This Management's Discussion and Analysis of Financial Condition and Results of Operations section and other parts of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve risks and uncertainties. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as "may", "could", "would", "should", "will", "expects", "anticipates", "intends", "plans", "believes", "estimates", and similar expressions. Our actual results and the timing of certain events may differ significantly from the results and timing described in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed or referred to in the Annual Report on Form 10-K for the year ended December 31, 2011 and in subsequent period reports filed with the Securities and Exchange Commission, including this report. The following discussion and analysis of our financial condition and results of operations should be read in light of those factors and in conjunction with our accompanying Consolidated Financial Statements, including the Notes thereto.

Overview

We develop, manufacture and market highly-engineered products and services in two principal business areas: (i) capital equipment and systems for the photovoltaic solar industry and (ii) biomedical, generally bringing to bear expertise in materials technologies, surface science and thin films across both business areas, discussed below.

In the photovoltaic solar area, we develop, manufacture and market specialized equipment for the production of terrestrial photovoltaic modules from solar cells and provide photovoltaic systems for grid connected applications in the commercial markets. Our equipment has been installed in approximately 200 factories in 50 countries. The equipment market is very competitive with major competitors located in Japan and Switzerland. Our flagship product is our Sun Simulator which tests module performance. Our other product offerings include turn-key module lines and to a lesser extent other individual equipment. To compete we offer other services such as training and assistance with module certification. We also provide turn-key services to our customers to backward integrate to solar cell manufacturing. At times, we supply materials such as solar cells to certain customers.

In the biomedical area, we provide value-added surface treatments to manufacturers of orthopedic and other medical devices that enhance the durability, antimicrobial characteristics or other material characteristics of their products; and perform sponsored research programs into practical applications of advanced biomedical and biophotonic technologies.

On March 9, 2012, we completed the sale of our semiconductor business unit, which provides semiconductor foundry services, operates a semiconductor foundry and fabrication facility and is engaged in the business of wafer epitaxy, foundry services, and device fabrication for the defense, medical, telecommunications and consumer products markets (the "Semiconductor Business Unit"), to Masimo Corporation ("Masimo"). See Note 12 to the unaudited condensed consolidated financial statements.

On December 14, 2009, we completed the sale of our Medical Products Business Unit, which develops and markets coated and uncoated hemodialysis catheters and related devices for the treatment of chronic kidney disease (the "Medical Products Business Unit"), to Bard Access Systems, Inc. ("Bard"). Accordingly, the results of operations and liabilities of the Medical Products Business Unit are being presented herein as discontinued operations. See Note 12 to the unaudited condensed consolidated financial statements.

Operating results will depend upon revenue growth and product mix, as well as the timing of shipments of higher priced products from our solar equipment line and delivery of solar systems. Export sales, which amounted to 64% and 65% of net sales and revenues for the three and six months ended June 30, 2012, respectively, and 74% and 55% of net sales and revenues for the three and six months ended June 30, 2011, respectively, continue to constitute a significant portion of our net sales and revenues.

Results of Operations

The following table sets forth certain items as a percentage of net sales and
revenues for the periods presented:
                                           Three Months Ended June 30,          Six Months Ended June 30,
                                             2012               2011             2012               2011
Net sales and revenues                       100  %             100  %           100  %             100  %
Cost of sales and revenues                   (81 )              (61 )            (77 )              (73 )
Gross margin                                  19                 39               23                 27
Selling, general and administrative
expenses                                     (45 )              (28 )            (46 )              (25 )
Internal research and development                                                                    (2 )
expenses                                      (1 )               (2 )             (1 )
 Operating income (loss) from                                                                         -
continuing operations                        (27 )                9              (24 )
Other expense, net                            (1 )                -                -                  -
Income (loss) from continuing
operations before income tax benefit         (28 )                9              (24 )                -
Income tax benefit - continuing
operations                                     -                  -               14                  -
Income (loss) from continuing
operations                                   (28 )                9              (10 )                -
Income (loss) from discontinued
operations, net of tax                         -                 (4 )             21                 (4 )

Overall

Our total net sales and revenues for the six months ended June 30, 2012 were $14.1 million as compared to $31.6 million for the six months ended June 30, 2011, which represents a decrease of $17.5 million or 55%. The decrease was primarily attributable to a $16.7 million decrease in solar revenue and a decrease of $805 thousand in biomedical revenue.

Solar Business Unit

Sales in our solar business unit decreased 61% during the six months ended June 30, 2012 to $10.7 million as compared to $27.4 million for the six months ended June 30, 2011. The decrease is the result of no solar cell material revenue in 2012 compared to $7.2 million in 2011, due to the completion of definite delivery commitments to a solar cell materials contract in the first quarter of 2011 and a decrease in solar module equipment sales in 2012 of $9.8 million.

Biomedical Business Unit

Revenues on our biomedical business unit decreased 19% during the six months ended June 30, 2012 to $3.4 million as compared to $4.2 million for the six months ended June 30, 2011. The decrease was primarily attributable to a decrease in revenue from our orthopedics coating services and, to a lesser extent, a decrease in revenue from our research and development contracts.

Three and Six Months Ended June 30, 2012 Compared to Three and Six Months Ended
June 30, 2011

Net Sales and Revenues

The following table categorizes our net sales and revenues for the periods
presented:
                                           Three Months Ended June 30,               Decrease
(in thousands)                                2012              2011             $             %
Sales of goods                          $        4,449     $      11,661       (7,212 )        (62 )%
Contract research and services revenues          2,171             2,210          (39 )         (2 )%
Net sales and revenues                  $        6,620     $      13,871       (7,251 )        (52 )%

The 62% decrease in sales of goods for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 was primarily due to a decrease of $7.3 million in solar module manufacturing equipment revenues, partially offset by a slight increase in solar systems and advanced technology center revenues. The decrease in solar module equipment sales of 63% in 2012 as compared to 2011 was primarily due to a decrease in individual module equipment units delivered in 2012.

The 2% decrease in contract research and services revenues for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 is primarily attributable to a decrease of $468 thousand in biomedical revenue, partially offset by an increase of $429 thousand in solar research and development revenue. Revenues from our biomedical services decreased 21% in 2012 as compared to 2011 as a result of a decrease in the number and value of biomedical orders in 2012 along with revenue recognized on a large biomedical funded research project favorably impacting 2011. The increase in revenues from our solar research and development services in 2012 as compared to 2011 was a result of revenue recognized on three government funded solar research projects in 2012.

The following table categorizes our net sales and revenues for the periods presented:

                                            Six Months Ended June 30,                Decrease
(in thousands)                                2012              2011             $             %
Sales of goods                          $        9,938     $      27,378      (17,440 )        (64 )%
Contract research and services revenues          4,157             4,221          (64 )         (2 )%
Net sales and revenues                  $       14,095     $      31,599      (17,504 )        (55 )%

The 64% decrease in sales of goods for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 was primarily due to a decrease of $9.8 million in solar module manufacturing equipment revenues, a decrease of $7.2 million in solar cell materials revenue, and a decrease of $423 thousand in solar systems revenues. The decrease in solar module equipment sales of 50% in 2012 as compared to 2011 was primarily due to a decrease in individual module equipment units delivered in 2012. The decrease in sales of solar cell materials, all to one customer, of 100% in 2012 as compared to 2011 was due to the completion of definite delivery commitments to a solar cell materials contract in the first quarter of 2011. The decrease in sales of solar systems of 90% in 2012 as compared to 2011 was primarily due to the completion of a photovoltaic system project in 2011.

The 2% decrease in contract research and services revenues for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 is primarily attributable to a decrease of $796 thousand in biomedical revenue, partially offset by an increase of $732 thousand in solar research and development revenue. Revenues from our biomedical services decreased 19% in 2012 as compared to 2011 as a result of a decrease in the number and value of biomedical orders in 2012 along with revenue recognized on a large biomedical funded research project favorably impacting 2011. Revenues from our solar research and development services increased 1,145% in 2012 as compared to 2011 as a result of revenue recognized on three government funded solar research projects in 2012.

Cost of Sales and Revenues

The following table categorizes our cost of sales and revenues for the periods
presented, stated in dollars and as a percentage of related sales and revenues:
                                             Three Months Ended June 30,                   Increase (Decrease)
(in thousands)                         2012             %         2011         %              $              %
Cost of goods sold               $    4,134              93 %   $ 7,417         64 %   $     (3,283 )       (44 )%
Cost of contract research and
services                              1,240              57 %     1,115         50 %            125          11  %
Net cost of sales and revenues   $    5,374              81 %   $ 8,532         62 %   $     (3,158 )       (37 )%

Cost of goods sold decreased 44% for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, primarily as a result of decreased costs related to solar module equipment, partially offset by a slight increase in solar systems costs. The decrease in solar module equipment costs of 46% in 2012 as compared to 2011 was primarily due to a decrease in associated revenue. As a percentage of sales, cost of goods sold was 93% of sales of goods in 2012 as compared to 64% of sales of goods in 2011. This increase in the percentage of sales in 2012 is due primarily to a lower utilization of capacity and an unfavorable product mix in the solar business unit.

Cost of contract research and services increased 11% for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, primarily as a result of increased costs related to solar research and development services, partially offset by a slight decrease in costs related to biomedical services. The increase in solar research and development services costs of 249% in 2012 as compared to 2011 was primarily due to an increase in associated revenue from three government funded solar research projects. Cost of contract research and services as a percentage of related revenue increased to 57% of related revenues

in 2012 from 50% in 2011, primarily due to lower margin orders in biomedical services.

Cost of sales and revenues also includes approximately $16 thousand and $26 thousand of stock-based compensation for the three months ended June 30, 2012 and 2011, respectively.

The following table categorizes our cost of sales and revenues for the periods presented, stated in dollars and as a percentage of related sales and revenues:

                                            Six Months Ended June 30,                  Increase (Decrease)
(in thousands)                       2012          %          2011         %              $              %
Cost of goods sold               $    8,422         85 %   $ 20,764         76 %   $    (12,342 )       (59 )%
Cost of contract research and
services                              2,474         60 %      2,378         56 %             96           4  %
Net cost of sales and revenues   $   10,896         77 %   $ 23,142         73 %   $    (12,246 )       (53 )%

Cost of goods sold decreased 59% for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, primarily as a result of decreased costs related to solar cell materials, solar module equipment and solar systems. The decrease in costs of solar cell materials, all to one customer, of 100% in 2012 as compared to 2011 was due to the completion of definite delivery commitments to a solar cell materials contract in the first quarter of 2011. The decrease in solar module equipment costs of 39% in 2012 as compared to 2011 was primarily due to a decrease in associated revenue. The decrease of solar system costs of 61% in 2012 as compared to 2011 was primarily due to the completion of a photovoltaic system project in 2011 as compared to none in 2012. As a percentage of sales, cost of goods sold was 85% of sales of goods in 2012 as compared to 76% of sales of goods in 2011. This increase in the percentage of sales in 2012 is due primarily to a lower utilization of capacity and an unfavorable product mix in the solar business unit.

Cost of contract research and services increased 4% for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, primarily as a result of increased costs related to solar research and development services, partially offset by decreased costs related to biomedical services. The increase in solar research and development services costs of 262% in 2012 as compared to 2011 was primarily due to an increase in associated revenue from three government funded solar research projects. The decrease in biomedical services costs of 7% in 2012 as compared to 2011 was primarily due to a decrease in associated revenue. Cost of contract research and services as a percentage of related revenue increased to 60% of related revenues in 2012 from 56% in 2011, primarily due to lower margin orders in biomedical services.

Cost of sales and revenues also includes approximately $35 thousand and $53 thousand of stock-based compensation for the three months ended June 30, 2012 and 2011, respectively.

Operating Expenses

The following table categorizes our operating expenses for the periods
presented, stated in dollars and as a percentage of total sales and revenues:
                                      Three Months Ended June 30,                          Decrease
(in thousands)               2012              %           2011           %             $             %
Selling, general and
administrative         $    2,940                45 %   $   3,893           28 %   $    (953 )        (24 )%
Internal research and
development                    93                 1 %         203            2 %        (110 )        (54 )%
Operating expenses     $    3,033                46 %   $   4,096           30 %   $  (1,063 )        (26 )%

Selling, General and Administrative Expenses

Selling, general and administrative expense decreased 24% in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, primarily as a result of a decrease in agent commissions, marketing and employee related expenses in the solar business unit. In addition, a benefit was realized related to the change in value of the deferred compensation plan. Selling, general and administrative expense increased to 45% of sales and revenues in 2012 as compared to 28% in 2011. The increase was primarily due to the decrease in sales and revenues.

Selling, general and administrative expenses include approximately $50 thousand and $74 thousand of stock-based compensation for the three months ended June 30, 2012 and 2011, respectively.

Internal Research and Development

Internal research and development expense decreased 54% in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, primarily as a result of lower levels of research and development spent in the solar group. As a percentage of sales and revenue, internal research and development expenses decreased slightly in 2012 when compared to 2011.

The following table categorizes our operating expenses for the periods presented, stated in dollars and as a percentage of total sales and revenues:

                                           Six Months Ended June 30,               Decrease
(in thousands)                           2012         %       2011      %         $          %
Selling, general and administrative $   6,404        46 %   $ 7,958    25 %   $ (1,554 )   (20 )%
Internal research and development         191         1 %       536     2 %       (345 )   (64 )%
Operating expenses                  $   6,595        47 %   $ 8,494    27 %   $ (1,899 )   (22 )%

Selling, General and Administrative Expenses

Selling, general and administrative expense decreased 20% in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, primarily as a result of a decrease in commissions, marketing, rent and employee related expenses in the solar business unit. Selling, general and administrative expense increased to 46% of sales and revenues in 2012 as compared to 25% in 2011. The increase was primarily due to the decrease in sales and revenues.

Selling, general and administrative expenses include approximately $86 thousand and $153 thousand of stock-based compensation for the six months ended June 30, 2012 and 2011, respectively.

Internal Research and Development

Internal research and development expense decreased 64% in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, primarily as a result of lower levels of research and development spent in the solar group. As a percentage of sales and revenue, internal research and development expenses decreased slightly in 2012 when compared to 2011.

Other Expense, Net

We incurred interest expense of $36 thousand and $34 thousand for the three months ended June 30, 2012 and 2011, respectively. We had currency exchange gains of approximately $1 thousand and currency exchange losses of approximately $5 thousand during the three months ended June 30, 2012 and 2011, respectively.

We incurred interest expense of $67 thousand and $65 thousand for the six months ended June 30, 2012 and 2011, respectively. We had currency exchange gains of approximately $3 thousand and currency exchange losses of approximately $2 thousand during the six months ended June 30, 2012 and 2011, respectively.

Income Taxes

We recorded an income tax benefit on our loss from continuing operations of $2.0 million during the six months ended June 30, 2012, which was offset by a provision on our income from discontinued operations of $2.0 million during the six months ended June 30, 2012. Gross federal net operating loss carryforwards were approximately $14 million as of December 31, 2011 and expire at various times through 2031. We have a full valuation allowance recorded against the net deferred tax assets at June 30, 2012 due to uncertainty regarding realization of these assets in the future.

We recorded a state income tax provision of $15 thousand for the three and six months ended June 30, 2011, respectively.

Loss from Discontinued Operations

During the first quarter of 2012, we began pursuing an exclusive sales process of our Semiconductor Business Unit.
On March 9, 2012, we completed the sale of the Semiconductor Business Unit to Masimo. Accordingly, the results of operations and assets and liabilities of the Semiconductor Business Unit are being presented herein as discontinued operations.

We recorded net income from discontinued operations of $3.0 million for the six months ended June 30, 2012. Included in discontinued operations for the six months ended June 30, 2012 is a gain on sale of business unit to Masimo of $5.4 million

and an income tax provision of $2.0 million. Included in the gain of $5.4 million is proceeds received from Masimo of $8.0 million, less assets and liabilities assumed by Masimo of $2.1 million and legal and professional fees related to complete the sale of $425 thousand.

We recorded a loss from discontinued operations of $495 thousand and $1.2 million for the three and six months ended June 30, 2011, respectively. See Note 12 to the unaudited condensed consolidated financial statements.

Net Income (Loss)

We reported net loss of $1.8 million and a net income $694 thousand for the three months ended June 30, 2012 and 2011, respectively. Net loss increased approximately $2.5 million, primarily due to a $4.1 million decline in gross margin associated with lower revenue, partially offset by a $1.1 million decline in operating expenses and a loss of $495 thousand from discontinued operations recorded in the three month period ended June 30, 2011.

We reported net income of $1.5 million and a net loss of $1.3 million for the six months ended June 30, 2012 and 2011, respectively. Net income increased approximately $2.9 million, primarily due to a $6.2 million improvement from discontinued operations before tax and $1.9 million decline in operating expenses, partially offset by a $5.3 million decline in gross margin associated with lower revenue.

Liquidity and Capital Resources
June 30, December 31, Increase (in thousands) 2012 2011 $ % Cash and cash equivalents $ 7,199 $ 4,758 $ 2,441 51 % Working capital $ 9,673 $ 5,700 $ 3,973 70 %

Cash and cash equivalents increased due to cash provided by operating and investing activities, primarily due to one time payments received in the first quarter of 2012 totaling $6.6 million related to the sale of the Semiconductor Business Unit included in discontinued operations. The overall increase in working capital is due to an increase in cash and a decrease in current liabilities, primarily accounts payable, advances on contracts in progress and liabilities of discontinued operations, partially offset by a decline in accounts receivable, inventory, deposits on equipment for inventory and assets of discontinued operations. We have historically funded our operating cash requirements using operating cash flow, proceeds from the sale and licensing of technology and assets and proceeds from the sale of equity securities.

There are no material commitments by us for capital expenditures. At June 30, 2012, our accumulated deficit was approximately $12.5 million, compared to accumulated deficit of approximately $14.1 million as of December 31, 2011.

During the first quarter of 2012, we began pursuing an exclusive sales process of our Semiconductor Business Unit and on March 9, 2012, we completed the sale of the Semiconductor Business Unit to Masimo Corporation. The asset purchase agreement provided that the aggregate purchase price for the Semiconductor Business Unit was $8.0 million plus the assumption of $500 thousand in liabilities, with the cash portion of the purchase price being reduced by retained cash and liabilities assumed by Masimo in excess of $500 thousand. As a result, in the fist quarter of 2012 we received approximately $7.3 million in cash (less the escrow described below) and Masimo assumed approximately $1.2 million in liabilities. Of the purchase price, approximately $717 thousand was deposited into an indemnity escrow account for fifteen months to partially secure our obligations for any indemnity claims under the asset purchase agreement. In connection with this transaction, the lease for the premises in Hudson, New Hampshire where the Semiconductor Business Unit was located was terminated on March 9, 2012, and we were released from all future obligations under the lease as of such date. See Note 12 to the unaudited condensed consolidated financial statements.

We have numerous options on how to fund future operational losses or working capital needs, including but not limited to sales of equity, bank debt or the sale or license of assets and technology, as we have done in the past; however, there are no assurances that we will be able to sell equity, obtain or access bank debt, or sell or license assets or technology on a timely basis and at appropriate values. We have developed several plans including cost containment . . .