PROPOSED BUSINESS

Overview

        On space satellites and near-space aircraft, photovoltaic ("PV") devices convert sunlight into the electricity needed to reliably power instruments, communications systems and the like. Currently, most PV devices used for space and near-space applications are rigid, bulky and relatively heavy, posing significant challenges to scientists and designers wishing to minimize volume and weight in order to maximize payload and reduce deployment cost. In addition to these shortcomings, PV devices traditionally used for such applications are expensive to manufacture and require the time-consuming and labor-intensive task of connecting individual solar cells together to create a complete PV module.

        We are working to overcome these limitations by creating a flexible, lightweight PV product suitable for space and near-space applications. We intend to be the first company to manufacture PV modules in commercial quantities that use a highly efficient thin-film Copper-Indium-Gallium-diSelenide ("CIGS") absorbing layer on a flexible polyimide (high-temperature plastic) substrate. By employing a proprietary monolithic integration fabrication process, we will manufacture our PV devices on the module level, rather than cell level, thereby avoiding the costly cell-to-cell interconnect procedure that plagues other PV device manufacturers. Our choice of materials and proprietary monolithic integration fabrication process should permit us to achieve significant cost, volume and weight performance advantages over existing technologies. As a result, we believe that we are well-positioned to capture opportunities in markets requiring highly efficient, lightweight and flexible PV power sources, including the markets for military and commercial spacecraft and satellites and the emerging high-altitude airship ("HAA") project under the supervision of the U.S. Department of Defense ("DoD").

Photovoltaic Technology

        Thin-film devices are manufactured by depositing a thin film of material onto a substrate or onto previously deposited layers. We intend to use thin-film techniques to manufacture PV modules for space and near-space applications.

        Solar cells are the most elementary component of a PV device; they absorb light and convert it into electrical power. Solar cells consist of a light-absorbing layer mounted on a substrate, together with top and back electrical contact points, much like a household battery. There are three materials currently considered by the PV industry as candidates for thin-film production: amorphous silicon ("a-Si"), cadmium telluride and CIGS. We choose to use a CIGS absorbing layer in our products because of that technology's superior performance attributes. An absorbing layer can be deposited on a substrate that is either rigid or flexible. A majority of companies currently use rigid glass substrates. The few companies that incorporate flexible substrates in their devices typically opt for stainless steel (or other metal) foil. We believe that the deposition of a CIGS absorbing layer on a polyimide high-temperature plastic substrate best meets the rigorous specifications and unusual demands of the space and near-space markets.

        Once fabricated, individual solar cells must be interconnected to form PV modules. Historically, this interconnection has been done manually using welding, soldering or bonding techniques that add both complexity and cost to the manufacturing process. We avoid manual interconnects by utilizing a proprietary form of "monolithic integration," whereby we intersperse laser patterning and printing steps during the thin-film deposition steps. We create the interconnects at the same time we create the cells, and we fabricate our PV devices at the module level, while most of our competitors manufacture at the cell level. We believe that the use of monolithic integration in our fabrication process will offer us significant cost and device weight savings over our competitors. The PV devices we intend to sell commercially will be complete modules with protective thermal and environmental coatings, mechanical

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and electrical interconnects, diode protection and the like. These modules can then easily be hooked together to create PV arrays in a variety of desired patterns, shapes or sizes.

        Benefiting from ITN's substantial investment in research and development of CIGS PV technology, we intend to manufacture monolithically integrated CIGS on high-temperature plastic substrate modules for use in the space and near-space markets.

The Space and Near-Space Markets

        Our thin-film PV modules are designed for space and near-space applications. We envision installation of our products on satellites and other spacecraft, as well as near-space instruments such as the HAAs being developed by Lockheed Martin and others. The target customers for our PV modules therefore include traditional aerospace companies, companies in the defense and communications industries and domestic and foreign government entities. We believe that the HAA industry presents attractive opportunities for us, insofar as companies such as Lockheed Martin are searching for standard suppliers of PV subsystems for use with their HAA designs. Also, although the market for satellites is relatively well-established, we believe that significant opportunities exist there as companies search for lighter, cheaper and more efficient PV devices.

Space Applications: Satellites and Spacecraft

        The U.S. satellite industry is fairly mature and is dominated by three major manufacturers: Lockheed Martin, The Boeing Company and Loral Space & Communications Ltd. In 2004, satellite manufacturing revenue totaled $3.9 billion in the U.S. and $10.2 billion worldwide. Industry analysts predict that government and military spending, together with strong consumer demand in the communications sector, will continue to drive growth in demand for satellites in the coming years.

        The vast majority of satellites currently use rigid and heavy PV array panels with market prices of approximately $1,000 per watt generated. The industry, however, is pursuing lightweight, flexible and less expensive PV products that can lower power costs, reduce the overall weight of satellites, increase payload capacity and permit the use of smaller, less expensive launch systems for placing satellites in orbit. We believe that thin-film PV devices generally, and our CIGS on high-temperature plastic substrate modules in particular, are primed to take advantage of these evolving market requirements.

        It is estimated that PV devices capable of generating over 1.9 MW will be required to power satellites launched between 2001 and 2010. At current market prices of approximately $1,000 per watt at the array level, this represents a market opportunity of $1.9 billion or an average of $190 million per year. These figures include space satellites only and do not include power needs for future space stations, power-generating stations and lunar or other space missions, all of which would increase the demands for PV power. We believe that our existing thin-film CIGS technology, together with advances on which we already have begun work, may allow our PV modules to become the new industry standard for space PV applications.

Near-Space Applications: High-Altitude Airships

        The DoD and the militaries of U.S. allies have long been interested in solar-powered HAAs as low-cost platforms to augment sensor-carrying unmanned aerial vehicles, aircraft and space satellites. As currently conceived, HAAs resemble giant blimps roughly 1,000 feet long. Cheaper to launch than space satellites, which orbit the planet outside the earth's atmosphere, HAAs, which are filled with lighter than air gases, operate within the atmosphere but at an altitude above the reach of many aircraft and conventional weapons systems. Operating at these near-space altitudes affords opportunities attractive to the communications and surveillance industries. For example, military commanders could park one or more HAAs equipped with advanced surveillance instruments at 70,000 to 100,000 feet in a stationary position over a combat zone to facilitate 24/7 surveillance. At an altitude

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of 70,000 to 100,000 feet (less than 20 miles), images generated and data gathered by a stationary HAA likely would offer greater resolution and detail than that from a geostationary surveillance satellite in space, which typically orbits the earth at a distance of 22,000 miles. Even a non-geostationary satellite, which has the disadvantage of making only infrequent passes over a given area of the earth's surface, operates hundreds of miles up, far higher than the anticipated realm of HAAs. Furthermore, HAAs should be more easily moved and deployed from one geographic region to another compared with space satellites. This is a valuable feature since some experts propose the deployment of HAAs equipped with signal repeaters or transmission equipment over areas victimized by a terrorist attack or by a natural disaster such as a tornado, flood or hurricane and in which conventional communications systems are incapacitated. Stationary HAAs could afford responders and government officials a means for rapid communication.

        Despite the potential of HAAs, prohibitively high costs and immature technology made HAAs a relatively low priority until the terrorist attacks of September 11, 2001. Since then, the DoD, Missile Defense Agency, Department of Homeland Security and North American Aerospace Defense Command have initiated plans to accelerate development of the HAA concept. A contract to deliver the first prototype HAA has been awarded by the Missile Defense Agency to Lockheed Martin, which began development of the prototype in 2005 with plans to fly in 2010. In October 2005, we submitted a proposal to Lockheed Martin to supply the thin-film PV subsystem that will equip and power its craft. Lockheed Martin's prototype alone requires PV manufacturing capacity of 1 MW per year by 2009. A project of this size incorporating novel technology likely will require Lockheed Martin to select more than one PV supplier for the prototype. We hope to be among those selected to fly on the prototype and, due to our technical and strategic advantages over our competitors, hope to be the sole supplier to HAA projects in the long-term. We expect that once Lockheed Martin's prototype HAA is successfully demonstrated, PV power requirements will increase as the industry moves into full-scale production. We expect to be able to satisfy such increases in demand by growing our production line, which will incorporates a modular design for relatively easy expansion. Expansion of production also should permit us to recognize economies of scale, which should enable us to achieve lower manufacturing costs and thereby generate additional market opportunities. We also may supply PV modules to companies other than Lockheed Martin, including some commercial ventures, who also are developing their own HAA concepts and systems.

Technical Demands of Space and Near-Space Applications

        Space and near-space systems require sources of energy to power communications, propulsion and other subsystems. PV technology is a logical choice for generating power because it is renewable and does not depend on an imported fuel source that would reduce other payload. Weight, volume, relative efficiency and cost play crucial roles in the selection of PV technology for space and near-space applications. Because satellites, spacecraft and other orbiting systems must be launched into space or to very high altitudes, it is desirable to minimize both the weight and volume of PV devices so as to accommodate greater instrument payloads. At the same time, specific power (the amount of PV power produced relative to PV device weight, expressed as W/Kg), power density (the amount of PV power produced relative to the PV device area, expressed as W/m ² ) and efficiency (a measure of sunlight-to-energy conversion, measured as a percentage) need to be maximized, while the cost per watt generated ($/W) needs to be minimized.

        PV devices geared toward the terrestrial market, where weight and volume generally are not critical, typically employ traditional crystalline silicon solar cell technologies at prices close to $3/W at the cell level. Because space and near-space markets require much more sophisticated PV technology, array-level prices of PV devices for space applications currently exceed $1,000/W. Notwithstanding this premium in price, existing PV systems typically generate no more than 70W/Kg, requiring substantial weight in order to meet the power needs of the instruments to which the devices are attached and

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making them unlikely candidates for any space or near-space applications requiring a significant amount of power. Moreover, while the crystalline PV panels that currently dominate the market for space applications are very efficient (14% to 30%), they require flat, rigid and relatively heavy substrates that make them unsuitable for HAA. Thin-film PV technology offers a solution to these shortcomings.

Ascent's Technology: Thin-Film CIGS on Flexible High-Temperature Plastic Substrate

        In the last decade, ITN has performed approximately 35 contracts for private and government entities in advanced PV technologies. Government sponsors of these contracts include the U.S. Air Force Research Laboratory, the National Science Foundation, the National Renewable Energy Laboratory, the Defense Advanced Research Projects Agency, the Missile Defense Agency and NASA. Through its work on these contracts, ITN has developed useful and proprietary processing and manufacturing know-how applicable to PV products generally and CIGS PV products in particular, including the creation and adoption of key processing technologies and the development of a monolithic integration fabrication process. ITN formed Ascent to commercialize this investment in CIGS PV technologies for the space and near-space markets. In January 2006, ITN assigned to us its key CIGS PV technologies and trade secrets and granted to us an exclusive, worldwide license to use certain of ITN's proprietary process, control and design technologies that we believe will be useful in our production of solar modules for our target markets. ITN also has agreed to design and build our initial production line, which will utilize ITN's proprietary roll-to-roll processing tools, real-time intelligent processing controls and thin-film processing technologies.

        We believe that our use of CIGS on a flexible high-temperature plastic substrate will offer the best combination of efficiency, specific power and power density among competing technologies in the space and near-space markets. Furthermore, we believe that our proprietary fabrication process—which, among other things, incorporates monolithic, cell-to-cell integration techniques—will allow us to manufacture our products with significant cost savings compared with our competitors.

Ascent's Technical Advantages Over Competitors

        Most PV companies employing thin-film techniques currently use a-Si (and cadmium telluride) as an absorbing layer. Instead we have chosen CIGS because it offers inherent performance and physical advantages over these alternative technologies. CIGS displays the highest efficiency of all thin-film technologies, with a demonstrated cell efficiency of 19.5% by the National Research Energy Laboratory ("NREL") in a terrestrial laboratory environment (compared with 12.9% demonstrated cell efficiency for a-Si under similar conditions). Unlike CIGS, a-Si exhibits inherent inefficiencies and measurable degradation when exposed to ultraviolet light, including ultraviolet light present in natural sunlight. To mitigate these effects, manufacturers using a-Si are forced to employ steps that add cost and complexity to the manufacturing process. By using CIGS, we avoid these issues. While cadmium telluride has demonstrated efficiencies approaching that of CIGS, cadmium telluride currently requires use of a rigid, transparent substrate, which virtually disqualifies it as a candidate for a multitude of applications, such as Lockheed Martin's prototype HAA project. Our choice of CIGS therefore provides us a significant technical advantage over competitors who use the alternative technologies of a-Si and cadmium telluride.

        We also hold a technical advantage over our competitors through our choice of polyimide high-temperature plastic as a substrate material. This flexible plastic is among the lightest materials currently available for PV modules and offers us a substantial advantage in achieving the published specific energy and power density requirements of the current prototype HAA project, as well as the more aggressive targets likely to be adopted for future HAA projects. By way of illustration, the prototype HAA project initially requires that candidate PV modules achieve a power density of at least 125 W/m ² and specific power of at least 400 W/kg under normal operating conditions. To achieve these

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minimum thresholds, a PV module like ours that uses a high-temperature plastic substrate would need to record efficiencies of about 9.3%, which, based upon the efficiencies achieved in the laboratory and in test production, we believe can reliably and consistently be attained in volume production. In contrast, a PV device using a stainless steel foil substrate would need to demonstrate efficiencies in excess of 24%, far greater than even the highest efficiencies achieved under controlled conditions by NREL. We believe that our choice of substrate material offers us another significant advantage over the vast majority of our competitors in the space and near-space markets.

        Our use of a roll-to-roll manufacturing process (which enables us to fabricate our flexible PV modules in large format or continuous operations), together with our use of proprietary monolithic, cell-to-cell integration techniques (which allows us to avoid the time-consuming, weight-additive and labor-intensive step of manually connecting individual solar cells), also affords us significant technical and cost advantages over our competitors. To our knowledge, ITN was the first company to master the use of roll-to-roll production of thin-film CIGS PV modules, and we are now a beneficiary of that expertise.

        In sum, among the technical advancements that distinguish us from our competitors in the space and near-space markets are:

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Our use of CIGS, which offers the highest efficiencies of the three candidate thin-film technologies and which can be deposited on variety of flexible substrates;



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Our use of polyimide high-temperature plastic as a substrate material, which not only is flexible, lightweight and relatively inexpensive but also provides us the ability to achieve the challenging specific power and power density requirements for space and near-space programs;



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Our experience with, and ITN's demonstrated ability to implement, roll-to-roll manufacturing in the context of thin-film CIGS PV modules; and



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Our use of proprietary monolithic integration techniques, which eliminates an entire back-end processing step in the assembly of a PV module, saving both time, labor and money relative to our competitors while also potentially offering measurable performance and weight advantages.

        We are pursuing improvements and enhancements to bolster performance of our PV modules including use of a high-temperature substrate, which allows for a higher CIGS processing temperature and, hence, higher efficiencies and incorporation of a two-junction (tandem) thin-film technology using a novel high-efficiency top cell in conjunction with proven high-efficiency CIGS PV bottom cell. Our objective is to develop flexible, low-weight, low-cost PV modules with efficiencies exceeding 15%, specific power in excess of 1000 W/kg and packaging of one-tenth the volume of existing systems.

        Finally, although our products are designed and manufactured specifically for the rigorous demands of the space and near-space markets, in the future it is possible that some of our technologies and advancements may be used in a line of products geared toward terrestrial applications. Although we currently have no plans to initiate sales into the terrestrial market, by reinvesting earnings in research and development, we may eventually be able to decrease our incremental manufacturing costs to a point where entry into the terrestrial market becomes economically feasible.

Ascent's Strategic Advantages Over Competitors

        We believe that we can introduce a product into the HAA market that delivers superior performance at a lower cost than competing technologies. If we are successful in doing so, we believe that the following factors, together with the technical advantages of our PV products, will offer us a competitive advantage in the space and near-space markets:

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We intend to be the first to market with a flexible thin-film PV product that meets the specific power and power density requirements of the prototype HAA project and future HAA systems;

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We intend to offer the lowest-cost solution to ensure that our PV modules becomes the de facto standard for full-scale HAA systems;



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We have the benefit of, and draw upon, the extensive experience and expertise of our key personnel in the thin-film, PV and aerospace industries;



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We benefit from our close and continuing business relationships with our affiliated companies ITN and MicroSat Systems, Inc. ("MicroSat"), another ITN spin-off, which designs and builds small, high performance satellites for military and commercial applications;



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Our key management and that of our affiliated companies share long-standing relationships with the U.S. Air Force Research Laboratory, NASA and other government agencies;



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Our PV modules are designed specifically for the unique requirements of the space and near-space markets, and our production line will be custom-built for that purpose; and



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We aggressively pursue improvements and enhancements to our existing technology and development of new technologies.

        By way of illustration, our close relationship with our parent company ITN and its subsidiary MicroSat may offer us testing or marketing opportunities typically unavailable through third parties. For example, in connection with MicroSat's bid to construct the TACSAT 3 spectral imaging satellite for the U.S. military, we, in conjunction with MicroSat, are investigating mounting a test package on the satellite to measure performance of our PV modules in true operational conditions if MicroSat secures the TACSAT project. We also are pursuing other flight demonstration opportunities with MicroSat, including one involving a MicroSat-developed patented, foldable array known as a "Fold Integrated Thin-film Stiffener" solar array deployment system ("FITS") that can incorporate our thin-film PV modules. We plan to jointly market FITS with MicroSat to commercial and government customers. We believe that successful early demonstration of FITS in the space satellite market will help validate our CIGS on high-temperature plastic PV modules for future space applications.

Key Competitors

        Competition in the near-space market currently is limited to other flexible thin-film PV device manufacturers, while competition in the space market also includes rigid PV device manufacturers. We believe that our primary competitors include United Solar Ovonic, a subsidiary of Energy Conversion Devices, Inc. ("Uni-Solar"), Global Solar Energy, Inc., a subsidiary of UniSource Energy Corporation ("GSE"), and DayStar Technologies, Inc. ("DayStar"). Uni-Solar, which employs a-Si technology, is an established participant in terrestrial market for solar power. Despite Uni-Solar's commercial success in that market, we believe that our flexible CIGS on high-temperature plastic PV modules will prove technically superior to Uni-Solar's devices in space and near-space applications and that our focus on these markets will provide an advantage over Uni-Solar.

        GSE was established in 1996 as a venture between ITN and Tucson Electric Power Company, which was later acquired by UniSource Energy Corporation. Now wholly owned by UniSource, GSE, together with DayStar are, to our knowledge, the only other companies actively exploring the production of a CIGS-based product on a flexible substrate for the space and near-space markets. Both DayStar and GSE's baseline products use a metal foil substrate for space and HAA applications. Given comparable efficiencies, our CIGS on high-temperature plastic substrate will have a higher specific power than a CIGS product on metallic foil. Furthermore, CIGS on a metallic foil must be interconnected, either by hand or by automation equipment, resulting in added weight and complexity. Our use of a high-temperature plastic substrate and monolithically interconnected cells avoids these issues.

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Intellectual Property

        In January 2006, ITN assigned to us its key CIGS PV technologies and trade secrets and granted to us an exclusive, worldwide license to use certain of ITN's proprietary process, control and design technologies that we believe will be useful in our production of solar modules for our target markets. We also are obtaining non-exclusive licenses with the University of Delaware's Institute of Energy Conversion and with NREL for U.S. patents that we believe also will prove useful to our manufacturing process.

Suppliers

        We rely on several unaffiliated companies to supply certain ingredients and materials used during the fabrication of our PV modules. We acquire these materials on a purchase order basis and do not have long-term contracts with the suppliers, although we may enter such contracts. We acquire our polyimide high-temperature plastic from Ube Industries, Ltd. (Japan), although alternative suppliers of similar materials exist. We purchase component copper, indium, gallium and selenide gases from a variety of suppliers. Our production line will be assembled in-house using off-the-shelf components, custom processing tools and software developed by ITN and other commercially available equipment and tools.