<SUBMISSION>
<ACCESSION-NUMBER>0000032878-06-000134
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20060930
<FILING-DATE>20061109
<DATE-OF-FILING-DATE-CHANGE>20061109
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ENERGY CONVERSION DEVICES INC
<CIK>0000032878
<ASSIGNED-SIC>3690
<IRS-NUMBER>381749884
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-08403
<FILM-NUMBER>061202279
</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-Q
<SEQUENCE>1
<FILENAME>form10q-sept06.htm
<DESCRIPTION>QUARTER ENDED SEPTEMBER 30, 2006 (Q107)
<TEXT>
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<BODY style="FONT-FAMILY: 'Times New Roman'" bgColor=#ffffff><DIV style="WIDTH: 670px"><FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><B>UNITED STATES</B></FONT></P>

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

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><B>Washington, D.C. 20549</B></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><B>FORM 10-Q</B></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: 6pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>(Mark One)</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 3.35pt; TEXT-ALIGN: left"><FONT face=Wingdings size=4>&#254;</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 3.35pt; TEXT-ALIGN: left"><FONT face=Wingdings size=4>&#168;</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><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: </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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<P style="MARGIN-TOP: 4pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; 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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<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: 35pt; 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: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 35pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(I.R.S. Employer Identification No.)</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>2956 Waterview Drive, Rochester Hills, Michigan</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>48309</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><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: 8pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(Zip Code)</FONT></P>
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<P style="MARGIN-TOP: 1pt; MARGIN-BOTTOM: 1pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Registrant&#146;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: 16pt; 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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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 4pt; TEXT-INDENT: 7.69%; TEXT-ALIGN: justify"><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>&nbsp;&nbsp;<FONT face=Wingdings size=4>&#254;</FONT> <FONT face="Times New Roman, Times, Serif" size=2>Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face=Wingdings size=4>&#168;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;No</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.69%; TEXT-ALIGN: justify"><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><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;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 10pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Large accelerated filer&nbsp;&nbsp;&nbsp;</FONT><FONT face=Wingdings size=4>&#254;</FONT> </P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 5pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Accelerated filer&nbsp;&nbsp;&nbsp;</FONT><FONT face=Wingdings size=4>&#168;</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 5pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Non-accelerated filer&nbsp;&nbsp;&nbsp;</FONT><FONT face=Wingdings size=4>&#168;</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.69%; 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;Yes&nbsp;&nbsp;</FONT><FONT face=Wingdings size=4>&#168;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT face=Wingdings size=4>&#254;</FONT>&nbsp;&nbsp;</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.69%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of November 6, 2006, there were 39,164,155 shares of ECD&#146;s Common Stock outstanding.</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>Page 1 of 41 Pages</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><B>ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES<BR><BR>CONSOLIDATED FINANCIAL STATEMENTS<BR><BR>TABLE OF CONTENTS</B></FONT></P>

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<TD align=left colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>PART I &#151; FINANCIAL INFORMATION</FONT></TD></TR>
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<TD style="TEXT-INDENT: 20px" align=left width="14%"><FONT face="Times New Roman, Times, Serif" size=2>Item 1.</FONT></TD>
<TD align=left width="80%" colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#toca">Financial Statements</A></FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>2</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 20px" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#toca">Consolidated Statements of Operations</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>2</FONT></TD></TR>
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<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 20px" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocb">Consolidated Balance Sheets &#150; Assets</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>3</FONT></TD></TR>
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<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 20px" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocc">Consolidated Balance Sheets &#150; Liabilities and Stockholders' Equity</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>4</FONT></TD></TR>
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<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 20px" align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocd">Consolidated Statements of Cash Flows</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5</FONT></TD></TR>
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<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;A</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#toce">Summary of Accounting Policies</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7</FONT></TD></TR>
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<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;B</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tocf">Accounts Receivable</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;C</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tocg">Inventories</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;D</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#toch">Joint Ventures and Investments</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;E</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#toci">Liabilities</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;F</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tocj">Line of Credit</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>24</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;G</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tock">Commitments</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>24</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;H</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tocl">Product Sales, Royalties, Revenues from Product Development Agreements,</A><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<A href="#tocm">Nonrefundable Advance Royalties and License and Other Agreements</A></FONT></TD>
<TD vAlign=bottom align=right><FONT face="Times New Roman, Times, Serif" size=2>25</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="TEXT-INDENT: 9px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE&nbsp;I</FONT></TD>
<TD align=left colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&#150;&nbsp;&nbsp;
<A href="#tocm">Business Segments</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>Item 2.</FONT></TD>
<TD align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocn">Management's Discussion and Analysis of Financial Condition and Results of Operations</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>29</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>Item 3.</FONT></TD>
<TD align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#toco">Quantitative and Qualitative Disclosures about Market Risk</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>Item 4.</FONT></TD>
<TD align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocp">Controls and Procedures</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39</FONT></TD></TR>
<TR style="LAYOUT-GRID-LINE: 3.5em" vAlign=bottom>
<TD align=left colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>PART II &#151; OTHER INFORMATION</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>Item 1A.</FONT></TD>
<TD align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocq">Risk Factors</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>40</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>Item 6.</FONT></TD>
<TD align=left colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocr">Exhibits and Reports on Form 8-K</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>40</FONT></TD></TR>
<TR style="LAYOUT-GRID-LINE: 3.5em" vAlign=bottom>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>
<A href="#tocs">SIGNATURES</A></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>41</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 19.69%; 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 face="Times New Roman, Times, Serif" size=2>i</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=center width="100%" noShade SIZE=2>

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

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT>
<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: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>PART I&nbsp;&nbsp;&#150;&nbsp;&nbsp;FINANCIAL INFORMATION</U></FONT></P>

<A name=toca>&nbsp;</A>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2><U>Item 1</U>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Financial Statements</U></FONT></P>

<P style="MARGIN-TOP: 4pt; MARGIN-BOTTOM: 4pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>CONSOLIDATED STATEMENTS OF OPERATIONS</U><BR>(Unaudited)</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR style="PADDING-BOTTOM: 0.1em" 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>Three Months Ended<BR>September 30,</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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="PADDING-TOP: 0.23em" vAlign=top>
<TD align=left width="50%"><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="9%"><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="9%"><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="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Product sales</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,857,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19,266,801</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>663,723</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>1,183,170</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>2,954,176</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>1,896,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Revenues from product development agreements with related parties</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>151,078</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>415,263</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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;Total 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>3,105,254</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>2,312,137</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>258,095</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>258,095</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>297,298</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>227,333</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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 REVENUES</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>27,182,244</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>23,247,536</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.23em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EXPENSES</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,004,287</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>15,859,451</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>2,573,703</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>1,871,302</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>8,175,114</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>8,504,612</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Patents</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>694,495</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>586,866</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Patent defense</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>166,273</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>19,440</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Operating, general and administrative (net)</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>4,911,982</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=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>3,190,028</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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 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>34,525,854</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>30,031,699</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.23em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LOSS FROM 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>(7,343,610</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>(6,784,163</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.23em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>OTHER INCOME (EXPENSE)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Interest income</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>5,270,446</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>796,554</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Interest expense</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>&#151;</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>(163,946</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Other nonoperating income (expense)</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>(228,511</FONT></TD>
<TD vAlign=top 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>(56,699</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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=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>5,041,935</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>575,909</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net 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>(2,301,675</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>(6,208,254</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Loss from Discontinued Operations</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>&#151;</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>(257,559</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<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><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,301,675</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,465,813</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic Net Loss Per Share</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Discontinued operations</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>&#151;</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>(.01</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.22</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Diluted Net Loss Per Share</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Continuing operations</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Discontinued operations</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>&#151;</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>(.01</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.1em" 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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.22</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</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: 2pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>See notes to consolidated financial statements.</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><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>2</FONT></P>

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

<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=tocb>&nbsp;</A>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>CONSOLIDATED BALANCE SHEETS</U></FONT></P>

<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>ASSETS</U></FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="98%" 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>September 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>2006</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=2><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD colSpan=2><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></TR>
<TR vAlign=bottom>
<TD align=left width="50%"><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="9%"><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="9%"><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="PADDING-BOTTOM: 0.2em; PADDING-TOP: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cash, including cash equivalents of $63,106,000 at September 30,</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006 and $164,311,000 at June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>63,359,947</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>164,961,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Short-term investments</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>314,354,816</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>&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></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>27,952,611</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>27,885,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>22,985,752</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>21,526,795</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Prepaid and Other 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>2,883,893</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>1,552,336</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" 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;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>431,537,019</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>455,431,253</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>PROPERTY, PLANT AND EQUIPMENT</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em; PADDING-TOP: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>15,851,066</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>15,753,035</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>64,630,115</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>64,394,232</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>26,161,653</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" 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>106,642,834</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>106,308,920</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>(38,144,636</FONT></TD>
<TD vAlign=top 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>(35,965,977</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" 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>68,498,198</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>70,342,943</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em; PADDING-TOP: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>1,376,580</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&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>92,857,032</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>66,511,334</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" 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;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>162,731,810</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>138,230,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" 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>2,315,273</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>2,680,216</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" 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;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>596,584,102</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>596,342,326</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</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: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" 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: 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>3</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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=tocc>&nbsp;</A>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>CONSOLIDATED BALANCE SHEETS</U></FONT></P>

<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>LIABILITIES AND STOCKHOLDERS' EQUITY</U></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>

<TABLE cellSpacing=0 cellPadding=0 width="98%" 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>September 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>2006</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=2><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=top>
<TD align=left width="70%"><FONT face="Times New Roman, Times, Serif" size=2>CURRENT LIABILITIES</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="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="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="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23,408,368</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>21,208,060</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Salaries, wages and amounts withheld from employees</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>3,173,121</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>3,186,659</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Deferred revenues under business 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>76,722</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>349,454</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Current portion of deferred patent license fee</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>952,380</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>952,380</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Current installments on long-term 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>713,073</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>642,308</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" 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 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>28,323,664</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>26,338,861</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LONG-TERM 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>25,384,064</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>25,594,088</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LONG-TERM DEFERRED PATENT LICENSE FEE</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>6,904,765</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>&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></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<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=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>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=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>245,660</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" 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</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>60,858,153</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>59,321,469</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>COMMITMENTS (NOTE G)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>STOCKHOLDERS' EQUITY</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Capital Stock</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Common Stock, par value $0.01 per share:</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" 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 style="PADDING-TOP: 0.2em" 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; 39,091,155 shares at September 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 39,058,610 shares at 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>390,912</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>390,586</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Additional paid-in capital</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>841,497,816</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>&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></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Accumulated deficit</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>(306,089,295</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>(303,787,620</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss)</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>(73,484</FONT></TD>
<TD vAlign=top 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>(120,908</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<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 STOCKHOLDERS' EQUITY</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>535,725,949</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>537,020,857</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=top>
<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 &amp; STOCKHOLDERS' EQUITY</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>596,584,102</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>596,342,326</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</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: 8pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" 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>4</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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=tocd>&nbsp;</A>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 6pt; MARGIN-BOTTOM: 6pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>CONSOLIDATED STATEMENTS OF CASH FLOWS</U><BR>(Unaudited)</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="99%" border=0>
<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>Three Months Ended<BR>September 30,</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 vAlign=top>
<TD align=left width="71%"><FONT face="Times New Roman, Times, Serif" size=2>OPERATING ACTIVITIES:</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 vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,301,675</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,465,813</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;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities:</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;Depreciation and amortization</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>1,981,723</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>1,982,345</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;Bad debt expense</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>1,051,121</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>24,614</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;Amortization of deferred nonrefundable patent license fee</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>(238,095</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>(238,095</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of premium/discount on investments</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>533,977</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=center><FONT face="Times New Roman, Times, Serif" size=2>&#151;</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;Changes in nonrefundable advance royalties</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>&#151;</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>(8,733</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock and stock options issued for services rendered</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>603,294</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>999,199</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=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Gain) loss on sale of 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>403,750</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>729</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;Retirement liability</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>(9,557</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>75,084</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;Other</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>(9,946</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=center><FONT face="Times New Roman, Times, Serif" size=2>&#151;</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;Changes in working capital:</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;Accounts receivable</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>(1,118,617</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>2,539,578</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;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>(1,458,957</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>(1,482,258</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other 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>(1,370,364</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>(1,081,902</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</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>2,186,770</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>(1,921,811</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenues under business agreements</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>(272,732</FONT></TD>
<TD vAlign=top 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>(392,944</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NET CASH USED IN OPERATING ACTIVITIES</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>(19,308</FONT></TD>
<TD vAlign=top 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>(5,970,007</FONT></TD>
<TD vAlign=top align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>INVESTING ACTIVITIES:</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;Purchases of property, plant and equipment (including</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;construction in progress)</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>(26,472,729</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>(10,642,800</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;&nbsp;&nbsp;&nbsp;Purchases of investments</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>(222,798,488</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=center><FONT face="Times New Roman, Times, Serif" size=2>&#151;</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;Proceeds from maturities of investments</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>100,178,722</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 vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of investments</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>47,250,000</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=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>&#151;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES</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>(101,842,495</FONT></TD>
<TD vAlign=top 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>1,197,726</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.4em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>FINANCING ACTIVITIES:</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;Principal payments under short-term and long-term debt obligations </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 assets under capitalized lease 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>(129,702</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>(88,768</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;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options</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>356,049</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>9,354,407</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NET CASH PROVIDED BY FINANCING ACTIVITIES</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>226,347</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>9,265,639</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>EFFECT OF EXCHANGE RATE CHANGES ON CASH AND</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;CASH EQUIVALENTS</FONT></TD>
<TD align=right style="BORDER-BOTTOM: #000000 1px solid"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right style="BORDER-BOTTOM: #000000 1px solid"><FONT face="Times New Roman, Times, Serif" size=2>33,421</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right style="BORDER-BOTTOM: #000000 1px solid"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right style="BORDER-BOTTOM: #000000 1px solid"><FONT face="Times New Roman, Times, Serif" size=2>(127,039</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</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>(101,602,035</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>4,366,319</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</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>164,961,982</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=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>84,295,571</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>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=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>63,359,947</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>88,661,890</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</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: 8pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" 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>5</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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<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: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2><U>CONSOLIDATED STATEMENTS OF CASH FLOWS</U><BR>(Unaudited)</FONT></P>

<TABLE cellSpacing=0 cellPadding=0 width="98%" border=0>
<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>Three Months Ended<BR>September 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="PADDING-BOTTOM: 0.75em; PADDING-TOP: 0.75em" vAlign=bottom>
<TD align=left width="55%"><FONT face="Times New Roman, Times, Serif" size=2>SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:</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="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT><BR></TD></TR>
<TR style="PADDING-BOTTOM: 0.5em; PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest, including capitalized interest</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>345,762</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>227,855</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT><BR></TD></TR>
<TR style="PADDING-BOTTOM: 0.5em; PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes</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>&#151;</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>707,302</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT><BR></TD></TR>
<TR style="PADDING-BOTTOM: 0.5em; PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncash transactions:</FONT><BR></TD></TR>
<TR style="PADDING-BOTTOM: 0.5em; PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation allocated to construction in progress</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>195,492</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>&#151;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 30%" vAlign=bottom>
<TD width="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="18%" colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" 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>6</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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=toce>&nbsp;</A>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Basis of Presentation</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The unaudited consolidated financial statements of Energy Conversion Devices, Inc. (&#147;ECD&#148; or &#147;the Company&#148;) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (&#147;SEC&#148;). Certain information and disclosures normally included in ECD&#146;s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. The information presented as of September 30, 2006 and for the three-month period ended September 30, 2006 is unaudited, but includes all adjustments that ECD&#146;s management believes to be necessary for the fair presentation of results for the periods presented. The results for interim periods are not necessarily indicative of results to be expected for the year. These consolidated condensed
financial statements should be read in conjunction with ECD&#146;s audited financial statements for the fiscal year ended June 30, 2006, which are included as part of ECD&#146;s Annual Report on Form 10-K for the fiscal year ended June 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Nature of Business</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The consolidated financial statements include the accounts of ECD and its 100%-owned manufacturing and sales subsidiary United Solar Ovonic Corp. (&#147;United Solar Ovonic&#148;) and its approximately 91%-owned subsidiary Ovonic Battery Company, Inc. (&#147;Ovonic Battery&#148;) (collectively the "Company"). No minority interest related to Ovonic Battery is recorded in the consolidated financial statements because there is no additional funding requirement by the minority shareholders. The Company has a number of strategic alliances and, as of September 30, 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 (&#147;Chevron&#148;), each having 50% interest in the joint venture and (ii) Ovonyx, Inc., a 39.5%-owned (31.3%
on a fully diluted basis after giving effect to exercise of stock options and warrants) 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>At September 30 and June 30, 2006, 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 </FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>7</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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<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>than technology, it recognizes its proportionate share of any losses until the investment reaches zero.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Discontinued Operations</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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. 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>For the quarterly period ended September 30, 2005, the Company recorded the following results of its metal hydride materials manufacturing business as a discontinued operation in accordance with Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 144:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="60%" border=0>
<TR vAlign=top>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR style="PADDING-BOTTOM: 0.15em" vAlign=top>
<TD align=left width="70%"><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>$</FONT></TD>
<TD align=right width="15%"><FONT face="Times New Roman, Times, Serif" size=2>30,194</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Costs and expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>287,753</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net loss from discontinued operations</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" noWrap align=right><FONT face="Times New Roman, Times, Serif" size=2>(257,559</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2></FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Use of Estimates</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Reclassifications</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Certain prior year amounts have been reclassified to conform with fiscal year 2007 presentation.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Short-Term Investments</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company has evaluated its investment policies consistent with SFAS No. 115, &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; and determined that all of its investment securities are classified as available-for-sale.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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=2 width="98%" border=0>
<TR vAlign=bottom>
<TH colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=4><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=4><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=4><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=5><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=4><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=9><FONT face="Times New Roman, Times, Serif" size=2>Gross Unrealized</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD colSpan=5><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 style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>Amortized Cost</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>Gains</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>(Losses)</FONT></TD>
<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>Estimated <BR>Fair Value</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="20%"><FONT face="Times New Roman, Times, Serif" size=2>September 30, 2006</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right 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></FONT></TD>
<TD align=left width="3%"><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="3%"><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="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="3.5%"><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="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="2.5%"><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="6.5%"><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></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>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>113,950</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</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=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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>113,950</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>&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=left></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;94,500</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>
<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>20</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>&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>(7)</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></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>94,513</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 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=left></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;80,324</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>
<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></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=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(55)</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></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>80,269</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 vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Certificates of Deposit</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left></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>&nbsp;25,603</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>
<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>24</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>&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)</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></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>25,623</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 vAlign=top>
<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></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>314,377</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>44</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>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(66)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>314,355</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 vAlign=bottom>
<TD align=left colSpan=21><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>&nbsp;</FONT></TD>
<TD align=left></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>85,950</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</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=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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</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>&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=left></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;45,970</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>
<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</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>&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>(15)</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></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>45,957</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 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=left></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;64,676</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>
<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>4</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>&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>(8)</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></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>64,672</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 vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Certificates of Deposit</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left></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>&nbsp;42,945</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>
<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</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>&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>(20)</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></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=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 vAlign=top>
<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></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,541</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>7</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>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(43)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</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>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><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 face="Times New Roman, Times, Serif" size=2>9</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>

<!-- EEDocs PBStart-->
<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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="98%" border=0>
<TR vAlign=bottom>
<TH colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR style="PADDING-BOTTOM: 0.15em" vAlign=bottom>
<TD 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>September 30, 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=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></FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD colSpan=2><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>Amortized Cost</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>Market Value</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>Amortized Cost</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>Market Value</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="40%"><FONT face="Times New Roman, Times, Serif" size=2>Due in less than one year</FONT></TD>
<TD align=left width="1%"><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>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>121,161</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>121,137</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>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>115,591</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>115,566</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>79,266</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>79,268</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>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></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Due after five 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" 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>113,950</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>113,950</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=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="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<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 style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>314,377</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>314,355</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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>239,541</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</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></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Capitalized Interest</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Interest on capitalized lease obligations is capitalized during active construction periods of equipment. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The following is a summary of the capitalized interest and interest incurred (in thousands):</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="84%" border=0>
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Three Months Ended <BR>September 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="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="38%"><FONT face="Times New Roman, Times, Serif" size=2>Total Interest Incurred</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="5.5%"><FONT face="Times New Roman, Times, Serif" size=2>346</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="5.5%"><FONT face="Times New Roman, Times, Serif" size=2>226</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Less Interest Capitalized</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>(346</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>(62</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net Interest Expense</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>164</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Overhead and Operating, General and Administrative Allocations</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The following is a summary of the gross operating, general and administrative expenses and the aforementioned allocations (in thousands):</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>

<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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></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%" border=0>
<TR vAlign=bottom>
<TH colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD>
<TD align=center colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>Three Months Ended <BR>September 30,</FONT></TD>
<TD><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>&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>&nbsp;</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>&nbsp;</TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="70%" colSpan=2><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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>8,452</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,983</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>Less&nbsp;&nbsp;</FONT></TD>
<TD align=left width="63%"><FONT face="Times New Roman, Times, Serif" size=2>-&nbsp;&nbsp;allocations to product development and research</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>(3,068</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>&nbsp;</FONT></TD>
<TD align=right width="8%"><FONT face="Times New Roman, Times, Serif" size=2>(3,512</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;</FONT></TD>
<TD align=left width="63%"><FONT face="Times New Roman, Times, Serif" size=2>-&nbsp;&nbsp;allocations to cost of revenues from product development agreements</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>(472</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>(281</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left colSpan=2><FONT face="Times New Roman, Times, Serif" size=2>Remaining Expenses</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>4,912</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,190</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Stock-Based Compensation</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>ECD has common stock reserved for issuance as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="96%" border=0>
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=7><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></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=7><FONT face="Times New Roman, Times, Serif" size=2>Number of Shares</FONT></TD></TR>

<TR style="PADDING-TOP: 0.2em" 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>September 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=3><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2006</FONT></TD></TR>


<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD ALIGN="LEFT" WIDTH="50%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock options</FONT></TD>

<TD WIDTH="2%"><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>3,206,014&nbsp;</FONT></TD>
<TD ALIGN="LEFT" WIDTH="4%"><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="8%"><FONT face="Times New Roman, Times, Serif" size=2>3,239,559&nbsp;</FONT></TD>
<TD ALIGN="LEFT" WIDTH="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>

<TR style="PADDING-BOTTOM: 0.25em" 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;Warrants</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>400,000&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>
<TD><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&nbsp;</FONT></TD>
<TD ALIGN="LEFT"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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;Convertible Investment Certificates</FONT></TD>
<TD><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>5,210&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>
<TD><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>5,210&nbsp;</FONT></TD>
<TD ALIGN="LEFT"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" 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 RESERVED SHARES</FONT></TD>
<TD><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>3,611,224&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>
<TD><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>3,644,769&nbsp;</FONT></TD>
<TD ALIGN="LEFT"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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. We issue new shares to satisfy stock option exercises.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>11</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006 and 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Total net stock-based compensation expense is attributable to the granting of and the remaining requisite service periods of stock options previously granted. Compensation expense attributable to net stock-based compensation in the three months ended September 30, 2006 and 2005 was $592,000 and $500,000, respectively, increasing both basic and diluted loss $0.02 per share for both periods. As of September 30, 2006, the total unrecognized compensation cost related to nonvested stock grants was $1,553,000 and the related weighted-average period over which it is expected to be recognized is approximately 1.59 years.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of the transactions during the three months ended September 30, 2006 with respect to ECD&#146;s 1995 and 2000 Stock Option Plans follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TH width="37%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="7%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2.5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="4%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="6%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</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><FONT face="Times New Roman, Times, Serif" size=2>Shares</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=4><FONT face="Times New Roman, Times, Serif" size=2>Weighted-Average Exercise Price</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=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate Intrinsic <BR>Value <SUP>(1)</SUP> </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>Weighted-Average Contractual Life Remaining in Years</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding at June 30, 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>1,349,263</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>$</FONT></TD>
<TD ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>19.63</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD 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 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>6.10</FONT></TD>
<TD align=center><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></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Granted at fair value</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>15,000</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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>32.90</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Exercised</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(3,545)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>17.68</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>
<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 style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Expired</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=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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Forfeited</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>(2,700)</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>$</FONT></TD>
<TD ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>10.40</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding at September 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,358,018</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD STYLE="BORDER-BOTTOM: #000000 3px double" ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>19.80</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>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>23,657,289</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>5.89</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Exercisable at September 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,091,150</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD STYLE="BORDER-BOTTOM: #000000 3px double" ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>19.80</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>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>18,815,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>5.42</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Exercisable at June 30, 2006</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,013,245</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD STYLE="BORDER-BOTTOM: #000000 3px double" ALIGN="RIGHT"><FONT face="Times New Roman, Times, Serif" size=2>19.86</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 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>16,789,349</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 style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>5.44</FONT></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></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<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></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>
<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>
<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=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="PADDING-LEFT: 5em" align=left width="27%" color=gray noShade SIZE=1>

<TABLE cellSpacing=0 cellPadding=0 width="90%" align=center border=0>
<TR vAlign=top>
<TD align=center width="4.2%"><FONT face="Times New Roman, Times, Serif" size=2>(1)</FONT></TD>
<TD>
<P style="MARGIN-LEFT: 0.35pt; TEXT-INDENT: 0.35pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" 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: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>12</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The weighted average fair value of stock options granted and the total intrinsic value of stock options exercised during the three months ended September 30, 2006 and 2005 were as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="91%" border=0>
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></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>Three Months Ended <BR>September 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></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="PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="60%"><FONT face="Times New Roman, Times, Serif" size=2>Weighted average fair value of options granted</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9.5%"><FONT face="Times New Roman, Times, Serif" size=2>330,417</FONT></TD>
<TD align=left width="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=center width="9.5%"><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 style="PADDING-TOP: 0.25em" 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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>93,095</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>6,632,404</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: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>In September 1993, ECD entered into Stock Option Agreements with Stanford R. Ovshinsky and Dr. Iris M. Ovshinsky granting an option to purchase 150,000 shares (391,294 as of September 30, 2006) and 100,000 shares (260,865 as of September 30, 2006) to Mr. and Dr. Ovshinsky, respectively. The weighted average exercise price of the outstanding stock options is $17.66 per share at September 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The Stock Option Agreements provided for periodic antidilution protection adjustments based on changes in the number of outstanding shares of ECD Common Stock. In June 2005, the Agreements were amended by deleting the antidilution protection adjustment provision, and no further options will be granted under the Agreements. In consideration of the agreements by Mr. and Dr. Ovshinsky to such amendment, the Company's Compensation Committee approved the grant of options to Mr. Ovshinsky (100,000 shares) and to Dr. Ovshinsky (65,000 shares) under the Company's 2000 Non-Qualified Stock Option Plan. Upon the death of Dr. Ovshinsky on August 16, 2006, and pursuant to the terms of the Stock Option Agreements and our stock option plans, options owned by Dr. Ovshinsky were transferred to her estate.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>13</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of the transactions during the three months ended September 30, 2006 with respect to the above Agreements follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TH width="38%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="6.5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="4%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="7%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</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><FONT face="Times New Roman, Times, Serif" size=2>Shares</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=4><FONT face="Times New Roman, Times, Serif" size=2>Weighted-Average Exercise Price</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=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate Intrinsic Value <SUP>(1)</SUP> </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>Weighted-Average Contractual Life Remaining in Years</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2006</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>652,159</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>$</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>17.66</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>12,241,480&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>
<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=center><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></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Granted at fair value</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>&#151;</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>&nbsp;</FONT></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 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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Exercised</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>&#151;</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>&nbsp;</FONT></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 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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Expired</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>&#151;</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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Forfeited</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><FONT face="Times New Roman, Times, Serif" size=2>&#151;</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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at September 30, 2006</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=center><FONT face="Times New Roman, Times, Serif" size=2>652,159</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 style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>17.66</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>12,639,297&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>
<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></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 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=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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="PADDING-LEFT: 5em" align=left width="27%" color=gray noShade SIZE=1>

<TABLE cellSpacing=1 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=top>
<TD align=center width="4%"><FONT face="Times New Roman, Times, Serif" size=2>(1)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" 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> </TD></TR>
<TR vAlign=top>
<TD align=center width="4%"><FONT face="Times New Roman, Times, Serif" size=2>(2)</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>Twelve months after termination of employment other than voluntary termination.</FONT> </TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>On January 15, 1999, ECD entered into a Stock Option Agreement with Robert C. Stempel that granted Mr. Stempel an option to purchase up to 300,000 shares of Common Stock at an exercise price of $10.688 per share, the fair market value of the Common Stock as of the date of the Stock Option Agreement. The option, which is not subject to vesting requirements, may be exercised from time to time, in whole or in part, commencing as of the date of the Stock Option Agreement and ending on the tenth anniversary of such date.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>14</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of the transactions during the three months ended September 30, 2006 with respect to the above Agreements follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=bottom>
<TH width="38%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="6%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="4%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="4%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="2%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH width="1%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</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><FONT face="Times New Roman, Times, Serif" size=2>Shares</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=4><FONT face="Times New Roman, Times, Serif" size=2>Weighted-Average Exercise Price</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=2><FONT face="Times New Roman, Times, Serif" size=2>Aggregate Intrinsic Value <SUP>(1)</SUP> </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>Weighted-Average Contractual Life Remaining in Years</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.3em; PADDING-TOP: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at June 30, 2006</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>300,000</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>$</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>10.688</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>7,722,600</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>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;2.55</FONT></TD>
<TD align=center><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></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Granted at fair value</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>&#151;</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>&nbsp;</FONT></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 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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Exercised</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>(30,000)</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>$</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>10.688</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>
<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 style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Expired</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>&#151;</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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Forfeited</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><FONT face="Times New Roman, Times, Serif" size=2>&#151;</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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-TOP-COLOR: black" align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Outstanding and exercisable at September 30, 2006</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=center><FONT face="Times New Roman, Times, Serif" size=2>270,000</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 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>10.688</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 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>7,115,040</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>
<TD style="BORDER-BOTTOM: #000000 3px double" align=center><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;2.29</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></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<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></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>&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>
<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>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left colSpan=5><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<HR style="PADDING-LEFT: 5em" align=left width="27%" color=gray noShade SIZE=1>

<TABLE cellSpacing=1 cellPadding=0 width="98%" align=center border=0>
<TR vAlign=top>
<TD align=center width="4%"><FONT face="Times New Roman, Times, Serif" size=2>(1)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" 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> </TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006 and June 30, 2006, there were 407,000 and 430,000, respectively, 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>15</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of the status of the Company's nonvested shares as of September 30, 2006, and changes during the three months ended September 30, 2006, is presented below:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="85%" border=0>
<TR vAlign=bottom>
<TH colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center><FONT face="Times New Roman, Times, Serif" size=2>Nonvested Shares</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;Shares</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=4><FONT face="Times New Roman, Times, Serif" size=2>Weighted-Average Grant-Date Fair Value</FONT></TD></TR>
<TR style="PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="37%"><FONT face="Times New Roman, Times, Serif" size=2>Nonvested at June 30, 2006</FONT></TD>
<TD align=left width="2%">&nbsp;</TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="4%"><FONT face="Times New Roman, Times, Serif" size=2>430,000</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;$</FONT></TD>
<TD align=center width="7.5%"><FONT face="Times New Roman, Times, Serif" size=2>10.688</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Granted</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD width="2%">&nbsp; </TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Vested</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>(23,000)</FONT></TD>
<TD width="2%">&nbsp; </TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp;</TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>10.688</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Cancelled</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD 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 width="2%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp;</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="PADDING-TOP: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Nonvested at September 30, 2006</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=right><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>407,000</FONT></TD>
<TD width="2%"></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%">&nbsp; </TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;$</FONT></TD>
<TD align=center><FONT face="Times New Roman, Times, Serif" size=2>10.688</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Basic and Diluted Net Income (Loss) Per Share</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding. ECD uses the treasury stock method to calculate diluted earnings per share. Potential dilution exists from stock options and warrants. Weighted average number of shares outstanding and basic and diluted net income (loss) per share for the three months ended September 30 are computed as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="92%" border=0>
<TR vAlign=bottom>
<TH colSpan=2><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD colSpan=2><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="PADDING-TOP: 0.25em" vAlign=top>
<TD align=left width="57%"><FONT face="Times New Roman, Times, Serif" size=2>Weighted average number of shares outstanding:</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="9.5%"><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="9.5%"><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="PADDING-TOP: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&#151;&nbsp; for basic net income (loss) per share</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>39,070,061</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>29,016,006</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;&#151;&nbsp; for diluted net income (loss) per share</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>39,070,061</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>29,016,006</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>Net loss from continuing operations</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,301,675</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,208,254</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Loss on discontinued operations</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=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>(257,559</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Net loss</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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(2,301,675</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,465,813</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.3em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Basic net loss per share</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;Continuing operations</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</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;Discontinued operations</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=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>(.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<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 style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.22</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Diluted net loss per share</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;Continuing operations</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(.21</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</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;Discontinued operations</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=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>(.01</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.15em" vAlign=top>
<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 style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.06</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(.22</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: 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>16</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>

<!-- EEDocs PBStart-->
<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Due to the Company&#146;s net loss, the 2006 and 2005 weighted average shares of potential dilutive securities of 1,209,461 and 2,132,838, respectively, were excluded from the calculations of diluted net loss per share, as inclusion of these securities would have been antidilutive to the net loss per share. Additional securities of 12,466 were excluded from the 2006 calculation of weighted average shares of potential dilutive securities. Because of the relationship between the exercise prices and the average market price of ECD&#146;s Common Stock during this period, these securities would have been antidilutive regardless of the Company&#146;s net income or loss. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Recent Pronouncements</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>In February 2006, the Financial Accounting Standards Board (&#147;FASB&#148;) 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 its financial statements.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>In September 2006, the FASB issued SFAS No. 157, &#147;Fair Value Measurements,&#148; which defines fair value and establishes a framework for measuring fair value. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently assessing the potential impact that the adoption of SFAS No. 157 will have on our financial statements.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBStart-->
<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE A &#150; Summary of Accounting Policies (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (&#147;SAB&#148;) No. 108, &#147;Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements.&#148; SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment. SAB No. 108 is effective for fiscal years ending after November 15, 2006. We have assessed the effect of SAB No. 108 and it is not material.</FONT></P>

<A name=tocf>&nbsp;</A>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE B &#150; Accounts Receivable</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Accounts Receivable consist of the following:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="95%">
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="43%">
<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="8%"><FONT face="Times New Roman, Times, Serif" size=2>September 30,<BR>2006</FONT></TD>
<TD width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2>June 30,<BR>2006</FONT></TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Billed</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Trade</FONT></P>
</TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>23,318,609</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>22,244,261</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Related parties</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>174,048</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>228,310</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Other</FONT></P>
</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,316,516</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,038,267</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 50.25pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Subtotal</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>24,809,173</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>23,510,838</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Unbilled</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Trade</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>970,419</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>145,532</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Related parties</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>149,275</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>91,749</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Interest receivable</FONT></P>
</TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,052,306</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,204,646</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Royalties</FONT></P>
</TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,277,460</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,954,267</FONT></P>
</TD>
<TD width="1%">&nbsp;</TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Government contracts</FONT></P>
</TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,124,277</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%">&nbsp;</TD>
<TD vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>1,119,973</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 27.75pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Other</FONT></P>
</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>254,701</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>549,110</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 50.25pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Subtotal</FONT></P>
</TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>4,828,438</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD width="1%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>5,065,277</FONT></P>
</TD>
<TD width="1%"></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Less allowance for uncollectible accounts</FONT></P>
</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right>
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>(1,685,000</FONT></P>
</TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" width="1%">&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom align=right width="7%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>(691,000</FONT></P>
</TD>
<TD width="1%"><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom>
<P style="MARGIN-TOP: 1.5pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 3px double" width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 3px double" align=right>
<P style="MARGIN-TOP: 1.5pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>27,952,611</FONT></P>
</TD>
<TD align=left width="3%"></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 3px double" width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="PADDING-BOTTOM: 0in; PADDING-TOP: 0in; BORDER-BOTTOM: #000000 3px double" align=right width="7%">
<P style="MARGIN-TOP: 1.5pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>27,885,115</FONT></P>
</TD>
<TD width="1%"></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>18</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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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=tocg>&nbsp;</A>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE C &#150; Inventories</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Inventories (substantially all for United Solar Ovonic) are as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></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>September 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>2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left width="35%"><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>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>1,514,591</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="10%"><FONT face="Times New Roman, Times, Serif" size=2>2,034,485</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" 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>3,887,761</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>3,607,559</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Raw materials</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>17,583,400</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>15,884,751</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.1em" 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 width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>22,985,752</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>21,526,795</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: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The above amounts include an allowance for obsolescence of $1,276,000 and $1,164,000 as of September 30, 2006 and June 30, 2006, respectively.</FONT></P>

<P style="MARGIN-TOP: 19pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE D &#150; Joint Ventures and Investments</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Joint Ventures</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Cobasys</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 $238,000 as revenues from license and other agreements in each of the three months ended September 30, 2006 and 2005 in connection with the amortization of this fee.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company recorded revenues from Cobasys of $191,000 and $457,000 for the three months ended September 30, 2006 and 2005, respectively, for services performed on behalf of Cobasys (primarily for advanced product development and other matters).</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>

<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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<A name=toch>&nbsp;</A>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 18pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE D &#150; Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The following sets forth certain financial data regarding Cobasys that are derived from its financial statements:</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>COBASYS LLC AND SUBSIDIARY</FONT></P>

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

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

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

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="99%" border=0>
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=4><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></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>Three Months Ended<BR>September 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>July 17, 2001<BR>(date of inception) to</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></FONT>&nbsp;</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>&nbsp;</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>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=4><FONT face="Times New Roman, Times, Serif" size=2>September 30, 2006</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</TD></TR>
<TR vAlign=bottom>
<TD align=left width="47%"><FONT face="Times New Roman, Times, Serif" size=2>Revenue</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="5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="3%">&nbsp;</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="3%">&nbsp;</TD>
<TD align=left width="2%"><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 and prototype revenues</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,595,611</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>90,974</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>7,153,698</FONT></TD>
<TD align=left>&nbsp;</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;Contract research revenue</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>1,277,549</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>120,188</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>7,879,806</FONT></TD>
<TD align=left>&nbsp;</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;Licensing, royalty and other revenues</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>531,867</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=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>526,293</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>4,794,383</FONT></TD>
<TD align=left>&nbsp;</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;Total Revenue</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>3,405,027</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>737,455</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>19,827,887</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" 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=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>6,255,558</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>1,850,216</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>41,237,472</FONT></TD>
<TD align=left>&nbsp;</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;Research and development costs</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>5,465,776</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>4,722,623</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>108,954,192</FONT></TD>
<TD align=left>&nbsp;</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;Sales, marketing, and general and</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;administrative costs</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>2,961,178</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>2,442,898</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>42,807,296</FONT></TD>
<TD align=left>&nbsp;</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;Depreciation and amortization</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>1,140,421</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>834,235</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>14,117,450</FONT></TD>
<TD align=left>&nbsp;</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;Loss on asset and cost-basis impairment</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and disposal</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>1,225,358</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>16,060</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>10,561,173</FONT></TD>
<TD align=left>&nbsp;</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;Interest expense</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>2,033,452</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>595,203</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>5,933,170</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" 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;Total 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>19,081,743</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>10,461,235</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</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>223,610,753</FONT></TD>
<TD align=left>&nbsp;</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 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>(15,676,716</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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(9,723,780</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Deficit accumulated during the development stage</FONT></TD>
<TD align=left colSpan=6><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left>&nbsp;</TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(203,782,866</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=left>&nbsp;</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><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 face="Times New Roman, Times, Serif" size=2>20</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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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE D &#150; Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>COBASYS LLC AND SUBSIDIARY</FONT></P>

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

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

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

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><U><FONT face="Times New Roman, Times, Serif" size=2>(Unaudited)</FONT></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR vAlign=bottom>
<TD align=left width="65%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>September 30,</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=3><FONT face="Times New Roman, Times, Serif" size=2>June 30,</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="65%"><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>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=3><FONT face="Times New Roman, Times, Serif" size=2>2006</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left width="65%"><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="12%"><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD>
<TD align=left width="6%"><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="12%"><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="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Current Assets:</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>162,253</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</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 style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts and note receivable (net of allowance of $2,750</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as of September 30, 2006 and 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>2,726,525</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>2,862,241</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&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>9,977,742</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>7,206,389</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&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>1,014,389</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>453,546</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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 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>13,880,909</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>11,039,381</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&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>48,759,761</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>42,782,979</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&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>950,826</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>748,508</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em" 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 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>63,591,496</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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>54,570,868</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Liabilities and Members&#146; Interest</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Current Liabilities:</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>11,139,974</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>9,025,145</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenues &#151; 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>1,904,762</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>1,936,762</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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 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>13,044,736</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>10,961,907</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&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>13,848,249</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>14,423,014</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Redeemable preferred interest &#151; related party</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>94,269,216</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>71,623,539</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&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>2,212,161</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>1,668,558</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>123,374,362</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>98,677,018</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=middle>
<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>(59,782,866</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>(44,106,150</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.15em" 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 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>63,591,496</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>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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE D &#150; Joint Ventures and Investments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Ovonyx</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006, ECD owns 39.5% (31.3% on a fully diluted basis) of Ovonyx, with Mr. Tyler Lowrey, Intel Capital and other investors owning the remainder of the shares outstanding. ECD is entitled to receive 0.5% of the annual gross revenues of Ovonyx.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 $150,000 minimum royalty 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.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>ECD recorded revenues from Ovonyx of $144,000 and $164,000 for the three months ended September 30, 2006 and 2005, respectively, representing services provided to this joint venture. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Ovonic Hydrogen Systems</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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). 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: 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>

<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=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<A name=toci>&nbsp;</A>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE E &#150; Liabilities</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Warranty Liability</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company estimates the liability for product warranty costs based upon its past experience and best estimate of future warranty claims. The following is a summary of the changes in the product warranty liability during the three months ended September 30, 2006 and 2005:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="85%" border=0>
<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>Three Months Ended<BR>September 30,</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="PADDING-BOTTOM: 0.2em; PADDING-TOP: 0.15em" vAlign=bottom>
<TD align=left width="49%"><FONT face="Times New Roman, Times, Serif" size=2>Liability beginning of the period</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,835,136</FONT></TD>
<TD align=left width="4%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,635,532</FONT></TD>
<TD align=left width="3.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Amounts accrued for as warranty costs</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>177,558</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>(27,618</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)<SUP>(1)</SUP></FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.2em" 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=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>(68,337</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>(77,108</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Liability at September 30</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,944,357</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,530,806</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>

</DIV>
<HR style="TEXT-INDENT: 40px" align=left width="27%" color=gray SIZE=1>

<DIV align=left>
<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="80%" border=0>
<TR vAlign=top>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top width="5%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 5pt; PADDING-TOP: 5pt" vAlign=top width="5%">
<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>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 5pt; PADDING-TOP: 5pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>During the three months ended September 30, 2005, 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Government Contracts, Reserves and Liabilities</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 has questioned the allowability and the allocability of certain costs as well as the Company&#146;s methodology for allocating independent research and development to its indirect cost pools. The Company has a reserve of $2,383,000 and $2,343,000 at September 30, 2006 and June 30, 2006, respectively.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>In connection with a 1992 battery development contract with the United States Advanced Battery Consortium (&#147;USABC&#148;), partially funded by the Department of Energy (&#147;DOE&#148;), 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, from licensing technologies developed pursuant to USABC funding in those applications, 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. The Company has a liability for this item of approximately $2,000 at both September 30, 2006 and June 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>23</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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<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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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<A name=tocj>&nbsp;</A>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE F &#150; Line of Credit</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 8.44%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006, the Company has 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 September 30, 2006, the Company had outstanding letters of credit of $2,161,000 against the line of credit.</FONT></P>

<A name=tock>&nbsp;</A>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE G &#150; Commitments</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 solar cell manufacturing equipment being constructed for the Auburn Hills and Greenville facilities in Michigan. The Company's total obligations under purchase commitments at September 30, 2006, were $88,745,000 ($77,253,000 of which was due within one year and $11,492,000 thereafter) compared to $42,210,000 at June 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The increase in purchase commitments is primarily due to additional commitments to purchase steel for the new Auburn Hills facility and construction and equipment commitments for the new Greenville facility.</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>

<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="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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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<A name=tocl>&nbsp;</A>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE H &#150; Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>A summary of all of the Company&#146;s revenues follows.</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR vAlign=bottom>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></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>Three Months Ended<BR>September 30,</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left width="65%"><FONT face="Times New Roman, Times, Serif" size=2>Product sales</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="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="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="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,142,025</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,146,740</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>&#151;</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>397,580</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>715,849</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>722,481</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>22,857,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>19,266,801</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Royalties</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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 style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transportation</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>310,074</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>704,989</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer</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>378,764</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>425,600</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photonic devices</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>(48,873</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>46,323</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ovonic Universal Memory</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>23,758</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>6,258</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>663,723</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,183,170</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Revenues from product development agreements</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photovoltaics</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,922,289</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,421,461</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Photonic devices</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>250,000</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>163,402</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>250,627</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>84,222</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>419,330</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>205,377</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=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>111,930</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=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>22,412</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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>2,954,176</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>1,896,874</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Revenues from product development agreements &#151; related parties</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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 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>151,078</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>415,263</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,105,254</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,312,137</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>License and other agreements</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>258,095</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>258,095</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>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>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE H &#150; Product Sales, Royalties, Revenues from Product Development Agreements, Nonrefundable Advance Royalties and License and Other Agreements (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>At September 30 and June 30, 2006, the Company deferred recognition of revenue in the amount of $245,660, respectively, relating to nonrefundable advance royalty payments.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Creditable royalties earned and recognized as revenue in 2006 and 2005 were zero and $9,000, 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The quarters ended September 30, 2006 and 2005 included license fees of $238,000 in each period resulting from the amortization over 10.5 years of the $10,000,000 payment received in the MEI settlement (see Note D).</FONT></P>

<A name=tocm>&nbsp;</A>
<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE I &#150; Business Segments</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 photonic devices and Ovonic cognitive computer (including the Ovonic quantum control device) technologies, for which we are continuing research and development activities in an effort to define
marketable technologies that can result in commercial 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>26</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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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE I &#150; Business Segments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>The Company's operations by business segments were as follows:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=2 cellPadding=0 width="99%">
<TR vAlign=bottom>
<TH><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH>
<TH colSpan=3><FONT face="Times New Roman, Times, Serif" size=2></FONT></TH></TR>
<TR vAlign=bottom>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center colSpan=14><FONT style="BORDER-BOTTOM: #000000 1px solid" face="Times New Roman, Times, Serif" size=2>Financial Data by Business Segment<BR>(in thousands)</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>United Solar Ovonic</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>Ovonic Battery</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>ECD</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>Consolidating Entries</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>Consolidated</FONT></TD>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left width="34%"><FONT face="Times New Roman, Times, Serif" size=2>Revenues<SUP>(1)</SUP></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></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></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></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="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=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></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;Three months ended</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>23,860</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,860</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>19,861</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(18,399</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>27,182</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>19,359</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>2,964</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>11,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></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>(10,190</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>23,248</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Operating Income (Loss)<SUP>(1)</SUP></FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>1,469</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,521</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,761</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(531</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(7,344</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>1,680</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>(724</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>(7,592</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>(148</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>(6,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Depreciation Expense</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,434</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>101</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>447</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</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=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>1,376</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>86</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>520</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></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>1,982</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2></FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Capital Expenditures</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Three months ended</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>26,953</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>39</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>218</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(542</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>26,668</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR vAlign=bottom>
<TD style="TEXT-INDENT: 20px" align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 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>10,285</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>229</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>295</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>(166</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>10,643</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.5em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Identifiable Assets</FONT></TD></TR>
<TR vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2006</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>224,442</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>5,544</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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>593,144</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>(226,546</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>596,584</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;September 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>100,438</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>5,011</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>221,553</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>(127,753</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>199,249</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>


<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR vAlign=top>
<TD colSpan=7>
<HR align=left width="30%" color=gray SIZE=1>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="6%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="79%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Excludes discontinued operations (Ovonic Battery) at September 30, 2005.</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom width="14%">
<P style="MARGIN-TOP: 3pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT size=1></FONT>&nbsp;</P>
</TD></TR>
<TR>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=top width="6%">
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>(2)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 5.4pt; PADDING-LEFT: 5.4pt; PADDING-BOTTOM: 0in; PADDING-TOP: 0in" vAlign=bottom colSpan=2>
<P style="MARGIN-TOP: 2pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Principally, the sale by ECD to United Solar of the solar PV module machinery and equipment which is eliminated in consolidation. The ECD revenues, excluding the consolidating entry, were $1,474,000 and $933,000 at September 30, 2006 and 2005, respectively.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><FONT face="Times New Roman, Times, Serif" size=2>Notes to Consolidated Financial Statements</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 10pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>NOTE I &#150; Business Segments (Continued)</FONT></U></P>

<P style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 12pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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="80%" border=0>
<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>Three Months Ended<BR>September 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="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0.15em" vAlign=bottom>
<TD align=left width="36%"><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>$</FONT></TD>
<TD align=right width="8.5%"><FONT face="Times New Roman, Times, Serif" size=2>13,721,704</FONT></TD>
<TD align=left width="4.5%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="8.5%"><FONT face="Times New Roman, Times, Serif" size=2>9,435,433</FONT></TD>
<TD align=left width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Germany</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>8,179,350</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>8,712,886</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>China</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>767,998</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>1,207,227</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Japan</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>779,628</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>1,295,408</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" 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" 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>3,733,564</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>2,596,582</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.05em" 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 width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>27,182,244</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>23,247,536</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: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The composition of the Company's property, plant and equipment, net of accumulated depreciation, is principally in the United States as of September 30 and June 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 12pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The following customers represented a significant portion of product sales in the United Solar segment:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="60%" border=0>
<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>Three Months Ended<BR>September 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="PADDING-BOTTOM: 0.25em; PADDING-TOP: 9px" vAlign=bottom>
<TD align=left width="30%"><FONT face="Times New Roman, Times, Serif" size=2>Solar Integrated Technologies Inc.</FONT></TD>
<TD align=right width="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="7%"><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="2%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=center width="7%"><FONT face="Times New Roman, Times, Serif" size=2>27%</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0px" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Alwitra Flachdach Systeme GmbH</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>17%</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>10%</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0px" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Actus Lend Lease</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>10%</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="PADDING-BOTTOM: 0.25em; PADDING-TOP: 0px" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Biohaus PV Handels GmbH</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>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=center><FONT face="Times New Roman, Times, Serif" size=2>15%</FONT></TD>
<TD align=right><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>28</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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<HR align=center width="100%" noShade SIZE=2>

<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

<!-- EEDocs PBEnd-->
<A name=tocn>&nbsp;</A>
<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: 8pt; PADDING-TOP: 0in" vAlign=top width="8.5%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Item 2</FONT></U><FONT face="Times New Roman, Times, Serif" size=2>.</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 8pt; PADDING-TOP: 0in" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></U></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>This section summarizes significant factors affecting the Company&#146;s consolidated operating results, financial condition and liquidity for the three months ended September 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 and the Company&#146;s filed Annual Report on Form 10-K for the year ended June 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Overview</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 Universal
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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>These business activities represent application of our overall business strategy to commercialize our 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>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD vAlign=top width="12%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;</FONT></P>
</TD>
<TD vAlign=top align=left width="88%"><FONT face="Times New Roman, Times, Serif" 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 88% and 83% of our total revenue in the three months ended September 30, 2006 and 2005, respectively. Additionally, our United Solar Ovonic segment generated operating income of $1,469,000 in the three months ended September 30, 2006, while our other two segments had combined operating losses of $8,282,000 (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><BR><BR></TD></TR>
<TR>
<TD vAlign=top width="12%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;</FONT></P>
</TD>
<TD vAlign=top align=left width="88%"><FONT face="Times New Roman, Times, Serif" 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</I></FONT><BR><BR></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 11.72%; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 11.72%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 12pt; MARGIN-LEFT: 12%; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2><I>market in particular, and we will require significant capital to fund this expansion</I></FONT></I><FONT face="Times New Roman, Times, Serif" size=2>. 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 phases of this expansion with the proceeds from our March 2006 common stock offering. We will require additional funding for subsequent phases through 2010, which we may obtain from equity and debt financing, business agreements and other sources.<BR></FONT></P>

<DIV align=left>
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD vAlign=top width="12%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;</FONT></P>
</TD>
<TD vAlign=top align=left width="88%"><FONT face="Times New Roman, Times, Serif" 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 &#151; Cobasys and Ovonyx &#151; 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 September 30,
2006 and June 30, 2006.</FONT><BR><BR></TD></TR>
<TR>
<TD vAlign=top width="12%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: right"><FONT face="Times New Roman, Times, Serif" size=2>&#149;&nbsp;&nbsp;&nbsp;</FONT></P>
</TD>
<TD vAlign=top align=left width="88%"><FONT face="Times New Roman, Times, Serif" 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 photonic devices and Ovonic cognitive computer (including the Ovonic quantum control device), 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><BR><BR></TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Key indicators of Financial Condition and Operating Performance</FONT></I><FONT face="Times New Roman, Times, Serif" 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: 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>

<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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<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Results of Operations</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The quarter-over-quarter comparisons contained in this section exclude discontinued operations (see &#147;Other Income/Expense&#148; below).</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left"><I><FONT face="Times New Roman, Times, Serif" size=2>Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The following table summarizes each of our business segment&#146;s operating results (in thousands) for the three months ended September 30, 2006 and 2005:</FONT></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="98%" 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>Revenues</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>Income (Loss) from Operations</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>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="PADDING-BOTTOM: 0.3em; PADDING-TOP: 0.3em" vAlign=bottom>
<TD align=left width="35%"><FONT face="Times New Roman, Times, Serif" size=2>United Solar Ovonic</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>23,860</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>19,359</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>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,469</FONT></TD>
<TD align=left width="3%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right width="1%"><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right width="9%"><FONT face="Times New Roman, Times, Serif" size=2>1,680</FONT></TD>
<TD align=left width="1%"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Ovonic Battery<SUP>(1)</SUP></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>1,860</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>2,964</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>(1,521</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>(724</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Energy Conversion Devices</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>19,861</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></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>11,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(2)</SUP></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>(6,761</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>(7,592</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.3em" vAlign=bottom>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Consolidating Entries</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>(18,399</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>(10,190</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>(531</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>(148</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
<TR style="PADDING-BOTTOM: 0.1em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>Consolidated</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>27,182</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>23,248</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>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(7,344</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,784</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>


<HR align=left width="30%" color=gray SIZE=1>

<TABLE style="BORDER-COLLAPSE: collapse" cellSpacing=0 cellPadding=0 width="98%" border=0>
<TR vAlign=top>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top width="4%">
<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>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Excludes discontinued operations</FONT></P>
</TD></TR>
<TR style="PADDING-BOTTOM: 0.25em" vAlign=bottom>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top width="4%">
<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>(2)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top width="80%">
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Principally the sale by ECD to United Solar Ovonic of the solar PV module machinery and equipment which is eliminated in consolidation. The ECD revenues, excluding the consolidating entry, were $1,474,000 and $933,000 at September 30, 2006 and 2005, respectively.</FONT></P>
</TD></TR>
</TABLE>

</DIV>
<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our loss from operations in 2006 was higher than 2005. Operating results in our United Solar Ovonic segment decreased due to an additional $1,000,000 allowance for uncollectible accounts, partially offset by increased production and product sales, while the operating loss in our Ovonic battery segment increased due principally to reduced product sales and royalties. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><I><FONT face="Times New Roman, Times, Serif" size=2></FONT></I></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><I><FONT face="Times New Roman, Times, Serif" size=2>United Solar Ovonic Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=2 width="95%" border=0>
<TR vAlign=bottom>
<TD align=left width="65%"><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>Three Months Ended<BR>September 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" 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 vAlign=bottom>
<TD align=left width="65%"><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 width="65%"><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="9%"><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="9%"><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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>22,127</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,147</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;Revenues from product development agreements and other revenues</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>1,733</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>1,212</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 REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>23,860</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>19,359</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>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>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>16,927</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>14,579</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>1,170</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>742</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;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>635</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>819</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;Operating, general and administrative expenses and patent 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>3,659</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>1,539</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" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>22,391</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>17,679</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 FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,469</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,680</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: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our United Solar Ovonic segment's operating income decreased in 2006 versus 2005, due to an additional $1,000,000 allowance for uncollectible accounts for one of its major customers, partially offset by increased production and product sales.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The increases in revenues and expenses in 2006 were primarily attributable to increased volume ($2,200,000) of PV products to meet market demand plus a more favorable pricing mix ($1,700,000). Gross profit margin on product sales increased to 24% in 2006 from 20% 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 ($944,000), including new hiring and start up costs ($354,000) associated with our new Auburn Hills facility. We expect a temporary, substantial decline for fiscal year 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. In addition, United Solar Ovonic increased its allowance for uncollectible accounts by $1,000,000 representing a portion of the accounts receivable from SIT.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The combined product development and research expenses increased due principally to increased activities under product development agreements with the U.S. Air Force (to develop new products for space and airship applications), Lockheed Martin and the National </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Renewable Energy Laboratory. Revenues under these product development agreements also increased due to the increased 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><I><FONT face="Times New Roman, Times, Serif" size=2>Ovonic Battery Segment</FONT></I></U></P>

<TABLE cellSpacing=0 cellPadding=0 width="95%" border=0>
<TR vAlign=bottom>
<TD align=left width="65%"><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>Three Months Ended<BR>September 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" 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 vAlign=bottom>
<TD align=left width="65%"><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 width="65%"><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="9%"><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="9%"><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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>716</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,120</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;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>689</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>1,131</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;Revenues from product development&nbsp;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>151</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>415</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;Revenues from license and other&nbsp;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>258</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>258</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;Other operating revenues</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>46</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>40</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>1,860</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>2,964</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>645</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>1,058</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>39</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>261</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;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>2,014</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>1,918</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;Operating, general and administrative expenses and patent 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>683</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>451</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,381</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>3,688</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LOSS FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(1,521</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(724</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>


<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our Ovonic Battery segment&#146;s operating loss increased in 2006 due to reduced sales of equipment to our Rare Earth Ovonic joint venture, together with reduced royalties and reduced revenues from product development agreements.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Product sales, which include sales of our positive electrode nickel hydroxide products, decreased in 2006 as compared to 2005 due to reduced sales to our Rare Earth Ovonic joint venture (zero in 2006 compared to $398,000 in 2005). Positive electrode nickel hydroxide sales were relatively unchanged at $716,000 in 2006 as compared to $722,000 in 2005. Costs of sales of these products decreased to $645,000 in 2006, from $687,000 in 2005, reflecting lower material costs.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Royalties decreased in 2006 as compared to 2005, due principally to additional royalties in 2005 from one of our licensees that received a one-time payment from a customer.</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>

<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="PAGE-BREAK-BEFORE: always"></P>
<FONT face="Times New Roman, Times, Serif" size=1><U><I>
<A href="#tocmain">Table of Contents</A></I></U> </FONT><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 style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Revenues from licenses and other agreements were the same in 2006 as in 2005. These revenues include $238,000 in each of 2006 and 2005, representing amortization over 10.5 years of a $10,000,000 payment received in a July 2004 settlement of certain patent infringement disputes.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The combined product development and research expenses were relatively unchanged, as we continued to develop and enhance our 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 ($151,000 in 2006 compared to $415,000 in 2005).</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Operating, general and administrative expenses and patent expenses increased in 2006 due principally to increased patent defense costs.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><I><FONT face="Times New Roman, Times, Serif" size=2>Energy Conversion Devices Segment</FONT></I></U></P>

<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 width="95%" border=0>
<TR vAlign=bottom>
<TD align=left width="65%"><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>Three Months Ended<BR>September 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" 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 vAlign=bottom>
<TD align=left width="65%"><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 width="65%"><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="9%"><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="9%"><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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,172</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)</SUP></FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,024</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2><SUP>(1)</SUP></FONT></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>(25</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>52</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;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>8</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>13</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;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>1,309</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>793</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;Other operating revenues</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>397</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>233</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL REVENUES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>19,861</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>11,115</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<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=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>18,196</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD align=right><FONT face="Times New Roman, Times, Serif" size=2>10,133</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>1,450</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>974</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;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>5,526</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>5,768</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;Operating, general and administrative expenses and patent 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>1,450</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>1,832</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>TOTAL EXPENSES</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>26,622</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>18,707</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR style="PADDING-TOP: 0.2em" vAlign=top>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>LOSS FROM OPERATIONS</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(6,761</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=left><FONT face="Times New Roman, Times, Serif" size=2>$</FONT></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" align=right><FONT face="Times New Roman, Times, Serif" size=2>(7,592</FONT></TD>
<TD align=left><FONT face="Times New Roman, Times, Serif" size=2>)</FONT></TD></TR>
</TABLE>


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<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top width="5%">
<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>(1)</FONT></P>
</TD>
<TD style="PADDING-RIGHT: 0in; PADDING-LEFT: 0in; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign=top>
<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Represents principally the sale by ECD to United Solar Ovonic of the solar PV module machinery and equipment which is eliminated in consolidation.</FONT></P>
</TD></TR>
</TABLE>
</DIV>

<P style="MARGIN-TOP: 12pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our ECD segment had a decrease in its operating loss in 2006 as compared to 2005 due to increased revenues from product development agreements.</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>

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<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 product sales increased due to commencement of production and sales of production equipment for this expansion.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Royalties, consisting principally of royalties related to our Ovonic photonic devices technologies, decreased principally due to a one time adjustment in 2006 of royalties payable by one of our licensees. Included in the Ovonic Universal Memory royalties of $24,000 is approximately $15,000 of timing adjustments.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The combined product development and research expenses increased slightly to $6,976,000 in 2006 from $6,742,000 in 2005, as we continued to develop our emerging technologies, including our Ovonic solid hydrogen storage systems, Ovonic metal hydride fuel cell, Ovonic photonic devices and Ovonic cognitive computer (including the Ovonic quantum control device) technologies. Revenues from product development agreements increased primarily due to new programs in 2006 for biofuel reformation with Xcel Energy and organic electroluminescent devices with United States Display Consortium, together with increased fuel cell activity with the Michigan Public Service Commission and other programs.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Operating, general and administrative expenses and patent expenses were slightly lower in 2006 compared to 2005.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><I><FONT face="Times New Roman, Times, Serif" size=2>Other Income/Expense</FONT></I></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Other income (net) increased to $5,042,000 in 2006 from $576,000 in 2005, primarily due to higher interest income ($5,270,000 in 2006 compared to $797,000 in 2005) relating to increased funds available for investment.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Liquidity and Capital Resources</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 common stock offering) 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 </FONT></P>



<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><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>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2></FONT>&nbsp;</P>

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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>our March 2006 common stock offering for our PV manufacturing expansion, which includes construction of two 60MW manufacturing facilities in Greenville, Michigan, and related assembly equipment, and general corporate purposes. We will require additional funding for this expansion through 2010, and for emerging technologies and general corporate purposes, which we may obtain from equity and debt financing, business agreements and other sources.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006, we had $377,715,000 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 36 months, except for the ARC&#146;s which have maturities from 20 to 40 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 September 30, 2006, we had consolidated working capital of $403,213,000.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Cash Flows</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash used in our operating activities was $19,000 in 2006 as compared to $5,970,000 in 2005 reflecting increased interest income and improved cash flow from operations at our United Solar Ovonic segment. </FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash used in investing activities was $101,842,000 in 2006 as compared to $1,198,000 provided in 2005. This increase was due to net purchases ($75,370,000) of investments plus purchases ($26,473,000) of property, plant and equipment in 2006. This increase in capital spending was principally associated with expansion of our United Solar Ovonic segment&#146;s manufacturing capacity.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Net cash provided by our financing activities (principally exercise of stock options) was $226,000 in 2006 as compared to $9,266,000 in 2005.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company does not have any off-balance sheet arrangements at September 30, 2006.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Short-term Borrowings</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006, we had 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 September 30, 2006, we had outstanding letters of credit of $2,161,000 against the line of credit.</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>

<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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<A href="#tocmain">Table of Contents</A></I></U> </FONT><BR>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Joint Ventures</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><U><FONT face="Times New Roman, Times, Serif" size=2>Critical Accounting Estimates and Significant Accounting Policies</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our significant accounting policies are more fully described in Note 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Warranty Liability</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our accrued warranty liability increased to $1,944,357 at September 30, 2006 from $1,835,136 at June 30, 2006, due to increased product sales in our United Solar Ovonic segment. See Note 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Allowance for Uncollectible Accounts</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our allowance for uncollectible accounts was $1,685,000 at September 30, 2006, from $691,000 at June 30, 2006. See Note&nbsp;B, &#147;Accounts Receivable,&#148; to our Consolidated Financial Statements. At September 30, 2006, ECD increased its allowance for uncollectible accounts by $1,000,000 reflecting a portion of the accounts receivable from a major customer.</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>

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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Government Contracts, Reserves and Liabilities</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Our reserves and liabilities for government contracts was relatively unchanged ($2,385,000 at September 30, 2006 from $2,345,000 at June 30, 2006). See Note E, &#147;Liabilities,&#148; to our Consolidated Financial Statements.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>See Note A, &#147;Summary of Accounting Policies &#150; Recent Pronouncements,&#148; for a description of recent accounting pronouncements and the impact on the Company&#146;s financial statements.</FONT></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: justify"><I><FONT face="Times New Roman, Times, Serif" size=2>Forward-Looking Statements</FONT></I></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>This Quarterly Report on Form 10-Q 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; of our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, 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: 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>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Item 3</FONT></U><FONT face="Times New Roman, Times, Serif" size=2>.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Quantitative and Qualitative Disclosures about Market Risk</FONT></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" 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 $377,461,000 and $403,816,000 of these investments (including cash equivalents) on September 30, 2006 and June 30, 2006, 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 September 30, 2006, portfolio of approximately $610,000.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Item 4</FONT></U><FONT face="Times New Roman, Times, Serif" size=2>.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Controls and Procedures&nbsp;</FONT></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>As of September 30, 2006, the end of the period covered by this report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of ECD&#146;s management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures. 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 we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.</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>39</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 12pt; TEXT-ALIGN: center"><U><FONT face="Times New Roman, Times, Serif" size=2>PART II &#150; OTHER INFORMATION</FONT></U></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Item 1A</FONT></U><FONT face="Times New Roman, Times, Serif" size=2>.</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Risk Factors</FONT></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 18pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>There have been no material changes from the risk factors as previously disclosed in Item 1A, &#147;Risk Factors,&#148; of our Annual Report on Form 10-K for the fiscal year ended June 30, 2006.</FONT></P>

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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>Item 6</FONT></U><FONT face="Times New Roman, Times, Serif" size=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 face="Times New Roman, Times, Serif" size=2>A.</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>10.1</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 15.6pt; TEXT-INDENT: -15.6pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Severance Agreement entered as of June 5, 2006 by and between Jay B. Knoll and Energy Conversion Devices, Inc.</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>31.1</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 15.6pt; TEXT-INDENT: -15.6pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>31.2</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 15.6pt; TEXT-INDENT: -15.6pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>32</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; MARGIN-LEFT: 15.6pt; TEXT-INDENT: -15.6pt; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><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: center"><FONT face="Times New Roman, Times, Serif" size=2>40</FONT></P>

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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-ALIGN: center"><U><FONT face="Times New Roman, Times, Serif" size=2>SIGNATURES</FONT></U></P>

<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 8pt; TEXT-INDENT: 7.81%; TEXT-ALIGN: justify"><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</FONT></P>

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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 3pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><U><FONT face="Times New Roman, Times, Serif" size=2>ENERGY CONVERSION DEVICES, INC.</FONT></U> <FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></P>

<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 18pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>(Registrant)</FONT><U></U></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>By:</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>/s/&nbsp;Sanjeev Kumar</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0.17in; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Date: November 9, 2006</FONT><U></U></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0.17in; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Sanjeev Kumar<BR>Vice President and Chief Financial Officer<BR>(Principal Financial and Accounting Officer)</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>By:</FONT></P>
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<P style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>/s/&nbsp;Robert C. Stempel</FONT></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0.1in; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Date: November 9, 2006</FONT><U></U></P>
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<P style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0.1in; MARGIN-LEFT: 0in; TEXT-INDENT: 0pt; TEXT-ALIGN: left"><FONT face="Times New Roman, Times, Serif" size=2>Robert C. Stempel<BR>Chairman and Chief Executive Officer</FONT></P>
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<TYPE>EX-10.1
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<FILENAME>ex10p1-severanceagreementjk.htm
<DESCRIPTION>SEVERANCE AGREEMENT BETWEEN ECD AND J. KNOLL
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<p style=' margin-bottom:12pt; margin-top:12pt;text-align:center;'><font SIZE=2>SEVERANCE AGREEMENT</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>This Severance Agreement (Agreement) is entered into as of June 5, 2006, by and between Jay B. Knoll ("Employee") and Energy Conversion Devices, Inc., a Delaware corporation (the "Corporation").</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><b><font size=2>Section 1 &#150; Employment</font></b></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>The Employee's employment with the Corporation began on June 5, 2006.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><b><font size=2>Section 2 &#150; Right to Terminate; Automatic Termination of Employment</font></b></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(a)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><u><font size=2>Termination Without Cause</font></u><font size=2>.  Subject to Section 3 of this Agreement, the Corporation may terminate Employee&#146;s employment at any time and for any reason.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(b)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination For Cause</font></u><font size=2>.  The Corporation may terminate Employee&#146;s employment at any time for &#147;Cause&#148; (as defined below) by giving ten (10) business days notice to Employee stating the basis for such termination.  Employee shall have the opportunity to respond or cure the reasons stated in the Corporation notice during the ten (10) business day notice period.  &#147;Cause&#148; shall mean any of the following:  </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(i)&nbsp;&nbsp;&nbsp;Employee has materially breached this Agreement or any other agreement to which Employee and the Corporation or its subsidiaries are parties or has materially breached any other obligation or duty owed to the Corporation or its subsidiaries; </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(ii)&nbsp;&nbsp;&nbsp;Employee has committed gross negligence, gross misconduct or conviction of a violation of law in the performance of Employee&#146;s duties for the Corporation or its subsidiaries (Violation of the law shall not include traffic violations or misdemeanors); </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(iii)&nbsp;&nbsp;&nbsp;Employee has materially failed to follow reasonable, ethical and lawful instructions from the Board, officer, body or other entity or individual to whom Employee reports concerning the operations or business of the Corporation or its subsidiaries; </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(iv)&nbsp;&nbsp;&nbsp;Employee has been convicted of a felony the circumstances of which substantially relate to Employee&#146;s employment duties with the Corporation or its subsidiaries; </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(v)&nbsp;&nbsp;&nbsp;Employee has misappropriated funds or property of the Corporation or its subsidiaries; </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(vi)&nbsp;&nbsp;&nbsp;Employee has attempted to obtain a personal profit from any transaction in which the Corporation or its subsidiaries has an interest, and which constitutes a corporate opportunity of the Corporation or its subsidiaries, or which is adverse to the interests of the Corporation or its subsidiaries, unless the transaction was approved in writing by the Corporation&#146;s Board after full disclosure of all details relating to such transaction.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(c)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination by Death or Disability</font></u><font size=2>.  Employee&#146;s employment and the Corporation&#146;s obligations under this Agreement shall terminate automatically, effective immediately and without any notice being necessary, upon Employee&#146;s death or upon expiration of three (3) months after a determination of Disability of Employee.  For purposes of this Agreement, &#147;Disability&#148; means the inability of Employee, due to a physical or mental </font></p>

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

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

<p style=' margin-bottom:0pt; margin-top:12pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><font size=2>impairment, to perform the essential functions of Employee&#146;s job with the Corporation for a period of three (3) months, despite all reasonable accommodations having been made by the Corporation.  A determination of Disability shall be made by an independent physician selected by the Corporation and the Employee who specializes in the area associated with Employee&#146;s disability.  Employee shall cooperate with any efforts to make such determination by the independent designated physician.  Should the physician for the Employee disagree with the determination, the Corporation and Employee will select a third independent physician pursuant to the regulations pertaining to the Family and Medical Leave Act.  Any such determination by the third physician shall be conclusive and binding on the Corporation and Employee.  Any determination of Disability under this Section 2(c) is not intended to alter any
benefits any party may be entitled to receive under any short-term or long-term disability insurance policy carried by either the Corporation or Employee with respect to Employee, which benefits shall be governed solely by the terms of any such insurance policy.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(d)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination by Resignation</font></u><font size=2>.  Employee&#146;s employment and the Corporation&#146;s obligations under this Agreement shall terminate automatically, effective upon ten (10) business day written notice to the Corporation of Employee&#146;s resignation from employment with the Corporation without &#147;Good Reason&#148; or at such other time as may be mutually agreed between the Corporation and Employee following the provision of such notice.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(e)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination for Good Reason</font></u><font size=2>.  Employee may terminate Employee&#146;s employment upon ten (10) business days advance written notice for &#147;Good Reason&#148; (as defined below) by giving notice to the Corporation stating the basis for such Good Reason termination.  The Corporation will have the opportunity to cure the items set forth in the Good Reason notice within the ten (10) business day cure period.  &#147;Good Reason&#148; shall mean:</font></p>



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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom: 2.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="4%" nowrap valign=top style='padding:0.0pt 0in 0.0pt 0in; '>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(i)</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>any material breach of this Agreement by the Corporation; or</font></p></td> </tr>

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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(ii)</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>other than for &#147;Cause&#148;, any material reduction in the nature or scope of Employee&#146;s title, authority, powers, functions, duties, reporting requirements, responsibilities, base salary, method of computing the Employee&#146;s bonus or benefits (except for any change in benefits that generally apply to all executives) or</font></p> </td> </tr>

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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(iii)</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>a transfer of Employee&#146;s place of employment of more than 30 miles.</font></p> </td> </tr></table>


<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>Notwithstanding the foregoing to the contrary, Good Reason shall not exist unless Employee first provides the Board with notice of the facts alleged to constitute Good Reason and the provision of this Section 2 (e) which Employee alleges applies, and until such breach, reduction or requirement remains uncured for ten (10) business days following the Board&#146;s receipt of such written notice from Employee.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><b><font size=2>Section 3 &#150; Rights Upon Termination</font></b></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(a)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination Without Cause and Termination for Good Reason</font></u><font size=2>.  If Employee&#146;s employment is terminated Without Cause or for Good Reason, Employee shall, after executing the Release of Claims described in Section 4 (m), receive (i) any unpaid Base Salary and accrued but unused vacation pay with respect to the period prior to the effective date of termination; (ii) severance payments equal to the Employee&#146;s annual base salary (at the highest rate in effect during the term of this Agreement) payable in equal installments for one year according to the Corporation&#146;s regular pay schedule for salaried employees; (iii) continued participation in the Corporation&#146;s annual and long-term incentive plans (upon the </font></p>

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

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

<p style=' margin-bottom:0pt; margin-top:12pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><font size=2>terms in effect immediately prior to such termination) for (A) the full fiscal year in which the termination occurs, payable within 30 days after the end of such fiscal year, and (B) on a pro-rated basis for the period from the beginning of the next fiscal year to the first anniversary of the termination, payable within 30 days after such anniversary; (iv) continued participation in the benefit plans, programs and arrangements (including medical and dental plans) for one year following the termination date; provided, however, that participation in such benefit plans, programs and arrangements shall cease prior to the expiration of such one-year period to the extent the Employee has been offered or actually participates in comparable benefit plans, programs or arrangements with another employer during such period and Employee shall report any such offer or participation to the Corporation; (v) payment of the
cost of COBRA coverage for Employee and his eligible dependents until the earlier of twelve (12) months following the termination of his employment with the Corporation or the time at which Employee becomes eligible for other health and dental insurance coverage; and (vi) reimbursement of expenses incurred by Employee prior to termination.  The right to receive severance is not subject to offset for other earnings for Employee and there shall be no duty to mitigate damages.  The Corporation shall also cause the Employee to receive all vested and accrued benefits earned by Employee under all employee benefit plans and programs sponsored by the Corporation in which Employee participates.  The Employee will not be required to return any signing or similar bonus or compensation upon any Termination Without Cause or Termination for Good Reason or his Death or Disability, notwithstanding any other agreement to the contrary.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(b)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Termination for Cause, Termination by Death or Disability and Termination by Resignation</font></u><font size=2>.  If Employee&#146;s employment is terminated for Cause or for Death, or if Employee resigns without good reason, Employee or Employee&#146;s estate shall have no further rights against the Corporation hereunder, except for the right to receive (i) any unpaid Base Salary and accrued but unused vacation pay with respect to the period prior to the effective date of termination and (ii) reimbursement of expenses incurred by Employee.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><b><font size=2>Section 4 &#150; Miscellaneous Provisions</font></b><font size=2> </font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(a)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Waiver</font></u><font size=2>.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Corporation (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(b)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Whole Agreement</font></u><font size=2>.  No agreements, representations or understandings (whether oral or written and whether express or implied) that are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(c)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Presumption</font></u><font size=2>.  The Corporation shall make or cause to be made the payments described in this Agreement upon receiving written notice from the Employee describing such payment, referring to the provision of this Agreement under which such payment is claimed and certifying that all conditions for such payment, as set forth in this Agreement, have been satisfied. The information so furnished to the Corporation by the Employee shall be presumed to be correct, subject to rebuttal by the Corporation after payment. After making the payment claimed by the Employee, the Corporation may seek a refund of such payment in accordance </font></p>

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

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

<p style=' margin-bottom:0pt; margin-top:12pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:12pt; margin-top:12pt;text-align:left;'><font size=2>with Subsection (h) below. This Subsection (c) shall not be used to cause a payment to be made at a time earlier than provided in this Agreement.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(d)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Notice</font></u><font size=2>.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to the Employee at the home address that the Employee most recently communicated to the Corporation in writing. In the case of the Corporation, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(e)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>No Setoff</font></u><font size=2>.  There shall be no right of setoff or counterclaim, with respect to any claim, debt or obligation, against payments to the Employee under this Agreement.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(f)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Choice of Law</font></u><font size=2>.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the state of Michigan, irrespective of Michigan's choice-of-law principles.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(g)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Severability</font></u><font size=2>.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:justify;'><font size=2>(h)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Arbitration</font></u><font size=2>.  All disputes arising out of or relating to the employment relationship shall be resolved only by final and binding arbitration using the following procedure:</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(i)&nbsp;&nbsp;&nbsp;The Corporation and Employee shall first attempt to select an arbitrator by the mutual agreement.  If the arbitrator is not selected by mutual agreement of the Corporation and Employee within thirty (30) days, then the arbitrator will be selected from a panel of experienced employment arbitrators supplied by the American Arbitration Association (AAA), utilizing the AAA National Rules for the Resolution of Employment Disputes.  Once either party provides notice to the other of the intent to arbitrate, it shall be the joint obligation of the Corporation and Employee to file for arbitration with AAA with the Corporation to pay the filing and administrative fees and related expenses established by AAA except as set forth in subparagraph (iv) below.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:justify;'><font size=2>(ii)&nbsp;&nbsp;&nbsp;The arbitrator will decide the time and place of the hearing in Oakland County or such other location as may be mutually agreed to by the Corporation and Employee.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:justify;'><font size=2>(iii)&nbsp;&nbsp;&nbsp;The Arbitrator shall have power to award all relief as allowed by law or contract, including the award of costs and attorney fees to the prevailing party.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(iv)&nbsp;&nbsp;&nbsp;Should the arbitrator determine that Employee was terminated for &#147;Cause&#148;, Employee shall be responsible for the entire filing fees, administrative costs and reasonable Corporation attorney fees.  Should the arbitrator determine that the Employee was not terminated for Cause, the Corporation shall be responsible for the entire filing fees, administrative costs and reasonable Employee attorney fees.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; margin-left:7.81%;text-align:left;'><font size=2>(v)&nbsp;&nbsp;&nbsp;The award of the Arbitrator may be entered in the Circuit Court for the County of Oakland, Michigan.</font></p>

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

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>The arbitration procedures described in this section shall be the exclusive dispute resolution mechanism for resolution of disputes relating to the employment relationship.  The Corporation and Employee waive all rights to trial, including trial by jury, with respect to disputes arising out of or relating to this Agreement.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(i)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>No Assignment of Benefits</font></u><font size=2>.  The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Subsection (i) shall be void.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(j)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Employment at Will; Limitation of Remedies</font></u><font size=2>.  The Corporation and the Employee acknowledge that the Employee's employment is at will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(k)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Employment Taxes</font></u><font size=2>.  All payments made pursuant to this Agreement shall be subject to withholding of applicable taxes.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(l)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Benefit Coverage Nonadditive</font></u><font size=2>.  In the event that the Employee is entitled to life insurance and health plan coverage under more than one provision hereunder, only one provision shall apply, and neither the periods of coverage nor the amounts of benefits shall be additive.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>(m)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u><font size=2>Release of Claims</font></u><font size=2>.  As a condition to the receipt of the payments and benefits described in this Agreement, the Employee shall be required to execute a release of all claims arising out of the Employee&#146;s employment or the termination thereof, including but not limited to any claims of discrimination under state or federal law, as reasonably acceptable to the Employee.  Such release shall be promptly presented to the Employee following any Termination Without Cause or Termination for Good Reason.</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt; text-indent:7.81%;text-align:left;'><font size=2>IN WITNESS WHEREOF, each of the Corporation and Employee has executed this Agreement, in the case of the Corporation by its duly authorized officer, as of the day and year first above written.</font></p>


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            <p style='margin-left:0pt;text-indent:200pt;text-align:left;margin-top:.25in;margin-bottom:15pt'><font size=2>EMPLOYEE</font></p>
            <P STYLE="margin-left:0pt; text-indent:200pt; text-align:left; margin-top:0pt; margin-bottom:0pt;"><font size=2><u>/S/&nbsp;&nbsp;Jay B. Knoll&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></p>
            <p style='margin-left:0pt;text-indent:200pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;&nbsp;&nbsp;Jay B. Knoll</font></p>


            <p style='margin-left:0pt;text-indent:200pt;text-align:left;margin-top:25pt;margin-bottom:15pt'><font size=2>CORPORATION</font></p>
            <p style='margin-left:0pt;text-indent:200pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>By:&nbsp;&nbsp;<u>/S/&nbsp; Robert C. Stempel</u></font></p>

            <p style='margin-left:0pt;text-indent:217pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;&nbsp;&nbsp;Robert C. Stempel</font></p>

            <p style='margin-left:0pt;text-indent:200pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Its:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman and Chief Executive Officer</font></p>

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>
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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>ex31p1_sept0610q.htm
<DESCRIPTION>CEO CERTIFICATION - RULE 13A-14(A)/15D-14(A)
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<p style=' margin-bottom:6pt; margin-top:6pt; text-indent:7.45%;text-align:center;'><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Exhibit 31.1</font></p>

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>CERTIFICATION OF CEO PURSUANT TO </font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</font></B></p>

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

<p style=' margin-bottom:6pt; margin-top:6pt;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:6pt; margin-top:12pt; text-align:justify;"><font size=2>1.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>I have reviewed this quarterly report on Form 10-Q of Energy Conversion Devices, Inc.;</font></p>

<P STYLE="margin-bottom:6pt; margin-top:12pt; 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:6pt; margin-top:12pt;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:6pt; margin-top:12pt;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>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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<p style=' margin-bottom:6pt; margin-top:12pt;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>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="3%" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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<p style=' margin-bottom:0pt; margin-top:6pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Date: November 9, 2006</font></p> </td>
        <td width="35%" nowrap valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2><U>/S/ Robert C. Stempel&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>&nbsp;Robert C. Stempel<BR>&nbsp;Chief Executive Officer</font></p> </td>
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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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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>ex31p2_sept0610q.htm
<DESCRIPTION>CFO CERTIFICATION _RULE 13A-14(A)/15D-14(A)
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<p style=' margin-bottom:6pt; margin-top:6pt; text-indent:0.5in;text-align:center;'><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Exhibit 31.2</font></p>

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

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>CERTIFICATION OF CFO PURSUANT TO </font></B></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><B><font SIZE=2>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</font></B></p>

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

<p style=' margin-bottom:6pt; margin-top:6pt;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:6pt; margin-top:12pt;text-align:justify;'><font size=2>1.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>I have reviewed this quarterly report on Form 10-Q of Energy Conversion Devices, Inc.;</font></p>

<p style=' margin-bottom:6pt; margin-top:12pt;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:6pt; margin-top:12pt;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:6pt; margin-top:12pt;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>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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        <td width="36" valign=top style='padding:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>

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        <td width="36" valign=top style='padding:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
    <tr >
        <td width="36" valign=top style='padding:6.0pt 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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<p style=' margin-bottom:6pt; margin-top:12pt;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>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:6.0pt;margin-bottom: 6.0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="20" valign=top style='padding:6.0pt 0in 6.0pt 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:6.0pt 0in 6.0pt 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>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>b)</font></p> </td>
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            <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>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Date: November 9, 2006</font></p> </td>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><u><font size=2><U>/S/ Sanjeev Kumar&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></font></u></p> </td> </tr>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;&nbsp;&nbsp;Sanjeev Kumar<BR>&nbsp;&nbsp;&nbsp;Chief Financial Officer</font></p> </td> </tr>
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<TYPE>EX-32
<SEQUENCE>5
<FILENAME>ex32_sept0610q.htm
<DESCRIPTION>CEO CFO SECTION 1350 CERTIFICATIONS
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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Exhibit 32</font></p> </td> </tr></table>
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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:center;'><font size=2>&nbsp;</font></p>

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

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

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

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

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>In connection with the Quarterly Report of Energy Conversion Devices, Inc. (the &#147;Company&#148;) on Form 10-Q for the quarter ended September 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:0.4in;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.96in; text-indent:-0.24in;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:0.96in; text-indent:-0.24in;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.96in; text-indent:-0.24in;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:0.4in;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2><u>/S/&nbsp;Robert C. Stempel&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>Robert C. Stempel</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>Chief Executive Officer</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>November 9, 2006</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2><U>/S/&nbsp;Sanjeev Kumar&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>Sanjeev Kumar</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>Chief Financial Officer</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;text-align:left;'><font size=2>November 9, 2006</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.4in;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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