $56,585 for the three
months ended September 30, 2005 and a gain of $11,803 for the three months ended September 30, 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE L &#151; Capital Stock
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>On September 30, 2005, in
accordance with the applicable agreements, 219,913 shares of Class A Convertible Stock and 430,000 shares of Class B Convertible
Stock were converted into Common Stock on a share-for-share basis.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>NOTE M &#151; Subsequent Event
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>On October 19, 2005, Intel
Capital exercised its warrant to increase its investment in Ovonyx which resulted in reducing ECD's ownership to 39.5%.  </font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>29</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

&nbsp;


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Item 2
</font></u><font size=2>.</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>
Management's Discussion and Analysis of Financial Condition and Results of Operations</font></u></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following discussion should
be read in conjunction with the accompanying Quarterly Financial Information and Notes thereto and the Company&#146;s Annual
Report on Form 10-K for the year ended June 30, 2005 and is qualified in its entirety by the foregoing.  The results of operations
for the three months ended September 30, 2005 are not necessarily indicative of results to be expected in future periods.</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>CAUTIONARY STATEMENT FOR PURPOSES OF THE </font>
</B><font size=2>"</font><B><font SIZE=2>SAFE HARBOR</font></B><font size=2>"</font><b><font size=2> PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>This Quarterly Report on Form
10-Q contains forward-looking statements about our financial condition, results of operations, plans, objectives, future
performance and business. In addition, from time to time we and our representatives have made or may make forward-looking
statements orally or in writing.  The words "may," "will,"  "believes," "expects," "intends," "anticipates," "estimates," and
similar expressions have been used in this Quarterly Report to identify forward-looking statements.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>We have based these
forward-looking statements on our current expectations with respect to future events and occurrences.  Investors are cautioned
that our actual results in the future may differ materially from the expected results reflected in our forward-looking statements.
The expected results reflected in our forward-looking statements are subject to various significant risks and uncertainties,
including the following:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Risks Related to Our Business </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:8.31%;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We have a
history of losses and our future profitability is uncertain.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We expect
that we will need to obtain additional significant financing to continue to operate our business, including significant capital
expenditures to increase our production capacity, and financing may be unavailable or available only on disadvantageous terms.
</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our
revenues and profits are substantially dependent upon licensing arrangements and joint ventures, and our licensees and joint
venture partners may be unwilling or unable to devote their financial resources and manufacturing and marketing capabilities to
commercialize products based on our technologies.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Additional
research and development efforts will be required before certain products based on our technologies can be manufactured and sold
commercially, and there can be no assurance that such efforts will be successful.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>It is
uncertain that the market will accept our products once the technology has been developed and commercial-scale manufacturing has
been achieved.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We and our
joint venture partners and licensees may not be able to manufacture products based on our technologies successfully on a
commercial scale.</font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>30</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We and our
joint venture partners and licensees may experience performance problems with key suppliers or subcontractors.</font></p> </td>
</tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Other
companies, many of which have greater resources than we, may develop competing products or technologies which cause products based
on our technologies to become obsolete or non-competitive.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our
ability to succeed will be dependent upon our ability to successfully implement our business plan, as to which no assurance can be
given.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We receive
a significant portion of our revenues from a small number of customers.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our
government product development and research contracts may be terminated by unilateral government action, or we may be unsuccessful
in obtaining new government contracts to replace those which have been terminated or completed.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>The
reduction or elimination of government incentives related to solar power could cause our revenues to decline.</font></p> </td>
</tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We may
suffer the loss of key personnel or may be unable to attract and retain qualified personnel to maintain and expand our business.
</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We may
become subject to legal or regulatory proceedings which may reach unfavorable resolutions.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We are
subject to a variety of federal, state and local laws, rules and regulations related to the discharge or disposal of toxic,
volatile or other hazardous chemicals.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We are
required to account for employee stock option plans using the fair value method, which will increase our net loss and net loss per
share. </font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>The
disclosure of a material weakness in our internal controls could, if not remedied, result in material misstatements in our
financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the
trading price of our stock. </font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="48%" style=' border-collapse:collapse'>
    <tr>
        <td width="100%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Risks
Related to Our Intellectual Property</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our
success depends upon our ability to protect our intellectual property and our proprietary technology.</font></p> </td> </tr>
</table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We rely on
trade secrets and other confidential information to maintain our proprietary position.</font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>We may be
involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.</font></p> </td> </tr>
</table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Third
parties may own or control patents or patent applications that are infringed by our products or technologies. </font></p> </td>
</tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>31</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Risk Related to an Investment in Our Common Stock
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our stock
price has been subject to significant volatility and your investment could suffer a decline in value.</font></p> </td> </tr>
</table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Our
quarterly operating results may fluctuate significantly. </font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Because we
do not intend to pay dividends, you will not receive funds without selling shares and, depending on when you sell your shares, you
may lose the entire amount of your investment. </font></p> </td> </tr></table>



<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="8%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:6.0pt 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Provisions
in our charter documents and Delaware law may delay or prevent an acquisition of our company. </font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>There is also the risk that we
incorrectly analyze these risks or that strategies we develop to address them are unsuccessful.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>These forward-looking statements
speak only as of the date of this Quarterly  Report.  All subsequent written and oral forward-looking statements attributable to
us or any person acting on our behalf are qualified in their entirety by the cautionary statements in this section.  Because of
these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements.  We are not
obligated to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Critical Accounting Policies</font>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Effective  July 1, 2005,  the Company  adopted  SFAS No.  123(R),  "Share-Based  Payment"
("SFAS  No.  123(R)").  This  statement  replaces  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation"  ("SFAS No. 123") and  supersedes  APB No. 25. SFAS No.  123(R)  requires  that all
stock-based  compensation  be recognized as an expense in the financial  statements and that such
cost be measured at the fair value of the award.  This  statement  was adopted using the modified
prospective  method of  application,  which  requires us to recognize  compensation  expense on a
prospective basis.  Therefore,  prior period financial  statements have not been restated.  Under
this method, in addition to reflecting  compensation expense for new share-based awards,  expense
is also  recognized to reflect the remaining  service  period of awards that had been included in
pro-forma  disclosures in prior  periods.  SFAS No. 123(R) also requires that excess tax benefits
(none for ECD due to tax losses)  related to stock  option  exercises  be  reflected as financing
cash inflows instead of operating cash inflows.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>With the  adoption of SFAS No.  123(R),  the Company is required to record the fair value
of stock-based  compensation  awards as an expense. In order to determine the fair value of stock
options  on the date of grant,  the  Company  applies  the  Black-Scholes  option-pricing  model.
Inherent in this model are assumptions related to expected stock-price  volatility,  option life,
risk-free  interest  rate and dividend  yield.  While the  risk-free  interest  rate and dividend
yield are less  subjective  assumptions,  typically  based on factual  data  derived  from public
sources,  the  expected  stock-price  volatility  and option life  assumptions  require a greater
level of judgment which make them critical accounting estimates.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The  Company  uses  an  expected  stock-price  volatility  assumption  that is  based  on
historical  implied  volatilities  of the  underlying  stock which is  obtained  from public data
sources. There were no stock option grants during the three months ended September 30, 2005.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>With regard to the  weighted-average  option life assumption,  the Company  considers the
exercise  behavior of past grants and models the pattern of  aggregate  exercises.  Patterns  are
determined on specific  criteria of the aggregate  pool of optionees.  There were no stock option
grants during the three months ended September 30, 2005.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In October 2005,  the Financial  Accounting  Standards  Board issued FASB Staff  Position
(FSP) No. FAS 123(R)-2,  "Practical  Accommodation to the Application of Grant Date as defined in
FASB Statement No.  123(R)," to provide  guidance on  determining  the grant date for an award as
defined in SFAS No.  123(R).  This FSP  stipulates  that assuming all other criteria in the grant
date  definition are met, a mutual  understanding  of the key terms and conditions of an award to
an  individual  employee is presumed to exist upon the award's  approval in  accordance  with the
relevant  corporate  governance  requirements,  provided that the key terms and  conditions of an
award (a)  cannot  be  negotiated  by the  recipient  with the  employer  because  the award is a
unilateral  grant,  and (b) are expected to be communicated to an individual  recipient  within a
relatively  short time period from the date of approval.  The Company has applied the  principles
set forth in this FSP upon its adoption of SFAS No. 123(R).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Results of Operations</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Overview</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company had a loss from
operations of $6,784,000 in the three months ended September 30, 2005 compared to an operating loss of $6,113,000 in the three
months ended September 30, 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company had a net loss from
continuing operations of $6,208,000 on revenues of $23,248,000 in the three months ended September 30, 2005 compared to net income
from continuing operations of $1,733,000 on revenues of $22,092,000 in the three months ended September 30, 2004 (due to a
one-time $8.0 million distribution from Cobasys following the settlement of patent infringement disputes and counterclaims in July
2004 to partially reimburse the Company for legal expenses).  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>For the three months ended
September 30, 2005, the Company had a loss from discontinued operations of $258,000, and for the three months ended September 30,
2004, the loss from discontinued operations was $386,000.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>32</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-indent:7.69%;text-align:justify;'><font size=2>The table below summarizes each of the
Company&#146;s business segment's operating results (in thousands) for the three months ended September 30, 2005 and 2004.</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Income (Loss) from<BR>Operations</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Segment</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH>
     <TH COLSPAN=3><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>United Solar Ovonic</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  19,359</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  15,092</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD  WIDTH=1%> </TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   1,680</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>    (632</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Energy Conversion Devices</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>11,115</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4,073</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(7,592</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(4,776</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2">Ovonic Battery<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,964</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,351</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(724</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(1,082</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

 <TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Consolidating Entries</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(10,190</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(424</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(148</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>377</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD> </TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD colspan=3 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="1" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Consolidated</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  23,248</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>  22,092</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD> </TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,784</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(6,113</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>)</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></font></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD> </TD>
     <TD colspan=3 ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD>
     <TD colspan=3 ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT><HR SIZE="3" WIDTH="90%" ALIGN="LEFT" NOSHADE="Noshade"></TD></TR>

<TR>
     <TD COLSPAN=2></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD> </TD>
     <TD COLSPAN=3></TD></TR>
</TABLE>

<HR noshade align="center" width="30%" size="2">

<p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-bottom: 0in'><font size=1>&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excludes
discontinued operations.</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><u><font size=2>Three Months Ended September 30, 2005 Compared
to Three Months Ended </font></u><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>September 30, 2004</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><i><font size=2>United Solar Ovonic Segment</font></i></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The United Solar Ovonic
segment's operating income improved by $2,312,000 in 2005 versus 2004 primarily due to significantly higher product sales and the
impact of cost reductions in 2005. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.46%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>United Solar Ovonic&#146;s 2005
revenues increased by $4,267,000 primarily due to increased product sales.  Photovoltaic product sales increased by 40% to
$18,147,000 for 2005 from $12,976,000 for 2004.  This increase was principally attributable to higher physical photovoltaic
shipments ($3,422,000), sales of $1,670,000 recognized in the three months ended September 30, 2005 for shipments physically
shipped under DDP terms in the prior quarter and increased pricing ($80,000). </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Gross profit on United Solar
Ovonic&#146;s product sales was $3,567,000 in 2005 compared to a gross profit of $609,000 in 2004 because of higher sales, lower
material costs, and improved absorption of fixed costs in 2005. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>United Solar Ovonic&#146;s
revenues from product development agreements in the three months ended September 30, 2005 were $1,211,000 compared to $1,946,000
in 2004.  The decrease in 2005 was principally due to lower revenues on the U.S. Air Force contract for the development of new
products for space and airship applications and a delay in the start up of the replacement contract with National Renewal Energy
Laboratory.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Revenues from product
development agreements for the United Solar Ovonic segment in 2005 funded 78% of its cost of product development.  Revenues from
product development agreements decreased by $735,000 and
spending decreased by $534,000, resulting in an increase of $201,000 in net cost of product development.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>33</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=80%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=70% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Cost of revenues from product development agreements</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>742,000</FONT></TD>
     <TD WIDTH=2%> </TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,609,000</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Product development and research</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>819,000</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>486,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of product development</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,561,000</FONT></TD>
        <TD> </TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,095,000</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues from product development agreements</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,211,000</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,946,000</FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cost of product development</FONT>
     </TD><TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>350,000</FONT></TD>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>149,000</FONT></TD></TR>

</TABLE>



<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>While product sales revenues
increased 40%, United Solar Ovonic&#146;s operating, general and administrative expenses (net of allocations) increased by only
$278,000 (22%) in 2005.  $136,000 of the increase resulted from higher personnel costs and $68,000 from higher utility costs, both due to increased manufacturing and sales volumes. </font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The product development
expenditures were used to fund the development of new products for space and airship applications and to develop lower-cost and
higher-efficiency terrestrial products.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><i><font size=2>Energy Conversion Devices Segment</font></i></u>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The ECD segment had an increased
operating loss in 2005, versus 2004, primarily due to a $2,643,000 decrease in the segment&#146;s hydrogen development contract
revenues. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD&#146;s product sales,
consisting of machine building, were $10,025,000 in 2005 compared to $32,000 in 2004 with the increase due to the commencement of
work to construct the new 25MW equipment for United Solar Ovonic.  These sales were made to a consolidated subsidiary and are
eliminated in consolidation.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD&#146;s revenues from product
development agreements decreased in the three months ended September 30, 2005 to $793,000 from $3,843,000 in the three months
ended September 30, 2004, due to lower revenues from Ovonic Hydrogen Systems, which is now a wholly owned subsidiary of ECD, (zero
in 2005 versus $2,643,000 in 2004), plus reduced revenues on contracts with National Institute of Standards and Technology (NIST)
($369,000 in 2005 versus $591,000 in 2004) for work done in optical switching and developing manufacturing technology related to
OLEDs, and reduced revenues ($99,000 in 2005 versus $355,000 in 2004) on work performed by ECD on United Solar Ovonic's U.S. Air
Force contract. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Revenues from product
development agreements for the ECD segment for the three months ended September 30, 2005 funded 12% of this segment&#146;s cost of
product development.  Revenues from product development agreements decreased by $3,050,000 while spending decreased by $597,000,
principally in the hydrogen technology, resulting in an increase of $2,453,000 in net cost of product development. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>34</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=80%>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><hr></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><hr></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=48% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Cost of revenues from product development agreements</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   974,000</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 3,892,000</FONT></TD>
     </TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Product development and research</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>5,768,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,447,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of product development</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>6,742,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>7,339,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues from product development agreements</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>793,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3,843,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cost of product development</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 5,949,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 3,496,000</FONT></TD>
        </TR>
</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Product development programs
include work on the Ovonic Cognitive Computer technology, including a unique three-terminal device with high-speed high-current
capabilities based on ECD's Ovonic threshold/memory technology.  Additionally, since acquiring a 100% interest in Ovonic Hydrogen
Systems and Ovonic Fuel Cell Company, ECD has continued the development of solid hydrogen storage systems and the Ovonic metal
hydride fuel cell technologies at a reduced level.  ECD is also continuing development of its photovoltaics, optical switching,
and OLED technologies. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD&#146;s royalties, consisting
principally of optical memory royalties, were $53,000 in 2005 compared to $13,000 in 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Other revenues are primarily
related to insurance proceeds, services, facilities and miscellaneous administrative and laboratory services provided to some of
the Company&#146;s joint ventures.  Other revenues were $233,000 in the three months ended September 30, 2005 up from $185,000 in
the three months ended September 30, 2004.  The increase in other revenues in 2005 was primarily due to increased services
provided to Ovonyx.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>ECD&#146;s operating, general
and administrative expenses (net of allocations) were $1,557,000 in 2005 compared to $889,000 in 2004.  The increase in the net
expense for 2005 was principally due to expenses of $427,000 of the total consolidated expense of $500,000 recorded in 2005 in connection with the adoption of SFAS 123(R) (see
Note A of Notes to Consolidated Financial Statements) and an increase of $318,000 in 2005 for the costs associated with
nonemployee stock options, partially offset by a reduction in 2005 for costs related to compliance with Sarbanes-Oxley
requirements.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Ovonyx is included in the ECD
segment.  However, since this investment is not consolidated, but is accounted for using the equity method of accounting, no
revenues or expenses of Ovonyx are included in ECD's results of operations for 2005 and 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><i><font size=2>Ovonic Battery Segment</font></i></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Ovonic Battery segment had a
decreased operating loss in the three months ended September 30, 2005 versus 2004, primarily resulting from higher sales of nickel
hydroxide and a reduced net cost of product development, offset by lower revenues and margins for the profitable equipment
contract with Rare Earth Ovonic in 2005 compared to 2004, and lower royalties (due to $1,125,000 recognized in the three months
ended September 30, 2004 &#151; see Note H of Notes to Consolidated Financial Statements).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>35</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The decrease in Ovonic
Battery&#146;s revenues was primarily due to a decrease in equipment sales to Rare Earth Ovonic as this program moves into final
machine acceptance, and a reduction in revenues from product development agreements principally related to decreased activities
under the advanced product development agreement from Cobasys as Cobasys staffed up to assume full responsibility for its product
development activities and is no longer reliant on Ovonic Battery.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Equipment sales revenues
decreased 63% to $398,000 in 2005 from $1,070,000 in 2004, primarily due to Ovonic Battery contracts with Rare Earth Ovonic to
provide battery-manufacturing equipment, which is nearing completion.  Nickel hydroxide sales were $722,000 in 2005.  Sales were
zero in 2004 due to a customer's temporary plant closure and accumulation of inventory.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Revenues from product
development agreements for the Ovonic Battery segment in the three months ended September 30, 2005 funded 19% of Ovonic
Battery&#146;s cost of product development as it continues to develop its core technologies.  Revenues from product development
agreements decreased by $60,000 and spending decreased by $399,000, resulting in a decrease of $339,000 in net cost of product
development.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<TABLE CELLPADDING=0 CELLSPACING=1 BORDER=0 WIDTH=90%>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Three Months Ended<BR>September 30,</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2005</FONT><hr width-80% size=1></TH>
     <TH><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2004</FONT><hr width-80% size=1></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=48% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Cost of revenues from product development agreements</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   261,000</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>   463,000</FONT></TD>
     </TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Product development and research</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>1,918,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,115,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of product development</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,179,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2,578,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Revenues from product development agreements</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>415,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>475,000</FONT></TD>
        </TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cost of product development</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 1,764,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2> 2,103,000</FONT></TD>
        </TR>
</TABLE>


<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Royalties for transportation
applications increased to $705,000 in 2005, up from $100,000 in 2004.  Overall royalties decreased by 28% to $1,131,000 in the
three months ended September 30, 2005 from $1,566,000 in the three months ended September 30, 2004 due to the recognition in 2004
of $1,125,000 related to an advance royalty payment made by a licensee to the Company in 1993 associated with a license agreement
under which the licensee no longer has a contractual obligation to make payments.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Revenues from license and other
agreements increased to $258,000 in the three months ended September 30, 2005 from $238,000 in the three months ended September
30, 2004.  The 2005 and 2004 license fees result from $238,000 for the amortization over 10.5 years of the $10,000,000 payment
received in the settlement of the patent infringement disputes and counterclaims in consideration of the licenses granted and the
agreement to cross license through December 31, 2014 (see Note B of Notes to Consolidated Financial Statements).  In addition, in
2005 Ovonic Battery received a $20,000 license fee from Intellect Battery, a Chinese licensee.  Revenues from license and other
agreements depend on a small number of new business arrangements, are sporadic and vary dramatically from period to period.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>36</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Patent expenses were incurred in
2005 and 2004 in connection with the protection of Ovonic Battery&#146;s United States and foreign patents covering its
proprietary technologies.  Total patent expenses decreased to $322,000 in the three months ended September 30, 2005 from $439,000
in the three months ended September 30, 2004, principally due to lower patent defense costs (zero in 2005 versus $173,000 in
2004).  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Ovonic Battery's operating,
general and administrative expenses (net of allocations) were $129,000 in 2005 compared to $404,000 in 2004.  The decrease was
primarily due to a reduced allocation in 2005 from ECD. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><u><font size=2>Other Income/Expense</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The $7,271,000 decrease in other
income (net) ($576,000 income in 2005 compared to $7,847,000 income in 2004) resulted primarily from an $8,000,000 distribution
from joint venture in 2004, partially offset by higher interest income ($797,000 in 2005 compared to $77,000 in 2004) due to
increased funds available for investment and higher interest rates. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>Liquidity and Capital Resources</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>As of September 30, 2005, the
Company had $88,662,000 consolidated cash and cash equivalents consisting of money market funds, certificates of deposit and
corporate notes, classified as available-for-sale, maturing from one day to two months and had consolidated working capital of
$106,702,000.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Our strategy is to transition
from a highly successful research-oriented company to the next phase of development, which is to commercialize the products we
have developed and concentrate on growing sales revenues and equity value in our core commercial businesses United Solar Ovonic,
Cobasys and Ovonyx.  The Company intends to continue its efforts to secure funding to finance its hydrogen, fuel cell and other
technologies.  We are also continuing with the sale of the assets of the metal hydride materials manufacturing business and
vacating three facilities, with the goal of moving the Company into a position of having sustained profitability. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company has commenced
construction of new United Solar Ovonic 25MW manufacturing equipment at a total cost of $70,000,000, which is anticipated to begin
manufacturing products in the Fall of 2006 following optimization of the manufacturing equipment.  In addition, the Company is
evaluating a number of alternatives to increase its manufacturing capacity in order to accelerate the growth of the United Solar
Ovonic segment.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>On September 19, 2005, ECD
announced that  United Solar Ovonic, its wholly owned subsidiary, has entered into a Memorandum of Understanding with Tianjin
Jinneng Investment Company (TJIC) to form a joint venture to establish a 25-megawatt (MW) thin-film triple-junction amorphous
silicon photovoltaic module manufacturing operation in Tianjin, the People's Republic of China.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>37</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The commercialization of the
Company's Ovonic Unified Memory through the Ovonyx joint venture does not require financial support because Ovonyx has generated
sufficient funds for its operations through licensing activities.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The commercialization of NiMH
battery solutions by the Cobasys joint venture does not require financial support due to the mechanism for additional funding from
Chevron described below.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The December 2004 agreement with
Chevron provides a mechanism for additional funding from Chevron to continue the Cobasys expansion.  Chevron will be entitled to
priority right of repayment for providing the additional funding.  ECD and Chevron will each continue to own a 50% interest in
Cobasys subject to adjustment under certain circumstances.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company expects the amount
of cash to be received under existing product development agreements in the year ending June 30, 2006 to decrease to approximately
$9,295,000, compared to $21,015,000 received in the year ended June 30, 2005, due to reduced funding to be received in the year
ending June 30, 2006 from Chevron, Cobasys and the U.S. Air Force programs.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Our current backlog of orders
for machine-building and equipment sales contracts and photovoltaic products is $35,685,000 (of which we expect to recognize
$33,801,000 in fiscal 2006) compared to a backlog of $52,059,000 as of June 30, 2005.  The backlog includes $35,323,000 and
$51,299,000 at United Solar Ovonic at September 30, 2005 and June 30, 2005, respectively. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>During the three months ended
September 30, 2005, $5,970,000 of cash was used in operating activities.  The difference between the net loss from continuing
operations of $6,208,000 and the net cash used in operations was principally due to reductions in both accounts receivable
($2,329,000) and related-party accounts receivable ($210,000), depreciation and stock issued for service rendered, including $500,000
for stock-based compensation expense recognized in connection with the adoption of SFAS 123(R).  These differences were partially
offset by increase in inventories ($1,482,000), other assets ($1,082,000) and reduction in accounts payable and accrued expenses
($1,922,000).</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The Company spent $10,643,000 on
property, plant and equipment during the three months ended September 30, 2005, principally for United Solar Ovonic's
manufacturing expansion.  In total, the Company expects to spend $51,000,000 for capital expenditures in fiscal 2006, primarily to
double United Solar Ovonic's capacity to manufacture solar modules and for leasehold improvements to the Company's facilities.
</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>On October 25, 2005, ECD filed a
shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (SEC).  The shelf registration statement
will enable us to offer and sell up to an aggregate of $300 million of common stock, senior and subordinated debt securities,
subscription rights, stock purchase contracts or stock purchase units from time to time in one or more public offerings.  The
terms of any such future offerings will be established at the time of such offerings.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>38</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>In order to fund this
accelerated growth, the Company is exploring many alternatives including, but not limited to, equity and debt financing, new
business agreements and government-sponsored programs.  The Company is also in discussions with potential partners to fund its
various activities.  No assurances can be given as to the timing or success of the aforementioned plans, negotiations, discussions
and programs.  </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Management believes that funds
generated from operations, new business agreements, exercises of Common Stock purchase warrants and stock options,
cost-containment initiatives, and existing cash and cash equivalents will be adequate to support and finance planned growth,
capital expenditures and company-sponsored product development programs over the coming year. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Item 3
</font></u><font size=2>.</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>
Quantitative and Qualitative Disclosures about Market Risk</font></u></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>The following discussion about
our exposure to market risk of financial instruments contains forward-looking statements.  Actual results may differ materially
from those described.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Our holdings of financial
instruments are comprised of debt securities and time deposits.  All such instruments are classified as securities
available-for-sale.  We do not invest in portfolio equity securities, or commodities, or use financial derivatives for trading
purposes.  Our debt security portfolio represents funds held temporarily, pending use in our business and operations.  The Company
had $84,659,000 and $95,805,000 of these investments (including cash equivalents) on September 30, 2005 and June 30, 2005,
respectively.  On September 30, 2005, the investments had an average maturity of less than 30 days.  It is the Company&#146;s
policy that investments (including cash equivalents) shall be rated &#147;A&#148; or higher by Moody's or Standard and
Poor&#146;s, no single investment (excluding cash equivalents) shall represent more than 10% of the portfolio and at least 10% of
the
total portfolio shall have maturities of 90 days or less.  Our market risk primarily relates to the risks of changes in the credit
quality of issuers.  As of September 30, 2005, the risk associated with changes in interest rates is minimal due to the short
average maturity of the investments.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%; text-indent:-9.85%;text-align:left;'><u><font size=2>
</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%; text-indent:-9.85%;text-align:left;'><font size=2>&nbsp;</font>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>39</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%;text-align:left;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Item 4
</font></u><font size=2>.</font></p> </td>
        <td valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Controls
and Procedures</font></u></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%;text-align:left;'><font size=2>&nbsp;</font></p>

<table border="0" cellspacing=0 cellpadding=0 width="80%" style=' border-collapse:collapse'>
    <tr>
        <td width="70%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>A.&nbsp;&nbsp;<u>Evaluation
of Disclosure Controls and Procedures</u></font></p>
</td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Under the direction of our Chief
Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures.  Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that, with the exception of the following, the design and
operation of these disclosure controls and procedures were effective for gathering, analyzing and disclosing information required
to be disclosed in connection with the Company&#146;s filing of its Annual Report on Form 10-K for the year ended June 30, 2005.
We identified the following material weakness in our internal control over financial reporting with respect to accounting for sale
transactions: </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="11%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>a failure
to ensure the correct application of SEC Staff Accounting Bulletin No. 104 &#151; Revenue Recognition when certain sale
transactions were entered into with our international customers with shipping terms of Delivered Duty Paid.</font></p> </td> </tr>
</table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style='text-indent:7.69%;text-align:justify;'><font size=2>Solely as a result of this
material weakness, we concluded that our disclosure controls and procedures were not effective as of June 30, 2005. </font></p>


<table border="0" cellspacing=0 cellpadding=0 width="64%" style=' border-collapse:collapse'>
    <tr>
        <td width="5%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>B.</font></p>
</td>
        <td width="94%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>
Remediation of Material Weakness in Internal Control</font></u></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>We are confident that, as of the
date of this filing, we have fully remediated the material weakness in our internal control over financial reporting with respect
to accounting for these sale transactions.  The remedial actions included: </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="11%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>improved
training, education and accounting reviews designed to ensure that all relevant personnel involved in sale transactions understand
and apply proper revenue recognition accounting in compliance with SEC Staff Accounting Bulletin No. 104 &#151; Revenue
Recognition; and</font></p> </td> </tr></table>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="11%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>reviewing
all shipping terms, other than FOB shipping point, to ensure proper revenue recognition with current contracts; and</font></p>
</td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="11%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>adding
controls around changes to shipping terms, other than FOB shipping point, and monitoring shipping terms periodically; and</font>
</p> </td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="11%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="3%" valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b>
</font></p> </td>
        <td  valign=top style='padding:.05in 0in 0in 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>reviewing
all new contracts to ensure that proper revenue recognition occurs.</font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>Under the direction of our Chief
Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as currently in effect,
including the remedial actions discussed above, and we have concluded that, as of this date, our disclosure controls and
procedures are effective. </font></p>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:-0.15%;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>40</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:-0.15%;text-align:center;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>




<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:-0.15%;text-align:center;'><u><font size=2>PART II &#151; OTHER
INFORMATION</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Item 6
</font></u><font size=2>.</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>Exhibits
and Reports on Form 8-K</font></u></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:9.85%;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="25%" style=' border-collapse:collapse'>
    <tr>
        <td width="30%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="22%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font SIZE=2>A.</font>
</p> </td>
        <td width="46%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><u><font size=2>
Exhibits</font></u></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="6%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>31.1</font>
</p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:16%; text-indent:-6.31%;text-align:justify;'><font size=2>&nbsp;</font>
</p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="6%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>31.2</font>
</p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:16%; text-indent:-6.31%;text-align:justify;'><font size=2>&nbsp;</font>
</p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="9%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;
</font></p> </td>
        <td width="6%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>32.</font>
</p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.</font></p> </td> </tr></table>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>41</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:-0.15%;text-align:center;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>





<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><u><font size=2>SIGNATURES</font></u></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:7.69%;text-align:justify;'><font size=2>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
thereunto duly authorized.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:47.85%;text-align:left;'><u><font size=2>ENERGY CONVERSION DEVICES,
INC.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>


<table border="0" cellspacing=0 cellpadding=0 width="63%" style=' border-collapse:collapse'>
    <tr>
        <td width="75%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td width="24%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(Registrant)
</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:47.85%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:47.85%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:46.15%;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="41%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td width="5%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>By:</font>
</p> </td>
        <td  colspan="4" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>/s/
Stephan W.
Zumsteg&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p> </td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td width="25%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Stephan W.
Zumsteg</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Date:
November 9, 2005</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Vice
President and Chief Financial Officer</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(Principal
Financial and Accounting Officer)</font></p> </td>
        <td  width="3%">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</td> </tr>
    <tr>
        <td width="261" ></td>

        <td width="38" ></td>

        <td width="163" ></td>

        <td width="140" ></td>

        <td width="10" ></td>

        <td width="24" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:46.15%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:46.15%;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style=' border-collapse:collapse'>
    <tr>
        <td width="41%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td width="5%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>By:</font>
</p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><font size=2>/s/ Robert
C.
Stempel&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p> </td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</p> </td>
        <td width="22%" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Robert C.
Stempel</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Date:
November 9, 2005</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Chairman and
Chief Executive Officer</font></p> </td>
        <td  width="9%">
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font>
</td> </tr>
    <tr>
        <td width="261" ></td>

        <td width="37" ></td>

        <td width="145" ></td>

        <td width="131" ></td>

        <td width="60" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>42</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


</div>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>ex31p1_sept2005q.txt
<DESCRIPTION>CEO CERTIFICATION - SECTION 302 OF SOX
<TEXT>


                                                                 Exhibit 31.2


                        CERTIFICATION OF CEO PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Robert C. Stempel, Chief Executive Officer of Energy Conversion Devices,
Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Energy Conversion
Devices, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:

     a)  Designed such disclosure controls and procedures, or caused such
     disclosure controls and procedures to be designed under our supervision, to
     ensure that material information relating to the registrant, including its
     consolidated subsidiaries, is made known to us by others within those
     entities, particularly during the period in which this report is being
     prepared;

     b)  Designed such internal control over financial reporting, or caused such
     internal control over financial reporting to be designed under our
     supervision, to provide reasonable assurance regarding the reliability of
     financial reporting and the preparation of financial statements for
     external purposes in accordance with generally accepted accounting
     principles;

     c)  Evaluated the effectiveness of the registrant's disclosure controls and
     procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end of
     the period covered by this report based on such evaluation; and

     d)  Disclosed in this report any change in the registrant's internal
     control over financial reporting that occurred during the registrant's most
     recent fiscal quarter (the registrant's fourth fiscal quarter in the case
     of an annual report) that has materially affected, or is reasonably likely
     to materially affect, the registrant's internal control over financial
     reporting.

5.  The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

     a)  All significant deficiencies and material weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely affect the registrant's ability to record, process,
     summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal control
     over financial reporting.


Date: November 9, 2005                      /S/ Robert C. Stempel
                                              ---------------------------------
                                              Robert C. Stempel
                                              Chief Executive Officer


                                      149
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>ex31p2_sept2005q.txt
<DESCRIPTION>CFO CERTIFICATION PURSUANT TO SECTION 302 OF SOX
<TEXT>


                                                                 Exhibit 31.2


                        CERTIFICATION OF CFO PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Stephan W. Zumsteg, Chief Financial Officer of Energy Conversion Devices,
Inc., certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Energy Conversion
Devices, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the
registrant and have:

     a)  Designed such disclosure controls and procedures, or caused such
     disclosure controls and procedures to be designed under our supervision, to
     ensure that material information relating to the registrant, including its
     consolidated subsidiaries, is made known to us by others within those
     entities, particularly during the period in which this report is being
     prepared;

     b)  Designed such internal control over financial reporting, or caused such
     internal control over financial reporting to be designed under our
     supervision, to provide reasonable assurance regarding the reliability of
     financial reporting and the preparation of financial statements for
     external purposes in accordance with generally accepted accounting
     principles;

     c)  Evaluated the effectiveness of the registrant's disclosure controls and
     procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end of
     the period covered by this report based on such evaluation; and

     d)  Disclosed in this report any change in the registrant's internal
     control over financial reporting that occurred during the registrant's most
     recent fiscal quarter (the registrant's fourth fiscal quarter in the case
     of an annual report) that has materially affected, or is reasonably likely
     to materially affect, the registrant's internal control over financial
     reporting.

5.  The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

     a)  All significant deficiencies and material weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely affect the registrant's ability to record, process,
     summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal control
     over financial reporting.


Date: November 9, 2005                      /S/ Stephan W. Zumsteg
                                              ---------------------------------
                                              Stephan W. Zumsteg
                                              Chief Financial Officer


                                      149
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>ex32_sept2005q.txt
<DESCRIPTION>CEO-CFO SECTION 1350 CERTIFICATION
<TEXT>
                                                                 Exhibit 32


                           CERTIFICATIONS PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)


     In connection with the Quarterly Report of Energy Conversion Devices, Inc.
     (the "Company") on Form 10-Q for the quarter ended September 30, 2005, as
     filed with the Securities and Exchange Commission on the date hereof (the
     "Report"), Robert C. Stempel, Chief Executive Officer of the Company, and
     Stephan W. Zumsteg, Chief Financial Officer of the Company, respectively,
     do each hereby certify, pursuant to ss. 906 of the Sarbanes-Oxley Act of
     2002 (18 U.S.C. ss. 1350), that based on his knowledge:

         1.  The Report fully complies with the requirements of Section 13(a)
             or 15(d) of the Securities Exchange Act of 1934; and

         2.  The information contained in the Report fairly presents, in all
             material respects, the financial condition and results of
             operations of the Company.


     /S/ Robert C. Stempel
     ------------------------------
     Robert C. Stempel
     Chief Executive Officer
     November 9, 2005


     /S/ Stephan W. Zumsteg
     ------------------------------
     Stephan W. Zumsteg
     Chief Financial Officer
     November 9, 2005










                                      150

</TEXT>
</DOCUMENT>
</SUBMISSION>
