<SUBMISSION>
<ACCESSION-NUMBER>0000032878-06-000102
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20060630
<FILING-DATE>20060913
<DATE-OF-FILING-DATE-CHANGE>20060912
<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-K
<ACT>34
<FILE-NUMBER>001-08403
<FILM-NUMBER>061087496
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2956 WATERVIEW DRIVE
<CITY>ROCHESTER HILLS
<STATE>MI
<ZIP>48309
<PHONE>248-293-0440
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2956 WATERVIEW DRIVE
<CITY>ROCHESTER HILLS
<STATE>MI
<ZIP>48309
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ENERGY CONVERSION LABORATORIES INC
<DATE-CHANGED>19710603
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>fiscal2006_10-k.htm
<DESCRIPTION>FISCAL YEAR 2006 10K
<TEXT>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>UNITED STATES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>SECURITIES AND EXCHANGE COMMISSION</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>WASHINGTON, D.C. 20549</FONT></P>
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<TD noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FORM 10-K</B></FONT></TD>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 6pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;X&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;</FONT></U></P>
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<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top colSpan=3>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>ANNUAL&nbsp;REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR&nbsp;ENDED JUNE 30, 2006. </FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 6pt; TEXT-ALIGN: left"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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></P>
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<P style="MARGIN-TOP: 7pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Commission File Number:&nbsp;</FONT><U><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;1-8403&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U></P>
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<TD style="PADDING-RIGHT: 0pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=4>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><B>ENERGY CONVERSION DEVICES, INC.</B></FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(Exact name of registrant as specified in its charter)</FONT></P>
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<TD style="PADDING-RIGHT: 0pt; PADDING-LEFT: 10pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>DELAWARE</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>38-1749884</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(State or other jurisdiction of incorporation)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(I.R.S. Employer Identification No.)</FONT></P>
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<TD colSpan=4>&nbsp;</TD></TR>
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<TD style="PADDING-RIGHT: 0pt; PADDING-LEFT: 10pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=3>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>2956 Waterview Drive, Rochester Hills, Michigan</FONT></P>
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<TD style="PADDING-RIGHT: 0pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>48309</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(Address of principal executive offices)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 7pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (Zip Code)</FONT></P>
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<TD colSpan=4>&nbsp;</TD></TR>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Registrant's telephone number, including area code</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(248) 293-0440</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 9pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Former name, former address and former fiscal year, if changed since last report.</FONT> </P>
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<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Securities registered pursuant to Section 12(b) of the Act:</FONT></TD>
<TD width=222><BR></TD></TR>
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<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Common Stock, $.01 par value per share</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(Title of Securities)</FONT></P>
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<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Securities registered pursuant to Section 12(g) of the Act:&nbsp;None</FONT></TD>
<TD width=222>&nbsp;</TD></TR>
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<TD width=38></TD>
<TD width=291></TD>
<TD width=69></TD>
<TD width=222></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify" width="80%"><FONT face="Times New Roman, Times, Serif" size=2>Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. </FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;[&nbsp;X&nbsp;]<BR>Yes</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]<BR>&nbsp;&nbsp;No</FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify" width="80%"><FONT face="Times New Roman, Times, Serif" size=2>Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;[&nbsp;&nbsp;&nbsp;]<BR>Yes</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;[&nbsp;X&nbsp;]<BR>&nbsp;&nbsp;No</FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify" width="80%"><FONT face="Times New Roman, Times, Serif" 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></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;[&nbsp;X&nbsp;]<BR>Yes</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]<BR>&nbsp;&nbsp;No</FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify" vAlign=bottom width="80%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendments to this Form 10K.</FONT></TD>
<TD vAlign=bottom align=center width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;[&nbsp;X&nbsp;]</FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify" colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule 12b-2 of the Exchange Act.</FONT></TD></TR>
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<TD align=center width="37%"><FONT face="Times New Roman, Times, Serif" size=2>Large accelerated filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;X&nbsp;]</FONT></TD>
<TD align=center width="30%"><FONT face="Times New Roman, Times, Serif" size=2>Accelerated filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD align=center width="30%"><FONT face="Times New Roman, Times, Serif" size=2>Non-accelerated filer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT></TD></TR>
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<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
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<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).</FONT><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Yes&nbsp;[&nbsp;&nbsp;&nbsp;]</FONT><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;[&nbsp;X&nbsp;]</FONT></P>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The aggregate market value of the voting and nonvoting common equity held by nonaffiliates (based upon the closing price of such voting and nonvoting common equity on the NASDAQ National Market System on December 31, 2005, the last business day of the registrant's most recently completed second fiscal quarter) was approximately $1.2 billion.</FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 8, 2006, there were 39,060,855 shares of ECD's Common Stock outstanding.</FONT></TD></TR>
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<TD align=center><FONT face="Times New Roman, Times, Serif" size=2><B>DOCUMENTS INCORPORATED BY REFERENCE</B></FONT></TD></TR>
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<TD style="TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the Registrant's Proxy Statement to be filed within 120 days of June 30, 2006 for the 2006 Annual Meeting of Shareholders.</FONT></TD></TR>
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<FONT face="Times New Roman, Times, Serif" size=2><B><U>PART I</U></B></FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 1:</FONT></B></U></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Business</FONT></B></U></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>In this Report, when we use the terms &#147;Company,&#148; &#147;ECD,&#148; &#147;we,&#148; &#147;us&#148; and &#147;our,&#148; unless otherwise indicated or the context otherwise requires, we are referring to Energy Conversion Devices, Inc. and its consolidated subsidiaries. A substantial portion of the Company&#146;s operations are conducted through subsidiaries controlled by ECD. The Company is also a party to various joint venture arrangements that are not consolidated. Certain disclosures included in this Report constitute forward-looking statements that are subject to risks and uncertainties. See Item 1A, &#147;Risk Factors,&#148; and Item 7, &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations &#151; Forward-Looking Statements.&#148;</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Overview</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc. invents, designs, develops and commercializes materials, products and production processes for the alternative energy generation, energy storage and information technology markets. Our materials, products and production processes originate from the pioneering work of Mr. Stanford R. Ovshinsky, principal inventor and our President, Chief Scientist and Technologist, in materials science at the atomic (or nanostructure) level, principally amorphous and disordered materials. Based on this work, we have invented and developed materials that permit the design and commercialization of products such as thin-film solar (&#147;photovoltaic&#148; or &#147;PV&#148;) modules, nickel metal hydride (&#147;NiMH&#148;) batteries and phase-change memory devices.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our business strategy is to invent, design and develop materials, products and production processes and then commercialize these materials, products and production processes internally and through third-party relationships, such as licenses and joint ventures. As part of this strategy, we regularly evaluate and align our technology portfolio with respect to high-potential, emerging technologies to meet market needs and then allocate resources to those technologies accordingly. We also continue to invent new, basic technologies to add to our portfolio, while at the same time improving our existing technologies. Our current commercialized products, including thin-film PV modules and NiMH batteries, have been brought to commercialization through this strategy.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our commercialized solar and NiMH battery products are experiencing significant increases in demand, driven principally by converging global trends, including rising prices for traditional energy resources, national security concerns based on reliance on foreign energy sources, growing government incentives for renewable energy resources and the public&#146;s demand for more fuel efficient vehicles. We expect demand for alternative energy generation solutions, including our thin-film PV modules, to continue to increase dramatically over the next several years. In response, we plan to increase our manufacturing capacity from the current 28MW per annum to an expected capacity exceeding 300MW per annum by 2010. In March 2006, we completed an offering of our common stock and raised net proceeds of approximately $360,854,000, </FONT><FONT size=2>which we intend to use principally for this expansion,
including construction of a 60MW manufacturing facility in Greenville, Michigan. In addition, we recently announced that we are adding a second 60MW per annum PV cell manufacturing facility at our Greenville site, which is expected to begin operation in mid-2008.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>1</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our overall alternative energy strategy includes developing a complete systems solution for the hydrogen economy, including products and systems based on our PV technology to generate electricity to extract hydrogen from water through electrolysis; products and systems based on our Ovonic solid hydrogen storage technology to store, transport and distribute hydrogen; products and systems based upon our NiMH technology to store electricity and power hybrid electric vehicles; and products and systems based on our Ovonic metal hydride fuel cell technology and other technologies (including modified internal combustion engines and turbines) to use hydrogen as a fuel source for a wide range of transportation, stationary and mobile applications. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Our Business Segments</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD operates in three business segments: United Solar Ovonic, Ovonic Battery (which includes our joint venture, Cobasys LLC) and ECD (which includes our joint venture, Ovonyx, Inc.). Financial information regarding each segment is available in Note L, &#147;Business Segments,&#148; of Notes to our Consolidated Financial Statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>United Solar Ovonic Segment</FONT></I></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment consists of our thin-film solar PV business in which we design, develop, manufacture and sell PV modules that generate clean, renewable energy by converting sunlight into electricity. This business, which we conduct through our wholly owned subsidiary, United Solar Ovonic LLC, is based principally on our pioneering technologies for thin-film amorphous silicon PV cells and low-cost, roll-to-roll manufacturing. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We manufacture our PV modules using our proprietary, roll-to-roll process in which we deposit amorphous silicon as a thin film on a sheet of stainless steel. Our PV modules are lightweight, thin, flexible and durable and can be integrated directly with roofing materials for a seamless appearance. Conventional PV products, which currently represent over 90% of the solar modules sold globally, are made of crystalline or polycrystalline silicon and are covered in glass enclosed by a metal frame. Our PV modules are typically 18-foot laminates (without a frame) and have several competitive advantages over conventional PV products, including greater electricity generation per rated power output; no use of polysilicon material, which is currently in short supply; low cost of production; simpler, lower cost installation; greater durability; lighter weight; better aesthetics; more applications; and greater
opportunity to reduce product cost and increase profitability with higher production volumes.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We are presently focusing primarily on terrestrial applications for our PV modules, such as commercial and industrial roofing solutions. However, we have also designed and are developing PV products for space and stratospheric applications and are presently working with Lockheed Martin and the United States Air Force to develop ultra-lightweight PV cells and modules for satellites and airships.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We believe that we have a strategic competitive advantage because our PV modules are readily adaptable for seamless integration into various roofing materials, and we therefore sell most of our modules to commercial roofing materials manufacturers, builders and building contractors, and solar power installers/integrators, who incorporate our solar panels into their products and services for commercial sale and then handle all aspects of the consumer relationship, including marketing, sales and service. Our strategic customers include Solar Integrated Technologies Inc. (&#147;SIT&#148;), Biohaus PV Handels GmbH (&#147;Biohaus&#148;), Alwitra Flachdach Systeme GmbH, URS Corporation, Corus Bausysteme GmbH, Hoesch Contecna Systembau, </FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Unimetal S.p.A., Sunset Energietechnik GmbH, and Actus Lend Lease (a subsidiary of Lend Lease Corp. Ltd). Sales to SIT represented 20.6% and 32.6% of our product sales in this segment in the fiscal years ended June 30, 2006 and June 30, 2005, respectively. In the fiscal year ended June 30, 2006, Biohaus represented 13.7% of our product sales in this segment. We also sell framed PV products on a limited basis.years ended June 30, 2006 and June 30, 2005, respectively. We also sell framed PV products on a limited basis. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We compete with companies that currently manufacture and distribute products based on well-established technologies for electricity generation, as well as companies that currently manufacture and distribute products based on alternative energy generation technologies, such as solar and wind. Our principal competitors in the solar market include Sharp Corporation, Q-Cells AG, Kyocera Corporation, Sanyo Electric Co., Ltd. (&#147;Sanyo&#148;) and Mitsubishi Electric Corporation, all of which manufacture predominantly crystalline or polycrystalline silicon solar cells. The competitiveness of alternative energy generation products in general, including solar power products, is typically enhanced by governmental incentives designed to encourage the use of these products as compared to conventional energy generation sources, which today are less expensive at the customer level in most locations. However, our
long-term goal is to compete directly, without subsidies, in energy markets.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our long-term research and development strategy involves improving the throughput of our PV cell manufacturing equipment, reducing the cost of production and increasing the sunlight-to-electricity conversion efficiency of our PV modules. For example, we have extended the throughput of our existing PV module manufacturing equipment to 28MW per annum and are continuing our efforts to reach an expected capacity of 30MW per annum. We have an extensive patent portfolio in PV technology with U.S. and foreign counterparts covering solar cell and module materials, manufacturing processes and product design, including basic patents that have broad coverage. We are also regularly adding new patents to our portfolio based upon our continuing research and development activities. As a result, we do not believe that the expiration of any of our PV technology patents during the next five years will have a material
adverse effect on our business.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The key raw materials used in our United Solar Ovonic segment business are primarily stainless steel; high purity industrial gases, primarily argon, nitrogen, hydrogen, silane and germane; and polymer materials. We believe that we have adequate sources for the supply of key raw materials and components for our PV module manufacturing needs. We have, in certain instances, selected single-source suppliers for certain key raw materials and components for efficiency, cost and quality. The cost of certain raw materials, in particular stainless steel and resin-based polymer materials, have risen dramatically over the last several years, and we are actively managing these costs through purchasing strategies (including higher volume purchasing), and product design and operating improvements. For example, we have qualified additional stainless steel suppliers to diversify our supply base and reduce cost. Our
operations are not impacted by the shortage of polysilicon (a key raw material for conventional PV products) that is affecting most of our competitors through higher costs and limited availability. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our backlog of orders for PV products was $30,650,000 and $51,299,000 at June 30, 2006 and June 30, 2005, respectively. In fiscal 2007, we expect to recognize all of our existing backlog as revenue. The principal reason for the change in backlog is an expected temporary, substantial decline for 2007 of sales of our PV modules to SIT. We are presently reallocating production to other customers in our existing backlog and seeking additional sales to offset the impact of SIT. Additionally, the reduction in backlog was impacted by a change in our business practices to focus on long-term supply agreements, in which, consistent with </FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0in; TEXT-ALIGN: justify"><FONT size=2>industry norms, we accept firm orders from our customers on a more current basis than our past practice. Only firm orders are included in backlog.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment is headquartered in Auburn Hills, Michigan and has manufacturing facilities in Auburn Hills, Michigan and Tijuana, Mexico. To meet present and expected demand, we plan to rapidly expand our manufacturing capacity from the current 28MW per annum to an expected capacity exceeding 300MW by 2010 by adding new manufacturing facilities, as well as constantly improving our products and process efficiencies. Our second manufacturing facility in Auburn Hills, with an expected capacity of 30MW per annum, is anticipated to begin operation in Fall 2006. This facility will duplicate our existing Auburn Hills facility, manufacturing PV cells and finished PV modules. We are also presently constructing a manufacturing facility in Greenville, Michigan, which is expected to begin operation in late 2007. This facility will manufacture PV cells, with an expected initial capacity of 60MW per
annum, which will then be used in the assembly of finished PV modules at facilities in Mexico and elsewhere. In addition, we recently announced that we are adding a second 60MW per annum PV cell manufacturing facility at our Greenville site, which is expected to begin operation in mid-2008.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>Ovonic Battery Segment</FONT></I></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our Ovonic Battery segment designs, develops, manufactures and sells rechargeable NiMH batteries and battery materials internally and through third-party relationships (i.e., joint ventures and licenses). This business is founded upon our pioneering rechargeable NiMH battery technology, which we developed and patented. We commercialize this and related technologies principally through our Cobasys joint venture and third-party licensing arrangements with NiMH battery manufacturers throughout the world. We also manufacture and sell proprietary positive electrode nickel hydroxide materials used to manufacture NiMH batteries. We conduct this business through our subsidiary, Ovonic Battery Company, Inc. of which we own 91.4% of the common stock, and the remainder is owned by Honda Motor Company, Ltd. (3.2%), Sanoh Industrial Co., Ltd. (3.2%) and Sanyo (2.2%).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>NiMH batteries are rechargeable energy storage solutions offering high power, long cycle life and maintenance-free operation. They are adaptable to a broad range of consumer, transportation and stationary applications. Products utilizing our NiMH battery technology compete with lead-acid batteries and products based on other rechargeable battery technologies, such as nickel cadmium and lithium ion. NiMH batteries produce superior power for their weight and volume and have a longer cycle life compared to lead-acid and nickel-cadmium batteries. In addition, NiMH batteries are maintenance free, have no memory effect and do not contain cadmium or lead, both environmentally hazardous substances. NiMH technology has numerous advantages over lithium ion technology, such as lower cost, greater safety and improved durability and abuse tolerance. While lithium ion batteries are used in many laptop computers and
cell phones, we believe NiMH batteries are preferable for many mass-market consumer and retail products incorporating rechargeable batteries where safety and cost are important factors. NiMH batteries are also the preferred technology for manufacturers of hybrid electric vehicles (&#147;HEVs&#148; or &#147;hybrids&#148;) due to their performance, cost, safety and durability.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have an extensive patent portfolio in NiMH battery technology with U.S. and foreign counterparts covering materials, manufacturing processes and product design, including basic patents that have broad coverage. We are also regularly adding new patents to our portfolio based upon our continuing research and development activities. As a result, we do not believe</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0in; TEXT-ALIGN: justify"><FONT size=2>that the expiration of any of our NiMH battery patents during the next five years will have a material adverse effect on our business.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following paragraphs describe our principal commercialization activities for our NiMH battery technologies:</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Cobasys</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our Cobasys joint venture designs, develops, manufactures and sells advanced NiMH battery system solutions for transportation markets, including HEVs, electric vehicles and 36/42 volt applications, in addition to stationary back-up power supply systems for uninterruptible power supply, telecom and distributed generation requirements. Cobasys has recently begun commercial production of its advanced NiMH battery system for General Motors Corporation&#146;s first hybrid SUV, the Saturn VUE Green Line.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We own 50% of Cobasys, and Chevron Technology Ventures LLC (&#147;Chevron&#148;), a subsidiary of Chevron Corporation, owns the remaining 50%. Cobasys operates independently of its joint venture partners, although each partner participates on Cobasys&#146; managing board. As part of this joint venture arrangement, we have licensed certain technology to Cobasys (as described below) and contributed intellectual property, licenses, production processes and know-how. Chevron is presently funding Cobasys&#146; operations by acquiring preferred interests in Cobasys, for which it is entitled to a priority right of repayment. Cobasys has obtained $71,624,000 from Chevron for preferred interests through June 30, 2006, and Chevron is committed under the Cobasys operating agreement to continue funding the approved operating budgets through December 2007. Beginning in January 2008, the joint venture partners will
be required to make capital contributions as necessary to fund approved operating budgets in proportion to their percentage interests, subject to the terms of the Cobasys operating agreement.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have granted Cobasys a royalty-free, exclusive license to our NiMH battery technology for certain applications, including vehicle propulsion and ancillary vehicle applications, telecommunications applications and uninterruptible power supply applications. Certain licenses that we had entered into prior to Cobasys&#146; formation (as discussed below) were excepted from this exclusivity, and we retain nonexclusive rights to manufacture in China and India cylindrical batteries for two- and three-wheeled transportation applications for sale worldwide.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Cobasys&#146; principal competitors for HEV batteries are Panasonic EV Energy Company (&#147;PEVE&#148;) (an affiliate of Toyota Motor Corporation), which provides NiMH batteries for Toyota&#146;s HEVs and the Honda Civic Hybrid, and Sanyo, which provides NiMH batteries for the Ford Escape Hybrid, the Honda Accord Hybrid and the Mercury Mariner Hybrid. PEVE provides its NiMH batteries under licenses from Cobasys and ECD, under which royalties are payable to Cobasys on North American battery sales and fully-paid up with respect to all other battery sales. Sanyo provides its NiMH batteries under a royalty-bearing license from Ovonic Battery (as described below).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Cobasys is headquartered in Orion Township, Michigan and has a 170,000 square foot state-of-the-art production facility with automated manufacturing equipment in Springboro, Ohio, which will have the capacity to produce three million battery modules annually when fully equipped. The manufacturing facility is ISO/TS 16949, ISO 17025, ISO 9001:2000 and TL 9000 certified.</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Licensing</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our recent licensing activities have focused on consumer applications. We have licensed our NiMH battery technology to major NiMH battery manufacturers, principally for consumer applications, on a royalty-bearing, nonexclusive basis. We are presently receiving royalties from manufacturers who are currently producing NiMH batteries using our technology. Royalties from Sanyo represented 26% and 3% of our revenues in this segment in the fiscal years ended June 30, 2006 and June 30, 2005, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our royalty-bearing licenses generally provide for upfront nonrefundable license fees and, depending on factors such as geographical scope and fields of application, require licensees to pay us a royalty of 0.5% (for consumer applications) or 3.0% (for transportation applications) of the selling price of the NiMH batteries. Certain licensees, because of their relatively small production capacities, have paid modest nonrefundable upfront license fees, but are required to pay royalty rates considerably higher than 0.5% and to pay additional license fees as their sales of NiMH batteries increase, or have been granted substantially narrower rights to geographical areas in which licensed products can be made or sold. Based upon our current NiMH battery patent portfolio, we believe that we will continue to generate royalty revenues based on licensing these patents at least through 2017.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Prior to Cobasys&#146; formation, we entered into royalty-bearing, nonexclusive license agreements for the manufacture and sale of NiMH batteries with Sanyo, Varta Automotive, Walsin Technology Corporation, Sanoh, Nan Ya Plastics Corporation, GP Batteries International Limited, Toshiba Battery Co., Ltd., Hyundai Motor Company, Saft Group, the United States Advanced Battery Consortium and our Rare Earth Ovonic joint ventures. Among these licensees, Sanyo, GP Batteries and Saft are presently manufacturing NiMH batteries for four-wheel vehicle transportation applications.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Materials Manufacturing</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We produce proprietary high-performance positive electrode nickel hydroxide materials for use in NiMH batteries, which we sell to licensees of our NiMH battery technology. While these licensees are not required to purchase our materials in order to manufacture NiMH batteries using the licensed NiMH technology, our positive electrode materials offer advantages such as higher capacity and power, greater cycle life, high-temperature performance and lower costs. We conduct our manufacturing operations at an automated facility in Troy, Michigan.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The key raw materials used in our nickel hydroxide business are primarily nickel and cobalt. All of the raw materials used are generally readily available from numerous sources, but interruptions in production or delivery of key raw materials could have an adverse impact on our manufacturing operations.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>ECD Segment</FONT></I></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our ECD segment consists of our Ovonyx joint venture, our Production Technology and Machine Building Division, and our emerging technologies, including Ovonic solid hydrogen storage, Ovonic metal hydride fuel cell, Ovonic optical memory, Ovonic cognitive computer and Ovonic quantum control technologies, for which we are continuing research and development activities in an effort to reach full-scale commercialization.</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Ovonyx</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our Ovonyx joint venture is commercializing our proprietary Ovonic Universal Memory (&#147;OUM&#148;) technology through various licensing and product development arrangements. OUM is a basic, new type of nonvolatile memory that can replace conventional nonvolatile or FLASH memory in applications requiring retention of stored data when power is turned off, including cell phones, PDAs, digital cameras and microelectronics. OUM, which is also known in the semiconductor industry as phase-change random access memory, PRAM and PC-RAM, offers several advantages over conventional nonvolatile memory, including significantly faster write time, greater scalability, lower power utilization and longer life, and is compatible with existing CMOS manufacturing processes.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We own 39.5% of the common stock of Ovonyx. Tyler Lowrey (formerly chief technology officer of Micron Technology, Inc.), Intel Capital (a subsidiary of Intel Corporation) and other investors own the remainder. As part of this joint venture arrangement, we have licensed all OUM technology to Ovonyx on an exclusive, worldwide basis and contributed intellectual property, licenses, production processes and know-how. In addition to our equity interest in Ovonyx, we are entitled to receive 0.5% of Ovonyx&#146; annual gross revenue. We have licensed back from Ovonyx, on an exclusive, royalty-bearing basis, certain technology relating to our Ovonic cognitive computer technology.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Ovonyx has entered into royalty-bearing, nonexclusive license agreements with Intel Corporation, Samsung Electronics Co., Ltd., Elpida Memory, Inc., STMicroelectronics N.V., BAE Systems and Nanochip, Inc. to produce OUM products. Under most of these agreements, Ovonyx is also participating in joint development programs to assist in the commercialization of OUM phase-change memory products. While BAE has announced a product based on OUM technology, Ovonyx has not yet realized any royalty revenues since its licensees have not begun commercial sale of products based on OUM.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Production Technology and Machine Building Division</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We design, develop and manufacture automated production equipment based on our proprietary process technologies, particularly our vacuum deposition and large-scale, roll-to-roll manufacturing processes. These business activities are closely aligned with our product commercialization activities, so that we have developed and enhanced manufacturing capabilities concurrently with product development (i.e., short-run capabilities for limited production products to volume manufacturing for commercial products). This division has designed, developed and manufactured multiple generations of photovoltaic production lines. It is currently focused on producing the equipment to expand manufacturing capacity in our United Solar Ovonic segment from the current 28MW per annum to an expected capacity exceeding 300MW per annum by 2010.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Emerging Technologies</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our core business strategy has been to develop new technologies addressing important societal needs based upon our patented materials, products and processes, and then seek to commercialize these new technologies through licensing arrangements and manufacturing activities (directly and through joint ventures). We are seeking to bring our emerging technologies, including those discussed below, to full-scale commercialization through this strategy. These technologies are subject to further development and will require substantial additional funding to reach commercial product status. We seek to offset our funding requirements associated with </FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>7</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0in; TEXT-ALIGN: justify"><FONT size=2>these activities by obtaining third-party funding through strategic alliances and government contracts. Presently, we are actively seeking additional strategic funding for several of our emerging technologies.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>Ovonic Solid Hydrogen Storage Technologies</FONT></I><FONT size=2>. Hydrogen is a clean and efficient fuel source that yields more energy per unit of weight than any other combustible fuel, but the inability to store hydrogen safely and efficiently has impeded its development as a practical fuel alternative. We are developing a practical approach to storing hydrogen in a solid metal matrix at low pressures using a family of new, efficient metal hydrides based upon our pioneering technology relating to atomically-engineered materials. Our solid hydrogen storage solutions have several advantages over conventional gaseous and liquid storage solutions, including improved convenience and greater safety due to our technology&#146;s low-pressure refilling and storage capabilities.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>These materials can be packaged in a variety of sizes and shapes to meet application requirements, and we plan to develop solid hydrogen storage systems for commercial use in stationary, portable power and transportation applications. The U.S. Department of Transportation has approved, through a special exemption, the transport, manufacture, labeling, sale, and use of portable canisters containing our solid hydrogen storage materials, allowing hydrogen storage capacity up to 1300 standard liters.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We are presently manufacturing pre-production volumes of portable hydrogen canisters in Rochester Hills, Michigan, and have sold over 2,000 canisters of various sizes to multiple customers. Additionally, we have successfully converted an original equipment 1.5-liter internal combustion engine in a 2005 Toyota Prius to run on hydrogen using our solid hydrogen storage system. This modified Prius represents our third generation of vehicle propulsion conversions and demonstrates our solid hydrogen storage technology using two 33-liter hydrogen storage vessels, which store up to 3.6 kilograms of hydrogen to provide nearly a 200-mile vehicle range. Refueling at 1,500 psi to 90% capacity currently takes approximately 10 minutes. Our current research and development activities are focused on reducing the weight and cost of the hydrogen storage materials.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>Ovonic Metal Hydride Fuel Cell Technologies</FONT></I><FONT size=2>. Fuel cells are environmentally-clean power generators in which hydrogen and oxygen are combined to produce electricity, with water and heat as the only byproducts. Our Ovonic metal hydride fuel cell technology is a fundamentally new approach that combines the best features of both fuel cell and battery technologies for a new, lower cost solution in comparison to conventional proton exchange membrane (&#147;PEM&#148;) fuel cells, which require expensive platinum catalysts. This approach results in significant benefits, including reduced costs, enhanced low-temperature performance and intrinsic storage of energy in the fuel cell stack, which provides instant start capability and the opportunity to store regenerative braking energy for automotive applications independently from the battery currently used in hybrid vehicles utilizing
PEM fuel cells. We believe these benefits make our technology particularly robust and versatile for applications, such as automotive applications, requiring performance under harsh or varying conditions. Our current research and development activities are focused on military and stationary applications.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>Ovonic Optical Memory Technologies</FONT></I><FONT size=2>. We have developed phase-change rewritable optical memory solutions based on our pioneering amorphous materials technology. Our technology is used in the rewritable version of CDs and DVDs, as well as either of the new, high-definition digital video disc formats, Blu-Ray and HD-DVD. We have licensed our technology to a</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>8</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>number of data storage media companies on a royalty-bearing, nonexclusive basis. We are currently developing new uses for our Ovonic optical phase-change technology under a three-year cost-sharing contract awarded in 2003 by the National Institute of Standards and Technology (&#147;NIST&#148;) to develop optical switching devices for active optical routing devices in digital signal processing.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>Ovonic Cognitive Computer and Ovonic Quantum Control Technologies</FONT></I><FONT size=2>. We are developing a multifunctional approach to computing which incorporates nanostructural materials deposited as thin films used to make devices which, when fully developed, are expected to have the capability to execute ordinary arithmetic and logic operations as well as advanced functions such as nonbinary processing and higher mathematics. When commercially developed, the devices could be used in larger numbers than implementations using conventional technologies in densely interconnected parallel circuits to enable more powerful neural networks and cognitive processors. We are also developing thin-film devices that have functionality beyond transistors and can be used for switching and control in cognitive processors and potentially in OUM and other types of memories and more general integrated
circuits.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Our Technology and Intellectual Property</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our technology and related intellectual property are the foundation of our business activities. The principal markets in which we compete&#151;the alternative energy generation, energy storage and information technology markets&#151;are characterized by rapid change and competition driven by technological and product performance advantages. We have driven some of this activity through our pioneering materials, product and production process technologies. At the same time, we are actively engaged in product design and development to commercialize and improve our materials, products and production processes. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Research and Development Expenditures</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have a multi-disciplinary business, scientific and technical organization engaged in research and development activities in which we invent new technologies and improve our existing materials, products and production processes. We have funded these activities directly and through third-party funding, including strategic alliances and government contracts, as summarized for the three years ended June 30, 2006 in the following table:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Direct Research and Development Expenditures<SUP>(1)</SUP><BR>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.2in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="53%"><FONT face="Times New Roman, Times, Serif" size=2>Sponsored by industrial partners, government</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;agencies and licensees</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,072,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,517,370</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,767,032</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.2in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Sponsored by us</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>20,310,933</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>16,457,311</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>14,196,280</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.2in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Total</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>28,382,933</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>30,974,681</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>36,963,312</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 57pt; TEXT-ALIGN: justify"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=1></FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1>Direct research and development expenditures exclude allocation of patents, depreciation and general and administrative expenses. All of our research and development costs are expensed as incurred and are included in our Consolidated Statement of Operations as cost of revenues from product development agreements and product development and research.</FONT></P>
</TD></TR>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>9</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Competition</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Since our businesses are based upon our pioneering technologies that offer fundamental solutions in the alternative energy generation, energy storage and information technology markets, we compete not only at the product level for market share but also at the technology level for market acceptance. Our competition includes well-established conventional technologies, other alternative technology solutions and other technologies within an alternative solution. For example, our PV technology competes with conventional electricity generation technologies, such as gas and coal; alternative electricity generation technologies, such as wind and nuclear; and other solar technologies, such as crystalline products. Our business competitors include some of the world&#146;s largest industrial companies, many of which are pursuing new technology solutions in addition to their well-established conventional
technologies.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We believe that we have derived a key business and technological advantage for over 46 years through our research and development activities by continuously inventing new technologies and improving our existing materials, products and production processes. These activities are intended to enhance the performance, efficiency, cost and environmental advantages of products based on our technologies as compared to conventional and alternative solutions. We diligently prosecute patents and maintain an extensive patent portfolio to protect our technology position.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>However, even as we successfully pursue these research and development activities, some of our technologies, particularly in the alternative energy generation and energy storage markets, presently face commercial barriers as compared to well-established conventional technologies, including infrastructural barriers, customer transition costs and higher manufacturing costs associated with present production volumes. The competitiveness of products based on our technologies in these areas is typically enhanced by external factors, including rising energy costs, concerns regarding energy security and governmental incentives at the customer level. Our long-term goal is to compete directly in energy markets without subsidies.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Patents and Intellectual Property</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Protection of our technologies is a key business imperative. Accordingly, we have developed an extensive patent portfolio consisting of over 350 U.S. patents and over 500 foreign counterparts (including patents assigned to a joint venture partner), to which we are regularly adding new patents based upon our continuing research and development activities. Importantly, our portfolio includes numerous basic and fundamental patents applicable to each of our business segments, covering not only materials, but also the production technology and products we develop. Based on the breadth and depth of our patent portfolio, we believe that our proprietary patent position is sustainable notwithstanding the expiration of certain patents. We do not expect the expiration of any patents to materially affect the business prospects of any of our business segments. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Our Employees</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of September 8, 2006, we and our consolidated subsidiaries had a total of 694 employees in the U.S. and 270 employees outside of the U.S. These numbers do not include employees of our joint ventures or licensees.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>10</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Available Information</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our website address is www.ovonic.com. We make available on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (&#147;SEC&#148;). We also make available on our website, or in printed form upon request, free of charge, our Corporate Governance Guidelines, Code of Business Conduct and Ethics, charters for the committees of our Board of Directors and other information related to the Company. The information found on our website is not part of this or any other report we file with or furnish to the SEC.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 1A</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Risk Factors</FONT></B></U></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We have a history of losses and our future profitability is uncertain.</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Since our founding, we have incurred substantial net losses in connection with the research, development and commercialization of products based on our technologies and, at June 30, 2006, we have an accumulated deficit of approximately $303,788,000. Our ability to achieve profitability in the future is uncertain and will depend largely on the successful commercialization of our products, as to which there can be no assurance. If we do not achieve or sustain profitability or otherwise meet the expectations of securities analysts or investors, the market price of our common stock may decline. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We expect that we will need to obtain significant additional 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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have in the past experienced substantial losses and negative cash flow from operations and have required significant financing, including equity financing and financing provided through capital and operating leases of facilities, in order to pursue the commercialization of products based on our technologies. We expect that we will continue to need significant financing to operate our business, including capital expenditures to expand our production capacity. In particular, we believe that we will require additional funding for manufacturing capacity expansion in our United Solar Ovonic segment from the current 28MW per annum to an expected capacity exceeding 300 MW per annum by 2010. There can be no assurance that such additional financing will be available or that the terms of such additional financing, if available, will be acceptable to us. If additional financing is not available or not
available on terms acceptable to us, our ability to fund our operations, develop and expand our manufacturing operations and distribution network, maintain our research and development efforts or otherwise respond to competitive pressures may be significantly impaired.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We are rapidly expanding our manufacturing capacity for PV products in order to meet expected demand, and our revenues and profits will depend upon our ability to successfully complete this expansion and then to sell our PV products at higher volumes to match our expanded capacity. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We plan to expand our manufacturing capacity from the current 28MW per annum to an expected capacity exceeding 300MW per annum by 2010. This expansion plan includes adding new facilities in Auburn Hills, Michigan (which is expected to begin operation in Fall 2006) and</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Greenville, Michigan (the first facility of which is expected to begin operation in late 2007 and the second in mid-2008). We are designing, developing, manufacturing, installing and testing the equipment for this expansion through our Production Technology and Machine Building Division. We may experience delays, additional or unexpected costs and other adverse events in connection with our capacity expansion projects, including those associated with the equipment we are providing. Additionally, there can be no assurance that market demand will align with our expanding manufacturing capacity or that our marketing capabilities at the expanded manufacturing volumes will be successful. As a result, we may not be able to realize revenues and profits based upon the expected capacity, or we may experience delays or reductions in these revenues and profits, and our business could be materially adversely affected.
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>A portion of our revenues and profits are 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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have entered into licensing and joint venture agreements with established industrial companies in order to develop and commercialize certain products based on our technologies. Any revenues or profits which may be derived by us from these licensing and joint venture agreements will be substantially dependent upon the willingness and ability of our licensees and joint venture partners to devote their financial resources and manufacturing and marketing capabilities to commercialize products based on our technologies. There can be no assurance that such financial resources will be available or that such commercialization will be successful. Accordingly, there can be no assurance that our joint ventures will continue to operate. If our joint venture partners provide additional financing to our joint ventures, it may be on terms that result in a reduction in our ownership interest in the joint ventures
or that otherwise reduce any profits we may realize from the joint ventures. If any of our joint ventures are terminated, there can be no assurance that we will be able to attract new joint venture partners to continue the activities of the terminated joint venture. If our licensees and joint venture partners are unwilling or unable to devote their financial resources and manufacturing and marketing capabilities to commercialize products based on our technologies, or if any of our joint ventures are terminated, we may not be able to realize revenues and profits based on our technologies and our business could be materially adversely affected. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Additional research and development efforts by us, our licensees or our joint ventures will be required before certain products based on our technologies may be manufactured and sold commercially. The commercialization of products based on our technologies depends upon consumer acceptance and the achievement and verification of the overall performance, cost, reliability, efficiency and safety of the products. There can be no assurance that such research and development efforts will be successful or that we, our licensees or our joint ventures will be able to develop commercial applications for our products and technologies. Further, the areas in which we are developing technologies and products are characterized by rapid and significant technological change. Rapid technological development may result in our products becoming obsolete or noncompetitive. If future products based on our technologies
cannot be developed for manufacture and sold commercially or our products become obsolete or noncompetitive, we may be unable to recover our investments or achieve profitability. In addition, the commercialization</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>12</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>schedule may be delayed if we, our licensees or our joint ventures experience delays in meeting development goals, if products based on our technologies exhibit technical defects, or if we, our licensees or our joint ventures are unable to meet cost or performance goals. In this event, potential purchasers of products based on our technologies may choose alternative technologies and any delays could allow potential competitors to gain market advantages. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>There can be no assurance that products based on our technologies will be perceived as being superior to existing products or new products being developed by competing companies or that such products will otherwise be accepted by consumers. The market prices for products based on our technologies may exceed the prices of competitive products based on existing technologies or new products based on technologies currently under development by competitors. There can be no assurance that the prices of products based on our technologies will be perceived by consumers as cost-effective or that the prices of such products will be competitive with existing products or with other new products or technologies. If consumers do not accept products based on our technologies, we may be unable to recover our investments or achieve profitability. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We and our joint ventures and licensees may not be able to manufacture products based on our technologies successfully on a commercial scale. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>There can be no assurance that we and our joint ventures and licensees will be able to successfully manufacture products based on our technologies. In order to produce products on a commercial scale, we and our joint ventures and licensees will be required to establish or significantly increase manufacturing capabilities currently being used to produce certain of our products. Although substantially all of our joint venture partners and licensees have experience in commercial-scale manufacturing, we have little such experience and there can be no assurance that we or our joint ventures and licensees will expand or establish capabilities for manufacturing products beyond those presently in existence. If commercial-scale manufacturing of products based on our technologies is not achieved, we may be unable to recover our investments or achieve profitability. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We and our joint ventures and licensees may experience performance problems with key suppliers or subcontractors. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We and our joint ventures and licensees are highly dependent on the continued services of a limited number of key suppliers and subcontractors. The loss of any of these suppliers and subcontractors could have a material adverse effect on us and on our joint ventures and licensees. There can be no assurance that existing relationships with key suppliers and subcontractors will continue on acceptable terms and, if not continued, our business could be materially adversely affected. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Other companies, many of which have greater resources than we have, may develop competing products or technologies which cause products based on our technologies to become obsolete or noncompetitive. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We and our joint ventures and licensees currently compete with firms, both domestic and foreign, that perform research and development, as well as firms that manufacture and sell products. In addition, we expect additional potential competitors to enter the markets for our</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>13</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>products in the future. Some of these current and potential competitors are among the largest industrial companies in the world with longer operating histories, greater name recognition, access to larger customer bases, significantly more well-established business organizations and product lines and significantly greater resources and research and development staff and facilities. There can be no assurance that one or more such companies will not succeed in developing technologies or products that will become available for commercial sale prior to our products, that will have performance superior to products based on our technologies or that would otherwise render our products obsolete or noncompetitive. If we fail to compete successfully, our business would suffer and we may lose or be unable to gain market share. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We receive a significant portion of our revenues from a small number of customers. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We historically have entered into agreements with a relatively small number of major customers throughout the world. Our five largest customers represented approximately 47% and 46% of our total revenue for the fiscal years ended June 30, 2006 and 2005, respectively, excluding the recognition of a one-time, noncash license revenue of approximately $79,532,000 in our Ovonic Battery segment in 2005. Our revenues would decrease substantially if we were to lose any major customer and unable to offset this loss through reallocation of production or additional sales.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Adverse business or financial conditions affecting the automotive industry may have a material adverse effect on our Cobasys joint venture and our NiMH battery business. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Cobasys, our joint venture with Chevron Corporation, designs, manufactures and sells high-power commercial NiMH batteries and systems for hybrid electric vehicles, or HEVs. The principal customers for the NiMH batteries and systems manufactured by Cobasys are the major domestic and international automotive manufacturers. Certain of these manufacturers have in recent years experienced static or reduced revenues, increased costs, loss of market share, labor issues and other business and financial challenges. Adverse business or financial conditions affecting individual automotive manufacturers or the automotive industry generally could have a material adverse effect on our Cobasys joint venture and our NiMH battery business. Automotive manufacturers may discontinue or delay their planned introduction of HEVs as a result of adverse changes in their financial condition or other factors. Automotive
manufacturers may also seek alternative battery systems from other suppliers which may be more cost-effective or require fewer modifications in standard manufacturing processes than the battery systems manufactured by Cobasys. We or Cobasys may also experience delays or losses with respect to the collection of payments due from customers in the automotive industry experiencing financial difficulties. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have several government product development and research contracts. Any revenues or profits which may be derived by us from these contracts will be substantially dependent upon the government agencies&#146; willingness to continue to devote their financial resources to our research and development efforts. There can be no assurance that such financial resources will be available or that such research and development efforts will be successful. Our government contracts may be terminated for the convenience of the government at any time, even if we have fully performed our obligations under the contracts. Upon a termination for convenience, we would generally only be entitled to recover certain eligible costs and expenses we had incurred</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>14</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>prior to termination and would not be entitled to any other payments or damages. Therefore, if government product development and research contracts are terminated or completed and we are unsuccessful in obtaining replacement government contracts, our revenues and profits may decline and our business may be adversely affected. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>The reduction or elimination of government incentives related to solar power could cause our revenues to decline. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Today, the cost of solar power exceeds the cost of power furnished by the electric utility grid in most locations. As a result, federal, state and local government bodies in many countries, most notably Germany, Japan, Italy, Spain and the United States, have provided incentives in the form of rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated. Reductions in, or eliminations or expirations of, incentives related to solar power could result in decreased demand for our solar modules and lower our revenue. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our success is highly dependent on the continued services of a limited number of skilled managers, scientists and technicians. The loss of any of these individuals could have a material adverse effect on us.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In addition, our success will depend upon, among other factors, the recruitment and retention of additional highly skilled and experienced management and technical personnel. There can be no assurance that we will be able to retain existing employees or to attract and retain additional personnel on acceptable terms given the competition for such personnel in industrial, academic and nonprofit research sectors. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>High raw material costs may continue to have an adverse impact on our profitability and our ability to successfully develop our emerging technologies. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Higher costs for certain raw materials and commodities, principally steel, resin-based polymers, and nickel, as well as higher energy costs, had an adverse impact on our operating results in 2006 and could continue to negatively impact our profitability in 2007. While we have developed strategies to mitigate or partially offset the impact of higher raw material, commodity and energy costs, there can be no assurances such measures will be successful. In addition, no assurances can be given that the magnitude and duration of these cost increases or any future cost increases will not have a larger adverse impact on our profitability and consolidated financial position than currently anticipated. Additionally, certain of our emerging technologies utilize high-cost raw materials. As part of our continuing research and development activities, we are attempting to substantially reduce these costs through
material reduction and substitution strategies. There can be no assurances that we will succeed in these cost-reduction efforts, which are essential for the development of our emerging technologies.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We may become subject to legal or regulatory proceedings which may reach unfavorable resolutions. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We are involved in legal proceedings arising in the normal course of business. Due to the inherent uncertainties of legal proceedings, the outcome of any such proceeding could be</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>15</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2>unfavorable, and we may choose to make payments or enter into other arrangements, to settle such proceedings. Failure to settle such proceedings could require us to pay damages or other expenses, which could have a material adverse effect on our financial condition or results of operations. We have been subject to legal proceedings in the past involving the validity and enforceability of certain of our patents. While such patent-related legal proceedings have been resolved, such proceedings can require the expenditure of substantial management time and financial resources and can adversely affect our financial performance. There can be no assurance that we will not be a party to other legal proceedings in the future.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><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></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Although we believe that we are in material compliance with these laws, rules and regulations, the failure to comply with present or future regulations could result in fines, suspension of production or cessation of operations. Third parties may also have the right to sue to enforce compliance. Moreover, it is possible that increasingly strict requirements imposed by environmental laws and enforcement policies thereunder could require us to make significant capital expenditures. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The operation of a manufacturing plant entails the inherent risk of environmental damage or personal injury due to the handling of potentially harmful substances. There can be no assurance that we will not incur material costs and liabilities in the future because of an accident or other event resulting in personal injury or unauthorized release of such substances to the environment. In addition, we generate hazardous materials and other wastes that are disposed of at licensed disposal facilities. We may be liable, irrespective of fault, for material cleanup costs or other liabilities incurred at these facilities in the event of a release of hazardous substances by such facilities into the environment. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Our success depends in part upon our ability to protect our intellectual property and our proprietary technology including our trade secrets and other confidential information. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our success depends in part on our ability to obtain and maintain intellectual property protection for products based on our technologies. Our policy is to seek to protect our products and technologies by, among other methods, filing United States and foreign patent applications related to our proprietary technology, inventions and improvements. The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain our proprietary position for our technology will depend on our success in obtaining effective patent claims and enforcing those claims once granted. We do not know whether any of our patent applications will result in the issuance of any patents. Our issued patents and those that may issue in the future may be challenged, invalidated, rendered unenforceable or circumvented, which could limit our ability to stop competitors
from marketing related products or the length of term of patent protection that we may have for our products and technologies. In addition, the rights granted under any issued patents may not provide us with competitive advantages against competitors with similar products or technologies. Furthermore, our competitors may independently develop similar technologies or duplicate technology developed by us in a manner that does not infringe our patents or other intellectual property. Because of the extensive time required for development and commercialization of products based on our technologies, it is possible that, before these products can be commercialized, any related patents may expire or remain in force for only a short period following commercialization, thereby</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>16</FONT></P>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0in; TEXT-ALIGN: justify"><FONT size=2>reducing any advantages of these patents and making it unlikely that we will be able to recover investments we have made to develop our technologies and products based on our technologies. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In addition to patent protection, we also rely on protection of trade secrets, know-how and confidential and proprietary information. To maintain the confidentiality of trade secrets and proprietary information, we have entered into confidentiality agreements with our employees, agents and consultants upon the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual&#146;s relationship with us be kept confidential and not disclosed to third parties. Our agreements with employees also provide that inventions conceived by the individual in the course of rendering services to us will be our exclusive property. Individuals with whom we have these agreements may not comply with their terms. In the event of the unauthorized use or disclosure of our trade secrets
or proprietary information, these agreements, even if obtained, may not provide meaningful protection for our trade secrets or other confidential information. To the extent that our employees or consultants use technology or know-how owned by others in their work for us, disputes may arise as to the rights in related inventions. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. The disclosure of our trade secrets would impair our competitive position and could have a material adverse effect on our operating results, financial condition and future growth prospects. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Interference proceedings brought by the United States Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to our management. We may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure. In addition, during the course of this litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We may not prevail in any litigation or interference proceeding in which we are involved. Even if we do prevail, these proceedings can be expensive and distract our management. </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>17</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Third parties may own or control patents or patent applications that are infringed by our products or technologies. </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our success depends in part on avoiding the infringement of other parties&#146; patents and proprietary rights. In the United States and most other countries, patent applications are published 18 months after filing. As a result, there may be patents of which we are unaware, and avoiding patent infringement may be difficult. We may inadvertently infringe third-party patents or patent applications. These third parties could bring claims against us that, even if resolved in our favor, could cause us to incur substantial expenses and, if resolved against us, could additionally cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we and our joint venture partners and licensees could be forced to stop or delay research, development, manufacturing or sales of products based on our technologies in the country or countries covered by the patent we infringe,
unless we can obtain a license from the patent holder. Such a license may not be available on acceptable terms, or at all, particularly if the third party is developing or marketing a product competitive with products based on our technologies. Even if we were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We also may be required to pay substantial damages to the patent holder in the event of an infringement. Under some circumstances in the United States, these damages could be triple the actual damages the patent holder incurs. If we have supplied infringing products to third parties for marketing or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they may be required to pay to the patent holder and for any losses the third parties may sustain themselves as the result of lost sales or damages paid to the patent holder.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Any successful infringement action brought against us may also adversely affect marketing of products based on our technologies in other markets not covered by the infringement action. Furthermore, we may suffer adverse consequences from a successful infringement action against us even if the action is subsequently reversed on appeal, nullified through another action or resolved by settlement with the patent holder. The damages or other remedies awarded, if any, may be significant. As a result, any infringement action against us would likely harm our competitive position, be costly and require significant time and attention of our key management and technical personnel.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 1B</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Unresolved Staff Comments</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>None.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>18</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<HR align=LEFT width="700" noShade SIZE=3>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 2</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Properties</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our corporate headquarters are located in Rochester Hills, Michigan.&nbsp; We currently lease our headquarters, together with adjacent facilities in Rochester Hills, Michigan, which we use principally for our Ovonic Battery and ECD segments.&nbsp; These facilities, including our headquarters, provide an aggregate of approximately 210,000 sq ft. for technical and administrative uses, and are supplemented by an aggregate of approximately 45,000 sq ft. of additional leased facilities in Troy, Michigan and San Clemente, California for administrative, technical and manufacturing purposes.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment&#146;s headquarters are located in Auburn Hills, Michigan, and we maintain a sales office in San Diego, California, and Frankfurt/Main, Germany. We lease two manufacturing facilities in Auburn Hills, Michigan for this segment: one of these facilities (approximately 167,000 sq ft.), which also contains the segment&#146;s headquarters, is presently operational; the other facility (approximately 172,000 sq ft.) is expected to become operational in Fall 2006. We also lease an approximately 67,000 sq ft. manufacturing facility in Tijuana, Mexico, which principally manufactures framed PV products. We are in the process of constructing a manufacturing facility in Greenville, Michigan, which we own and which is expected to begin operations in late 2007.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 3</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=151>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Legal Proceedings</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>On July 26, 2006, our subsidiary, Ovonic Battery Company, Inc., filed a complaint with the U.S. International Trade Commission (ITC) charging Varta Microbattery GmbH, Varta AG and Varta Microbattery, Inc. (collectively Varta) with patent infringement with respect to Varta's consumer nickel metal hydride battery button cell products. The complaint alleges that Varta has engaged in unfair trade practices by manufacturing and importing infringing batteries into the United States and requests that ITC exclude those infringing products from further importation into the United States. The complaint was filed under Section 337 of the Trade Act of 1930 which prohibits unfair methods of competition in import trade and is traditionally used to enforce patents and trademarks against international encroachments. On August 23, 2006, the ITC initiated the investigation into Varta&#146;s alleged unfair trade
practices.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We are involved in certain other legal actions and claims arising in the ordinary course of business, including, without limitation, commercial disputes, intellectual property matters, personal injury claims, tax claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, we do not believe that any of these other legal proceedings or matters in which we are currently involved, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations. </FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 4</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Submission of Matters to a Vote of Security Holders</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Not applicable.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>19</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<HR align=LEFT width="700" noShade SIZE=3>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><B><FONT size=2>PART II</FONT></B></P>

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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 5</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our common stock is listed on the NASDAQ Global Select Market under the symbol "ENER." As of September 8, 2006, there were approximately 1,830 holders of record of our common stock.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following table sets forth the range of high and low prices of our common stock as reported by The Nasdaq Stock Market, Inc. for the periods indicated:</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="78%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=12><FONT face="Times New Roman, Times, Serif" size=2>For the Fiscal Year Ended June 30,<BR>(In Dollars Per Share)</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>High</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Low</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>High</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Low</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="35%"><FONT face="Times New Roman, Times, Serif" size=2>First Quarter</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;(July &#150; September)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>46.44</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22.31</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14.89</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9.62</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Second Quarter</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;(October &#150; December)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>46.878</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>28.76</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23.45</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>12.50</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Third Quarter</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;(January &#150; March)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>57.84</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39.81</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23.42</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>15.64</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Fourth Quarter</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;(April &#150; June)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>56.00</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>31.31</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26.20</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16.27</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
</TABLE>


<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have not paid any cash dividends in the past and do not expect to pay any in the foreseeable future.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>During the fiscal year ended June 30, 2006, we issued the following securities to the following persons for the consideration noted. In each case, the issuances were to persons who had complete access to all material information relating to the Company. Accordingly, we claim exemption from the registration requirements of Section 5 of the Securities Act of 1933 pursuant to Section 4(2) of that Act, no public offering having been involved.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD noWrap align=left width="43%"><FONT face="Times New Roman, Times, Serif" size=2>Party/ies</FONT></TD>
<TD width="22%"><FONT face="Times New Roman, Times, Serif" size=2><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Security Issued&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>

<TD width="22%"><FONT face="Times New Roman, Times, Serif" size=2><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number&nbsp;of&nbsp;Securities&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</FONT></TD>

<TD align=center width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consideration&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Four nonemployee members of our Board of Directors</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>Common Stock&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>1,440 shares&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>Annual Retainer</FONT></TD>
<TD>&nbsp;</TD></TR>
</TABLE>


<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The nonemployee directors of the Company are issued approximately $15,000 per year in ECD Common Stock based on the closing price of the Common Stock on the day the directors are elected by ECD&#146;s stockholders at its Annual Meeting of Stockholders. See ECD&#146;s definitive proxy statement in connection with the Company&#146;s Annual Meeting of Stockholders scheduled to be held on November 14, 2006 for compensation of directors.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>20</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=264 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=65>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 6</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Selected Financial Data</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.12in; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Set forth below is certain financial information derived from the Company's audited consolidated financial statements prior to the reclassification in 2002 for discontinued operations discussed in Note A, &#147;Summary of Accounting Policies,&#148; of our Consolidated Financial Statements.</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 border=0 width=98%>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="3%" colSpan=15><FONT face="Times New Roman, Times, Serif" size=1>Year Ended June 30,</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2006</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2005</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2004</FONT></TD>
<TD align=left width="1%" colSpan=2>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2003</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2002</FONT></TD>
<TD align=left width="1%">&nbsp;</TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="35%"><FONT face="Times New Roman, Times, Serif" size=1>Revenues:</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>84,430,664</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>51,943,873</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>33,808,209</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>22,260,912</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 36,307,715</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>4,245,754</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>5,332,003</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>2,521,779</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1,843,647</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2,000,914</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>10,045,585</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>17,652,510</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>29,220,752</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>37,335,248</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 52,685,717</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Revenues from license and other agreements</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1,322,365</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;80,784,380</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1><SUP>(1)</SUP></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>125,000</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>3,444,114</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 25,000</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>2,375,108</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>857,286</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>580,195</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>140,061</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 364,487</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL REVENUES </FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>102,419,476</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>156,570,052</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>66,255,935</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>65,023,982</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 91,383,833</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Net income (loss) from continuing operations <BR>&nbsp;&nbsp;&nbsp;before income taxes, extraordinary <BR>&nbsp;&nbsp;&nbsp;item and cumulative effect of <BR>&nbsp;&nbsp;&nbsp;change in accounting principle </FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(18,910,246</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>50,287,216</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(49,191,286</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(35,772,568)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (17,460,015</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Income taxes</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>825,414</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Net income (loss) from continuing operations<BR>&nbsp;&nbsp;&nbsp;before extraordinary item and cumulative<BR>&nbsp;&nbsp;&nbsp;effect of change in accounting principle</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(18,910,246</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>49,461,802</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(49,191,286</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(35,772,568</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (17,460,015</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Discontinued operations, net of tax benefit</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>313,979</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(1,392,630</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2,230,388</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2,641,151</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3,428,019</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Extraordinary item, net of tax</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>2,262,910</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Cumulative effect of change in accounting principle</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>2,215,560</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Net income (loss)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(18,596,267</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>50,332,082</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(51,421,674</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(36,198,159</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (20,888,034</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Basic net income (loss) per share</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.58</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1.80</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2.06</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(1.63</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.80</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.01</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.05</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.09</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.12</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.16</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Extraordinary item </FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.08</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Cumulative effect of change in accounting principle</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.10</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.57</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1.83</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2.15</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(1.65</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.96</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>Diluted net income (loss) per share</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.58</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1.67</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2.06</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(1.63</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.80</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.01</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.05</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.09</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.12</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.16</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Extraordinary item</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.08</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Cumulative effect of change in accounting principle</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>.10</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(.57</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>1.70</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(2.15</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>(1.65</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.96</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>At year end:</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>164,961,982&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>84,295,571&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>12,676,537&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>6,567,261&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42,221,015&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Short-Term Investments</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>239,505,025&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>11,840,526&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp; &#150;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>26,801,506&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;71,997,154&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Total Assets</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>596,342,326&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>198,063,433&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>113,311,775&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>153,694,650&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;192,118,594&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Long-Term Liabilities </FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>25,594,088&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>10,203,772&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>10,160,791&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>10,187,127&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14,428,769&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Working Capital</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>429,092,392&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>111,934,992&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>24,649,431&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>37,794,730&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100,796,311&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;Stockholders' Equity </FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>537,020,857&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>155,720,361&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>81,155,068&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=1>99,832,172&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135,254,960&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 1pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: -0.13in; TEXT-ALIGN: left"><U><FONT 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;&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><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=629 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=17>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=612>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>Revenues from license and other agreements include a one-time, noncash license fee of $79,532,000 for 2005.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>21</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 7</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></B></U></P>
</TD></TR>
</TABLE>
</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>This section summarizes significant factors affecting the Company&#146;s consolidated operating results, financial condition and liquidity for the three-year period ended June 30, 2006. This section should be read in conjunction with the Company&#146;s Consolidated Financial Statements and related notes appearing elsewhere in this report. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Overview</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We invent, design, develop and commercialize materials, products and production processes for the alternative energy generation, energy storage and information technology markets. Our materials, products and production processes originate from the pioneering work of Mr. Stanford R. Ovshinsky, principal inventor and our President, Chief Scientist and Technologist, in materials science at the atomic (or nanostructure) level, principally amorphous and disordered materials. In particular, we manufacture for commercial sale thin-film photovoltaic (&#147;PV&#148;) modules and positive electrode nickel hydroxide for nickel metal hydride (&#147;NiMH&#148;) batteries, and license our NiMH battery technology, which is used in commercial products. Our principal joint ventures&#151;Cobasys LLC and Ovonyx, Inc.&#151;are also commercializing our NiMH battery and Ovonic Unified Memory (&#147;OUM&#148;) technologies,
and battery products manufactured by Cobasys are commercially available. At the same time, we continue our research and development activities for our emerging technologies in order to bring these technologies to full-scale commercialization. We seek third-party funding to offset our funding requirements for these activities.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>These business activities represent application of our overall business strategy, which is to invent, design and develop materials, products and production processes and then commercialize these materials, products and production processes internally and through third-party relationships, such as licenses and joint ventures. Accordingly, our results reflect our approach to commercialization of a particular technology, as well as the commercial readiness of that technology, and consideration should be given to the following key factors when reviewing our results for the periods discussed: </FONT></P>
</DIV>
<TABLE width="100%">
<TR>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>
</TD>
<TD vAlign=top>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.5in; TEXT-ALIGN: left"><FONT size=2>&#149;</FONT></P>
</TD>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.2in; TEXT-ALIGN: justify"><FONT size=2><I>We are engaged in full-scale manufacturing and sale of our PV products through our United Solar Ovonic segment, and our consolidated financial results are driven primarily by the performance of this segment.</I> Our United Solar Ovonic segment accounted for 85% of our total revenue in fiscal 2006 compared to 56% for 2004 (the first full fiscal year in which we consolidated the results of our subsidiary, United Solar Ovonic). Additionally, our United Solar Ovonic segment generated operating income of $8,607,000 in fiscal year 2006, while our other two segments had combined operating losses of $35,037,000 (which we seek to fund as described below). Given the projected growth of our photovoltaic business (see below) relative to our other business segments, our overall success in the foreseeable future will be aligned primarily with the performance of our United Solar Ovonic segment and subject to the
risks of that business.</FONT> </P>
</TD></TR>
<TR>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>
</TD>
<TD vAlign=top>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.5in; TEXT-ALIGN: left"><FONT size=2>&#149;</FONT></P>
</TD>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.2in; TEXT-ALIGN: justify"><FONT size=2><I>We are rapidly expanding manufacturing capacity for our PV products to meet the rapid growth in the alternative energy generation market in general and the solar market in particular, and we will require significant capital to fund this expansion.</I> We are expanding our PV module manufacturing capacity from 28MW per annum to an expected capacity exceeding 300MW per annum by 2010. We are funding the initial </FONT></P>
</TD></TR>
</TABLE>


<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>22</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P22 -->
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.9in; TEXT-ALIGN: justify"><FONT size=2>phases of this expansion with the proceeds from the common stock offering, which we completed in March 2006. We will require additional funding for subsequent phases through 2010, which we may obtain from equity and debt financing, business agreements and other sources. </FONT></P>

<TABLE width="100%">
<TR>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>
</TD>
<TD vAlign=top>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.5in; TEXT-ALIGN: left"><FONT size=2>&#149;</FONT></P>
</TD>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.2in; TEXT-ALIGN: justify"><FONT size=2><I>We are commercializing our NiMH battery and OUM technologies principally through nonconsolidated joint ventures, and we account for our interests in these joint ventures under the equity method of accounting.</I> Our principal joint ventures &#150; Cobasys and Ovonyx &#150; were founded upon technologies that we pioneered, and then formed to further develop and commercialize these technologies. In each case, we participate in the business as equity holders but do not directly manage or have a controlling interest in the entity. We have not reported any earnings or losses from Cobasys because our only contributions to Cobasys have been noncash items, including intellectual property and know-how. We have contributed intellectual property and cash to Ovonyx, and have reported losses up to our cash investment in Ovonyx. Our interests in Cobasys and Ovonyx were recorded at zero on our balance sheet at
June 30, 2006.</FONT></P>
</TD></TR>
<TR>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>
</TD>
<TD vAlign=top>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.5in; TEXT-ALIGN: left"><FONT size=2>&#149;</FONT></P>
</TD>
<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.2in; TEXT-ALIGN: justify"><FONT size=2><I>We are continuing to further develop our emerging technologies, and we will continue to generate losses, and at the same time require substantial additional funding, as we seek to bring these technologies to commercial product status.</I> We have successfully brought our PV and NiMH technologies from pioneering technologies to commercial products, and Ovonyx has been collaborating successfully with a number of semiconductor companies to commercialize OUM. We are utilizing a similar strategy for our current emerging technologies, such as Ovonic solid hydrogen systems, Ovonic metal hydride fuel cell, Ovonic optical memory, Ovonic cognitive computer and Ovonic quantum control, as we engage in research and development activities to define marketable technologies that can result in commercial products. We expect to record losses associated with these activities at this stage while we seek to offset our
funding requirements with third-party funding, including strategic alliances and government contracts. Our third-party funding for these activities has declined in recent years, principally due to the restructuring of certain strategic relationships and completion of certain government contracts, and we are presently actively seeking additional strategic funding for several of our emerging technologies.</FONT></P>
</TD></TR>
</TABLE>


<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><I><FONT size=2>Key indicators of Financial Condition and Operating Performance</FONT></I><FONT size=2>. In evaluating our business, we use operating income and cash flow from operations as key performance metrics. We also use production capacity, measured in MW per annum, as a key performance metric for our United Solar Ovonic segment, particularly in connection with the manufacturing capacity expansion in this segment. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Results of Operations</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The year-over-year comparisons contained in this section exclude an extraordinary item and discontinued operations (see &#147;Other Income/Expense, Extraordinary Item, and Discontinued Operations,&#148; below).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following table summarizes each of our business segment&#146;s operating results (in thousands) for the last three fiscal years ended June 30:</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>23</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=8><FONT face="Times New Roman, Times, Serif" size=1>Revenues</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=8><FONT face="Times New Roman, Times, Serif" size=1>Income (Loss) from Operations</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="16%"><FONT face="Times New Roman, Times, Serif" size=1>United Solar Ovonic</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>87,508</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>58,718</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>36,959</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>8,607</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(3,240</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(13,418</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Ovonic Battery</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>8,888</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>88,557</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1><SUP>(1)</SUP></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>15,230</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(4,596</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>68,358</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(13,840</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>ECD</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>65,765<SUP>(2)</SUP> </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>16,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>16,155</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(30,441</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(22,282</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(22,877</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Consolidating Entries</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(59,742</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)<SUP>(2)</SUP></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(7,546</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(2,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(791</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>547</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>1,599</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Consolidated</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>102,419</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>156,570</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>66,256</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(27,221</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>43,383</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=1>(48,536</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: -0.15in; TEXT-ALIGN: justify"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 1.5pt" vAlign=top width=19>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 1.5pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1>Includes a one-time noncash license fee of $79,532,000 for 2005.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 0in" vAlign=top width=19>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(2)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 0in" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1>Consolidating entries represent principally the elimination of the sale by ECD to United Solar Ovonic in 2006 of the solar PV module manufacturing machinery and equipment.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Year Ended June 30, 2006 Compared to Year Ended June 30, 2005</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We had an operating loss of $27,221,000 in 2006 as compared to operating income of $43,383,000 in 2005 that was attributable to a one-time, noncash license fee of $79,532,000 in 2005 in our Ovonic Battery segment (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). Operating results in our United Solar Ovonic segment significantly improved, as we continued to rapidly expand our manufacturing capacity and product sales, while the operating loss at our ECD segment increased due principally to consolidation of a previously unconsolidated joint venture.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>United Solar Ovonic Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD width="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD width="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD width="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="68%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>81,816</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>50,777</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,670</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,768</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>173</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>87,508</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>58,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>63,609</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>46,427</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,809</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,935</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,047</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,618</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>8,436</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left style="BORDER-BOTTOM: #000000 1px solid" noWrap ><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>6,978</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>78,901</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>61,958</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>INCOME (LOSS) FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>8,607</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment generated operating income in 2006 compared to an operating loss in 2005, as we continued to rapidly expand our manufacturing capacity and product sales. </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>24</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P24 -->
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The increases in revenues and expenses in 2006 were primarily attributable to increased volume of PV products to meet market demand. Gross profit margin on product sales increased to 22% in 2006 from 9% in 2005, reflecting increased production and sales and improved absorption of fixed costs as we continue to improve manufacturing production toward an expected capacity of 30MW per annum at our existing Auburn Hills facility. Operating, general and administrative expenses and patent expenses increased due principally to increased production volume and manufacturing capacity expansion activities (including new hiring). We expect a temporary, substantial decline for 2007 of sales of our PV modules to Solar Integrated Technologies Inc.(&#147;SIT&#148;). We are presently reallocating production to other customers in our existing backlog and seeking additional sales to offset the impact of SIT.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses decreased due principally to reduced activities under product development agreements with the U.S. Air Force (to develop new products for space and airship applications) and the National Renewable Energy Laboratory. Revenues under these product development agreements also decreased due to the reduced activities. We continue to incur product development and research expenses to improve the throughput of our PV cell manufacturing equipment, reduce the cost of production and increase the sunlight-to-electricity conversion efficiency of our PV modules. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>Ovonic Battery Company Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD width="67%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD width="67%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005<SUP>(1)</SUP> </FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD width="67%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="67%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,623</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,167</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,370</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,481</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>824</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,977</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from license and other agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,322</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>80,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>749</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>148</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>8,888</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>88,557</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,765</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,429</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>322</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,447</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>950</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>5,986</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>13,484</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>20,199</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>INCOME (LOSS) FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(4,596</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>68,358</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 0pt; TEXT-ALIGN: justify"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=1></FONT></P>

<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="89%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top width=22>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1>Revenue from license and other agreements includes a one-time noncash license fee of $79,532,000 for 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>25</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P25 -->
<!-- BEG-P26 -->
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our Ovonic Battery segment had decreased operating income in 2006 due to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales, which include sales of our positive electrode nickel hydroxide, increased in 2006 as compared to 2005, due principally to a one-time item in 2005 discussed below. Positive electrode nickel hydroxide sales increased to $1,855,000 in 2006 from $1,762,000 in 2005 due primarily to an increase in demand in 2006 from our principal customer. Costs of sales of these products were relatively unchanged at $2,035,000 in 2006 as compared to $2,029,000 in 2005.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales also include sales of equipment to our Rare Earth Ovonic joint venture under a contract that was substantially completed in 2006. These equipment sales increased to $767,000 in 2006 from negative $595,000 in 2005 due primarily to a one-time item in 2005 (a $2,668,000 adjustment as a result of a review of estimates to complete the contract). Cost of sales decreased due primarily to substantial completion of the contract in 2006. As of June&nbsp;30, 2006, we had recorded revenues equal to cash received under the contracts (see Note D, &#147;Joint Ventures and Investments,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Royalties decreased in 2006 as compared to 2005, due principally to a one-time recognition in 2005 of $1,125,000 related to an advance royalty payment received in 1993 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Revenues from licenses and other agreements decreased in 2006 as compared to 2005, due to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). These revenues include $952,000 in each of 2006 and 2005, representing amortization of a $10,000,000 payment received in a July 2004 settlement of certain patent infringement disputes (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses were relatively unchanged, as we continued to develop and enhance our core NiMH battery technologies. Revenues from product development agreements decreased principally due to reduced research and development support for our Cobasys joint venture as it transitioned toward product development and production in 2006 ($782,000 in 2006 compared to $1,997,000 in 2005).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Operating, general and administrative expenses and patent expenses decreased in 2006 due to royalties under an intercompany agreement related to our ECD segment, under which a $3,956,000 royalty was recorded in 2005, principally attributable to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). This royalty is eliminated in consolidation.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>26</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>
</DIV>
<!-- END-P26 -->
<!-- BEG-P27 -->
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>ECD Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="85%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="69%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>58,931</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)</SUP> </FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,740</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>876</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>851</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties from intercompany agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>37</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,956</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,011</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,480</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>1,910</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>814</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>65,765</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>16,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>59,284</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,056</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,720</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,583</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,356</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16,228</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>8,846</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>9,256</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>96,206</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>39,123</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OPERATING LOSS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(30,441</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(22,282</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 54pt; TEXT-ALIGN: justify"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=1></FONT></P>

<DIV align=left>
<TABLE style="MARGIN-LEFT: 54pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="89%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top width=22>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(</FONT><FONT size=2>1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1><FONT size=2>Represents principally the sale by ECD to United Solar Ovonic in 2006 of the solar PV module machinery and equipment. This amount is eliminated in consolidation</FONT>.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our ECD segment had an increase in its operating loss in 2006 as compared to 2005, primarily due to the impact of acquiring our joint venture partner&#146;s interest in Ovonic Hydrogen Systems in December 2004, which resulted in the elimination of revenues from certain intercompany agreements and assumption of operating costs associated with consolidation of this company. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales represent principally sales of production equipment by our Production Technology and Machine Building Division to our United Solar Ovonic segment in connection with the manufacturing expansion that are eliminated in consolidation. Product sales increased and cost of product sales increased due to increased production and sales of production equipment for this expansion.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Royalties, consisting principally of royalties related to our Ovonic optical memory technologies, were relatively unchanged in 2006 as compared to 2005. Royalties from intercompany agreements represent royalties under an intercompany license agreement related to our Ovonic Battery segment, under which a $3,956,000 royalty was recorded in 2005, principally attributable to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). These intercompany royalties are eliminated in consolidation.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses increased to $28,076,000 in 2006 from $26,811,000 in 2005 as we continued to develop our emerging technologies, including </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>27</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<HR align=LEFT width="700" noShade SIZE=3>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>our Ovonic solid hydrogen storage systems, Ovonic metal hydride fuel cell, Ovonic optical memory, Ovonic cognitive computer and the Ovonic quantum control technologies. Revenues from product development agreements decreased primarily due to the elimination in 2005 of a product development agreement with Ovonic Hydrogen Systems in connection with our acquisition of our partner&#146;s interest in that company (zero in 2006 compared to $4,089,000 in 2005), and reduced activities ($2,090,000 in 2006 compared to $3,724,000 in 2005) under contracts with NIST related to optical switching and organic electroluminescent devices technology and to support United Solar Ovonic&#146;s U.S. Air Force contract.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Patents and operating, general and administrative expenses decreased in 2006 due to increased allocation to product development and research expenses. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Other operating revenues consist primarily of services, facilities and miscellaneous administrative and laboratory and machine shop services provided to some of our nonconsolidated affiliates.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>Other Income/Expense, Extraordinary Item and Discontinued Operations</FONT></I></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Other income (net) increased to $8,310,000 in 2006 from $6,904,000 in 2005, primarily due to higher interest income ($8,672,000 in 2006 compared to $1,400,000 in 2005) relating to increased funds available for investment and higher interest rates, partially offset by one-time items in 2005 (an $8,000,000 distribution from a joint venture as partial reimbursement of legal fees and a $1,710,000 impairment in our investment in our Rare Earth Ovonic joint venture).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We recognized an extraordinary gain in 2005 of $2,263,000 (net of tax) as a result of a $4,675,000 payment from Chevron relating to the restructuring of certain agreements (see Note D, &#147;Joint Ventures and Investments,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Discontinued operations reflects our metal hydride manufacturing materials business, which we sold in December 2005 as part of our restructuring plan and focus (see Note A, &#147;Summary of Accounting Policies,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Year Ended June 30, 2005 Compared To Year Ended June 30, 2004</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We had operating income of $43,383,000 in 2005 that was attributable to a one-time, noncash license fee of $79,532,000 in 2005 in our Ovonic Battery segment (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements), as compared to an operating loss of $48,536,000 in 2004. Operating results in our United Solar Ovonic segment significantly improved, as we continued to rapidly expand our manufacturing capacity and product sales.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>28</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>United Solar Ovonic Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="69%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>50,777</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>27,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,768</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,373</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenue</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>173</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>58,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>36,959</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>46,427</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>33,897</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,935</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,615</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,618</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>972</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>6,978</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>7,893</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>61,958</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>50,377</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT> </TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OPERATING LOSS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(13,418</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment significantly reduced its operating loss in 2005 as compared to 2004, as we continued to rapidly expand our manufacturing capacity and product sales.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The increases in revenues and expenses were primarily attributable to increased volume of PV product sales, with increased volume partially offset by unfavorable product mix ($2,682,000).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Gross profit margin on product sales was 9% in 2005 compared to a gross loss of 23% in 2004, reflecting increased production and sales and improved absorption of fixed costs as manufacturing production reached its full-rated capacity in the fourth quarter of 2005. Operating, general and administrative expenses and patent expenses also increased due principally to increased production volume and manufacturing capacity expansion activities (including new hirings).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses were relatively unchanged as we continue to seek to improve the throughput of our PV cell manufacturing equipment, reduce the cost of production and increase the sunlight-to-electricity conversion efficiency of our PV modules. Revenues from product development agreements decreased principally due to reduced activities ($5,699,000 in 2005 compared to $7,869,000 in 2004) under product development agreements with the U.S. Air Force (to develop new products for space and airship applications) and with Lockheed Martin.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>29</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>Ovonic Battery Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="68%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,167</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,142</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,481</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,903</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,977</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,037</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from license and other agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>80,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>125</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>148</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>23</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>88,557</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)</SUP></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>15,230</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,429</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,442</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,603</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,991</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>5,986</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>9,034</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>20,199</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>29,070</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>INCOME (LOSS) FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>68,358</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(13,840</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 65pt; TEXT-ALIGN: justify"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=1></FONT></P>

<DIV align=left>
<TABLE style="MARGIN-LEFT: 65pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="89%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top width=22>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1>Revenue from license and other agreements includes a one-time noncash license fee of $79,532,000 for 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements).</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our Ovonic Battery segment had increased operating income in 2005 due to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales, which include sales of our positive electrode nickel hydroxide products, decreased in 2005 as compared to 2004. Positive electrode nickel hydroxide sales were relatively unchanged at $1,762,000 in 2005 as compared to $1,732,000 in 2004. Costs of sales of these products increased to $2,029,000 in 2005, from $1,569,000 in 2004, reflecting higher raw material costs.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales also include sales of equipment to our Rare Earth Ovonic joint venture under a contract that was nearing completion in 2005. We increased our estimated cost of completing the project by $2,668,000 in 2005 and as a result recorded negative revenue of $595,000 in 2005 related to these product sales as compared to revenue of $4,410,000 in 2004. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Royalties increased to $4,481,000 in 2005 from $1,903,000 in 2004, primarily due to a one-time recognition in 2005 of $1,125,000 related to recognition of an advance royalty payment received in 1993 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>30</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P30 -->
<!-- BEG-P31 -->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements) and a $1,287,000 increase in royalties for transportation applications, primarily hybrid vehicles. The 2005 revenues include royalties of $952,000, representing amortization of a payment received in a July 2004 settlement of certain patent infringement disputes (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses decreased due principally to reduced research and development support for our Cobasys joint venture as it transitioned toward product development and production in 2005. Revenues also decreased due to the reduced activities, together with the completion of a government contract (zero in 2005 compared to $1,158,000 in 2004). We continue to incur product development and research expenses to develop and enhance our core NiMH battery technologies.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Operating, general and administrative and patent expenses decreased in 2005 as compared to 2004, due to decreased patent expenses in 2005, partially offset by a $3,956,000 royalty to our ECD segment in 2005 (as discussed below), which is eliminated in consolidation.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><I><FONT size=2>ECD Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="83%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year ended June 30,</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="69%"><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,740</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>184</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>851</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>619</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Royalties from intercompany agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,956</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,480</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,713</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other operating revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>814</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>639</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>16,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>16,155</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,056</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,022</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,583</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>15,562</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16,228</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,553</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative expenses and patent expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>9,256</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>6,895</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>39,123</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>39,032</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OPERATING LOSS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(22,282</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(22,877</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our ECD segment had a slight decrease in its operating loss in 2005 as compared to 2004.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales represent principally sales of production equipment by our Production Technology and Machine Building Division to our United Solar Ovonic segment in connection with its manufacturing expansion that are eliminated in consolidation. Product sales and cost of </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>31</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>product sales increased due to commencement of production and sales of production equipment for this expansion.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Royalties, consisting principally of royalties related to our Ovonic optical memory technologies, increased principally due to recognition of revenue for advance royalty payments received in prior years pursuant to a license agreement under which no further royalties are due ($686,000 for 2005 as compared to $464,000 for 2004) (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). Royalties from intercompany agreements represents royalties under an intercompany license agreement related to our Ovonic Battery segment, under which a $3,956,000 royalty was recorded in 2005, principally attributable to a one-time, noncash license fee of $79,532,000 in 2005 (see Note H, &#147;Product Sales, Royalties, Revenues from Product Development Agreements,
Nonrefundable Advance Royalties and License and Other Agreements,&#148; of the Notes to our Consolidated Financial Statements). Royalties under this intercompany agreement are eliminated in consolidation.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The combined product development and research expenses decreased to $26,811,000 in 2005 from $30,115,000 in 2004, as we continued to develop our emerging technologies, including our Ovonic solid hydrogen storage systems, Ovonic metal hydride fuel cell, Ovonic optical memory, Ovonic cognitive computer and the Ovonic quantum control technologies. Revenues from product development agreements decreased primarily due to the elimination in 2005 of a product development agreement with Ovonic Hydrogen Systems in connection with our acquisition of our partner&#146;s interest in that company ($4,089,000 in 2005 compared to $10,063,000 in 2004), and completion of a hydrogen systems development contract with TACOM (zero in 2005 compared to $499,000 in 2004), partially offset by increased activities ($2,200,000 in 2005 compared to $799,000 in 2004) under contracts with NIST (related to optical switching and organic
electroluminescent devices technologies).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Other operating revenues consist primarily of services, facilities and miscellaneous administrative and laboratory and machine shop services provided to some of our nonconsolidated affiliates.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Patents and operating, general and administrative expenses increased in 2005 due to reduced allocation to cost of revenues from product development agreements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Liquidity and Capital Resources</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our primary liquidity needs are to fund capital expenditures associated with expansion of our United Solar Ovonic segment&#146;s manufacturing capacity and support our working capital requirements, as well as to fund the further development of our emerging technologies. Our principal sources of liquidity are cash, cash equivalents and short-term investments (which principally represent the proceeds from our March 2006 offering of common stock) and cash flows from operating activities at our United Solar Ovonic segment. We believe that cash, cash equivalents and short-term investments and cash flows from operations will be sufficient to meet our liquidity needs for the foreseeable future. We intend to use the net proceeds from our March 2006 common stock offering </FONT><FONT size=2>for our </FONT><FONT size=2>PV manufacturing expansion</FONT><FONT size=2>, which includes construction of two 60MW
manufacturing facilities in Greenville, Michigan, and general corporate purposes. </FONT><FONT size=2>We will require additional funding for this expansion through 2010, which we may obtain from equity and debt financing, business agreements and other sources.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>32</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, we had $404,467,000 consolidated cash, cash equivalents, and short-term investments consisting of certificates of deposits, variable rate corporate bonds (&#147;VRCB&#146;s&#148;), auction rate certificates (&#147;ARC&#146;s&#148;), corporate notes and money market funds. All short-term investments are classified as &#147;available-for-sale.&#148; These short-term investments have maturities up to 33 months, except for the ARC&#146;s which have maturities from 20 to 38 years. Both the VRCB&#146;s and ARC&#146;s resemble short-term instruments due to the periodic interest rate reset and put options. At June 30, 2006, we had consolidated working capital of $429,092,000, which included a cash and short-term investments balance of $404,467,000.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Cash Flows</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Net cash used in our operating activities was $21,419,000 in 2006 as compared to $16,864,000 in 2005 reflecting improved cash flow from operations at our United Solar Ovonic segment and the receipt in 2005 of a one-time, nonrefundable license fee of $10,000,000 as part of a settlement of certain patent infringement disputes. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Net cash used in investing activities was $295,067,000 in 2006 as compared to $13,797,000 in 2005. This increase was due to net purchases ($230,839,000) of investments plus purchases ($69,020,000) of property, plant and equipment in 2006. This increase in capital spending ($69,020,000 in 2006 compared to $3,120,000 in 2005) was principally associated with expansion of our United Solar Ovonic segment&#146;s manufacturing capacity. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Net cash provided by our financing activities was $397,449,000 in 2006 as compared to $102,028,000 in 2005, primarily as a result of our March 2006 common stock offering in which we raised net proceeds of approximately $360,854,000.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>For details of our cash flows, see the Consolidated Statement of Cash Flows in our Consolidated Financial Statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company does not have any off-balance sheet arrangements at June 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Short-term Borrowings</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, we have a line of credit with LaSalle Bank Midwest N.A. in the amount of $4,000,000. This line of credit provides a mechanism for obtaining letters of credit and entering into foreign exchange transactions. The line of credit, which expires on August 31, 2007, is secured by a security interest in inventory and receivables and contains certain covenants, including a minimum $20,000,000 liquidity covenant. At June 30, 2006, we had outstanding letters of credit of $2,161,000 against the line of credit.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Joint Ventures</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We do not presently provide funding to either of our principal joint ventures, Cobasys and Ovonyx. Chevron, our partner in Cobasys, is presently funding Cobasys&#146; operations and is committed under the Cobasys operating agreement to continue funding approved operating budgets through December 2007. Beginning in January 2008, the joint venture partners will be required to make capital contributions as necessary to fund approved operating budgets in proportion to their percentage interests, subject to the terms of the Cobasys operating agreement. Ovonyx does not currently require financial support because it has generated sufficient funds for its operations through licensing activities.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>33</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Contractual Obligations</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our contractual obligations include the following maturities (in thousands):</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=15><FONT face="Times New Roman, Times, Serif" size=2>Payments Due by Period</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Total</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Less than<BR>1 Year</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>1-3 years</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>3-5 years</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>More than<BR>5 years</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.2in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="35%"><FONT face="Times New Roman, Times, Serif" size=2>Capital Lease Obligations</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>49,904</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>2,737</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>6,196</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>6,109</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>34,862</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Operating Leases</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,561</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,196</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,067</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,672</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>626</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Purchase Obligations</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>42,210</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>41,867</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>182</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>161</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Long-Term Retirement</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>1,281</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>1,281</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>102,956</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>46,800</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>10,445</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>8,942</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>36,769</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>This table includes contractual obligations associated with the early stages of the construction of a 60MW manufacturing facility in Greenville, Michigan, and we expect to incur additional contractual obligations related to this construction, which is expected to be completed in late 2007.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Critical Accounting Estimates and Significant Accounting Policies</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our significant accounting policies are more fully described in Note&nbsp;A, &#147;Summary of Accounting Policies,&#148; to our Consolidated Financial Statements. Certain of our accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. However, they are subject to an inherent degree of uncertainty. As a result, actual results in these areas may differ significantly from our estimates. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We consider an accounting estimate to be critical if it requires us to make assumptions about matters that were uncertain at the time the estimate was made and changes in the estimate would have had a significant impact on our consolidated financial position or results of operations.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Stock-Based Compensation</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Effective July 1, 2005, ECD 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 grant. 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 grants, expense is also recognized to reflect the remaining service period of grants that had been included in pro-forma disclosures in prior periods.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>34</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD records the fair value of stock-based compensation grants as an expense. In order to determine the fair value of stock options on the date of grant, ECD 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.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD 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.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>With regard to the weighted-average option life assumption, ECD 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. Forfeiture rates are based on the Company&#146;s historical data for stock option forfeitures.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Prior to the adoption of SFAS No. 123(R), ECD applied APB 25 to its stock-based compensation awards to employees. Had compensation costs for ECD&#146;s stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No.123(R), the Company&#146;s net income (loss) and net income (loss) per share for the years ended June 30, 2005 and 2004 would have changed as follows:</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.2in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="67%"><FONT face="Times New Roman, Times, Serif" size=2>Income (loss) from continuing operations before income taxes</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income (loss) from continuing operations</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic and diluted income (loss) per common share</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.13</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 fiscal 2006 was $1,719,000, increasing both basic and diluted loss $.05 per share. As of June 30, 2006, the total unrecognized compensation cost related to nonvested stock grants was $1,895,334 and the related weighted-average period over which it is expected to be recognized is approximately 1.6 years.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Warranty Liability</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our accrued warranty liability increased to $1,835,136 at June 30, 2006 from $1,635,532 at June 30, 2005, due to increased product sales in our United Solar Ovonic segment. See Note&nbsp;E, &#147;Liabilities,&#148; to our Consolidated Financial Statements. We generally provide a 20-year product warranty on power output on all Uni-Solar products installed as part of pre-engineered solutions. Our accrued warranty liability also includes warranties previously&nbsp;provided on our machine-building and equipment products.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>35</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Allowance for Uncollectible Accounts</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our allowance for uncollectible accounts increased to $691,000 at June 30, 2006 from $412,000 at June 30, 2005, due principally to the increase in product sales in our United Solar Ovonic segment. See Note&nbsp;B, &#147;Accounts Receivable,&#148; to our Consolidated Financial Statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><I><FONT size=2>Government Contracts, Reserves and Liabilities</FONT></I></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our reserves and liabilities for government contracts decreased to $2,345,000 at June 30, 2006 from $2,638,000 at June 30, 2005, due principally to an aggregate $1,064,000 reduction in our estimated liability in 2006, which was partially offset by additional accrued costs for work performed in 2006 under government contracts. The 2006 reduction reflects partial resolution of an audit of certain government contracts by the Defense Contract Audit Agency and adjustment of a reserve to better reflect our residual royalty obligations under an advanced development agreement. See Note E, &#147;Liabilities,&#148; to our Consolidated Financial Statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>See Note A, &#147;Summary of Accounting Policies &#150; Recent Pronouncements,&#147; for a description of recent accounting pronouncements and the impact on the Company&#146;s financial statements. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Forward-Looking Statements</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including in particular statements about our financial condition, results of operations, plans, objectives, expectations, future performance and business prospects. These statements are identified by forward-looking words such as &#147;may,&#148; &#147;will,&#148; &#147;anticipate,&#148; &#147;believe,&#148; &#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;plan,&#148; &#147;seek&#148; and similar expressions. We have based these forward-looking statements on our current expectations with respect to future events and occurrences, but our actual results in the future may differ materially from the expected results reflected in our forward-looking statements. Important factors that could cause our actual results to differ materially from the
results anticipated by the forward-looking statements include general economic and industry conditions in the markets in which we operate, risks associated with conducting business in foreign countries, and the risks discussed in Item 1A, &#147;Risk Factors,&#148; and in other filings with the SEC from time to time. Any or all of these factors could cause our actual results and financial or legal status for future periods to differ materially from those expressed or referred to in any forward-looking statement. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made. Except as required by law, we undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>36</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<TR>
<TD>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 7A</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=432>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Quantitative and Qualitative Disclosures about Market Risk</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 $403,816,000 and $95,805,000 of these investments (including cash equivalents) on June 30, 2006 and June 30, 2005, respectively. 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. An interest rate change of 1% would result in a change in the value of our June 30, 2006, portfolio of approximately $444,000.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>37</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<TD>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Item 8</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Consolidated Financial Statements and Supplementary Data</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: justify"><FONT size=2>Board of Directors and Shareholders of</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>We have audited the accompanying consolidated balance sheets of Energy Conversion Devices, Inc. (a Delaware corporation) and subsidiaries as of June 30, 2006 and 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Energy Conversion Devices, Inc. and subsidiaries as of June 30, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2006, in conformity with accounting principles generally accepted in the United States of America.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>As discussed in Note A to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R), &#147;Share-Based Payments,&#148; effective July 1, 2005.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated when considered in relation to the basic consolidated financial statements taken as a whole.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0in; TEXT-ALIGN: justify"><FONT size=2>We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Energy Conversion Devices, Inc. and subsidiaries internal control over financial reporting as of June 30, 2006, based on the criteria established in </FONT><I><FONT size=2>Internal Control</FONT></I><FONT size=2>&nbsp;</FONT><I><FONT size=2>&#151; Integrated Framework</FONT></I><FONT size=2> issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 30, 2006 expressed an unqualified opinion on management&#146;s assessment of the effectiveness of the Company&#146;s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company&#146;s internal control over financial reporting.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>/s/ Grant Thornton LLP</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2>Southfield, Michigan</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2>August 30, 2006</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>38</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
</DIV>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.35in; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.35in; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>CONSOLIDATED BALANCE SHEETS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>ASSETS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="90%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="68%"><FONT face="Times New Roman, Times, Serif" size=2>CURRENT ASSETS</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash, including cash equivalents of $164,311,000 at June 30, <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006 and $83,964,000 at June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>164,961,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>84,295,571</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>239,505,025</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,840,526</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable (net)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>27,885,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19,532,475</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>21,526,795</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,066,876</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,552,336</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,091,925</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL CURRENT ASSETS</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>455,431,253</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>134,827,373</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD colSpan=9>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>PROPERTY, PLANT AND EQUIPMENT</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buildings and improvements</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>15,753,035</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,804,999</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Machinery and other equipment</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>64,394,232</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>63,994,972</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets under capitalized leases</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>26,161,653</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>10,000,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>106,308,920</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>88,799,971</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less accumulated depreciation and amortization</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(35,965,977</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(29,920,832</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR>
<TD colSpan=9>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NET DEPRECIABLE ASSETS</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>70,342,943</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>58,879,139</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Land</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,376,580</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>267,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction in progress</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>66,511,334</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,789,838</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD colSpan=9>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL PROPERTY, PLANT AND EQUIPMENT</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>138,230,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>60,935,977</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OTHER ASSETS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,680,216</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,300,083</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL ASSETS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>596,342,326</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>198,063,433</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>See notes to consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>39</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>CONSOLIDATED BALANCE SHEETS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%" colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="69%"><FONT face="Times New Roman, Times, Serif" size=2>CURRENT LIABILITIES</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>21,208,060</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>15,914,518</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Salaries, wages and amounts withheld from employees</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,186,659</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,368,205</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Deferred revenues under business agreements</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>349,454</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,288,268</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Current portion of deferred patent license fee</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Current installments on long-term liabilities</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>642,308</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>369,010</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL CURRENT LIABILITIES</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26,338,861</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,892,381</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LONG-TERM LIABILITIES</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>25,594,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,203,772</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LONG-TERM DEFERRED PATENT LICENSE FEE</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,142,860</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,095,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NONREFUNDABLE ADVANCE ROYALTIES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>245,660</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,151,679</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL LIABILITIES</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>59,321,469</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>42,343,072</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD colSpan=9>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>COMMITMENTS (NOTE G)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>STOCKHOLDERS' EQUITY</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Capital Stock</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Class A Convertible Common Stock, par value $0.01 per share:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized &#150; zero shares at June 30, 2006 and</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;500,000 shares at June 30, 2005</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued &amp; outstanding &#150; zero shares at June 30, 2006</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 219,913 shares at June 30, 2005</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,199</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Class B Convertible Common Stock, par value $0.01 per share:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized, issued and outstanding - zero shares at June 30,</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006 and 430,000 shares at June 30, 2005</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,300</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, par value $0.01 per share:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized - 50,000,000 shares</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued and outstanding &#150; 39,058,610 shares at June 30,</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006 and 28,232,970 shares at June 30, 2005</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>390,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>282,330</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Additional paid-in capital</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>840,538,799</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>440,577,239</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Accumulated deficit</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(303,787,620</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(285,191,353</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Accumulated other comprehensive income (loss)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(120,908</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>211,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Unearned compensation on Class B Convertible Common Stock</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(165,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL STOCKHOLDERS' EQUITY</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>537,020,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>155,720,361</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL LIABILITIES &amp; STOCKHOLDERS' EQUITY</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>596,342,326</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>198,063,433</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>See notes to consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>40</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P40 -->
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=1></FONT>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<TABLE cellSpacing=0 cellPadding=0 width="99%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>REVENUES</FONT></TD>
<TD colSpan=9><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>84,430,664</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>51,943,873</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>33,808,209</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Royalties</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,245,754</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,332,003</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,521,779</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenues from product development agreements</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,263,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,566,334</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>13,547,648</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenues from product development agreements with related parties</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>781,867</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>6,086,176</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,673,104</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues from product development agreements</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,045,585</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>17,652,510</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>29,220,752</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenues from license and other agreements</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,322,365</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>80,784,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>125,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,375,108</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>857,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>580,195</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL REVENUES</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>102,419,476</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>156,570,052</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>66,255,935</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of product sales</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>67,251,614</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>51,426,076</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39,703,247</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues from product development agreements</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,391,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16,839,605</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>28,878,722</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Product development and research</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>34,850,658</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26,738,343</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,516,247</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Patent defense (net)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>418,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>217,815</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,135,427</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Patents</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,418,339</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,406,999</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,086,896</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Operating, general and administrative (net)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,309,437</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,558,248</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>14,471,210</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>129,640,142</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>113,187,086</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>114,791,749</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>INCOME (LOSS) FROM OPERATIONS</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(27,220,666</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>43,382,966</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(48,535,814</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OTHER INCOME (EXPENSE)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,671,098</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,400,461</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>714,049</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(197,334</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(776,725</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,314,202</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Equity in losses of joint ventures</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(150,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(100,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(644,220</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss in Rare Earth Ovonic-China</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,710,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Distribution from joint venture</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,000,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Gains on sales of investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>364,416</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Other nonoperating income (expense)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(13,344</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>90,514</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>224,485</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL OTHER INCOME (EXPENSE)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>8,310,420</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>6,904,250</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(655,472</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net Income (loss) from continuing operations before income taxes and</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;extraordinary item</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,910,246</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>50,287,216</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(49,191,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income taxes</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>825,414</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net Income (loss) from continuing operations before extraordinary item</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,910,246</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>49,461,802</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(49,191,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Discontinued operations, net of tax benefit of $23,642 in 2005 (including</FONT></TD></TR>

<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;gain on disposition of discontinued operations of $739,602 in 2006)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>313,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,392,630</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,230,388</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Extraordinary item, net of tax of $38,416</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,262,910</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net Income (Loss)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,596,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>50,332,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(51,421,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1.80</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1.83</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.15</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Diluted net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1.67</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1.70</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.15</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; TEXT-ALIGN: left"><FONT size=2>See notes to consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>41</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
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<DIV style="WIDTH: 770px" align=center>
<TABLE cellSpacing=0 cellPadding=0 width="99%" border=0>
<TR vAlign=bottom>
<TD align=center colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES <BR><BR><U>CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</U><BR><BR>Three years ended June 30, 2006<BR><BR></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=1>Class A and Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=1>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Additional<BR>Paid-In<BR>Capital</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Deficit</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Other<BR>Comprehensive<BR>Income (Loss)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Unearned<BR>Compensation<BR>on Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Total<BR>Stockholders'<BR>Equity</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Balance at July 1, 2003</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>21,252,207</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>212,522</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>384,987,156</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(284,392,111</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>546,646</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>(1,528,540</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>99,832,172</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Net loss for year ended June 30, 2004</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(51,421,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(51,421,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Unrealized loss on investments (net<BR>&nbsp;&nbsp;&nbsp;of reclassification adjustment)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(431,153</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(431,153</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Foreign currency translation gains</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>134,906</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>134,906</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em; PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Comprehensive loss</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(51,717,921</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Sale of units to institutional investors, net</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>3,266,254</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>32,663</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>32,176,154</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>32,208,817</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Earned compensation on Class B stock</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>681,600</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>681,600</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Issuance of stock to directors and consultants</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2,140</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>19,988</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>20,009</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Common stock issued in connection with<BR>&nbsp;&nbsp;&nbsp;exercise of stock options and warrants</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2,400</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>24</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>24,427</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>24,451</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Stock options issued to nonemployees</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>105,940</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>105,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Balance at June 30, 2004</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>24,523,001</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>245,230</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>417,313,665</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(335,813,785</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>250,399</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(846,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>81,155,068</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD><FONT size=+0>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>See notes to consolidated financial statements.</FONT></TD></TR>
<TR>
<TD><FONT size=+0>&nbsp;</FONT></TD></TR>
<TR>
<TD><FONT size=+0>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=center colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>(Continued on next page)</FONT></TD></TR>
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<DIV style="WIDTH: 770px" align=center>
<TABLE cellSpacing=0 cellPadding=0 width="99%" border=0>
<TR vAlign=bottom>
<TD align=center width="26%" colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES <BR><BR><U>CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</U><BR><BR>Three years ended June 30, 2006<BR><BR>(CONTINUED)<BR><BR></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=1>Class A and Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=1>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Additional<BR>Paid-In<BR>Capital</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Deficit</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Other<BR>Comprehensive<BR>Income (Loss)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Unearned<BR>Compensation<BR>on Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Total<BR>Stockholders'<BR>Equity</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Balance at July 1, 2004</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>24,523,001</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>245,230</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>417,313,665</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(335,813,785</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>250,399</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>(846,940</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>81,155,068</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Net income for year ended June 30, 2005</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>50,332,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>50,332,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Foreign currency translation losses</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(38,813</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(38,813</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em; PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Comprehensive income</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>50,293,269</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Earned compensation on Class B stock</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>681,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>681,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Sale of units to institutional investors, net</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>5,090,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>50,900</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>82,055,312</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>82,106,212</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>License exchange for option to purchase<BR>&nbsp;&nbsp;&nbsp;ECD stock</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(79,532,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(79,532,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Exercise of option to purchase and to retire<BR>&nbsp;&nbsp;&nbsp;ECD stock</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(4,376,633</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(43,766</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(19,869,914</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(19,913,680</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Issuance of stock to directors</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,876</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>19</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>35,025</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>35,044</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Common stock issued in connection with<BR>&nbsp;&nbsp;&nbsp;exercise of stock options</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,028,883</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>10,289</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>12,601,463</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>12,611,752</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Common stock issued in connection with<BR>&nbsp;&nbsp;&nbsp;exercise of warrants</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,965,843</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>19,658</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>27,423,510</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>27,443,168</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Stock options issued to nonemployees</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>303,460</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>303,460</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Tax credits relating to stock options</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>132,886</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>132,886</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>113,832</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>290,350</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>404,182</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Balance at June 30, 2005</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>28,232,970</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$ </FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>282,330</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>440,577,239</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(285,191,353</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>211,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(165,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>155,720,361</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="26%"><FONT size=+0>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>See notes to consolidated financial statements.</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=center colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>(Continued on next page)</FONT></TD></TR>
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<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="99%" border=0>
<TR vAlign=bottom>
<TD align=center colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES <BR><BR><U>CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</U><BR><BR>Three years ended June 30, 2006<BR><BR><BR><BR>(CONTINUED)<BR><BR></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=1>Class A and Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=1>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Number<BR>of<BR>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Amount</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Additional<BR>Paid-In<BR>Capital</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Deficit</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Accumulated<BR>Other<BR>Comprehensive<BR>Income (Loss)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Unearned<BR>Compensation<BR>on Class B<BR>Convertible<BR>Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Total<BR>Stockholders'<BR>Equity</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left width="26%"><FONT face="Times New Roman, Times, Serif" size=1>Balance at July 1, 2005</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>28,232,970</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>282,330</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>440,577,239</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(285,191,353</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>211,586</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>(165,940</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>155,720,361</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Net loss for year ended June 30, 2006</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(18,596,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>(18,596,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Unrealized loss on investments</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>(36,409</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>(36,409</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Foreign currency translation losses</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>(296,085</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>(296,085</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em; PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Comprehensive loss</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>(18,928,761</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Earned compensation on Class B stock</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>165,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>165,940</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Equity offering, net of expenses<BR>&nbsp;&nbsp;&nbsp;of $19,493,616</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>7,666,928</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>76,669</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>356,109,187</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>356,185,856</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Conversion of Class A and Class B<BR>&nbsp;&nbsp;&nbsp;stocks into Common Stock</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>(649,913</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>(6,499</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>649,913</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>6,499</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Issuance of stock to directors</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>1,440</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>14</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>60,019</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>60,033</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Common stock issued in connection with<BR>&nbsp;&nbsp;&nbsp;&nbsp;exercise of stock options</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>1,116,467</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>11,165</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>19,353,951</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>19,365,116</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Common stock issued in connection with<BR>&nbsp;&nbsp;&nbsp;&nbsp;exercise of warrants</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>1,390,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>13,909</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>22,282,090</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>22,295,999</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Stock options issued to nonemployees</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>437,080</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>437,080</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Stock options issued to employees</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>1,719,233</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>1,719,233</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Balance at June 30, 2006</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center width="6%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center width="4%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>39,058,610</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>390,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=1>840,538,799</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=1>(303,787,620</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="4%"><FONT face="Times New Roman, Times, Serif" size=1>(120,908</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="6%"><FONT face="Times New Roman, Times, Serif" size=1>537,020,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="26%"><FONT size=+0>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 1em" vAlign=bottom>
<TD align=left colSpan=27><FONT face="Times New Roman, Times, Serif" size=1>See notes to consolidated financial statements.</FONT></TD></TR>
</TABLE>

</DIV>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>44</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=1>Year Ended June 30,</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>2004</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>OPERATING ACTIVITIES:</FONT></TD>
<TD align=left colSpan=9><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(18,596,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>50,332,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(51,421,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income (loss) to net cash used in</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operating activities:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>7,627,278</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>7,991,995</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>7,858,641</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation on discontinued operations</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>76,759</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>269,778</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bad debt expense</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>289,767</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>309,512</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>93,093</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in government contracts and other reserves</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,063,776</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred nonrefundable patent license fee</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of premium/discount on investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(912,448</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>73,083</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity in losses of joint ventures</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>150,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>100,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>644,220</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss in Rare Earth Ovonic</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,710,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in nonrefundable advance royalties</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(906,019</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(1,840,883</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(515,433</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock and stock options issued for services rendered</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2,382,287</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,019,503</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>807,549</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax credit relating to stock options</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>132,886</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(739,602</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) on sales of investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(364,416</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on sale of property, plant and equipment</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(43,079</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(93,362</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>10,368</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency adjustment</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>132,644</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement liability</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(104,255</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>263,638</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>307,032</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term operating lease</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>4,629</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>148,353</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Option received in exchange for license</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(79,532,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in working capital:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(8,642,407</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(4,931,818</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2,494,737</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(3,459,919</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(4,415,161</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(1,203,543</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(822,342</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(84,062</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>479,305</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of deferred nonrefundable patent license fee</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>3,048,220</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2,579,333</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(5,479,016</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenues under business agreements</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(938,814</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>321,672</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(4,159,973</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred nonrefundable patent license fee</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>9,047,620</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>NET CASH USED IN OPERATING ACTIVITIES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(21,418,931</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(16,863,933</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(50,106,249</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>INVESTING ACTIVITIES:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reduction in restricted cash</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,150,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>850,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of property, plant and equipment (including construction</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in progress)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(69,019,555</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(3,119,771</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(3,546,922</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment in Ovonyx</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(150,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(100,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(50,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Investment</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(150,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance proceeds</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>98,745</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(249,597,305</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(19,768,819</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(11,969,949</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from maturities of investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>18,758,845</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>7,928,293</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>11,969,949</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>891,887</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of investments</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>4,050,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>26,661,685</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of property, plant and equipment</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>148,997</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>15,065</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>161,477</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(295,067,131</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(13,796,487</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>24,076,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>FINANCING ACTIVITIES:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal payments under short-term and long-term debt</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;obligations and assets under capitalized lease obligations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(398,413</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(333,368</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(228,889</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of stock and exercise of stock options</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and warrants, net of expenses</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>397,846,971</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>122,274,965</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>32,233,268</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercise of option to purchase ECD stock</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(19,913,680</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>397,448,558</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>102,027,917</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>32,004,379</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(296,085</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>251,537</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>134,906</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>NET INCREASE IN CASH AND CASH EQUIVALENTS</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>80,666,411</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>71,619,034</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>6,109,276</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>84,295,571</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>12,676,537</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>6,567,261</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>CASH AND CASH EQUIVALENTS AT END OF PERIOD</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>164,961,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>84,295,571</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>12,676,537</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="55%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
</TABLE>


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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>45</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="85%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>SUPPLEMENTAL DISCLOSURES OF <BR>&nbsp;&nbsp;&nbsp;CASH FLOW INFORMATION:</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest, including capitalized interest</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>904,276</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;776,725</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,314,202</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>707,302</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncash transactions:</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term and long-term note receivable - United</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solar Ovonic LLC</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(11,629,489</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term and long-term note payable - Canon</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,629,489</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts due from sale of assets</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>438,887</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital lease obligations to finance capital equipment</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16,161,653</FONT></TD>
<TD></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="48%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="8%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0.06in; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; LINE-HEIGHT: 93.75%; TEXT-ALIGN: left"><FONT size=2>See notes to consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>46</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Nature of Business</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc. (ECD) invents, designs, develops and commercializes materials, products and production processes for the alternative energy generation, energy storage and information technology markets.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Financial Statement Presentation, Principles of Consolidation and Equity Accounting</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The consolidated financial statements include the accounts of ECD and its 100%-owned manufacturing and sales subsidiary United Solar Ovonic Corp.&nbsp;(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 June 30, 2006, 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 39.5%-owned corporation with Mr. Tyler Lowrey, Intel Capital,
and other investors. See Note D for discussions of all of the Company&#146;s major joint ventures and investments.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>At June 30, 2006 and 2005, the Company&#146;s investments in Cobasys and Ovonyx are recorded at zero. The Company will continue to carry its investment in each of these joint ventures at zero until the venture becomes sustainably profitable, at which time the Company will start to recognize over a period of years its share, if any, of the then equity of each of the ventures, and will recognize its share of each venture&#146;s profits or losses on the equity method of accounting. To the extent that the Company has made contributions other than technology, it recognizes its proportionate share of any losses until the investment reaches zero.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Intellectual property, including patents, resulting from the Company&#146;s investments in its technologies, is valued at zero in the balance sheet. Intellectual property provides the foundation for the creation of the important strategic alliances whereby the Company provides intellectual property and patents and joint venture partners provide cash.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>While the Company believes that it has no obligation to fund any losses that its joint ventures incur beyond the Company&#146;s investment, the Company has decided to provide limited funding to certain of its joint ventures (see Note D). </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Upon consolidation, all intercompany accounts and transactions are eliminated. Any profits on intercompany transactions are eliminated to the extent of the Company&#146;s ownership percentage.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>47</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Discontinued Operations</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In 2005, the Company, as part of its restructuring plan, decided to sell the assets of Ovonic Battery's metal hydride materials manufacturing business. At June 30, 2005, the Company reclassified the current net book value of these fixed assets as assets held for sale and ceased depreciating these assets. In December 2005, the Company sold Ovonic Battery's metal hydride materials manufacturing business to Great Western Technologies Inc. (&#147;GWTI&#148;) for installment payments totaling $906,000, with an initial payment of $453,000; a second payment of $271,800 to be made no later than December 12, 2006; and a third payment of $181,200 (discounted to $167,087) to be made no later than December 12, 2007. The Company recorded a gain on this sale of approximately $740,000 in the year ended June 30, 2006. In addition, GWTI assumed the lease obligations for two of Ovonic Battery's manufacturing plants.
Ovonic Battery is subleasing a portion of one of these facilities.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>For each of the three years ended June 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 Statement (&#147;SFAS&#148;) No. 144:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Revenues</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>54,788</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>217,602</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>48,634</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Costs and expenses</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(480,411</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,633,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,279,022</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Gain on disposition of discontinued operations</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>739,602</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income (loss) from discontinued operations<BR>&nbsp;&nbsp;&nbsp;&nbsp;before income taxes</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>313,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,416,272</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,230,388</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income taxes &#150; benefit</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>23,642</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss) from discontinued operations</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>313,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,392,630</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,230,388</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Reclassifications</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Certain prior year amounts have been reclassified to conform with 2006 presentation.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Cash Equivalents</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Cash equivalents consist of investments in short-term, highly liquid securities maturing 90 days or less from the date of acquisition.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Short-Term Investments</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 short-term 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 </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>48</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>amortization and accretions 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 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 auction rate certificates, corporate bonds and notes, and certificates of deposit which mature 91 days or more from date of acquisition.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following schedule summarizes the unrealized gains and losses on the Company's short-term investments (in thousands):</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="75%" align=center border=0>
<TR vAlign=bottom>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Amortized </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Gross Unrealized</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Estimated</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Cost </FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>Gains</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>(Losses)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Fair Value</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2006</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Auction Rate Certificates</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>85,950</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>85,950</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Corporate Bonds</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>45,970</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>2</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>(15)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>45,957</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Corporate Notes</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>64,676</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>4</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>(8)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>64,672</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Certificates of Deposit</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>42,945</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>1</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>(20)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>42,926</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,541</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>7</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>(43)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,505</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2005</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Corporate Notes</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="40%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="7%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following schedule summarizes the contractual maturities of the Company&#146;s short-term investments (in thousands):</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Amortized<BR>Cost</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Market<BR>Value</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Amortized<BR>Cost</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Market<BR>Value</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Due in less than one year</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>115,591</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>115,566</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Due after one year through five years</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>38,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>37,989</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Due after five years</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>85,950</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>85,950</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,541</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,505</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>11,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="40%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Capitalized Interest</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Interest on capitalized lease obligations is capitalized during active construction periods of equipment. During the year ended June 30, 2006, the Company incurred total interest costs of $903,000, of which $706,000 was capitalized as part of the new solar cell manufacturing equipment currently under construction.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>49</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P49 -->
<!-- BEG-P50 -->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Impairment</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Upon the identification of an event indicating potential impairment, the Company compares the carrying value of its long-lived assets with the estimated undiscounted cash flows or fair value associated with these assets. If the carrying value of the long-lived assets is more than the estimated undiscounted cash flows or fair value, then an impairment loss is recorded.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Financial Instruments</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Due to the short-term maturities of cash, cash equivalents, short-term investments, accounts receivable and accounts payable, the Company believes that the carrying value of its financial instruments is a reasonable estimate of fair value.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Accounts Receivable</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company maintains an allowance for uncollectible accounts considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, the customer&#146;s current ability to pay its obligation, and the condition of the general economy and industry as a whole.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Property, Plant, and Equipment</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>All properties are recorded at cost. Plant and equipment are depreciated on the straight-line method over the estimated useful lives of the individual assets. The estimated lives of the principal classes of assets are as follows:</FONT></P>

<DIV align=center>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="60%" align=center border=0>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=454>
<P style="MARGIN-TOP: 1pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: black 1pt solid" vAlign=top width=175>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>Years</FONT></P>
</TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=454>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Buildings and improvements*</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=175>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27pt; TEXT-ALIGN: left"><FONT size=2>5 to 20</FONT></P>
</TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=454>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Machinery and other equipment</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=175>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27pt; TEXT-ALIGN: left"><FONT size=2>3 to 12.5</FONT></P>
</TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=454>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Assets under capitalized leases</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=175>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; TEXT-ALIGN: left"><FONT size=2>3 to 20</FONT></P>
</TD></TR>
</TABLE>


<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="60%" align=center border=0>
<TR vAlign=top>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="2%"><FONT size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="20%"><FONT size=1>&nbsp;</FONT></TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="80%"><FONT size=1>&nbsp;</FONT> </TD></TR>
<TR vAlign=top>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 10pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="2%"><FONT size=1>*<BR><BR><BR></FONT></TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="80%" colSpan=2><FONT size=1>Includes leasehold improvements which are amortized over the shorter of the balance of the lease term or the life of the improvement, ranging from one to 20 years.</FONT> </TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=1>&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><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=108>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=16>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2></FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Costs of machinery and other equipment acquired or constructed for a particular product development project, which have no alternative future use (in other product development projects or otherwise), are charged to product development and research costs as incurred.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Assets under capitalized leases are amortized over the shorter of the term of the lease or the life of the equipment or facility, usually three to 20 years. Accumulated amortization on assets under capitalized leases as of June 30, 2006 and June 30, 2005 was $3,616,000 and $2,778,000, respectively.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>50</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Expenditures for maintenance and repairs are charged to operations. Expenditures for betterments or major renewals are capitalized and are depreciated over their estimated useful lives.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Warranty Reserve</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>A warranty reserve 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Product Development, Patents and Technology</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product development and research costs are expensed as they are incurred and, as such, the Company&#146;s investments in its technologies and patents are recorded at zero in its financial statements, regardless of their values. The technology investments are the bases by which the Company is able to enter into strategic alliances, joint ventures and license agreements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Product Sales</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Product sales include revenues related to photovoltaic products, machine-building and equipment sales and nickel hydroxide. Revenues related to most machine-building and equipment sales contracts and sales related to other long-term 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. Generally, this is upon shipment from the factory as most products are shipped FOB shipping point. Some shipments to foreign customers have been made under Delivered Duty Prepaid terms where the customer takes delivery at the point of destination. All intersegment sales are eliminated in consolidation.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Royalties</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Most license agreements provide for the Company to receive royalties from the sale of products which utilize the licensed technology. Typically, the royalties are incremental to and distinct from the license fee and are recognized as revenue upon the sale of the respective licensed product. In several instances, the Company has received cash payments for nonrefundable advance royalty payments which are creditable against future royalties under the licenses. 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.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Business Agreements</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Revenues are also derived through business agreements for the development and/or commercialization of products based upon the Company's proprietary technologies. The Company has two major types of business agreements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>51</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The first type of business agreement relates to licensing the Company's proprietary technology. Licensing activities are tailored to provide each licensee with the right to use the Company's technology, most of which is patented, for a specific product application or, in some instances, for further exploration of new product applications of such technologies. The terms of such licenses, accordingly, are tailored to address a number of circumstances relating to the use of such technology which have been negotiated between the Company and the licensee. Such terms generally address whether the license will be exclusive or nonexclusive, whether the licensee is limited to very narrowly defined applications or to broader-based product manufacture or sale of products using such technologies, whether the license will provide royalties for products sold which employ such licensed technology and how such
royalties will be measured, as well as other factors specific to each negotiated arrangement. In some cases, licenses relate directly to product development that the Company has undertaken pursuant to product development agreements; in other cases, they relate to product development and commercialization efforts of the licensee; and other agreements combine the efforts of the Company with those of the licensee.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>License agreement fees are generally recognized as revenue at the time the agreements are consummated, which is the completion of the earnings process. Typically, such fees are nonrefundable, do not obligate the Company to incur any future costs or require future performance by the Company, and are not related to future production or earnings of the licensee. In some instances, a portion of such license fees is contingent upon the commencement of production or other uncertainties. In these cases, license fee revenues are not recognized until commencement of production or the resolution of uncertainties. Generally, there are no current or future direct costs associated with license fees.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In the second type of agreement, product development agreements, the Company conducts specified product development projects related to one of its principal technology specializations for an agreed-upon fee. Some of these projects have stipulated performance criteria and deliverables whereas others require "best efforts" with no specified performance criteria. Revenues from product development agreements that contain specific performance criteria are recognized on a percentage-of-completion basis which matches the contract revenues to the costs incurred on a project based on the relationship of costs incurred to estimated total project costs. Revenues from product development agreements, where there are no specific performance terms, are recognized in amounts equal to the amounts expended on the programs. Generally, the agreed-upon fees for product development agreements contemplate reimbursing the
Company, after its agreed-upon cost share, if any, for costs considered associated with project activities including expenses for direct product development and research, patents, operating, general and administrative expenses and depreciation. Accordingly, expenses related to product development agreements are recorded as cost of revenues from product development agreements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Deferred Revenues</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Deferred revenues represent amounts received under business agreements in excess of amounts recognized as revenues. At June 30, 2005, approximately $759,000 in deferred revenues related to the Rare Earth High-Tech of Inner Mongolia, China (&#147;Rare Earth Ovonic&#148;) </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>52</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>contracts with the joint ventures, which represents the excess of payments made by Rare Earth Ovonic in excess of revenues recognized on these contracts. At June 30, 2006, all work was complete on these contracts and all revenues under these contracts were recognized.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Overhead and Operating, General and Administrative Allocations</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company allocates overhead and 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.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following is a summary of the gross operating, general and administrative expenses and the aforementioned allocations (in thousands):</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="51%"><FONT face="Times New Roman, Times, Serif" size=2>Gross Expenses</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>31,169</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>28,161</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>28,903</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Less - allocations to product development and research</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(14,539</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(10,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(8,315</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- allocations to cost of revenues from product development agreements</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,321</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,363</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,117</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Remaining Expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,309</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,558</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>14,471</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Other Operating Revenues</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Other operating revenues consist principally of revenues related to services provided to certain related parties and third-party service revenue realized by certain of the Company&#146;s service departments, including the Production Technology and Machine Building Division and Central Analytical Laboratory. Revenues related to services are recognized upon completion of performance of the applicable service.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Other Nonoperating Income</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Other nonoperating income consists of gains and losses on sales of property, plant and equipment, amortization of deferred gains, rental income, and other miscellaneous income.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Stock-Based Compensation</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, ECD had established a number of stock option plans as discussed in Note J. Prior to fiscal 2006, ECD 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 its stock option plans. Under </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>53</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>the intrinsic value method, no compensation expense was recognized if the exercise price of 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 operations prior to fiscal year 2006 on stock options granted to employees, since all options granted under ECD'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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Effective July 1, 2005, ECD 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 grant. 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 grants, expense is also recognized to reflect the remaining service period of grants that had been included in pro-forma disclosures in prior periods.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In February 2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued FASB Staff Position (&#147;FSP&#148;) No. FAS 123(R)-4, &#147;Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event.&#148; This FSP addresses the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The guidance in this FSP is applied upon initial adoption of Statement 123(R). An entity that adopted Statement 123(R) prior to the issuance of this FSP shall apply the guidance in this FSP in the first reporting period beginning after the date the FSP is posted to the FASB website. If in applying Statement 123(R) an entity treated options or similar instruments that allow for cash settlement upon the occurrence of a contingent event in a manner consistent with the guidance in this FSP, then that entity would not be required to retrospectively apply the guidance in this FSP to prior periods. However, if in applying Statement 123(R) an entity treated options or similar instruments that allow for cash settlement upon the occurrence of a contingent event in a manner inconsistent with the guidance in this FSP, then that entity would be required to retrospectively apply the guidance in this FSP to prior
periods. Early application of this guidance is permitted in periods for which financial statements have not yet been issued. The Company&#146;s adoption of this FSP did not have a material effect on the Company&#146;s financial position or results of operations.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD records the fair value of stock-based compensation grants as an expense. In order to determine the fair value of stock options on the date of grant, ECD 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.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>54</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD 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. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>With regard to the weighted-average option life assumption, ECD 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. Forfeiture rates are based on the Company&#146;s historical data for stock option forfeitures.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In October 2005, the FASB issued 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 a grant 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 a grant to an individual employee is presumed to exist upon the grant's approval in accordance with the relevant corporate governance requirements, provided that the key terms and conditions of a grant (a) cannot be negotiated by the recipient with the employer because the grant 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. ECD has applied the principles set forth in this FSP upon its adoption of SFAS No.
123(R).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Prior to the adoption of SFAS No. 123(R), ECD applied APB 25 to its stock-based compensation awards to employees. Had compensation costs for ECD&#146;s stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No.123(R), the Company&#146;s net income (loss) and net income (loss) per share for the years ended June 30, 2005 and 2004 would have changed as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="67%"><FONT face="Times New Roman, Times, Serif" size=2>Income (loss) from continuing operations before income taxes</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income (loss) from continuing operations</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,535,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,004,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic and diluted income (loss) per common share</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.13</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The weighted average&nbsp;fair value of the options granted during 2006, 2005 and 2004 is estimated as $1,088,000, $3,315,000 and $276,000, respectively, on the date of grant using the Black-Scholes option-pricing model with the following assumptions:</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>55</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="63%" align=center border=0>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=222>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 17.25pt; TEXT-ALIGN: left"><U><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 17.25pt; TEXT-ALIGN: left"><U><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 17.25pt; TEXT-ALIGN: left"><U><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2004&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=222>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Dividend Yield </FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0.5in; TEXT-ALIGN: left"><FONT size=2>0%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0.5in; TEXT-ALIGN: left"><FONT size=2>0%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0.5in; TEXT-ALIGN: left"><FONT size=2>0%</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=222>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Volatility %</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 14.25pt; TEXT-ALIGN: left"><FONT size=2>68.37%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 14.25pt; TEXT-ALIGN: left"><FONT size=2>62.29%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 14.25pt; TEXT-ALIGN: left"><FONT size=2>64.83%</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=222>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Risk Free Interest Rate</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 20.25pt; TEXT-ALIGN: left"><FONT size=2>4.99%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 20.25pt; TEXT-ALIGN: left"><FONT size=2>3.55%</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 20.25pt; TEXT-ALIGN: left"><FONT size=2>2.50%</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=222>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Expected Life</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>6.63 years</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>5.76 years</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width=93>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>5.11 years</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Basic and Diluted Net Income (Loss) Per Share</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 years ended June 30 are computed as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="58%"><FONT face="Times New Roman, Times, Serif" size=2>Weighted average number of shares outstanding:</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&#151;&nbsp; for basic net income (loss) per share</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>32,495,709</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>27,465,767</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23,920,337</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&#151;&nbsp; for diluted net income (loss) per share</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>32,495,709</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>29,661,847</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23,920,337</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss) from continuing operations before income taxes and extraordinary item</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,910,246</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>50,287,216</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(49,191,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Income taxes</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>825,414</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss) from continuing operations before extraordinary item</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,910,246</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>49,461,802</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(49,191,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Discontinued operations, net of tax benefit of $23,642 in 2005</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>313,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,392,630</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,230,388</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Extraordinary item, net of tax of $38,416</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,262,910</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net income (loss)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,596,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>50,332,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(51,421,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1.80</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1.83</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.15</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Diluted net income (loss) per share</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1.67</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Discontinued operations</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1.70</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2.15</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>56</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE A &#151;&nbsp;Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center></DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Due to the Company&#146;s net losses, the 2006 and 2004 weighted average shares of potential dilutive securities of 2,092,283 and 80,713, respectively, were excluded from the calculations of diluted loss per share, as inclusion of these securities would have been antidilutive to the net loss per share. Because of the relationship between the exercise price and the average market price of ECD&#146;s Common Stock, additional securities of 537 were excluded from the 2006 calculations of the weighted average shares of potential dilutive securities. Additionally, securities of 510,501 and 4,069,454, respectively, were excluded from the 2005 and 2004 calculations, as these securities would have been antidilutive regardless of the Company&#146;s net income or loss. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Use of Estimates</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (&#147;U.S. GAAP&#148;) 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Recent Pronouncements</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In February 2006, the FASB issued SFAS No. 155, &#147;Accounting for Certain Hybrid Instruments.&#148; This statement allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity&#146;s first fiscal year that begins after September 15, 2006. The Company is in the process of reviewing this statement for the future effect on the Company&#146;s consolidated financial position and results of operations.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In June 2006, the FASB issued FASB Interpretation No. 48 (&#147;FIN 48&#148;), &#147;Accounting for Uncertainty in Income Taxes,&#148; &#150; an interpretation of FASB Statement No. 109, &#147;Accounting for Income Taxes&#148; &#150; which clarifies the accounting for uncertainty in income taxes. FIN 48 prescribes a recognition threshold and measurement attributed for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. The interpretation requires that the Company recognize in the financial statements the impact of a tax position; if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006 with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on&nbsp;its financial statements. </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>57</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE B &#151;&nbsp;Accounts Receivable</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Accounts Receivable consist of the following:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30,<BR>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30,<BR>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="55%"><FONT face="Times New Roman, Times, Serif" size=2>Billed</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,244,261</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,307,881</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Related parties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>228,310</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>326,933</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,038,267</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,073,548</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23,510,838</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>15,708,362</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Unbilled</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>145,532</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>144,168</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Related parties</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>91,749</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>92,929</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,827,996</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,999,016</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,065,277</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,236,113</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Less allowance for uncollectible accounts</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(691,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(412,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>27,885,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>19,532,475</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE C &#151;&nbsp;Inventories</FONT></U></P>



<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Inventories (substantially all for United Solar Ovonic) are as follows:</FONT></P>
</DIV>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="60%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30,<BR>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30,<BR>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="45%"><FONT face="Times New Roman, Times, Serif" size=2>Finished products</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>2,034,485</FONT></TD>
<TD align=left width="6%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>5,104,043</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Work in process</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,607,559</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,150,529</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Raw materials</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,884,751</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>9,812,304</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>21,526,795</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>18,066,876</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The above amounts include an allowance for obsolescence of $1,164,000 and $419,000 as of June 30, 2006 and 2005, respectively.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>58</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE D &#151;&nbsp;Joint Ventures and Investments</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Joint Ventures</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>Cobasys</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 inception of the joint venture in July 2001. In consideration of the expanded licenses, ECD received an option to purchase the 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In July 2004, ECD and Cobasys entered into a settlement agreement with Matsushita Electric Industrial Co. (&#147;MEI&#148;), Panasonic EV Energy Co., Ltd. (&#147;PEVE&#148;), and Toyota Motor Corporation with respect to patent infringement disputes and counterclaims involving nickel metal hydride (&#147;NiMH&#148;) 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As part of the settlement, ECD and its subsidiary, Ovonic Battery, received a $10,000,000 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 $952,000 as revenues from license and other agreements in each of the years ended June 30, 2006 and 2005 in connection with the amortization of this fee. In addition, Cobasys received a $20,000,000 license fee from MEI, PEVE and Toyota. Upon receipt of the license fee, Cobasys made an $8,000,000 distribution each to Ovonic Battery and Chevron representing a partial reimbursement of legal expenses. The Company recorded this $8,000,000 as a distribution from joint venture in the year ended June 30, 2005.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company recorded revenues from Cobasys of $1,047,000, $2,033,000 and $5,696,000 for the years ended June 30, 2006, 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-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>59</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE D &#151;&nbsp;Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>COBASYS LLC AND SUBSIDIARY</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>(A Development Stage Enterprise)</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>STATEMENTS OF OPERATIONS</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><U><FONT size=2>(Unaudited)</FONT></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="54%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="30%"><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD align=left width="15%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="54%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="12%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="15%" colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>July 17, 2001<BR>(date of inception)<BR>to June 30,2006</FONT></TD></TR>
</TABLE>


<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="54%"><FONT face="Times New Roman, Times, Serif" size=2>Revenue</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product and prototype revenues</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,641,695</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,170,140</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,558,087</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Contract research revenue</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>887,793</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>770,941</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,602,257</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Licensing, royalty and other revenues</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,323,048</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,939,468</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,262,516</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenue</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,852,536</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,880,549</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>16,422,860</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Expenses</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cost of product and prototype revenues</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,981,630</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,006,484</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>34,981,914</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Research and development costs</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>20,494,177</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19,514,620</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>103,488,416</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Sales, marketing, and general and administrative costs</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,743,172</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,070,438</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39,846,118</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,693,766</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,206,142</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>12,977,029</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Loss on asset and cost-basis impairment and disposal</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>526,628</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,195,786</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,335,815</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Interest expense</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,735,657</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>164,061</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,899,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>50,175,030</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>45,157,531</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>204,529,010</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net Loss</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(45,322,494</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(41,276,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Deficit accumulated during the development stage</FONT></TD>
<TD align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(188,106,150</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>60</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P60 -->
<!-- BEG-P61 -->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE D &#151;&nbsp;Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>COBASYS LLC AND SUBSIDIARY</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT size=2>(A Development Stage Enterprise)</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><U><FONT size=2>BALANCE SHEET</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><U><FONT size=2>(Unaudited)</FONT></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2006</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="63%"><FONT face="Times New Roman, Times, Serif" size=2>Assets</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="11%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Current Assets:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>517,205</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts and note receivable (net of allowance of $2,750 as of June 30, 2006)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,862,241</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Inventories, net</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,206,389</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Prepaid expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>453,546</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Assets</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,039,381</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Net Property, Plant and Equipment</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>42,782,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Cash surrender value of life insurance and other assets</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>748,508</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>54,570,868</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Liabilities and Members&#146; Interest</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Current Liabilities:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,025,145</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Deferred revenues &#150; current portion</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,936,762</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Current Liabilities</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,961,907</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Deferred revenue - noncurrent</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,423,014</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Redeemable preferred interest - related party</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>71,623,539</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Other noncurrent liabilities</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,668,558</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>98,677,018</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Members&#146; Interest (deficit)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(44,106,150</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liabilities and Members&#146; Interest</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>54,570,868</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2></FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>61</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE D &#151;&nbsp;Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Ovonyx</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, ECD owns 39.5% of Ovonyx, Mr. Tyler Lowrey and his colleague own 39.5%, and Intel Capital and other investors own the remainder of the shares outstanding. ECD is entitled to receive 0.5% of Ovonyx annual gross revenues.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In October 2002, ECD 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. ECD is required to make annual minimum royalty payments in order to maintain its exclusive license. ECD made a $100,000 minimum royalty payment in December 2004 and a $150,000 payment in December 2005. In addition to its technology contribution, ECD has made a total cash investment of $1,300,000 in Ovonyx and accounts for this investment on the equity method and has recognized its proportionate share of Ovonyx losses to the extent of its $1,300,000 investment. In the years ended June 30, 2006, 2005 and 2004, ECD recorded an equity loss of $150,000, $100,000 and $644,000, respectively, related to its investment in Ovonyx. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: left"><FONT size=2>ECD recorded revenues from Ovonyx of $493,000, $272,000 and $186,000, respectively, for the years ended June 30, 2006, 2005 and 2004 representing a portion of the services provided to this joint venture.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>Ovonic Hydrogen Systems</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In October 2000, ECD and ChevronTexaco (now Chevron) formed Texaco Ovonic Hydrogen Systems. In December 2004, Chevron transferred to ECD its interest in Texaco Ovonic Hydrogen Systems (renamed Ovonic Hydrogen Systems LLC by ECD). In accordance with purchase accounting (SFAS 141), we wrote down the assets and liabilities of Ovonic Hydrogen Systems to zero at December 2, 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. The Company has recognized this as an extraordinary item (gain) in the year ended June 30, 2005. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Since December 2, 2004, Ovonic Hydrogen Systems has been wholly owned by ECD and is included in the Company's consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>For the years ended June 30, 2005 and 2004, the Company recorded revenues of $4,089,000 and $10,063,000, respectively, for services provided to this joint venture, primarily for market development and advanced product development work.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>Investments in Rare Earth Ovonic</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>During the year ended June 30, 2000, ECD and Ovonic Battery formed three joint ventures for the manufacturing and licensing of advanced NiMH battery technology, alloy powders and certain battery applications. All of these joint ventures are being accounted for using the cost method of accounting.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>62</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE D &#151;&nbsp;Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 June 30, 2006, 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 reduced its estimated margin from 12% to 8%. This resulted in a reduction in the cumulative revenue recognized for these contracts at June 30, 2005 of approximately $2,668,000. At June 30, 2006, these contracts are complete and the Company has recognized all revenues under these contracts.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company recorded revenues from Rare Earth Ovonic of $759,000, ($595,000) and $4,410,000 for the years ended June 30, 2006, 2005 and 2004, respectively.</FONT></P>

<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE E &#151;&nbsp;Liabilities</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Warranty Liability</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 years ended June 30, 2006, 2005 and 2004:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="47%"><FONT face="Times New Roman, Times, Serif" size=2>Liability at beginning of the period</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>1,635,532</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>1,945,934</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>2,990,661</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Amounts accrued for as warranty costs</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>382,980</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(105,737</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)*</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(721,312</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)*</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Warranty claims</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(183,376</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(204,665</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>(323,415</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Liability at end of period</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,835,136</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,635,532</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,945,934</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><U><FONT 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;</FONT></U><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=18>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>*</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>During the years ended June 30, 2005 and 2004, the Company revised its warranty liability, based upon its recent experience, and recorded a reduction in this liability.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Government Contracts, Reserves and Liabilities</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 (&#147;DCAA&#148;). 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 questioned the allowability of and the allocability of certain costs as well as the </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>63</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P63 -->
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE E &#151;&nbsp;Liabilities (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Company&#146;s methodology for allocating independent research and development to its indirect cost pools. In August 2005, the Company was requested to provide additional information to the Department of Energy (&#147;DOE&#148;) in support of the allowability of these items in dispute with DCAA. In December 2005, the Company provided the requested information to DOE. In June 2006, the Company received a final determination letter from DOE on some of these matters. In some matters DOE agreed with the Company&#146;s position and in some matters DOE agreed with the DCAA position. Based on their determination, in June 2006, the Company reduced its reserve by $573,000. The Company has a reserve of $2,343,000 and $2,294,000 at June 30, 2006 and 2005, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In connection with a 1992 battery development contract with the United States Advanced Battery Consortium (&#147;USABC&#148;), partially funded by the DOE, the Company has agreed to reimburse USABC and DOE for payments to the Company under the 1992 contract. The agreed reimbursement includes a 15% share of royalty payments the Company receives through May 3, 2012 where Ovonic NiMH batteries serve as the primary source of power for electric vehicles. The Company has accrued as an expense 15% of such royalty payments.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In June 2006, the Company reviewed this agreement and its estimate in connection with this obligation and reduced its&nbsp;liability by approximately $491,000. The Company has a liability for this item of $2,000 and $344,000 at June 30, 2006 and 2005, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Long-Term Liabilities</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>A summary of the Company's long-term liabilities is as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="60%"><FONT face="Times New Roman, Times, Serif" size=2>Capital leases</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>24,727,722</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>8,964,481</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Long-term retirement</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,280,692</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,384,948</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Other</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>227,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>223,353</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26,236,396</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,572,782</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Less amounts included in current liabilities</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>642,308</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>369,010</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Long-Term Liabilities</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>25,594,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>10,203,772</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Capital Leases</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company has two principal capital leases, both for United Solar Ovonic facilities. One lease, entered into in April 2001 is for 15 years with two renewal terms of five years each subject to certain provisions. This lease, which is for United Solar Ovonic&#146;s main manufacturing and office facility, was recorded in 2001 as a capitalized lease asset and a capital lease liability in the amount of $10,000,000, representing the net present value of all lease payments. The other lease, entered into in June 2005, is for 10 years with an option for an additional 10 years. This </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>64</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

<!-- END-P64 -->
<!-- BEG-P65 -->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE E &#151;&nbsp;Liabilities (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>lease, which is for United Solar Ovonic&#146;s second manufacturing facility, was recorded in 2006 as a capitalized lease asset and a capital lease liability in the amount of $15,900,000, representing the fair market value of this facility. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Operating Leases</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company has operating lease agreements, principally for office and research facilities and equipment. These leases, in some instances, include renewal provisions at the option of the Company. Rent expense under such lease agreements for the years ended June 30, 2006, 2005 and 2004 was approximately $2,658,000, $2,668,000 and $2,843,000, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Long-Term Retirement</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company has retirement plans for certain executives that provide for benefits after retirement. The Company recorded retirement expense of $235,000, $264,000 and $307,000 in the years ended June 30, 2006, 2005 and 2004, respectively. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD and its subsidiaries are participating in qualified 401(k) plans that are available to all employees. ECD and Ovonic Battery matched participants&#146; contributions at a rate of 100% of the first 2% of the participant&#146;s compensation plus 50% of the next 4% of compensation for the parent company. United Solar Ovonic matched 50% of the first 8% of the participant&#146;s compensation. Amounts charged against income for the 401(k) plan, representing the Company&#146;s matching contributions, were $1,094,000, $1,031,000 and $1,117,000 for the years ended June 30, 2006, 2005 and 2004, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Future Minimum Payments</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Future minimum payments on other long-term liabilities, obligations under capital leases and noncancellable operating leases expiring in each of the five years subsequent to June 30, 2006 are as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Other Long-Term Liabilities</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Capital Leases</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Operating Leases</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="40%"><FONT face="Times New Roman, Times, Serif" size=2>2007</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>(21,802</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>2,736,302</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="12%"><FONT face="Times New Roman, Times, Serif" size=2>2,196,389</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2008</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,626</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,114,422</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,022,943</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2009</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>27,251</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,081,894</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,043,711</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2010</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>43,062</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,018,212</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,728,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2011</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>38,170</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,090,623</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>943,157</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Thereafter</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,412,367</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>34,862,082</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>626,640</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,508,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>49,903,535</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>9,561,697</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Less interest included above</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>25,175,813</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Present value of minimum payments</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,508,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>24,727,722</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>65</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE F &#151;&nbsp;Line of Credit</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.54in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, we have a line of credit with LaSalle Bank Midwest N.A. in the amount of $4,000,000. This line of credit provides a mechanism for obtaining letters of credit and entering into foreign exchange transactions. The line of credit, which expires on August 31, 2007, is secured by a security interest in certain of our inventory and receivables and contains certain covenants, including a minimum $20,000,000 liquidity covenant. At June 30, 2006, we had outstanding letters of credit of $2,161,000 against the line of credit.</FONT></P>

<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>NOTE G &#151;&nbsp;Commitments</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 30MW solar manufacturing equipment being installed in Auburn Hills, Michigan. The Company's total obligations under purchase commitments at June 30, 2006, were $42,210,000 ($41,867,000 of which was due within one year and $343,000 thereafter).</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>66</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>NOTE H &#151;&nbsp;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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.</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=429 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=48>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=381>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>A summary of all of the Company&#146;s revenues follows:</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="61%"><FONT face="Times New Roman, Times, Serif" size=2>Product sales</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>81,732,393</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>50,777,272</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>27,586,197</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Machine building and equipment sales</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>842,921</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(595,487</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,489,728</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nickel hydroxide</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,855,350</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,762,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,729,862</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>84,430,664</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>51,943,873</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>33,805,787</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Product sales &#150; related parties</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nickel hydroxide</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,422</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,422</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Total product sales</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>84,430,664</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>51,943,873</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>33,808,209</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Royalties</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology:</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transportation</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,218,157</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,679,585</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>393,453</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,151,930</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,801,289</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,509,394</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,370,087</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,480,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,902,847</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optical memory</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>866,117</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>837,112</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>616,824</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ovonic Unified Memory</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>9,550</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>14,017</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,108</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Total royalties</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,245,754</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>5,332,003</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,521,779</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Revenues from product development agreements</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,250,951</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,716,805</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,501,264</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>41,878</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(20,602</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,426,325</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Optical memory</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>527,234</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,035,461</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>403,932</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solid hydrogen storage systems</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>774,366</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>428,398</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>737,538</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organic electroluminescent devices (OLEDs)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,399,290</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,406,272</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>478,589</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fuel cell technology</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>269,999</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>9,263,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,566,334</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>13,547,648</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Revenues from product development</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;agreements - related parties</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>781,867</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,997,252</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,610,242</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solid hydrogen storage systems</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,088,924</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>10,062,862</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>781,867</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>6,086,176</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>15,673,104</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Total revenues from product development agreements</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>10,045,585</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>17,652,510</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>29,220,752</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>License and other agreements</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery technology</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,322,365</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>80,784,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>125,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>


<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>67</FONT></P>


<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE H &#151;&nbsp;Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>At June 30, 2006 and 2005, the Company deferred recognition of revenue in the amount of $245,660 and $1,151,679, respectively, relating to nonrefundable advance royalty payments.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Creditable royalties earned and recognized as revenue in 2006, 2005 and 2004 were $904,000, $1,811,000 and $448,000, respectively, related to advance royalty payments received by the Company in prior years associated with license agreements under which the licensees no longer have a contractual obligation to make payments.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Fiscal year 2006 included license fees of $952,000 resulting from the amortization over 10.5 years of the $10,000,000 payment received in the MEI settlement (see Note D). There were also new license agreements in 2006 with Intellect Battery Co. Ltd., Zhejiang Kan Battery Co., Ltd., Hunan Corun Hi-Tech Co., Ltd., L&amp;K Battery Technology Co., Ltd., as well as BYD Company Limited.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Fiscal year 2005 included license fees resulting from the recognition of revenue of $79,532,000 as a one-time, noncash license fee and $952,000 resulted from the amortization over 10.5 years of the $10,000,000 payment received in the MEI settlement (see Note D). The Company also received $300,000 in new license fees with respect to the award of patent license agreements with several Chinese companies related to its consumer NiMH batteries.</FONT></P>

<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE I &#151;&nbsp;Capital Stock</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Prior to September 30, 2005, ECD had three classes of stock as follows:</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=485 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; PADDING-TOP: 6pt" vAlign=top noWrap width=96>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; PADDING-TOP: 6pt" vAlign=top noWrap width=389>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Class A Convertible Common Stock - 25 votes per share</FONT></P>
</TD></TR>
<TR>
<TD vAlign=top noWrap width=96>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD vAlign=top noWrap width=391>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Class B Convertible Common Stock - one vote per share</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 1pt" vAlign=top noWrap width=96>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=257>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Common Stock - one vote per share</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>On September 30, 2005, in accordance with the applicable agreement, 100% of the convertible stock (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-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As part of an employment agreement among ECD, Ovonic Battery and Mr. Stanford R. Ovshinsky, President and Chief Scientist and Technologist of ECD, ECD granted Mr. Ovshinsky the right to vote the shares of Ovonic Battery held by ECD following a change in control of ECD. For purposes of this agreement, change in control means (i) any sale, lease, exchange or other transfer of all or substantially all of ECD's assets, (ii) the approval by ECD stockholders of any plan or proposal of liquidation or dissolution of ECD, (iii) the consummation of any consolidation or merger of ECD in which ECD is not the surviving or continuing corporation, (iv) the acquisition by any person of 30% or more of the combined voting power of the then-outstanding securities having the right to vote for the election of directors, (v) changes in the constitution of the majority of the Board of Directors, (vi) the holders of the Class
A Common Stock ceasing to be entitled to exercise their preferential voting rights other than as provided in ECD's charter and (vii) bankruptcy. The agreements are automatically renewable for successive one-year terms unless </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>68</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE I &#151;&nbsp;Capital Stock (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>terminated by Mr. Ovshinsky or ECD or Ovonic Battery by giving notice of termination 120 days in advance of renewal date.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky was granted stock options to purchase 186 shares of Ovonic Battery&#146;s common stock, exercisable at a price of $16,129 per share, representing approximately 6% of Ovonic Battery&#146;s outstanding common stock.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In March 2006, ECD sold 8,050,000 shares of common stock in connection with a public offering, including an over-allotment option exercised by the underwriters, and received net proceeds of approximately $360,854,000. Of the 8,050,000 shares, 383,072 shares were sold by certain officers and directors for which ECD did not receive any proceeds other than the aggregate option exercise price of approximately $4,668,000. Following the completion of the offering, each of the directors and officers continue to own shares equal to or greater than the number of shares owned prior to the public offering.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In February 2005, ECD completed an $82,106,212 (net of expenses) private placement of its Common Stock. ECD sold 5,090,000 shares of Common Stock at a price of $17.25 per share to institutional investors. On May 16, 2005, ECD used $19,913,680 of the net proceeds to exercise its option to purchase for $4.55 per share the 4,376,633 shares of ECD's Common Stock held by Chevron.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In&nbsp;2005, ECD received $27,443,000 from the exercise of warrants. In 2006, ECD received $22,296,000 from the exercise of warrants.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>During the years ended June 30, 2006, 2005 and 2004, ECD issued 1,440, 1,876, and 2,140 shares of restricted Common Stock, respectively, as compensation to directors. ECD recorded compensation expense, based upon fair market value of these shares at the date of issuance, for the years ended June 30, 2006, 2005 and 2004 of approximately $60,000, $35,000 and $20,000, respectively, relating to these restricted shares of Common Stock.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>69</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE J &#151;&nbsp;Stock Option Plans, Warrants and Other Rights to Purchase Stock</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD has Common Stock reserved for issuance as follows:</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="70%" border=0>
<TR vAlign=bottom>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>Number of Shares</FONT></TD></TR>
<TR>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2005</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="55%"><FONT face="Times New Roman, Times, Serif" size=2>Conversion of Class A Convertible Common Stock</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>219,913</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Conversion of Class B Convertible Common Stock</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="12%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>430,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Stock options</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,239,559</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,410,476</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Warrants</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>400,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,790,892</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Convertible Investment Certificates</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>5,210</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>5,210</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.05in">
<TD><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL RESERVED SHARES</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>3,644,769</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>6,856,491</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<DIV align=center></DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>ECD has two shareholder-approved plans: the 1995 Non-Qualified Stock Option Plan (the &#147;1995 Plan&#148;) pursuant to which 2,000,000 shares were reserved for grant and the 2000 Non-Qualified Stock Option Plan (the &#147;2000 Plan&#148;) 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 exercise period for stock options generally may not exceed 10 years from the date of grant. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Under the terms of the 1995 Plan, 40% of the option becomes exercisable six months after grant date, with an additional 30% becoming exercisable at the commencement of 18 and 30 months following the grant date. The 1995 Plan expired on January 26, 2005 and no additional grants will be made under this Plan.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Under the terms of the 2000 Plan, 40% of the option becomes exercisable one year after grant date, with an additional 20% becoming exercisable after each of the second, third and fourth anniversaries of the grant date. No additional option shall be granted after October 25, 2010 under this Plan.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 fiscal 2006 was $1,719,000, increasing both basic and diluted loss $.05 per share. As of June 30, 2006, the total unrecognized compensation cost related to nonvested stock grants was $1,895,334 and the related weighted-average period over which it is expected to be recognized is approximately 1.6 years.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In September 1993, ECD&#146;s Compensation Committee authorized ECD 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 ECD&#146;s Amended and Restated Stock Option Plan and to grant stock options to purchase 150,000 (391,294 as of June 30, 2006) and 100,000 (260,865 as of June 30, 2006) shares of Common Stock to Mr. and Dr. Ovshinsky, respectively, which were subsequently granted to them pursuant to Stock Option </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>70</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<BR>
<HR align=LEFT width="700" noShade SIZE=3>

<P style="PAGE-BREAK-BEFORE: always"></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE J &#151; Stock Option Plans, Warrants and Other Rights to Purchase Stock (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>agreements dated November 1993 (the &#147;Agreements&#148;). The weighted average exercise price of the outstanding stock options is $17.66 per share at June 30, 2006. A summary of the transactions during the fiscal years ended June 30, 2006, 2005 and 2004 with respect to the above Agreements follows:</FONT></P>
</DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="75%" border=0>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>Shares</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Exercise<BR>Price</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate<BR>Intrinsic<BR>Value<SUP>(1)</SUP><BR></FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding at July 1, 2003</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>659,749</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD align=center width="2%"><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;14.84</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3.5%"></TD>
<TD align=center width="1.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left width="6%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>110,652</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;10.12</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2004</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>770,401</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;14.17</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>(2)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(3)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>100,330</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;21.27</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD align=center width="5%" style="BORDER-BOTTOM: #000000 1px solid"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2005</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>870,731</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;14.99</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$ 6,439,038</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(3)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(218,572</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;7.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June&nbsp;30, 2006&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>652,159&nbsp;</FONT></TD>
<TD align=left></TD>
<TD align=center width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;17.66</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;$12,241,480</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(3)&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt" align=left width="40%" SIZE=2>
</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=613 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 113.4%; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=36>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=561>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>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>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=613 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 113.4%; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=36>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>(2)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 2pt" vAlign=top noWrap width=561>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>The weighted average exercise price exceeds the market value of the underlying stock.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=573 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 12pt; PADDING-TOP: 2pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 113.4%; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 12pt; PADDING-TOP: 2pt" vAlign=top noWrap width=36>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>(3)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 12pt; PADDING-TOP: 2pt" vAlign=top noWrap width=521>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 93.96%; TEXT-ALIGN: left"><FONT size=2>Twelve months after termination of employment other than voluntary termination.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; 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 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 2000 Stock Option Plan.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>71</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-71 -->
<!-- BEG-P72 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE J &#151; Stock Option Plans, Warrants and Other Rights to Purchase Stock (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Upon the death of Dr. Ovshinsky on August 16, 2006, and pursuant to the terms of the Agreements and our stock option plans, options owned by Dr. Ovshinsky were transferred to Mr. Ovshinsky. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>On January 15, 1999, ECD entered into a Stock Option Agreement (the &#147;Agreement&#148;) 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 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 Agreement and ending on the tenth anniversary of such date.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>At June 30, 2006, 2005 and 2004, there were 300,000 shares outstanding and exercisable with an exercise price of $10.688 per share. The option had an aggregate intrinsic value of $7,722,600, $3,507,600 and $171,600 at June 30, 2006, 2005 and 2004 with a weighted average remaining contractual life of 2.55 years, 3.55 years and 4.54 years, respectively.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>A summary of the transactions during the fiscal years 2006, 2005 and 2004 with respect to ECD's 1995 and 2000 Stock Option Plans follows:</FONT></P>
</DIV>
<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="75%" border=0>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>Shares</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Exercise<BR>Price</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate<BR>Intrinsic<BR>Value<SUP>(1)</SUP><BR></FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding at July 1, 2003</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>3,167,123</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD align=center width="2%"><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;16.97</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3.5%"></TD>
<TD align=center width="1.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left width="6%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>45,000</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;10.95</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(2,400</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;10.19</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(69,065</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;20.20</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(75,200</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;16.20</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2004</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>3,065,458</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;16.83</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;625,511</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>5.18</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>292,500</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;19.81</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(1,028,883</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;12,26</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(41,210</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;21.24</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(19,230</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;14.93</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2005</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>2,268,635</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;19.23</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;7,520,259</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>6.15</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>36,748</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;43.77</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(897,895</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;19.86</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expired</FONT></TD>
<TD align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(54,800</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;15.94</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>(3,425</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD width="3%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;12.62</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June&nbsp;30, 2006</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="5%"><FONT face="Times New Roman, Times, Serif" size=2>1,349,263</FONT></TD>
<TD align=left width="2%"></TD>
<TD align=center width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;19.63</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$22,935,128</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="1%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>6.10</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt" align=left width="40%" SIZE=2>

<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top width=31>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 116.64%; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top width=23>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>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>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>72</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-72 -->
<!-- BEG-P73 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE J &#151; Stock Option Plans, Warrants and Other Rights to Purchase Stock (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The table below sets forth stock options exercisable during the three years ended June 30, 2006, 2005 and 2004:</FONT></P>

<DIV>
<TABLE cellSpacing=0 cellPadding=0 width="75%" border=0>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="5%"><FONT face="Times New Roman, Times, Serif" size=2>Shares</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Exercise<BR>Price</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate<BR>Intrinsic<BR>Value<SUP>(1)</SUP></FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>Weighted-<BR>Average<BR>Contractual<BR>Life Remaining<BR>in Years</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Exercisable at June 30, 2004</FONT></TD>
<TD align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2>2,428,818</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center width="2%"><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;17.34</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3.5%"></TD>
<TD width="1.5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;&nbsp;&nbsp;300,041</FONT></TD>
<TD width="1%"></TD>
<TD align=left width="6%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>4.48</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Exercisable at June 30, 2005</FONT></TD>
<TD align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2>1,720,345</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;20.40</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;3,779,110</FONT></TD>
<TD width="1%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>5.34</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="22%"><FONT face="Times New Roman, Times, Serif" size=2>Exercisable at June&nbsp;30, 2006</FONT></TD>
<TD align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2>1,013,245</FONT></TD>
<TD align=left width="2%"></TD>
<TD align=center width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$&nbsp;&nbsp;19.86</FONT></TD>
<TD></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$16,789,349</FONT></TD>
<TD width="1%"></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>5.44</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt" align=left width="40%" SIZE=2>

<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top width=31>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 116.64%; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top width=23>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 2pt; PADDING-TOP: 3pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>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>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The weighted average fair value of stock options granted and the total intrinsic value of stock options exercised during the fiscal years ended June 30, 2006 and 2005 were as follows:</FONT></P>
</DIV>
<DIV align=center>


<DIV style="WIDTH: 500px">


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=CENTER WIDTH=65%>
<TR VALIGN=Bottom>
     <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=3 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended June 30,</FONT></TD>
     <TD ><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD ><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=2 ALIGN=CENTER NOWRAP STYLE="BORDER-BOTTOM: 1PX SOLID #000000"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>
     <TD COLSPAN=1 ALIGN=CENTER NOWRAP STYLE="BORDER-BOTTOM: 1PX SOLID #000000"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TD>
     <TD ><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=2 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=2 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>


<TR VALIGN=Bottom>
     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average fair value of options granted</FONT></TD>
     <TD WIDTH=3% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,088,024</FONT></TD>
     <TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,314,997</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=2 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD COLSPAN=2 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>

<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total intrinsic value of stock options exercised</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,857,237</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,956,840</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>

</div>



<BR></DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006 and at June 30, 2005, there were 430,000 nonvested shares of restricted stock pursuant to a Restricted Stock Agreement dated January 19, 1999, and amended as of September 22, 2005, between Mr. Stempel and ECD with a weighted average grant date fair value of approximately $4,595,840. The vesting schedule provides for quarterly vesting of 23,000 shares at the beginning of each quarter commencing July 1, 2006 through October 1, 2010 with 16,000 shares vesting on December 31, 2010.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Warrants</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>As of June 30, 2006, ECD had outstanding a warrant for the purchase of 400,000 shares of Common Stock granted pursuant to a Common Stock Warrant Agreement entered into in March 2000. This warrant is exercisable on or prior to March 10, 2010 at $22.93 per share.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In connection with the sale of units in fiscal year 2004, ECD issued warrants to purchase 3,266,254 shares of Common Stock to three institutional investors and a warrant to purchase 90,481 shares of Common Stock to the placement agent. Each warrant gave the holder the right to purchase a share of ECD Common Stock for $13.96, if exercised on or prior to May 2, 2005, and for $16.03, if exercised at any time thereafter but prior to October 31, 2006. As a result of the </FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>73</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-73 -->
<!-- BEG-74 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE J &#151; Stock Option Plans, Warrants and Other Rights to Purchase Stock (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>exercise of the warrants by the warrantholders, ECD received $22,296,000 in fiscal 2006 and $27,443,000 in fiscal 2005.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><U><FONT size=2>Other Rights to Purchase Stock</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Pursuant to the Stock Purchase Agreement between ECD and ChevronTexaco (now Chevron) dated as of May 1, 2000, ChevronTexaco purchased a 20% equity stake in ECD for $67.4 million. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>In consideration of an expanded license, revised joint venture agreements, and the grant to Chevron of a security interest in our membership interest in Cobasys, ECD, through its subsidiary Ovonic Battery, received an option to purchase the 4,376,633 shares of ECD Common Stock owned by Chevron. The option, approximately $20,000,000, exercisable at $4.55 per share, was exercised on May 16, 2005 and the shares retired.</FONT></P>

<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE K &#151;&nbsp;Federal Taxes on Income</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Due to the transaction with Chevron (see Note D) and the recognition of $79,532,000 in revenue from the license with Cobasys, the Company had an alternative minimum tax liability as of June 30, 2005. The Company used the effective alternative minimum tax rate of 2% in computing the income tax expense.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The income tax provision or benefit reflected in the consolidated statement of operations consists of the following:</FONT></P>
</DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=10><FONT face="Times New Roman, Times, Serif" size=2>Year Ending June 30,</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=10><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Current:</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=2>840</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State and local</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-U.S</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Deferred:</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State and local</FONT> </TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-U.S</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total:</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>840</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>74</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-74 -->
<!-- BEG-P75 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE K &#151;&nbsp;Federal Taxes on Income (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company accounts for income taxes using the asset and liability approach. Deferred income taxes are provided for the differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. This method also requires the recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Temporary differences and carryforwards that give rise to deferred tax assets and (liabilities) are as follows:</FONT></P>
</DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=7><FONT face="Times New Roman, Times, Serif" size=2>June 30,</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>(in thousands)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Deferred tax asset:</FONT></TD>
<TD align=left colSpan=8><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="35%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis difference in intangibles</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>16,518</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>18,360</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity losses in subsidiaries</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>4,107</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>4,056</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase accounting adjustments</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>5,661</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>5,661</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOL carryforward </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>94,740 </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>77,538</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R&amp;D credit carryforward </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>487</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>487</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AMT credit carryforward </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>1,363 </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>726</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All other</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>3,882 </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>2,712</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>126,758</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>109,540</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Deferred tax liability:</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis and depreciation differences of property </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(13,953</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(10,776</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All other</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(131</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(98</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred tax asset </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>112,674 </FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>98,666</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation allowance</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(112,674</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>(98,666</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Net deferred tax asset</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=center width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company's valuation allowance increased by $14,008,000 in 2006, decreased by $10,900,000 in 2005 and increased by $20,634,000 in 2004. The increases in the valuation&nbsp;allowance in 2006 and 2004 are mainly due to net operating losses and primarily comprise the difference between statutory and effective tax rates. The decrease in the valuation&nbsp;allowance in 2005 is mainly due to taxable income and the utilization of net operating losses.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>75</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-75 -->
<!-- BEG-76 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE K &#151;&nbsp;Federal Taxes on Income (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>At June 30, 2006, the Company's remaining net tax operating loss carryforwards and tax credit carryforwards expire as follows:</FONT></P>
</DIV>
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="75%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="23%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Net Tax Operating Loss Carryforward</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>R&amp;D Credit Carryforward</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="23%"><FONT face="Times New Roman, Times, Serif" size=2>2007</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>276,000</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2008</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>7,983,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>41,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2009</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>11,923,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>30,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2010</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>9,313,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>15,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2011</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>6,854,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>40,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2012</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>26,121,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>14,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2013</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>12,447,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>29,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2014</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>7,219,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>42,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2015</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2016</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2017</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2018</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>6,825,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2019</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>993,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2020</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>10,170,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2021</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>4,674,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2022</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>22,599,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2023</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>36,846,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2024</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>67,627,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2025</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>2026</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>47,053,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="14%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>278,647,000</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right width="14%"><FONT face="Times New Roman, Times, Serif" size=2>487,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company&#146;s utilization of United Solar Ovonic&#146;s net operating losses is limited to approximately $10,000,000 per year under the Internal Revenue Code. Due to the history of losses and uncertainties, the Company has determined that it is more likely than not that the deferred tax assets will not be recovered through future taxable income. As a result, a valuation reserve has been provided to fully offset deferred tax assets.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>76</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-76 -->
<!-- BEG-77 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE L &#151;&nbsp;Business Segments</FONT></U></P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The Company has three business segments: United Solar Ovonic, Ovonic Battery and the parent company, ECD. Some general corporate expenses have been allocated to Ovonic Battery.</FONT><FONT size=1></FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our United Solar Ovonic segment consists of our thin-film solar PV business in which we design, develop, manufacture and sell PV modules that generate clean, renewable energy by converting sunlight into electricity. Our Ovonic Battery segment consists of our battery business in which we design, develop, manufacture and sell rechargeable NiMH batteries and battery materials internally and through third-party relationships (i.e., joint ventures and licenses). Our ECD segment consists of our Ovonyx joint venture, our Production Technology and Machine Building Division, and our emerging technologies, including Ovonic solid hydrogen storage, Ovonic metal hydride fuel cell, Ovonic optical memory, Ovonic cognitive computer and Ovonic quantum control technologies, for which we are continuing research and development activities in an effort to reach full-scale commercialization.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>The Company's operations by business segments were as follows:</FONT></P>
</DIV>
<DIV align=center></DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=15><FONT face="Times New Roman, Times, Serif" size=2>Financial Data by Business Segment<BR>(in thousands)</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>United Solar Ovonic</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Ovonic Battery</FONT></TD>
<TD align=right width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>ECD</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Consolidating Entries</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Consolidated<SUP>(1)</SUP></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Revenues<SUP>(1)</SUP></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>87,508</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>8,888</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">65,765</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(59,742</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>102,419</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>58,718</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>88,557</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>16,841</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(7,546</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>156,570</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2004</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>36,959</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>15,230</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>16,155</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(2,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>66,256</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Operating Income (Loss)<SUP>(1)</SUP></FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>8,607</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(4,596</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(30,441</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(791</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(27,221</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(3,240</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>68,358</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(22,282</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>547</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>43,383</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2004</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(13,418</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(13,840</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(22,877</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,599</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(48,536</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Depreciation Expense</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>5,556</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>359</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,713</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>7,628</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>6,042</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>487</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>2,180</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(640</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>8,069</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2004</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>6,815</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>634</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>2,228</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(1,549</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>8,128</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Capital Expenditures</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>83,730</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>588</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,711</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(848</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>85,181</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>2,671</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>280</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>169</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>3,120</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2004</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>868</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>934</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,745</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>3,547</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>77</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>



<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-77 -->
<!-- BEG-P78 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE L &#151;&nbsp;Business Segments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="99%" align=center border=0>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>United Solar Ovonic</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="10%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Ovonic Battery</FONT></TD>
<TD align=right width="1%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>ECD</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Consolidating Entries</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="9%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Consolidated<SUP>(1)</SUP></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>Identifiable Assets</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2006</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>181,544 </FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>5,554 </FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>596,409</FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(187,165</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>596,342</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2005 </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>86,342</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>6,315</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>223,792</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(118,386</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>198,063</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Year ended June 30, 2004 </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>82,366</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>6,378 </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>132,097</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>(107,529</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>113,312</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: -0.19in; TEXT-ALIGN: left"><U><FONT 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=338 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; PADDING-TOP: 3pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 1pt; PADDING-TOP: 3pt" vAlign=top noWrap width=323>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Excludes discontinued operations (Ovonic Battery).</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=508 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(2)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top noWrap width=492>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>The ECD revenues, excluding the consolidating entry, were $5,837,000 in 2006.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following table presents revenues by country based on the location of the customer:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="70%" align=center border=0>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=9><FONT face="Times New Roman, Times, Serif" size=2>Year Ended June 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2005</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>2004</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2>United States</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2>47,007,251</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2>122,902,029</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2>43,993,570</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Germany</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>35,429,666</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,370,383</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,551,530</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>China</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,634,989</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,966,506</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,540,300</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Japan</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4,700,483</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,727,884</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,083,261</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Luxembourg</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3,833,483</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,501,608</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,283,754</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Other countries</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>7,813,604</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>6,101,642</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>3,803,520</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.01in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>102,419,476</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>156,570,052</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>66,255,935</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The composition of the Company's property, plant and equipment, net of accumulated depreciation, is principally in the United States as of June 30, 2006, 2005 and 2004.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Sales to Solar Integrated Technologies Inc. represented 20.6% and 32.6% of our product sales in the United Solar segment in the fiscal years ended June 30, 2006 and June 30, 2005, respectively.&nbsp; In the fiscal year ended June 30, 2006, Biohaus PV Handels GmbH represented 13.7% of our product sales in this segment.&nbsp;</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>78</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-78 -->
<!-- BEG-P79 -->
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><FONT size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>NOTE M &#151;&nbsp;Quarterly Financial Data (Unaudited)</FONT></U></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><FONT size=2>(In thousands, except for per-share amounts)</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom align=center>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>First Quarter</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Second Quarter</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Third Quarter</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Fourth Quarter</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" colSpan=2><FONT face="Times New Roman, Times, Serif" size=1>Total Year</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=1>Year Ended June 30, 2006</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Revenues </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>23,248</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>24,285</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>26,957</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>27,929</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>102,419</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Operating income (loss) </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(7,063</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(7,454</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(5,920</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(27,221</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Net income(loss) from continuing</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations </FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,208</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,307</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(5,626</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(769</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(18,910</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Gain (loss) from discontinued</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations,</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(258</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>572</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>314</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) </FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,466</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(5,735</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(5,626</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(769</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(18,596</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;Basic net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.17</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From discontinued operations</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.19</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.17</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;Diluted net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.17</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(.58</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From discontinued operations</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.19</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.17</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(.57</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>Year Ended June 30, 2005</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Revenues</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>22,092</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>95,674</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>17,896</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>20,908</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>156,570</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Operating income (loss)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,113</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>68,016</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(11,286</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(7,234</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>43,383</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Net income(loss) from continuing</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations before extraordinary item</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1,734</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>65,322</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(10,945</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,649</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>49,462</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Loss from discontinued operations, net</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of tax</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(386</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(451</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(305</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(251</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(1,393</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary item, net of tax</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;<FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>2,266</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>(3</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>2,263</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>1,348</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>67,137</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(11,250</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(6,903</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>50,332</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;Basic net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>0.07</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2.56</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.38</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1.80</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;<FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.09</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>2.63</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.39</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.23</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>1.83</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;Diluted net income (loss) per share</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>0.07</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>2.38</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.38</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>1.67</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From discontinued operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.02</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp;&nbsp;&nbsp;From extraordinary item</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=1>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.08</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>0.05</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>2.44</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.39</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>(0.23</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=1>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=1>1.70</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=1></FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>79</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
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<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 9</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: left"><FONT size=2>Not applicable. </FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 9A</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Controls and Procedures</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e)&nbsp;as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective to ensure that the Company is able to collect, process and disclose, within the required time periods, the information we are required to disclose in the reports we file with the Securities and Exchange Commission. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><B><FONT size=2>Report of Management on Internal Control over Financial Reporting</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules&nbsp;13a-15(f)&nbsp;and 15d-15(f)&nbsp;under the Securities Exchange Act of 1934. The Company&#146;s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that (i)&nbsp;pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets, (ii)&nbsp;provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Management assessed the effectiveness of the Company&#146;s internal control over financial reporting as of June 30, 2006. Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control&#151;Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management&#146;s assessment included an evaluation of the design of the Company&#146;s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the Company&#146;s Board of Directors.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>80</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Based on this assessment, management determined that, as of June 30, 2006, the Company maintained effective internal control over financial reporting. Grant Thornton LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of the Company included in this report, has issued an attestation report on management&#146;s assessment of internal control over financial reporting.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Changes in Internal Control over Financial Reporting</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>There was no change in the Company&#146;s internal control over financial reporting that occurred during the Company&#146;s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company&#146;s internal control over financial reporting.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Report of Independent Registered Public Accounting Firm </FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2>Board of Directors and Shareholders of</FONT></P>

<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>We have audited management's assessment, included in the accompanying &#147;Management&#146;s Annual Report on Internal Control over Financial Reporting&#148;, that Energy Conversion Devices, Inc. (a Delaware Corporation) and subsidiaries (the Company) maintained effective internal control over financial reporting as of June 30, 2006</FONT><I><FONT size=2>,</FONT></I><FONT size=2> based on criteria established in </FONT><I><FONT size=2>Internal Control&#151;Integrated Framework</FONT></I><FONT size=2> issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO</FONT><I><FONT size=2>).</FONT></I><FONT size=2>&nbsp; The Company&#146;s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.&nbsp; Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.&nbsp; Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.&nbsp; We believe that our audit provides a reasonable basis for our opinions.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>A company's internal control over financial reporting is a process designed 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.&nbsp; A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>81</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P>&nbsp;</P>

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<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.&nbsp; Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>In our opinion, management's assessment that Energy Conversion Devices, Inc. and subsidiaries maintained effective internal control over financial reporting as of June 30, 2006, is fairly stated, in all material respects, based on criteria established in </FONT><I><FONT size=2>Internal Control&#151;Integrated Framework</FONT></I><FONT size=2> issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).&nbsp; Also in our opinion, Energy Conversion Devices, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2006, based on criteria established in </FONT><I><FONT size=2>Internal Control&#151;Integrated Framework</FONT></I><FONT size=2> issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Energy Conversion Devices, Inc. and subsidiaries as of June 30, 2006 and 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2006, and our report dated August 30, 2006 expressed an unqualified opinion on those financial statements.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><FONT size=2>/s/ Grant Thornton LLP</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2>Southfield, Michigan</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT size=2>August 30, 2006</FONT></P>
</DIV>
<DIV align=left>
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<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 9B</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=144>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Other Information</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Not applicable.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>82</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>

<P>&nbsp;</P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><B><FONT size=2>PART III</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT size=2>DOCUMENTS INCORPORATED BY REFERENCE</FONT></P>

<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Certain information required by Part III is omitted from this Report on Form 10-K in that the Registrant will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on November 14, 2006 (the &#147;2006 Proxy Statement&#148;) pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, not later than 120 days after the end of the fiscal year covered by this Report, and certain information included in the 2006 Proxy Statement is incorporated herein by reference.</FONT></P>
</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=461 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 10</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=368>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Directors and Executive Officers of the Registrant</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The information required by this Item is included in the 2006 Proxy Statement under the captions &#147;Election of Directors,&#148; and &#147;Executive Officers&#148; and is incorporated herein by reference. </FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>We have adopted a code of ethics that applies to all directors, officers and employees, including our Chairman and Chief Executive Officer and our Vice President and Chief Financial Officer. This code of ethics, entitled &#147;Code of Business Conduct and Ethics,&#148; can be found on our website at www.ovonic.com, and we will post on our website any amendment to or waiver from the provisions of the code that applies to these executive officers within four business days.</FONT></P>
</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=288 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 11</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=195>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Executive Compensation</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The information required by this Item is included in the 2006 Proxy Statement under the caption &#147;Executive Compensation&#148; and is incorporated herein by reference. </FONT></P>
</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="100%" border=0>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top width=77>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 12</FONT></B></U><B><FONT size=2>:</FONT></B></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><U><B><FONT size=2>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</FONT></B></U></P>
</TD></TR>
</TABLE>

</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Certain of the information required by this Item is included in the 2006 Proxy Statement under the caption &#147;Security Ownership of Certain Beneficial Owners and Management&#148; and is incorporated herein by reference.</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following information is set forth with respect to our equity compensation plans at June 30, 2006.</FONT></P>
</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>83</FONT></P>
<BR>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: justify"><B><FONT size=2>Equity Compensation Plan Information</FONT></B></P>

<DIV align=center>
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<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
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<TR vAlign=bottom>
<TD align=left>

<P><FONT face="Times New Roman, Times, Serif" size=2>Plan Category</FONT></P>
</TD>
<TD align=center colSpan=2>

<P><FONT face="Times New Roman, Times, Serif" size=2>Number of Securities to be Issued Upon Exercise of Outstanding Options,Warrants and Rights<BR><B>(a)</B> </FONT></P>
</TD>
<TD align=center>

<P><FONT face="Times New Roman, Times, Serif" size=2>Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights<BR><B>(b)</B> </FONT></P>
</TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))<BR><B>(c)</B> </FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="12%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="15%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Equity compensation plans approved by <BR>security holders<SUP>(1)</SUP> </FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;1,349,263</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$ 19.63&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>938,137</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Equity compensation plans not approved by security holders</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;952,159 </FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)(3)</SUP></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$ 15.46&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>(2)(3)</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;2,301,422</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;$ 17.91</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>938,137</FONT></TD></TR>
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</DIV>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 2pt; MARGIN-LEFT: 0.13in; TEXT-ALIGN: justify"><U><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U><FONT size=1></FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top width=30>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>These plans consist of the 1995 Non-Qualified Stock Option Plan and 2000 Non-Qualified Stock Option Plan.</FONT></P>
</TD></TR>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=16>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=30>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(2)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>On November 18, 1993, we entered into stock option agreements, as amended, (the &#147;Agreements&#148;) with Stanford R. Ovshinsky, our President and Chief Scientist and Technologist, and Dr. Iris Ovshinsky, our Vice President, pursuant to which Mr. Ovshinsky was granted an option to purchase up to 150,000 shares of ECD Common Stock at a price of $7.00 per share and Dr. Ovshinsky was granted an option to purchase up to 100,000 shares of ECD Common Stock at a price of $7.00 per share. The Agreements provided for periodic antidilution protection adjustments based on changes in the number of outstanding shares of ECD Common Stock. Of the 952,159 shares issuable upon exercise, options to acquire 391,294 shares and 260,865 shares were issued to Mr. and Dr. Ovshinsky, respectively. Upon her death, on August 16, 2006, and pursuant to the terms of the Agreements, Dr. Ovshinsky&#146;s 260,865
shares were transferred to her estate.<BR><BR>In June 2005, the Agreements were further amended by deleting the antidilution protection adjustment provisions, and no further options will be granted under the Agreements. The option may be exercised in whole or in part and will terminate either upon 12 months after termination of Mr. Ovshinsky&#146;s employment with ECD for any reason other than voluntary termination. </FONT></P>
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<P style="MARGIN-TOP: 1pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.44in; TEXT-ALIGN: justify"><FONT size=2></FONT></P>
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<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="90%" border=0>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=16>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 3pt" vAlign=top width=30>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(3)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>On January 15, 1999, we entered into a stock option agreement (the &#147;Agreement&#148;) with Robert C. Stempel, our Chairman and CEO, pursuant to which we granted him an option to purchase up to 300,000 shares of ECD 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 Agreement. The option is not subject to vesting requirement and may be exercised from time to time in whole or in part commencing as of the date of grant and ending on the tenth anniversary of such date. There are no securities available for future issuance under this Agreement.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>84</FONT></P>
<BR>
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<P>&nbsp;</P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 13</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Certain Relationships and Related Transactions</FONT></B></U></P>
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</DIV>
<DIV style="WIDTH: 700px">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The information required under this Item is set forth in the 2006 Proxy Statement under the caption &#147;Employment Agreements,&#148; &#147;Compensation Committee Interlocks,&#148; &#147;Report of the Compensation Committee of the Board of Directors,&#148; and &#147;Stock Performance Graph&#148; and is incorporated herein by reference.</FONT></P>
</DIV>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 12pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 14</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Principal Accountant Fees and Services</FONT></B></U></P>
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</DIV>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The information required under this Item is set forth in the 2006 Proxy Statement under the caption &#147;Independent Registered Public Accounting Firm Fee Information&#148; and is incorporated herein by reference.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>85</FONT></P>
<BR>
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<P>&nbsp;</P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><B><FONT size=2>PART IV</FONT></B></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Item 15</FONT></B></U><B><FONT size=2>:</FONT></B></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><B><FONT size=2>Exhibits, Financial Statement Schedules and Reports on Form 8-K</FONT></B></U></P>
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</DIV>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=48>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(a)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>1.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Financial Statements:</FONT></P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 3pt" vAlign=top noWrap width=513>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 3pt" vAlign=top noWrap width=53>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT size=2>Page</FONT></U></P>
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</DIV>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>The following is included in Part II, Item 8:</FONT></P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=451>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Reports of Independent Registered Public Accounting Firm</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>38, 81</FONT></P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=48>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=48>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>2.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Financial Statement Schedules:</FONT></P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=79>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Schedule II &#150; Valuation and Qualifying Accounts</FONT></P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=36>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>89</FONT></P>
</TD></TR>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0.51in; TEXT-INDENT: -0.01in; TEXT-ALIGN: justify"><FONT size=2>Other financial statements and financial statement schedules are omitted (1) because of the absence of the conditions under which they are required or (2) because the information called for is shown in the financial statements and notes thereto.</FONT></P>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 6pt; PADDING-TOP: 6pt" vAlign=top noWrap width=48>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>3.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Exhibits (including those incorporated by reference)</FONT></P>
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<TR style="HEIGHT: 36.9pt">
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 36.9pt" vAlign=bottom width=76>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 36.9pt" vAlign=bottom width=438>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 36.9pt" vAlign=bottom width=86>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>Page or </FONT><U><FONT size=2>Reference</FONT></U></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>&nbsp;3.1</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Restated Certificate of Incorporation filed September 29, 1967</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(a)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>&nbsp;3.2</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Certificate of Amendment to Certificate of Incorporation filed March 25, 1999 extending voting rights of the Company's Class A Common Stock, increasing the authorized capital stock of the Company's Common Stock to 20,930,000 shares, and authorizing 430,000 shares of Class B Common Stock</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(b)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>&nbsp;3.3</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Certificate of Amendment to Certificate of Incorporation filed March 18, 2004, increasing the number of authorized shares from 30,000,000 to 50,000,000</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(c)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>&nbsp;3.4</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Bylaws in effect as of May 9, 2006</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(d)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.1</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Executive Employment Agreement dated as of September 2, 1993 between the Company, Ovonic Battery Company, Inc. and Stanford R. Ovshinsky</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(e)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.2</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Executive Employment Agreement dated as of September 2, 1993 between the Company and Stanford R. Ovshinsky</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(f)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.3</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Stock Option Agreement by and between Ovonic Battery Company, Inc. and Stanford R. Ovshinsky dated as of November&nbsp;18, 1993</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(g)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.4</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Stock Option Agreement by and between the Company and Stanford R. Ovshinsky dated as of November&nbsp;18, 1993 </FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(h)</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>86</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>
<P>&nbsp;</P>

<DIV style="PAGE-BREAK-AFTER: always">&nbsp;</DIV>
<!-- END-86 -->
<!-- BEG-P87 -->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT size=2></FONT>&nbsp;</P>

<DIV align=center>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.5</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc. 1995 Non-Qualified Stock Option Plan</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(i)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.6</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Energy Conversion Devices, Inc. 2000 Non-Qualified Stock Option Plan</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(j)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.7</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Executive Employment Agreement, Restricted Stock Agreement and Stock Option Agreement dated as of January 15, 1999 between the Company and Robert C. Stempel</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(k)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.8</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Amendment No. 2 to Stock Option Agreement by and between the Company and Stanford R. Ovshinsky dated as of June 27, 2005</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(l)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.9</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Amendment to Executive Employment Agreement dated as of June 27, 2005, between the Company and Stanford R. Ovshinsky</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(m)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.10</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Amendment to Executive Employment Agreement dated as of June 27, 2005, between the Company, Ovonic Battery Company, Inc. and Stanford R. Ovshinsky </FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(n)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=76>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>10.11</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Amended and Restated Operating Agreement of Cobasys LLC dated as of December 2, 2004 by and between ChevronTexaco Technology Ventures, LLC and Ovonic Battery Company, Inc. </FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>(o)</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>21.1</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>List of all direct and indirect subsidiaries of the Company</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>91</FONT></P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>23.1</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Consent of Independent Registered Public Accounting Firm, Grant Thornton LLP</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>92</FONT></P>
</TD></TR>
<TR style="HEIGHT: 28.35pt">
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>31.1</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>93</FONT></P>
</TD></TR>
<TR style="HEIGHT: 28.35pt">
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>31.2</FONT></P>
</TD>
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<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>94</FONT></P>
</TD></TR>
<TR style="HEIGHT: 28.35pt">
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width="5%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>&nbsp;&nbsp;32</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width="55%">
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Certifications 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>
<TD style="PADDING-RIGHT: 3.1pt; PADDING-LEFT: 3.1pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in; HEIGHT: 28.35pt" vAlign=top width=86>
<P style="MARGIN-TOP: 5.5pt; MARGIN-BOTTOM: 5.5pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT size=2>95</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>87</FONT></P>
<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<HR align=LEFT width="700" noShade SIZE=3>
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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: left"><U><FONT size=2>Notes to Exhibit List</FONT></U></P>

<DIV align=left>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 12pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(a)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 12pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 2-A to the Company's Form 8-A and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(b)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(c)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(d)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 3.1 to the Company&#146;s Current Report on Form 8-K dated May 9, 2006 and incorporated herein by reference. </FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(e)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.100 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(f)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.101 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(g)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(h)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(i)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(i)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit A to the Company's Proxy Notice and Statement dated January 19, 2001.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(k)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibits B, C and D, respectively, to the Company's Proxy Notice and Statement dated February 23, 1999.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(l)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.10 to the Company&#146;s Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and incorporated herein by reference.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(m)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.12 to the Company&#146;s Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and incorporated herein by reference.</FONT></P>
</TD></TR>
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</DIV>
<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(n)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.13 to the Company&#146;s Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and incorporated herein by reference.</FONT></P>
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</DIV>
<DIV align=left>
<TABLE style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top width=54>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>(o)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 8pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT size=2>Filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated December 7, 2004 and incorporated herein by reference.</FONT></P>
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</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>88</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>


<P>&nbsp;</P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: center"><FONT size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: center"><U><B><FONT size=2>Schedule II &#151; Valuation and Qualifying Accounts</FONT></B></U></P>

<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Additions</FONT></TD>
<TD align=right colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>Description;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>Balance at Beginning of Period</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Charged to Costs and Expenses</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center ><FONT face="Times New Roman, Times, Serif" size=2>Charged to Other Accounts</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Deductions</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>Balance at End of Period</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR style="LINE-HEIGHT: 0.5" vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Allowance for Uncollectible Accounts:</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>412,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>289,767</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>10,063</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(20,830)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>*</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>691,000</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2005</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>274,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>309,512</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(171,512)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>*</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>412,000</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2004</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>265,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>93,093</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(84,093)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>*</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>274,000</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR style="LINE-HEIGHT: 0.5" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Reserve for Losses on Government Contracts:</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,294,098</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>621,770</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(572,907)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>**</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,342,961</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2005</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,846,636</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>447,462</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,294,098</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2004</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,681,636</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>165,000</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,846,636</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><FONT size=2>Reserve for Warranty:</FONT>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,635,532</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>382,980</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(183,376)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,835,136</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2005</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,945,934</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(310,402)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,635,532</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2004</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2,990,661</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,044,727)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,945,934</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR style="LINE-HEIGHT: 0.5" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Reserve for Inventory Obsolescence:</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>418,995</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,518,284</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(773,446)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,163,833</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2005</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>813,607</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>664,755</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,059,367)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>418,995</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year Ended June 30, 2004</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,014,975</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,145,105</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,346,473)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>813,607</FONT></TD></TR>
<TR style="LINE-HEIGHT: 0.1in">
<TD>&nbsp;</TD></TR>
<TR vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 1pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: left"><U><FONT 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;&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><FONT size=2>&nbsp;</FONT></P>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=382 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=17>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>*</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=349>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Represents partial write-off of uncollectible accounts.</FONT></P>
</TD></TR>
</TABLE>

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<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=328 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=23>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>**</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 3pt; PADDING-TOP: 2pt" vAlign=top noWrap width=289>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Represents change in accounting estimate.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P>&nbsp;</P>

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<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><B><FONT size=2>SIGNATURES</FONT></B></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0.5in; TEXT-ALIGN: justify"><FONT size=2>Pursuant to the requirements of Section 13 or 15(d) 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>

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<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=601 border=0>
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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 12pt; PADDING-TOP: 12pt" vAlign=top noWrap width=312>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 12pt; PADDING-TOP: 12pt" vAlign=top noWrap width=289>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>ENERGY CONVERSION DEVICES, INC.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; PADDING-TOP: 0.25in" vAlign=top noWrap width=16>
<P style="MARGIN-TOP: 0.25in; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; PADDING-TOP: 0.25in" vAlign=top noWrap width=312>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>September 12, 2006</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; PADDING-TOP: 0.25in" vAlign=top noWrap width=29>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT size=2>By:</FONT></U></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0in; PADDING-TOP: 0.25in" vAlign=top noWrap width=163>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT size=2>/S/ Robert C. Stempel</FONT></U></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=483 border=0>
<TR>
<TD vAlign=top noWrap width=343>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD vAlign=top noWrap width=140>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Robert C. Stempel</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width=608 border=0>
<TR>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0.25in; PADDING-TOP: 0in" vAlign=top noWrap width=343>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0.25in; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0.25in; PADDING-TOP: 0in" vAlign=top noWrap width=265>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=2>Chairman and Chief Executive Officer</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<DIV align=left>
<TABLE width="90%" border=0>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="30%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC.</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="30%" colSpan=2><FONT face="Times New Roman, Times, Serif">&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>September 12, 2006</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2><FONT size=2><U>By: /S/ Robert C. Stempel<BR></U>Robert C. Stempel<FONT size=3> </FONT><FONT size=2>Chairman and Chief Executive Office</FONT>r</FONT></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Robert C. Stempel</U><BR>Robert C. Stempel</FONT></TD>
<TD align=left width="34%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Chairman of the Board, Chief Executive <BR>Officer and Director <BR>(Principal Executive Officer)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>September 12, 2006</FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Stanford R. Ovshinsky</U><BR>Stanford R. Ovshinsky</FONT></TD>
<TD align=left width="34%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;President, Chief Scientist and <BR>Technologist and Director</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>September 12, 2006</FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Sanjeev Kumar</U><BR>Sanjeev Kumar</FONT></TD>
<TD align=left width="34%" colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Vice President and Chief Financial Officer <BR>(Principal Financial and Accounting Officer)</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>September 12, 2006</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Robert I. Frey</U><BR>Robert I. Frey</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Director</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;September 12, 2006</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ William J. Ketelhut</U><BR>William J. Ketelhut</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Director</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;September 12, 2006</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Florence I. Metz</U><BR>Florence I. Metz</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Director</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;September 12, 2006</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2><U>/s/ Stephen Rabinowitz</U><BR>Stephen Rabinowitz</FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Director</FONT></TD>
<TD align=left width="25%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;September 12, 2006</FONT></TD>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="10%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=top>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="9%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>90</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
</DIV>
<HR align=LEFT width="700" noShade SIZE=3>


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<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>2
<FILENAME>ex21p1_2005k.txt
<DESCRIPTION>DIRECT AND INDIRECT SUBSIDIARIES
<TEXT>
                                                                    Exhibit 21.1







                        DIRECT AND INDIRECT SUBSIDIARIES
                        --------------------------------


      Subsidiary                   Percentage             Jurisdiction of
                                   Ownership                Organization

-------------------------------------------------------------------------------

United Solar Ovonic Corp.             100%                    Delaware

United Solar Ovonic LLC               100%                    Delaware

Ovonic Battery Company, Inc.         91.4%                    Delaware

Ovonic Fuel Cell Company LLC          100%                    Delaware

Ovonic Hydrogen Systems LLC           100%                    Delaware






























                                      145
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>ex23p1_fy200610k.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>
                                                                    Exhibit 23.1



                Consent of Independent Registered Public Accounting Firm



We have issued our reports dated August 30, 2006, accompanying the consolidated
financial statements, schedule and management's assessment of the effectiveness
of internal control over financial reporting included in the Annual Report of
Energy Conversion Devices, Inc. and Subsidiaries on Form 10-K for the year ended
June 30, 2006.  We hereby consent to the incorporation by reference of said
reports in the Registration Statements of Energy Conversion Devices, Inc. on
Form S-3ASR (File No. 333-131886, effective February 16, 2006), on Form S-3
(File No. 333-129234, effective October 25, 2005, File No. 333-129232, effective
October 25, 2005, File No. 333-122961, effective February 23, 2005, File No.
333-121167, effective December 10, 2004, File No. 333-42758, effective August 1,
2000, File No. 333-50749, effective April 22, 1998 and File No. 333-05709,
effective June 11, 1996) and on Form S-8 (File No. 333-84398, effective
March 15, 2002 and File No. 33-92918, effective May 31, 1995).

/s/ Grant Thornton LLP


Southfield, Michigan
August 30, 2006













                                      146
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>ex31p1_2006-10k.htm
<DESCRIPTION>CEO- RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
<TEXT>
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<BODY bgcolor="#ffffff" style='font-family:"Arial"'><DIV style="WIDTH: 650px">




<p style=' margin-bottom:7pt; margin-top:6pt; text-indent:7.25%;text-align:right'><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Exhibit 31.1</font></p>

<p>

<p style=' margin-bottom:0pt; margin-top:5pt;text-align:center;'><font SIZE=2>CERTIFICATION OF CEO PURSUANT TO</font></p>

<p style=' margin-bottom:7pt; margin-top:0pt;text-align:center;'><font SIZE=2>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</font></p>

<br>
<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>I, Robert C. Stempel, Chief Executive Officer of Energy Conversion Devices, Inc., certify that:</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>1.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>I have reviewed this annual report on Form 10-K of Energy Conversion Devices, Inc.;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>2.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=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;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>3.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>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;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>4.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>The registrant&#146;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:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='margin-left:0pt;border-collapse:collapse'>
    <tr >
        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>a)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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;</font></p> </td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="100%" style='margin-left:0pt;border-collapse:collapse'>
    <tr >
        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <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  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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;</font></p> </td> </tr></table>

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    <tr >
        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>c)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Evaluated the effectiveness of the registrant&#146;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 </font></p> </td> </tr></table>



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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>d)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting. </font></p> </td> </tr></table>


<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>5.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of registrant&#146;s board of directors (or persons performing the equivalent functions):</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='border-collapse:collapse'>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>a)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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&#146;s ability to record, process, summarize and report financial information; and</font></p> </td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="100%" style='border-collapse:collapse'>
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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <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  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</font></p> </td> </tr></table>

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


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        <td width=25%><font size=2>Date: September 12, 2006</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2> <u>/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;</u></font> </td>
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    <tr >
        <td width=25%><font size=1>&nbsp;</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2>Robert C. Stempel</font></td>
</tr>

    <tr >
        <td width=25%><font size=1>&nbsp;</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2>Chief Executive Officer</font></td>
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    <tr>
        <td>&nbsp;</td>
        <td width=25%>&nbsp;</td>
        <td>&nbsp;</td> </tr>
</table>

<p style=' margin-bottom:6pt; margin-top:6pt;text-align:center;'><font size=4>&nbsp;</font></p>
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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>ex31p2_2006-10k.htm
<DESCRIPTION>CFO - RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
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<p style=' margin-bottom:6pt; margin-top:6pt;text-align:center;'><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Exhibit 31.2</font></p>

<br>
<p style=' margin-bottom:0pt; margin-top:4pt;text-align:center;'><font SIZE=2>CERTIFICATION OF CFO PURSUANT TO</font></p>

<p style=' margin-bottom:5pt; margin-top:0pt;text-align:center;'><font SIZE=2>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</font></p>

<br>
<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>I, Sanjeev Kumar, Chief Financial Officer of Energy Conversion Devices, Inc., certify that:</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>1.</font><font size=1>&nbsp;&nbsp;</font><font size=2>I have reviewed this annual report on Form 10-K of Energy Conversion Devices, Inc.;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>2.</font><font size=1>&nbsp;&nbsp;</font><font size=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;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>3.</font><font size=1>&nbsp;&nbsp;</font><font size=2>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;</font></p>

<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>4.</font><font size=1>&nbsp;&nbsp;</font><font size=2>The registrant&#146;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:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='margin-left:0pt;border-collapse:collapse'>
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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>a)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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;</font></p> </td> </tr></table>


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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <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  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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;</font></p> </td> </tr></table>


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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>c)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Evaluated the effectiveness of the registrant&#146;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 </font></p> </td> </tr></table>


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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>d)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting. </font></p> </td> </tr></table>


<p style=' margin-bottom:4.5pt; margin-top:4.5pt;text-align:justify;'><font size=2>5.</font><font size=1>&nbsp;&nbsp;</font><font size=2>The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of registrant&#146;s board of directors (or persons performing the equivalent functions):</font></p>


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        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>a)</font></p> </td>
        <td  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>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&#146;s ability to record, process, summarize and report financial information; and</font></p> </td> </tr></table>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='margin-left:0pt;border-collapse:collapse'>
    <tr >
        <td width="5%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:4.5pt;margin-bottom: 4.5pt'><font size=1>&nbsp;</font></p> </td>
        <td width="2%" valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <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  valign=top style='padding:4.5pt 0in 4.5pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</font></p> </td> </tr></table>


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


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        <td width=25%><font size=2>Date: September 12, 2006</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2> <u>/s/ Sanjeev Kumar&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;</u></font> </td>
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        <td width=25%><font size=1>&nbsp;</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2>Sanjeev Kumar</font></td>
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        <td width=25%><font size=1>&nbsp;</font></td>
        <td width=25%>&nbsp;</td>
        <td width=50%> <font size=2>Chief Financial Officer</font></td>
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    <tr>
        <td>&nbsp;</td>
        <td width=25%>&nbsp;</td>
        <td>&nbsp;</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>
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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>ex32p1_2006-10k.htm
<DESCRIPTION>CEO/CFO SECTION 1350 CERTIFICATIONS
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<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>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:right;margin-top:0pt;margin-bottom:0pt'><font size=2>Exhibit 32</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>&nbsp;</font></p>

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font SIZE=2>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(18 U.S.C. SECTION 1350)</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>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>In connection with the Annual Report of Energy Conversion Devices, Inc. (the &#147;Company&#148;) on Form 10-K for the fiscal year ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the &#147;Report&#148;), Robert C. Stempel, Chief Executive Officer of the Company, and Sanjeev Kumar, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to &sect; 906 of the </font><i><font size=2>Sarbanes-Oxley</font></i><font size=2> Act of 2002 (18 U.S.C. &sect; 1350), that based on his knowledge:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:13.91%; text-indent:-3.48%;text-align:left;'><font size=2>1.  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:13.91%; text-indent:-3.48%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:13.91%; text-indent:-3.48%;text-align:left;'><font size=2>2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><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; </font></u><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>Robert C. Stempel</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>Chief Executive Officer</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>September 12, 2006</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><u><font size=2>/s/ Sanjeev Kumar&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><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>Sanjeev Kumar</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>Chief Financial Officer</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;text-align:left;'><font size=2>September 12, 2006</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:5.8%;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: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>

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