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<SEC-DOCUMENT>0000032878-05-000046.txt : 20061002
<SEC-HEADER>0000032878-05-000046.hdr.sgml : 20061002
<ACCEPTANCE-DATETIME>20050429153249
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000032878-05-000046
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050429

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ENERGY CONVERSION DEVICES INC
		CENTRAL INDEX KEY:			0000032878
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				381749884
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2956 WATERVIEW DRIVE
		CITY:			ROCHESTER HILLS
		STATE:			MI
		ZIP:			48309
		BUSINESS PHONE:		248-293-0440

	MAIL ADDRESS:	
		STREET 1:		2956 WATERVIEW DRIVE
		CITY:			ROCHESTER HILLS
		STATE:			MI
		ZIP:			48309

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ENERGY CONVERSION LABORATORIES INC
		DATE OF NAME CHANGE:	19710603
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>

                         (COMPANY LETTERHEAD)




                                          April 29, 2005



Mr. Jay Webb (Mail Stop 0306)
Reviewing Accountant
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549

Re:   Energy Conversion Devices, Inc.
      Form 10-K for fiscal year ended June 30, 2004
      Form 10-Q for the period ending December 31, 2004
      Your File No. 1-8403

Dear Mr. Webb:

      This letter is in response to your April 12, 2005 letter. The information
set forth below is numbered to correspond to the paragraphs of your letter.

FORM 10-K FOR THE PERIOD ENDING JUNE 30, 2004

Managements Discussion and Analysis - Page 27
- ---------------------------------------------

Results of Operations - Page 31
- -------------------------------

1.  We note that the increase in royalties in 2004 compared to 2003 is
attributable to payments for optical memory royalties from a licensee who had
not previously made payments that covered amounts owed for a four-year period.
Are royalty revenues normally recognized on a cash basis? Please supplementally
address our concerns and explain in detail why four year's of royalty revenue
would only be recognized upon receipt of payment. In a related matter, are your
royalty (and other) revenue recognition accounting policies consistent with
those that existed at the time of our review of your June 30, 2000 Form 10-K? If
not, supplementally explain and support any material changes thereto.

    Response:
    In responding to the above comment, we will address three matters: (a) our
    royalty revenue recognition policy, (b) the recognition of royalties over a
    four-year period and (c) revenue recognition of advance royalties.


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 2
- ------

    a. Royalties are not recognized on a cash basis. Royalties are recognized
       upon the sale of the respective licensed products and when the earnings
       process is complete. The Company receives royalty reports from its
       licensees generally for a six-month period. The Company estimates its
       royalties for periods subsequent to the receipt of these royalty reports
       based on the most recent royalty report. When a licensee does not provide
       a timely royalty report, efforts are made to follow up with this licensee
       for a current royalty report. As stated on page 59 of the Company's Form
       10-K for the year ended June 30, 2004, "Advance royalty payments are
       deferred and recognized in revenues as the creditable sales occur, the
       underlying agreement expires, or when the Company has demonstrable
       evidence that no additional royalties will be creditable and,
       accordingly, the earnings process is completed."

    b. One of the licensees had been delinquent in providing these royalty
       reports and subsequently acknowledged it owed ECD royalties for an
       approximate four-year period. Upon receipt of that information, ECD
       accrued the revenues and subsequently received payment for these
       royalties.

    c. Our policy (as noted above) is consistent with the policy included in our
       Form 10-K/A (Amendment No. 1) for the year ended June 30, 2000. In the
       Company's Form 10-K for the year ended June 30, 2004 (page 31) we stated
       (emphasis added) that, "The Company also recognized in 2004 royalties of
       $464,000 related to nonrefundable advance royalty payments received by
       the Company in prior years associated with license agreements under which
                   --------------
       the licensees no longer have an obligation to make royalty payments."
       Some of our licensees, such as those from whom we recognized revenue in
       2004, pay us nonrefundable advance royalties at the time that the license
       is granted. We do not recognize as revenue the payment of nonrefundable
       advance royalties. The amount ($464,000) of royalties recognized in 2004
       represents payments received from two licensees in prior years pertaining
       to the underlying agreements which had expired as of June 30, 2004.

Liquidity and Capital Resources - Page 40
- -----------------------------------------

2. Please expand your discussion in future filings to better explain cash flows
from operations. Discuss significant changes to the components of working
capital - i.e., individually significant changes in line items. For example, we
note that accounts


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 3
- ------

payable and accrued expenses decreased $5.5 million or 30% from the past year
while inventories increased. When you cite the significant changes in components
of working capital - for example, receivables, inventory, payables, and
accruals - please explain the reasons for the changes.

    Response:
    We will expand our discussion of liquidity and capital resources in future
    filings to include any significant changes to the components of working
    capital, together with an explanation of the reasons for the changes.

FINANCIAL STATEMENTS
- --------------------

Statement of Cash Flows - Page 52
- ---------------------------------

3. Restricted cash (restricted by third parties) should generally not be
included in the beginning or ending balance of cash and cash equivalents as
discussed in SFAS 95, footnote 1 and the guidance at FRR 203. Please revise in
future filings or tell us why no changes are necessary.

    Response:
    We will revise in future filings our Statement of Cash Flows to exclude from
    the beginning or ending balance of cash and cash equivalents any restricted
    cash.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - PAGE 54
- --------------------------------------------------------

Note G - Joint Ventures and Investments - Page 70
- -------------------------------------------------

4. Please supplementally provide us with the significance test calculations
outlined at Rule 1-02(w)(3) of Regulation S-X for each of the joint venture
investments outlined in this Note for each of the three fiscal years included in
your 2004 Form 10-K. Tell us why you have or have not included Rule 3-09
financial statements or Rule 4-08(g) information for each joint venture
investment disclosed. We may have further comments after reviewing your
response.

    Response:
    Attached to this letter as Appendix A is our significant subsidiary test
    calculation as set forth in Rule 1-02(w)(3) of Regulation S-X for each of
    the joint venture investments outlined in Note G - Joint Ventures and
    Investments (page 70) - for each of the three years ended June 30, 2004.
    See Appendix A, page 1, for our summary of compliance with the


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 4
- ------

    requirements of Rule 3-09 financial statements or Rule 4-08(g)information
    for each joint venture disclosed.

5. Refer to your response letter dated May 23, 2001 to our comment letter dated
March 27, 2001 letter sent in connection with our review of your 2000 Form 10-K.
Specifically, confirm that you still apply the same accounting policies for your
joint ventures, including the matters outlined in comment 72 from that letter
that were discussed with and not objected to by the Staff at that time or
earlier. If not, supplementally explain and support any material changes to such
policies.

    Response:
    We confirm that the accounting policies noted in our letter dated May 23,
    2001 sent to you in connection with your review of our 2000 Form 10-K are
    still applied by us, including the matters outlined in comment 72 from that
    letter.

Item 9A Controls and Procedures - Page 93
- -----------------------------------------

6. We note your statement that the chief executive officer and chief financial
officer have concluded that the company's disclosure controls and procedures are
effective "with the exception of the items listed below." Given the exceptions
noted, it remains unclear whether your chief executive officer and chief
financial officer have concluded that your disclosure controls and procedures
are effective. Please revise your disclosure to state, in clear and unqualified
language, the conclusions reached by your chief executive officer and your chief
financial officer on the effectiveness of your disclosure controls and
procedures. For example, if true, you can state that your disclosure controls
and procedures are effective including consideration of the identified matters,
so long as you provide appropriate disclosure explaining how the disclosure
controls and procedures were determined to be effective in light of the
identified matters. Or, if true, you can state that given the identified
matters, your disclosure controls and procedures are not effective. You should
not, however, state the conclusion in your current disclosure, which appears to
state that your disclosure controls and procedures are effective except to the
extent they are not effective.

    Response:
    We agree to revise in future filings the evaluations of the Company's chief
    executive officer and chief financial officer to include, in clear and
    unqualified language, conclusions and determinations as to the effectiveness
    or noneffectiveness, as appropriate, of the Company's disclosure controls
    and procedures. (See response to items 10 and 11 below for additional
    discussion.)


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 5
- ------

FORM 10-Q FOR THE PERIOD ENDING DECEMBER 31, 2004

Note B Financings - Page 12
- ---------------------------

7. We note that CTTV transferred its interest in Ovonic Hydrogen to you. Please
tell us and revise future filings to disclose how you accounted for and valued
this transaction. Also, tell us how the transaction impacts your accounting and
presentation requirements for Ovonic Hydrogen in your December 31, 2004 and
future financial statements. We may have further comments after reviewing your
response.

    Response:
    We will revise our future filings to disclose the fact that, upon the
    transfer by CTTV of its interest in Ovonic Hydrogen to ECD, Ovonic Hydrogen
    is 100% owned by ECD and is included in the Company's consolidated financial
    statements. ECD received CTTV's interest in Ovonic Hydrogen for no
    consideration and, in accordance with purchase accounting (SFAS 141), we
    wrote down the assets and liabilities of Ovonic Hydrogen to zero at December
    2, 2004.

8. We note that ECD received $4,675,000 from CTTV for payment of restructuring
fees and accounted for this as an extraordinary item (gain). Please tell us why
presentation of this gain as an extraordinary item complies with APB Opinion 30
(or other generally accepted accounting principles). What was the nature of the
restructuring fees? Did ECD provide restructuring services to CTTV or Ovonic
Hydrogen? Tell us the business purpose of this transaction in light of the fact
that CTTV transferred its interest in Ovonic Hydrogen in consideration of the
relieving CTTV of any continuing obligations to fund Ovonic Hydrogen. We may
have further comments after reviewing your response.

    Response:
    In accordance with generally accepted accounting principles (APB Opinion No.
    30, paragraph 11 and SFAS 141, paragraph 45), the excess ($2,266,000, net of
    tax) of monies received over the costs incurred or committed in this
    restructuring could not be accrued as a liability, and should be accounted
    for as an extraordinary gain. The $4,675,000 received from CTTV represented
    estimated costs to be incurred by ECD for the relocation of facilities,
    severance of personnel and other restructuring costs associated with CTTV's
    withdrawal from the Ovonic Hydrogen joint venture. There is no contingent
    consideration agreement. No restructuring services were provided to CTTV;
    however, ECD did pay $2,374,000 of the costs of the restructuring for Ovonic
    Hydrogen from


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 6
- ------

    the $4,675,000 received from CTTV. ECD was providing service to Ovonic
    Hydrogen under a service agreement. The agreements provided certain
    termination provisions. CTTV and ECD mutually agreed, in lieu of the
    termination provisions, that certain restructuring fees be paid to ECD
    to enable ECD to transition from the full funding by CTTV of the
    joint venture to ECD funding the joint venture.

9. We see that on December 2, 2004 you entered into a series of agreements with
CTTV and Cobasys to expand the scope of licenses granted to Cobasys at the time
of the formation of the joint venture in July 2001 and also see in consideration
of the expanded license, revised joint venture agreements and the grant to CTTV
of a subsidiary interest in our membership interest in Cobasys, ECD, through its
subsidiary Ovonic Battery, you received an option to purchase the 4,376,633
shares of your common stock currently owned by a subsidiary of ChevronTexaco.
Finally we see the transaction increased your revenues and decreased additional
paid-in capital in the quarter ended December 31, 2004 by $79,532,000. Please
supplementally support the accounting and presentation of this transaction via
discussion about and reference to the authoritative generally accepted
accounting principles relied upon when preparing these financial statements. We
may have further comments after reviewing your response.

    Response:
      The agreements provided that in consideration of expanded market rights
      granted to Cobasys by ECD and Ovonic Battery Company, Inc. (OBC) a
      consolidated subsidiary of ECD, CTTV granted OBC a transferable option,
      exercisable in whole or in part on or before November 1, 2005, to purchase
      the ECD common shares held by TRMI Holdings Inc. (TRMI), an affiliate of
      CTTV, at a bargain price of $4.55 per share. One of the transaction
      agreements to this transaction defines the tax accounting treatment agreed
      to by all parties. It states that for the option premium, OBC will
      transfer 50% of the contributed market rights to TRMI. TRMI will transfer
      these rights to CTTV. CTTV and OBC will each contribute their market
      rights to Cobasys.

      The market rights contributed to Cobasys eliminate a market restriction on
      their nickel metal hydride (NiMH) batteries and allows them access to the
      full line of market opportunities for prismatic batteries. As in the past,
      ECD/OBC will continue, as required under previous technology contribution
      obligations, to provide Cobasys with future NiMH developments.

      For valuing the option and contributed technology refer to APB Opinion No.
      29-Accounting for Nonmonetary Transactions.


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 7
- ------

      APB29 (emphasis added) states:

      "18. The Board concludes that in general accounting for nonmonetary
      transactions should be based on the fair values of the assets (or
      services) involved which is the same basis as that used in monetary
      transactions. Thus, the cost of a nonmonetary asset acquired in exchange
      for another nonmonetary asset is the fair value of the asset surrendered
      to obtain it, and a gain or loss should be recognized on the exchange. The
      fair value of the asset received should be used to measure the cost if it
      is more clearly evident than the fair value of the asset surrendered.
      Similarly, a nonmonetary asset received in a nonreciprocal transfer should
      be recorded at the fair value of the asset received.  A TRANSFER OF A
      NONMONETARY ASSET TO A STOCKHOLDER OR TO ANOTHER ENTITY IN A NONRECIPROCAL
      TRANSFER SHOULD BE RECORDED AT THE FAIR VALUE OF THE ASSET TRANSFERRED,
      AND A GAIN OR LOSS SHOULD BE RECOGNIZED ON THE DISPOSITION OF THE ASSET.
      The fair value of an entity's own stock reacquired may be a more clearly
      evident measure of the fair value of the asset distributed in a
      nonreciprocal transfer if the transaction involves distribution of a
      nonmonetary asset to eliminate a disproportionate part of owners'
      interests (that is, to acquire stock for the treasury or for retirement)."

      For determining the classification of the option refer to EITF Issue No.
      00-19-Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company's Own Stock.

      "Purchased Call Options

      Description

      40. The company (the buyer) purchases call options that provide it with
      the right, but not the obligation, to buy from the seller, shares of the
      company's stock at a specified price. If the options are exercised, the
      contract may be settled by physical settlement, net-share settlement, or
      net-cash settlement, or the issuing company or the counterparty may have a
      choice of settlement methods.

      Consensus

      41. The company should follow the table included in the 'Forward Sale
      Contracts, Written Call Options or Warrants, and Purchased Put Options'
      section, above, in accounting for the call options."


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 8
- ------

      The table referred to above says that if the transaction is concluded with
      physical settlement, defined as, "...the party designated in the contract
      as a buyer delivers the full stated amount of cash to the seller, and the
      seller delivers the full stated number of shares to the buyer...", the
      option is classified as permanent equity, recorded at fair value of the
      nonmonetary items with no adjustments for changes in fair value.

      To determine the proper accounting for the "option premium" portion refer
      to the revenue recognition literature.

      We considered the GAAP referred to by SAB 104 (pg 52) for licenses of
      intellectual property. This is SOP 97-2 and SFAS 50. SOP 97-2 addresses
      software and does not address, nor can parallels be drawn from its
      contents, to licenses for intellectual property. SFAS 50, however, does
      state:

      "7. Substantial revenues may be realized by the owner of a record master
      or music copyright by entering into license agreements. A license
      agreement may be, in substance, an outright sale. If the licensor has
      signed a noncancelable contract, has agreed to a fixed fee, has delivered
      the rights to the licensee who is free to exercise them, and has no
      remaining significant obligations to furnish music or records, the
      earnings process is complete and the licensing fee shall be reported as
      revenue if collectibility of the full fee is reasonably assured."

      Current literature that supports recognition of the up-front fee in
      revenue upon entering into these license agreements is on the EITF web
      site that states that there is variation in practice and has tabled their
      issue pending FASB conclusion as follows: "Issue No. 02-G, "Recognition of
      Revenue from Licensing Arrangements on Intellectual Property." Licensing
      arrangements can take many forms, such as arrangements with a specific
      term or those with an unlimited term. The accounting for licensing
      arrangements varies in practice. Some may view the licensing of
      intellectual property as indistinguishable from a lease of a physical
      asset in which the total arrangement fee should be recognized over the
      contract term, while others may view such licensing arrangements as
      indistinguishable from the licensing of software or motion picture rights
      in which revenue is recognized once the license has been conveyed and the
      seller has no further obligations. The latter group believes their
      approach is fully consistent with the guidance in AICPA Statements of
      Position 97-2, Software Revenue Recognition, and 00-2, Accounting by
      Producers or Distributors of Films. The issue is when to recognize revenue
      from licensing arrangements on intellectual property.


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 9
- ------

      STATUS: At the November 21, 2002 meeting, the Task Force agreed to remove
      this Issue, as well as eight other Issues that are related to revenue
      recognition, from its agenda because the FASB has agreed to add to its
      agenda a major project on recognition of revenues and liabilities in
      financial statements."

      In SAB 104 the SEC staff "...believes that revenue generally is realized
      or realizable and earned when all of the following criteria are met:

           Persuasive evidence of an arrangement exists,
           Delivery has occurred or services have been rendered,
           The seller's price to the buyer is fixed or determinable, and
           Collectibility is reasonably assured."

      Under the terms of this option agreement, ECD and OBC have no further
      obligations. The option should be recorded on the books of OBC at fair
      value, determined by the Black Scholes formula and included as a component
      of equity. The fair value should be recognized as income upon receipt of
      the option. Application of this logic is consistent with the revenue
      recognition provided on other license agreements of ECD and OBC.

Item 4 Controls and Procedures - Page 42
- ----------------------------------------

10. In light of the fact that material weaknesses exist with respect to (i)
insufficient documentation of ECD's policies and procedures around internal
controls, (ii) no monitoring of controls, (iii) employees performing processes
or controls that are incompatible with their functions, and (iv) weaknesses in
the security of data within ECD's information systems, revise future filing to
expand the disclosure to explain in reasonable detail the basis for officers'
conclusions that the company's disclosure controls and procedures were
nonetheless effective as of the end of the period covered by the report. Also,
supplementally confirm none of the disclosed weaknesses resulted in material
errors or adjustments to your financial statements prior to their issuance. If
not the case, tell us the nature of the errors or adjustments, how they were
identified, steps taken to prevent reoccurrences of the errors and why you
believe your current and previously filed financial statements are compliant
with generally accepted accounting principles.

    Response:
    We will revise future filings to expand the disclosure of Item 4 Controls
    and Procedures to explain in detail the basis for the conclusions of the
    Company's chief executive officer and chief financial officer that the
    Company's disclosure controls and procedures were effective as of the end of
    the respective reporting period notwithstanding the material


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 10
- -------

    weaknesses noted. As discussed in Item 11 below, we will expand our
    disclosures to update all significant actions taken by us within the
    reporting period to address and remediate the material weaknesses noted.

    We confirm that none of the material weaknesses identified resulted in
    material errors or adjustments to our quarterly financial statements prior
    to their issuance.

11. To this regard, tell us supplementally and revise future filings to update
all significant actions taken within the period by ECD to address and remediate
- ---
the material weaknesses. Indicating that ECD has devised a plan and committed
the required resources to address and remediate the material weaknesses is not
sufficient. Expand your future disclosures to indicate the significant aspects
of the plan and what you mean by "commit the required resources". We note you
indicate that a public accounting firm has been retained to assist in the
project direction, execution and external reporting. Have any of the material
weaknesses been directly addressed? In future filings, make the appropriate
disclosures until all material weaknesses have been mitigated and corrected.

    Response:
    We will revise future filings to update all significant actions taken by us
    within the reporting period to address and remediate the material
    weaknesses, including the significant aspects of our plan and resources
    committed. We will make all of the appropriate disclosures in our future
    filings until all material weaknesses have been mitigated and corrected.

    For your information, the following steps have been taken to address and
    remediate the material weaknesses as of the date of this letter and this is
    the type of disclosure we plan to include in any future filings.

       1. The Company has retained a registered public accounting firm as a
       consultant (Consultant) to assist in the project direction, execution and
       external reporting. This firm is assisting the Company in documenting its
       policies and procedures around its internal controls. These policies and
       procedures have been drafted, reviewed, approved and disseminated to all
       critical employees. The Company has completed its documentation of these
       policies and procedures and the Consultant has completed, where no
       remediation is necessary, its walkthrough and testing of these policies
       and procedures.


<PAGE>

Mr. Jay Webb
April 29, 2005
Page 11
- -------

       2. The Company has enhanced its monitoring controls in the area of
       financial reporting and has contracted with the Consultant to act as its
       internal auditor to assist in this monitoring activity.

       3. The Company has completed job descriptions for all of its accounting
       and finance employees, has prepared matrices of all the accounting and
       finance functions, and has restructured these duties and responsibilities
       to provide for appropriate segregation of duties and oversight or review
       of their activities.

       4. The Company, with the assistance of the Consultant, is in the process
       of strengthening its controls in the security of data within its
       information systems, initiating security event logs and activity reports,
       assignment of administrative rights, segregation of duties and access to
       data and applications.

    The Company, with its Consultant's assistance, has a plan in place to fully
    complete the remediation of all of the above items to enable management to
    assess its internal controls and to enable the Company's independent
    registered public accounting firm to audit management's assessment as of
    June 30, 2005.

    The Company has committed significant resources (total estimated cost of
    $2.2 million) to this project and management has informed all employees that
    this project is of the utmost importance to the Company and all of its
    employees.

12. We note your disclosure that "there were no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls.. ." Please revise these disclosures in future filings to
remove the word significant and to discuss all changes in your internal control
over financial reporting that have materially affected, or that are reasonably
likely to materially affect, your internal control over financial reporting, as
required by Item 308(c) of Regulation S-K, as amended effective August 13, 2003.

    Response:
    We will revise in our future filings our disclosures to exclude the word
    "significant" and to discuss all changes in our internal control over
    financial reporting that have materially affected, or that are reasonably
    likely to materially affect, our internal control over financial reporting.


                                         * * * * *

<PAGE>

Mr. Jay Webb
April 29, 2005
Page 12
- -------

      ECD acknowledges that:

         o   it is responsible for the adequacy and accuracy of the disclosure
             in the filings,
         o   the staff comments or changes to disclosure in response to staff
             comments in the filings reviewed by the staff do not foreclose the
             Commission from taking any action with respect to the filing, and
         o   it may not assert staff comments as a defense in any proceeding
             initiated by the Commission or any person under the federal
             securities laws of the United States.

      If you have any additional questions or comments, please contact me at
(248) 299-6013.

                                    Sincerely,


                                    /S/ Stephan W. Zumsteg

                                    Stephan W. Zumsteg
                                    Chief Financial Officer



Attachments


<PAGE>

                                                           Appendix A - Page 1

                JOINT VENTURE FINANCIAL STATEMENTS / INFORMATION
                ------------------------------------------------
             (See Appendix A - Pages 2-4 for detail of computations)
             -------------------------------------------------------


                                                          Year Ended June 30,
                                                         --------------------
              Joint Venture                              2004    2003    2002
- -------------------------------------------              ----    ----    ----

 United Solar Ovonic LLC
    (formerly Bekaert ECD Solar Systems)                 (6)      (6)     (4)
 Cobasys
    (formerly Texaco Ovonic Battery Systems)             (1)      (1)     N/A
 Ovonyx                                                  (2)      (2)     (2)
 Ovonic Fuel Cell (formerly Texaco Ovonic Fuel Cell)     (6)      (6)     (5)
 Texaco Ovonic Hydrogen Systems                          (5)      (5)     (5)
 Ovonic Media                                            N/A      (2)     (5)
 Rare Earth Ovonic                                       (3)      (3)     (3)
 Innovative Transportation Systems (ITS)                 N/A      (7)     (2)
 ------------------

   N/A  Information not available.  Investees were dormant or, in the case of
   the Cobasys, newly formed and no information available.

   (1)  Met 10% asset test. Financial information required by Rule 4-08(g) was
        included in ECD's Form 10-K footnote for the respective years.

   (2)  Did not meet 10% or 20% tests.

   (3)  Accounted for on cost basis.

   (4)  Met 20% asset and 10% income tests. Audited financial statements, as
        required by Rule 3-09, filed as an exhibit to ECD's June 30, 2002 Form
        10-K.

   (5)  Did not meet 10% or 20% test. However, financial information was
        included in ECD's Form 10-K footnote for the respective years.

   (6)  100% owned by ECD as of June 30 of the respective year.

   (7)  Met 10% income test for 2003.  However, ITS required significant
        additional investments as it continued commercialization of its products
        and lacked funds to continue operations without new equity investors.
        Neither partner in the venture had an obligation nor had committed to
        provide additional funding. As a result, ECD wrote down its investment
        in ITS to zero in the year ended June 30, 2003 and recorded equity in
        losses and writedown of joint ventures of $5,286,000. Since financial
        information was not available and since the Company has no further
        investment in ITS as of June 30, 2003, it was not considered relevant
        to the users of the Company's financial statements to include in its
        footnotes any financial information for ITS.

<PAGE>

                                                           Appendix A - Page 2


                                    Investees
                                    6/30/2004

<TABLE>
<CAPTION>
                                                                                  COBASYS      Texaco Ovonic
                                                                              (Texaco Ovonic      Hydrogen
                                               Ovonic Media       Ovonyx          Battery)        Systems
                                               ------------    ------------   --------------   -------------

<S>                                            <C>             <C>            <C>              <C>
Investments & Advances                         $     -         $     -        $     -          $     -

ECD Ownership Interest                              49%            41.7%           50%              50%

Assets
   Consolidated - 06/30/04                      113,311,775     113,311,775    113,311,775      113,311,775
       10%                                       11,331,178      11,331,178     11,331,178       11,331,178
       20%                                       22,662,356      22,662,356     22,662,356       22,662,356
   JV Assets 06/30/04                               N/A           9,158,273     34,359,134        6,093,178
       ECD Share of Assets                          N/A           3,818,999     17,179,567        3,046,589

Consolidated Loss - 06/30/04                    (51,421,674)    (51,421,674)   (51,421,674)     (51,421,674)
       10%                                       (5,142,167)     (5,142,167)    (5,142,167)      (5,142,167)
       20%                                      (10,284,335)    (10,284,335)   (10,284,335)     (10,284,335)

Amount of ECD Share of Losses Recognized
on ECD Financial Statements                          -             (644,000)        -                -


- ---------------------
   Note - See Appendix A - Page 1 for summary of tests.
        - No information is available for the following joint ventures:
                Rare Earth Ovonic (accounted for on the cost basis)
                Ovonic Media (dormant - would not be expected to meet 10% or 20% test)
                Sovlux (dormant - would not be expected to meet 10% or 20% test)
                Sovlux Battery (dormant - would not be expected to meet 10% or 20% test)
                Innovative Transportation Systems (dormant - would not be expected to meet 10% or 20% test)

        N/A  Information not available.

</TABLE>

<PAGE>

                                                           Appendix A - Page 3

                                    Investees
                                    6/30/2003

<TABLE>
<CAPTION>

                                                                    Texaco       Texaco Ovonic     Innovative
                                                                    Ovonic          Hydrogen     Transportation
                                   Ovonic Media       Ovonyx        Battery         Systems      Systems (ITS)
                                   ------------    ------------   ------------   -------------   --------------

<S>                                <C>             <C>            <C>            <C>             <C>
Investments & Advances             $     -         $   594,220    $     -        $     -         $     -
    ECD Ownership Interest              49%           41.7%            50%            50%             30%

Assets
  Consolidated - 06/30/03           153,694,650    153,694,650     153,694,650    153,694,650     153,694,650
     10%                             15,369,465     15,369,465      15,369,465     15,369,465      15,369,465
     20%                             30,738,930     30,738,930      30,738,930     30,738,930      30,738,930
  JV Assets 06/30/03                    378,965     13,131,929      36,769,812      8,698,467       1,105,695
     ECD Share of Assets                185,693      5,476,014      20,384,906      4,349,234         331,709

Consolidated Loss Before
Cumulative Effect of Change in
Accounting Principle - 06/30/03     (38,413,719)   (38,413,719)    (38,413,719)   (38,413,719)    (38,413,719)
     10%                             (3,841,372)    (3,841,372)     (3,841,372)    (3,841,372)     (3,841,372)
     20%                             (7,682,744)    (7,682,744)     (7,682,744)    (7,682,744)     (7,682,744)

Amount of ECD Share of Losses            -            (406,000)         -              -           (5,286,000)
Recognized on ECD Financial
Statements


- ----------------------
       Note - See Appendix A - Page 1 for summary of tests
            - No information is available for the following joint ventures:
                    Rare Earth Ovonic (accounted for on the cost basis)
                    Sovlux (dormant - would not be expected to meet 10% or 20% test)
                    Sovlux Battery (dormant - would not be expected to meet 10% or 20% test)


</TABLE>
<PAGE>

                                                           Appendix A - Page 4


                                   Investees
                                   6/30/2002

<TABLE>
<CAPTION>
                                                           Texaco       Bekaert-ECD    Texaco Ovonic     Texaco        Innovative
                                                           Ovonic          Solar          Hydrogen     Ovonic Fuel   Transportation
                            Ovonic Media     Ovonyx        Battery        Systems         Systems          Cell          Systems
                            ------------  ------------   ------------   ------------   ------------   ------------   --------------

<S>                         <C>           <C>            <C>            <C>            <C>            <C>            <C>
Investments & Advances      $     -       $     -        $     -        $ 27,269,793   $     -        $     -        $  3,285,757

ECD Ownership Interest           49%          41.7%           50%           32.4%           50%            50%            30%

Assets
    Consolidated - 06/30/02  192,118,594   192,118,594    192,118,594    192,118,594    192,118,594    192,118,594    192,118,594
        10%                   19,211,859    19,211,859     19,211,859     19,211,859     19,211,859     19,211,859     19,211,859
        20%                   38,423,719    38,423,719     38,423,719     38,423,719     38,423,719     38,423,719     38,423,719

    JV Assets 06/30/02           460,241     8,495,962         -         139,265,816      7,985,829      2,622,420      2,197,653
        ECD Share of Assets      225,519     3,542,816         -          45,122,124      3,992,915      1,311,210        659,296

Consolidated Loss - 06/30/02 (20,888,034)  (20,888,034)   (20,888,034)   (20,888,034)   (20,888,034)   (20,888,034)   (20,888,034)
        10%                   (2,088,803)   (2,088,803)    (2,088,803)    (2,088,803)    (2,088,803)    (2,088,803)    (2,088,803)
        20%                   (4,177,606)   (4,177,606)    (4,177,606)    (4,177,606)    (4,177,606)    (4,177,606)    (4,177,606)

Amount of ECD Share of Losses     -             -              -          (2,944,000)        -              -            (714,000)
Recognized on ECD Financial
Statements


- -----------------------
    Note - See Appendix A - Page 1 for summary of tests.
         - No information is available for the following joint ventures:
                 Texaco Ovonic Battery Systems (newly formed; no information available)
                 Rare Earth Ovonic (accounted for on the cost basis)
                 Sovlux (dormant - would not be expected to meet 10% or 20% test)
                 Sovlux Battery (dormant - would not be expected to meet 10% or 20% test)


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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