Ascent Solar Technologies (ASTI)

Overview

We are a development stage company formed in October 2005 to commercialize flexible photovoltaic (“PV”) modules using proprietary technology. Our technology was initially developed at ITN Energy Systems, Inc. (“ITN”) by our founder and core scientific team beginning in 1994 and subsequently assigned and licensed to us. Our proprietary manufacturing process deposits multiple layers of materials, including a thin film of highly efficient copper-indium-gallium-diselenide (“CIGS”) semiconductor material, on a flexible, lightweight, plastic substrate and then laser patterns the layers to create interconnected PV cells, or PV modules, in a process known as monolithic integration. We believe that our technology and manufacturing process provides us with significant advantages over both the crystalline silicon (“c-Si”) based PV manufacturers that currently dominate the PV market, as well as other thin-film PV manufacturers that use rigid and/or heavier substrate materials such as glass, stainless steel or other metals.

Our thin-film PV modules require less than 1% of the semiconductor material currently needed to achieve the same power output as a c-Si-based PV device. Consequently, we do not face the supply constraints and raw material costs that may affect silicon-based PV manufacturers. Also, we believe that our use of CIGS on a flexible, durable, lightweight, high-tech plastic substrate should allow for integration of our PV modules into a variety of building materials, electronic products, military and space applications, as well as other products and applications that may emerge. We believe that the unique attributes of our materials will enable a reduction in the overall system cost, installation cost and logistical cost-per-watt ratios. For markets that place a high premium on weight, like space and near-space markets, our materials should provide attractive increases in the power-to-weight ratio, and we believe that our materials have higher power-to-area ratios and voltage-to-area ratios than do competing flexible PV thin-films. These metrics will be critical as we position ourselves to compete in commercial roof-top applications and high value-added markets like military, space and electronic integrated PV (“EIPV”) solar module applications. We believe that, when employed on a sufficiently large commercial scale, our large-format, roll-to-roll manufacturing process and proprietary monolithic integration techniques will allow us to achieve a per watt manufacturing cost lower than most of our flexible, lightweight, thin-film competitors. At sufficiently large commercial scale, we believe overall grid parity is possible—i.e., the point at which the system level cost of our PV-generated power is equal to that of retail power distributed from the electric utility grid—in certain geographic markets within five years.

Overview

        Our Bylaws provide that the size of our Board of Directors is to be determined from time to time by resolution of the Board of Directors, but shall consist of at least two and no more than eight members. Our Board of Directors currently consists of eight members, five of whom our Board has determined are independent under the rules of The NASDAQ Stock Market. Our Certificate of Incorporation provides that the Board of Directors will be divided into three classes as nearly equal in number of directors as possible. Our Class 1 directors are Dr. Amit Kumar, Joel Porter and Richard Swanson. Our Class 2 directors are Stanley Gallery and Dr. T.W. Fraser Russell. Our Class 3 directors are Richard Erskine, Einar Glomnes and Dr. Mohan Misra. The term of our Class 1 directors expires at our 2009 annual meeting of stockholders, and our Board has nominated Dr. Amit Kumar and Richard Swanson for re-election by our stockholders. The Board has nominated Ron Eller as a Class 1 director. Richard Erskine was appointed by our Board to fill a Class 3 vacancy in October 2008; consequently, pursuant to our Bylaws, Mr. Erskine is standing for election by our stockholders to serve the remainder of the scheduled term of Class 3 directors (i.e., until the 2011 annual meeting).

        The Board has determined that the following directors are "independent" as required by applicable laws and regulations, by the listing standards of The NASDAQ Stock Market and by our corporate governance guidelines: Mr. Gallery, Dr. Kumar, Mr. Porter, Dr. Russell and Mr. Swanson. The Board also has determined that Mr. Eller, if elected, would be "independent" as required by applicable laws and regulations, by the listing standards of The NASDAQ Stock Market and by our corporate governance guidelines.

Overview

We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the three months ended March 31, 2009, we generated approximately $516,000 in revenues.  A majority of revenue was from government research and development contracts not from our planned principal operations to commercialize flexible PV modules.  As of March 31, 2009, we had an accumulated deficit of approximately $29.5 million. Under our current business plan, we expect losses to continue through 2009 at which point we plan to commence production on our initial 30 MW manufacturing line that is currently in development. To date, we have financed our operations primarily through public and private equity financings including our recent secondary public offering of 4,370,000 shares of common stock with net proceeds of approximately $56.8 million completed in May 2008, and an additional investment of approximately $15 million by our largest shareholder Norsk Hydro in October 2008. The proceeds from these stock sales are primarily being utilized to fund the equipment purchases for our 30 MW production facility in Thornton, Colorado.

While focused on speed to market, we believe that quality and consistency of product will be paramount to our success in the marketplace. Consequently, our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones and supported by over fourteen years of concerted research and development activity by our scientists. Our progression also takes into account market conditions, as well as financing options. In keeping with our philosophy, we completed construction of a 1.5 MW production line in December 2007. In March 2008, we demonstrated initial operating capability (IOC) of our 1.5 MW production line by initiating production trials as an end-to-end integrated process. Early IOC production trials resulted in average thin-film device efficiencies of 9.5% and small area monolithically integrated module efficiencies of over 7%. Recent and ongoing production optimization trials have resulted in thin-film device efficiencies in the 9.5% to 11.5% range and corresponding module efficiencies in the 7.0% to 9.0% range. In the fourth quarter 2008 the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) independently verified that the modules produced on our 1.5 MW line measured as high as 9.64% in conversion efficiency. The test modules measured six inches wide by one foot long and serve as our building block for both building integrated PV (“BIPV”) and portable power products. During 2008 we focused on testing and qualifying our 1.5 MW production line in anticipation of commencing limited regular production. During the first quarter of 2009, we began regular production of monolithically integrated flexible CIGS modules from our 1.5 MW production line. We expect that process optimization will be an ongoing effort as we continuously strive for improvements in production yield, production throughput, and product efficiency that have a direct bearing on our cost competitiveness in the marketplace.

During 2008, we initiated the critical tasks of internal product testing and product development with customers. In 2009, we continued those tasks further and have commenced prototype development with our BIPV, electronic integrated PV (“EIPV”) and military customers by providing them test samples from our 1.5MW production line. At the same time we expect to complete the internal testing and product certification in the second half of 2009.

The Company’s new manufacturing facility in Thornton, Colorado is in the final stages of completion and will be ready to accommodate installation of the equipment in the second quarter of 2009. Production tooling and equipment for the 30 MW plant began arriving in the first quarter of 2009 and installation is scheduled to be completed in the first half of 2010. We expect to begin production with an annual rated capacity of 15 MW by the middle of 2010, and 30 MW of annual capacity by the end of 2010. We intend to incrementally expand our production capacity to 110 MW or greater by adding more capacity based on manufacturing developments, market conditions and availability of financing.

Overview

        We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the year ended December 31, 2008, we generated approximately $1.5 million in revenues, none of which resulted from our planned principal operations to commercialize flexible PV modules. As of December 31, 2008, we had an accumulated deficit of approximately $25.1 million. Under our current business plan, we expect losses to continue through 2009 at which point we plan to commence production on our initial 30 MW manufacturing line that is currently in development. To date, we have financed our operations primarily through public and private equity financings including our recent secondary public offering of 4,370,000 shares of common stock with net proceeds of approximately $56.8 million completed in May 2008, and an additional investment of approximately $15 million by our largest shareholder Norsk Hydro in October 2008. The proceeds from these stock sales are primarily being utilized to fund the equipment purchases for our 30 MW production facility in Thornton, Colorado.

        While focused on speed to market, we believe that quality and consistency of product will be paramount to our success in the marketplace. Consequently, our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones and supported by over fourteen years of concerted research and development activity by our scientists. Our progression also takes into account market conditions, as well as financing options. In keeping with our philosophy, we completed construction of a 1.5 MW production line in December 2007. In March 2008, we demonstrated initial operating capability (IOC) of our 1.5 MW production line by initiating production trials as an end-to-end integrated process. Early IOC production trials resulted in average thin-film device efficiencies of 9.5% and small area monolithically integrated module efficiencies of over 7%. Recent and ongoing production optimization trials have resulted in thin-film device efficiencies in the 9.5% to 11.5% range and corresponding module efficiencies in the 7.0% to 9.0% range. In the fourth quarter 2008 the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) independently verified that the modules produced on our 1.5 MW line measured as high as 9.64% in conversion efficiency. The test modules measured six inches wide by one foot long and serve as our building block for both BIPV and portable power products. During 2008 we focused on testing and qualifying our 1.5 MW production line in anticipation of commencing limited regular production. During the first quarter of 2009, we began regular production of monolithically integrated flexible CIGS modules from our 1.5 MW production line. We expect that process optimization will be an ongoing effort as we continuously strive for improvements in production yield, production throughput, and product efficiency that have a direct bearing on our cost competitiveness in the marketplace.

        During 2008, we initiated the critical tasks of internal product testing and product development with customers. In 2009, we continued those tasks further and have commenced prototype development with our BIPV, EIPV and military customers by providing them test samples from our 1.5MW production line. At the same time we expect to complete the internal testing and product certification in the second half of 2009.

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Table of Contents

        The Company's new manufacturing facility in Thornton, Colorado is in the final stages of completion and will be ready to accommodate installation of the equipment in second quarter of 2009. Production tooling and equipment for the 30 MW plant began arriving in the first quarter of 2009 and installation is scheduled to be completed in the first half of 2010. We expect to begin production with an annual rated capacity of 15 MW by the middle of 2010, and 30 MW of annual capacity by the end of 2010. We intend to incrementally expand our production capacity to 110 MW or greater by adding more capacity based on manufacturing developments, market conditions and availability of financing.

Overview

        We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the year ended
December 31, 2008, we generated approximately $1.5 million in revenues, none of which resulted from our planned principal operations to commercialize flexible PV modules. As of
December 31, 2008, we had an accumulated deficit of approximately $25.1 million. Under our current business plan, we expect losses to continue through 2009 at which point we plan to
commence production on our initial 30 MW manufacturing line that is currently in development. To date, we have financed our operations primarily through public and private equity financings including
our recent secondary public offering of 4,370,000 shares of common stock with net proceeds of approximately $56.8 million completed in May 2008, and an additional investment of approximately
$15 million by our largest shareholder Norsk Hydro in October 2008. The proceeds from these stock sales are primarily being utilized to fund the equipment purchases for our 30 MW
production facility in Thornton, Colorado.

        While
focused on speed to market, we believe that quality and consistency of product will be paramount to our success in the marketplace. Consequently, our path to commercialization is
defined by a highly disciplined, staged progression based upon the achievement of key milestones and supported by over fourteen years of concerted research and development activity by our scientists.
Our progression also takes into account market conditions, as well as financing options. In keeping with our philosophy, we completed construction of a 1.5 MW production line in December 2007. In
March 2008, we demonstrated initial operating capability (IOC) of our 1.5 MW production line by initiating production trials as an end-to-end integrated process. Early IOC
production trials resulted in average thin-film device efficiencies of 9.5% and small area monolithically integrated module efficiencies of over 7%. Recent and ongoing production
optimization trials have resulted in thin-film device efficiencies in the 9.5% to 11.5% range and corresponding module efficiencies in the 7.0% to 9.0% range. In the fourth quarter 2008
the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) independently verified that the modules produced on our 1.5 MW line measured as high as 9.64% in conversion efficiency. The
test modules measured six inches wide by one foot long and serve as our building block for both BIPV and portable power products. During 2008 we focused on testing and qualifying our 1.5 MW production
line in anticipation of commencing limited regular production. During the first quarter of 2009, we began regular production of monolithically integrated flexible CIGS modules from our 1.5 MW
production line. We expect that process optimization will be an ongoing effort as we continuously strive for improvements in production yield, production throughput, and product efficiency that have a
direct bearing on our cost competitiveness in the marketplace.

        During
2008, we initiated the critical tasks of internal product testing and product development with customers. In 2009, we continued those tasks further and have commenced prototype
development with our BIPV, EIPV and military customers by providing them test samples from our 1.5MW production line. At the same time we expect to complete the internal testing and product
certification in the second half of 2009.

29

HREF="#bg78701a_main_toc">Table of Contents

        The
Company's new manufacturing facility in Thornton, Colorado is in the final stages of completion and will be ready to accommodate installation of the equipment in second quarter of
2009. Production tooling and equipment for the 30 MW plant began arriving in the first quarter of 2009 and installation is scheduled to be completed in the first half of 2010. We expect to begin
production with an annual rated capacity of 15 MW by the middle of 2010, and 30 MW of annual capacity by the end of 2010. We intend to incrementally expand our production capacity to 110 MW or greater
by adding more capacity based on manufacturing developments, market conditions and availability of financing.

Overview

We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the three and nine months ended September 30, 2008, we generated approximately $422,000 and $1,071,000, respectively, in revenues, none of which came from our planned principal operations to commercialize flexible PV modules. As of September 30, 2008, we had an accumulated deficit of approximately $21.0 million. Under our current business plan, we expect losses to continue through at least 2009 at which point we plan to commence production on our initial 30 MW manufacturing line that is currently in development. To date, we have financed our operations primarily through public and private equity financings including our recent secondary public offering of 4,370,000 shares of common stock with net proceeds of approximately $56,819,000 which we completed in May 2008 and the October 2008 investment of approximately $15 million by our largest shareholder Norsk Hydro. The proceeds from these stock sales are primarily being utilized to fund the equipment purchases for our 30 MW production facility in Thornton, Colorado.

Our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones. Our current focus is on development of strategic relationships, product development and certification, performance optimization of our 1.5 MW manufacturing tools and processes, staffing, and acceleration of our production capacity beyond the initial 30 MW capacity.

We completed construction of a 1.5 MW production line on schedule in December 2007 after consistently achieving PV cell conversion efficiencies of approximately 10% to 12%, and PV module conversion efficiencies of approximately 6% to 8%, and as high as 9.6%, in a pre-production prototyping and test facility that we have operated since the fourth quarter of 2006. Conversion efficiency is the percentage of energy from absorbed light that a device is able to convert into electrical energy. Our 2008 production objective is to successfully transition the manufacturing processes yielding these demonstrated performance levels to our 1.5 MW production line and commence certification of our planned products from independent testing laboratories such as Underwriters Laboratory (UL) in the U.S. and Technischer Überwachungs-Verein (TÜV) in Europe. Product certifications are necessary for the deployment of our planned products for building integrated photovoltaic (BIPV) applications and we expect to achieve these certifications by the third quarter of 2009. Our other target market is electronic integrated photovoltaic (EIPV) for consumer electronics and portable power applications which do not require the same level of product certification.

In March 2008, we demonstrated initial operating capability (IOC) of our 1.5 MW production line by initiating production trials as an end-to-end integrated process. Early IOC production trials resulted in average thin-film device efficiencies of 9.5% and small area monolithically integrated module efficiencies of over 7%. Recent and ongoing production optimization trials have resulted in thin-film device efficiencies in the 8.0% to 11.5% range and corresponding module efficiencies in the 8.0% to 9.0% range. We continue to operate at low rate initial production levels as we systematically perform production trials focused on improving process repeatability, efficiency and yield to achieve the desired initial production metrics necessary to produce module efficiencies of 7% to 8%. Our current focus is to demonstrate consistent run-to-run performance by achieving initial module efficiencies of 7% to 8% in low rate initial production. Recently we have demonstrated cell efficiencies in the range of 9.0% to 11.5% with average cell efficiency of 9.5%. Performing these ongoing production trials in the short term and focusing on process optimization before commencing single shift, full-rate production on the 1.5 MW line, we believe will benefit our long-term production performance, expansion plans, and UL and TÜV product certification which we plan to begin in the fourth quarter of 2008. Even as we attain full production, we expect that process optimization will be an ongoing effort as we continuously strive for improvements in production yield, production throughput, and product efficiency that have a direct bearing on our cost competitiveness in the marketplace.

During the second quarter of 2008, we commenced product development with customers and internal product testing. The initial product prototypes and samples are being provided to EIPV and BIPV customers such as ICP Solar, Icopal, Hydro and Texsa, among others. Our product development plans envision entering the market in 2009 initially with EIPV products while simultaneously developing BIPV product applications with BIPV customers. These developments should enable product certification by the third quarter of 2009 at which point we plan to begin limited commercial deployment of BIPV system level projects with customers using product from the 1.5 MW production line.

19

Overview

We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the three and six months ended June 30, 2008, we generated approximately $344,000 and $649,000, respectively, in revenues, none of which came from our planned principal operations to commercialize flexible PV modules. As of June 30, 2008, we had an accumulated deficit of approximately $17.0 million. Under our current business plan, we expect losses to continue through at least 2009 at which point we plan to commence production on our initial 30 MW production line that is currently in development. To date, we have financed our operations primarily through public and private equity financings including our recent secondary public offering of 4,370,000 shares of common stock with net proceeds of approximately $56,829,000 which we completed in May 2008.  The proceeds from the secondary offering are primarily being utilized to fund the equipment purchases for our 30 MW production facility in Thornton, Colorado.

Our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones. Our current focus is on development of strategic relationships, product development and certification, performance optimization of our 1.5 MW manufacturing tools and processes, staffing, and acceleration of our production capacity beyond the initial 30 MW capacity.

We completed construction of a 1.5 MW production line on schedule in December 2007 after consistently achieving PV cell conversion efficiencies of approximately 10% to 12%, and PV module conversion efficiencies of approximately 6% to 8%, and as high as 9.6%, in a pre-production prototyping and test facility that we have operated since the fourth quarter of 2006. Conversion efficiency is the percentage of energy from absorbed light that a device is able to convert into electrical energy. Our 2008 production objective is to successfully transition the manufacturing processes yielding these demonstrated performance levels to our 1.5 MW production line and commence certification of our planned products from independent testing laboratories such as Underwriters Laboratory (UL) in the U.S. and Technischer Überwachungs-Verein (TÜV) in Europe.  Product certifications are necessary for the deployment of our planned products for building integrated photovoltaic (BIPV) applications and we expect to achieve these certifications by the second quarter of 2009. Our other target market is electronic integrated photovoltaic (EIPV) for consumer electronics and portable power applications which do not require the same level of product certification.

In March 2008, we demonstrated initial operating capability (IOC) of our 1.5 MW production line by initiating production trials as an end-to-end integrated process. Early IOC production trials resulted in average thin-film device efficiencies of 9.5% and small area monolithically integrated module efficiencies of over 7%. Recent and ongoing production optimization trials have resulted in thin-film device efficiencies in the 8% to 10% range and corresponding small area module efficiencies in the 6.0% to 7.5% range. We continue to operate at low rate initial production levels as we systematically perform production trials focused on improving process repeatability, efficiency and yield to achieve the desired initial production metrics necessary to produce module efficiencies of 7% to 8%. Our current focus is to demonstrate consistent run-to-run performance by achieving initial module efficiencies of 7% to 8% in low rate initial production.   Performing these ongoing production trials in the short term and focusing on process optimization before commencing single shift, full-rate production on the 1.5 MW line, we believe will benefit our long-term production performance, expansion plans, and UL and TÜV product certification which we plan to begin in the fourth quarter of 2008. Even as we attain full production, we expect that process optimization will be an ongoing effort as we continuously strive for improvements in production yield, production throughput, and product efficiency that have a direct bearing on our cost competitiveness in the marketplace.

During the second quarter of 2008, we commenced product development with customers and internal product testing. The initial product prototypes and samples are being provided to EIPV and BIPV customers such as ICP Solar,

18

Overview

        Subject to stockholder approval, the Board approved an amendment and restatement of our 2005 Stock Option Plan that, among other things, increases the number of shares of common stock authorized for issuance under the Option Plan by 500,000 shares. The amendment and restatement also addresses vesting provisions, including in the event the Company undergoes a liquidation, dissolution or change of control.

        The Option Plan was adopted by the Board in October 2005 and approved by the stockholders in November 2005. The stockholders subsequently approved amendments to the Option Plan in June 2007.

        We believe that the Option Plan provides meaningful performance incentives to our directors, officers, employees and other service providers, which, in turn, are expected to improve the Company's long-term performance. We are asking our stockholders to approve an increase in the number of shares issuable under the Option Plan in order to continue this company-wide compensation strategy and to provide resources to recruit and retain qualified personnel to support our planned strategic growth. Under the Option Plan, the number of shares of common stock currently authorized by our stockholders for issuance is 1,000,000 shares. As of March 31, 2008, about 117,000 shares remained available for grant under the Option Plan, and approximately 43 persons were eligible to participate in the Option Plan. We expect the number of persons eligible to participate in the Option Plan to increase as we embark on our planned expansion of operations. If the stockholders approve the amendment and restatement of the Option Plan, 500,000 additional shares will be available for issuance under the Option Plan.

Overview

        We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the three months ended March 31, 2008, we generated approximately $305,000 in revenues, none of which came from our planned principal operations to commercialize flexible PV modules. As of March 31, 2008, we had an accumulated deficit of approximately $14.3 million. Under our current business plan, we expect losses to continue through at least 2009. To date, we have financed our operations primarily through public and private equity financings.

        Our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones. We completed construction of a 1.5 MW production line on schedule in December 2007 after having consistently achieved PV cell conversion efficiencies of approximately 10% to 12%, and PV module conversion efficiencies of approximately 6% to 8%, and as high as 9.6%, in a pre-production prototyping and test facility that we have operated since the fourth quarter of 2006. Conversion efficiency is the percentage of energy from absorbed light that a device is able to convert into electrical energy. Over time and with further refinement of our existing processes, we believe that our PV modules should be able to consistently achieve efficiencies of 10% to 12%. We are now testing and qualifying our 1.5 MW production line in anticipation of commencing limited commercial production during the second quarter of 2008 with an emphasis on module testing and further optimization of production yield. Our production line incorporates into an integrated process each of the discrete manufacturing steps that have been previously tested in our pre-production prototyping and test facility.

        Our manufacturing expansion plan entails the design, installation, qualification, testing and operation of additional production tools to increase our rated production capacity, and contemplates the addition of approximately 30 MW of rated capacity by the end of 2009, another approximately 30 MW of rated capacity by the end of 2010 and another approximately 50 MW of rated capacity by the end of 2011. We therefore expect to have approximately 110 MW of rated production capacity in place by the end of 2011. Rated production capacity refers to our expected level of annual production upon optimizing our production process and is based on assumed production yields and module efficiencies. The actual production levels that we are able to realize at any point during our planned expansion will depend on a variety of factors, including our ability to optimize our production process to achieve targeted production yields and module efficiencies.

Overview

        We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the year ended December 31, 2007, we generated approximately $1.0 million in revenues, none of which came from our planned principal operations to commercialize flexible PV modules. As of December 31, 2007, we had an accumulated deficit of approximately $11.9 million. Under our current business plan, we expect losses to continue through at least 2009. To date, we have financed our operations primarily through public and private equity financings.

        Our path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones. We completed construction of a 1.5 MW production line on schedule in December 2007 after having consistently achieved PV cell conversion efficiencies of approximately 10% to 12%, and PV module conversion efficiencies of approximately 6% to 8%, and as high as 9.6%, in a pre-production prototyping and test facility that we have operated since the fourth quarter of 2006. Conversion efficiency is the percentage of energy from absorbed light that a device is able to convert into electrical energy. Over time and with further refinement of our existing processes, we believe that our PV modules should be able to consistently achieve efficiencies of 10% to 12%. We are now testing and qualifying our 1.5 MW production line in anticipation of commencing limited commercial production during the second quarter of 2008 with an emphasis on module testing and further optimization of production yield. Our production line incorporates into an integrated process each of the discrete manufacturing steps that have been previously tested in our pre-production prototyping and test facility.

        Our manufacturing expansion plan entails the design, installation, qualification, testing and operation of additional production tools to increase our rated production capacity, and contemplates the addition of approximately 30 MW of rated capacity by the end of 2009, another approximately 30 MW of rated capacity by the end of 2010 and another approximately 50 MW of rated capacity by the end of 2011. We therefore expect to have approximately 110 MW of rated production capacity in place by the end of 2011. Rated production capacity refers to our expected level of annual production upon optimizing our production process and is based on assumed production yields and module efficiencies. The actual production levels that we are able to realize at any point during our planned expansion will depend on a variety of factors, including our ability to optimize our production process to achieve targeted production yields and module efficiencies. See Risk Factors including "Risk Factors—We have a limited history of operations, have not generated any revenue from operations and have not commenced commercial production of our PV modules."

28

Overview

        We are a development stage company formed to commercialize flexible PV modules using proprietary technology. For the year ended December 31, 2007, we
generated approximately $1.0 million in revenues, none of which came from our planned principal operations to commercialize flexible PV modules. As of December 31, 2007, we had an
accumulated deficit of approximately $11.9 million. Under our current business plan, we expect losses to continue through at least 2009. To date, we have financed our operations primarily
through public and private equity financings.

        Our
path to commercialization is defined by a highly disciplined, staged progression based upon the achievement of key milestones. We completed construction of a 1.5 MW production
line on schedule in December 2007 after having consistently achieved PV cell conversion efficiencies of approximately 10% to 12%, and PV module conversion efficiencies of approximately 6% to 8%, and
as high as 9.6%, in a pre-production prototyping and test facility that we have operated since the fourth quarter of 2006. Conversion efficiency is the percentage of energy from absorbed
light that a device is able to convert into electrical energy. Over time and with further refinement of our existing processes, we believe that our PV modules should be able to consistently achieve
efficiencies of 10% to 12%. We
are now testing and qualifying our 1.5 MW production line in anticipation of commencing limited commercial production during the second quarter of 2008 with an emphasis on module testing and
further optimization of production yield. Our production line incorporates into an integrated process each of the discrete manufacturing steps that have been previously tested in our
pre-production prototyping and test facility.

        Our
manufacturing expansion plan entails the design, installation, qualification, testing and operation of additional production tools to increase our rated production capacity, and
contemplates the addition of approximately 30 MW of rated capacity by the end of 2009, another approximately 30 MW of rated capacity by the end of 2010 and another approximately
50 MW of rated capacity by the end of 2011. We therefore expect to have approximately 110 MW of rated production capacity in place by the end of 2011. Rated production capacity refers to
our expected level of annual production upon optimizing our production process and is based on assumed production yields and module efficiencies. The actual production levels that we are able to
realize at any point during our planned expansion will depend on a variety of factors, including our ability to optimize our production process to achieve targeted production yields and module
efficiencies. See Risk Factors including "Risk Factors—We have a limited history of operations, have not generated any revenue from operations and have not commenced commercial production
of our PV modules."

28

Overview

Subject to stockholder approval, the Board of Directors approved an amendment and restatement of our 2005 Stock Option Plan to increase the number of shares of common stock authorized for issuance under the Option Plan from 750,000 shares to 1,000,000 shares, and to limit the number of shares that may be granted to individual employees as stock option awards in a single fiscal year to qualify such awards as performance-based compensation under Section 162(m) of the Internal Revenue Code.

The Option Plan was adopted to provide meaningful incentives for the achievements of our directors, officers, employees and other service providers, which, in turn, are expected to improve the Company’s long-term performance. We are asking our stockholders to approve an increase in the number of shares issuable under the Option Plan in order to continue this company-wide compensation strategy and to provide resources to recruit and retain qualified personnel to support our planned strategic growth. Under the Option Plan, the number of shares of common stock currently authorized by our stockholders for issuance is 750,000 shares. As of March 31, 2007, only about 15,000 shares remained available for grant under the Option Plan. As of March 31, 2007, approximately 24 persons were eligible to participate in the Option Plan. If the stockholders approve the amendment and restatement of the Option Plan, 250,000 additional shares will be available for issuance under the Option Plan.

We are also asking our stockholders to approve the proposed amended and restated Option Plan so that awards granted under it may qualify as “performance-based” compensation under the Internal Revenue Code. Under Section 162(m) of the Internal Revenue Code, in order for the Company to be able to deduct compensation in excess of $1 million paid in any year to our chief executive officer or the four other most highly compensated executive officers (within the meaning of Section 162(m)), the compensation must qualify as “performance-based.”  One way for stock option-based compensation to qualify as performance-based under the Option Plan is by limiting the number of optioned shares that may be awarded to an employee during a specific period of time if the stockholders approve such limits. The material terms of the proposed limits for awards under the amended and restated Option Plan (namely, that no employee shall be granted, in any fiscal year of the Company, options to purchase more than 100,000 shares) are described below.

A copy of the amended and restated Option Plan is attached to this proxy statement as an appendix and is incorporated herein by reference. The following description is a summary of the material terms of the proposed amended and restated Option Plan and does not purport to be a complete description. Please refer the attached amended and restated Option Plan for more detailed information.