DILUTION

        For purposes of the dilution computation and the following tables, we have attributed the full purchase price of a unit to the share of common stock included in the unit and nothing to the warrants included in the unit. If you invest in our units, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our capital stock after this offering. Our net tangible book deficiency as of March 31, 2006 was $48,464 without giving effect to any changes in the net tangible book value after March 31, 2006 other than (i) the sale of 3,000,000 units in this initial public offering at a price of $5.50 per unit, less the underwriting discount and offering expenses; and (ii) the issuance of 290,909 units to certain bridge lenders; and (iii) the repayment of bridge loan financing and the recognition to accumulated deficit of remaining bridge loan discount. Our pro forma net tangible book value as of March 31, 2006 was $13,136,611, or $2.48 per share of outstanding capital stock. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of our units in this offering and the net tangible book value per share of our capital stock immediately afterwards. This represents an immediate increase of $2.50 per share of capital stock to existing stockholders and an immediate dilution of $3.02 (or 54.9%) per share of common stock to the new investors who purchase units in this offering. The following table illustrates this per share dilution:

        If the underwriters' over-allotment option is exercised in full, dilution per share to new investors would be $2.82 (or 51.2%) per share of common stock instead of $3.02 (or 54.9%) per share of common stock.

        The following table summarizes the differences between the existing stockholders and the new investors with respect to the number of shares of common stock purchased, the total consideration paid, and the average price per share paid:

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MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under "Risk Factors" and those included elsewhere in this prospectus.

Introduction

        Ascent was formed to commercialize CIGS PV technology developed by ITN for the space and near-space markets. For over a decade, ITN had been engaged in the research and development of PV technologies and devices. Funded largely by contracts sponsored by government agencies such as 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, ITN developed roll-to-roll fabrication of a CIGS absorbing layer on a stainless steel metal substrate in the late 1990s. ITN then developed the technology necessary to put a CIGS absorbing layer on high-temperature plastic and produced and tested small area demonstration cells of CIGS on high-temperature plastic. This new technology has been transferred to us and will comprise the technical foundation for our initial product line and business in the near-term.

        Unlike ITN, we intend primarily to be a commercial manufacturing company engaged in the production of CIGS PV on high-temperature plastic modules. Our near-term objective is to assemble a 500 kW/shift/year production line by the end of 2007 and begin commercial production of CIGS PV on high-temperature plastic modules by 2008. We expect to remain substantially dependent upon the net proceeds from this offering until commencement of commercial production, after which we hope that revenues from sales will be sufficient to sustain all or a substantial portion of our ongoing operations.

        Our most serious near-term challenges and uncertainties relate to product development and manufacturing, on the one hand, and to sales and marketing, on the other.

Product Development and Manufacturing

        Meeting the 2008 production deadline with products that satisfy the technical specifications demanded by potential customers, including by Lockheed Martin in the early stages of its HAA prototype project, will require timely resolution of certain technical matters. These matters relate to the supply of our substrate material, further testing of our monolithic integration technology and our intelligent process controls.

        We currently obtain the majority of our high-temperature plastic substrate material from Ube Industries, Ltd. (Japan) ("Ube"). We believe the supply of this material from Ube will be available to us in commercial quantities. However, we also have tested our CIGS absorbing layer on a relatively new high-temperature silicone resin (also a form of plastic) substrate material developed by the Dow Corning Corporation ("DCC"). The DCC substrate material can be processed at a higher temperature than the Ube substrate material, a feature that typically results in higher PV efficiencies. We therefore believe that the DCC substrate can be successfully used in our CIGS PV products in space and near-space applications, where efficiencies and weight are a critical measurement. To date, however, the DCC substrate is not commercially available, but DCC has informed us that it is improving on its ability to provide the material in larger quantities. However, if sufficient quantities are not available when we begin production, we will be forced to rely on Ube and other suppliers to provide substrate

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materials that may result in lower efficiencies for our planned products. Although we do not expect serious technical difficulties in the use of materials from these alternate suppliers, the impact on efficiencies may affect evaluation and qualification of our planned product by prospective customers and force us to boost efficiencies through implementation of other technologies, some of which (such as tandem-junction devices) already are under development by us.

        Meeting the projected deadlines also requires final testing and integration of our monolithic integration technology by early 2007. In general, solar cells generate electrical power in small voltage increments; in order to provide a usable voltage and current, individual cells must be interconnected in series to increase voltage (similar to batteries stacked in a flashlight) and in parallel to increase current. In 2000, ITN demonstrated an automated solar cell interconnect technology that takes a large area of plastic coated with solar cell material, then patterns cells and connects them at the same time without cutting through the substrate material. This process, called monolithic integration, eliminates the need for connecting individual cells and thus simplifies the manufacturing process. In 2005, ITN established a next-generation, laser patterning operation to further improve its monolithic integration technology. Now that we own the technology, we intend to tailor it for use in our planned production line. All laser patterning steps and printing steps (which entail the deposition or application of insulating ink layers) have been separately demonstrated, and the first monolithically integrated module (solar cells interconnected by laser patterning) has been produced. We are optimizing the monolithic integration process with Ube's substrate materials for space and near space applications, while ITN is modifying the process for use with DCC's silicone resin substrate material, with the technical aspects of ITN's development to be assigned to us. We expect to be able to demonstrate monolithic integration processes for both substrate materials by the third quarter of 2006, but if we are unable to do so before the latter half of 2007, we might opt to manufacture discrete cells instead of modules. We would then integrate the cells into modules employing approaches developed for use with CIGS on stainless steel substrates. The additional interconnect steps would add cost to our end products, leaving product weight and efficiencies as the primary advantages we believe that our planned products would have over those of competitors. The financial impact of these additional costs cannot be quantified at this time.

        We also need to tailor the automated manufacturing control technology developed by ITN, which we refer to as intelligent process controls, for use in our planned production line. We believe that implementation of intelligent process controls, which continuously monitor the manufacturing process, will help to control and maximize product yields and device efficiencies. In addition, the manufacturing process parameters that have demonstrated promising results in small batches at laboratory level may require additional development as we scale up to large area continuous roll-to-roll production methods in much larger manufacturing equipment.

        These challenges must be addressed in order for us to execute out our business plan, which contemplates completion of our 500 kW/shift/year production line by the end of 2007. Although we believe that the project can be completed within the contemplated time frame, events such as unforeseen shortages in supplies or equipment or variations in materials costs could force us to modify our development calendar or reallocate funds, which may affect our anticipated cash flow in 2008. Significant delays could require us to seek additional capital in 2008 to sustain operations. Furthermore, because one of our challenges will be to meet the product performance and manufacturing metrics—including yield, rate and efficiencies—of prospective customers such as Lockheed Martin within their own project calendars, a delay in our own development calendar or our inability to timely resolve one or more of the technical challenges above might jeopardize our ability to attract and retain customers and generate revenues.

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Sales and Marketing

        The market's acceptance of our planned products poses a significant challenge to our success. Although system developers in the space and near-space markets are in search of efficient, lightweight, flexible and less-expensive PV products, we will be attempting to introduce a new technology into a field dominated by large, established companies that may be reluctant to quickly adopt our newer technologies.

        The Missile Defense Agency has awarded Lockheed Martin a contract to deliver the first prototype HAA. Lockheed Martin began development of the prototype in 2005 with plans to fly in 2009. This prototype project presents a timely opportunity for us to enter the near-space market. Lockheed Martin's timeline is consistent with our development calendar. In October 2005 and in response to a request for proposal, we, together with ITN and with the support of DCC, submitted a written proposal to supply our CIGS on high-temperature plastic substrate PV modules to Lockheed Martin for use on its program. The program is divided into a development phase and a production phase. Participation in and throughout each phase generally will be dependent upon continued satisfactory performance. We expect that Lockheed Martin will select suppliers in the summer of 2006. The program itself is scheduled to begin in November 2006.

        We believe that we will be a successful bidder in the program because our planned products are designed to meet the specific power and power density requirements of the prototype project. If we are not initially selected to participate in the prototype program, we intend to work with Lockheed Martin to pursue opportunities in later stages of the program. To participate in these later stages without having participated in earlier stages, we would need to outperform the contractor or contractors that Lockheed Martin initially selected, requiring us to fund the initial development stages with our own resources, which would largely come from our internal research and technology development budget.

        We expect the space satellite market to be more difficult to penetrate than the HAA near-space market. Although we believe that our planned products will offer cost and performance advantages over others available on the market, we will first be challenged to find customers willing to use our planned products on their platforms, each of which is likely to have different product requirements. Although we intend to manufacture and package our planned products in such a way that they can easily be integrated in a variety of diverse platforms, the space market we believe is more uncertain than the near-space market in terms of gaining customer confidence and acceptance. In addition to these challenges, we also need to adopt and undertake quality control processes, procedures and tests to qualify and validate our planned products for use in the harsh environmental conditions of space and near-space.

Information Presented

        Historical financial information in this prospectus consists of:

•

An audited historical balance sheet of Ascent as of December 31, 2005 and audited statements of operations, stockholder's equity and cash flows for the period from inception (October 18, 2005) through December 31, 2005 and unaudited statements as of March 31, 2006 and for the three months ended March 31, 2006 and for the period from inception (October 18, 2005) through March 31, 2006.



•

Unaudited pro forma statements of operations of Ascent for the three months ended March 31, 2006 and for the year ended December 31, 2005, reflecting the transfer of the Transferred Assets (described below under "Overview") from ITN in consideration of 1,028,000 shares of common stock, as if such transactions had occurred on January 1, 2005.



•

Audited statements of selected assets and liabilities of ITN as of December 31, 2005 and December 31, 2004, and audited statements of revenues and expenses, changes in net assets and

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cash flows relating to the Transferred Assets, for the years ended December 31, 2005 and December 31, 2004.

        The assets, liabilities and operations reflected in these financial statements reflect a portion of the assets and liabilities of ITN and the conduct of a portion of ITN's business, specifically the portion relating to PV technology, research and development. ITN is a relatively mature company engaged in the business of developing technology, in part through obtaining and performing governmental research and development contracts. Ascent proposes to continue to perform under the government contracts that have been transferred to it, but its principal business is expected to consist of commercial sales of PV devices for use in space and near-space applications.

        Because of the substantially different nature of the businesses conducted by ITN and proposed to be conducted by us, we believe that the historical financial data presented in this prospectus are not predictive of our future financial condition or results of operations.

Overview

        ITN formed Ascent to commercialize CIGS PV technology for the space and near-space markets. In January 2006, in exchange for 1,028,000 shares of common stock of Ascent, ITN: (i) assigned its CIGS PV technologies and trade secrets ("Transferred Assets") to Ascent; (ii) licensed certain proprietary process, control and design technologies to Ascent; (iii) agreed to seek permission to assign certain contract rights relating to its CIGS PV business to Ascent; (iv) transferred certain key personnel to Ascent; (v) executed a contract to design and build Ascent's initial production line, which will utilize ITN's proprietary roll-to-roll processing tools, real-time intelligent processing controls and thin-film processing technologies; and (vi) executed a contract to provide administrative services such as facilities management, equipment maintenance, human resources and payroll at cost.

        The statements of selected assets and liabilities, of revenues and expenses, of changes in net assets and of cash flows of the Transferred Assets have been presented in the accompanying financial statements. These selected assets and liabilities directly correspond to contracts related to ITN's PV business. Because of uncertainty surrounding the novation of SBIR to Ascent, the SBIR contracts were not included in the Transferred Assets financial statements. The following table reflects total revenues from ITN's PV contracts, including revenues from SBIR contracts, for the financial periods reported:

        During 2004, ITN partnered with government agencies such as the National Renewable Energy Laboratory ("NREL"), a division of the Department of Energy. The NREL contracts are cost-reimbursable contracts with no profit and also include a cost-sharing arrangement where ITN contributes its own internal funds for technology development. In 2004 and 2005, ITN received additional significant awards of SBIR contracts from the Air Force Research Laboratory along with a non-SBIR award from NASA. These research and development ("R&D") contracts do not have a cost-sharing arrangement and have profit margins of 6 to 7%. We intend to pursue government contracts in 2006 and beyond for continued R&D related to our PV devices. However, our business plan does not rely on the acquisition of any such new government contracts. We do not anticipate meaningful revenue until we are able to begin sales of PV products produced by our proposed manufacturing facility. We plan to offer standard pricing of our planned products to both commercial and government customers and will use portions of our earnings for continued R&D purposes.

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        Our historical statement of operations for the period ended December 31, 2005 reflects a loss of approximately $1,207,000, of which $959,000 relates to a non-cash recording of stock based compensation.

        As a result of the investment required to develop our proposed manufacturing facility, we expect our indirect costs to increase substantially in 2006 and 2007 as we hire new personnel and invest in new equipment. We therefore expect that our net losses will increase substantially until 2008, when we anticipate they will be offset to a limited degree by revenue from the sale of PV devices.

        We expect to be dependent on additional capital infusions, such as the net proceeds of this offering, to execute our business plan, and we may require additional capital if we wish to further expand capacity.

Critical Accounting Policies and Estimates

        The preparation of our consolidated financial statements will require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures. A summary of accounting policies that have been applied to the historical financial statements presented in the prospectus can be found in the footnotes thereto. We consider certain of these accounting policies to be critical as they are both important to the portrayal of our financial condition and results of operations and require judgments on the part of management about matters that are uncertain. We have identified the following accounting policies that are important to the presentation of the financial information in this Prospectus.

Revenue Recognition

        Revenue from cost-type R&D contracts is recognized as costs are incurred on the basis of direct costs plus allowable indirect costs and an allocable portion of the fixed fee. Revenue from fixed price-type R&D contracts is recognized under the percentage-of-completion method of accounting, with costs and estimated profits included in contract revenue as work is performed. If actual and estimated costs to complete a contract indicate a loss, provision is made currently for the loss anticipated on the contract. Revenue from time and materials contracts is recognized as costs are incurred at amounts represented by the agreed-upon billing amounts.

        Certain of the US government R&D contracts require that the contracting party contribute to the R&D effort under a cost-sharing arrangement. The contracting party's share of costs is expensed as incurred.

Stock based compensation

        In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) is effective for public companies for interim or annual periods beginning after June 15, 2005, supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.

        SFAS No. 123(R) requires all share-based payments, including grants of stock options and issuances of stock to employees, to be recognized in the income statement based on their fair values. Proforma disclosure is no longer an alternative. The Company adopted the new standard October 18, 2005.

        In connection with the valuation of our stock at various points in time, including at the times of stock issuances and option grants, we followed guidance provided by the American Institute of Certified Public Accountants ("AICPA") Task Force's Audit and Accounting Practice Aid— Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the "AICPA Practice Aid"). As a

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development stage company without significant resources and no current revenue-generating operations, our management concluded that the expenditure of limited available funds to engage an outside valuation specialist to perform contemporaneous and comprehensive valuations at key dates between inception and the date of this offering was not an appropriate use of financial resources. We instead derived relevant valuations internally using the AICPA Practice Aid and evaluated those figures in light of Generally Accepted Accounting Principles ("GAAP") to establish book values for our accounting and book purposes.

        Chapter 6 of the AICPA Practice Aid recommends three general approaches to valuation: (i) the market approach, which compares a company's financial data and ratios to other companies with similar characteristics in order to draw correlations relevant to valuation (the "Guideline Public Company Method") or which examines transactions in a company's equity securities with unrelated investors (the "Guideline Transactions Method"); (ii) the income approach, which develops an estimate of value for a company based on its historical or expected future financial performance ("Income Method"); and (iii) the asset (or replacement cost) approach, which uses an estimate of value for a company's net assets (the "Asset Method").

        According to the AICPA Practice Aid, "[o]ne of the principal elements contributing to a change in an enterprise's fair value over time is the stage of development of the enterprise and, typically, value is created as an enterprise advances through the various stages of development." Bearing this in mind, we considered the AICPA Practice Aid's guidance on stages of enterprise development. The AICPA Practice Aid describes a "Stage 1" enterprise as one that has not yet generated product revenue and has a limited expense history. It also typically has an incomplete management team with a plan for initial product development and perhaps has secured seed capital or first round financing. A "Stage 2" enterprise is described as one that has no product revenue, but has substantive expense history, as product development is underway and business challenges are thought to be understood. Typically, a second or third round of financing occurs during Stage 2. We believe that, at least until the completion of this offering, these stage descriptors accurately describe our business, and we consider the Guideline Public Company Method and the Income Method to be inappropriate valuation methods because (under the Guideline Public Company Method) little relative comparative data for non-public companies in our industry are available to us and because (under the Income Method) projections of our cash flow or income are limited and subject to many assumptions that may be affected by factors beyond our control. We therefore were compelled to use either the Guideline Transactions Method or the Asset Method in our analysis.

        Bearing in mind the AICPA Practice Aid's description of stages of enterprise development, we identified the following key dates and events, among others, as relevant to the valuation analysis:

Developmental Stage 1

        

•

October 18, 2005 (date of inception)



•

October 26, 2005 (our Board of Directors appointed certain key members of management)



•

November 3, 2005 (we issued stock to our founders)



•

November 11, 2005 (we received a $200,000 loan to fund initial operations)



•

November 18, 2005 (we issued stock options to certain employees)



•

January 17, 2006 (we entered into several agreements with ITN, whereby ITN assigned and licensed several key technologies to us and agreed to seek permission to assign certain third-party research and available contracts)

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Developmental Stage 2

        

•

January 18, 2006 (we closed our $1.6 million bridge loan with outside lenders)



•

January 23, 2006 (we first filed a registration statement for our initial public offering)



•

January 27, 2006 through March 1, 2006 (we granted additional stock options to employees and consultants)



•

The date of effectiveness of the registration statement associated with this offering.

        Our Board of Directors previously derived fair values on certain key dates for purposes of issuing stock and granting options as follows:

        These valuations were based only upon all of the information available, and in light of the many imposing challenges and risks existing, at the time such valuations were made. With the benefit of hindsight and the knowledge of developments that have occurred since each of these valuation dates, we have concluded that the previously derived per share values may understate the true value of our common stock and, if used for book purposes, may result in a material misstatement of our financial statements under GAAP. Consequently, relying on guidance from the AICPA Practice Aid and other generally accepted reference sources, we have derived the fair values of our common stock to be used for book purposes.

        To value our common stock for book purposes, we examined the circumstances existing on each relevant date, and relied in particular on the $1.6 million (face value) bridge loan obtained from 23 outside investors on January 18, 2006. The principal terms of this loan included: (i) a maturity date of the earlier of a qualified public offering or January 2007; (ii) an annual interest rate of 10%; (iii) the issuance of bridge rights to receive equity of the company regardless of whether a qualified public offering occurs; and (iv) a conversion right to permit issuance of equity if a qualified public offering does not occur and the loan cannot be repaid in cash. We believe that this loan transaction represents a contemporaneous and objective assessment of the value of our common stock by third parties because, among other things:

•

The investor group consisted of accredited and sophisticated investors capable of assessing the risks involved with our business and the transaction;



•

The lenders anticipated that repayment of the loan would come only from the proceeds of a qualified public offering and that, in the absence of such an offering, they would be forced to receive our common stock in lieu of cash;



•

In the absence of a qualified public offering, the lenders agreed to accept up to 16,666 shares of our common stock for each $25,000 of principal and interest, resulting in an effective per share value of $1.50; and



•

In the absence of a qualified pubic offering, the accredited lenders would be forced to accept the equity interest and wait for a liquidity event to recover their investment, and it is reasonable to assume that the lenders priced the equity investment (i.e., the conversion ratios) at a value that they considered commensurate with the risks involved.

        Using the Guideline Transactions Method referenced in the AICPA Practice Aid, and based upon the notion that fair value can be identified as "[t]he price at which the property would change hands

24

between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts" ( IRS Revenue Ruling 59-60 ), we concluded that the $1.6 million bridge loan by third parties establishes a fair value of our enterprise and of our common stock as of January 18, 2006 and accordingly arrived at an implied minority non-marketable per share value of $1.50.

        After arriving at this arms-length valuation, we examined the events that occurred in the months prior to the bridge loan, including: (i) the execution of a letter of intent with our underwriters, our incorporation and formation and the election of management, all of which occurred prior to the sale of founders' stock on November 3, 2005; (ii) a loan of $200,000 from Paulson Investment Company to help fund initial operations and the execution of employment agreements with certain of our executive officers, all of which occurred prior to the issuance of stock options on November 18, 2005; and (iii) the execution of agreements with, and assignment of assets from, ITN, which occurred prior to the closing of the $1.6 million bridge loan transaction. Attributing relative weights or perceived importance to each event and distributing these weights across a spread of $0.00 (inception) to $1.50 (January 18, 2006), we determined that the fair value of our common stock for book purposes on November 3, 2005 should be $1.00 and on November 18, 2005 should be $1.20.

        We also concluded that the fair value of our common stock between January 27 and March 31, 2006 should be recorded for book purposes at $2.95. This conclusion was reached by examining the events that occurred after the bridge loan transaction, which included the initial filing of our registration statement on January 26, 2006, a critical milestone that required the concurrence of our auditors and underwriters and represented an essential step in the offering process. The same conclusion was reached by extrapolating backwards from $5.50, the midpoint of the anticipated offering range that we negotiated with our underwriters. Each unit comprises one share of common stock and three warrants. We examined the trading patterns of the shares and warrants of another early-stage company in the PV industry in the initial weeks after its initial public offering (in which each offered unit, like ours, comprised one share and three warrants, and each warrant had comparable terms as the warrants being offered by us) and found that, during that period, the trading price of that company's common stock represented between 50% to 57% of the aggregate trading price of its common stock and three warrants. Based upon this empirical data, we concluded that the value of our common stock for book purposes from January 27 through at least March 31, 2006 should be approximately 53.5% of our unit offering price, or $2.95 per share. Using the anticipated public offering price of our units as a starting point, we also attempted to validate the fair values on November 3 and November 18, 2005 that we derived for book purposes, and we concluded that the $1.00 and $1.20 fair values fell within reasonable ranges after considering adjustments for milestones and key events, and after applying discounts for lack of marketability. In sum, we have for book purposes used the following fair values on certain dates for our common stock, and our financial statements reflect and in the future will reflect these values:

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Results of Operations

Transferred Assets of ITN Energy Systems Inc.:

Comparison of years ended December 31, 2005 and 2004

        Revenues.     Total revenues related to the Transferred Assets were $1,050,502 for the year ended December 31, 2005, a decrease of $375,384 or 26% from the corresponding period in 2004. All revenues for both periods were from government research and development contracts ("R&D contracts"). R&D contracts in 2004 were cost-reimbursable contracts with no profit. A few of the R&D contracts also had cost-sharing arrangements where ITN contributed their own internal funds for technology development. The decrease is due to several contracts completed during late 2004 and early 2005. A new contract awarded in April 2005 partially offset the decrease from the completed contracts in 2004.

        Direct contract costs.     Direct contract costs were $529,218 for the year ended December 31, 2005, a decrease of $154,212 or 23% from the corresponding period in 2004. This 23% decrease is in direct relationship to the 26% decrease in revenues and overall contract volume.

        Gross margin on revenues.     Gross margin on revenue was $521,284 for the year ended December 31, 2005, or 50% of contract revenues. Gross margin for the year ended December 31, 2004 was $742,456, or 52% of contract revenues. The slight increase in gross margin for the year ended December 31, 2005 was due to proportionately lower direct labor costs in the period compared with the prior year.

        Indirect costs.     Indirect costs were $513,678 for the year ended December 31, 2005, a decrease of $309,788 or 38% from the previous period. Indirect costs include: general and administrative expenses; overhead expenses; and subcontract, material and handling expenses. Indirect costs are allocated to all contracts based on an approved government allocation method. The decrease of indirect costs from 2004 to 2005 was due to the decrease in contract volume and the significant decrease in direct labor. A majority of indirect costs are allocated based on direct labor incurred on the contract.

        Net income (loss).     Net income of $7,706 for the year ended December 31, 2005 represented an increase of $88,616 or 110% from the year ended December 31, 2004. This increase in net income was due to a decrease in cost-share commitments on contracts from 2004 to 2005 of approximately $120,000, profit from the new contract awarded in April 2005, and lower indirect expenses.

        Business development and product qualification costs for the three months ended March 31, 2006 of $160,502 and for the period from inception (October 18, 2005) through December 31, 2005 of $54,291 are associated with efforts related to identifying and bidding on government and commercial

26

contracts. If won these contracts will be utilized to help further define our product for space and near space applications. Manufacturing development costs of $48,331 for the three months ended currently consist of coordinating with equipment manufacturers and equipment component suppliers in order to provide the manufacturing equipment required for our plant. Additional manufacturing development costs consist of coordinating design requirements for the manufacturing equipment. General corporate purpose expenses relate to facility costs and administrative support costs along with other normal operating expenses. Included in general corporate purpose costs is a non-cash transaction for stock based compensation related to the issuance of the Company's stock and stock options at fair value. Stock based compensation for the three months ended March 31, 2006 and for the period from inception (October 18, 2005) through December 31, 2005 was $63,080 and $959,124, respectively. Also included in general corporate purpose costs for the three months ended March 31, 2006 are additional costs of approximately $23,000 over normal corporate expenses for travel associated with the road show in connection with this offering. General corporate expenses for the period from inception (October 18, 2005) through December 31, 2005 include approximately $106,000 related to legal fees incurred in the formation of the Company.

        Research and technology development costs for the three months ended March 31, 2006 of $40,223 consists of activities related to process and product development of our thin film PV technology. There were no research and technology costs incurred for the period from inception (October 18, 2005) through December 31, 2005.

        Other income (expense) for the three months ended March 31, 2006 and for the period from Inception (October 18, 2005) through December 31, 2005 of $230,738 and $2,740, respectively, consists of interest expense on financing activities. The Company's other/income (expense) is comprised of the following:

        Interest Expense—Note Payable for the three months ended March 31, 2006 and for the period from Inception (October 18, 2005) through December 31, 2005 of $1,398 and $2,740, respectively, consists of interest expense on the $200,000 short term note from Paulson Investment Company, Inc. This note was paid in full on February 1, 2006. Interest expense-Bridge Loan is the 10% interest computed for the first quarter on the $1,600,000 bridge loan financing completed on January 18, 2006. Interest expense-Amortization of Bridge Loan Discount is the bridge loan discount recorded of $800,000 for the value of the bridge rights amortized over the life of the bridge loan financing (1 year). Interest Expense-Amortization of Deferred Financing Costs represents the amortization of direct costs

27

associated with obtaining the bridge loan financing, including $160,000 for commission to Paulson, over the life of the bridge loan financing (1 year).

        For the three months ended March 31, 2006 the company recorded revenues of $3,380 and direct costs of $2,571 associated with support services performed by the Company on behalf of ITN. The Company bills ITN for any support activities at cost.