On space satellites and near-space aircraft, photovoltaic, or 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.

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.

The U.S. satellite industry is fairly mature and is dominated by three major manufacturers. 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.

Most PV companies employing thin-film techniques currently use a-Si (and cadmium telluride) as an absorbing layer. Instead the Company has 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).

The Company also holds a technical advantage over its competitors through its 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 the Company 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.

The Company is pursuing improvements and enhancements to bolster performance of its 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. The Company’s 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.

The Company intends 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.

The Company intends to offer the lowest-cost solution to ensure that its PV modules become the de facto standard for full-scale HAA systems.

The Company’s PV modules are designed specifically for the unique requirements of the space and near-space markets, and its production line will be custom-built for that purpose.

Direct contract costs were $521,671 for the ten months ended October 31, 2005, a decrease of $78,380 or 13% from the corresponding period in 2004.

Indirect costs were $485,556 for the ten months ended October 31, 2005, a decrease of $237,665 or 33% from the previous period.

Net income of $16,609 for the ten months ended October 31, 2005 represented an increase of $130,547 or 115% from the corresponding ten-month period in 2004.