UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-8403

ENERGY CONVERSION DEVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware		38-1749884
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2956 Waterview Drive, Rochester Hills, Michigan		48309
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (248) 293-0440
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of each Exchange on which registered
Common Stock, $.01 par value per share		NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     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. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of December 31, 2009, the aggregate market value of the registrant’s Common Stock held by nonaffiliates of the registrant was approximately $483.5 million based on the closing price as reported on the NASDAQ Global Select Market.

     As of August 25, 2010, there were 48,539,622 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the registrant’s Proxy Statement to be filed within 120 days of June 30, 2010 for the 2010 Annual Meeting of Stockholders.

 

 

TABLE OF CONTENTS
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
FORM 10-K
FISCAL YEAR ENDED JUNE 30, 2010

PART I
Item 1: Business			2
Item 1A: Risk Factors			9
Item 1B: Unresolved Staff Comments			24
Item 2: Properties			25
Item 3: Legal Proceedings			25
Item 4: Removed and Reserved			25
PART II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			26
Item 6: Selected Financial Data			28
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 7A: Quantitative and Qualitative Disclosures about Market Risk			46
Item 8: Financial Statements and Supplementary Data			47
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			96
Item 9A: Controls and Procedures			96
Item 9B: Other Information			99
PART III
Item 10: Directors, Executive Officers and Corporate Governance			100
Item 11: Executive Compensation			100
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			100
Item 13: Certain Relationships and Related Transactions, and Director Independence			101
Item 14: Principal Accounting Fees and Services			101
PART IV
Item 15: Exhibits, Financial Statement Schedules			102
SCHEDULE II – Valuation and Qualifying Accounts			107
SIGNATURES			108
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32

PART I

Item 1:		Business

     In this Report, we use the terms “Company,” “ECD,” “we,” “us” and “our,” unless otherwise indicated or the context otherwise requires, to refer to Energy Conversion Devices, Inc. and its consolidated subsidiaries. Certain disclosures included in this Report constitute forward-looking statements that are subject to risks and uncertainties. See Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements.”

Overview

     We design, manufacture and sell photovoltaic (“PV”) products, known as PV or solar laminates that generate clean, renewable energy by converting sunlight into electricity. Our solar laminates have unique characteristics that differentiate them from conventional crystalline solar modules, including physical flexibility, light weight, high durability and ease of installation. These characteristics make our products particularly suitable for rooftop and building integrated photovoltaic (“BIPV”) applications, which are our primary target markets. We manufacture our solar laminates using a proprietary process and technology that we developed through nearly 30 years of research. We are also expanding our portfolio of solutions in the low load-bearing building applied (“BAPV”) market. In addition, we develop and install solar PV systems on rooftops and in other applications to which our PV products are well suited. Solar sales represent over 90% of our revenues. We also receive fees and royalties from licensees of our nickel metal hydride (“NiMH”) battery technology and sell high performance nickel hydroxide used in NiMH batteries.

Our Business Segments

     We operate our business in two segments: United Solar Ovonic and Ovonic Materials. Financial information regarding each segment is available in Note 24, “Business Segments,” to our Notes to the Consolidated Financial Statements.

United Solar Ovonic

     Our United Solar Ovonic segment designs, manufactures and sells PV laminates that generate clean, renewable energy by converting sunlight into electricity. This business, which we conduct through our wholly owned subsidiary, United Solar Ovonic LLC (“USO”), is based principally on our pioneering technologies for thin-film amorphous silicon PV laminates and roll-to-roll manufacturing. On August 19, 2009, we acquired 100% of the outstanding common shares of Solar Integrated Technologies, Inc. (“SIT”), which expanded our sales activities to include design, development and installation of rooftop BIPV systems and applications, as well as enhanced our field engineering and technical support activities. Through a combination of SIT and USO resources, we also develop specialized ground mount and rooftop PV projects, including projects that deploy our PV laminates.

     Our PV laminates possess several unique attributes that make them ideal for both rooftop and building integrated applications, including the ability to be integrated with roofing materials; qualify for special BIPV incentives; light weight; superior resistance to wind uplift; no roof penetration; high durability and impact resistance; and ease of installation. In addition, our products generate more

electricity in real world conditions than many competing products, resulting in higher financial returns for our customers.

     We sell our PV laminates principally for commercial and industrial rooftop applications. We believe we have a strategic competitive advantage because our PV laminates are readily adaptable for integration into various roofing materials. We sell our laminates to commercial roofing materials manufacturers, builders and building contractors, and solar power installers/integrators who incorporate our PV laminates into their products for commercial sale and then handle all aspects of the consumer relationship, including marketing, sales and service. We have developed similar relationships with residential roofing material manufacturers, who are developing applications to sell our laminates through their distribution and installation channels for the residential market. We are also expanding our portfolio of solutions in the low load-bearing BAPV market through the introduction of new products such as PowerTilt, which offers a lightweight building-applied solution combined with slight tilt that provides greater energy output. In addition, we are developing multiple building integrated products to address the residential rooftop market opportunities in North America and Europe. For example, we have worked with market leader CertainTeed to develop and launch its EnerGen brand residential solar system that integrates our flexible PV laminates with traditional asphalt residential roofing shingles. The adaptability of our lightweight, flexible PV laminates also presents opportunities for sales to developers of certain ground mount and other PV applications. In addition, through SIT we now have the capability to sell complete rooftop PV systems directly to end-user customers.

     We manufacture our PV laminates using our proprietary vacuum deposition and large-scale, roll-to-roll manufacturing processes that deposit amorphous silicon as a thin film on a stainless steel substrate. We have designed, developed and manufactured the automated production equipment based on these proprietary process technologies. We believe our manufacturing process and product design create significant barriers to entry for competitors who may seek to produce products similar to our own. We also believe that consolidating our PV equipment design and manufacturing activities with our PV laminate manufacturing activities allows us to more effectively improve our manufacturing efficiency and reduce capital costs.

     Our PV sales compete with companies that currently manufacture and distribute products based on well-established technologies for electricity generation, as well as companies that currently manufacture and distribute products based on alternative energy generation technologies, such as solar and wind. Our principal competitors in the solar market include Sharp Corporation, Q-Cells AG, Evergreen Solar, Inc., Kyocera Corporation, Sanyo Electric Co., Ltd. (“Sanyo”), SunPower Corp., Mitsubishi Electric Corporation, Yingli Solar, Trina Solar Limited, and Suntech Power Holdings Co., Ltd., all of which manufacture predominantly crystalline or polycrystalline silicon PV modules, and First Solar, Inc., which manufactures thin film, cadmium telluride PV modules on glass substrates. The competitiveness of alternative energy generation products in general, including solar power products, is typically enhanced by governmental incentives designed to encourage the use of these products as compared to conventional energy generation sources, which today are less expensive at the customer level in most locations. However, our long-term goal is to compete directly, without subsidies, in energy markets. SIT competes with numerous developers, contractors and installers of PV systems principally for rooftop applications.

     We have entered into long-term supply agreements with our customers, some of which are “take-or-pay” agreements (under which we could demand that the customer purchase a specified minimum amount of our products). As of June 30, 2010, our backlog of anticipated product sales for fiscal years 2011 through 2016 was $634.6 million. As of June 30, 2009, our backlog of anticipated product sales was approximately $1.6 billion (including sales to SIT, which we subsequently acquired in August of 2009, of $506.7 million). Anticipated product sales include future firm commitments under take-or-pay

agreements (i.e. contractually required minimum quantities), confirmed orders from customers as of June 30, 2010 and government contracts. The Company’s estimate of anticipated product sales may be impacted by various assumptions, including anticipated price reductions, currency exchange rates, and overall customer demand. Current macroeconomic conditions, including the global economic crisis, are adversely impacting our customers, including some customers (who are unable to fully comply) with take-or-pay agreements, and, as a result, our revenues and net income are likewise adversely impacted. We are working with our customers to preserve relationships and maximize long-term value by, among other things, reallocating product shipments to other customers and pursuing other remedies (including contract renegotiations), as appropriate on a case-by-case basis. For a discussion of the risks associated with our backlog and customer demand more generally, see Item 1A – Risk Factors.

     Our strategic customers include Solardis-Soprasolar, Alwitra Flachdach Systeme GmbH, Advanced Green Technologies, Inc. (a unit of Advanced Roofing, Inc.), Marcegaglia Taranto S.p.A., Derbigum Suisse Sarl, and Centrosolar AG. The only customer with sales in excess of 10% of our solar sales was Enel Green Power, which represented 22% of our solar sales in this segment for the 2010 fiscal year. For more information about our major customers and our revenues by geographic region, see Note 24 “Business Segments,” to our Notes to the Consolidated Financial Statements.

     We presently have 150 megawatts (“MW”) of nameplate manufacturing capacity. Our long-term research and development strategy involves reducing production costs, improving light-to-electricity conversion efficiency and identifying new commercial applications for our products. We seek to offset our research and development costs with third-party funding, including product development agreements and government funding. We entered into a cooperative agreement in which we will receive approximately $19 million from the Department of Energy under an innovative program, the Solar America Initiative, to increase the efficiency of our photovoltaic products, lower material costs and develop innovative installation methods in order to reduce overall system costs. This program will end in February 2011. Recently, we announced our “Technology Roadmap” to improve conversion efficiency and reduce cost per watt by introducing new processes in our production machines. In the first phase, we modified, and are now optimizing, a deposition line at our Auburn Hills campus to incorporate our new high frequency (“HF”) deposition technology. We expect that laminates with 10% aperture area conversion efficiency, as compared to our current conversion efficiency of 8%, will be produced from this facility in calendar year 2011, at a reduced cost per watt. The next phase will involve modifications of another deposition line at our Auburn Hills campus to HF, and also modifications to the deposition lines at our Greenville campus to incorporate our HF technology depositing enhanced-efficiency silicon (“Hybrid-Nano”), which is expected to further increase aperture area efficiency to 12% in calendar year 2012, with further reductions cost per watt. These modifications will increase the capacity of the modified lines.

     The key raw materials used in our United Solar Ovonic segment business are stainless steel, high purity industrial gases (primarily argon, nitrogen, hydrogen, silane and germane) and polymer materials. We believe we have adequate sources for the supply of key raw materials and components for our PV laminate manufacturing needs. We have recently expanded our supplier base for certain key raw materials and components for efficiency, cost reduction and quality, while limiting the number of suppliers who act as the single source supplier for a particular raw material. We are actively managing our direct material costs through purchasing strategies, product design and operating improvements. We have entered into long-term supply agreements, some of which are “take-or-pay” agreements (that require us to purchase a specified minimum amount of materials) with our suppliers.

     Our United Solar Ovonic segment is headquartered in Auburn Hills, Michigan, and has manufacturing facilities in Auburn Hills and Greenville, Michigan and Tijuana, Mexico. We maintain sales offices in France, Germany, Italy, Spain, and the United States. Additionally, we have established a joint venture, United Solar Ovonic Jinneng Limited, which is organized under the laws of the People’s Republic of China, to manufacture solar products in China for sale in the Chinese market using solar cells

purchased from, and technology licensed by, USO. We presently own 25% of the joint venture, with the option to increase our ownership to 51% in certain circumstances. Tianjin Jinneng Investment Co. owns the remainder of the joint venture. The joint venture commenced operations in the fourth quarter of fiscal year 2010.

Ovonic Materials

     Our Ovonic Materials segment invents, designs and develops materials and products based on our pioneering materials science technology. We seek to commercialize this technology internally and through third-party relationships, such as licenses and joint ventures. We are presently commercializing our materials, and consumer and stationary NiMH battery technology through this segment. We are also engaged in pre-commercialization activities for our emerging technologies, the funding of which we seek to offset with royalties and licensing revenues and third-party funding, including product development agreements and government funding.

NiMH Batteries

     NiMH batteries are rechargeable energy storage solutions offering high power and energy, long cycle life and maintenance-free operation. They are adaptable to a broad range of consumer, transportation and stationary applications. Products utilizing our NiMH battery technology compete with lead-acid, nickel-cadmium, lithium battery technologies and primary alkaline disposable batteries. NiMH batteries produce high energy and power for their weight and volume, do not contain any environmentally hazardous substances, have excellent durability and abuse tolerance, have a long cycle life, and provide excellent cost benefits.

     We commercialize our NiMH battery technology principally through third-party licensing arrangements with NiMH battery manufacturers throughout the world. We also sell proprietary high-performance positive electrode nickel hydroxide materials for use in NiMH batteries. We conduct our NiMH battery technology licensing and materials manufacturing activities through our consolidated subsidiary Ovonic Battery Company, Inc., in which we have a 93.6% equity interest and the balance is owned by Honda Motor Company, Ltd. (3.2%) and Sanoh Industrial Co., Ltd. (3.2%). On July 13, 2009, we completed the sale of our interest in Cobasys LLC, our former joint venture through which we also commercialized our NiMH battery technology.

     Transportation NiMH batteries are in widespread commercial use in hybrid electric vehicles where the NiMH chemistry offers proven cost, safety, performance and durability. The electrification of vehicles worldwide in hybrid electric vehicles (“HEV”), plug-in HEV (“PHEV”) and pure battery electric (“BEV’s”) is expected to be a high growth opportunity for rechargeable batteries, although there is significant competition in these transportation segments from emerging technologies such as lithium ion (“Li-Ion”).

Licensing

     We have licensed our NiMH battery technology to NiMH battery manufacturers, principally for consumer and transportation applications, on a royalty-bearing, non-exclusive basis. We are presently receiving royalties from manufacturers who are currently producing NiMH batteries using our technology. Royalties from Sanyo for consumer and transportation applications represented 36% of our revenues in this segment for both fiscal years 2010 and 2009.

     As part of the sale of Cobasys to SB LiMotive, we reacquired exclusive rights for stationary NiMH batteries, subject to preexisting licenses. Stationary NiMH batteries are well suited to compete in telecommunications, uninterruptible power supplies, and emerging energy storage applications. NiMH technology will compete in these storage applications due to its superior energy density, deep discharge cycle life and abuse tolerance compared to the incumbent large format lead-acid battery technology. Whereas the higher energy per weight of Li-Ion batteries (compared to NiMH batteries) has allowed Li-ion chemistries to penetrate into portable electronic devices such as laptop computers and cellular telephones and is the source of automotive interest, NiMH chemistries are competitive on an energy per volume basis and therefore are a good match for stationary storage applications. In addition, NiMH batteries provide proven durability, abuse tolerance, an attractive cost value proposition and therefore a significant commercial opportunity. Various business models for monetizing our stationary NiMH patents and know-how are being considered, including licensing and cooperative ventures with our existing licensees and strategic partners in the value chain.

Materials Manufacturing

     We produce proprietary high-performance positive electrode nickel hydroxide materials for use in NiMH batteries, which we sell to licensees of our NiMH battery technology. Our positive electrode materials offer advantages such as higher capacity and power, greater cycle life, high-temperature performance and lower costs. Sales to Gold Peak Industries (Holdings) Limited represented 95% and 100%, respectively, of our NiMH materials product sales in this segment and 16% and 18%, respectively, of our total revenues in this segment for fiscal years 2010 and 2009. We conduct our manufacturing operations at an automated facility in Troy, Michigan.

     The key raw materials used in our nickel hydroxide business are primarily nickel and cobalt. All of the raw materials used are generally readily available from numerous sources, but interruptions in production or delivery of key raw materials could have an adverse impact on our manufacturing operations in this segment. Prices for these raw materials fluctuate in the normal course of business due to supply and demand. Our product pricing formula to our customers is based on the raw material price.

Emerging Technologies

     Our research and development activities have generated new technologies, which we are seeking to bring to full-scale commercialization. These technologies, some of which are discussed below, are subject to further development and will require substantial additional funding to reach commercial product status. We seek to offset our funding requirements by obtaining third-party funding through strategic alliances and government contracts.

     Ovonic Solid Hydrogen Storage Technologies

     Hydrogen is a clean and efficient fuel source that yields more energy per unit of weight than any other combustible fuel, and we are developing a practical approach to storing hydrogen in a solid metal matrix at low pressures using a family of efficient metal hydrides. Our solid hydrogen storage solutions have several advantages over conventional gaseous and liquid storage solutions, including improved volumetric density and greater safety due to our technology’s low-pressure refilling and storage capabilities. We are presently manufacturing and selling pre-production volumes of portable hydrogen canisters in our Rochester Hills, Michigan facility.

     Ovonic Metal Hydride Fuel Cell Technologies

     Fuel cells are environmentally-clean power generators in which hydrogen and oxygen are combined to produce electricity, with water and heat as the only byproducts. Our Ovonic metal hydride fuel cell technology is a proprietary approach which provides a lower-cost solution in comparison to conventional proton exchange membrane (“PEM”) fuel cells, which require expensive platinum catalysts. As part of our development activities, we have demonstrated high power fuel stacks utilizing our metal hydride fuel cell technology that meet the power ratings of certain commercially-available fuel cells for the stationary market at a fraction of the cost.

     Ovonic Bio Reformation Technologies

     Hydrogen is a widely used industrial gas. Our Ovonic reformation technology produces high-purity hydrogen in a safe process from multiple renewable biofuel and biomass sources at far lower operating temperatures than commercial processes and without the generation of carbon dioxide gas. Our proprietary process has the potential to dramatically reduce distributed hydrogen cost by eliminating high transportation costs. We are presently seeking funding as we move from laboratory-scale development to pilot-scale production.

     Ovonyx

     Our Ovonyx joint venture is commercializing our proprietary Ovonic Universal Memory (“OUM”) and Ovonic Threshold Switch (“OTS”) technology through licensing and product development arrangements. OUM is a basic, new type of nonvolatile memory that can replace conventional nonvolatile or FLASH memory in applications requiring retention of stored data when power is turned off, including cell phones, PDAs, digital cameras and microelectronics. OUM, which is also known in the semiconductor industry as phase-change random access memory (PRAM and PC-RAM), offers several advantages over conventional nonvolatile memory, including significantly faster write time, greater scalability, lower power utilization and longer life, and is compatible with existing complementary metal-oxide-semiconductor (“CMOS”) manufacturing processes.

     We own 38.6% (or 32.4% on a fully diluted basis after giving effect to the potential exercise of stock options and warrants) of the common stock of Ovonyx. As part of this joint venture arrangement, we have contributed intellectual property, licenses, production processes and know-how. In addition to our equity interest in Ovonyx, we receive 0.5% of the Ovonyx annual gross revenue as a royalty.

     Ovonyx has entered into royalty-bearing, nonexclusive license agreements with Intel Corporation, Samsung Electronics Co., Ltd., Elpida Memory, Inc., STMicroelectronics N.V., BAE Systems, Hynix Semiconductor, Inc., and Numonyx B.V. (acquired by Micron Technology, Inc.), to produce OUM products. Under most of these agreements, Ovonyx has participated in joint development programs to assist in the commercialization of OUM phase-change memory products.

Our Technology and Intellectual Property

     The principal markets in which we compete – the alternative energy generation, energy storage and information technology markets – are characterized by rapid change and competition driven by technological and product performance advantages, as well as cost. We have driven some of this activity through our pioneering and proprietary materials, product and production process technologies. At the same time, we are actively engaged in product design and development to commercialize and improve our materials, products and production processes.

Research and Development Expenditures

     Our research and development expenditures are reflected as cost of revenues from product development agreements and product development and research expenses in our Consolidated Statements of Operations. We seek to offset our research and development costs with third-party funding, including joint ventures, product development agreements and government funding.

Patents and Intellectual Property

     We maintain an extensive patent portfolio presently consisting of approximately 260 U.S. patents and over 275 foreign counterparts to which we are regularly adding new patents based upon our continuing research and development activities. Importantly, our portfolio includes numerous basic and fundamental patents applicable to each of our segments, covering not only materials, but also the production technology and products we develop. Based on the breadth and depth of our patent portfolio, we believe that our proprietary patent position is sustainable notwithstanding the expiration of certain patents. We do not expect the expiration of any patents to materially affect the business prospects of any of our segments.

Competition

     Since our businesses are based upon our pioneering technologies that offer fundamental solutions in the alternative energy generation, energy storage and information technology markets, we compete not only at the product level for market share but also at the technology level for market acceptance. Our competition includes well-established conventional technologies, other alternative technology solutions and other technologies within an alternative solution. For example, our PV technology competes with conventional electricity generation technologies, such as gas and coal; alternative electricity generation technologies, such as wind and nuclear; and other solar technologies, such as crystalline products. Our business competitors include some of the world’s largest industrial companies, many of which are pursuing new technology solutions in addition to their well-established conventional technologies.

     A key factor affecting demand for PV systems is the levelized cost of energy (“LCOE”) supplied by such systems in comparison to other sources of electricity. LCOE is determined by dividing the present value of the total lifetime cost of a PV system by the present value of the total energy output of the system measured in kilowatt hours. Major factors affecting the LCOE of PV systems include cost of the PV products, energy conversion efficiency of the PV products, cost of the remaining components of the PV system (“balance of system costs”), maintenance costs, and durability of performance. Developers and purchasers of PV systems, particularly utility scale and large commercial grid-connected systems, generally seek to obtain the lowest LCOE by choosing PV systems that optimize this combination of low PV product cost, high conversion efficiency, low balance of system and maintenance costs, and long-time durability. As a result of technology innovation, manufacturing scale and efficiency improvements and dramatic reductions in the cost of polycrystalline silicon and certain other raw materials used in many PV products, the LCOE of PV systems generally has been declining rapidly in recent years.

     We believe that we have derived a key business and technological advantage through our research and development activities by continuously inventing new technologies and improving our existing materials, products and production processes. However, even as we successfully pursue these research and development activities, some of our technologies, particularly in the alternative energy generation and energy storage markets, presently face commercial barriers as compared to well-established conventional technologies, including infrastructural barriers, customer transition costs and higher manufacturing costs associated with present production volumes. The competitiveness of products based on our technologies

in these areas is typically enhanced by external factors, including rising energy costs, concerns regarding energy security and governmental incentives at the consumer level. Our long-term goal is to compete directly in energy markets without subsidies.

Our Employees

     As of June 30, 2010, we employed approximately 1,500 people, approximately 960 of whom are located in the United States.

Available Information

     Our website address is www.energyconversiondevices.com. We make available on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). We also make available on our website, or in printed form upon request, free of charge, our Corporate Governance Guidelines, Code of Business Conduct, charters for the committees of our Board of Directors and other information related to the Company. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

Item 1A: Risk Factors

Our success depends significantly on our ability through technology improvements to reduce the cost and improve the conversion efficiency of our solar laminates and otherwise to continue to develop and market new and innovative products. There can be no assurance that such efforts will be successful or the capital spending required will be available.

     Our financial performance depends in part on our ability to enhance our existing solar laminates, develop new and innovative products and product applications, reduce our costs of producing solar laminates, and adopt or develop new technologies that continue to differentiate our products from those of our competitors. The continued demand for our solar products is premised in part on the features of our solar laminates that distinguish them from the solar products of our competitors and the resulting unique product applications. These features include physical flexibility, the ability of our laminates to be integrated with roofing materials, light weight, superior resistance to wind uplift, durability, no roof penetration and ease of installation. There are companies using similar or competitive technologies that have introduced or announced plans to introduce solar products incorporating some or all of these features. In addition, all solar products compete based on efficiency and significant advances in the efficiency of the solar products of our competitors also could provide them with a competitive advantage. If we fail to enhance our existing solar laminates, develop new and innovative products and product applications, or adopt or develop new technologies that continue to differentiate our products from those of our competitors, our business, financial condition and results of operations could be adversely affected.

     In June 2010 we announced our Technology Roadmap to improve both the conversion efficiency and cost per watt of our laminates and thereby reduce the LCOE of PV systems that incorporate our laminates to enhance our ability to compete more effectively with other PV suppliers. We also announced specific objectives regarding conversion efficiency, laminate cost per watt, and LCOE. Our Technology Roadmap requires a substantial investment of financial resources and novel alterations of our manufacturing processes and product designs. It also requires careful project management and coordination of multiple simultaneous activities. There is no assurance that we will have access to sufficient capital to fund our

Technology Roadmap or otherwise be able to execute fully or timely on our Technology Roadmap in order to achieve the cost reduction and conversion efficiency goals that we have established. If we are unable to achieve these goals our ability to compete effectively with other PV suppliers, and our financial condition and results of operations will be adversely affected.

The continuing global economic, capital markets and credit disruptions pose risks for our business segments.

     The continuing global economic, capital markets and credit disruptions pose risks for our business segments. These risks include slower economic activity and investment in construction projects that make use of our products and services. These economic developments, particularly decreased credit availability, have reduced demand for solar products, including our solar laminates, and for the solar development and installation services of SIT. Further, these conditions have caused some of our customers to be unable to fully comply with the terms of their agreements to purchase our solar laminates.

     Continued decreases in credit availability as well as continued economic instability may adversely impact our existing or future business and require that we reallocate product shipments from customers who are unable to satisfy their contractual obligations to other customers or pursue other remedies, including contract renegotiation.

The decline in polysilicon prices, and the increase in the global capacity of PV products, is causing downward pressure on the prices of our products, resulting in lower revenues and earnings.

     Polysilicon, a key raw material for traditional crystalline PV products, is readily available to solar cell and module manufacturers after several years of short supply and prices have been falling rapidly. These price reductions by our competitors are resulting in price reductions of solar cells and modules that compete with our laminates. While we believe our laminates have unique characteristics that make them attractive for a variety of applications, particularly BIPV installations, the market price decline of competitive products is resulting in downward pressure on our pricing that negatively impacts our revenues and earnings.

We have instituted demand creation initiatives that are extending our business model and subjecting us to additional business and financial risks.

     We have instituted demand creation initiatives in our United Solar Ovonic segment to stimulate demand for our products. Certain of these initiatives, such as offering project financing and acquiring SIT, extend our existing business model in this segment from principally manufacturing and selling laminates through our channel partners to include development, design, installation, financing and ownership of PV projects. As a result, these initiatives will expose us to additional business risks, such as credit risks (project financing) and project construction and performance risks, which may be significant. Some of these initiatives, such as project financing, are capital intensive, and there can be no assurances that our existing capital resources will be sufficient to meaningfully stimulate demand. Additionally, certain of these initiatives will require us to redeploy our capital resources from other initiatives, such as our manufacturing expansion, which may impair our ability to pursue these other initiatives and realize their benefits. Further, there can be no assurance that these initiatives will successfully stimulate demand for our products.

In response to market conditions, we have instituted capital expenditure and cost reduction initiatives that are impacting our financial performance and our cash resources, and will continue to do so in the future.

     We have instituted a number of cost reduction initiatives to improve our cost structure and preserve capital in response to market conditions. We have incurred restructuring expenses as a result of certain of these activities and may incur additional restructuring expenses as we pursue further cost reduction activities in the future. In addition, in response to market conditions, we temporarily suspended our manufacturing expansion in our United Solar Ovonic segment and reduced our production in this segment. We recognized under-absorption of overhead costs resulting from our production adjustments and may recognize similar costs in the future if we do not operate our facilities at production capacity. If our production levels and related cash flows remain at reduced levels we may be required to record an additional impairment to our property, plant and equipment, which could have a material adverse effect on our financial position and results of operations. Furthermore, there can be no assurance that market demand will align with our present manufacturing capacity and, as a result, our business could be materially adversely affected.

Volatility in customer demand in the solar industry could affect future levels of sales and profitability and limit our ability to predict such levels; if we are unable to balance our production levels with customer demand, our business and financial results will be materially adversely impacted.

     In June 2008, in order to meet increasing demand for our products, we announced the active expansion of our production capacity and the commencement of a plan to reach 1 gigawatt (“GW”) of annual production capacity by 2012. In March of 2009, we announced that we were slowing the pace of our “demand-driven” production and expansion plan to better reflect the present impact of credit availability on project flow in the global pipeline for photovoltaics. In connection with this announcement we delayed expansion at our Greenville facility and Battle Creek facility, which will reduce our capital expenditures and allow us to preserve and, in strategic situations, redeploy our capital in other areas. When market conditions and visibility improve, we believe that we can quickly re-initiate our manufacturing expansion, as a result of the operational improvements we have made with respect to the construction and ramp of new facilities. In the meantime, however, we will have to ensure that we balance our production levels with demand for our products. If we are unable to balance our production levels with customer demand, our business and financial results will be materially adversely impacted.

     Historically, we have maintained moderate lead times, which has enabled customers to place orders close to their true needs for product. In defining our financial goals and projections, we consider inventory on hand, backlog, production cycles and expected order patterns from customers. If our estimates in these areas become inaccurate, we may not be able to meet our revenue goals and projections. In addition, some customers require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding commitment to purchase all, or even some, of the products. As a result, in any quarterly fiscal period we are subject to the risk of cancellation of orders leading to a fall-off of sales and backlog. Further, those orders may be for products that meet the customer’s unique requirements so that those cancelled orders would, in addition, result in an inventory of unsaleable products, and thus potential inventory write-offs. We routinely estimate inventory reserves required for such products, but actual results may differ from these reserve estimates. If these differences are material, our business and financial results will be materially adversely impacted.

We have acquired SIT to extend our business model and enhance our competitiveness, but we face integration and other related risks arising from this acquisition that could expose us to liability or cause us not to achieve these benefits.

     Our ability to successfully integrate the SIT operations involves numerous risks, including designing and implementing internal controls over financial reporting at those locations. However, we may not be able to integrate SIT successfully into our existing business and could incur or assume unknown or contingent liabilities as a result of this acquisition or fail to realize the expected improvements in our engineering and technical capabilities or responsiveness to market opportunities. We also may lose some laminate sales from customers who choose to withdraw business from us because they perceive SIT to be a competitor of theirs. If any of these possibilities occur, our business could be materially adversely affected.

We face intense competition from other companies producing solar energy and other renewable energy products.

     The solar energy market is intensely competitive and rapidly evolving. The number of solar energy product manufacturers is rapidly increasing due to the growth of actual and forecast demand for solar energy products and the relatively low barriers to entry. If we fail to attract and retain customers in our target markets for our current and future core products, namely solar laminates, we will be unable to increase our revenue and market share. Some of our competitors have established more prominent market positions, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to increase our sales. In addition, many of our competitors manufacture predominantly crystalline or polycrystalline silicon solar modules which are currently sold at lower cost and have higher conversion efficiency than our solar laminates.

     We may also face competition from new entrants to the solar energy market, including those that offer more advanced technological solutions or that have greater financial resources. A significant number of our competitors are developing or currently producing products based on more advanced solar energy technologies, including amorphous silicon, string ribbon, copper indium gallium (di)selenide, and nano technologies, which may eventually offer cost and technology advantages over the technologies currently used by us. A widespread adoption of any of these technologies could result in a rapid decline in our position in the solar energy market and our revenue if we fail to adopt such technologies or develop new technologies. Furthermore, the entire solar energy industry also faces competition from conventional energy (for example a decline in base grid electricity prices), and non-solar renewable energy providers. Due to the relatively high manufacturing costs compared to most other energy sources, solar energy is generally not competitive without government incentive programs.

     Many of our existing and potential competitors have substantially greater financial, technical, manufacturing and other resources than we do. Our competitors’ greater size in some cases provides them with a competitive advantage with respect to manufacturing because of their economies of scale and their ability to purchase raw materials at lower prices. As a result, those competitors may have stronger bargaining power with their suppliers and may have an advantage over us in negotiating favorable pricing, as well as securing supplies in times of shortages. Many of our competitors also have greater brand name recognition, more established distribution networks, balance of system capabilities, and larger customer bases. In addition, many of our competitors have well-established relationships with our current and potential distributors and have extensive knowledge of our target markets. As a result, they may be able to devote more resources to the research, development, promotion and sale of their products, or respond more quickly to evolving industry standards and changes in market conditions than we can. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors may materially and adversely affect our financial condition and results of operations.

Our customers increasingly need financing to purchase our products, which exposes us to additional business and credit risks.

     Availability and cost of financing are significant factors that affect demand for our products. Developers and owners of solar facilities typically require project financing before initiating a solar installation. Roofing contractors and other solar integrators must obtain working capital financing to carry inventory of our products and maintain their operations. Historically most of our customers have arranged their own financing without assistance from us, but with the illiquidity of current financing markets some of our customers have sought various forms of credit support from us. From time to time we may provide credit support to certain customers through open account sales or extended payment terms. Due to our size and capital constraints, we are not able to satisfy all credit requests by our customers. These credit support transactions expose us to credit risk, including the risk of default by customers. In addition, if we are unable to provide credit to our customers, or otherwise induce third parties to satisfy customer credit demands, we could lose sales and be unable to achieve our future business plan.

We have a history of losses and our future profitability is uncertain; the failure to maintain sustainable profitability could have a material adverse effect on our business, results of operations, financial condition and cash flows.

     Since our inception, we have incurred significant net losses. Principally as a result of ongoing operating losses, we had an accumulated deficit of $772.5 million as of June 30, 2010. Our goal is to operate our business in such a way that profitability is sustainable over the long term. Nonetheless, we may be unable to sustain or increase profitability in the future, which in turn could materially and adversely impact our ability to repay our debt and could materially decrease the market value of our common stock (and as a result, the value of our convertible senior notes). We expect to continue to make significant capital expenditures and anticipate that our expenses will increase as we seek to:

	•		continuously improve our manufacturing operations, whether domestically or internationally;
	•		service our debt obligations;
	•		develop our distribution network;
	•		continue to research and develop our products and manufacturing technologies;
	•		implement our demand creation initiatives, which may include project financing and strategic acquisitions;
	•		implement internal systems and infrastructure to support our growth; and
	•		retain key members of management and other personnel, and hire additional personnel.

     We do not know whether our revenue will grow at all or grow rapidly enough to absorb these costs and our limited operating history under our current business strategy and new management team makes it difficult to assess the extent of these expenses or their impact on our operating results. If we fail to achieve profitability, our business, results of operations, financial condition and cash flows could be materially adversely affected.

We may incur future restructuring charges and long-lived asset impairment losses.

     We have recorded long-lived asset impairment losses, including impairment losses for goodwill and intangible assets, and employee severance and restructuring charges. Generally, we record long-lived asset impairment losses when we determine that our estimates of the future undiscounted cash flows will not be sufficient to recover the carrying value of the long-lived assets. During 2010, we recorded substantial long-lived asset impairment losses and wrote off the entire balance of our goodwill and

intangible assets. In light of the continued volume reductions we have experienced, we may incur similar losses and charges in the future, and those losses and charges may be significant.

We have international operations, which we are expanding, that are vulnerable to risks associated with doing business in foreign countries.

     We have a PV laminate manufacturing facility in Tijuana, Mexico, and have established a joint venture in Tianjin, China, to manufacture PV laminates. Also, a portion of our expenses are denominated in currencies other than U.S. dollars. International operations and transactions are subject to certain risks inherent in doing business abroad, including:

	•		the potential that we may be forced to forfeit, voluntarily or involuntarily, foreign assets due to economic or political instability in the countries in which we choose to locate our manufacturing facilities;
	•		difficult and expensive compliance with the commercial and legal requirements of international markets;
	•		difficulty in interpreting and enforcing contracts governed by foreign law, which may be subject to multiple, conflicting and changing laws, regulations and tax systems;
	•		inability to obtain, maintain or enforce intellectual property rights;
	•		encountering trade barriers such as export requirements, tariffs, currency exchange controls, taxes and other restrictions and expenses, which could affect the competitive pricing of our solar laminates and reduce our market share in some countries;
	•		being subjected to additional withholding taxes or other tax on our foreign income or tariffs and other restrictions on foreign trade and investment, including currency exchange controls;
	•		being subjected to fluctuations in exchange rates which may affect product demand and our profitability in U.S. dollars to the extent the price of our solar laminates and cost of raw materials, labor and equipment is denominated in a foreign currency;
	•		limitations on dividends or restrictions against repatriation of earnings;
	•		difficulty in recruiting and retaining individuals skilled in international business operations;
	•		increased costs associated with maintaining international marketing efforts; and
	•		potentially adverse tax consequences associated with our permanent establishment of operations in more countries.

     In addition, since expanding our business globally is an important element of our strategy, our exposure to these risks will be greater in the future. The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. However, any such occurrences could be harmful to our business and our profitability.

Demand for our products is affected by existing regulations concerning the electrical utility industry; changes to such regulations may present technical, regulatory and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products.

     The market for electricity generation products is influenced heavily by foreign, federal, state and local government regulations and policies concerning the electric utility industry, as well as internal policies and regulations promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the United States (at both the national level and the state and local level) and in a number of other countries, these regulations and policies are being modified and may continue to be modified.

     Customer purchases of, or further investment in the research and development of, alternative energy sources, including solar power technology, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our solar power products. For example, utility companies commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could increase the cost to our customers of using our solar power products and make them less desirable, thereby harming our business, prospects, results of operations and financial condition.

     We anticipate that our solar power products and their installation will be subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. There is also a burden in having to track the requirements of individual countries and states and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our solar power products may result in significant additional expenses to us and our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar power products.

We receive a significant portion of our revenues from a small number of customers.

     We historically have entered into agreements with a relatively small number of major customers throughout the world. Our five largest customers represented approximately 42%, 46% and 50% of our total revenue for the fiscal years ended June 30, 2010, 2009 and 2008, respectively. Any loss or material reduction in sales to any of our top customers would be difficult to recoup from other customers and could have an adverse effect on our sales, results of operations, financial condition and cash flows.

The reduction or elimination of government incentives related to solar power could cause our revenues to decline.

     Today, the cost of solar power exceeds the cost of power furnished by the electric utility grid in most locations. As a result, federal, state and local government bodies in many countries, most notably Germany, Japan, Italy, Spain, France, Greece, China, Canada and the United States, have provided incentives in the form of feed-in tariffs, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy to reduce dependency on other forms of energy. Some of these government mandates and economic incentives have expired, are scheduled to be reduced or expire, or could be eliminated altogether. Reductions in, or eliminations or expirations of, incentives related to solar power could result in decreased demand for our solar laminates or result in increased price competition, and lower our revenue.

The expansion of our business into new markets, such as residential, may increase our exposure to certain risks, including class action claims.

     We are developing and have launched new applications of our solar technology, including solar laminates to be integrated into residential roofing materials. Our new solar technology applications may not gain market acceptance and we may not otherwise be successful in entering new markets, including the market for residential applications. Moreover, entry into new markets may increase our exposure to certain risks that we currently face or expose us to new risks. For example, the residential construction market for solar energy systems is exposed to different risks than the commercial construction markets, including more acute seasonality, sensitivity to interest rates, and other macroeconomic conditions, as well as aesthetics and enhanced legal exposure. In particular, new home developments can result in class action litigation when one or more homes in a development experience problems with roofing or power systems. If we penetrate the residential market and experience product failures that create property damage or personal injury, we may be exposed to greater liability of a different nature than with respect to product failures in commercial building applications.

We have focused our business strategy on, and invested significant financial resources in, the BIPV segment of the PV market and there is no guarantee that the demand for BIPV systems will develop as we anticipate.

     Our recent business strategy has focused on increasing demand for BIPV systems. We believe that there has been an increase in demand for BIPV systems based in part on increasing interest and customer support from the building industry, solar customers and governments. As a result, we have invested, and will continue to invest, significant financial resources in the production and commercialization of our solar laminates for BIPV systems. If the BIPV segment does not develop as we anticipate, or takes longer to develop than we anticipate, we may experience difficulties implementing our growth and business targets. This in turn could adversely impact our business, financial condition and results from operations.

We may be unable to obtain key raw materials that meet our quality, quantity and cost requirements.

     The key raw materials used in our business are stainless steel, resin-based polymers, nickel and high purity industrial gases, primarily argon, nitrogen, hydrogen, silane and germane. Most of our key raw materials are readily available from numerous sources, however we have, in certain instances, selected single-source suppliers for certain key raw materials and components for efficiency, cost and quality. Our supply chain and operations could be adversely impacted by the failure of the suppliers of the single-sourced materials to provide us with the raw materials that meet our quality, quantity and cost requirements. In addition, significant shortages or price increases in raw materials that are not single-sourced may adversely impact our business. Any constraint on our production may cause us to be unable to meet our obligations under customer purchase orders, and any increase in the price of raw materials could constrain our margins, either of which would adversely impact our financial results.

     We actively manage our raw materials and other supply costs through purchasing strategies, product design and operating improvements; however our management may not always be effective, which could adversely impact our supply chain and financial condition. Some of our suppliers may be unable to supply our demand for raw materials and components. In such event, we may be unable to identify new suppliers or qualify their products for use in our production lines in a timely manner and on commercially reasonable terms. Raw materials and components from new suppliers also may be less suited for our technology and yield solar laminates with lower conversion efficiencies, higher failure rates and higher

rates of degradation than solar laminates manufactured with the raw materials from our current suppliers. Our failure to obtain raw materials and components that meet our quality, quantity and cost requirements in a timely manner could interrupt or impair our ability to manufacture our solar laminates or increase our manufacturing cost, either of which would adversely impact our prospects, financial condition and results of operations.

Significant warranty and product liability claims could adversely affect our business and results of operations.

     We may be subject to warranty and product liability claims in the event that our solar laminates or PV systems fail to perform as expected or if a failure of our solar laminates or PV systems results, or is alleged to result, in bodily injury, property damage or other damages. Since our solar laminates and PV systems are electricity producing devices, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. In addition, because the products we are developing incorporate new technologies and use new installation methods, we cannot predict whether or not product liability claims will be brought against us in the future or the effect of any resulting negative publicity on our business. As a result of our acquisition of SIT, we may be subject to warranty and product liability claims associated with the manufacture, sale and installation of products by SIT before the acquisition. Moreover, we may not have adequate resources in the event of a successful claim against us.

     Our current standard product warranty for our solar laminates ranges from 20-25 years. We believe our warranty periods are competitive with industry practice. Due to the long warranty period and our proprietary technology, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. Although we test our solar power products for reliability and durability, we cannot ensure that we effectively simulate the 20-25 year warranty period. Any increase in the defect rate of our products would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our financial results.

     A successful warranty or product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation. The possibility of future product failures could cause us to incur substantial expenses to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share and cause sales to decline.

The conversion rate of our outstanding convertible debt is dependent upon the trading price of our common stock and thus the dilutive impact of the future converted shares cannot be predicted.

     Except in the instance of specific events involving the price of the Company’s common stock, the price of the convertible senior notes (“Notes”), and certain corporate transactions, our outstanding convertible debt is not convertible until March 15, 2013. The holders of the Notes may convert the principal amount of their notes into cash and, if applicable, shares of the Company’s common stock initially at a conversion rate of 10.8932 shares (equivalent to an initial conversion price of approximately $91.80 per share) per $1,000 principal amount of the Notes. The holders of the Notes are only entitled to amounts in excess of the principal amount if shares of the Company’s common stock exceed a market price of $91.80 for a period of 20 consecutive trading days during the applicable cash settlement averaging period. Since we cannot predict the future trading price of our common stock, we cannot

estimate the number of shares that will be issued at the time of conversion and the effect of those shares on the trading price of the common stock or the effect on earnings per share.

If we lose key personnel or are unable to attract and retain qualified personnel to maintain and expand our business, financial condition, results of operations and prospects could be adversely affected.

     Our success is highly dependent on the continued services of the senior management team and of a limited number of skilled managers, scientists and technicians. The loss of any of these individuals could have a material adverse effect on us. In addition, our success will depend upon, among other factors, the recruitment and retention of additional highly skilled and experienced management and technical personnel. There can be no assurance that we will be able to retain existing employees or to attract and retain additional personnel on acceptable terms given the competition for such personnel in industrial, academic and nonprofit research sectors.

We may become subject to legal or regulatory proceedings which may reach unfavorable resolutions.

     We are involved in legal proceedings arising in the normal course of business. Due to the inherent uncertainties of legal proceedings, the outcome of any such proceeding could be unfavorable, and we may choose to make payments or enter into other arrangements to settle such proceedings. Failure to settle such proceedings could require us to pay damages or other expenses, which could have a material adverse effect on our financial condition or results of operations. We have been subject to legal proceedings in the past involving the validity and enforceability of certain of our patents. While such patent-related legal proceedings have been resolved, such proceedings can require the expenditure of substantial management time and financial resources and can adversely affect our financial performance. There can be no assurance that we will not be a party to other legal proceedings in the future.

We are subject to a variety of federal, state and local laws, rules and regulations related to the discharge or disposal of toxic, volatile or other hazardous chemicals that may expose us to liability and other compliance risks.

     Although we believe that we are in compliance with these laws, rules and regulations, the failure to comply with present or future regulations could result in fines, suspension of production or cessation of operations. Third parties may also have the right to sue to enforce compliance. Moreover, it is possible that increasingly strict requirements imposed by environmental laws and enforcement policies thereunder could require us to make significant capital expenditures.

     The operation of a manufacturing plant entails the inherent risk of environmental damage or personal injury due to the handling of potentially harmful substances. There can be no assurance that we will not incur material costs and liabilities in the future because of an accident or other event resulting in personal injury or unauthorized release of such substances into the environment. In addition, we generate hazardous materials and other wastes that are disposed of at licensed disposal facilities. We may be liable, irrespective of fault, for material cleanup costs or other liabilities incurred at these facilities in the event of a release of hazardous substances by such facilities into the environment.

Our success depends in part upon our ability to protect our intellectual property and our proprietary technology including our trade secrets and other confidential information.

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

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

We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.

     Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

     Interference proceedings brought by the United States Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to our management. We may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

     Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure. In addition, during the course of this litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

     We may not prevail in any litigation or interference proceeding in which we are involved. Even if we do prevail, these proceedings can be expensive and distract our management.

Third parties may own or control patents or patent applications that are infringed by our products or technologies.

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

     We also may be required to pay substantial damages to the patent holder in the event of an infringement. Under some circumstances in the United States, these damages could be triple the actual damages the patent holder incurs. If we have supplied infringing products to third parties for marketing or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they may be required to pay to the patent holder and for

any losses the third parties may sustain themselves as the result of lost sales or damages paid to the patent holder.

     Any successful infringement action brought against us may also adversely affect marketing of products based on our technologies in other markets not covered by the infringement action. Furthermore, we may suffer adverse consequences from a successful infringement action against us even if the action is subsequently reversed on appeal, nullified through another action or resolved by settlement with the patent holder. The damages or other remedies awarded, if any, may be significant. As a result, any infringement action against us would likely harm our competitive position, be costly and require significant time and attention of our key management and technical personnel.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may require us to pay substantial fines, suspend production or cease operations.

     The operation of our manufacturing facilities entails the use and handling of potentially harmful substances, including toxic and explosive gases that pose inherent risks of environmental damage or personal injury. Although we believe that we are in material compliance with environmental regulations, rules and regulations, there can be no assurance that we will not incur material costs and liabilities in the future because of an accident or other event resulting in personal injury or unauthorized release of such substances into the environment. We may be liable, irrespective of fault, for material cleanup costs or other liabilities incurred at these facilities in the event of a release of hazardous substances into the environment by our operations.

     For example, our manufacturing process involves the controlled storage and use of silane and germane gases, both of which are toxic and combustible. Although we have rigorous safety procedures for handling these materials, the risk of accidental injury from such hazardous materials cannot be completely eliminated. If we have an accident at one of our facilities involving a release of these substances, we may be subject to civil and/or criminal penalties, including financial penalties and damages, and possibly injunctions preventing us from continuing our operations.

     In addition, it is possible that increasingly strict requirements imposed by environmental laws and enforcement policies could require us to make significant capital expenditures. To date such laws and regulations have not had a significant impact on our operations, and we believe that we have all necessary permits to conduct operations as they are presently conducted. If more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. The failure to comply with present or future regulations could result in fines, third party lawsuits, and suspension of production or cessation of operations.

We have entered into joint ventures and licensing agreements to develop and commercialize products based on our technologies and we must manage such joint ventures and licensing agreements successfully.

     We have entered into licensing and joint venture agreements in order to develop and commercialize certain products based on our technologies. Any revenue or profits that may be derived by us from these agreements will be substantially dependent upon our ability to agree with our joint venture partners and licensees about the management and operation of the joint ventures and license agreements. In addition, any revenue or profits from such agreements will be substantially dependent on the willingness and ability of our joint venture partners and licensees to devote their financial resources and manufacturing and marketing capabilities to commercialize products based on our technologies. There can be no assurance that we will agree regarding the operation of such joint ventures and licensing agreements, that

required financial resources will be available on mutually agreeable terms or that commercialization efforts will be successful. If we and our joint venture partners and licensees are unable to agree with respect to the operation of our joint ventures and licensing agreements, are unwilling or unable to devote financial resources or are unable to commercialize products based on our technologies, we may not be able to realize revenue and profits based on our technologies and our business could be materially adversely affected.

Our government product development and research contracts may be terminated by unilateral government action, or we may be unsuccessful in obtaining new government contracts to replace those that have been terminated or completed.

     We have several government product development and research contracts. Any revenue or profits that may be derived by us from these contracts will be substantially dependent upon the government agencies’ willingness to continue to devote their financial resources to our research and development efforts. There can be no assurance that such financial resources will be available or that such research and development efforts will be successful. Our government contracts may be terminated for the convenience of the government at any time, even if we have fully performed our obligations under the contracts. Upon a termination for convenience, we would generally only be entitled to recover certain eligible costs and expenses we had incurred prior to termination and would not be entitled to any other payments or damages. Therefore, if government product development and research contracts are terminated or completed and we are unsuccessful in obtaining replacement government contracts, our revenue and profits may decline and our business may be adversely affected.

The credit facility entered into by our subsidiaries, United Solar Ovonic Corporation and United Solar Ovonic LLC, contains covenant restrictions that may limit our ability to operate our business.

     We conduct substantially all of our United Solar Ovonic segment operations through our subsidiaries United Solar Ovonic Corporation and United Solar Ovonic LLC. For example, our cash flows from that segment are dependent on the distributions to us by United Solar Ovonic Corporation and United Solar Ovonic LLC. In February 2008, United Solar Ovonic Corporation and United Solar Ovonic LLC entered into a secured credit facility with an aggregate commitment of up to $55.0 million, of which we are a guarantor. The credit facility contains, and any other future debt agreements may contain, covenant restrictions that may effectively limit our ability to operate our business, due to restrictions on our or our subsidiaries’ ability to, among other things:

	•		incur additional debt or issue guarantees;
	•		create liens;
	•		make certain investments;
	•		enter into transactions with our affiliates;
	•		sell certain assets;
	•		make certain restricted payments; declare or pay dividends or make other distributions to stockholders; and
	•		merge or consolidate with any person.

     As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us due to the restrictions imposed by the credit facility. In addition, the failure to comply with these covenants could result in a default, which could permit the lenders and debt holders to accelerate such debt.

Our ability to utilize our net operating loss carryforwards could be substantially limited if we experience an ownership change under the Internal Revenue Code, which may adversely affect our results of operations and financial condition.

     As a result of our past financial performance, we have significant operating loss and research and development credit carryforwards which expire from 2010 to 2030. Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), contains rules that limit the ability of a company that undergoes an ownership change to utilize its net operating loss carryforwards in years after the ownership change. An “ownership change” for purposes of Section 382 of the Code generally refers to any change in ownership of more than 50% of the company’s stock over a three-year period. These rules generally operate by focusing on ownership changes among stockholders owning, directly or indirectly, 5% or more of the stock of a company or any change in ownership arising from a new issuance of the company’s stock.

     If we undergo an ownership change for purposes of Section 382 as a result of future transactions involving our common stock, including purchases or sales of stock between our greater than 5% stockholders, our ability to use our net operating loss carryforwards would be subject to the limitations of Section 382. Depending on the resulting limitations, a significant portion of our net operating loss carryforwards could expire before we would be able to use them. Our inability to utilize our net operating loss carryforwards may adversely affect our results of operations and financial condition.

We have a significant amount of debt outstanding. Our indebtedness, along with our other contractual commitments, could adversely affect our business, financial condition and results of operations, as well as our ability to meet any of our payment obligations.

     Together with our subsidiaries, we have a significant amount of debt and debt service requirements. As of June 30, 2010, we have approximately $293.3 million face value of outstanding debt. This level of debt and related debt service could have significant consequences on our future operations, including:

	•		making it more difficult for us to meet our payment and other obligations;
	•		resulting in an event of default if we and our subsidiaries fail to comply with covenants contained in our debt agreements, which could result in such debt becoming immediately due and payable;
	•		reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
	•		subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our credit facility;
	•		limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and
	•		placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.

     Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations, liquidity and our ability to meet our payment obligations. Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available

to us under existing or any future credit facilities or otherwise, in an amount sufficient to enable us to meet our payment obligations and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under our debt and other obligations.

We may be unable to remediate our material weakness related to the accuracy of the adjustment to value inventory at actual cost.

     In the fourth quarter we identified a material weakness in our internal control over financial reporting relating to the adjustment we make to value inventory at actual cost. This failure and any failure in the future to achieve and maintain effective internal controls over financial reporting and otherwise comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business. Such noncompliance could result in perceptions of our business among customers, suppliers, lenders, investors, securities analysts and others being adversely affected. We may not be able to complete our remediation plans designed to address the identified material weakness in our internal controls over financial reporting and continue to simplify and automate the accounting for standard cost and cost variances. The failure to successfully complete our remediation plans could adversely affect our business. For additional information see “Item 9A. Controls and Procedures.”

Item 1B: Unresolved Staff Comments

     None.

Item 2: Properties

     Our corporate headquarters is located in Rochester Hills, Michigan. We currently lease facilities worldwide which are used for manufacturing, technical, research and development, sales, and administrative purposes. These facilities range in size from 10,000 square feet to 320,000 square feet, with an aggregate of 1.5 million square feet. In addition, we own approximately 25 acres of land in Battle Creek, Michigan upon which we started the construction of a building for our manufacturing expansion and subsequently paused in the third quarter of fiscal year 2009. In August 2009, we acquired SIT which has its European headquarters in Mainz, Germany. We believe these facilities are adequate for our business needs.

     The following table presents the locations of our primary facilities and the segment that use such facilities:

		Own or Lease
Property Location
Corporate Headquarters, Rochester Hills, Michigan		Lease
Ovonic Materials Segment
Rochester Hills, Michigan		Lease
Troy, Michigan		Lease
United Solar Ovonic Segment
Auburn Hills, Michigan (2 facilities)		Lease
Greenville, Michigan (2 facilities)		Lease
Tijuana, Mexico		Lease
Los Angeles, California		Lease
Mainz, Germany		Lease

     In addition, we lease sales offices for our United Solar Ovonic segment in Villafranca, Italy; Paris, France; Madrid, Spain; and Frankfurt/Mainz, Germany.

Item 3: Legal Proceedings

     We are involved in certain legal actions and claims arising in the ordinary course of business, including, without limitation, commercial disputes, intellectual property matters, personal injury claims, tax claims and employment matters. Although the outcome of any legal matter cannot be predicted with certainty, we do not believe that any of these other legal proceedings or matters in which we are currently involved, either individually or in the aggregate, will have a material adverse effect on our business, liquidity, consolidated financial position or results of operations.

Item 4: Removed and Reserved

PART II

Item 5:		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     Our common stock is listed on the NASDAQ Global Select Market under the symbol “ENER.” As of August 25, 2010, there were 2,306 holders of record of our common stock.

     The following table sets forth the range of high and low closing prices for our common stock as reported by The Nasdaq Global Select Market, Inc. for each period indicated:

		For the year ended June 30,
		2010								2009
		High				Low				High				Low
		(in dollars per share)
First Quarter (July — September)		$	15.55			$	10.32			$	79.38			$	53.05
Second Quarter (October — December)			13.26				9.92				61.77				18.50
Third Quarter (January — March)			12.55				7.16				29.38				13.23
Fourth Quarter (April — June)			7.77				4.10				20.51				13.37

Dividends

     We have not paid any cash dividends in the past and do not expect to pay any in the foreseeable future.

Stock Price Performance Graph

     The following graph compares the cumulative 5-year total return provided shareholders on Energy Conversion Devices, Inc.’s common stock relative to the cumulative total returns of the NASDAQ Composite index and the NASDAQ Clean Edge Green Energy index. Data for the NASDAQ Composite and the NASDAQ Clean Edge Green Energy Index assume market cap weighting and reinvestment of dividends over a five-year period. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on June 30, 2005, and its relative performance is tracked through June 30, 2010.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Energy Conversion Devices, Inc., the NASDAQ Composite Index
and the NASDAQ Clean Edge Green Energy Index

		6/30/2005				6/30/2006				6/30/2007				6/30/2008				6/30/2009				6/30/2010
Energy Conversion Devices, Inc.			100.00				162.78				137.71				329.04				63.23				18.32
NASDAQ Composite			100.00				107.08				130.99				114.02				90.79				105.54
NASDAQ Clean Edge Green Energy			100.00				118.12				153.69				178.30				100.37				97.67

     The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Item 6: Selected Financial Data

     Set forth below is certain financial information derived from the Company’s audited consolidated financial statements.

		Year Ended June 30,
		2010				2009(1)				2008				2007				2006
		(in thousands, except per share data)
Consolidated Statements of Operations
Total Revenues		$	254,416			$	316,293			$	255,861			$	113,567			$	102,419
Impairment loss			359,228				—				—				—				—
Restructuring charges			4,736				2,231				9,396				—				—
Net (loss) income from continuing operations before discontinued operations			(456,009	)			8,547				3,853				(25,231	)			(18,910	)
Discontinued operations, net of tax benefit			—				—				—				—				314
Net (loss) income		$	(456,009	)		$	8,547			$	3,853			$	(25,231	)		$	(18,596	)
(Loss) earnings per share
Continuing operations		$	(10.72	)		$	0.20			$	0.10			$	(0.64	)		$	(0.58	)
Discontinued operations			—				—				—				—				0.01
		$	(10.72	)		$	0.20			$	0.10			$	(0.64	)		$	(0.57	)
Diluted (loss) earnings per share
Continuing operations		$	(10.72	)		$	0.20			$	0.09			$	(0.64	)		$	(0.58	)
Discontinued operations			—				—				—				—				0.01
		$	(10.72	)		$	0.20			$	0.09			$	(0.64	)		$	(0.57	)
Consolidated Balance Sheets
Total Assets		$	688,321			$	1,076,097			$	1,041,967			$	600,679			$	596,342
Long-Term Obligations			263,950				269,386				342,055				25,796				25,594

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This section summarizes significant factors affecting the Company’s consolidated operating results, financial condition and liquidity for the three-year period ended June 30, 2010. This section should be read in conjunction with the Company’s Consolidated Financial Statements and related notes appearing elsewhere in this report.

Overview

     We design, manufacture and sell photovoltaic (“PV”) products, known as PV or solar laminates that generate clean, renewable energy by converting sunlight into electricity. Solar sales represent more than 90% of our revenues. We also receive fees and royalties from licensees of our nickel metal hydride (“NiMH”) battery technology, sell high performance nickel hydroxide used in NiMH batteries, and receive funds for product development agreements under government sponsored programs.

     In August 2009, we acquired SIT, a company that manufactures, designs, and installs building integrated PV systems for commercial rooftops. As a result of this acquisition, we are transitioning our business from manufacturing and selling our PV products to a company that provides complete solar solutions, project implementation and value-added services. The SIT business is included in our United Solar Ovonic segment.

     The following key factors should be considered when reviewing our results for the periods discussed:

	•		Our consolidated financial results are driven primarily by the performance of our United Solar Ovonic segment. Our United Solar Ovonic segment accounted for 93% and 96% of our total revenue in the fiscal years ended June 30, 2010 and 2009, respectively. Our United Solar Ovonic segment generated an operating loss of $418.0 million and operating income of $44.4 million in the fiscal years ended June 30, 2010 and 2009, respectively. Given the size of this segment relative to our other business activities, 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.
	•		Global economic, capital markets and credit disruptions have significantly impacted current market conditions in the solar market and created uncertainty, but we believe that credit market conditions will continue to improve. We also believe that a strong interest in alternative energy in general and solar in particular remains, but global financial constraints experienced during 2010 impacted the funding of solar projects that otherwise have strong strategic rationale and/or financial returns. Our business has also been adversely impacted by related weakness in the construction market, because we have historically focused on building-integrated PV through our building materials channel, which in turn relies on new roof and re-roof sales. Current macroeconomic conditions, including the global economic crisis, are adversely impacting our customers, including some customers who are unable to fully comply with take-or-pay agreements, and, as a result, our revenues and net income are likewise adversely impacted. We are working with our customers to preserve relationships and maximize long-term value by, among other things, reallocating product shipments to other customers and pursuing other remedies (including contract renegotiations), as appropriate on a case-by-case basis. We also continue to be encouraged by the opportunities for large scale restructuring of the energy infrastructure to increase emphasis on renewable energy, such as our solar laminates. Countries around the world are demonstrating support for the adoption of solar energy through renewable portfolio standards and feed-in tariffs.

			We are also responding to these market conditions by transforming our business model and enhancing our competitiveness as described below
	•		We are expanding our business by continuing to enhance our focus on our projects business to supplement our channel strategy, and introducing new product applications to expand our addressable markets to include residential and building-applied solutions. During fiscal year 2010, in response to market conditions that impaired demand for our products through our existing channels to market, we transformed our business model to include projects activities, including direct sales on large projects and turnkey systems. These project sales allow us to compete more effectively for large-scale projects by providing a sophisticated, turnkey solution that addresses the key elements of these projects, including site control, financing (which we typically arrange through third parties), and energy offtake and project execution. Additionally, during fiscal year 2010, we extended our product reach, announcing a new residential product through a joint development relationship and our new PowerTilt™ solution for the building-applied market. We did not previously significantly participate in these markets, and we believe that there are considerable opportunities to leverage our product differentiation in these markets (including low impact and lightweight) to generate sales.
	•		We are increasing production in our United Solar Ovonic segment and reducing costs to respond to improve our overall competitiveness. During fiscal 2010, we transformed our business model to include projects activities (as described above) and moderated our production in response to market conditions that impaired demand for our products through our existing channels to market. Our cost per watt increased during the fiscal year as a result of the reduced production, primarily due to unabsorbed overhead costs. We are now re-ramping production based on traction with our new business model and improving market conditions. We expect to see reduced cost per watt from better factory utilization. We are at the same aggressively focusing on various cost per watt reductions. For example, during fiscal year 2011, we will introduce materials savings and enhancements to our laminates, resulting from manufacturing and quality improvements. As a result, we expect to substantially reduce our cost per watt during fiscal year 2011. We will further lower product cost per watt, and increase conversion efficiency, through our Technology Roadmap.

•

We are operating our Ovonic Materials segment profitably and are continuing to realize value from our technology portfolio. We have developed proprietary technologies in our Ovonic Materials segment that we believe have value, including technologies for advanced NiMH batteries, solid hydrogen storage, metal hydride fuel cells, and bio reformation. The development activities for these technologies have been substantially balanced with external sources of revenues, such as royalties and development agreements (principally government contracts), to align our development commercialization efforts at sustainable levels. We are continually evaluating commercialization opportunities and strategic alternatives to maximize value for these technologies, which may include licenses, joint ventures, and sales. We completed the disposition of our Cobasys joint venture interest, but retained certain technology and royalty rights, including regaining exclusive stationary NiMH rights, subject to preexisting agreements.

Key Indicators of Financial Condition and Operating Performance

     In evaluating our business, we use product and system sales, gross profit, pre-tax income, earnings per share, net income, cash flow from operations and other key performance metrics. We also use production and shipments, both measured in megawatts (“MW”), and gross margins on product sales as key performance metrics for our United Solar Ovonic segment, particularly in connection with the manufacturing operations in this segment.

Results of Operations

     We have two segments, United Solar Ovonic and Ovonic Materials. We include the SIT business in our United Solar Ovonic segment.

     The following table summarizes our revenues and operating income (loss) for the last three fiscal years ended June 30, and reconciles to the amounts included in our consolidated financial statements. The grouping “Corporate and Other” below does not meet the definition of a segment as it contains our headquarter costs, consolidating entries, and our investments in joint ventures, which are not allocated to the above segments; however, it is included below for reconciliation purposes only.

		Revenues												Operating Income (Loss)
		2010				2009				2008				2010				2009(1)				2008
										(in thousands)
United Solar Ovonic		$	237,437			$	302,758			$	239,398			$	(418,001	)		$	44,447			$	31,644
Ovonic Materials			16,810				13,317				16,066				8,666				3,912				899
Corporate and Other			169				218				397				(25,766	)			(27,763	)			(36,604	)
Consolidated		$	254,416			$	316,293			$	255,861			$	(435,101	)		$	20,596			$	(4,061	)

Year Ended June 30, 2010 Compared to Year Ended June 30, 2009

United Solar Ovonic Segment

		Year Ended June 30,
		2010				2009
		(in thousands)
REVENUES
Product sales		$	197,554			$	292,402
System sales			29,781				—
Revenues from product development agreements			9,895				10,356
License and other revenues			207				—
TOTAL REVENUES			237,437				302,758
EXPENSES
Cost of product sales			201,087				206,047
Cost of system sales			33,087				—
Cost of revenues from product development agreements			8,184				7,414
Product development and research			7,900				5,412
Preproduction costs			305				5,409
Selling, general and administrative			40,421				31,397
Loss on disposal of property, plant and equipment			1,153				979
Impairment loss			359,228				—
Restructuring charges			4,073				1,653
TOTAL EXPENSES			655,438				258,311
OPERATING (LOSS) INCOME		$	(418,001	)		$	44,447

     Total revenues for the year ended June 30, 2010 were $237.4 million, a decrease of $65.3 million or 22%, compared to the same period in 2009. The decrease was primarily due to reductions in product sales which comprised of a $43.6 million decrease due to lower sales volume and a $65.2 million decrease due to lower average selling prices, offset by incremental system sales of $29.8 million and product sales of $14.0 million associated with our SIT business.

     Cost of product sales for the year ended June 30, 2010 was $201.1 million, a decrease of $5.0 million or 2%, compared to the same period in 2009. Approximately $30.8 million of the decrease was due to decreased sales volume and change in product mix, $2.1 million of the decrease was due to reduced warranty costs and $1.3 million of the decrease related to improved manufacturing efficiencies. These decreases were offset by increased unabsorbed overhead costs of $15.8 million due to a planned decrease in production and incremental costs of $13.4 million attributable to sales in our SIT business.

     Cost of system sales for the year ended June 30, 2010 was $33.1 million which were incremental costs associated with our SIT business and system sales and included the write-off of certain inventory of $2.5 million and $1.0 million in unabsorbed overhead costs.

     Combined cost of revenues from product development agreements and product development and research expenses increased by $3.3 million in 2010. Our combined product development and research expenses are partially offset by revenues from product development agreements principally funded by government programs under contracts from the U.S. Air Force and the Department of Energy’s Solar America Initiative. The revenue remaining on each contract at the end of fiscal year 2010 was $4.8 million and $4.1 million, respectively. We continue to invest in product development and research 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 laminates.

     Preproduction costs (consisting of new employee training, facilities preparation, set-up materials and supplies) decreased substantially for the year ended June 30, 2010, compared to fiscal year 2009, primarily because we paused the expansion of our Michigan and Mexico facilities.

     Selling, general, and administrative expenses for the twelve months ended on June 30, 2010 were $40.4 million, an increase of $9.0 million or 29%, compared to the same period in 2009. The increase was primarily due to additional expenses from the SIT business of $11.6 million.

     The loss on disposal of property, plant and equipment increased by $0.2 million in 2010. The increase was primarily due to disposals of equipment at our Greenville and Auburn Hills, Michigan facilities.

     We incurred impairment losses of $1.3 million related to the December 2009 restructuring plan, of which $1.1 million was related to equipment and $0.2 million related to intangible assets which will no longer be utilized. During the third quarter, changing market conditions, losses incurred to-date and the increased near-term capacity anticipated from our Technology Roadmap developed during the third quarter, caused us to evaluate the recoverability of our long-lived assets and goodwill. As a result, we recorded an additional impairment loss of $358.0 million, which consisted of $320.7 million for property, plant and equipment, $35.4 million for goodwill and $1.9 million for intangible assets. See Note 16 “Impairment Loss” to our Notes to the Consolidated Financial Statements for additional information.

     During the year ended June 30, 2010, we incurred restructuring charges related to the severance of certain employees of $3.9 million and $0.2 million for equipment relocation costs associated with the consolidation of certain production operations from our Auburn Hills 1 facility. See Note 18 “Restructuring Charges” to our Notes to the Consolidated Financial Statements for additional information.

Ovonic Materials Segment

		Year Ended June 30,
		2010				2009
		(in thousands)
REVENUES
Product sales		$	2,897			$	2,590
Royalties			7,984				6,355
Revenues from product development agreements			1,870				3,053
License and other revenues			4,059				1,319
TOTAL REVENUES			16,810				13,317
EXPENSES
Cost of product sales			2,423				2,581
Cost of revenues from product development agreements			1,215				2,093
Product development and research			3,447				3,574
Selling, general and administrative expenses			1,059				1,157
TOTAL EXPENSES			8,144				9,405
OPERATING INCOME		$	8,666			$	3,912

     Our Ovonic Materials segment’s total revenues increased by $3.5 million in 2010. This increase was primarily due to increased license sales comprised of a consumer nickel metal hydride battery license fee of $2.5 million, a $1.6 million increase in vehicle NiMH royalties, and a $0.3 million increase in product sales. These increases were partially offset by a $1.2 million decrease in product development contract revenue due to the successful completion of certain contracts and increased cost-share for ongoing contracts.

     Cost of product sales decreased $0.2 million for 2010. This decrease was primarily due to decreased costs for nickel, the primary cost in our nickel hydroxide manufacturing process.

     Combined cost of revenues from product development agreements and product development and research expenses decreased by $1.0 million in 2010. The decrease was primarily due to reduced research and development expenses resulting from reduced headcount and the completion of certain product development contracts.

Corporate and Other

     Selling, general and administrative expenses, which consist primarily of corporate operations, including human resources, legal, finance, strategy, information technology, business development, and corporate governance, decreased by $0.8 million in 2010. The reduction in selling, general and administrative expenses in fiscal 2010 was primarily due to lower salaries, wages and related expenses, lower stock and option award amortization offset by increases in administrative expenses.

Other Income (Expense)

     Other expense was $22.9 million in fiscal 2010 compared to $10.6 million in fiscal year 2009. The $12.3 million increase was principally due to increased interest expense of $12.8 million which is related to a reduced level of capitalized interest, reduced interest income of $3.9 million due to lower levels of investments in the period, and incremental foreign currency transaction losses of $2.4 million associated

with our SIT business, offset by a $4.3 million gain on debt extinguishment, $1.3 million distribution from our previously owned Cobasys joint venture and other-than-temporary impairment of $1.0 million related to our investment in a Lehman Brothers bond in fiscal 2009.

Income Taxes

     Our income tax benefit was $2.2 million for fiscal year 2010 compared to expense of $1.5 million in fiscal year 2009. The decrease in tax expense is primarily related to certain federal refundable research expenses and the benefit of the current year net operating loss which will be carried back to claim a refund of previously paid taxes under the current tax law.

Year Ended June 30, 2009 Compared to Year Ended June 30, 2008

United Solar Ovonic Segment

		Year Ended June 30,
		2009				2008
		(in thousands)
REVENUES
Product sales		$	292,402			$	231,519
Revenues from product development agreements			10,356				7,879
License and other operating revenues			—				—
TOTAL REVENUES			302,758				239,398
EXPENSES
Cost of product sales			206,047				169,015
Cost of revenues from product development agreements			7,414				4,938
Product development and research			5,412				3,650
Preproduction costs			5,409				6,920
Selling, general and administrative			31,397				21,935
Loss on disposal of property, plant and equipment			979				1,296
Restructuring charges			1,653				—
TOTAL EXPENSES			258,311				207,754
OPERATING INCOME		$	44,447			$	31,644

     Our United Solar Ovonic segment’s revenues increased $63.4 million due to growth in international sales of $101.4 million, primarily the western European country markets, reduced by declines in the U.S. market of $38.0 million. Operating income also increased $12.8 million in 2009 as compared to 2008, principally as a result of expanding our manufacturing capacity from 118MW at the end of 2008 to 150MW at the end of 2009 and increasing our product sales by 32% in the first half of fiscal year 2009 versus the second half of 2008. These increases were offset in part by production furloughs, under-absorption of factory overhead costs, and product sales decreases of 43% in the second half of fiscal year 2009 compared to the first half of the fiscal year.

     The increase in total revenues in 2009 was primarily attributable to an increase in PV product sales of $67.2 million, the impact of which was partially offset by a price declines and product mix of $6.3 million. The cost of product sales increased $37.0 million reflecting higher product sales volume, and the operating costs associated with the expansion of our production capacity in our Greenville, Michigan facility in the first half of fiscal year 2009.

     The cost of product sales increased in 2009 primarily due to the previously mentioned sales volume increase, which resulted in $46.0 million of additional cost, as well as increased inventory reserves of $5.0 million, higher warranty costs of $5.3 million and associated period costs of $8.2 million, caused by the under-absorption of fixed overhead costs resulting from our declines of sales and production in the second half of fiscal 2009. These additional costs were offset in part by lower raw material costs and improved efficiencies in our manufacturing processes, which in total amounted to $27.6 million resulting in increased margins on product sales from 27.0% in 2008 to 29.6% in 2009.

     Combined cost of revenues from product development agreements and product development and research expenses increased by $4.2 million in 2009. This additional cost was partially offset by increased revenues from product development agreements of $2.5 million. Our combined product development and research expenses are principally funded by government programs under contracts from the U.S. Air Force and the Department of Energy’s Solar America Initiative. The revenue remaining on each contract at the end of fiscal year 2009 was $8.5 million and $10.3 million, respectively. We continue to invest in product development and research 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 laminates.

     Although we expanded our nameplate capacity in the first half of fiscal 2009 from 118MW to 150MW with the addition of 60MW of nameplate capacity in our Greenville, Michigan facility, preproduction costs (consisting of new employee training, facilities preparation, set-up materials and supplies) decreased $1.5 million as, in the second half of fiscal 2009, we paused the continued expansion of our Michigan and Tijuana, Mexico facilities.

     Our selling, general and administrative expenses increased due to increased support services of $4.8 million, sales and marketing of $1.9 million and an increase in the allowance for doubtful accounts receivable of $2.8 million.

     The loss on disposal of property, plant and equipment represents the write-off of obsolete equipment that is no longer used in the production process.

     The restructuring costs in fiscal year 2009 reflect severance and equipment relocation costs associated with the consolidation of certain production operations from Auburn Hills 1 facility to the newer Auburn Hills 2 facility. The restructuring was completed in fiscal year 2009.

Ovonic Materials Segment

		Year Ended June 30,
		2009				2008
		(in thousands)
REVENUES
Product sales		$	2,590			$	5,690
Royalties			6,355				5,306
Revenues from product development agreements			3,053				3,560
License and other revenues			1,319				1,510
TOTAL REVENUES			13,317				16,066
EXPENSES
Cost of product sales			2,581				5,374
Cost of revenues from product development agreements			2,093				2,318
Product development and research			3,574				6,256
Selling, general and administrative			1,157				1,219
TOTAL EXPENSES			9,405				15,167
OPERATING INCOME (LOSS)		$	3,912			$	899

     Our Ovonic Materials segment’s operating income increased in fiscal year 2009 as compared to fiscal year 2008, primarily as a result of increased transportation royalties, savings associated with our previous restructuring which was recorded in Corporate and Other, and additional cost-reduction activities, which have reduced our product development and research expenses.

     Product sales, representing sales of our high performance nickel hydroxide materials, decreased in 2009 as compared to 2008 due to reduced nickel prices and decreased volume from our principal customer.

     Royalties increased in 2009 compared to 2008, as indicated below, resulting primarily from increased royalties for our NiMH battery technology for transportation applications.

		Year Ended June 30,
		2009				2008
		(in thousands)
Royalties
Transportation — NiMH Battery		$	3,304			$	2,086
Consumer — NiMH Battery			2,779				2,985
Ovonyx			40				64
Other			232				171
Total Royalties		$	6,355			$	5,306

     Revenues from license agreements, included in “License and other revenues” above, consist primarily of $1.0 million recognized annually from a $10.0 million payment received in a July 2004 settlement of certain patent infringement disputes.

     Combined cost of revenues from product development agreements and product development and research expenses decreased to $5.7 million in 2009 from $8.6 million in 2008, reflecting the savings

associated with restructuring and additional cost-reduction activities. Revenues from product development agreements decreased as we completed certain contracts in fiscal year 2009.

Corporate and Other

		Year Ended June 30,
		2009				2008
		(in thousands)
TOTAL REVENUES		$	218			$	397
EXPENSES
Selling, general and administrative			26,096				27,605
Net loss on disposal of property, plant and equipment			1,307				—
Restructuring charges			578				9,396
TOTAL EXPENSES			27,981				37,001
OPERATING LOSS		$	(27,763	)		$	(36,604	)

     Revenues in Corporate and Other consist primarily of facilities and miscellaneous administrative and laboratory services provided to certain non-consolidated affiliates.

     Selling, general and administrative expenses consist primarily of corporate operations, including human resources, legal, finance, strategy, information technology, business development, and corporate governance. The reduction in selling, general and administrative expenses in fiscal 2009 was primarily due to lower salaries, wages and related expenses, lower supplies and professional fees, offset by stock and option award amortization.

     Net loss on disposal of property, plant and equipment increased in fiscal year 2009 to $1.3 million. We were unable to sell certain assets previously classified as assets held for sale and determined these assets no longer met the criteria for classification as assets held for sale. As a result, we reclassified these assets as held and used and recognized a loss of $1.3 million.

     The decline in restructuring charges in fiscal year 2009 as compared to fiscal year 2008 is primarily due to lower severance and facility related costs associated with our earlier business realignment activities. Most of the restructuring (which began in fiscal 2007) was completed during fiscal 2008. As a result, restructuring charges decreased by $8.8 million during the year ended June 20, 2009.

Other Income (Expense)

     Other income (expense) was $(10.6) million in fiscal 2009 compared to $8.1 million in fiscal year 2008. The change was principally due to increased interest expense reflecting a full year’s interest on our convertible senior notes of $14.5 million, a reduction in the level of investments and lower interest rates in fiscal 2009 (which reduced interest income by $1.8 million), foreign currency losses of $0.5 million, investment losses of $1.1 million reduced by insurance proceeds of $0.8 million in fiscal 2009.

Income Taxes

     Income tax expense was $1.5 million for fiscal year 2009 compared to $0.2 million in fiscal year 2008. The increase in tax expense is primarily related to taxes incurred for alternative minimum tax in the U.S. of $0.9 million, state taxes in the U.S. of $0.3 million and an increase in foreign income taxes in Germany and Mexico.

Liquidity and Capital Resources

     Our principal sources of liquidity are cash, cash equivalents and short-term investments, and borrowing available under our credit facility. We believe that cash, cash equivalents and investments and borrowing under our credit facility will be sufficient to meet our liquidity needs for our current operations and planned capital expenditures during the fiscal year. However, during fiscal year 2011 we intend to consider certain transactions to enhance our liquidity and address longer term capital needs, including maturity of our convertible notes and full implementation of our Technology Road map. At June 30, 2010, we had consolidated working capital of $276.4 million.

     As of June 30, 2010, we had $192.9 million in cash, cash equivalents, and short-term investments consisting of Floating Rate Corporate Notes (“FRNs”), corporate notes, U.S. Government agency notes, auction rate certificates (“ARCs”), and auction rate securities rights. In October 2008, we agreed to an offer from UBS AG (“UBS”) to sell at par value, at anytime from June 30, 2010 through July 2, 2012, the ARCs purchased from UBS (which represent the entire portfolio of our ARCs). These auction rate securities rights (“ARSRs”), which are akin to a freestanding put option, are non-transferable and are not traded on any exchange. We currently classify the ARCs as short-term investments. On June 30, 2010, we elected to exercise our right to sell the remaining ARCs to UBS and liquidate our ARSRs. These transactions settled in July 2010.

     Our valuations of ARCs and ARSRs are based on unobservable inputs for which there is little or no market data and therefore require us to develop our own assumptions. For additional information about our judgments and assumption underlying our fair value measurements and details about the methodology and inputs used see Note 20 “Fair Value Measurements” to our Notes to the Consolidated Financial Statements and information about the sensitivity of our measurements in Item 7A “Quantitative and Qualitative Disclosures About Market Risk.”

Cash Flows

Year Ended June 30, 2010 Compared to Year Ended June 30, 2009

     Net cash (used in) provided by our operating activities was $(34.2) million in 2010 compared to $11.1 million in 2009. The decrease was driven by a reduction in our net income (loss) adjusted for non-cash items of $111.4 million offset by $66.1 million cash used for changes in net working capital, specifically due to inventory, accounts receivable and accounts payable.

     Net cash provided by (used in) investing activities was $70.9 million in 2010 as compared to $(440.5) million in 2009. This increase was principally due to reduced capital expenditures of $210.3 million, reduced investment purchases of $100.7 million, increased proceeds from maturities and sales of our investments of $225.7 million, offset by $14.2 million of developmental loans.

     Net cash (used in) provided by financing activities was $(15.3) million in 2010 compared to $0.9 million in 2009. This decrease was principally due to the $5.7 million repayment of the revolving credit facility and $8.0 million repayment of the convertible notes assumed as part of the SIT acquisition.

Year Ended June 30, 2009 Compared to Year Ended June 30, 2008

     Net cash provided by our operating activities was $11.1 million in 2009 compared to $28.5 million in 2008. The operating cash flows in our United Solar Ovonic segment were negatively impacted by the change in working capital as we expand sales activities, extend payment terms to certain customers, develop project financing capabilities for new projects and fund our inventory and accounts receivable growth.

     Net cash used in investing activities was $440.5 million in 2009 as compared to $41.7 million in the corresponding period in 2008. This increase was principally due to increased purchases of investments and increased capital spending principally associated with expenditures for the expansion of our United Solar Ovonic segment’s manufacturing capacity during the first half of fiscal 2009. Because of adverse market conditions, we significantly curtailed our production capacity and expansion plans in the third quarter of fiscal year 2009.

     Net cash provided by our financing activities was $0.9 million in 2009 compared to $417.2 million in 2008, primarily as a result of proceeds from the June 2008 convertible debt and equity offerings.

Short-term Borrowings

     We maintain a $30.0 million revolving line of credit to finance domestic activities and a separate $25.0 million revolving line of credit provided under the United States Export-Import Bank’s fast track working capital guarantee program to finance foreign activities. Availability of financing under the lines of credit will be determined a borrowing base comprised of domestic and foreign inventory and receivables, respectively. At June 30, 2010, there was approximately $17.7 million of available financing under the agreement based on the borrowing formula. At June 30, 2010, there were no outstanding borrowings on the line of credit. The credit facilities also contain an aggregate $10.0 million sub-limit for standby letters of credit, which count against the available financing described above and there were approximately $7.6 million of standby letters of credit outstanding at June 30, 2010. We are presently considering implementing alternative credit facilities to better meet our needs which may involve early termination of these lines.

Convertible Senior Notes

     Our Convertible Senior Notes (“Notes”) bear interest at a rate of 3.0% per year, payable on June 15 and December 15 of each year. If the Notes are not converted, they will mature on June 15, 2013. The Notes are only convertible prior to March 13, 2013 under specific circumstances involving the price of our common stock, the price of the Notes and certain corporate transactions including, but not limited to, an offering of common stock at a price less than market, a distribution of cash or other assets to stockholders, a merger, consolidation or other share exchange, or a change in control. The holders of the Notes may convert the principal amount of their notes into cash and, if applicable, shares of our common stock initially at a conversion rate of 10.8932 shares (equivalent to an initial conversion price of approximately $91.80 per share) per $1,000 principal amount of the Notes. The holders of the Notes are only entitled to amounts in excess of the principal amount if shares of our common stock exceed a market price of $91.80 for a period of 20 consecutive trading days during the applicable cash settlement averaging period. The applicable conversion rate will be subject to adjustments in certain circumstances. The Notes are senior unsecured obligations of ECD and rank equal in right of payment with any future senior unsecured debt of ECD, and senior in right of payment to all of ECD’s existing and future debt, if any, that is subordinated to the Notes.

     In May 2010, we entered into exchange agreements with certain holders of our Notes whereby we issued an aggregate of 2,770,871 shares of our common stock in exchange for an aggregate of principal amount of $23.0 million held by the holders of the Notes. In connection with this exchange we recorded a gain on debt extinguishment of $4.3 million. During fiscal year 2011 we expect to consider additional debt-for-equity exchanges and other transactions to reduce the outstanding principal of our Notes prior to their maturity.

Off Balance Sheet Arrangements

     Our off balance sheet financing consists primarily of operating leases for equipment and property. These leases have terms ranging from a month-to-month basis to 5 years. We incurred lease expense of $6.5 million, $4.7 million and $5.0 million for the years ended June 30, 2010, 2009 and 2008, respectively.

Contractual Obligations

     We, in the ordinary course of business, enter into purchase commitments for certain raw materials and capital equipment. Our contractual obligations are as follows:

		Payments Due by Period
						Less than 1												More than 5
		Total				year				1-3 years				3-5 years				years
		(in thousands)
Convertible senior notes		$	293,250			$	—			$	293,250			$	—			$	—
Structured financing			12,260				604				1,286				1,386				8,984
Capital lease obligations			21,413				1,117				2,689				3,573				14,034
Interest on convertible senior notes, structured financing, and capital lease obligations			44,912				11,010				21,616				3,366				8,920
Operating leases			17,990				5,246				7,149				5,595				—
Purchase obligations			98,663				16,368				70,894				11,401				—
Total		$	488,488			$	34,345			$	396,884			$	25,321			$	31,938

     We anticipate capital expenditures to be approximately $31.5 million during fiscal year 2011, primarily for projects included in the Technology Roadmap.

Significant Accounting Policies and Critical Accounting Estimates

     Our significant accounting policies are more fully described in Note 1 “Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the 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.

     We consider an accounting estimate to be significant 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.

Inventory Reserves

     We evaluate the recoverability of our inventory based upon assumptions about anticipated customer demand and future market conditions. The key factors we consider when estimating our inventory

reserve include historical sales, anticipated demand, expected sales price, market trends, product obsolescence, the effect new products might have on the sale of existing products and other factors. If actual market conditions are less favorable than those projected by management, additional inventory reserves may be required. Inventory reserves were $15.9 million and $12.9 million at June 30, 2010 and 2009, respectively.

Warranty Reserve

     We generally provide a 20-25 year product warranty on power output on all solar product sales. We estimate our warranty liability based on past experience of claims and claims paid as well as our engineering and laboratory tests of our product under different conditions and then apply that knowledge to the installed base of solar product sales. At June 30, 2010 and 2009, the Company had recorded a liability for future warranty claims of approximately $41.3 million and $5.9 million, respectively.

     For installed solar systems, we generally provide a 20-year roof membrane warranty, a 20-year power warranty and a 10-year warranty on inverters. In addition, we generally provide a 20-year product warranty on our building integrated photovoltaic (“BIPV”) product. Reserves for warranty costs are recognized at the date of sale of the relevant products, at management’s best estimate of the expenditure required to settle the liability, taking into account the specific arrangements of the transaction and past experience.

Allowance for Uncollectible Accounts

     We maintain an allowance for uncollectible accounts and consider a number of factors, when estimating the allowance including the length of time trade accounts receivable are past due, trade credit insurance coverage, previous payment and loss history, the customer’s current ability to pay its obligation, and our knowledge of the customer and the customer’s business. The allowance for doubtful accounts was $1.8 million and $4.5 million at June 30, 2010 and 2009, respectively.

Accounting for Business Combinations

     We recorded all assets acquired and liabilities assumed, including goodwill and other intangible assets, at fair value as of the date of the acquisition. The determination of the fair values of assets acquired and liabilities assumed required us to make significant estimates and assumptions that are highly judgmental and affect our financial statements.

Valuation of Long-Lived Assets

     We periodically evaluate the carrying value of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. Our assessment utilizes quoted market prices, fair value appraisals, management forecasts and discounted cash flow analyses. The impairment analysis is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a substantial impact on the amount of any impairment loss recorded. Discounted cash flow analyses are dependent upon management estimates and assumptions of future sales trends, current and expected future economic trends, market conditions and the effects of new technologies. The estimates and assumptions used in the impairment analysis are consistent with our business plan; however, actual cash flows in the future may differ significantly from those previously forecasted.

Share-Based Compensation

     We record the fair value of stock-based compensation grants as an expense. In order to determine the fair value of stock options on the date of grant, we apply the Black-Scholes option-pricing model. Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock-price volatility and option life assumptions require a greater level of judgment.

     We use an expected stock-price volatility assumption that is based on historical implied volatilities of the underlying stock which is obtained from public data sources.

     With regard to the weighted-average option life assumption, we consider the exercise behavior of past grants and models the pattern of aggregate exercises. Patterns are determined on specific criteria of the aggregate pool of optionees. Forfeiture rates are based on our historical data for stock option forfeitures.

Impact of Recent Accounting Pronouncements

     See Note 1, “Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies,” to our Notes to the Consolidated Financial Statements for a description of recent accounting pronouncements and the impact on our financial statements.

Forward-Looking Statements

     This Annual Report on Form 10-K includes “forward-looking statements” that involve risks and uncertainties. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future sales or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “foresees,” “likely,” “may,” “should,” “goal,” “target” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this report.

     These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Item 1A “Risk Factors.” Factors you should consider that could cause these differences are:

	•		the worldwide credit markets including sufficiency and availability of credit financing for solar projects and for our customers;
	•		the impact of the current lack of credit financing capacity on our customer’s ability to meet their obligations to ECD and its subsidiaries;
	•		the worldwide demand for electricity and the market for renewable energy, including solar energy;
	•		the ability or inability of conventional fossil fuel-based generation technologies to meet the worldwide demand for electricity;

	•		government subsidies and policies supporting renewable energy, including solar energy;
	•		our expenses, sources of sales and international sales and operations;
	•		future pricing of, and demand for, our solar laminates;
	•		the performance, features, costs, and benefits of our solar laminates and plans for the enhancement of solar laminates;
	•		our ability to maintain high standards of quality in our product;
	•		the supply and price of components and raw materials;
	•		our ability to expand our manufacturing capacity in a timely and cost-effective manner;
	•		our ability to retain our current key executives, integrate new key executives and attract and retain other skilled managerial, engineering, sales and marketing personnel;
	•		the viability of our intellectual property and our continued investment in research and development;
	•		payments and other obligations resulting from the unfavorable resolution of legal proceedings;
	•		changes in, or the failure to comply with, government regulations and environmental, health and safety requirements;
	•		interest rate fluctuations and both our and our end-users’ ability to secure financing on commercially reasonable terms or at all;
	•		general economic and business conditions, including those influenced by international and geopolitical events; and
	•		ability to generate internal cash flow or arrange external financing for our anticipated capital expenditures and Technology Roadmap.

     There may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by law.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

     The following discussion about our exposure to market risk of financial instruments contains forward-looking statements. Actual results may differ materially from those described.

Interest Rate Risk

     Our investments in financial instruments are comprised of debt securities. 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 (corporate notes and U.S. Government agency notes) represents funds held temporarily, pending use in our business and operations. We had $99.6 million of these investments as of June 30, 2010. It is our policy that investments shall be rated “A” or higher by Moody’s or Standard and Poor’s, no single investment 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 increase or decrease of 1% would increase or decrease the value of our portfolio by approximately $1.1 million, as of June 30, 2010.

     Our Notes are subject to interest rate and market price risk due to the convertible feature of the Notes. Since the Notes are convertible to common stock, as the fair market value of our common stock increases, so will the fair market value of the Notes. Conversely, as the fair market value of our common stock decreases, the fair market value of the Notes will decrease as well. As interest rates rise, the fair market value of the Notes will decrease and as interest rates fall, the fair market value of the Notes will increase. At June 30, 2010, the estimated fair market value of our Notes was approximately $156.2 million. An increase or decrease in market interest rates of 1% would increase or decrease the fair value of our Notes by approximately $1.6 million.

Foreign Exchange Risk

     We primarily conduct our business in U.S. Dollars, which may impact our foreign customers and suppliers as a result of changes in currency exchange rates. These factors may adversely impact our existing or future sales agreements and require us to reallocate product shipments or pursue other remedies.

     The majority of SIT’s sales in Europe are denominated in Euros while the related costs of sales are denominated in Euros and U.S. Dollars. An increase or a decrease in exchange rates of 1% would increase or decrease our foreign currency transaction gain by approximately $0.4 million.

     We recognized a net foreign currency transaction loss of $2.4 million and $0.6 million at June 30, 2010 and 2009, respectively.

Item 8: Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Energy Conversion Devices, Inc.

     We have audited the accompanying consolidated balance sheets of Energy Conversion Devices, Inc. (a Delaware Corporation) and subsidiaries as of June 30, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended June 30, 2010. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the table of contents under Item 15(a)2. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Energy Conversion Devices, Inc. and subsidiaries as of June 30, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2010 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Energy Conversion Devices, Inc. and subsidiaries’ internal control over financial reporting as of June 30, 2010, which did not include an audit of internal control over financial reporting of Solar Integrated Technologies, Inc. which was acquired on August 19, 2009. Our audit was based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated August 31, 2010 expressed an adverse opinion.

     As discussed in notes 1 and 14 to the consolidated financial statements, the Company changed its method for accounting for business combinations and convertible debt during the year ending June 30, 2010 as a result of the adoption of new accounting literature which was effective July 1, 2009.

/s/ GRANT THORNTON LLP
Southfield, Michigan
August 31, 2010

ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

		Year Ended June 30,
		2010				2009(1)				2008
Revenues
Product sales		$	200,451			$	294,992			$	237,191
System sales			29,781				—				—
Royalties			7,984				6,355				5,306
Revenues from product development agreements			11,765				13,409				11,440
License and other revenues			4,435				1,537				1,924
Total Revenues			254,416				316,293				255,861
Expenses
Cost of product sales			203,510				208,375				174,075
Cost of system sales			33,087				—				—
Cost of revenues from product development agreements			9,399				9,507				7,257
Product development and research			11,347				8,986				9,906
Preproduction costs			305				5,409				6,920
Selling, general and administrative			66,797				58,902				51,252
Net loss on disposal of property, plant and equipment			1,108				2,287				1,116
Impairment loss			359,228				—				—
Restructuring charges			4,736				2,231				9,396
Total Expenses			689,517				295,697				259,922
Operating (Loss) Income			(435,101	)			20,596				(4,061	)
Other Income (Expense)
Interest income			1,331				5,226				7,019
Interest expense			(27,510	)			(14,682	)			(165	)
Gain on debt extinguishment			4,294				—				—
Distribution from joint venture			1,309				—				—
Other nonoperating income (expense), net			(2,321	)			(1,118	)			1,216
Total Other Income (Expense)			(22,897	)			(10,574	)			8,070
(Loss) Income before Income Taxes and Equity Loss			(457,998	)			10,022				4,009
Income tax (benefit) expense			(2,248	)			1,475				156
(Loss) Income before Equity Loss			(455,750	)			8,547				3,853
Equity loss			(259	)			—				—
Net (Loss) Income			(456,009	)			8,547				3,853
Net Loss Attributable to Noncontrolling Interest			(113	)			—				—
Net (Loss) Income Attributable to ECD Shareholders		$	(455,896	)		$	8,547			$	3,853
(Loss) Earnings Per Share, Attributable to ECD Shareholders		$	(10.72	)		$	0.20			$	0.10
Diluted (Loss) Earnings Per Share, Attributable to ECD Shareholders		$	(10.72	)		$	0.20			$	0.09

See notes to consolidated financial statements.

ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)

		June 30,
		2010				2009(1)
ASSETS
Current Assets:
Cash and cash equivalents		$	79,158			$	56,379
Short-term investments			113,771				245,182
Accounts receivable, net			72,021				69,382
Inventories, net			61,495				74,266
Other current assets			27,237				4,897
Total Current Assets			353,682				450,106
Property, Plant and Equipment, net			301,056				614,330
Other Assets:
Restricted cash			11,749				—
Lease receivable, net			10,854				—
Other assets			10,980				11,661
Total Other Assets			33,583				11,661
Total Assets		$	688,321			$	1,076,097
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	56,035			$	50,238
Current portion of warranty liability			12,125				5,917
Other current liabilities			9,130				3,506
Total Current Liabilities			77,290				59,661
Long-Term Liabilities:
Convertible senior notes			243,654				247,974
Capital lease obligations			20,296				21,412
Warranty liability			29,210				—
Other liabilities			19,872				9,701
Total Long-Term Liabilities			313,032				279,087
Commitments and Contingencies (Note 15)
Stockholders’ Equity
Common stock, $0.01 par value, 100 million shares authorized, 48,554,812 and 45,754,652 issued at June 30, 2010 and 2009, respectively			486				458
Additional paid-in capital			1,074,410				1,055,705
Treasury stock			(700	)			(700	)
Accumulated deficit			(772,514	)			(316,618	)
Accumulated other comprehensive loss, net			(3,570	)			(1,496	)
Total ECD stockholders’ equity			298,112				737,349
Accumulated deficit – noncontrolling interest			(113	)			—
Total Stockholders’ Equity			297,999				737,349
Total Liabilities and Stockholders’ Equity		$	688,321			$	1,076,097

See notes to consolidated financial statements.

ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Year Ended June 30,
		2010				2009(1)				2008
Cash flows from operating activities:
Net (loss) income		$	(456,009	)		$	8,547			$	3,853
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Impairment loss			359,228				—				—
Depreciation and amortization			32,708				33,605				21,917
Amortization of debt discount and deferred financing fees			15,991				14,672				—
Share-based compensation			4,428				5,273				2,010
Gain on debt extinguishment			(4,294	)			—				—
Other-than-temporary impairment of investment			—				1,002				—
Net loss on disposal of property, plant and equipment			1,258				2,287				1,116
Equity loss			259				—				—
Other			(180	)			(597	)			1,649
Changes in operating assets and liabilities, net of foreign exchange:
Accounts receivable			(8,538	)			(17,376	)			(16,947	)
Inventories			35,283				(43,054	)			7,582
Other assets			(8,634	)			(7,054	)			(1,168	)
Accounts payable and accrued expenses			(7,201	)			13,714				8,298
Other liabilities			1,525				70				200
Net cash (used in) provided by operating activities			(34,176	)			11,089				28,510
Cash flows from investing activities:
Purchases of property, plant and equipment			(31,992	)			(242,257	)			(117,335	)
Acquisition of business, net of cash acquired			(2,088	)			—				—
Investment in joint venture			—				(1,000	)			—
Purchases of investments			(102,657	)			(203,355	)			(62,250	)
Proceeds from maturities of investments			202,209				3,400				22,591
Proceeds from sale of investments			29,671				2,750				115,038
Proceeds from sale of property, plant and equipment			48				—				288
Development loans			(14,155	)			—				—
Increase in restricted cash			(10,186	)			—				—
Net cash provided by (used in) investing activities			70,850				(440,462	)			(41,668	)
Cash flows from financing activities:
Proceeds from convertible senior notes			—				—				306,762
Payments for deferred financing costs			—				—				(1,258	)
Proceeds from common stock issuance			—				—				98,998
Principal payments under capitalized lease obligations and other debt			(1,549	)			(1,054	)			(1,144	)
Repayment of revolving credit facility			(5,705	)			—				—
Repayment of convertible notes			(8,000	)			—				—
Increase in long-term customer deposits			—				—				680
Decrease in restricted investments			—				—				(273	)
Proceeds from sale of stock and share-based compensation, net of expenses			—				1,966				13,482
Net cash (used in) provided by financing activities			(15,254	)			912				417,247
Effect of exchange rate changes on cash and cash equivalents			1,359				348				(367	)
Net increase (decrease) in cash and cash equivalents			22,779				(428,113	)			403,722
Cash and cash equivalents at beginning of period			56,379				484,492				80,770
Cash and cash equivalents at end of period		$	79,158			$	56,379			$	484,492

See notes to consolidated financial statements.

ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(in thousands)

		Common Stock												Treasury Stock
																														Accumulated Other
										Additional Paid In																Noncontrolling				Comprehensive				Total Shareholders’
		Number of Shares				Amount				Capital				Number of Shares				Amount				Accumulated Deficit				Interest				Income (Loss)				Equity
Balance at June 30, 2007			39,797			$	398			$	854,161				—			$	—			$	(329,018	)		$	—			$	(33	)		$	525,508
Net income			—				—				—				—				—				3,853				—				—				3,853
Unrealized losses on investments, net			—				—				—				—				—				—				—				(2,210	)			(2,210	)
Foreign currency translation gains, net			—				—				—				—				—				—				—				77				77
Unrealized gains on derivative instruments			—				—				—				—				—				—				—				66				66
Comprehensive income			—				—				—				—				—				—				—				—				1,786
Share-based compensation expense, net of shares issued			873				9				16,311				—				—				—				—				—				16,320
Stock repurchases			—				—				—				(11	)			(700	)			—				—				—				(700	)
Equity offering (net of expenses $6.2 million)			4,905				49				98,949				—				—				—				—				—				98,998
Balance at June 30, 2008			45,575				456				969,421				(11	)			(700	)			(325,165	)			—				(2,100	)			641,912
Net income(1)			—				—				—				—				—				8,547				—				—				8,547
Unrealized gain on investments, net			—				—				—				—				—				—				—				2,292				2,292
Foreign currency translation losses, net			—				—				—				—				—				—				—				(1,622	)			(1,622	)
Unrealized losses on derivative instruments			—				—				—				—				—				—				—				(66	)			(66	)
Comprehensive income			—				—				—				—				—				—				—				—				9,151
Equity component from issuance of convertible debt(1)			—				—				79,130				—				—				—				—				—				79,130
Share-based compensation expense, net of shares issued			180				2				7,168				—				—				—				—				—				7,170
Equity offering expenses			—				—				(14	)			—				—				—				—				—				(14	)
Balance at June 30, 2009			45,755				458				1,055,705				(11	)			(700	)			(316,618	)			—				(1,496	)			737,349
Net loss			—				—				—				—				—				(455,896	)			—				—				(455,896	)
Unrealized losses on investments, net			—				—				—				—				—				—				—				(469	)			(469	)
Foreign currency translation losses, net			—				—				—				—				—				—				—				(1,554	)			(1,554	)
Unrealized losses on derivative instruments			—				—				—				—				—				—				—				(51	)			(51	)
Comprehensive loss			—				—				—				—				—				—				—				—				(457,970	)
Noncontrolling interest loss			—				—				—				—				—				—				(113	)			—				(113	)
Common stock issued in connection with convertible debt exchange			2,771				28				14,277				—				—				—				—				—				14,305
Share-based compensation expense, net of shares issued			29				—				4,428				—				—				—				—				—				4,428
Stock repurchases			—				—				—				(4	)			—				—				—				—				—
Balance at June 30, 2010			48,555			$	486			$	1,074,410				(15	)		$	(700	)		$	(772,514	)		$	(113	)		$	(3,570	)		$	297,999