SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)
  X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 ---  SECURITIES EXCHANGE ACT OF 1934

For the period ended                   DECEMBER 31, 1999
                     -----------------------------------------------------------
                                       OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 ---  SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to
                               ---------------------    ------------------------

                 Commission file number       1-8403
                                        ------------------

                        ENERGY CONVERSION DEVICES, INC.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

        DELAWARE                                          38-1749884
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

  1675 WEST MAPLE ROAD, TROY, MICHIGAN                            48084
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code            (248) 280-1900
                                                   -----------------------------

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such reports,  and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
                                             ----    ----

      As of  February  11,  2000,  there were  219,913  shares of Class A Common
Stock,  430,000 shares of Class B Common Stock and  12,895,114  shares of Common
Stock outstanding.

                               Page 1 of 32 Pages



<PAGE>




                             PART I - FINANCIAL INFORMATION
                             ------------------------------

Item 1.  Financial Statements
-------  --------------------

                     ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                          CONSOLIDATED STATEMENTS OF OPERATIONS
                          -------------------------------------
                                       (Unaudited)
<TABLE>
<CAPTION>
                                              Three Months Ended            Six Months Ended
                                                 December 31,                  December 31,
                                            -------------------------   -------------------------
                                                1999          1998          1999          1998
                                            -----------   -----------   -----------   -----------
REVENUES
<S>                                         <C>           <C>           <C>           <C>
 Product sales                              $ 1,377,228   $ 1,041,300   $ 3,247,395   $ 2,007,855
 Royalties                                    1,074,879       616,545     1,738,034     1,231,881
 Revenues from product development
    agreements                                1,992,195     4,828,913     5,909,749     8,602,260
 Revenues from license and other
    agreements                                1,778,000     4,442,000     2,178,000     4,484,000
 Other                                          547,617       940,260     1,276,813     1,720,647
                                            -----------   -----------   -----------   -----------
    TOTAL REVENUES                            6,769,919    11,869,018    14,349,991    18,046,643

EXPENSES
 Cost of product sales                        2,287,791     2,215,205     4,638,488     4,307,204
 Cost of revenues from product
    development agreements                    2,260,195     4,885,649     5,897,963     8,916,986
 Product development and research             4,205,219     2,996,934     7,337,820     5,903,085
 Patents                                        419,642       403,299       893,359       828,129
 Operating, general and administrative        1,348,374     1,027,686     2,767,504     2,185,054
                                             ----------   -----------   -----------   -----------
    TOTAL EXPENSES                           10,521,221    11,528,773    21,535,134    22,140,458
                                             ----------   -----------   -----------   -----------

INCOME (LOSS) FROM OPERATIONS                (3,751,302)      340,245    (7,185,143)   (4,093,815)

OTHER INCOME (EXPENSE)
 Gain on sale of Ovonic Battery Company
    stock                                         --        1,970,000         --        1,970,000
 Equity interest in United Solar's net loss    (738,000)   (1,026,914)   (1,298,000)   (2,115,914)
 Interest expense                              (117,463)     (140,388)     (216,256)     (307,305)
 Interest income                                192,443       326,058       418,902       681,551
 Other nonoperating income (net)                123,866       196,724       244,901       307,213
                                             ----------   -----------   -----------   -----------
    TOTAL OTHER INCOME (EXPENSE)               (539,154)    1,325,480      (850,453)      535,545
                                             ----------   -----------   -----------   -----------
NET INCOME (LOSS)                           $(4,290,456)  $ 1,665,725   $(8,035,596)  $(3,558,270)
                                            ============  ===========   ============  ============
BASIC NET INCOME (LOSS) PER SHARE           $      (.32)  $       .13   $      (.60)  $      (.28)
                                            ============  ===========   ============  ============
DILUTED NET INCOME (LOSS) PER
     SHARE                                  $      (.32)  $       .13   $      (.60)  $      (.28)
                                            ============  ===========   ============  ============
</TABLE>

See notes to consolidated financial statements.

                                           2

<PAGE>




                     ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                               CONSOLIDATED BALANCE SHEETS
                               ---------------------------

                                         ASSETS
                                         ------
                                      (Unaudited)
<TABLE>
<CAPTION>

                                                             December 31,      June 30,
                                                                 1999            1999
                                                             ------------    ------------
CURRENT ASSETS
<S>                                                           <C>             <C>
   Cash, including cash equivalents of
     $12,293,000 as of December 31, 1999 and
     $19,026,000 as of June 30, 1999                          $12,419,078     $19,076,983
   Accounts receivable (net of allowance for
     uncollectible accounts of approximately
     $310,000 at December 31, 1999 and
     $303,000 at June 30, 1999)                                 5,988,270       6,296,097
   Amounts due from related parties                             1,058,751       1,423,828
   Inventories                                                    372,210         589,245
                                                              -----------     -----------
     TOTAL CURRENT ASSETS                                      19,838,309      27,386,153

PROPERTY, PLANT AND EQUIPMENT
   Land and land improvements                                     312,588         312,588
   Buildings and improvements                                   3,795,114       3,733,816
   Machinery and other equipment (including
        construction in progress of approximately
        $845,000 at December 31, 1999 and
        $844,000 at June 30, 1999)                             18,566,732      18,353,014
   Capitalized lease equipment                                  4,982,140       4,988,672
                                                              -----------     -----------
                                                               27,656,574      27,388,090
Less accumulated depreciation and amortization                (20,513,395)    (19,449,827)
                                                              -----------     -----------
     TOTAL PROPERTY, PLANT AND EQUIPMENT                        7,143,179       7,938,263

Investments in EV Global and Innovative Transportation Systems  2,239,716       2,239,716

JOINT VENTURES
   United Solar                                                   558,411         956,411
   GM Ovonic                                                        --              --
   Sovlux                                                           --              --
   Ovonyx                                                           --              --

OTHER ASSETS                                                    1,241,129       1,287,455
                                                              -----------     -----------
TOTAL ASSETS                                                  $31,020,744     $39,807,998
                                                              ===========     ===========
</TABLE>




See notes to consolidated financial statements.

                                           3

<PAGE>




                    ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                              CONSOLIDATED BALANCE SHEETS
                              ---------------------------
                         LIABILITIES AND STOCKHOLDERS' EQUITY
                         ------------------------------------
                                      (Unaudited)
<TABLE>
<CAPTION>

                                                            December 31,      June 30,
                                                                1999            1999
                                                            ------------    ------------
CURRENT LIABILITIES
<S>                                                         <C>             <C>
     Accounts payable and accrued expenses                  $  4,105,271    $  4,707,158
     Salaries, wages and amounts withheld
        from employees                                         1,721,822       1,581,447
     Deferred revenues under business
        agreements                                             1,431,609       1,349,087
     Current installments on long-term
        liabilities                                            1,273,952       1,309,508
                                                            ------------    ------------
           TOTAL CURRENT LIABILITIES                           8,532,654       8,947,200

LONG-TERM LIABILITIES                                          2,061,600       2,679,936

DEFERRED GAIN                                                    889,602       1,110,132

NON-REFUNDABLE ADVANCE ROYALTIES                               3,814,707       3,882,103
                                                            ------------    ------------
           TOTAL LIABILITIES                                  15,298,563      16,619,371

STOCKHOLDERS' EQUITY
     Capital Stock
        Class A Convertible Common Stock, par value $0.01 per share:
           Authorized - 500,000 shares
           Issued & outstanding - 219,913 shares                   2,199           2,199
        Class B Convertible Common Stock,
        par value $0.01 per share:
           Authorized, issued and outstanding - 430,000 shares     4,300           4,300
        Common Stock, par value $0.01 per share:
           Authorized  - 20,000,000  shares  Issued &  outstanding  - 12,843,898
           shares at December 31, 1999 and
           12,841,270 shares at June 30, 1999                    128,439         128,413
     Additional paid-in capital                              234,090,023     233,861,099
     Accumulated deficit                                    (213,563,548)   (205,527,952)
     Treasury stock at cost - 109,400 shares at
        December 31, 1999 and at June 30, 1999                (1,028,092)     (1,028,092)
     Unearned compensation on Class B Convertible
        Common Stock                                          (3,911,140)     (4,251,340)
                                                            ------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                    15,722,181      23,188,627
                                                            ------------    ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                    $ 31,020,744    $ 39,807,998
                                                            ============    ============
</TABLE>


See notes to consolidated financial statements.


                                           4

<PAGE>



                     ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Unaudited)

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                       December 31,
                                                               ----------------------------
                                                                   1999            1998
                                                               ------------    ------------
OPERATING ACTIVITIES:
<S>                                                            <C>             <C>
     Net loss                                                  $(8,035,596)    $(3,558,270)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                         1,082,777         848,632
           Equity interest in United Solar's net loss            1,298,000       2,115,914
           Gain on sale of Ovonic Battery stock                      --         (1,970,000)
           Creditable royalties                                    (67,396)        482,264
           Options issued to executive for services rendered       113,250         226,500
           Stock issued for services rendered                      425,850           --
           Amortization of deferred gain                          (220,530)       (220,484)
           Loss on disposal of capital equipment                     4,958           --
     Changes in working capital
           Accounts receivable and amounts due
              from related parties                                 672,904        (294,496)
           Inventories                                             217,035         362,846
           Other assets                                             46,326         274,842
           Accounts payable and accrued expenses                  (461,512)       (778,017)
           Deferred revenues under business agreements              82,522        (167,012)
                                                               -----------     -----------

NET CASH USED IN OPERATIONS                                     (4,841,412)     (2,677,281)

INVESTING ACTIVITIES:
     Investment in United Solar                                   (900,000)          --
     Purchases of capital equipment (net)                         (292,651)       (398,674)
                                                               -----------     -----------
NET CASH USED IN INVESTING ACTIVITIES                           (1,192,651)       (398,674)

FINANCING ACTIVITIES:
     Purchase of treasury stock                                      --           (419,284)
     Principal payments under short-term and long-term
        debt and capitalized lease obligations                    (653,892)       (663,348)
     Proceeds from sale of stock of subsidiary                       --          2,970,000
     Proceeds from sale of stock upon exercise of stock
        option and warrants                                         30,050         228,224
                                                               -----------     -----------
NET CASH PROVIDED BY (USED IN) FINANCING
   ACTIVITIES                                                     (623,842)      2,115,592
NET DECREASE IN CASH AND CASH EQUIVALENTS                       (6,657,905)       (960,363)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
   PERIOD                                                       19,076,983      25,786,112
                                                               -----------     -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $12,419,078     $24,825,749
                                                               ===========     ===========
</TABLE>

See notes to consolidated financial statements.

                                           5

<PAGE>



                     ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY

                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                          -------------------------------------
                                       (Unaudited)

                                                                Six Months Ended
                                                                    December 31,
                                                            --------------------
                                                              1999        1998
                                                            --------    --------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

          Cash paid for interest                            $216,256    $307,305






































                                           6

<PAGE>



        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - DECEMBER 31, 1999
        --------------------------------------------------------------

NOTE A - Basis of Presentation
------------------------------

      Information  for the three months and six months  ended  December 31, 1999
(fiscal 2000) and 1998 (fiscal 1999) is unaudited,  but includes all adjustments
which Energy Conversion  Devices,  Inc. ("ECD")  considers  necessary for a fair
presentation of financial condition, cash flows and results of operations.

      In accordance  with the  instructions  for the completion of the Quarterly
Report on Form 10-Q, certain  information and footnotes necessary to comply with
Generally  Accepted   Accounting   Principles   ("GAAP")  for  annual  financial
statements have been condensed or omitted.  These financial statements should be
read in conjunction with ECD's 1999 Annual Report on Form 10-K, which contains a
summary of ECD's accounting principles and other footnote information.

      The consolidated  financial statements include the accounts of ECD and its
approximately   91%-owned  subsidiary  Ovonic  Battery  Company,  Inc.  ("Ovonic
Battery"),  a company  formed to develop and  commercialize  ECD's Ovonic nickel
metal hydride  ("NiMH") battery  technology  (collectively  "the Company").  The
remaining  shares  of Ovonic  Battery  are owned by Honda  Motor  Company,  Ltd.
("Honda"),  Sanoh Industrial Company, Ltd. ("Sanoh") and Sanyo Electric Company,
Ltd. ("Sanyo"). Due to cumulative losses incurred by Ovonic Battery, no minority
interest is recorded in the consolidated financial statements.

      ECD also has two major investments accounted for by the equity method: (i)
United Solar Systems Corp. ("United Solar") (49.98%),  ECD's photovoltaic (solar
energy)  joint  venture with Canon Inc. of Japan  ("Canon"),  and (ii) GM Ovonic
L.L.C.  ("GM Ovonic") (40%),  Ovonic Battery's joint venture with General Motors
Corporation ("General Motors") to manufacture and sell the Company's proprietary
NiMH  batteries for  electric,  hybrid  electric and fuel cell electric  vehicle
applications  worldwide.  ECD also has a 50%-owned joint venture,  Ovonyx,  Inc.
("Ovonyx"),  with Mr.  Tyler  Lowrey,  a recognized  authority in  semiconductor
memory  technology and the former vice chairman and chief technology  officer of
Micron  Technology,   Inc.,  together  with  an  affiliate  of  Mr.  Lowrey,  to
commercialize  ECD's Ovonic  Unified  Memory  ("OUM").  In  addition,  ECD has a
50%-owned joint venture in Russia,  Sovlux Co., Ltd. ("Sovlux").  See Note D for
discussion of these ventures.

Investments  in  EV  Global  Motors  Company  ("EV  Global")  and  Innovative
Transportation Systems A.G. ("Innovative Transportation")

      The  Company  accounts  for its  investment  in EV  Global,  a  non-public
company,  under the cost  method of  accounting.  The Company  accounts  for its
investment in Innovative  Transportation,  formerly known as Unique Europa GmbH,
on the equity basis of accounting in accordance with Accounting Principles Board
Opinion ("APB") No. 18, The
                                        7

<PAGE>



NOTE A - Basis of Presentation (Continued)
------------------------------------------

Equity  Method of  Accounting  for  Investments  in Common  Stock.  The  Company
accounted  for  its  previous  investment  in  Unique  Mobility,  Inc.  ("Unique
Mobility") in accordance  with SFAS 115,  Accounting for Certain  Investments in
Debt and Equity Securities,  and classified this security as available-for-sale.
Unrealized  gains or losses as a result of changes  in the  market  value of the
Unique Mobility investments were  marked-to-market,  with the offset recorded to
Stockholders'  Equity. Upon the exchange of Unique Mobility stock for Innovative
Transportation the loss was realized.

      Upon  consolidation,   all  intercompany  accounts  and  transactions  are
eliminated.

      Certain items for the three months and six months ended  December 31, 1998
have been reclassified to be consistent with the  classification of items in the
three months and six months ended December 31, 1999.

      In preparing financial  statements in conformity with GAAP,  management is
required to make estimates and  assumptions  that affect the reported  amount of
assets and liabilities  and the disclosure of contingent  assets and liabilities
at the date of the  financial  statements  and revenues and expenses  during the
reported period.  Actual results could differ from those estimates.  The Company
is impacted by other factors such as the continued receipt of contracts from its
industrial partners and the U.S. government, its ability to protect and maintain
the   proprietary   nature  of  its  technology,   its  continued   product  and
technological  advances and the strength and ability of the Company's  licensees
and  joint  venture  partners  to  commercialize  the  Company's   products  and
technologies.

      During the first  quarter of the 1999 fiscal  year,  the  Company  adopted
Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  130,  Reporting
Comprehensive  Income.  This Statement  requires that all items recognized under
accounting  standards as components of comprehensive  earnings be reported in an
annual  financial  statement that is displayed with the same prominence as other
financial statements. This Statement also requires that an entity classify items
of  other  comprehensive  earnings  by  their  nature  in  an  annual  financial
statement.  For example,  other comprehensive  earnings include unrealized gains
and  losses on  marketable  securities  classified  as  available-for-sale.  The
Company's total comprehensive loss was as follows:
<TABLE>
<CAPTION>

                                             Three Months Ended              Six Months Ended
                                                December 31,                    December 31,
                                         -------------------------      ---------------------------
                                             1999           1998            1999           1998
                                         ------------   ------------    ------------   ------------
                                         (Unaudited)    (Unaudited)     (Unaudited)    (Unaudited)

<S>                                      <C>            <C>             <C>            <C>
Net Income (Loss)                        $(4,290,456)   $ 1,665,725     $(8,035,596)   $(3,558,270)
OTHER COMPREHENSIVE LOSSES:
Unrealized gains (losses) on securities       --             16,000          --           (275,000)
                                         -----------    -----------     -----------    -----------
COMPREHENSIVE INCOME (LOSS)              $(4,290,456)   $ 1,681,725     $(8,035,596)   $(3,833,270)
                                         ===========    ===========     ===========    ===========


</TABLE>

                                        8

<PAGE>



NOTE A - Basis of Presentation (Continued)
------------------------------------------

Accounts Receivable
-------------------

      The  following   tabulation  shows  the  component  elements  of  accounts
receivable from long-term contracts, royalties and other programs:

                                                 December 31,      June 30,
                                                     1999            1999
                                                 ------------     ------------
      U.S. Government:
         Amounts billed                          $ 1,015,903      $ 1,055,313
         Unbilled                                    639,734          876,649
                                                 -----------      -----------
               Total                               1,655,637        1,931,962
                                                 -----------      -----------
      Commercial Customers:
         Amounts billed                            1,848,940          910,848
         Related party billed
               - United Solar                        289,382          184,200
               - GM Ovonic                           625,242          830,875
         Royalties                                 1,762,428        1,430,731
         License fees                                528,000            --
         Due per contracts                           150,031        2,101,833
         Related party unbilled
               - United Solar                         23,127            --
               - GM Ovonic                           121,000          408,753
         Other unbilled                              214,246          116,236
                                                 -----------      -----------
            Total                                  5,562,396        5,983,476
                                                 -----------      -----------
      Other                                          138,988          107,487
      Allowance for Uncollectible Accounts          (310,000)        (303,000)
                                                 -----------      -----------
               TOTAL                             $ 7,047,021      $ 7,719,925
                                                 ===========      ===========


      Amounts due per contracts, related party unbilled, and other unbilled from
commercial  customers  represent  revenues  recognized  for the present value of
license  payments to be received in future periods.  They also include  revenues
recognized  on the  percentage-of-completion  method of  accounting  related  to
machine-building   contracts  and  amounts   earned  under  certain   commercial
contracts, for which amounts are billed in subsequent months.

      Certain  contracts  with the U.S.  government  require a retention that is
paid upon  completion of audit of the  Company's  indirect  rates.  There are no
material  retentions  at  December  31,  1999 and June 30,  1999.  Certain  U.S.
government   contracts  remain  subject  to  audit.   Management  believes  that
adjustments, if any, which may result from an audit would not be material to the
financial position or results of operations of the Company.


                                        9

<PAGE>



NOTE A - Basis of Presentation (Continued)
------------------------------------------
Inventories
-----------
      Inventories of raw  materials,  work in process and finished goods for the
manufacture of negative electrodes,  battery packs and other products,  together
with supplies,  are valued at the lower of cost (moving average) or market. Cost
elements  included in inventory are  materials,  direct labor and  manufacturing
overhead. Cost of sales is removed from inventory based on actual costs of items
shipped to customers.

      Inventories (principally those of Ovonic Battery) are as follows:

                                                December 31,      June 30,
                                                    1999            1999
                                                ------------    ------------

            Finished products                     $  --           $  1,000
            Work in process                        206,780         286,193
            Raw materials                          165,430         302,052
                                                  --------        --------
                                                  $372,210        $589,245
                                                  ========        ========

Product Sales
-------------

      Product sales include battery electrodes,  revenues related to building of
battery packs,  and revenues  related to  machine-building  contracts.  Revenues
related to  machine-building  contracts  are  recognized  on the  percentage-of-
completion method of accounting using the costs incurred to date as a percentage
of the total expected  costs.  All other product sales are  recognized  when the
product is shipped. In certain cases, cost of sales exceeds product sales due to
significant changes in products, manufacturing methods, and sales volume.

Royalties
---------

      Most license  agreements provide for the Company to receive royalties from
the sale of products  which  utilize the  licensed  technology.  Typically,  the
royalties  are  incremental  to and  distinct  from  the  license  fee  and  are
recognized  as revenue  upon the sale of the  respective  licensed  product.  In
several  instances,  the Company has received  cash  payments for  nonrefundable
advance royalty payments which are creditable against future royalties under the
licenses.  Advance  royalty  payments are deferred and recognized in revenues as
the  creditable  sales occur,  the  underlying  agreement  expires,  or when the
Company  has  demonstrable   evidence  that  no  additional  royalties  will  be
creditable and, accordingly, the earnings process is completed.

      For both ECD and Ovonic  Battery  royalties,  there are  royalty  trust or
contingent fee  arrangements  whereby the Company is obligated to pay to a trust
25% of optical memory royalties received and to a law firm 25% of Ovonic Battery
royalties received relative to

                                       10

<PAGE>



NOTE A - Basis of Presentation (Continued)
------------------------------------------

consumer battery licenses entered into in 1995 in settlement of an International
Trade Commission action.

Product Development, Patents and Technology
-------------------------------------------

      Product  development  and research costs are expensed as they are incurred
and, as such,  the Company's  investments  in its  technologies  and patents are
recorded at zero in its financial  statements,  regardless of their values.  The
technology  investments are the bases by which the Company is able to enter into
license and joint venture agreements.

Business Agreements
-------------------

      A substantial  portion of revenues are derived through business agreements
for  the  development  and/or  commercialization  of  products  based  upon  the
Company's proprietary technologies. Such agreements are of two types.

      The first type of business  agreement  relates to licensing  the Company's
proprietary  technology.  Licensing  activities  are  tailored  to provide  each
licensee  with  the  right  to use the  Company's  technology,  most of which is
patented, for a specific product application or, in some instances,  for further
exploration of new product applications of such technologies.  The terms of such
licenses,  accordingly,  are  tailored  to  address  a number  of  circumstances
relating to the use of such technology  which have been  negotiated  between the
Company and the licensee.  Such terms generally address whether the license will
be exclusive or  nonexclusive,  whether the licensee is limited to very narrowly
defined applications or to broader-based product manufacture or sale of products
using such technologies, whether the license will provide royalties for products
sold which  employ  such  licensed  technology  and how such  royalties  will be
measured, as well as other factors specific to each negotiated  arrangement.  In
some cases, licenses relate directly to product development that the Company has
undertaken  pursuant to product  development  agreements;  in other cases,  they
relate to product development and commercialization efforts of the licensee; and
other agreements combine the efforts of the Company with those of the licensee.

      License agreement fees are generally recognized as revenue at the time the
agreements are  consummated,  which is the  completion of the earnings  process.
Typically, such fees are nonrefundable, do not obligate the Company to incur any
future costs or require future  performance by the Company,  and are not related
to future  production  or  earnings of the  licensee.  License  fees  payable in
installments  are  recorded at the present  value of the amounts to be received,
taking into account the collectibility of the license fee. In some instances,  a
portion of such license fees is contingent  upon the  commencement of production
or other uncertainties.  In these cases, license fee revenues are not recognized
until  commencement of production or the resolution of uncertainties.  There are
no current or future direct costs associated with license fees.


                                       11

<PAGE>



NOTE A - Basis of Presentation (Continued)
------------------------------------------

      In the second  type of  agreement,  product  development  agreements,  the
Company conducts  specified product  development  projects related to one of its
principal  technology  specializations  for an  agreed-upon  fee.  Some of these
projects have stipulated  performance  criteria and deliverables  whereas others
require "best  efforts" with no specified  performance  criteria.  Revenues from
product development  agreements that contain specific  performance  criteria are
recognized  on a  percentage-of-completion  basis  which  matches  the  contract
revenues to the costs incurred on a project based on the  relationship  of costs
incurred to estimated  total  project  costs.  Revenue from product  development
agreements,  where there are no specific  performance  terms,  are recognized in
amounts equal to the amounts  expended on the programs.  Generally,  the agreed-
upon fees for product development agreements contemplate reimbursing the Company
for costs considered  associated with project activities  including expenses for
direct  product  development  and  research,  patents,  operating,  general  and
administrative  expenses  and  depreciation.  Accordingly,  expenses  related to
product  development  agreements  are recorded as cost of revenues  from product
development agreements.

Overhead Allocations
--------------------

      The Company allocates  overhead to product  development  research expenses
and to cost of revenues  from  research and  development  agreements  based on a
percentage of direct labor costs. For cost of revenues from product  development
agreements,  this allocation is limited to the amount of revenues,  after direct
expenses,  under the  applicable  agreements.  Overhead is  allocated to cost of
product sales through the application of overhead to inventory costs.

Other Operating Revenues
------------------------

      Other  operating  revenues  consist  principally  of  third-party  service
revenue realized by certain of the Company's service departments,  including the
Production  Technology  and Machine  Building  Division  and Central  Analytical
Laboratory, and changes in estimates of revenues recognized on certain customers
and contracts.

Other Non-Operating Income
--------------------------

      Other  non-operating  income-net  consists of the amortization of deferred
gains, rental income and gains and losses on sale of fixed assets.

                                       12

<PAGE>



NOTE B - Product Sales, Royalties, Revenues from Product Development Agreements
-------------------------------------------------------------------------------
and License and other Agreements
--------------------------------

      The Company has product sales and business  agreements  with third parties
for which royalties and revenues are included in the consolidated  statements of
operations. A summary of all of the Company's revenues follows:

                                                         Six Months Ended
                                                           December 31,
                                                   ----------------------------
                                                       1999            1998
                                                   ------------    ------------
Product Sales:
     Negative and positive electrodes              $ 1,119,953     $ 1,770,335
     Battery packs                                   1,004,762         237,520
     Machine building                                1,122,680           --
                                                   -----------     -----------
                                                   $ 3,247,395     $ 2,007,855
                                                   ===========     ===========
Royalties:
     Battery technology                            $ 1,676,424     $ 1,196,147
     Optical Memory                                     61,610          35,734
                                                   -----------     -----------
                                                   $ 1,738,034     $ 1,231,881
                                                   ===========     ===========
Revenues from product development agreements:
     Photovoltaics                                 $   873,531     $ 1,547,985
     Battery technology                              2,896,180       5,689,081
     Optical Memory                                    686,541       1,263,224
     Hydrogen                                        1,345,999          90,220
     Other                                             107,498          11,750
                                                   -----------     -----------
                                                   $ 5,909,749     $ 8,602,260
                                                   ===========     ===========
License and other agreements:
     Battery                                       $ 2,178,000     $ 4,484,000
                                                   ===========     ===========

      The following table presents  revenues by country based on the location of
the customer:

                                                         Six Months Ended
                                                           December 31,
                                                   ----------------------------
                                                       1999            1998
                                                   ------------    ------------
         United States                             $ 9,755,095     $11,358,917
         Japan                                       3,638,752       5,489,262
         Hong Kong                                       --            797,045
         Netherlands                                   687,500           --
         Other countries                               268,644         401,419
                                                   -----------     -----------
                                                   $14,349,991     $18,046,643
                                                   ===========     ===========

                                       13

<PAGE>



NOTE C - Nonrefundable Advance Royalties
----------------------------------------

      At December 31, 1999 and June 30, 1999, the Company  deferred  recognition
of revenue relating to  nonrefundable  advance royalty  payments.  Nonrefundable
advance royalties consist of the following:

                                              December 31,        June 30,
                                                  1999              1999
                                              ------------      ------------

            Battery                            $1,752,072        $1,792,068
            Optical Memory                      2,062,635         2,090,035
                                               ----------        ----------
                                               $3,814,707        $3,882,103
                                               ==========        ==========

NOTE D - Joint Ventures and Investments
---------------------------------------

Joint Ventures
--------------

      The Company's investments in its joint ventures,  other than United Solar,
are recorded at zero.  The Company will continue to carry its investment in each
of these joint ventures at zero until the venture becomes profitable (based upon
the venture's  history of sustainable  profits),  at which time the Company will
start to recognize over a period of years its share,  if any, of the then equity
of each of the ventures and will recognize its share of each  venture's  profits
or losses on the equity method of accounting.

      Based upon the opinion of legal counsel,  the Company believes that it has
no  obligation  to fund any  losses  that its joint  ventures  incur  beyond the
Company's  investment.  Additionally,  the  Company  has no  financial  or other
guarantees with respect to liabilities incurred by its joint ventures.

United Solar

      GAAP  requires ECD to carry its pre-May 1998  investments  in United Solar
(as  well  as  ECD's  other  joint  ventures)  at  zero,  notwithstanding  ECD's
contributions  to United  Solar of  licenses in the field of  photovoltaics  and
other  property and  equipment  in exchange for ECD's 49.98%  interest in United
Solar and notwithstanding  Canon's investments of $55,000,000.  In May 1998, ECD
and Canon  each  invested  $2,500,000  in United  Solar to fund  United  Solar's
continuing  operations.  In the year ended June 30,  1999,  the  Company  loaned
United  Solar  $2,500,000.  This  loan is  convertible,  at ECD's  option,  into
additional  shares of United Solar stock.  In the six months ended  December 31,
1999, ECD advanced United Solar an additional $900,000.

      GAAP requires that ECD's cash investments  (including loans and advances),
regardless of the true value of United  Solar,  be recorded on the balance sheet
as the value of ECD's  investment  in United Solar.  At the same time,  however,
GAAP requires that ECD make non-cash adjustments to its carrying value of United
Solar such that ECD's  carrying value of United Solar is decreased by the losses
of United Solar (in proportion to ECD's

                                       14

<PAGE>



NOTE D - Joint Ventures and Investments (Continued)
---------------------------------------------------

ownership  share of United  Solar)  and ECD is  required  to record a  non-cash,
non-operating  expense in the amount of the  reduction in the carrying  value of
United Solar.

      The investment in United Solar will continue to be carried at an amount no
higher than ECD's total cash investments ($5,900,000 at December 31, 1999) until
United Solar becomes profitable (based upon its history of sustainable profits),
at which time ECD will start to recognize  over a period of years its share,  if
any, of the then equity of United Solar,  and will  recognize its  proportionate
share of United Solar's profits or losses on the equity method of accounting.

      The following sets forth certain  financial  data  regarding  United Solar
that are derived from United Solar's financial statements.


                      UNITED SOLAR STATEMENTS OF OPERATIONS
                     -------------------------------------
<TABLE>
<CAPTION>

                                             Three Months Ended              Six Months Ended
                                                December 31,                    December 31,
                                         -------------------------      ---------------------------
                                             1999           1998            1999           1998
                                         ------------   ------------    ------------   ------------
                                         (Unaudited)    (Unaudited)     (Unaudited)    (Unaudited)

<S>                                      <C>            <C>             <C>            <C>


Revenues                                 $ 2,572,284    $ 2,359,582     $ 5,526,134    $ 5,500,006

Operating Expenses
      Cost of sales                        2,973,827      2,683,129       6,029,489      6,367,713
      Product development                    677,280        643,762       1,383,730      1,380,279
      General and administrative             377,143        618,296         695,568      1,005,006
      Sales and marketing                    240,058        335,665         472,554        699,020
                                         -----------    -----------     -----------    -----------
           Total                           4,268,308      4,280,852       8,581,341      9,452,018
Other Income (Expense)                       218,927       (179,548)        456,669       (327,208)
                                         -----------    -----------     -----------    -----------
Net Loss                                 $(1,477,097)   $(2,100,818)    $(2,598,538)   $(4,279,220)
                                         ===========    ===========     ===========    ===========


</TABLE>
                                       15

<PAGE>



NOTE D - Joint Ventures and Investments (Continued)
---------------------------------------------------


                           UNITED SOLAR BALANCE SHEETS
                          ---------------------------


                                                    December 31,      June 30,
                                                        1999            1999
                                                    ------------    ------------
                                                    (Unaudited)     (Unaudited)
Current Assets:
    Cash and Cash Equivalents                        $   151,423    $   210,314
    Accounts Receivable                                2,129,663      3,025,485
    Inventory                                          3,618,156      2,629,643
    Other Current Assets                                 443,347        358,350
                                                     -----------    -----------
       Total Current Assets                            6,342,589      6,223,792
Property, Plant and Equipment (Net)                    8,558,183      9,465,050
Other Assets                                             234,703        219,351
                                                     -----------    -----------
       Total Assets                                  $15,135,475    $15,908,193
                                                     ===========    ===========
Current Liabilities:
    Accounts Payable and Accrued Expenses            $ 6,462,581    $ 4,197,061
    Note Payable-ECD                                   2,500,000      2,500,000
                                                     -----------    -----------
       Total Current Liabilities                       8,962,581      6,697,061
Note Payable-Canon                                     2,500,000      2,500,000
Lease Payable                                          6,468,333      6,908,033
Total Stockholders' Equity                            (2,795,439)      (196,901)
                                                     -----------    -----------
       Total Liabilities and Stockholders' Equity    $15,135,475    $15,908,193
                                                     ===========    ===========

GM Ovonic

      In 1994,  Ovonic  Battery and General  Motors formed a joint  venture,  GM
Ovonic, for the manufacture and  commercialization  of Ovonic NiMH batteries for
electric and hybrid  electric  vehicles.  General  Motors has a 60% interest and
Ovonic  Battery has a 40%  interest in this joint  venture.  Ovonic  Battery has
contributed  intellectual property,  licenses,  production processes,  know-how,
personnel and engineering  services pertaining to Ovonic NiMH battery technology
to the joint venture.  The  contribution of General Motors consists of operating
capital,  plant, equipment and management personnel necessary for the production
of batteries.

      There are no financial  statements  currently  available for GM Ovonic. GM
Ovonic is in its  developmental  stage and, as such,  has a history of operating
losses.

Ovonyx

      In January 1999, ECD and Mr. Tyler Lowrey, the former vice chairman and
chief technology officer of Micron Technology, Inc., formed a joint venture,
Ovonyx, Inc. (owned 50% by each of ECD and Mr. Lowrey together with an affiliate
of Mr. Lowrey), to commercialize ECD's Ovonic Unified Memory.


                                       16

<PAGE>



NOTE D - Joint Ventures and Investments (Continued)
---------------------------------------------------

      ECD has advanced Ovonyx $1,841,000  through December 31, 1999 ($559,000 in
the current quarter),  representing  expenses for its operations which commenced
on January 15,  1999.  ECD has  expensed  the  advances to Ovonyx,  as incurred,
pending third-party funding.

Investments in EV Global and Innovative Transportation

      In  February  1998,  the Company  and EV Global,  a Lee  Iacocca  company,
entered into a Stock  Purchase  Agreement  ("Agreement")  which provided for the
transfer  to EV Global of 146,924  shares of ECD Common  Stock and  warrants  to
purchase 133,658 shares of ECD Common Stock. The Agreement also provided for the
transfer to ECD of 250,000  shares of EV Global Common Stock and 129,241  shares
of Unique Mobility Common Stock. The warrants are exercisable  prior to February
2,  2003,  with  73,462  shares   exercisable  at  $13.6125  and  60,196  shares
exercisable at $16.6125.

      In May 1999,  ECD, Unique Mobility and EV Global formed the German private
company,  Unique Europa,  headquartered in Mittweida,  near Leipzig, in the Free
State of Saxony, Germany, to manufacture  battery-electric,  hybrid-electric and
fuel  cell-electric  vehicles.  In October 1999, the private company changed its
name to Innovative Transportation Systems.

      Innovative  Transportation  has been  initially  capitalized  with a minor
amount of cash and a contribution  of 625,000 shares of Unique  Mobility  Common
Stock. Of the stock contribution,  208,333 shares (79,092 of which were acquired
from EV Global in exchange for 34,723  shares of ECD) were  contributed  by ECD,
resulting in an initial share interest of 33.2%.  ECD's share interest decreased
to 5.8% in October 1999 due to an additional cash investment by a shareholder.

      There are no  financial  statements  currently  available  for  Innovative
Transportation.

Sovlux

      In 1990, ECD formed Sovlux,  a joint venture to manufacture  the Company's
photovoltaic  products in the countries of the former  Soviet  Union.  Sovlux is
owned 50% by ECD and 50% by the State Research and Production  Enterprise  Kvant
and enterprises of the Russian Ministry of Atomic Energy ("Minatom"). Sovlux has
not been able to commence  production  of  photovoltaic  products due to current
economic conditions in Russia.

      In  1998,  ECD  formed  Sovlux  Battery  to  produce  NiMH  batteries  and
components for sale to Ovonic Battery and its licensees. Sovlux Battery is owned
50% by  ECD  and  50%  by  the  Chepetsky  Mechanical  Plant  ("Chepetsky"),  an
enterprise of Minatom.  ECD's  contribution  to the ventures  consists solely of
technology.

                                       17

<PAGE>



NOTE D - Joint Ventures and Investments (Continued)
---------------------------------------------------

      There are no financial statements currently available for Sovlux or Sovlux
Battery.  Sovlux and Sovlux  Battery  are in their  developmental  stage and, as
such, have a history of operating losses.

NOTE E - Net Income (Loss) Per Share
------------------------------------

      Basic net loss per common  share is computed  by dividing  the net loss by
the weighted average number of common shares  outstanding.  The Company used the
treasury  stock  method to  calculate  diluted  earnings  per  share.  Potential
dilution  exists from stock options and  warrants.  Weighted  average  number of
shares outstanding and basic and diluted earnings per share for the three months
and six months ended December 31 are computed as follows:


<TABLE>
<CAPTION>

                                             Three Months Ended              Six Months Ended
                                                December 31,                    December 31,
                                         -------------------------      ---------------------------
                                             1999           1998            1999           1998
                                         ------------   ------------    ------------   ------------
                                         (Unaudited)    (Unaudited)     (Unaudited)    (Unaudited)

<S>                                      <C>            <C>             <C>            <C>
Weighted average number of
   shares outstanding                     13,384,411     12,783,195      13,383,565     12,806,812

Net income (loss)                        $(4,290,456)    $1,665,725     $(8,035,596)   $(3,558,270)

BASIC NET INCOME (LOSS) PER SHARE        $      (.32)    $      .13     $      (.60)   $      (.28)
                                         ===========     ==========     ===========    ===========
Weighted average number of
   shares outstanding                     13,384,411     12,783,195      13,383,565     12,806,812

Weighted average shares for
   dilutive securities                        --              5,773          --             --
                                         -----------     ----------     -----------    -----------
Average number of shares outstanding
   and potential dilutive shares          13,384,411     12,788,968      13,383,565     12,806,812

Net income (loss)                        $(4,290,456)    $1,665,725     $(8,035,596)   $(3,558,270)

DILUTED NET (INCOME) LOSS PER SHARE      $      (.32)    $      .13     $      (.60)   $      (.28)
                                         ===========     ==========     ===========    ===========
</TABLE>

      Due to the Company's net losses,  the weighted average shares of potential
dilutive  securities for 1999 of 129,085 (three months) and 167,974 (six months)
and for 1998  dilutive  securities  of 179 (six months) were  excluded  from the
calculations  of diluted loss per share as inclusion of these  securities  would
have been  antidilutive to the net loss per share.  Basic and diluted income per
share for the three months ended December 31, 1998 were the same due to the fact
that only 5,773 dilutive  shares were added in the computation of diluted income
per share. Additional securities of 4,859,851 (for both 1999

                                       18

<PAGE>



NOTE E - Net Income (Loss) Per Share (Continued)
------------------------------------------------

periods) and  5,098,170  (for both 1998 periods) were excluded from the 1999 and
1998 calculations of weighted average shares of potential  dilutive  securities.
Because of the  relationship  between the exercise prices and the average market
price of ECD's Common Stock during these periods,  these  securities  would have
been antidilutive regardless of the Company's net loss.

NOTE F - Business Segments
--------------------------

      In June 1997, the FASB issued SFAS No. 131,  Disclosure  about Segments of
an Enterprise and Related  Information.  This  Statement  requires that a public
business  enterprise  report  financial and  descriptive  information  about its
reportable   operating  segments.   Operating  segments  are  components  of  an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate  resources  and in  assessing  performance.  The  Company  adopted  the
provisions of this Statement in fiscal 1999.

      The Company has two business segments: its subsidiary, Ovonic Battery, and
the parent company,  ECD. Ovonic Battery is primarily involved in developing and
commercializing battery technology.  ECD is primarily involved in photovoltaics,
hydrogen  storage,  microelectronics  and machine  building.  General  corporate
expenses  (except for those  expenses  allocated  to Ovonic  Battery),  interest
expense and interest income are classified in the ECD business segment.

                                       19

<PAGE>



NOTE F - Business Segments (Continued)
--------------------------------------


      The Company's operations by business segment were as follows:

                       Financial Data by Business Segment
                      ----------------------------------
                                (in thousands)

                                          Ovonic Battey     ECD     Consolidated
                                          -------------  ---------  ------------
Revenues*
   Three months ended December 31, 1999     $  5,303      $ 1,467     $  6,770
   Three months ended December 31, 1998       10,081        1,788       11,869

   Six months ended December 31, 1999       $ 10,171      $ 4,179     $ 14,350
   Six months ended December 31, 1998         14,973        3,074       18,047

Identifiable Assets
   Six months ended December 31, 1999       $ 11,267     $ 19,754     $ 31,021
   Six months ended December 31, 1998         16,153       31,063       47,216

Operating Income (Loss)
   Three months ended December 31, 1999     $ (2,650)    $ (1,101)    $ (3,751)
   Three months ended December 31, 1998          794         (454)         340

   Six months ended December 31, 1999       $ (5,677)    $ (1,508)    $ (7,185)
   Six months ended December 31, 1998         (3,161)        (933)      (4,094)
---------

 * All revenues are derived from external customers.

                                       20

<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and Results
-------  -----------------------------------------------------------------------
         of Operations
         -------------

       The  following   discussion  should  be  read  in  conjunction  with  the
accompanying Quarterly Financial Information and Notes thereto and the Company's
Annual Report on Form 10-K for the year ended June 30, 1999, and is qualified in
its entirety by the  foregoing.  The results of operations  for the three months
and six months ended December 31, 1999 are not necessarily indicative of results
to be expected in future periods.

Forward-Looking Information

       This Quarterly  Report on Form 10-Q contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933 (the "Securities
Act") and  Section 21E of the  Securities  Exchange  Act of 1934 (the  "Exchange
Act") which are not historical  facts and involve risks and  uncertainties  that
could  cause  actual  results  to differ  materially  from  those  expected  and
projected.  These  forward-looking  statements concern,  among other things, the
Company's   expectations,   plans  and  strategies  for  the   development   and
commercialization  of  products  based  on its  technologies  and are  generally
identified  by  the  use  of  such  terms  as  "intends,"   "expects,"  "plans,"
"projects," "estimates," "anticipates," "should" and "believes."

       The Company's future business prospects are substantially  dependent upon
the ability of the Company, its joint venture partners and licensees to develop,
manufacture and sell products based on the Company's technologies.  Any revenues
or profits  which may be derived by the Company from  license and joint  venture
agreements will be  substantially  dependent upon the willingness and ability of
the Company's  licensees and joint  venture  partners to devote their  financial
resources and manufacturing and marketing capabilities to commercialize products
based on the  Company's  technologies.  Additional  development  efforts will be
required  before  certain  products based on the Company's  technologies  can be
manufactured  and sold  commercially.  There can be no  assurance  that  certain
products  based  on  the  Company's   technologies  can  be  manufactured   cost
effectively  on  a  commercial  scale,  that  such  products  will  gain  market
acceptance, or that competing products and technologies will not render products
based on the Company's technologies obsolete or noncompetitive.  There can be no
assurance  that the  Company's  patents  or  other  proprietary  rights  will be
determined to be valid or enforceable  if challenged in court or  administrative
proceedings or that the Company  patents or other  proprietary  rights,  even if
determined  to be valid,  will be broad enough in scope to enable the Company to
prevent third parties from  producing  products  using similar  technologies  or
processes.

       The Company cautions that the foregoing factors, as well as other factors
discussed in this Quarterly  Report and in other  documents and reports filed by
the  Company  with  the  Securities  and  Exchange  Commission  pursuant  to the
requirements of the federal  securities  laws,  could cause the actual facts and
conditions  that may exist in the  future to vary  materially  from the  assumed
facts and conditions upon which the forward-looking  statements contained herein
are based. The Company does not undertake any obligation

                                       21

<PAGE>



to update or revise any forward-looking  statement, made by it or on its behalf,
whether as a result of new information, future events or otherwise.

                              Results of Operations

Three Months Ended December 31, 1999 Compared to Three Months Ended
-------------------------------------------------------------------
December 31, 1998
-----------------

       The  Company had a net loss from  operations  in the three  months  ended
December 31, 1999,  of  $3,751,000  compared to a net income from  operations of
$340,000 for the three months ended December 31, 1998. The change  resulted from
a  reduction  in  revenues  to  $6,770,000  in 1999  from  $11,869,000  in 1998,
partially offset by a $1,008,000  reduction in operating  expenses.  The revenue
reduction  primarily  resulted  from lower  revenues  from  product  development
agreements  ($2,837,000)  and lower  revenues from license and other  agreements
($2,664,000),  partially  offset by a $458,000  increase in royalties.  Revenues
from license and other agreements in 1999 included a $1,778,000 license fee from
a license agreement with Toshiba Battery Company,  Ltd.  ("Toshiba") for the HEV
technology compared to a $4,400,000 license fee in 1998 from Sanyo Electric Co.,
Ltd. ("Sanyo").

       A large portion of the losses in 1999 was primarily due to the fact that,
in  accordance  with  GAAP,  ECD must  report  its  activities  to  further  its
advancements in its  technologies as a loss. The ECD/Ovonic  Battery programs in
its Ovonic NiMH battery technology has led to a new family of batteries not only
for HEVs, EVs and FCEVs, but also for a new universal  battery platform that has
included a  much-needed  addition to the Starter  Lighter  Ignition  field where
especially  high voltages are required.  ECD's  continued  investments in United
Solar,  its Ovonyx joint venture  activities  and its solid hydride  development
programs are all reported as losses.  Losses related to electrode production and
the ongoing protection of the Company's  intellectual  property also contributed
to the 1999  losses.  In  addition  to the loss  from  operations,  the  Company
incurred other expenses (net) of $539,000 in the three months ended December 31,
1999  compared to other  income  (net) of  $1,325,000  in the same period in the
prior year.  1998  included the  $1,970,000  gain on the sale of Ovonic  Battery
Stock to Sanyo. Other income (expense)  principally includes interest income and
expense and equity losses. Due to better operating  performance at United Solar,
the  Company  incurred  reduced  charges  for equity  losses of $738,000 in 1999
compared to  $1,027,000 in 1998.  GAAP  requires that the Company  recognize its
investments in United Solar's ongoing operations as a loss. The losses represent
the Company's  share of the losses of United Solar related to its investments in
United Solar  regardless of the value of the investment  (see NOTE A of Notes to
Consolidated Financial Statements).

       Product sales,  consisting of positive and negative  battery  electrodes,
battery  packs and machine  building,  increased  32% to $1,377,000 in the three
months  ended  December  31,  1999 from  $1,041,000  in the three  months  ended
December 31, 1998.  There were battery pack sales of $452,000 in 1999,  compared
to $238,000 in 1998, and machine-building revenues of $395,000 in 1999, compared
to no revenues in 1998. The machine-building revenues in 1999 were applicable to
a contract to build large-area microwave

                                       22

<PAGE>



deposition  equipment.  Sales of  negative  and  positive  electrodes  decreased
$273,000,  primarily due to one of the Company's  principal  negative  electrode
licensees  currently  manufacturing its own electrode  products as allowed under
its license from the  Company.  The Company has  continued  its  development  of
advanced electrode materials to be introduced to its customers.

       Royalties  increased 74% from $617,000 in the three months ended December
31, 1998 to  $1,075,000 in the three months ended  December 31, 1999.  While the
volume of NiMH batteries currently being sold has increased  substantially,  the
royalties  the  Company  receives  continues  to  reflect  increased  production
efficiencies  of its licensees  which have resulted in lower prices as licensees
move  aggressively to increase market share. (See NOTE B - Notes to Consolidated
Financial Statements.)

       Revenues  from  product   development   agreements   decreased  59%  from
$4,829,000  in the three months ended  December 31, 1998,  to  $1,992,000 in the
three months ended  December  31, 1999.  There were total  increases in revenues
from the  conclusion  of the Shell  Hydrogen  program in 1999  ($375,000 in 1999
compared to none in 1998),  the hydrogen  storage program with the Department of
Energy  ("DOE")  ($224,000 in 1999  compared to none in 1998),  and battery pack
research  ($201,000  compared to $45,000 in 1999).  These increases in 1999 were
more than offset by decreases in revenues from a program with General  Motors to
develop batteries for electric and hybrid electric vehicle applications (none in
1999  compared  to  $2,153,000  in 1998)  and from  contracts  with  NIST in the
Company's optical memory and battery technologies  ($870,000 in 1999 compared to
$1,789,000  in  1998)  and DOE  and the  National  Renewable  Energy  Laboratory
("NREL") in photovoltaics ($257,000 in 1999 compared to $830,000 in 1998).

       Revenues from license and other  agreements  decreased from $4,442,000 in
the three months ended December 31, 1998 to $1,778,000 in the three months ended
December 31, 1999.  The 1998 license fees included  $4,400,000  from Sanyo.  The
1999 revenues included a $1,778,000 license fee from Toshiba.

       Other  revenues  decreased by $392,000  from $940,000 in the three months
ended December 31, 1998 to $548,000 in the three months ended December 31, 1999,
primarily due to decreased  billings for work  performed for licensees of Ovonic
Battery.

       The increase in cost of product sales from $2,215,000 in the three months
ended  December 31, 1998 to  $2,288,000  in the three months ended  December 31,
1999 was due to an increased  level of machine  building  revenues in 1999.  The
reduced loss on product  sales from  $1,174,000 to $911,000 is a result of cost-
reduction measures taken by the Company. While the Company has taken significant
steps to reduce  costs,  the low sales  volume,  combined with high fixed costs,
results in the loss on product sales.  The Company has continued its development
of advanced electrode materials to be introduced to its customers.

       The  Company  incurred  expenses  of  $6,465,000  ($2,260,000  funded and
$4,205,000  unfunded) in the three  months  ended  December 31, 1999 for product
development

                                       23

<PAGE>



compared to expenses of $7,883,000  ($4,886,000 funded and $2,997,000  unfunded)
in the three months ended December 31, 1998. The expenditures were primarily for
continued development of the Company's "family of batteries" products as well as
work performed on the OUM program.

       Expenses were incurred in 1999 and 1998 in connection with the protection
of the Company's  United  States and foreign  patents  covering its  proprietary
technology.  These  expenses  increased  to $420,000 in the three  months  ended
December 31, 1999 from $403,000 in the three months ended December 31, 1998.

       The  increase in  operating,  general and  administrative  expenses  from
$1,028,000  in the three months ended  December  31, 1998 to  $1,348,000  in the
three  months  ended  December  31,  1999 was  primarily  related  to  decreased
allocations  to  cost  of  revenues  from  product  development  agreements  and
increased depreciation expense in 1999.

       The change from other  income  (net) of  $1,325,000  in the three  months
ended  December 31,  1998,  compared to other  expense  (net) of $539,000 in the
three months ended December 31, 1999, was due  principally to $1,970,000 gain on
the sale of Ovonic  Battery  Stock in 1998 to Sanyo.  In the three  months ended
December 31, 1999, other expense (net) was lower due to  significantly  improved
operating  performance  of United Solar in 1999,  which  reduced  ECD's share of
United Solar's losses, and to decreased interest income.

Six Months Ended December 31, 1999 Compared to Six Months Ended
---------------------------------------------------------------
December 31, 1998
-----------------

       The  Company  had a net loss  from  operations  in the six  months  ended
December 31,  1999,  of  $7,185,000  compared to a net loss from  operations  of
$4,094,000 for the six months ended December 31, 1998. The change  resulted from
a  reduction  in  revenues  to  $14,350,000  in 1999 from  $18,047,000  in 1998,
partially  offset by a $605,000  reduction  in operating  expenses.  The revenue
reduction  primarily  resulted  from lower  revenues  from  product  development
agreements  ($2,693,000)  and lower  revenues from license and other  agreements
($2,306,000),  partially  offset by a $506,000  increase in royalties.  Revenues
from license  agreements in 1999 included  $1,778,000  from a license  agreement
with Toshiba for the HEV technology and $400,000 from Japan Storage, compared to
a $4,400,000 license fee in 1998 from Sanyo.

       A large portion of the losses in 1999 was primarily due to the fact that,
in  accordance  with  GAAP,  ECD must  report  its  activities  to  further  its
advancements in its  technologies as a loss. The ECD/Ovonic  Battery programs in
its Ovonic NiMH battery technology has led to a new family of batteries not only
for HEVs, EVs and FCEVs, but also for a new universal  battery platform that has
included a  much-needed  addition to the Starter  Lighter  Ignition  field where
especially  high voltages are required.  ECD's  continued  investments in United
Solar,  its Ovonyx joint venture  activities  and its solid hydride  development
programs are all reported as losses.  Losses related to electrode production and
the ongoing protection of the Company's  intellectual  property also contributed
to the 1999  losses.  In  addition  to the loss  from  operations,  the  Company
incurred other expenses (net) of $850,000 in the six

                                       24

<PAGE>



months ended December 31, 1999 compared to other income (net) of $536,000 in the
same period in the prior year.  1998  included a $1,970,000  gain on the sale of
Ovonic  Battery  Stock to Sanyo.  Other income  (expense)  principally  includes
interest  income  and  expense  and  equity  losses.  Due  to  better  operating
performance at United Solar,  the Company  incurred  reduced  charges for equity
losses of $1,298,000 in 1999 compared to $2,116,000 in 1998.  GAAP requires that
the Company recognize its investments in United Solar's ongoing  operations as a
loss.  The losses  represent the  Company's  share of the losses of United Solar
related  to its  investments  in  United  Solar  regardless  of the value of the
investment (see NOTE A of Notes to Consolidated Financial Statements).

       Product sales,  consisting of positive and negative  battery  electrodes,
battery  packs and machine  building,  increased  62% to  $3,247,000  in the six
months ended December 31, 1999 from  $2,008,000 in the six months ended December
31,  1998.  There were  battery  pack sales of  $1,005,000  in 1999  compared to
$238,000 in 1998 and machine-building revenues of $1,123,000 in 1999 compared to
no revenues in 1998. The machine-building  revenues in 1999 were applicable to a
contract to build large-area microwave deposition  equipment.  Sales of negative
and  positive  electrodes  decreased  $650,000,  primarily  due  to  one  of the
Company's principal negative electrode licensees currently manufacturing its own
electrode  products as allowed  under its license from the Company.  The Company
has continued its development of advanced  electrode  materials to be introduced
to its customers.

       Royalties  increased 41% from $1,232,000 in the six months ended December
31, 1998 to  $1,738,000  in the six months ended  December  31, 1999.  While the
volume of NiMH batteries currently being sold has increased  substantially,  the
royalties  the  Company  receives  continues  to  reflect  increased  production
efficiencies  of its licensees  which have resulted in lower prices as licensees
move  aggressively to increase market share. (See NOTE B - Notes to Consolidated
Financial Statements.)

       Revenues  from  product   development   agreements   decreased  31%  from
$8,602,000  in the six months ended  December 31, 1998 to  $5,910,000 in the six
months  ended  December  31,  1999.   There  were  total  increases  in  product
development  agreements of $1,766,000 which were due to substantially  increased
revenues from the conclusion of the Shell Hydrogen  program in 1999 ($688,000 in
1999  compared to none in 1998) and the  hydrogen  storage  program with the DOE
($658,000  in 1999  compared to $90,000 in 1998).  These  increases in 1999 were
more than offset by decreases in revenues  resulting  from the  conclusion  of a
program  with  General  Motors to  develop  batteries  for  electric  and hybrid
electric  vehicle  applications  ($1,002,000  in 1999  compared to $4,077,000 in
1998)  from  contracts  with DOE and  NREL in  photovoltaics  ($828,000  in 1999
compared to $1,548,000 in 1998) and contracts with NIST in the Company's optical
memory and battery  technologies  ($2,145,000  in 1999 compared to $2,777,000 in
1998).

       Revenues from license and other  agreements  decreased from $4,484,000 in
the six months  ended  December 31, 1998 to  $2,178,000  in the six months ended
December 31, 1999.  The 1998 license fees included  $4,400,000  from Sanyo.  The
1999  revenues  included a  $1,778,000  license  fee from  Toshiba  Battery  and
$400,000 from Japan Storage.

                                       25

<PAGE>



       Other  revenues  decreased by $444,000 from  $1,721,000 in the six months
ended December 31, 1998 to $1,277,000 in the six months ended December 31, 1999,
primarily due to decreased  billings for work  performed for licensees of Ovonic
Battery.

       The increase in cost of product  sales from  $4,307,000 in the six months
ended  December 31, 1998 to $4,638,000 in the six months ended December 31, 1999
was due to an increased level of machine building  revenues in 1999. The reduced
loss on  product  sales  from  $2,299,000  to  $1,391,000  is a result  of cost-
reduction measures taken by the Company. While the Company has taken significant
steps to reduce  costs,  the low sales  volume,  combined with high fixed costs,
results in the loss on product sales.  The Company has continued its development
of advanced electrode materials to be introduced to its customers.

       The Company  incurred  expenses  of  $13,236,000  ($5,898,000  funded and
$7,338,000  unfunded)  in the six months  ended  December  31,  1999 for product
development   compared  to  expenses  of  $14,820,000   ($8,917,000  funded  and
$5,903,000 unfunded) in the six months ended December 31, 1998. The expenditures
were primarily for continued  development of the Company's "family of batteries"
products as well as work performed on the OUM program.

       Expenses were incurred in 1999 and 1998 in connection with the protection
of the Company's  United  States and foreign  patents  covering its  proprietary
technology.  These  expenses  increased  to  $893,000  in the six  months  ended
December 31, 1999 from $828,000 in the six months ended December 31, 1998.

       The  increase in  operating,  general and  administrative  expenses  from
$2,185,000  in the six months ended  December 31, 1998 to  $2,768,000 in the six
months ended December 31, 1999 was primarily related to decreased allocations to
cost of revenues from product development  agreements and increased depreciation
expense in 1999.

       The change from other  income  (net) of $535,000 in the six months  ended
December 31, 1998, compared to other expense (net) of $850,000 in the six months
ended December 31, 1999, was due  principally to $1,970,000  gain on the sale of
Ovonic  Battery  Stock in 1998 to Sanyo.  In the six months  ended  December 31,
1999,  other expense  (net) was lower due to  significantly  improved  operating
performance of United Solar in 1999, which reduced ECD's share of United Solar's
losses, and to decreased interest income.

                         Liquidity and Capital Resources

       As of December 31, 1999, the Company had unrestricted  consolidated cash,
cash  equivalents  and  accounts  receivable  of  $19,466,000,   a  decrease  of
$7,331,000  from June 30,  1999.  As of  December  31,  1999,  the  Company  had
consolidated working capital of $11,306,000 compared with a consolidated working
capital of $18,439,000 as of June 30, 1999.


                                       26

<PAGE>



       The Company's  strategy is to finance its  operations  and growth through
strategic  alliances (joint ventures and license  agreements) with third parties
who can provide  financial  resources and marketing  expertise for the Company's
technologies and products.  As a result of the issuance of the basic patents for
NiMH batteries and phase-change  optical memory in Japan, various new agreements
are under discussion. Other important areas of the Company's development are the
use of the  Company's  photovoltaic  technology  and  its  proprietary  hydrogen
storage technology for storing, transporting and using hydrogen for a wide range
of  portable  and  stationary   applications,   with  vehicles  being  of  prime
importance.  Hydrogen is clean,  abundant and  considered the ultimate fuel. The
barrier to the use of  hydrogen  as a fuel has been a lack of a viable  means to
transport and store it.

       ECD's  joint  venture,  Ovonyx,  owned  equally by ECD and by Mr.  Lowrey
(together  with an  affiliate  of Mr.  Lowrey)  expects to pursue  semiconductor
device manufacturing as well as licensing of selected applications of ECD's OUM,
a unique thin-film  nonvolatile  solid-state  memory.  In November 1999,  Ovonyx
entered into a royalty-bearing  agreement with Lockheed Martin Space Electronics
and  Communications to commercialize  ECDs OUM to replace Flash,  DRAM, FPGA and
other electronic devices in radiation-hardened  space and military applications.
Ovonyx and ECD are in  negotiations  with new strategic  partners for funding to
commercialize  ECD's  OUM and to repay  the  amounts  advanced  by ECD to Ovonyx
($1,841,000 through December 31, 1999).

       In the six months ended December 31, 1999, the Company entered into a new
license  agreement  ($1,778,000  in license  fees plus  future  royalties)  with
Toshiba for its HEV technology. In addition, Japan Storage, a licensee, notified
the Company  that it had reached a certain  level of sales of its  products  and
that the Company had earned an  additional  license fee of $400,000  pursuant to
certain terms contained in the previous license agreement with Japan Storage.

       In August  1999,  Ovonic  Battery  signed an  agreement  with Rare  Earth
High-Tech  Co. Ltd.  ("Rare Earth  High-Tech")  of Baotou Steel  Company,  Inner
Mongolia,  China  (subject to approvals by the  Governments of the United States
and China and the finalization of financing  arrangements)  for a series of NiMH
battery  projects  with a  potential  value  of $100  million.  The  Company  is
negotiating  with a number of financial  institutions  to provide  financing for
this project.  Rare Earth High-Tech has agreed to pay all costs  associated with
this financing.  Although no assurances can be given,  the Company believes that
it and Rare  Earth  High-Tech  will be  successful  in  obtaining  the  required
financing and government approvals.

       During the six months ended  December 31,  1999,  $4,841,000  of cash was
used in operations.  The  difference  between the net loss of $8,036,000 and the
net cash used in operations was due to ECD's  $1,298,000  share of the losses in
United  Solar  relating to ECD's  investment  of cash in United  Solar's  future
growth and the Company's  depreciation expense. In the six months ended December
31, 1999, ECD advanced  $900,000 to United Solar (bringing its total  investment
to  $5,900,000),  providing  funding  for  new  opportunities  in the  worldwide
photovoltaic market served by United Solar's unique products which offer

                                       27

<PAGE>



particular  advantages to the satellite and  telecommunications  industries.  In
addition,  $293,000 of machinery and  equipment  was  purchased or  constructed,
principally for the Company's battery operations, during this period.

       The  Company  expects  significant  revenues  and cash  flows  related to
product  development  agreements,  many of which already exist, that are entered
into by the Company with U.S.  government agencies and with industry partners to
develop the Company's products and production  technology.  ECD has been awarded
government contracts with various  governmental  agencies (Department of Energy,
National Renewable Energy Laboratory, National Institute of Standards, etc.) and
with  various  industry  partners.  Generally,  the  agreed-upon  fees for these
product  development  agreements  reimburse  the  Company  for its direct  costs
associated  with  these  projects,  together  with a portion of  indirect  costs
(patents, operating, general and administrative expenses and depreciation).

       During the next 12 months, the Company expects to purchase up to $500,000
of machinery and equipment. ECD advanced to United Solar $2,500,000 in May 1998,
$2,500,000  during the year  ended June 30,  1999,  and an  additional  $900,000
during the period July 1, 1999 to December 31, 1999.  In addition,  ECD advanced
an additional $900,000 during the period January 1, 2000 to February 14, 2000.

       The Company has a financing  arrangement with Standard Federal Bank for a
$3,000,000  line of credit  bearing an interest rate at prime rate which expires
on March 31,  2001.  The  Company  does not expect to use any of this  available
financing during the next 12 months.

       As previously noted, the Company's  strategy is to finance its operations
and growth through the formation of strategic alliances to further commercialize
its products.  While the Company is in negotiations concerning its NiMH battery,
hydrogen storage, photovoltaics, OUM, phase-change optical memory and production
systems  technologies  with a number of  companies  which could  provide it with
additional  revenue under license and other agreements in the coming year, it is
unable to predict the amount, if any, of such revenue.

       The  Company  is  not  aware  of  events  or  circumstances   that  would
significantly alter royalty revenues for the next 12 months.

       In February 1999, ECD received a contract (for approximately  $2,060,000)
to build large-area microwave deposition  equipment.  This new contract provides
the platform for the  commercialization of ECD's passive coatings technology and
equipment to manufacture products incorporating such technology.  The receipt of
this order directly results from the research and development  conducted by ECD,
the costs of which were recorded as losses in prior years.  Through December 31,
1999,  ECD has  recognized  revenues  of  $1,451,000  in  connection  with  this
contract.  This contract is nearing completion and the Company expects to obtain
approval of this machine at its facility in the quarter ending March 31, 2000 at
which time it will be shipped to the customer's  location for final  acceptance.
Machine  building is a cyclical but an important part of ECD's  business.  While
there is no other backlog of machine-building contracts as of December 31, 1999,
negotiations are in

                                       28

<PAGE>



progress with a number of companies for  additional  machine-building  contracts
that could provide revenues in the coming year and beyond.

       Based upon the above information, the amount of cash to be received under
existing  product  development  agreements  in the year  ending June 30, 2000 is
anticipated to be  approximately  $12,049,000  compared to $19,164,000  received
from product  development  agreements in the year ended June 30, 1999.  Based on
historical  trends, the amount of cash from royalties to be received in the year
ending  June 30, 2000 is expected  to be  approximately  $3,022,000  compared to
$2,367,000 received in the year ended June 30, 1999.

       Since license  agreements are continuously  being  negotiated,  fees from
such agreements are difficult to predict.  The Company is unable to forecast the
amount of cash to be  received  from  license  fees in the year  ending June 30,
2000.

       Due to the recent  increase in its stock price,  the Company has received
since January 1, 2000, approximately $3,800,000 in proceeds from the exercise of
employee stock options.  While there are additional employee stock options which
may be exercised,  the Company is unable to predict the amount nor the timing of
such exercises.

       Management  believes that funds generated from  operations,  new business
agreements and existing cash and cash equivalents  will be adequate,  other than
project  financing needed for the Rare Earth High-Tech  project,  to support and
finance planned  growth,  capital  expenditures  and  company-sponsored  product
development  programs  over the  coming  year.  Additional  sources  of cash are
required to sustain the Company for the  long-term  and to build the business in
the future.  While it is the Company's  intent to fund its near-term  operations
from  cash and cash  equivalent  balances  on hand and from  activities  such as
product  sales,  licensing,   royalties,   product  development  agreements  and
strategic alliances,  the amount and timing of revenues from such activities are
uncertain.  The  Company  is in  discussions  with  third  parties to form joint
ventures and to engage in machine-building and licensing agreements. It may also
consider  equity  or debt  financing  in  order to fund its  growth  in  certain
strategic areas.

                                 Year 2000 Issue

       Historically,  many computer  programs have been written using two digits
rather  than four to define  the  applicable  year,  which  could  result in the
program  failing to properly  recognize a year that begins with "20"  instead of
"19." This, in turn,  could result in major system  failures or  miscalculations
and is generally referred to as the "Year 2000 Issue."

       The  Company  formulated  and  completed  a Year 2000 Plan to address the
Company's  Year 2000  Issues.  The Company  evaluated  its  financial,  business
reporting and data processing as well as other software applications, including,
but not limited to, its  computerized  laboratory  manufacturing  equipment  and
embedded  chips,  to identify  any Year 2000 Issues to ensure that there were no
material disruptions in the Company's  operations.  Most non- compliant software
was upgraded from equipment manufacturers

                                       29

<PAGE>



and  software  providers.  The cost of Year 2000  compliance  was  approximately
$255,000  and was  comprised  of the  purchase of upgraded  software  and new or
upgraded computers.

       The Company  experienced no significant  Year 2000 problems.  The Company
will  continue to monitor its Year 2000  compliance  and that of its  customers,
suppliers  and other third  parties on which it relies.  The Company can give no
assurance that any Year 2000 problems which may develop would not  significantly
disrupt the Company's business.



                                       30

<PAGE>



                           PART II - OTHER INFORMATION
                          ---------------------------

Item 4.  Submission of Matters to a Vote of Security Holders
-------  ---------------------------------------------------

       At the Annual  Meeting of  Stockholders  (the  "Meeting")  of ECD held on
January 27, 2000, the following  directors were elected for the ensuing year and
until their successors shall be duly elected and qualified:

                                           For           Withheld Authority
                                        ----------       ------------------

       Stanford R. Ovshinsky            16,940,234             629,001
       Iris M. Ovshinsky                16,939,814             629,421
       Robert C. Stempel                16,954,931             614,304
       Nancy M. Bacon                   16,950,796             618,439
       Kenneth R. Baker                 16,960,031             609,204
       Umberto Colombo                  16,959,801             609,434
       Subhash K. Dhar                  16,955,006             614,229
       Hellmut Fritzsche                16,929,371             639,864
       Joichi Ito                       16,924,571             644,664
       Seymour Liebman                  16,927,971             641,264
       Tyler Lowrey                     16,960,031             609,204
       Walter J. McCarthy, Jr.          16,958,931             610,304
       Florence I. Metz                 16,958,731             610,504
       Nathan J. Robfogel               16,957,301             611,934
       Stanley K. Stynes                16,926,841             642,394

       At the  Meeting,  the  stockholders  approved a proposal to increase  the
number of  authorized  shares of the Company's  Common Stock from  20,000,000 to
30,000,000  with 10,458,121  Common Stock votes,  5,497,825 Class A Common Stock
votes and 430,000 Class B Common Stock votes cast for the  proposal.  There were
1,096,445  Common Stock votes cast against the proposal and 86,844  Common Stock
abstentions.

       Also approved at the Meeting was the appointment of Deloitte & Touche LLP
as  independent  accountants  for the fiscal  year  ending  June 30,  2000 (with
17,315,208 for, 224,757 against, and 29,270 abstentions).

Item 6.  Exhibits and Reports on Form 8-K.
-------  ---------------------------------

       A.  Exhibits
           --------

           Exhibit 27.    Financial Data Schedule (Edgar version)

       B.  Reports on Form 8-K
           -------------------

           None

                                       31

<PAGE>



                                   SIGNATURES
                                  ----------

       Pursuant to the requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                       Energy Conversion Devices, Inc.
                                       -------------------------------
                                       (Registrant)



                            By:        /s/ Stephan W. Zumsteg
                                       -------------------------------
                                       Stephan W. Zumsteg
Date:  February 14, 2000               Treasurer



                            By:        /s/ Stanford R. Ovshinsky
                                       -------------------------------
                                       Stanford R. Ovshinsky
Date:  February 14, 2000               President and Chief Executive Officer










                                       32