United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-KSB

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

o TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _________________

Commission File Number 000-19404

SOLAR THIN FILMS, INC.

(Name of small business issuer as specified in its charter)

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

Koerberki út 36. Budapest, Hungary 1112

(Address of principal executive offices)

Issuer’s telephone number, including area code: +36- 1-248-2880

Securities registered under Section 12(g) of the Exchange Act:

Title of Each Class	Name of Each Exchange on which Registered
Common Stock, par value $.001 per share	None

Check whether the issuer is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act. o

Check whether the issuer (1) 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 requirement for the past 90 days. Yes x No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o

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

Issuer had revenues of $2,426,954 for the year ended December 31, 2006. As of April 9 2007, 49,696,101 shares of Common Stock were outstanding of which 31,143,707 were held by non-affiliates of the Company. The aggregate market value of the Common Stock held by non-affilaites of the Comapny as of April 9, 2007 was $23,357,780.25.

Transitional Small Business Disclosure Format (check one):

Yes o No x

TABLE OF CONTENTS

		Page
PART I		3
ITEM 1.	DESCRIPTION OF BUSINESS	3
Sales and Project management		7
ITEM 2.	DESCRIPTION OF PROPERTIES	8
ITEM 3.	LEGAL PROCEEDINGS	8
ITEM 4.	SUBMISSION OF MATTERS TO A NOTE SECURITY HOLDERS	9
PART II		9
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
	STOCKHOLDER MATTERS	9
	Market Information	9
	Holders of Common Stock	10
	Dividends	10
ITEM 6	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	12
	Commitments and contingencies	14
	Results of Operations	15
	Year Ended December 31, 2006 compared to Year Ended December 31, 2005	15
	Liquidity and Capital Resources	17
	Inflation and Foreign Currency	17
	Effect of Recent Accounting Pronouncements	18
	Risk Factors	19
	Forward-Looking Statements	28
ITEM 7.	FINANCIAL STATEMENTS.	29
ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
	ACCOUNTING AND FINANCIAL DISCLOSURE	29
ITEM 8A	CONTROLS AND PROCEDURES	30
ITEM 8A(T)	CONTROLS AND PROCEDURES	31
PART III		32
ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT	32
ITEM 10.	EXECUTIVE COMPENSATION	34
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
	MANAGEMENT	40
ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	40
ITEM 13.	EXHIBITS	41
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	43

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

On August 9, 2005, Solar Thin Films, Inc (“Company” or “STF”) entered into a Share Purchase Agreement (the “Agreement”) with Kraft Rt., a Hungarian corporation (“Kraft”) and the shareholders of Kraft. Pursuant to the Agreement, the Company agreed to acquire 100% of the outstanding interest in Kraft. On January 30, 2006, the Agreement expired pursuant to its own terms.

Commencing in March 2006 through June 2006, the Company entered into Securities Purchase Agreements with shareholders of Kraft that together owned 95.5% of the equity interest in Kraft to acquire their interests. On June 14, 2006, the Company closed on the acquisition of 95.5% of the outstanding securities of Kraft and, as a result, Kraft is now a majority-owned subsidiary of the Company. As a result of the acquistion, there was a change in control of the Registrant. In consideration for the shares of Kraft, STF issued the sellers an aggregate of 95,500 shares of Series B-4 Preferred Stock of the Company (the “Preferred Shares”). The Preferred Shares automatically converted into 350 shares of common stock or an aggregate of 33,425,000 shares of common stock upon our increasing our authorized shares of common stock and, prior to such conversion, the Preferred Shares will have the same voting rights of the shares of common stock and vote together with the shares of common stock on all matters.

On June 15, 2006, shareholders of the Company representing a majority of the outstanding voting stock of the company authorized the Company to engage in the following:

- increase the authorized shares of common stock as set forth in its certificate of incorporation from 40,000,000 to 150,000,000; and

- reverse split the authorized shares of common stock on a basis of one for 1.6 shares of common stock.

The Company filed a definitive information statement with the Securities and Exchange Commission in January 2007 and delivered a definitive information statement to its record shareholders disclosing the aforementioned items. There reverse split and increase of authorized share became effective in February 2007.

Effective as of July 3, 2006, the Company changed its name from “American United Global, Inc.” to “Solar Thin Films, Inc.” As a result, our quotation symbol changed from “AUGB.PK” to “SLTF.PK”. In February 2007, the symbol changed to SLTN.OB.

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Organizational History

Solar History

The Company was initially organized as a New York corporation on June 22, 1988 under the name Alrom Corp. ("Alrom"), and completed an initial public offering of securities in August 1990. Alrom effected a statutory merger in December 1991, pursuant to which Alrom was reincorporated in the State of Delaware under the name American United Global, Inc. Prior to the acquisition of Kraft, the Company intended to focus its business strategy on acquisitions of operating businesses in various sectors. On June 14, 2006, in connection with its business strategy, the Company closed on the acquisition of 95.5% of the outstanding securities of Kraft and, as a result, now conducts its operations via Kraft, the majority-owned subsidiary.

Kraft History

Kraft was founded in 1993, shortly after the breakup of the communist economy in Hungary. Its founding members were associated with the Hungarian Central Research Institute for Physics. In 1996, Kraft was contracted to develop thin-film photovoltaic deposition equipment for production of amorphous silicon based thin-film modules, as well as complete turnkey facilities. Photovoltaics (PV) is the physical phenomenon, which allows certain semiconductor materials to directly convert sunlight into electricity.

In the subsequent years, Kraft has manufactured four such facilities in New Jersey, Hungary, China and Greece. In producing these facilities, Kraft developed all aspects needed for becoming a leading manufacturer of turnkey plants and equipment that produce photovoltaics modules that utilizing thin-film technology.

On behalf of its customers, Kraft is presently engaged in the design, development and construction of various turnkey manufacturing plants that produce photovoltaic thin-film modules. The Company expects the primary purchase of such photovoltaic thin-film modules to be used by corporations and governments in the development and construction of solar power plants. Kraft, in the future, may further integrate itself in this industry through the engagement in other areas including, but not limited to, operating the manufacturing plants, selling thin-film photovoltaic modules, installing the thin-film photovoltaic modules and managing solar power plants.

Business Overview

The Company conducts its business operations via the recently acquired majority-owned subsidiary, Kraft. Kraft is an equipment design and manufacturing company headquartered in Budapest, Hungary and historically has been engaged in the design, development and manufacturing of vacuum based production and quality control equipment used in several hi-tech industries. Over its ten year existence, Kraft has developed and manufactured a line of equipment serving the semiconductor industry, glass coating technologies and, more recently, the photovoltaic industry. The Company is currently focusing substantially all of its efforts on the design, development and construction of turnkey thin-film PV manufacturing plants that produce photovoltaic thin-film modules and expects most of its near term growth to develop through the delivery of its turnkey PV facilities.

Through the Company’s association with strategic partners, STF is seeking to secure a leading position as the primary supplier of turnkey PV facilities to manufacture thin-film based photovoltaic modules. Such turnkey facility consists of all the hardware and machinery manufactured, assembled, and installed by the Company and all the software, know-how and training associated with the manufacturing process supplied jointly with its strategic partners. Historically, the strategic partner has served as the main contractor guaranteeing process performance to the buyer, and Kraft is the equipment supplier through its partner to the buyer. STF also has a right to market and sell such turnkey PV production facilities.

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The main strategic partners of the Company, in the sale of turnkey thin-film photovoltaic module manufacturing facility, are TerraSolar Global, Inc. (“TerraSolar”) and Renewable Energy Solutions, Inc. (“RESI”). TerraSolar, Inc. (“TSI”) owns approximately 49% of the outstanding securities of TerraSolar. Zoltan Kiss, a director and shareholder of the Company, through TSI, is a shareholder of TerraSolar. Zoltan Kiss, a director and shareholder of the Company, is also the majority owner of RESI.

Products and product development

PV Modules on Glass Substrate

The Company has developed manufacturing equipment used in its turnkey manufacturing facilities that produce thin-film based modules on glass substrates. By 2006, Kraft constructed four turnkey manufacturing facilities, and is currently in the process of completing a fifth facility, to manufacture amorphous silicon based photovoltaic modules. The PV industry and other industries using thin-film PV technology are changing very rapidly, and it is imperative that we carry on R&D activities to develop the next generation deposition equipment. To accomplish this, the Company commenced R&D activity, either internally or through our relationship with RESI, to develop:

- manufacturing equipment to manufacture copper indium gallium diselenide (CIGS) based PV modules on a 2ft x 4ft glass substrate;

- manufacturing technology for thin-film based PV modules that will be able to use substrate size 4ft x 8ft; and

- automated glass handling and robotic processes to eliminate labor costs from PV module production.

Architectural Glass Applications

One large existing market for thin-films on a glass substrate has been used in the architectural glass industry to create low-e coated windows with reflective properties to enhance the insulation. Similar coated glass using different color films has been used as architectural glass on the sides of skyscrapers. The Company’s technology is capable of preparing such glass, and, in some cases, can add a photovoltaic component to it. There is ongoing R&D effort to extend the application of building integrated photovoltaics or so-called BIPV modules to window glass in high-rise buildings.

Market

Management believes the PV industry is currently growing from infancy to adolescence. The Company believes this growth is aided by the concerns of global warming, governmental incentives, political and institutional involvement and the economics of the PV industry. STF believes the strongest force in causing the move from fossil fuels to PV is the economics of PV. Since the cost of the PV module represents more that 70% of the cost of installed PV systems, to manufacture the lowest cost PV modules secures the greatest competitive edge and advantage in the market place.

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The market presently consists substantially of modules produced using crystalline silicon. Most of the thin-films that have been produced, until now, use amorphous silicon on a glass substrate. The costs of the thin-film based modules are less than half of those for crystalline silicon. Based on the economic pressures by this major cost difference, Kraft believes that the ratio of crystalline to thin-film in the product mix will substantially shift in the next decade.

Most of this growth has taken place using crystalline modules. The Company’s management believes the emergence of thin-films as a lower cost alternative is now being absorbed by the market.

Competition

Crystalline silicon PV technologies currently represent substantially 90% of PV market. Demand for crystalline silicon has grown very rapidly over the past decade, but the photovoltaic module prices remained relatively unchanged. The competitors of the Company, through their own research and development, have been developing their own pilot lines for thin-films PV module manufacturing. As a result, STF believes its competitors will consist of companies that decide to build their own PV plants utilizing their internal technology and know how. Most of the players are specialized on the sale of individual pieces of equipment which are only a part of the thin-films module production line. STF believes that the marketing and sale of turnkey manufacturing facilities is substantially more profitable than the marketing of particular pieces of equipment. However, in case a customer requests only pieces of equipments, Kraft fulfills the order seamlessly as well.

Strategy

The Company’s strategy is to market complete turnkey manufacturing equipment to manufacture thin-film based PV modules. Kraft intends to develop its strategy by developing the following areas:

Sale of Turnkey Facilities

The Company’s main focus is on developing the photovoltaic business. The large PV companies with technical background have been developing their own thin-film manufacturing pilot lines. STF believes these players will buy individual machines and components from Kraft. In addition to the large technical or energy companies, there are companies that desire to sell PV modules, which on their own do not have the technical expertise to define a manufacturing process and assemble thin-film factories through the purchase of stand alone components.

Together with strategic partners such as Resi and Terrasolar, STF offers a turnkey manufacturing facility that is sold installed together with guarantees of the manufacturing line, such as throughput, module efficiency, and in some cases, even manufacturing cost. Such turnkey facility consists of all the hardware and machinery manufactured, assembled, and installed by the Company and all the software, know-how and training associated with the manufacturing process supplied by its strategic partners. In this arrangement, TerraSolar has historically been the main contractor guaranteeing process performance to the buyer, and STF is the developer of the facility through TerraSolar to the buyer.

STF also has a right to sell such turnkey facilities. In cases, where the turnkey facility is sold by STF, either the Company will be the main contractor, with its strategic partner subcontranting to deliver their know-how and soft costs, or the strategic partner will be the main contractor but in this case, the Company will receive additional remuneration for its marketing efforts.

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In addition to the sale of the turnkey facilities, STF may commence to build and operate the turn key facilities and, in turn, sell the PV modules as well as installing the thin-film photovoltaic modules and managing solar power plants.

Sale of Individual Machines

Some of the individual products can be sold for a specific, limited function. These products include a tin-oxide deposition system that could be offered to architectural or so-called low-e coating deposition architectural glass manufacturers. The Company can also offer for sale various components for vacuum systems (for example, gate valves, chambers, etc.)

Customers

Currently the Company has two key customers, which count for over 90% of the total revenue. Both companies are located in the US and request Kraft to manufacture and deliver thin-film photovoltaic manufacturing equipments to their clients in the various parts of the world (e.g. Portugal, China, Taiwan).

Governmental Regulation

The Company’s operations are subject to local, state and federal laws and regulations governing environmental quality and pollution control. To date, the Company’s compliance with these regulations had no material effect on its operations, capital, earnings, or competitive position, and the cost of such compliance has not been material. STF is unable to assess or predict at this time the effects that additional regulations or legislation could have on the activities.

Employees

As of December 31, 2006, the Company employed 48 full-time and 2 part-time employees, neither of whom is a member of a union or work council.

Sales and Project management

STF employs approximately four people in sales and project management, who are mainly responsible for finding and contacting potential customers, bid-management and operations service management activities. Their main task involves creating business offers and interaction with engineering and production departments within the Company. The sales force works closely with the equipment manufacturing group, which is responsible for the timely production and deliveries.

Engineering

Equipment is designed by the engineering department. Three engineers are employed for the mechanical design activites of the equipment. Seven electrical engineers are responsible for the design of the electrical parts of the manufactured equipments. Both engineering groups work closely with the manufacturing unit.

Production (Equipment manufacturing)

The biggest unit in the Company is the production (equipment manufacturing) department, consisting of 25 employees. These people are performing the actual assembly of the equipment, including the activities related the the mechanical, vacuum system and electrical parts of the product. The manufacturing activities are also supported by the input provided by engineers in close cooperation.

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ITEM 2. DESCRIPTION OF PROPERTIES

The following table lists the office space that the Company leases from unaffiliated persons:

Lessee	Address of Property	Primary Use	Sq. feet	Rent Amount/ Month	Lease Terms
Kraft Zrt.	1112 Budapest, Kőérberki út 36. Hungary	General operation stockholder relations, general executive	20,063	USD 14,200	3 years from November,2005 non-cancelable
Kraft Zrt.	Körmend	Equipment manufacturing plant	10,760	USD 1300	unlimited with 6 months cancellation period

In November 2005, Kraft entered into a three year fixed term lease agreement for its corporate offices and facilities in Budapest, Hungary at a rate ranging from $4,543 to $14,200 per month as the lease has provisions for additional space for the period calendar year of 2006 and beyond. The lease agreement provides for moderate increases in rent after December 31, 2006 in accordance with the inflationary index published by the Central Statistical Office. Rental expenses charged to operations for the year ended December 31, 2006 and 2005 are $123,043 and $81,038, respectively. The increase in the rent expense for the year ended December 31, 2006 as compared to the year ended December 31, 2005 was the result of a increase in the amount of square footage rented by Kraft from approximately 500 square feets in late 2005 to over 20,000 square feets in late 2006.

The Company also has a mailing address within the United States located at 25 Highland Blvd., Dix Hills, New York 11746.

ITEM 3. LEGAL PROCEEDINGS

New York Medical, Inc. and Redwood Investment Associates, L.P. vs. American United Global, Inc., et al. (Supreme Court, New York State, New York County). In this suit, filed on December 12, 2003, plaintiffs seek a declaration that a series of transactions by which we allegedly acquired Lifetime Healthcare Services, Inc. ("Lifetime") and Lifetime acquired an interest in NY Medical from Redwood (collectively "Transactions") were properly rescinded or, alternatively, that because the Transactions were induced by fraudulent conduct of our company and others, that the Transactions should be judicially rescinded. In addition to the requests for equitable relief, plaintiffs also seek monitory damages in excess of $5 million and exemplary damages in the amount of $15 million.

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Currently, the suit has not proceeded past the filing and service of the complaint. We have obtained an open-ended extension of time in which to answer and/or move with regard to the complaint. We are attempting to resolve the matter amicably. However, in the event litigation proceeds, it will be aggressively defended.

The Company’s Act in Hungary prescribes that in the case of obtaining majority interest (over 50%) by a company in other Public Limited Companies by Shares (“PLC”) any of the remaining minority shareholders in a PLC may offer their shares to the new majority owner for acquisition. In the case of offering, the Company is obliged to purchase those shares on market value valid on the date when the majority owner acquired interest. The remaining shareholders of Kraft RT representing 4.5% indicated their intention to offer their shares for purchase by the Company; the majority shareholder of Kraft RT. The Company offered the acquisition of 4.5% of Kraft with the same term than provided to any other shareholder in the form of issuing 1,575,000 shares of common stock of the Company. The party did not accept the offer and has requested cash payment. The parties are currently in discussion about the fair market price of 4.5% ownership of Kraft RT which was valid on June 14, 2006 when the acquisition of majority ownership was acquired. The Company has yet to determine what the final settlement will be.

From time to time, we are a party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders through the solicitation of proxies or otherwise, during the last quarter of the fiscal year ended December 31, 2006.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company's common stock is traded on the OTC Bulletin Board ("OTC") under the symbol "SLTF.PK".

Listed below are the high and low sale prices for the shares of Company’s common stock during the years ended December 31, 2006 and 2005. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission and may not represent actual transactions.

	High ($)		Low ($)
Quarter Ending:
2005
March 31, 2005		1.65		0.65
June 30, 2005		1.20		0.72
September 30, 2005		2.25		0.70
December 31, 2005		2.50		1.50

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2006
March 31, 2006	2.00	0.86
June 30, 2006	1.86	0.85
September 30, 2006	1.75	1.20
December 31, 2006	1.40	0.98

On April 9, 2007 the closing bid price on the OTC Bulletin Board for the Company’s common stock was$0.97.

The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the company’s common stock and may affect the ability of shareholders to sell their shares.

Holders of Common Stock

On April 9, 2007, there were approximately 240 holders of record of the Company’s Common Stock then issued and outstanding.

Dividends

Except for dividend payment declared by Kraft in 2001 and 2002, the Company has never paid cash dividends and has no plans to do so in the foreseeable future. STF future dividend policy will be determined by its board of directors and will depend upon a number of factors, including our financial condition and performance, its cash needs and expansion plans, income tax consequences, and the restrictions that applicable laws and our credit arrangements then impose.

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Equity Compensation Plans

Plan Category	Number of shares to be issued upon exercise of outstanding options and warrants		Weighted-average exercise price of outstanding options and warrants		Number of shares remaining available for future issuance under equity compensation plans
Approved by security holders		—		—		—
Not approved by security holders		2,046,875		2.16		2,640,625
Total		2,046,875		2.16		2,640,625

The equity compensation plans are discussed in Note 11 of the 2006 Consolidated Financial Statements.

Sale of Securities that were not Registered Under the Securities Act of 1933

The Company did not sell any securities that were not registered under the Securities Act of 1933 during the year ended December 31, 2006 that have not been previously included in a Quarterly Report on Form 10-QSB or a Current Report on Form 8-K.

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ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company operates in Hungary through its majority owned subsidiary, Kraft, a Hungarian corporation.

The Company through its subsidiary is presently engaged in the design, development and construction on behalf of its customers of turnkey manufacturing plants that produce photovoltaic thin film modules. The Company expects the primary use of such photovoltaic thin film modules is to be used by corporations and governments in the development and construction of solar power plants.

STF, in the future, may further integrate itself in this industry through the engagement in other areas including, but not limited to, operating the manufacturing plants, selling thin film photovoltaic modules, installing the thin film photovoltaic modules and managing solar power plants.

Acquisition - Kraft

Commencing in March 2006 through June 2006, STF entered into Securities Purchase Agreements with shareholders of Kraft that together owned 95.5% of the equity interest in Kraft to acquire their interests. On June 14, 2006, the Company closed on the acquisition of 95.5% of the outstanding securities of Kraft and, as a result, Kraft became a majority-owned subsidiary of the Company. In consideration for the shares of Kraft, the Company issued the sellers an aggregate of 95,500 shares of Series B-4 Preferred Stock of the Company (the “Preferred Shares”). The Preferred Shares are each automatically convertible into 350 shares of common stock or an aggregate of 33,425,000 shares of common stock upon us increasing our authorized shares of common stock and, prior to such conversion, the Preferred Shares will have the same voting rights of the shares of common stock and vote together with the shares of common stock on all matters.

As a result of the Securities Purchase Agreement, there was a change in control of STF, 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 and charged to accumulated deficit. 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.

Critical Accounting Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various others assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

- Revenue Recognition

- Allowance for doubtful accounts

- Research and development

- Warrant liability

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Significant portions of Kraft’s revenues are derived from manufacturing. For revenue from product/contract sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”), which superceded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statement (“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 reasonable assured. 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.

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.

Currently, there are no warranties provided with the purchase of the Company’s products. The cost of replacing defective products and product return 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.

Allowance For Doubtful Accounts

We are required to estimate the collectibility of our trade receivables. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past due balances. In order to assess the collectibility of these receivables, we perform ongoing credit evaluations of our customers' financial condition. Through these evaluations we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. Our reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but are not limited to, current economic trends, historical payment and bad debt write-off experience. We are not able to predict changes in the financial condition of our customers and if circumstances related to our customers deteriorate, our estimates of the recoverability of our receivables could be materially affected and we may be required to record additional allowances. Alternatively, if we provided more allowances than are ultimately required, we may reverse a portion of such provisions in future periods based on our actual collection experience.

Research and development

Solar Thin Film’s 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 development cost are 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.

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Warrant Liability

In connection with the placement of certain debt instruments during the twelve month ended December 31, 2006, the Company issued freestanding warrants. Although the terms of the warrants do not provide for net-cash settlement, in certain circumstances, physical or net-share settlement is deemed to not be within our control and, accordingly, the Company are required to account for these freestanding warrants as a derivative financial instrument liability, rather than as shareholders’ equity.

The warrant liability is initially measured and recorded at its fair value, and is then re-valued at each reporting date, with changes in the fair value reported as non-cash charges or credits to earnings. For warrant-based derivative financial instruments, the Black-Scholes option pricing model is used to value the warrant liability.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

Use of Estimates

The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities, if any, at the date of the financial statements. The Company analyzes its estimates, including those related to future oil and gas revenues and oil and gas properties, contingencies and litigation. The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Commitments and contingencies

The Company’s subsidiaries have entered into non-cancelable operational agreements for office premises.

In connection with the acquisition of Kraft, the Company entered into consulting agreements with Robert Rubin and Zoltan Kiss pursuant to which each consultant will receive an annual salary of $160,000 per annum, reimbursement for up to $5,000 in expenses associated with company activities and major medical benefits in consideration for services performed on behalf of the company. Each of these agreements is for a term of three years.

On October 31, 2006, the Board of Directors appointed Csaba Toro as the Chief Executive Officer of the Company. His renumeration includes: (1) base salary of $200,000 per year; (2) issuance of 45,956 shares of common stock per year; (3) a bonus paid pursuant to the Executive Officer Incentive Plan as determined by the Board of Directors; (4) ten year option to purchase 1,875,000 shares of common stock at an exercise price of $2.18 per share on a cashless basis on a post reverse split basis. Although the option has vested immediately, Mr. Toro is only permitted to sell 52,084 shares per month on a cumulative basis; (5) participation in all employee benefit plans and programs; and (6) reimbursement of reasonable expenses.

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In November 2005, the Company entered into a three year fixed term lease agreement for our corporate offices and facilities in Budapest, Hungary at a rate ranging from $4,543 to $15,433 per month as the lease has provisions for additional space for the period calendar year of 2006 and beyond. The lease agreement provides for moderate increases in rent after the first year in accordance with the inflationary index published by the Central Statistical Office. Rental expenses charged to operations for the year ended December 31, 2006 and 2005 were $157,505 and $81,038, respectively. The 3 year minimum future cash flow for the leases at December 31, 2006 is as follows:

Fiscal Year:	Amount:
December 31, 2007	$	185,196
December 31, 2008		185,196

The following table summarizes the cash commitments described above:

Contractual Cash Obligations	2007		2008		2009		2010		After 2010
Operational leases	$	185,196	$	185,196		-		-		-
Employment agreements (1)	$	520,000	$	520,000	$	327,000		-		-
Total Contractual Cash Obligations	$	705,196	$	705,196	$	327,000		-		-

(1) base salary of CEO and the directors without bonus

Results of Operations

Year Ended December 31, 2006 compared to Year Ended December 31, 2005

Revenues

The following table summarizes our revenues for the year ended December 31, 2006 and 2005:

Year ended December 31,	2006		2005
Total Revenues	$	2,426,954	$	691,213

For the year ended December 31, 2006, revenues were increased by 251% or $1,735,741 as compared to the similar period in 2005. This increase in revenue was due to increased volume of export sales in 2006 as compared to a more domestic base in 2005.

Cost of good sold

The following table summarizes our cost of goods sold for the year ended December 31, 2006 and 2005:

Year ended December 31,	2006		2005
Total cost of goods sold	$	1,766,806	$	402,204

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Our cost of goods sold for year ended December 31, 2006 were $1,766,806 or 72.8% of our sales as compared to $402,204, or 58.18% of our sales for the year ended December 31, 2005. Our cost of sales predominantly consists of the cost of labor, raw materials, and absorbed indirect manufacturing cost.

General, selling and administrative expenses

The following table summarizes our general, selling and administrative expenses for the year ended December 31, 2006 and 2005:

Year ended December 31,	2006		2005
Compensation and related costs	$	5,531,590	$	790,348

For the year ended December 31, 2006 selling, general and administrative expenses were $5,531,590 as compared to $790,348 of sales in 2005. The increase in selling, general and administrative expenses of $4,741,243 are attributable to the additional staff/consultants (legal, audit) supporting the recapitalization along with stock based compensation issued in 2006 of $2,831,353 and accrued penalty on late registration of shares of $480,000 as compared with $-0- in 2005.

Research and development

The following table summarizes our research and development expenses for the year ended December 31, 2006 and 2005:

Year ended December 31	2006		2005
Research and development expenses	$	11,600	$	97,475

Our research and development for year ended December 31, 2006 were $11,600 compared to $97,475 for the year ended December 31, 2005. In late 2005, the Company suspended its research and development activity, while it signed a new contract with RESI in middle of December 2006 for a new agreement representing a monthly charge of $30,000.

Depreciation

The following table summarizes our depreciation and amortization for the year ended December 31, 2006 and 2005:

Year ended December 31,	2006		2005
Depreciation	$	55,328	$	12,687

Depreciation has increased by $42,641 in the year ended December 31, 2006 compared to the same period in 2005. The increase can be attributed to the acquisition of new equipments purchased in 2006.

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Liquidity and Capital Resources

As of December 31, 2006, our cash, cash equivalents and marketable securities were approximately $2,667,483, an increase of $2,634,402 from the end of fiscal year 2005.

As of December 31, 2006, we had working capital of $1,114,003. We generated a deficit in cash flow from operations of $3,280,318 for the year ended December 31, 2006. This deficit is primarily attributable to our net income from operations of $2,858,765, partially increased by depreciation and amortization of $1,697,086 as well as $2,831,353 fair value of options issued and $468,750 in stock based compensation for services offset by the gain in the fair value warrants issued of $9,356,400 and to changes in the balances of current assets and liabilities. Accounts payable, advances and accrued expenses increased by $1,157,707, and inventory, receivables, prepaid expenses and other current assets increased (net) by $2,917,029.

Cash flows provided by investing activities for the year ended December 31, 2006 was $4,699,068, primarily due to cash received through merger of $5,258,503 net with the purchase of property and equipment of $559,435.

We met our cash requirements during the period through net proceeds from the issuance of debt of $977,987.

While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and projected cash flow requirements from operations and development. We have sufficient cash on hand as of December 31, 2006 to meet our working capital needs and requirements for the next twelve (12) months only if the Company is able to collect receivables in 2007 on the projects under completion as of December 31, 2006 from our major customers. We are seeking additional financing, which may take the form of debt, convertible debt or equity, in order to provide the additional working capital and funds for expansion. We currently have no commitments for financing. There is no guarantee that we will be successful in raising the funds required.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements as of December 31, 2006 or as of the date of this report.

Inflation and Foreign Currency

The Company maintains its books in local currency: US Dollars for the parent holding Company in the United States of America and Hungarian Forint for Kraft in Hungary.

The Company’s operations are primary outside of the United States through its majority owned subsidiary. As a result, fluctuations in currency exchange rates may significantly affect the Company's sales, profitability and financial position when the foreign currencies, primarily the Hungarian Forint, of its international operations are translated into U.S. dollars for financial reporting. In additional, we are also subject to currency fluctuation risk with respect to certain foreign currency denominated receivables and payables. Although the Company cannot predict the extent to which currency fluctuations may or will affect the Company's business and financial position, there is a risk that such fluctuations will have an adverse impact on the Company's sales, profits and financial position. Because differing portions of our revenues and costs are denominated in foreign currency, movements could impact our margins by, for example, decreasing our foreign revenues when the dollar strengthens and not correspondingly decreasing our expenses. The Company does not currently hedge its currency exposure. In the future, we may engage in hedging transactions to mitigate foreign exchange risk.

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The translation of the Company’s subsidiaries forint denominated balance sheets into U.S. dollars, as of December 31, 2006, has been affected by the weakening of the U.S. dollar against the Hungarian forint from 212.99 as of December 31, 2005, to 191.57 as of December 31, 2006, an approximate 11% depreciation in value. The average Hungarian forint/U.S. dollar exchange rates used for the translation of the subsidiaries forint denominated statements of operations into U.S. dollars, for the years ended December 31, 2006 and 2005 were 198.80 and 210.52, respectively.

Effect of 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 did not 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.

In July 2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for uncertainty in Income Taxes”. FIN 48 clarifies the accounting for Income Taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition and clearly scopes income taxes out of SFAS 5, “ Accounting for Contingencies”. FIN 48 is effective for fiscal years beginning after December 15, 2006. We have not yet evaluated the impact of adopting FIN 48 on our consolidated financial position, results of operations and cash flows.

In September 2006 the Financial Account Standards Board (the “FASB”) issued its Statement of Financial Accounting Standards 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. FAS 157 effective date is for fiscal years beginning after November 15, 2007. The Company does not expect adoption of this standard will have a material impact on its financial position, operations or cash flows.

In December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration Payment Arrangements ("FSP 00-19-2") which addresses accounting for registration payment arrangements. FSP 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. FSP 00-19-2 further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable generally accepted accounting principles without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.

For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of EITF 00-19-2, this guidance shall be effective for financial statements issued for fiscal years beginning after December 15, 2006 and interim periods within those fiscal years. The Company has not yet determined the impact that the adoption of FSP 00-19-2 will have on its financial statements.

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In September 2006 the FASB issued its Statement of Financial Accounting Standards 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The effective date for an employer with publicly traded equity securities is as of the end of the fiscal year ending after December 15, 2006. The Company does not expect adoption of this standard will have a material impact on its financial position, operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value. SFAS 159 applies to reporting periods beginning after November 15, 2007. The adoption of SFAS 159 is not expected to have a material impact on the Company’s financial condition or results of operations.

Risk Factors

You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled “Information Regarding Forward Looking Statements.” The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently believes are immaterial may also impair the Company’s business operations. If any of the following risks actually occur, the Company’s businesses, financial condition or results of operations could be materially adversely affected, the value of the Company common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

·   We have a history of losses, expect to incur substantial further losses and may not achieve or maintain profitability in the future, which may decrease the market value of our stock.

Solar Thin Films has reported a net loss of $4,938,370 from operations for the year ended December 31, 2006 and a net loss of $611,501 from operations for the year ended December 31, 2005.

The Company has suffered operating losses and negative cash flows from operations since inception and, at December 31, 2006, the Company had an accumulated deficit $4,790,109. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. If revenues grow more slowly than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, we will continue to incur losses. We will continue to incur losses until we are able to establish significant sales. Our possible success is dependent upon the successful development and marketing of our services and products, as to which there is no assurance. Any future success that we might enjoy will depend upon many factors, including factors out of our control or which cannot be predicted at this time. These factors may include changes in or increased levels of competition, including the entry of additional competitors and increased success by existing competitors, changes in general economic conditions, increases in operating costs, including costs of supplies, personnel, marketing and promotions, reduced margins caused by competitive pressures and other factors. These conditions may have a materially adverse effect upon us or may force us to reduce or curtail operations. In addition, we will require additional funds to sustain and expand our sales and marketing activities, particularly if a well-financed competitor emerges. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain sufficient funds from operations or external sources would require us to curtail or cease operations.

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·   Kraft is dependent on a small amount of customers and any loss of these customers will a negative impact on our operations.

For the year ended December 31, 2006, Kraft derived 92% of its total revenues from two major customers and purchased 32% of its total materials to three vendors. A loss of any of these relationships, for any reason could cause the Company to experience difficulties in obtaining revenue and implementing its business strategy. There can be no assurance that the Company could establish other relationships of adequate revenue in a timely manner or at all. In the event that STF is not able to significantly increase the number of customers or vendors that purchase its products its financial condition and results of operations will be materially and adversely affected.

·   Kraft has generated limited revenues and it may never achieve profitability.

The Company has generated limited revenues of $2,426,954 and $691,213 for the year ended December 31, 2006 and December 31, 2005, respectively, and the Company incurred losses from operations of $4,938,370 and $611,501, respectively. STF’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems. We cannot assure you that the Company can achieve or sustain profitability in the future. STF’s operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether our PV manufacturing facilities development will achieve market acceptance. The Company may not achieve its business objectives and the failure to achieve such goals would have an adverse impact on STF. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

·   Evaluating our business and future prospects may be difficult due to the rapidly changing market landscape.

There is limited historical information available about our company upon which you can base your evaluation of our business and prospects. Although Kraft was formed in 1993 for the development of vacuum based technologies it has only recently developed four turnkey PV module manufacturing facilities pursuant to which it has only recognized limited revenues.

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The market we are addressing is rapidly evolving and is experiencing technological advances and new market entrants. Our future success will require us to scale our manufacturing capacity significantly beyond the capacity of our Budapest, Hungary manufacturing facility, and our business model and technology are unproven at significant scale. Moreover, Kraft’s strategic partnership with TerarSolar and RESI, are only in the early stages of development and have not been officially agreed to and formalized. Kraft has limited experience upon which to predict whether it will be successful. As a result, you should consider its business and prospects in light of the risks, expenses and challenges that we will face as an early-stage company seeking to develop and manufacture new products in a growing and rapidly evolving market.

·   Our future success substantially depends on our ability to significantly increase our manufacturing capacity through the development of additional manufacturing facilities. We may be unable to achieve our capacity expansion goals as a result of a number of risks, which would limit our growth potential, impair our operating results and financial condition and cause our stock price to decline.

Our future success depends on our ability to increase our manufacturing capacity through the development of additional manufacturing facilities. If we are unable to do so, we may not be able to achieve the production volumes and per unit costs that will allow us to meet customer demand, maintain our competitive position and achieve profitability. Our ability to develop additional manufacturing facilities is subject to significant risk and uncertainty, including:

-   we may need to continue to raise significant additional capital through the issuance of equity or convertible or debt securities in order to finance the costs of development of any additional facility, which we may be unable to do on reasonable terms or at all, and which could be dilutive to our existing stockholders;

-   the build-out of any additional facilities will be subject to the risks inherent in the development of a new manufacturing facility, including risks of delays and cost overruns as a result of a number of factors, many of which may be out of our control, such as delays in government approvals or problems with supplier relationships;

-   our manufacturing processes, particularly those for the development of the equipment used in the turnkey PV manufacturing facilities, are unproven at large scale and may prove difficult to implement in any new facility; and

-   if a new facility is established internationally, we may encounter legal restrictions and liability, encounter commercial restrictions and incur taxes and other expenses to do so and otherwise be subject to the risks inherent in conducting business in a foreign jurisdiction as described elsewhere in this section.

If we are unable to develop and successfully operate additional manufacturing facilities, or if we encounter any of the risks described above, we may be unable to scale our business to the extent necessary to achieve profitability, which would cause our stock price to decline. Moreover, there can be no assurance that if we do expand our manufacturing capacity that we will be able to generate customer demand for our turnkey PV manufacturing facilities at these production levels or that we will increase our revenues or achieve profitability.

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·   Our turnkey manufacturing facility may not gain market acceptance, which would prevent us from achieving increased sales and market share.

The development of a successful market for turnkey manufacturing facility may be adversely affected by a number of factors, many of which are beyond our control, including:

-   our ability to market our services together with our equipment;

-   our failure to produce a turnkey facility that competes favorably against companies electing to develop these facilities internally;

-   our failure to produce a turnkey facility that produces PV modules that compete favorably against conventional energy sources and alternative distributed generation technologies, such as wind and biomass, on the basis of cost, quality and performance; and

-   our failure to develop and maintain successful relationships with strategic partner.

If our turnkey facilities or the PV solar modules produced by our facilities fail to gain market acceptance, we would be unable to increase our sales and market share and to achieve and sustain profitability.

·   Technological changes in the solar power industry could render our turnkey manufacturing facilities uncompetitive or obsolete, which could reduce our market share and cause our sales to decline.

Our failure to further refine our technology and develop and introduce the next generation of our turnkey facility could cause our products to become uncompetitive or obsolete, which could reduce our market share and cause our sales to decline. The solar power industry is rapidly evolving and competitive. We will need to invest significant financial resources in research and development to keep pace with technological advances in the solar power industry and to effectively compete in the future. We believe that a variety of competing solar power technologies are under development by other companies that could result in lower manufacturing costs or higher product performance than those expected to be produced utilizing our turnkey facilities. Our development efforts may be rendered obsolete by the technological advances of others and other technologies may prove more advantageous for the commercialization of solar power products.

·   We face risks associated with the marketing, development and sale of our turnkey facilities internationally, and if we are unable to effectively manage these risks, it could impair our ability to expand our business abroad.

To date, Kraft has developed four turnkey facilities in New Jersey, Hungary, China and Greece. We expect to seek to develop turnkey facilities on an international basis. It will require significant management attention and financial resources to successfully develop our international sales channels either internally or through TerrarSolar. In addition, the marketing, development and sale of our turnkey facilities internationally could expose us to a number of markets with which we have limited experience. If we are unable to effectively manage these risks, it could impair our ability to grow our business abroad. These risks include:

-   difficult and expensive compliance with the commercial and legal requirements of international markets, with which we have only limited experience;

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-   inability to obtain, maintain or enforce intellectual property rights;

-   encountering trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could affect the competitive pricing of our turnkey facilities;

-   fluctuations in currency exchange rates relative to the United States dollar and the Hungarian florint;

-   difficulty in recruiting and retaining individuals skilled in international business operations; and

-   difficulty of enforcing revenue collection internationally.

We expect that a portion of our international sales will be denominated in United States dollars. As a result, increases in the value of the United States dollar relative to foreign currencies would cause our products to become less competitive in international markets and could result in limited, if any, sales and profitability.

Furthermore, in the development of our facilities in foreign markets, we may encounter legal restrictions, commercial restrictions and incur taxes and other expenses to establish our manufacturing facilities in certain countries. In addition, we may potentially forfeit, voluntarily or involuntarily, foreign assets due to economic or political instability in the countries where our local manufacturing facilities are located.

·   We may not be able to successfully develop and commercialize our turnkey PV manufacturing facilities which would result in continues losses and may require us to curtail or cease operations

While we have made progress in the development of our PV manufacturing facilities, we have generated limited revenues and we are unable to project when we will achieve profitability, if at all. As is the case with any new technology, we expect the development process to continue. We cannot assure that our engineering resources will be able to modify the product fast enough to meet market requirements. We can also not assure that our product will gain market acceptance and that we will be able to successfully commercialize the technologies. The failure to successfully develop and commercialize the technologies passed its current stage would result in continued losses and may require us to curtail or cease operations

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·   We do not maintain theft or casualty insurance and only maintain modest liability and property insurance coverage and therefore we could incur losses as a result of an uninsured loss.

We do not maintain theft or casualty insurance and we have modest liability and property insurance coverage. We cannot assure that we will not incur uninsured liabilities and losses as a result of the conduct of our business. Any such uninsured or insured loss or liability could have a material adverse affect on our results of operations.

·   The loss of strategic relationships used in the development and marketing of our products, including our relationship with various strategic partners including RESI and TerrarSolar could impede our ability to further develop our turnkey manufacturing facilities and result in a material adverse effect causing the business to suffer.

We have established a plan of operations under which we rely on a strategic relationship with strategic partners, which provides marketing, installation and software development services. We also have an alliance with RESI for the development of the next generation of the PV manufacturing equipment. We also market our products and engage in R&D activity internally outside of our relationships with TerraSolar and RESI. However, a loss of any of these relationships, especially our relationship with TerraSolar, for any reason could cause us to experience difficulties in completing the further development of our product and implementing our business strategy. There can be no assurance that we could establish other relationships of adequate expertise in a timely manner or at all.

·   We may need to raise additional capital which may not be available on acceptable terms or at all

The Company currently anticipates that its available cash resources will be sufficient to meet its presently anticipated working capital and capital expenditure requirements for at least the next twelve months. The Company may have future acquisitions or capital expenditures that could potentially exceed available funds. Therefore, the Company may need to raise additional funds in order to support more rapid expansion, acquire complementary businesses or technologies or take advantage of unanticipated opportunities through public or private financing, strategic relationships or fulfill our research and development plans or other arrangements. There can be no assurance that such additional funding, if needed, will be available on terms acceptable to the Company, or at all. If adequate funds are not available on acceptable terms, the Company may be unable to develop or enhance its products or take advantage of future opportunities either of which could have a material adverse effect on the Company's business, results of operations and financial condition and may reduce our ability to continue to conduct business operations.Any additional equity financing may involve substantial dilution to our then existing shareholders.

·   Our operating results are likely to fluctuate significantly

As a result of our limited operating history and the rapidly changing nature of the markets in which Kraft competes, our quarterly and annual revenues and operating results are likely to fluctuate from period to period. These fluctuations may be caused by a number of factors, many of which are beyond our control. These factors include the following, as well as others discussed elsewhere in this section:

-   how and when we introduce new products and services and enhance our existing products and services;

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-   our ability to attract and retain new customers and satisfy our customers' demands;

-   the timing and success of our brand-building and marketing campaigns;

-   our ability to establish and maintain strategic relationships;

-   our ability to attract, train and retain key personnel;

-   the emergence and success of new and existing competition;

-   varying operating costs and capital expenditures related to the expansion of our business operations and infrastructure, domestically and internationally, including the hiring of new employees;

-   changes in the mix of products and services that we sell to our customers;

-   costs and effects related to the acquisition of businesses or technology and related integration; and

-   costs of litigation and intellectual property protection.

In addition, because the market for our products and services is relatively new and rapidly changing, it is difficult to predict future financial results.

For these reasons, you should not rely on period-to-period comparisons of our financial results, if any, as indications of future results. Our future operating results could fall below the expectations of public market analysts or investors and significantly reduce the market price of our common stock. Fluctuations in our operating results will likely increase the volatility of our stock price.

·   Loss of Csaba Toro, our Chief Executive Officer, Robert Rubin, a director and a consultant, or Zoltan Kiss, a director and a consultant, could impair our ability to operate.

If we lose our key employees, Csaba Toro, Robert Rubin or Zoltan Kiss, or are unable to attract or retain qualified personnel, our business could suffer. Our success is highly dependent on our ability to attract and retain qualified management personnel. We are highly dependent on our management, in particular, Csaba Toro, our Chief Executive Officer, Robert Rubin, a director and a consultant, and Zoltan Kiss, a director and a consultant of our company, who are all critical to the development of our financing arrangements, technologies and business. The employment agreement entered with Mr. Toro and our company is for a term of three years through October 2009.The agreement had a termination clause, excercisable by Mr. Toro, which has now expired. The consulting agreements entered between our company and Messrs. Rubin and Kiss expire in June 2009. The loss of the services of Messrs. Toro, Rubin or Kiss could have a material adverse effect on our operations. If we were to lose any one of these individuals, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies or financing arrangements. We do not have key man life insurance in place for any person working for us.

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·   We have a few proprietary rights, the lack of which may make it easier for our competitors to compete against us.

We attempt to protect our limited proprietary property through copyright, trademark, trade secret, nondisclosure and confidentiality measures. Such protections, however, may not preclude competitors from developing similar technologies. Any inability to adequately protect our proprietary technology could harm our ability to compete.

Our future success and ability to compete depends in part upon our proprietary technology and our trademarks, which we attempt to protect with a combination of patent, copyright, trademark and trade secret laws, as well as with our confidentiality procedures and contractual provisions. These legal protections afford only limited protection and are time-consuming and expensive to obtain and/or maintain. Further, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

·   There are a large number of shares underlying our convertible notes and warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock.

As of April 9, 2007, we had 49,696,101 shares of common stock issued and outstanding, and outstanding warrants to purchase additional 12,625,000 shares of common stock. In the offering pursuant to this registration statement, the selling stockholders may sell up to 8,562,500 shares of common stock underlying convertible notes and 3,625,000 shares of common stock underlying the warrants.

·   Our historic stock price has been volatile and the future market price for our common stock may continue to be volatile. Further, the limited market for our shares will make our price more volatile. This may make it difficult for you to sell our common stock for a positive return on your investment.

Our common stock is currently quoted on the pink sheets under the symbol " SLTF". There is a limited trading market for our common stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

The public market for our common stock has historically been very volatile. For the past two fiscal years and as of the date of this Registration Statement, the market price for our common stock has ranged from $0.70 to $2.50. Any future market price for our shares may continue to be very volatile. This price volatility may make it more difficult for you to sell shares when you want at prices you find attractive. We do not know of any one particular factor that has caused volatility in our stock price. However, the stock market in general has experienced extreme price and volume fluctuations that often are unrelated or disproportionate to the operating performance of companies. Broad market factors and the investing public's negative perception of our business may reduce our stock price, regardless of our operating performance. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, this may make it difficult or impossible for you to sell our common stock for a positive return on your investment.

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·   A sale of a substantial number of shares of our common stock may cause the price of its common stock to decline.

If our stockholders sell substantial amounts of the Company’s common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of its common stock could fall. These sales also may make it more difficult for the Company to sell equity or equity-related securities in the future at a time and price that the Company deems reasonable or appropriate. Stockholders who have been issued shares in the Acquisition will be able to sell their shares pursuant to Rule 144 under the Securities Act of 1933, beginning one year after the stockholders acquired their shares.

·   Our common stock is subject to the "penny stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The SEC has adopted Rule 3a51-1 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:

-   that a broker or dealer approve a person's account for transactions in penny stocks; and

-   the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

-   In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

-   obtain financial information and investment experience objectives of the person; and

-   make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

-   sets forth the basis on which the broker or dealer made the suitability determination; and

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-   that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

·   We have not paid cash dividends in the past and do not expect to pay cash dividends in the future. Any return on investment may be limited to the value of our stock.

We have never paid cash dividends on our stock and do not anticipate paying cash dividends on our stock in the foreseeable future. The payment of cash dividends on our stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay cash dividends, our stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

·   Foreign Currency and Exchange Risks and Rate Revaluation.

We will be subject to significant foreign exchange risk. There are currently no meaningful ways to hedge currency risk in Hungary. Therefore, the Company’s ability to limit its exposure to currency fluctuations is significantly restricted. The Company’s ability to obtain dividends or other distributions is subject to, among other things, restrictions on dividends under applicable local laws and foreign currency exchange regulations of the jurisdictions in which its subsidiaries operate. The laws under which the Company’s operating subsidiaries are organized provide generally that dividends may be declared by the partners or shareholders out of yearly profits subject to the maintenance of registered capital and required reserves and after the recovery of accumulated losses.

Forward-Looking Statements

Forward-Looking Statements

We may from time to time make written or oral statements that are "forward-looking," including statements contained in this Form 10KSB and other filings with the Securities and Exchange Commission, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," "may," "should," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to uncertainties associated with the following:

(a) volatility or decline of our stock price;

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(b) potential fluctuation in quarterly results;

(c) our failure to earn revenues or profits;

(d) inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement its business plans;

(e) inadequate capital to continue business;

(f) changes in demand for our products and services;

(g) rapid and significant changes in markets;

(h) litigation with or legal claims and allegations by outside parties;

(i) insufficient revenues to cover operating costs.

You should read the following discussion and analysis in conjunction with our financial statements and notes thereto, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of management.

ITEM 7.FINANCIAL STATEMENTS.

Reference is made to the Consolidated Financial Statements of the Company, beginning with the index thereto on page F-1

ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 14, 2006, as a result of the acquisition of Kraft, the Company effectively terminated the services of Seligson and Giannattasio, LLP (“SG”), as its independent auditor. SG performed the audit for the two year period ended December 31, 2005, which reports for the two years ended December 31, 2005 and 2004 did not contain any adverse opinion or a disclaimer of opinion, nor was it qualified as to audit scope or accounting principles but did carry a modification as to going concern. During the Company’s two most recent fiscal years and during any subsequent interim period prior to the June 14, 2006 termination as the Company's independent auditors, there were no disagreements with SG, with respect to accounting or auditing issues of the type discussed in Item 304(a)(iv) of Regulation S-B.

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The Company will provide SG with a copy of this disclosure and requested that it furnish a letter to the Company, addressed to the SEC, stating that it agreed with the statements made herein or the reasons why it disagreed.

On July 12, 2006, the board of directors of STF approved the engagement of the firm of Russell Bedford Stefanou Mirchandani, LLP as its independent auditors. During the Company’s two most recent fiscal years or any subsequent interim period prior to engaging Russell Bedford Stefanou Mirchandani, LLP, the Company had not consulted Russell Bedford Stefanou Mirchandani, LLP regarding any of the accounting or auditing concerns stated in Item 304(a)(2) of Regulation S-B.

ITEM 8A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive/financial officer, to allow timely decisions regarding required disclosure.

As a result of comments raised by the Division of Corporate Finance of the Securities and Exchange Commission (the “Commission”), we determined that accounting errors were made in the accounting for and disclosing of the beneficial conversion feature, warrants issued, common shares issued and corresponding debt discount imbedded in a $1,250,000 convertible note payable assumed in connection with the acquisition of the American Global United, Inc. assets and assumption of the liabilities on June 14, 2006. In addition, the Company erroneously accounted for the net liabilities assumed of $ 6,681,891 in connection with the acquisition of American Untited Global, Inc. as an transaction cost and charged the amount to operations. The Company determined the assumption of the net liabilities was not a cost of operations, but a capital transaction incurred in connection with the recapitalization of the Company and has charged the $ 6,681,891 directly to accumulated deficit

As a result, we have determined that our disclosure controls were not effective as of the end of the period covered by this report.

We implemented the following remedial measures to address the identified material weaknesses. 

·   We reviewed all convertible equity and debt securities to identify any securities that may have embedded beneficial conversion features

·   We have improved the supervision and training of our accounting staff to understand and implement accounting requirements , policies and procedures applicable to the accounting and disclosure of convertible securities.

Changes in Disclosure Controls and Procedures

Except as described above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

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ITEM 8A(T).CONTROLS AND PROCEDURES

Not applicable

ITEM 8B.OTHER INFORMATION

None.

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PART III

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth certain information regarding the executive officers and directors of the Company as of April 9, 2007

Name	Age	Position with Company
Csaba Törő	40	Chief Executive Officer and Director
Zoltan Kiss	72	Chairman of the Board
Robert M. Rubin	66	Director
Michael Metter	54	Director

Set forth below is a biographical description of each director and senior executive officer of the Company based on information supplied by each of them.

Csaba Toro. Mr. Toro has served as the Company’s Chief Executive Officer since October 31, 2006. In 1995, Mr. Toro founded and served as the managing director of one of the first Hungarian internet service providers, E-Net Co. In 1997, E-Net and other Internet service providers were combined to create EuroWeb Hungary Ltd. (“Euroweb Hungary”), a wholly-owed subsidiary of Euroweb International Corp., a Nasdaq listed company (“Euroweb International”). Mr. Toro served as the President and Chief Executive Officer of Euroweb Hungary. In 1998, Mr. Toro was appointed as the Chief Operational Officer of EuroWeb International. In 2002, Mr. Toro was appointed as Chairman and until recently Chief Executive Officer of Euroweb International. During his leadership, in addition to its subsidiary in Hungary, EuroWeb made several acquisitions of other internet service providers in Romania, Slovakia and the Czech Republic resulting in EuroWeb International becoming a leading Internet service provider in the Central Eastern European region. In February 2001, in addition to his employment with Euroweb International, Mr. Toro served as the Operational Deputy CEO, and then the Chief Executive Officer, of PanTel Telecommunications and Communications Company (“Pantel”), an alternative telecom provider in Hungary. Mr. Toro resigned from Euroweb in June 2006 after assisting the company dispose of its Internet related assets.

In 1990, Mr. Törő graduated from the Hungarian Technical University as a transportation engineer. Between 1991 and 1995 he lived and studied in New York City, and received his second diploma from New York University. Mr. Toro is one of the founders and also the President of the Association of Alternative Telecommunications Service Providers. In 2005, Mr. Törõ received the Tivadar Puskas award from the Ministry of Informatics and Communications of Hungary and in March 2006 he received the KNIGHT’S CROSS ORDER OF MERIT OF THE REPUBLIC OF HUNGARY - honoring his intense contribution to the development of the information society, the liberalization of the telecommunication market and the penetration of the Internet within Hungary.

Zoltan Kiss. Mr. Kiss has served as the Chairman of the Board since June 2006. Mr. Kiss is also a member of the board of directors and a shareholder of TerraSolar and RESI. Mr. Kiss is a founder and President of several hi-tech companies. Since 2001, Mr. Kiss has been employed by RESI, Terrasolar and Kraft as a director and executive officer. He has Research and Development Experience at RCA Research Laboratories in Princeton, NJ for nine years. Mr. Kiss also serves as the Chairman of the Board of Directors of China Solar Energy, a public Hong Kong corporation. Mr. Kiss received his Bachelor of Applied Science and Engineering, his Master Degree in Spectroscopy and his PhD in Physics from the University of Toronto in 1956, 1957 and 1959, respectively. He also was a National Research Council Postdoctoral Fellow at Oxford University in 1960.

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Robert M. Rubin. Mr. Rubin has served as the Chairman of our Board of Directors since May 1991, and was our Chief Executive Officer from May 1991 to January 1, 1994. Between October 1990 and January 1, 1994, Mr. Rubin served as the Chairman of the Board and Chief Executive Officer of our company and its subsidiaries; from January 1, 1994 to January 19, 1996, he served only as Chairman of the Board of our company and its subsidiaries. From January 19, 1996 to the present, Mr. Rubin served as Chairman of the Board, President and Chief Executive Officer. Mr. Rubin was the founder, President, Chief Executive Officer and a Director of Superior Care, Inc. ("SCI") from its inception in 1976 until May 1986, when Mr. resigned as an executive officer. Mr. Rubin continued as a director of SCI until the latter part of 1987 In 1993, SCI was sold to Olsten Corporation (NYSE).

Michael Metter. Mr. Metter has served as a Director since December 14, 2001. Mr. Metter resigned as a member of our board of directors effective on June 17, 2003, but was reappointed to our board of directors upon the effectiveness of the rescission agreement with NY Medical on May 27, 2004. Since April 2001, Mr. Metter has been the President of RME International, Ltd. (RME). Mr. Metter also currently consults to a broad range of businesses, including IT communications and media businesses, on mergers, acquisitions, restructuring, financing and other matters. From October 1998 to February 2001, Mr. Metter was a principal of Security Capital Trading, Inc., and was a principal at Madison Capital from September 1997 to October 1998. Prior thereto, Mr. Metter was President of First Cambridge Securities from October 1994 to August 1997. Effective with a merger of a division of R.M. Enterprises International, Ltd into Azurel, Ltd., in October 2002, Mr. Metter became President and COO of Azurel. He resigned as President in February 2003 and subsequently resigned the position of COO which he held from February 2003 until June 28, 2003. Mr. Metter is also President and CEO of BusinessTalkRadio.net (a private company). BTR is a syndicated radio network based in Greenwich, Connecticut. He has held this position since June 2002. He is also chairman of Tiburon Capital Group, a privately held holding corporation. Mr. Metter is a director for Western Power & Equipment Corp. (a public company) since February 2003 and has been the CEO for Spongetech Delivery Systems since February 2001.

Directors are elected annually and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected and qualified.  Officers are elected annually and serve at the discretion of the Board of Directors.

ROLE OF THE BOARD

Pursuant to Delaware law, our business, property and affairs are managed under the direction of the Company’s board of directors. The board has responsibility for establishing broad corporate policies and for the overall performance and direction of Solar Thin Films, Inc, but is not involved in day-to-day operations. Members of the board keep informed of the Company’s business by participating in board and committee meetings, by reviewing analyses and reports sent to them regularly, and through discussions with its executive officers.

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2006 BOARD MEETINGS

In 2006, the board did not meet and made eight written resolutions.

BOARD COMMITTEES

We have not established an audit committee, compensation commitee or nominating committee.

Compensation of the Board of Directors

Directors who are also our employees do not receive additional compensation for serving on the Board or its committees. Non-employee directors are not paid any annual cash fee. In addition, directors are entitled to receive options under our Stock Option Plan. All directors are reimbursed for their reasonable expenses incurred in attending Board meetings. We intend to procure directors and officers liability insurance.

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more then 10 percent of the Company’s Common Stock, to file with the SEC the initial reports of ownership and reports of changes in ownership of common stock. Officers, directors and greater than 10 percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Specific due dates for such reports have been established by the Commission and the Company is required to disclose in this Proxy Statement any failure to file reports by such dates during fiscal 2006. Based solely on its review of the copies of such reports received by it, or written representations from certain reporting persons that no Forms 5 were required for such persons, the Company believes that during the fiscal year ended December 31, 2006, there was no failure to comply with Section 16(a) filing requirements applicable to its officers, directors and ten percent stockholders.

CODE OF ETHICS

The Company adopted a Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of the officers, directors and employees of the Company. A copy of our code of ethics may be found as Exhibit 14.3 to the Annual Report filed on Form 10-K with the Securities and Exchange Commission on July 16, 2004.

ITEM 10.EXECUTIVE COMPENSATION

The following table sets forth information concerning the total compensation that the Company has paid or that has accrued on behalf of Company’s chief executive officer and other executive officers with annual compensation exceeding $100,000 during the years ended December 31, 2006 and 2005.

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The following table sets forth the cash compensation (including cash bonuses) paid or accrued and equity awards granted by us for years ended December 31, 2006 and 2005 to our Chief Executive Officer and our most highly compensated officers other than the Chief Executive Officer at December 31, 2006 whose total compensation exceeded $100,000.

Name & Principal Position	Year			Salary ($)		Bonus ($)		Stock Awards($)			Option Awards ($)			Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Csaba Toro		2006		$	73,560		—	$	100,000(2	)	$	2,705,400(3	)		—		—		—	$	2,878,960
Chief Executive Officer (1)		2005			N/A		N/A		N/A			N/A			N/A		N/A		N/A		N/A
Zoltan Kiss		2006		$	100,800		—		—			—			—		—			$	100,800
Director (4)		2005(6	)	$	2,000		—		—			—			—		—		—	$	2,000
Robert Rubin		2006		$	255,972		—		—			—			—		—		—	$	255,972
Director (5)		2005		$	275,000		—		—			—			—		—		—	$	275,000

(1) Mr. Toro was appointed as Chief Executive Officer of our company on October 31, 2006.

(2) In accordance with Mr. Toro’s employment agreement, Mr. Toro is entitled to receive 45,956 shares of common stock per year. The shares are valued at the stated value in the employment agreement of $2.18 per share, which was the market price as of the date of grant.

(3) Mr. Toro was granted a ten year option to purchase 1,875,000 shares of common stock at an exercise price of $2.18 per share, which may be exercised on a cashless basis. Although the option has vested immediately, Mr. Toro is only permitted to sell 52,084 shares per month on a cumulative basis. The option was valued using the black scholes option pricing model assuming a ten year life, no expected dividend payments a volatility of 49.5% and a risk free rate of 4.6%.

(4) In June 2006, Mr. Kiss was appointed as a director and consultant.

(5) Mr. Rubin serves as a director and consultant.

(6) Represents compensation paid to Mr. Kiss by Kraft.

OUTSTANDING EQUITY AWARDS

Option Awards												Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Csaba Toro (1)		1,875,000(2	)		—		—	$	2.18		10/31/16		147,058 (3	)	$	145,587(3	)		—		—

(1)	Mr. Toro was appointed as Chief Executive Officer of our company on October 31, 2006.
(2)	Mr. Toro was granted a ten year option to purchase 1,875,000 shares of common stock at an exercise price of $2.18 per share, which may be exercised on a cashless basis. Although the option has vested immediately, Mr. Toro is only permitted to sell 52,084 shares per month on a cumulative basis.
(3)	In accordance with Mr. Toro’s employment agreement, Mr. Toro is entitled to receive 73,529 shares of common stock per year. The 147,058 shares represents the shares of common stock that have not vested to date. The value of such shares is based on the closing price for our common stock of $1.58 as of December 29, 2006 (the last trading day of 2006).

Except as set forth above, no other named executive officer has received an equity award.

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DIRECTOR COMPENSATION

The following table sets forth with respect to the named director, compensation information inclusive of equity awards and payments made in the year end December 31, 2006.

Name	Fees Earned or Paid in Cash ($)			Stock Awards ($)		Option Awards ($)			Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation ($)		Total ($)
Robert Rubin		(1	)		—		—			—		—		—		—
Zoltan Kiss		(1	)		—		—			—		—		—		—
Michael Metter		—			—	$	14,828(2	)		—		—		—	$	14,828

(1) All compensation earned by Messrs. Rubin and Kiss is fully reflected in the Summary Compensation Table above.

(2) On September 13, 2006, Michael Metter, was granted an option to purchase 15,625 shares of common stock at $2.07 per share.  The term is 3 years.  The option was valued using the black scholes option pricing model assuming a three year life, no expected dividend payments, a volatility of 63.2% and a risk free rate of 4.8%.

We do not pay directors compensation for their service as directors. We are in the process of developing a compensation policy for our directors.

Employment and Other Agreements

In connection with the acquisition of Kraft, we entered into consulting agreements with Robert Rubin and Zoltan Kiss pursuant to which each consultant will receive an annual salary of $160,000 per annum, reimbursement for up to $5,000 in expenses associated with company activities and major medical benefits in consideration for services performed on behalf of the company. Each of these agreements is for a term of three years.

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On December 19, 2006, we entered into the R&D Contract with RESI relating to the development and commercialization of certain technology and/or equipment related to the photovoltaic industry. Zoltan Kiss, our director, consultant and significant shareholder is also a shareholder, director and chief technical officer of RESI. Pursuant to the R&D Contract, RESI has provided us with an exclusive right to commercialize developments related to manufacturing equipment for the production of copper indium gallium selenide based thin film PV equipment and amorphous silicon equipment. In addition, we have a right of first refusal to develop any additional equipment not covered by the R&D Contract. The term of the R&D Contract is for three years and we are required to pay RESI $30,000 per month.