UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

Amendment No. 2

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934

For the quarterly period ended June 30, 2006

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________ to ___________.

Commission file number: 000-19404

SOLAR THIN FILMS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	95-4356228
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

25 Highland Boulevard, Dix Hills, New York 11746

(Address of principal executive offices)

(516) 417-8454

  (Issuer’s telephone number)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 x No o

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

As of October 19, 2006 we had 26,031,354 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x

EXPLANATORY NOTE

This Amendment No. 2 on Form 10-QSB/A (“Amendment No. 2”) amends the Quarterly Report of Solar Thin Films, Inc. (the “Company”) on Form 10-QSB/A for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on October 26, 2006 (the “Original Filing”). This Amendment No.  2 is being filed for the purpose of correcting errors in accounting for and disclosing of the acquisition of American Global United , Inc. and the Share Purchase Agreements entered into with the shareholders of Kraft Rt. on June 14, 2006. We have not updated the information contained herein for events occurring subsequent to October 26, 2006, the filing date of the Original Filing.

SOLAR THIN FILMS, INC .

FORM 10-QSB

FOR THE QUARTER ENDED JUNE 30, 2006

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheet as of June 30, 2006	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005	4
	Condensed Consolidated Statement of Stockholders’ Deficit for the Six Months Ended June 30, 2006	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7-24
Item 2.	Management’s Discussion and Analysis or Plan of Operation	25
Item 3.	Controls and Procedures	29
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Submission of Matters to a Vote of Security Holders	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		34

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2006
(Unaudited)
ASSETS
Current assets:		RESTATED
Cash and cash equivalents	$	5,633,781
Accounts receivable, net of allowance for doubtful accounts		10,651
Inventory		725,274
Prepaid expenses		209,123
Advances and other current assets		82,119
Total current assets		6,660,948
Property, plant and equipment, net of accumulated depreciation of $52,804		447,920
Other assets:
Deferred financing costs, net of accumulated amortization of $8,877		598,623
Other assets		12,123
Total other assets		610,746
Total assets	$	7,719,614
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,886,215
Advances received from customers		573,405
Note payable-other (Note 5)		1,500,000
Notes payable-related parties		159,000
Total current liabilities		4,118,620
Convertible notes payable, net of unamortized discount (Note 7)		487,713
Warrant liability (Note 7 )		9,311,100
Dividends payable (Note 6)		172,531
Total long term debt		9,971,344
Commitments and contingencies (Note 11)
Deficiency in Stockholder's Equity (Note 8)
Preferred stock, par value $0.01 per share; 1,200,000 shares authorized; -0- issued and outstanding		-
Series B-1 Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, 228,652 issued and outstanding		2,286
Series B-3 Preferred stock, par value $0.001 per share, 232,500 shares authorized, 48,486 issued and outstanding		475
Series B-4 Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, 95,500 issued and outstanding		955
Common stock, par value $0.01 per share, 150,000,000 shares authorized, 16,035,221 issued and outstanding (Note 8)		160,352
Additional paid in capital (Note 8)		330,113
Treasury stock, at cost		(80,000	)
Accumulated deficit		(6,771,687	)
Accumulated other comprehensive income (loss)		(12,844	)
Total deficiency in stockholders' equity		(6,370,350	)
Total Liabilities and Deficiency in Stockholders' Equity	$	7,719,614

See accompanying notes to the unaudited condensed consolidated financial statements

F-3

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
	RESTATED						RESTATED
REVENUE:	$	130,698		$	158,942		$	312,185		$	365,392
Cost of goods sold		(113,961	)		(115,540	)		(228,015	)		(200,989	)
Gross margin (loss)		16,737			43,402			84,170			164,403
OPERATING EXPENSES:
General, selling and administrative expenses		192,653			174,472			522,904			369,107
Depreciation		12,410			2,969			17,748			7,332
Total operating expenses		205,063			177,441			540,652			376,439
NET INCOME (LOSS) FROM OPERATIONS		(188,326	)		(134,039	)		(456,482	)		(212,036	)
Other income/(expense)
Foreign exchange expense (gain):		(1,264	)		781			1,568			3,707
Unrealized gain (loss) relating to adjustment of warranty liability to fair value		1,510,800			-			1,510,800			-
Interest expense, net		(166,950	)		(3,951	)		(183,549	)		(3,951	)
Debt acquisition costs		(8,877	)		-			(8,877	)		-
Other income/(expense)		0			228,950			13,727			243,461
Net income before provision for income taxes		1,145,383			91,741			877,187			31,181
Income taxes (benefit)		-			-			-			-
NET INCOME	$	1,145,383		$	91,741		$	877,187		$	31,181
Net income per common share (basic) (Note 1)	$	0.07		$	0.01		$	0.05		$	0.00
Net income per common share (assumed fully diluted) (Note 1)	$	0.00		$	0.01		$	(0.01	)	$	0.00
Weighted average shares outstanding-basic (Note 1)		16,035,221			16,035,221			16,035,221			16,035,221
Weighted average shares outstanding-assuming fully diluted (Note 1)		53,985,401			16,086,772			53,985,041			16,086,772
Comprehensive losses:
Net Income	$	1,145,383		$	91,741		$	877,187
Foreign currency transaction gain (loss)		(36,566	)		2,583			(44,841	)
Comprehensive Income	$	1,108,817		$	94,324		$	832,346

See accompanying notes to the unaudited condensed consolidated financial statements

F-4

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY OF STOCKHOLDERS' EQUITY
Six months ended June 30, 2006
RESTATED
	Preferred Series B-1				Preferred Series B-3				Preferred Series B-4
	Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2005, as adjusted for the Securities Purchase Agreement (Note 1) and reverse stock split (Note 12)		-		-		-		-		-		-
Shares issued to Kraft RT shareholders in exchange for 95.5% of issued and outstanding Kraft RT shares in connection with Securities Purchase Agreement on June 14, 2006 (Note 1)		-		-		-		-		95,500	$	955
Reclassification of Kraft equity with Share Exchange Agreement Transfer (Note 1)		-		-		-		-		-		-
Effect of merger with Solar Thin Films, Inc. (formerly American Global United) on June 14, 2006		228,652		2,286		47,518		475		-		-
Net Income at June 30, 2006		-		-		-		-		-		-
Balance at June 30, 2006		228,652	$	2,286		47,518	$	475		95,500	$	955

												Other						Total
	Common shares					Additional			Treasury			Comprehensive			Accumulated			Stockholders'
	Shares		Amount			Paid in Capital			Stock			Income (loss)			Deficit			Deficiency
Balance at December 31, 2005, as adjusted for the Securities Purchase Agreement (Note 1) and reverse stock split (Note 12)		16,035,222	$	240,400		$	253,781		$	-		$	31,997		$	(966,983	)	$	(440,805	)
Shares issued to Kraft RT shareholders in exchange for 95.5% of issued and outstanding Kraft RT shares in connection with Securities Purchase Agreement on June 14, 2006 (Note 1)		-		-			(955	)		-			-			-			-
Reclassification of Kraft equity with Share Exchange Agreement Transfer (Note 1)		-		(240,400	)		240,400			-			-			-			-
Effect of merger with Solar Thin Films, Inc. (formerly American Global United) on June 14, 2006		-		160,352			(163,113	)		(80,000	)		-			(6,681,891	)		(6,761,891	)
Net Income at June 30, 2006		-		-			-			-			(44,841	)		877,187			832,346
Balance at June 30, 2006		16,035,222	$	160,352		$	330,113		$	(80,000	)	$	(12,844	)	$	(6,771,687	)	$	(6,370,350	)

See accompanying notes to the unaudited condensed consolidated financial statements

F-5

SOLAR THIN FILMS, INC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
	Six months ended June 30,
	2006			2005
	RESTATED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	877,187		$	31,181
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		17,748			7,332
Amortization of deferred financing costs		8,877			-
Amortization of debt discounts		122,464			-
Unrealized gain on change in fair value of of warrant liabilities		(1,510,800	)		-
Loss on disposal of fixed assets		23,366			18,807
(Increase) decrease in:
Accounts receivable		1,380			80,180
Inventory		(343,900	)		60,270
Prepaid expenses		(176,346	)		27,703
Advances and other current assets		3,443			9,202
Other assets		(7,803	)		235
Increase (decrease) in:
Accounts payable and accrued liabilities		267,363			(219,235	)
Advances received from customers		474,167			(7,258	)
Other current liabilities		(2,545	)		3,270
Net cash used in operations		(245,399	)		11,687
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash acquired in connection with merger with American United Global		5,258,503			-
Acquisition of property, plant and equipment		(347,078	)		(40,349	)
Net cash provided by (used in) investing activities:		4,911,425			(40,349	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided by notes payable, other-net		979,948			49,065
Cash provided(used in) notes payable, related party		(433	)		-
Net cash provided by financing activities:		979,515			49,065
Effect of currency rate change on cash		(44,841	)		50,491
Net increase in cash and cash equivalents		5,600,700			70,894
Cash and cash equivalents at beginning of period		33,081			25,909
Cash and cash equivalents at end of period	$	5,633,781		$	96,803
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	-		$	-
Cash paid during the period for taxes	$	-		$	-

See accompanying notes to the unaudited condensed consolidated financial statements

F-6

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements of Solar Thin Films, formerly known as American United Global Inc., (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three and six month period ended June 30, 2006, are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2005 financial statements and footnotes thereto included in the Company's SEC Form 8-K dated June 14, 2006 as filed with the SEC on July 17, 2006.

Business and Basis of Presentation

The Company is incorporated under the laws of the State of Delaware, and is in the business of designing, manufacturing and marketing Solar Panel equipment on a world wide basis.

The consolidated financial statements include the accounts of the Company and it’s wholly and majority- owned subsidiaries, Kraft, Rt. and Superior Ventures Corp. All significant intercompany balances and transactions have been eliminated in consolidation.

Merger and Corporate Restructure

On June 14, 2006, the Company entered into a Securities Purchase Agreement (“Agreement” or “Merger”) with Kraft Rt. ("Kraft”), a company formed under the laws of the country of Hungary. As a result of the Merger, there was a change in control of the public entity. In accordance with SFAS No. 141, Kraft was the acquiring entity. While the transaction is accounted for using the purchase method of accounting, in substance the Agreement is a recapitalization of Kraft's capital structure.

For accounting purposes, the Company accounted for the transaction as a reverse acquisition and Kraft is the surviving entity. The total purchase price and carrying value of net assets acquired was $(6,681,891). The Company did not recognize goodwill or any intangible assets in connection with the transaction. Prior to the Agreement, the Company was an inactive corporation with no significant assets and liabilities.

Effective with the Agreement, 95.5% of previously outstanding shares of its common stock owned by the Kraft’s shareholders were exchanged for an aggregate of 95,500 shares of the Company’s newly issued Series B-4 Preferred Stock (the “Series B-4 Preferred”). The Series B-4 Preferred are each automatically convertible into 350 shares of common stock or an aggregate of 33,425,000 shares of the Company’s common stock. The conversion is subject to the Company increasing its authorized shares of common stock. Under the Agreement, prior to such conversion, each Series B-4 Preferred share will have the voting rights equal to 350 shares of common stock and vote together with the shares of common stock on all matters.

The value of the stock that was issued was the historical cost of the Company's net tangible assets, which did not differ materially from their fair value.

The accompanying financial statements present the historical financial condition, results of operations and cash flows of Kraft, Rt. prior to the merger with American United Global.

F-7

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The total consideration paid was $(6,681,891) and the significant components of the transaction are as follows:

American United Global, Inc. Summary Statement of Financial Position At June 14, 2006
Current Assets:
Cash	$	5,258,503
Other assets:
Deferred loan costs, net of accumulated amortization of $-0-		607,500
Notes receivable-Kraft RT		1,500,000
Current Liabilities:
Note payable - unsecured		(1,500,000	)
Accrued interest and other		(1,435,200	)
Long Term liabilities:
$525,000 Convertible debenture; less unamortized debt discount of $266,935		(258,065	)
$1,250,000 Convertible debenture; less unamortized debt discount of $1,140,988		(109,012	)
$6,000,000 Convertible debenture; less unamortized debt discount of $6,000,000		-0-
Warrant liability		(10,821,900	)
Preferred stock: series B-1		(2,287	)
Preferred stock: series B-3		(475	)
Preferred stock: series B-4		(955	)
Treasury stock, at cost		80,000
Net liabilities assumed	$	(6,681,891	)

The net liabilities assumed is accounted for as a recapitalization of the Company’s capital structure and , accordingly the Company has charged the $ 6,681,891 to accumulated deficit during the six period ended June 30, 2006.

Subsequent to the date of the financial statements, the Company changed its name from American United Global Inc. to Solar Thin Films, Inc.

Revenue Recognition

For revenue from product/contract sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101"). SAB 101 requires that four basic criteria must be met before revenue can be recognized: 1) Persuasive evidence of an arrangement exists; 2) delivery has occurred; 3) the selling price is fixed and determinable; and 4) collectibility is reasonably assured.

F-8

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the company and the customer jointly determine that the product has been delivered or no refund will be required. Deferred revenues as of June 30, 2006 are $573,405. SAB 104 incorporates Emerging Issues Task Force 00-21 (“EITF 00-21"), Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF 00-21 on the Company’s financial position and results of operations was not significant.

The Company recognizes revenue when persuasive evidence of an arrangement exists, the price to the customer is fixed, collectibility is reasonable assured and title and risk of ownership is passed to the customer, which is usually upon shipment. However, certain customers traditionally have requested to take title and risk of ownership prior to shipment. Revenue for these transactions is recognized only when:

1. Title and risk of ownership have passed to the customer;

2. The Company has obtained a written fixed purchase commitment;

3. The customer has requested the transaction be on a bill and hold basis;

4. The customer has provided a delivery schedule;

5. All performance obligations related to the sale have been completed;

6. The product has been processed to the customer’s specifications, accepted by the customer and made ready for shipment;

7. The product is segregated and is not available to fill other orders.

The remittance terms for these “bill and hold” transactions are consistent with all other sale by the company. There were no bill and hold transactions at June 30, 2006.

Currently, there are no warranties provided with the purchase of the Company‘s products. The cost of replacing defective products and product returns have been immaterial and within management’s expectations. In the future, when the Company deems warranty reserves are appropriate that such costs will be accrued to reflect anticipated warranty costs.

Research and Development

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 2 (“SFAS 2"), “Accounting for Research and Development Costs.” Under SFAS 2, all research and development cost must be charged to expense as incurred. Accordingly, internal research and developments cost is expensed as incurred.

Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company did not incur expenditures on research and product development for the three and six months ended June 30, 2006 and 2005, respectively

Reclassification

Certain reclassifications have been made to conform to prior periods’ data to the current presentation. These reclassifications had no effect on reported losses.

F-9

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123.” This statement amended SFAS 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary charge to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amended the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Effective for the six months ended June 30, 2006 the Company has adopted SFAS 123 (R) which supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and eliminates the intrinsic value method that was provided in SFAS 123 for accounting of stock-based compensation to employees. The Company made no employee stock-based compensation grants before December 31, 2005 and during the six months ended June 30, 2006 and therefore has no unrecognized stock compensation related liabilities or expense unvested or vested prior to 2006 and for the six months ended June 30, 2006.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Comprehensive Income (Loss)

The Company adopted Statement of Financial Accounting Standards No. 130; “Reporting Comprehensive Income” (SFAS) No. 130 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. SFAS No. 130 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

Foreign Currency Translation

The Company translates the foreign currency financial statements in accordance with the requirements of Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation”. Assets and liabilities are translated at current exchange rates in effect during the period. Resulting translation adjustments are recorded as a separate component in stockholder’s equity. Foreign currency transaction gains and losses are included in the statement of shareholders equity and the statement of operations when applicable.

Net income (loss) per share

The following reconciliation of net income and share amounts used in the computation of income (loss) per share for the three and six months ended June 30, 2006 and 2005:

F-10

	Three Months Ended June 30, 2006			Six Months Ended June 30, 2006			Three Months Ended June 30, 2005		Six Months Ended June 30, 2005
Net income used in computing basic net income per share	$	1,145,393		$	877,187		$	91,741	$	31,181
Impact of assumed assumptions:
Amortization of debt discount (interest expense) on convertible debentures		122,464			122,464			-		-
Impact of equity classified as liability:
Gain on warrant liability marked to fair value		(1,510,800	)		(1,510,800	)		-		-
Net Income (loss) in computing diluted net income (loss) per share:	$	(242,943	)	$	(511,149	)	$	91,741	$	31,181

The weighted average shares outstanding used in the basic net income per share computations for the three and six months ended June 30 30, 2006 was 16,035,222. In determining the number of shares used in computing diluted loss per share, the Company added approximately 37,950,179 potentially dilutive securities for the three and six months ended June 30, 2006. For the three and six months ended June 30, 2005, the Company added approximately 51,551 potentially dilutive shares.. The potentially dilutive securities added were mostly attributable to the warrants, options and convertible debentures outstanding. As a result, the diluted loss per share for the three and six months ended June 30, 2006 was $0.02 and $0.03, respectively; the diluted income per share for the three and six months ended June 30, 2005 was $0.00 and $0.00 respectively.

Basic and diluted income per share includes the common stock issuable upon the conversion of the series B-3 convertible preferred stock which was issued as a stock dividend to all common stockholders effective June 10, 2003. The remaining 29,699 (Note 8) common shares issuable upon conversion of the series B-3 preferred stock are included based on the preferred shareholders ability to share in distributions of earnings available, if any, to the holders of common shares.

F-11

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Liquidity

As shown in the accompanying consolidated financial statements, the Company incurred net loss from continuing operations of $456,482 for the six months ended June 30, 2006. The Company's liabilities exceeded its assets by $6,370,350 as of June 30, 2006.

Recent accounting pronouncements

In February 2006, the FASB issued SFAS No. 155. “ Accounting for certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140,” or SFAS No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We do not expect the adoption of SFAS 155 to have a material impact on our consolidated financial position, results of operations or cash flows.

In March 2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of Financial Assets - an amendment to FASB Statement No. 140. Statement 156 requires that an entity recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. The new standard is effective for fiscal years beginning after September 15, 2006. The adoption of SFAS No.156 did not have a material impact on the Company's financial position and results of operations.

F-12

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 2 - INVENTORIES

Inventories are stated at the lower of cost or market determined by the first-in, first-out (FIFO) method. Components of inventories as of June 30, 2006 consist of the following.

Finished Goods	$	53,242
Work in Progress		666,710
Raw Materials		5,322
	$	725,274

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

The Company's property and equipment at June 30, 2006 consist of the following:

Land and buildings	$	12,842
Construction in progress		44,646
Furniture and fixture		51,956
Machinery, plant and equipment		391,280
Total		500,724
Accumulated depreciation		52,804
Property and equipment	$	447,920

Property and equipment are recorded on the basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over their estimated useful lives.

Depreciation and amortization expense was $12,410 and $2,969 for the three months ended June 30, 2006 and 2005, respectively ($17,748 and $ 7,332 for the six months then ended respectively).

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at June 30, 2006 are as follows:

Accounts payable	$	160,367
Other accrued expenses		290,648
Accrued interest		1,435,200
	$	1,886,215

F-13

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 5 - NOTES PAYABLE OTHER

A summary of notes payable other at June 30, 2006 consists of the following:

Demand note payable: interest payable at 10.0 % per annum; in default and unsecured
	$	1,500,000
	$	1,500,000

NOTE 6- DIVIDENDS PAYABLE

In 2000 and 2001, the Company declared a dividend to its shareholders. However based on the Company’s limited financial resources it has been unable to pay it. The shareholders have conceded the deferment of this dividend until the company financially can afford paying it. At June 30, 2006 the outstanding balance was $172,531.

NOTE 7- PRIVATE PLACEMENT OF CONVERTIBLE NOTES

A summary of convertible notes payable at June 30, 2006 is as follows:

Convertible notes payable (“September 2005”), non-interest bearing interest; secured and due March 2007; Noteholder has the option to convert unpaid note principal to the Company’s common stock at a conversion price equal to 50% of the closing price on the day prior to the submission of the conversion notice, however, the conversion price may not be lower than $0.64 per share (Note 8)	$	525,000
Debt Discount - beneficial conversion feature, net of accumulated amortization of $271,651		(253,349	)
Net		271,651
Convertible notes payable (“March 2006”) non- interest bearing ; secured and due March 2009		1,250,000
Debt Discount, net of accumulated amortization of $128,391		(1,121,609	)
Net		128,391
Convertible notes payable (“June 2006”), non- interest bearing; secured and due June 2009; Noteholder has the option to convert unpaid note principal to the Company’s common stock at a rate of $1.60 per share (Note 8).		6,000,000
Debt Discount, net of accumulated amortization of $87,671		(5,912,329	)
Net		87,671
Total		487,713
Less Current Maturities		( -0-	)
Net	$	487,713

September 2005 Financing

The Company entered a Securities Purchase Agreement (the “September 2005 Agreement”) with Iroquois Master Fund Ltd., Smithfield Fiduciary LLC and Lilac Ventures Master Fund (collectively, the “September 2005 Investors”) dated September 22, 2005 for the sale of (i) $525,000 in senior secured convertible notes (the “September 2005 Notes”) and (ii) 525,000 (Note 8) shares of common stock of the Company (the “September 2005 Shares”). On September 26, 2005, the September 2005 Investors purchased the September 2005 Notes and September 2005 Shares.

F-14

SOLAR THIN FILMS, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

NOTE 7- PRIVATE PLACEMENT OF CONVERTIBLE NOTES (continued)

The Notes are interest free, mature in March 2007 and are convertible into the Company’s common stock, at the September 2005 Investors' option, at a conversion price equal to 50% of the closing price on the day prior to the submission of the conversion notice, however, the conversion price may not be lower than $0.40 (Note 8)(the “Floor Price”).

Upon maturity of the Notes, the Company, at the option of the September 2005 Investors, may pay the principal of the September 2005 Notes in cash or shares. The Company may only pay in shares if proper notice has been sent to the September 2005 Investors indicating that the Company intends to pay in shares, the number of authorized but un-issued shares is sufficient for issuance, the shares are registered for resale and the Company is not in default under the transaction documents. If the September 2005 Notes are paid in shares upon maturity, then the number issuable is determined by dividing the principal then payable by the lower of (i) 50% of the closing price on the