Global demand for electric power is expected to increase from 14.8 trillion kilowatt hours in 2003 to 27.1 trillion kWh by 2025, according to the Energy Information Administration, or the EIA. To meet this demand, the International Energy Agency, or the IEA, estimates that investments in generation, transmission and distribution of electricity must reach approximately $10 trillion by 2030. According to the IEA, fossil fuels such as coal, oil and natural gas generated approximately 66% of the world’s electricity in 2003.

Renewable energy sources for electric power generation include hydroelectric, biomass, geothermal, wind and solar. Within the renewable energy industry, hydroelectric power currently generates the most electricity. According to the EIA, hydroelectric power accounted for approximately 6.5% of electricity generated in the United States in 2004, compared to just 2.3% for all other sources of renewable energy combined. While hydroelectric power generation currently has the largest installed base within renewable energy, the future growth of hydroelectric power will likely be limited due to environmental concerns and a lack of suitable sites.

Among renewable sources of electricity, solar energy has the most potential to meet the world’s growing electricity needs. According to the Department of Energy, the sun is the only source of renewable energy that has a large enough resource base to meet a significant portion of the world’s electricity needs. A study commissioned by the Department of Energy estimates that, on average, 120,000 trillion Watts, or TW, of solar energy strike the Earth per year, far exceeding the global electricity consumption rate of 14.3TW in 2002.

The Company has participated, or is currently participating, in laboratory and field tests with the National Renewable Energy Laboratory, the Arizona State University Photovoltaic Testing Laboratory, the Fraunhofer Institute for Solar Energy, TÜV Immissionsschutz und Engergiesysteme GmbH and the Institut für Solar Energieversorgungstechnik.

Currently, the Company has approximately 10,000 solar modules installed worldwide at test sites designed to collect data for field performance validation. Using data logging equipment, the Company also monitors approximately 102,000 solar modules, representing approximately 6MW of installed photovoltaic systems in use by the end-users that have purchased systems using its solar modules. The modules in these monitored systems represent approximately 20% of all solar modules shipped by the Company from 2002 to 2005.

The Company maintains all certifications required to sell solar modules in the markets it serves or expects to serve, including UL 1703, IEC 61646, TÜV Safety Class II and CE.

The Company provides a limited warranty to the original purchasers of its solar modules for five years following delivery for defects in materials and workmanship under normal use and service conditions. The Company also warrants to the original purchasers of its solar modules that solar modules installed in accordance with agreed-upon specifications will produce at least 90% of their power output rating during the first 10 years following their installation and at least 80% of their power output rating during the following 15 years.

Cost of sales increased by $32.0 million, or 148%, from $21.7 million in the first nine months of 2005 to $53.7 million in the first nine months of 2006.

Gross profit increased by $15.8 million, or 123%, from $12.8 million in the first nine months of 2005 to $28.6 million in the first nine months of 2006.

Research and development expense increased by $3.8 million, or 418%, from $0.9 million in the first nine months of 2005 to $4.7 million in the first nine months of 2006.

Interest expense increased by $0.7 million from the first nine months of 2005 to the first nine months of 2006.