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, 2007

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 001-13549

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.)

25 Highland Blvd, Dix Hills, New York 11746

(Address of principal executive offices)

Issuer’s telephone number, including area code: (516) 417-8454

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 $.01 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 $5,779,578 for the year ended December 31, 2007. As of March 27, 2008, 57,607,601 shares of Common Stock were outstandingof which 29,004,609 were held bynon-affiliates of the Company. The aggregate market value of the Common Stock held by non-affiliates of the Company as of March 27, 2008 was $23,203,687.

Transitional Small Business Disclosure Format (check one):

Yes o No x

TABLE OF CONTENTS

		PAGE
PART I		2
ITEM 1.	DESCRIPTION OF BUSINESS	2
ITEM 2.	DESCRIPTION OF PROPERTIES	17
ITEM 3.	LEGAL PROCEEDINGS	17
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18
PART II		19
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	19
ITEM 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 7.	FINANCIAL STATEMENTS	32
ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	32
ITEM 8A	CONTROLS AND PROCEDURES	33
ITEM 8A(T)	CONTROLS AND PROCEDURES	34
ITEM 8B	OTHER INFORMATION	34
PART III		35
ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT	35
ITEM 10.	EXECUTIVE COMPENSATION	36
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	43
ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	44
ITEM 13.	EXHIBITS	44
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	47

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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 Elektonikai Zrt., 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. 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”). Each share of Series B-4 Preferred Stock 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. Prior to such conversion, the Preferred Shares had the same voting rights of the shares of common stock and voted together with the shares of common stock on all matters. As of September 30, 2007, all of the Series B-4 Preferred shares were converted into an aggregate of 33,425,000 shares of the Company’s common stock.

On August 3, 2007, the Company acquired the remaining 4.5% minority interest of Kraft in exchange for 1,575,000 shares of common stock, and as a result, Kraft is now a wholly-owned subsidiary of the Company.

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. The 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 Company’s symbol was changed to SLTN.OB.

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In October 2007, the Company formed a majority owned subsidiary, Solar Thin Power, Inc ( “Solar Thin Power”) to pursue international opportunities in Europe.

On December 19, 2007, Solar Thin Power issued and sold an aggregate of 6,770,000 shares of common stock of Solar Thin Power to 6 accredited investors (the “Investors”) in a private placement (the “Private Placement”). In addition, the Investors also received warrants to purchase an aggregate of 3,385,000 shares of common stock of the Company at an exercise price of $3.30 per share, subject to certain adjustments. The Warrants expire 5 years from the date of issuance. After deducting the expenses of the Private Placement, Solar Thin Power received net proceeds of $3,348,395.50. Solar Thin Power was a non-operational subsidiary of the Company as of December 31, 2007.

Organizational History

Solar Thin Films 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. In additional, the Company acquired the remaining 4.5% minority interest in August 2007 and, as a result, now conducts its operations via Kraft, the wholly-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.

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Business Overview

The Company conducts its business operations via the wholly-owned subsidiary, Kraft. Kraft is an equipment design and manufacturing company headquartered in Budapest, Hungary, which had historically been engaged in the design, development and manufacture 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. For the past five years, the Company has focused substantially all of its efforts on the design, development and construction of “turnkey” thin-film PV manufacturing equipment used in plants that produce photovoltaic thin-film modules. Going forward the Company expects most of its growth to develop through the delivery of its “turnkey” PV facilities and related equipment sales.

Over the past two years, the Company has utilized relationships with key strategic partners to help secure a leading position as the primary supplier of “turnkey” PV facilities. Such “turnkey” facilities 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 has served as primary sub-contractor for the equipment. However, STF maintains the right to market, sell and deliver “turnkey” PV production facilities and intends to increasingly take on this role in the future.

The main strategic partner of the Company in the sale of turnkey thin-film photovoltaic module manufacturing facilities is presently Renewable Energy Solutions, Inc. (“RESI”). Historically, the Company has also partnered with Terra Solar Global, Inc. (“Terra Solar”). Terra Solar, Inc. (“TSI”) owns approximately 49% of the outstanding securities of Terra Solar. Zoltan Kiss, a director and shareholder of the Company, is a shareholder of TSI. Zoltan Kiss, a director and shareholder of the Company, is also the Chairman and majority owner of RESI. Over the past two years, the Company has been supplying equipment for a large turnkey project with Blue Star Terra Corporation in China through its strategic partners - RESI and Terra Solar. The Blue Star contract was originally held by Terra Solar and in April 2007 RESI assumed right and obligations under the contract from Terra Solar. Revenues under the contract were $2,751,836 for the year ended December 31, 2007. The Company currently has related party trade receivables of $1,456,863 from RESI as of December 31, 2007, primarily from the Blue Star Contract. While the Company’s liability is contractually limited to the delivery of equipment and not to turnkey manufacturing performance, there is some risk of non-payment until the facility has successfully passed an acceptance test, a RESI liability. Mr. Kiss resigned as Chairman and a Director of the Company effective December 20, 2007.

Products and product development

PV Modules on Glass Substrate for Power Applications

The Company has developed a line of manufacturing equipment, sold both as individual products and as part of “turnkey” manufacturing facilities for the production of “thin-film” amorphous silicon modules on glass substrate. By 2007, STF’s Kraft subsidiary had participated in the construction of four “turnkey” manufacturing facilities. However, the PV industry ia changing rapidly, and it is imperative that STF continue to fund R&D activities dedicated to developing next generation deposition equipment. To accomplish this, the Company is participating directly and on a contracted basis to develop:

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

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· manufacturing equipment to produce more efficient modules using amorphous silicon and/or nano-crystalline silicon on a 2ft x 4ft glass substrate; and

· manual or automated glass handling and robotic processes to reduce labor costs from PV module production on 2ft x 4ft glass and larger substrates.

PV Modules on Glass Substrate for Building Integrated Photovoltaic (BIPV) Applications

The Company is working together with customers and partners to develop products targeted at the market for building integrated photovoltaic modules - that is photovoltaic modules incorporated into curtain wall systems for buildings. Management believes that using existing technology it can create attractive products for this market, which will bear higher prices per Watt for finished product.

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, fuel prices and the economics of the PV industry. STF believes the strongest force in causing the move from fossil fuels to PV will be the economics of PV. Since the cost of the PV module represents more that 70% of the cost of installed PV systems, learning to manufacture the lowest cost PV modules will help secure the greatest competitive edge and advantage in the market place.

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 caused by this major cost difference, STF believes that the ratio of crystalline to thin-film in the product mix will substantially shift in the next decade, driving rapid increases in the market for “thin film” PV products. The Company further believes that it can continue to drive costs down through further process improvements to existing technology (amorphous silicon) and through the introduction of newer technologies, possibly including CIGS.

Competition

Crystalline silicon PV technologies currently represent substantially 90% of the PV market. Demand for crystalline (and poly-crystalline) silicon has grown very rapidly over the past decade, but photovoltaic module prices have remained relatively unchanged due to cost realities of the crystalline production process. As such, prices are expected to remain relatively stable until “thin film” production expands sufficiently to drive prices down. In the mean time, this presents significant opportunities to profit for “thin film” module and equipment producers, placing STF in an attractive position.

However, there are an increasing number of competitors for the Company in this market, and through well funded research and development activities, these competitors have developed their own pilot lines for thin-films PV module manufacturing and are introducing both modules and equipment into the marketplace. Competitors will consist of 1) companies who build their own PV plants utilizing internal technology and know how - and who may represent customer opportunities for specific pieces of equipment, and 2) companies who manufacture and deliver production equipment to third parties. Many players in this latter market specialize in the sale of individual pieces of equipment rather than “turnk-key” production lines, while others compete directly for “turn-key” business.

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The former competitors include companies such as EPV Solar, which is likewise specializing in amorphous silicon thin film modules, and is a customer of STF, and companies such as First Solar, which produces cadmium telluride thin film modules. The latter competitors include a range of companies selling individual pieces of equipment such as IV testers and laminators, and companies selling “turn-key” lines including Applied Materials, Oerlikon and Energo Solar. STF believes that its competitive edge derives from 1) its ability to deliver “turn-key” lines at attractive capital costs and prectable production costs, and 2) its history of success in delivering such lines.

Strategy

The Company’s strategy is to market complete turnkey manufacturing equipment to manufacture thin-film based PV modules where possible, while offering individual pieces of equipment to companies possessing their own internal process knowledge.

Sale of Turnkey Facilities

The Company’s main focus is delivering “turnkey” amorphous silicon production lines, and in the future “turn-key” production lines based on newer materials. Customers include companies with manufacturing expertise and local knowledge, but without the technology base required to build and manage their own production lines.

Alone, and together with strategic partners, STF offers a “turnkey” amorphous silicon manufacturing facility that is sold installed and with certain guarantees regarding throughput, module efficiency, and in some cases, manufacturing cost. Such “turnkey” facilities consists of all the hardware and machinery manufactured, assembled, and installed by the Company together with all the software, know-how and training associated with the manufacturing process.

In the past TerraSolar and then RESI have acted as general contractor - guaranteeing process performance to the buyer - and STF as equipment sub-contractor, for specific “turnkey” facilities. Specifically for STF’s Blue Star (now CG Solar) contract TerraSolar acted as General Contractor to the buyer, until April 2007, when RESI assumed such rights and obligations under the contract.

STF also has maintained the right to sell such “turnkey” facilities on its own as General Contractor and intends to act in such fashion on a case-by-case basis going forward.

On a case-by-case basis STF will also consider investing in its clients “turn-key” production lines as an equity partner and may secure distribution and/or purchase rights for modules for resale or for use in power projects developed by its majority-owned subsidiary ST Power.

Sale of Individual Machines

The Company will also continue to sell individual pieces of equipment including deposition lines, sputtering equipment, laminators, IV testers, transport equipment, etc. to customers with their own technology expertise or as add-ons for existing “turn-key” customers.

Customers

Currently the Company has three key customers, which counted for over 99% of the total revenue in 2007. 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 and Taiwan).

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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, 2007 and 2006, the Company employed 54 and 48 full-time and 1 part-time employees, respectively none of whom is a member of a union or work council.

Sales and Project management

Two members of management and two sales engineers are currently focused on the company’s sales activity including finding and contacting potential customers and managing contracts and bids - for both “turn-key” and equipment sales. In addition the company currently has two project managers, responsible for managing contracts and projects from inception through completion. The sales and project management groups work together with the engineering and equipment manufacturing groups to assure timely production and deliveries.

Engineering

The Companies engineering department consists of three dedicated mechanical engineers and seven dedicated electrical engineers as well as a number of vacuum and field services engineers. The engineering department works closely with the manufacturing unit to guarantee quality and timely delivery, under the quidance of its project management staff.

Production (Equipment manufacturing)

The largest group in the Company is the production (equipment manufacturing) department, consisting of 25 employees. These people perform the actual assembly of equipment, including activities related to the mechanical, electrical and vacuum system parts of the finished product. The manufacturing activities are actively supported by input from the engineering group.

ITEM 1A. 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.

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· 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.

The Company has reported a net loss of $3,824,645 from operations for the year ended December 31, 2007 and a net loss of $4,938,370 from operations for the year ended December 31, 2006.

The Company has suffered operating losses and negative cash flows from operations since inception and, at December 31, 2007, the Company had an accumulated deficit of $24,075,554. 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.

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

For the year ended December 31, 2007, Kraft derived over 99% of its total revenues from three major customers. 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.

To date, the Company has generated limited revenues of $5,779,578 and $2,426,954 for the year ended December 31, 2007 and December 31, 2006, respectively, and the Company incurred losses from continuing operations of $3,824,645 and $4,938,370, 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.

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· 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.

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 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;

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·  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.

· 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.

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· 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 RESI. 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;

·  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.

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· 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

· 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 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 RESI. However, a loss of any of these relationships, especially our relationship with RESI, 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.

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· Our revenues and 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 the Company 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;

·  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 Peter Lewis, our Chief Executive Officer and Robert Rubin, our Chief Financial Officer, could impair our ability to operate.

If we lose our key employees, Peter Lewis or Robert Rubin, 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, Peter Lewis, our Chief Executive Officer, and Robert Rubin, a Chief Financial Officer, consultant who are all critical to the development of our financing arrangements, technologies and business. The employment agreement entered with Mr. Lewis and our company is for a term of three years through June 2010. The agreements entered between our company and Rubin expire in June 2009. The loss of the services of Lewis or Rubin 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 March 27, 2008, we had 57,607,601 shares of common stock issued and outstanding, and outstanding options and warrants to purchase additional 20,028,959 shares of common stock. In the offering pursuant to registration statement filed with SEC, the June 2006 private placement investors may sell up to 8,562,500 shares of common stock underlying convertible notes and 12,625,000 shares of common stock underlying the warrants. As of March 27, 2008, the selling stockholders have converted principal on the convertible notes into an aggregate of 4,624,000 shares of the Company’s Common Stock.

· 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 OTC Bulletin Board under the symbol “SLTN". 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.

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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 Financial Statements, the market price for our common stock has ranged from $0.42 to $3.52, as adjusted for the one for 1.6 reverse stock split effected on June 15, 2006. 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.

· 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.

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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

·  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.

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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	1112 Budapest, Kőérberki út 36. Hungary	General operation Equipment manufacturing plant stockholder relations, general executive	23,200	USD 20,800	3 years from January 1, 2008 non-cancelable
Kraft	9900 Körmend Hegyalja u 42. Hungary	Equipment manufacturing plant	10,760	USD 1,600	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, 2007 and 2006 are $217,885 and $123,043, respectively. The increase in the rent expense for the year ended December 31, 2007 as compared to the year ended December 31, 2006 was the result of an 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. In late 2007, the Company signed a modified rental agreement for the Budapest facilities and expanded its spaces as well as extended the contract for an additional three years period of time.

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 shareholders in a PLC may offer their shares to the new majority owner for acquisition. In the case of the offering, the Company is obligated to purchase those shares on market value valid on the date when the majority owner acquired interest. Commencing in March 2006 through June 2006, the company entered into securities purchase agreement with shareholders of Kraft that that together owned 95.5% of Kraft. The remaining shareholders of Kraft representing 4.5% requested cash payment. As of June 30, 2007, the partners were in discussion about the fair market price of the 4.5% interest. On August 3, 2007, the company entered into a share purchase agreement thereby the company acquired the remaining 4.5% interest in Kraft. In connection with the share purchase agreement, the remaining shareholders of Kraft released all planned and enforced claims against the Company under the Company's Act in Hungary.

On or about February 19, 2008, the Company was served with process by Hudson Bay Fund, L.P. (“Hudson Bay”). Hudson Bay is seeking in excess of registration delay payments. The Company intends to vigorously defend against such action.

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, 2007.

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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.OB".

Listed below are the high and low sale prices for the shares of Company’s common stock during the years ended December 31, 2007 and 2006. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission and may not represent actual transactions.

	High ($)		Low ($)
Quarter Ending:
2007
March 31, 2007		2.24		0.82
June 30, 2007		0.93		0.47
September 30, 2007		1.09		0.57
December 31, 2007		1.57		0.94

2006
March 31, 2007	3.20	1.36
June 30, 2007	3.52	1.36
September 30, 2007	3.12	1.92
December 31, 2007	2.27	1.52

On March 27, 2008 the closing bid price on the OTC for the Company’s common stock was$0.80.

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.

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Holders of Common Stock

On March 27, 2008, there were approximately 189 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.

Equity Compensation Plans

The following table shows information with respect to each equity compensation plan under which the Company’s common stock is authorized for issuance as of December 31, 2007.

					Number of securities
	Number of securities				remaining available for
	to be issued upon		Weighted average		future issuance under
	exercise of		exercise price of		equity compensation plans
	outstanding options,		outstanding options,		(excluding securities
Plan category	warrants and rights (a)		warrants and rights (b)		reflected in column (a))
Equity compensation plans approved by security holders
2001 Stock Plan		None		—		None
2007 Stock Plan		None		—		5,000,000
Equity compensation plans not approved by security holders		None		—		None
Total		None		—		5,000,000

The equity compensation plans are discussed in Note 12 of the 2007 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, 2007 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 wholly 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 both photovoltaic manufacturing equipment and through strategic partners “turnkey” manufacturing plants that produce photovoltaic thin film modules (though the Company retains the right to deliver turnkey plants on its own account). The Company expects the primary use of such photovoltaic thin film modules will be the construction of solar power plants by corporations and governments.

STF, in the future, may further vertically integrate itself within this industry through activities in, but not limited to, investing in and/or operating the module manufacturing plants, selling thin film photovoltaic modules, and through its newly formed subsidiary, Solar Thin Power, installing and/or managing solar power plants.

Acquisition - Kraft

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 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”). Each Preferred Shares is automatically converted 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 had the same voting rights of the shares of common stock and voted 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. Additionally, on August 3, 2007, the Company acquired the remaining 4.5% minority interest of Kraft in exchange for 1,575,000 shares of common stock value at $1,181,250, and as a result, Kraft is now a wholly-owned subsidiary of the Company. 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

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·  Allowance for doubtful accounts

·  Research and development

·  Warrant liability

·  Product warranty reserve

· Revenue recognition

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.

Percentage-of-Completion Accounting: in accordance with the provisions of the American Institute of Certified Public Accountants (AICPA) Statement of Position No. 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts." (”SOP 81-1”), sales - derived from long-term fixed-priced contracts to design, develop and construct of complete or just part of turnkey manufacturing plants that produce photovoltaic thin film modules in accordance with customer specifications - are recorded using the percentage of completion method as the compounds are delivered (under the units of delivery method). The contract costs related to delivered compounds are recorded to cost of revenue as the compounds are delivered and revenue is recognized.

· 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.

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· 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.

· 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.

· Product Warranty Reserves

We provide our customers with limited rights under a warranty agreement for a period of 18 months with a requirement to start any defective repairs within 7 working dates of notice. Additionally, we provide 6 additional months of service whereby we will repair or replace at our actual cost. In conjunction with our obligation under our warranties, we have charged to our operating expenses an estimated warranty cost upon recognition of the related revenue. Our estimate is management’s of anticipated estimated costs of repair based on historical costs and any known specific product issues. The Company accrued a provision for product warranty of approximately $180,000 during 2007; of which approximately $85,000 was utilized during the year ended December 31, 2007. The assumptions we used and our future anticipated warranty costs are reevaluated periodically and are adjusted accordingly. Our determinations are based on estimates. Should product failure rate differ from our estimates, actual costs could vary significantly from our expectations.

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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 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. Mr. Rubin’s salary was increased to $225,000 per annum when he assumed the duties of Chief Financial Officer. In December 2007, Mr. Kiss resigned as director of the Company.

On June 20, 2007, Peter Lewis and Solar Thin Films, Inc. (the “Company”) entered into an Employment Agreement pursuant to which Mr. Lewis has agreed to serve as the Chief Executive Officer of the Company. The Employment Agreement contains the following terms:

· base salary of $225,000 per year;

· the issuance of 187,617 shares of common stock per year;

· a bonus paid pursuant to the Executive Officer Incentive Plan as determined by the Board of Directors;

· a ten year option to purchase 3,000,000 shares of common stock at an exercise price of $0.533 per share on a cashless basis vesting on a pro-rata basis over a period of two years;

· participation in all employee benefit plans and programs; and

· 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. In November 2007, the Company signed the modification of lease agreement resulted a charge of $20,800 per months from January 1, 2008 for three years period of time. The 3 year minimum future cash flow for the leases at December 31, 2007 is as follows:

Fiscal Year:	Amount:
December 31, 2008	$	249,600
December 31, 2009	$	249,600
December 31, 2010	$	249,600

The following table summarizes the cash commitments described above:

Contractual cash obligation	2008		2009		2010		2011		After 2012
Operational leases	$	249,600	$	249,600	$	249,600		-		-
Employment agreements (1)		450,000		337,000		112,500		-		-
Total	$	699,600	$	586,600	$	362,100		-		-

(1) base salary of CEO and CFO

Results of Operations

Year Ended December 31, 2007 compared to Year Ended December 31, 2006

Revenues

The following table summarizes our revenues for the years ended December 31, 2007 and 2006:

Year ended December 31,	2007		2006
Total Revenues	$	5,779,578	$	2,426,954

For the year ended December 31, 2007, revenues were increased by 138% or $3,352,624 as compared to the similar period in 2006. This increase in revenues was due to the completion of a large related party and other contracts in 2007.

Cost of sales

The following table summarizes our cost of sales for the years ended December 31, 2007 and 2006:

Year ended December 31,	2007		2006
Total cost of sales	$	4,779,962	$	1,766,806

Our cost of sales for the year ended December 31, 2007 were $4,779,962 or 82.7% of our sales as compared to $1,766,806, or 72.8% of our sales for the year ended December 31, 2006. The decrease in gross margin was attributable primarily to the weakening of the US Dollar, higher cost of raw materials and related manufacturing cost. 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 years ended December 31, 2007 and 2006:

Year ended December 31,	2007		2006
General, selling and administrative expenses	$	4,243,401	$	5,531,590

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For the year ended December 31, 2007 selling, general and administrative expenses were $4,243,401 as compared to $5,531,590 in 2006. The decrease in selling, general and administrative expenses of $1,288,189 is attributable to the additional staff/consultants (legal, audit) supporting the recapitalization offset by reduction in stock based compensation issued in 2007 of $356,618 as compared with $2,831,353 in 2006.

Research and development

The following table summarizes our research and development expenses for the years ended December 31, 2007 and 2006:

Year ended December 31	2007		2006
Research and development expenses	$	360,000	$	11,600

Our research and development for year ended December 31, 2007 were $360,000 compared to $11,600 for the year ended December 31, 2006. 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 and amortization

The following table summarizes our depreciation and amortization for the years ended December 31, 2007 and 2006:

Year ended December 31,	2007		2006
Depreciation and amortization	$	220,860	$	55,328

Depreciation and amortization has increased by $165,532 in the year ended December 31, 2007 compared to the same period in 2006. The increase mainly due to the acquisition of new equipments purchased in second half of 2006 and during 2007.

Interest expense, net

The following table summarizes our interest expense, net for the years ended December 31, 2007 and 2006:

Year ended December 31,	2007		2006
Interest expense, net	$	4,527,940	$	1,476,599

Interest expense,net has increased by $3,051,341 in the year ended December 31, 2007 compared to the same period in 2006. The increase mainly due to the issuance of 4,029,000 shares of common stock in exchange for convertible notes payable in 2007.

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Liquidity and Capital Resources

As of December 31, 2007, our cash, cash equivalents and marketable securities were approximately $4,157,476, an increase of $1,489,993 from December 31, 2006.

As of December 31,  2007, we had working capital of $1,862,717. We generated a deficit in cash flow from operations of $1,674,555 for the year ended December 31, 2007. This deficit is primarily attributable to our net loss from operations of $8,747,795, net with depreciation and amortization, amortization of debt discount and deferred financing costs of $5,055,644 as well as $418,385 fair value of vested options and warrants issued, $242,000 in stock based compensation for services, minority interests of $17,089, non cash loss of disposal of fixed assets of $11,184 and to the changes in the balances of current assets and liabilities. Accounts payable and accrued expenses, and advances received from customers increased by $216,745 (net), and inventory, receivables, prepaid expenses and other current assets decreased (net) by $1,146,371.

Cash flows used by in investing activities for the year ended December 31, 2007 was $197,757, due to the purchase of property and equipment.

We met our cash requirements during the period through net proceeds from the sale of common stock of our subsidiary, Solar Thin Power, Inc of $3,348,395, net with payments towards related party notes of $157,472.

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 believe, we have sufficient cash on hand as of December 31, 2007 to meet our working capital needs and requirements for the next twelve (12) months. However, 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.

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 wholly 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.

The translation of the Company’s subsidiaries forint denominated balance sheets into U.S. dollars, as of December 31, 2007, has been affected by the weakening of the U.S. dollar against the Hungarian forint from 191.62 as of December 31, 2006, to 172.61 as of December 31, 2007, 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, 2007 and 2006 were 183.64 and 198.80, respectively.

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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 No. 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 SFAS No. 156, Accounting for Servicing of Financial Assets - an amendment to FASB Statement No. 140. SFAS No. 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, results of operations or cash flows.

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 No. 5, “ Accounting for Contingencies”. FIN 48 is effective for fiscal years beginning after December 15, 2006. We did not have a material impact on our consolidated financial position, results of operations or cash flows.

In September 2006, FASB issued its SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No.157 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, SFAS No. 157 does not require any new fair value measurements. However, for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective 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, results of operations or cash flows.

In September 2006 the FASB issued its SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”). SFAS No. 158 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. SFAS No. 158 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. SFAS No. did not have a material impact on the Company's financial position, results of operations or cash flows as the Company does not have any defined benefit pension and other postretirement plans at December 31, 2007.

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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 adopted FSP 00-19-2 in the preparation of the financial statements (see Note 1).

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 position, results of operations, or cash flows.

In June 2007, the Accounting Standards Executive Committee issued Statement of Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP 07-1 was originally determined to be effective for fiscal years beginning on or after December 15, 2007, however, on February 6, 2008, FASB issued a final Staff Position indefinitely deferring the effective date and prohibiting early adoption of SOP 07-1 while addressing implementation issues.

In June 2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and Development Activities” (EITF 07-3), which requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development (R&D) activities be deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. EITF 07-3 will be effective for fiscal years beginning after December 15, 2007. The Company does not expect that the adoption of EITF 07-3 will have a material impact on our consolidated financial position, results of operations or cash flows.

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In December 2007, the FASB issued SFAS No. 141(R),"Business Combinations" ("SFAS No. 141(R)"), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141(R) is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS No. 160"), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets. SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its financial position, results of operations or cash flows.

In December 2007, the FASB ratified the consensus in EITF Issue No. 07-1, “Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1 defines collaborative arrangements and requires collaborators to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) the other collaborators based on other applicable authoritative accounting literature, and in the absence of other applicable authoritative literature, on a reasonable, rational and consistent accounting policy is to be elected. EITF 07-1 also provides for disclosures regarding the nature and purpose of the arrangement, the entity’s rights and obligations, the accounting policy for the arrangement and the income statement classification and amounts arising from the agreement. EITF 07-1 will be effective for fiscal years beginning after December 15, 2008, which will be the Company’s fiscal year 2009, and will be applied as a change in accounting principle retrospectively for all collaborative arrangements existing as of the effective date. The Company has not yet evaluated the potential impact of adopting EITF 07-1 on our consolidated financial position, results of operations or cash flows.

 Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

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.

On August 8, 2007, SG provided the Company with the letter addressed to the SEC, stating that it agreed with the statements in the Company’s Form 8-K/A as filed with the SEC on June 14, 2006.

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On July 12, 2006, the board of directors of Solar Thin Films approved the engagement of the firm of RBSM LLP formerly known as 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 RBSM LLP, the Company had not consulted RBSM LLP regarding any of the accounting or auditing concerns stated in Item 304(a)(2) of Regulation S-B.

ITEM 8A. CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework . Based on our assessment we believe that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria.

This annual report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission

In the prior year, 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 United Global, Inc. as a 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, in the prior year, we concluded that our disclosure controls were not effective as of the end of the period covered by the prior year report.

In the current year, we implemented the following remedial measures to address the identified material weaknesses and concluded that our disclosure controls were effective as of the end of the period covered by this report. 

· 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.

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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 year to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

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

Executive Officers and Directors

The following table sets forth certain information regarding the executive officers and directors of the Company as of March 27, 2008

Name	Age	Position
Peter Lewis	48	Chief Executive Officer and Director
Robert M. Rubin	66	Chief Financial Officer and 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.

Peter Lewis. Mr. Lewis briefly provided consulting services to RESI, a business partner of the Company (from March 2007 until May 2007). A special meeting of the Board of Directors was held on August 22, 2007. The Board unanimously approved the appointment of Peter Lewis to the Board of Directors at such meeting. Mr. Lewis has served as the Company's Chief Executive Officer since June 2007. From 2005 through 2006, Mr. Lewis served as an Executive Vice President of KmX Corporation, a Toronto based company he helped co-found that provides advanced membrane solutions for the chemical recycling and ethanol markets. Prior to joining KmX Corporation, from 2002 through 2004, Mr. Lewis served as the Chief Operating Officer of CA Technology (now Agilence), a New Jersey based company providing software and hardware solutions to the digital video and security marketplace. Mr. Lewis holds a B.A. in Economics from Columbia and an M.B.A. from Harvard Business School.

Robert M. Rubin . Mr. Rubin has served as a director since May 1991, and was our Chief Executive Officer from May 1991 to January 1, 1994. Mr. Rubin currently serves as our Chief Financial Officer. 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 until June 2006, Mr. Rubin served as Chairman of the Board, President and Chief Executive Officer. Mr. Rubin resigned as Chairman in June 2006 and as an executive officer in October 2006. Mr. Rubin continues to serve as a director and consultant of our company. 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. Rubin 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). On August 20, 2007, the Board of Directors of Solar Thin Films, Inc. (the “Company”), by unanimous written consent, elected Robert Rubin as its Chief Financial Officer. 

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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BOARD MEETINGS

In 2006, the board did not meet and made eight written resolutions. In 2007 the board met twice.

BOARD COMMITTEES

We have not established an audit committee, compensation committee 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 2007. 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, 2007, 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, 2007 and 2006.

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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, 2007 and 2006 to our Chief Executive Officer and our most highly compensated officers other than the Chief Executive Officer at December 31, 2007 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 ($)		Total ($)
Peter Lewis (1)		2007		$	131,250		—	$	58,333	(2)	$	356,618	(3)		—		—		—	$	546,201
Chief Executive Officer		2006		$	—		—		—			—			—		—		—		—
Zoltan Kiss *		2007		$	136,000		—		—			—			—		—			$	136,000
Director (5)		2006	)	$	100,800		—		—			—			—		—		—	$	100,800
Robert Rubin		2007		$	245,000		—		—			—			—		—		—	$	245,000
Chief Financial Officer, Director(7)		2006		$	255,972		—		—			—			—		—		—	$	255,972
Csaba Toro**		2007		$	103,068		—		—			—			—		—		—	$	103,068
Chief Executive Officer (4)		2006		$	73,560		N/A	$	100,000	(5)	$	2,705,400	(6)		—		—		—	$	2,878,960

* Mr. Kiss resigned as director of the Company in December 2007

** Mr. Toro no longer serves as an executive officer of our company from June 20, 2007.

(1) Mr. Lewis was appointed as Chief Executive Officer of our company on June 20, 2007.

(2) In accordance with Mr. Lewis’s employment agreement, Mr. Lewis is entitled to receive 187,617 shares of common stock per year. The shares are valued at the stated value in the employment agreement of $0.533 per share, which was the the average closing bid price for the 20 trading days immediately prior to the date of the employment agreement.

(3) Mr. Lewis was granted a ten year option to purchase 3,000,000 shares of common stock at an exercise price of $0.533 per share on a cashless basis vesting on a pro-rata basis over a period of two years. The option was valued using the black scholes option pricing model assuming a ten year life, no expected dividend payments a volatility of 82.53% and a risk free rate of 5.14%.

(4) Mr. Toro was appointed as Chief Executive Officer of our company on October 31, 2006. In accordance with Mr. Toro’s employment agreement, Mr. Toro was 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. Mr. Toro resigned as an executive officer and director of the Company on June 20, 2007. All obligations under Mr. Toro’s employment agreement, including the stock options granted were terminated.

(5) In June 2006, Mr. Kiss was appointed as a director and consultant. Mr. Kiss resigned as a Director and Chairman of the Company effective December 20, 2007.

(6) 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%. Mr. Toro resigned as an executive officer and director of the Company on June 20, 2007. All obligations under Mr. Toro’s employment agreement, including the stock options granted were terminated.

(7)In June 2006, Mr. Rubin was appointed as a director and consultant. Mr. Rubin was appointed Chief Financial Officer of the Company in August 2007. In addition to the compensation noted above, Mr. Rubin’ wife, an employee of the Company receives a salary of $1,250 per month for administrative services.

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OUTSTANDING EQUITY AWARDS

Option Awards		Stock Awards
Name	Number  of  Securities  Underlying  Unexercised  Options  (#)  Exercisable