| Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                 | 22-3328734                           |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|--------------------------------------|
| (State of incorporation)                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                 | (IRS employer identification number) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                 |                                 |
| One Penn Plaza, Suite 1612, New York, NY                                                                                                                                                                                                                                                                                                                                                                                                                                     | 10119                |
| (Address of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                                                     | (Zip code)           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  (212) 994-5374 |                                 |
| (Registrant’s telephone number)                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|  Check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant as required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___                                                                                                                       |
| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ___ No ___                                        |
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One): Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company X  |
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes  ___  No X                                                                                                                                                                                                                                                                                                                      |
| The number of outstanding shares of common stock as August 23, 2010 was 2,879,307,216.                                                                                                                                                                                                                                                                                                                                                                                       |

| Part I – Financial Information |                                                                                        |
|--------------------------------------|---------------------------------------------------------------------------------------------|
| Item 1                               | Financial Statements (unaudited)                                                            | 4 |
|                                 | Condensed Consolidated Balance Sheets as of June 30, 2010 (unaudited) and                   |   |
|                                 | December 31, 2009                                                                           | 5 |
|                                 | Condensed Consolidated Statements of Operations for the Three and Six Month                 |   |
|                                 | Periods Ended June 30, 2010 (unaudited) and 2009 (unaudited)                                | 6 |
|                                 | Condensed Consolidated Statements of Cash Flows for the Six Months Ended                    |   |
|                                 | June 30, 2010 (unaudited) and 2009 (unaudited)                                              | 7 |
|                                 | Notes to Condensed Consolidated Financial Statements                                        | 8 |
| Item 2                               | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item 3                               | Quantitative and Qualitative Disclosures about Market Risk                                  | 17 |
| Item 4                               | Controls and Procedures                                                                     | 17 |
| Part II – Other Information    |                                                                                        |
| Item 1                               | Legal Proceedings                                                                           | 17 |
| Item 1A                              | Risk Factors                                                                                | 17 |
| Item 2                               | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 17 |
| Item 3                               | Defaults upon Senior Securities                                                             | 17 |
| Item 4                               | Submission of Matters to a Vote of Security Holders                                         | 17 |
| Item 5                               | Other Information                                                                           | 17 |
| Item 6                               | Exhibits                                                                                    | 19 |
|                                 |                                                                                        |   |
| Signatures                           |                                                                                        |   |

| Ø   | the volatility and uncertainty of commodity prices;                                                                                                                                      |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |                                                                                                                                                                                     |
| Ø   | the costs and business risks associated with developing new products and entering new markets;                                                                                           |
|               |                                                                                                                                                                                     |
| Ø   | our ability to locate and integrate future acquisitions;                                                                                                                                 |
|               |                                                                                                                                                                                     |
| Ø   | the impact of new, emerging and competing technologies on our business;                                                                                                                  |
|               |                                                                                                                                                                                     |
| Ø   | the possibility of one or more of the markets in which we compete being impacted by political, legal and regulatory changes or other external factors over which they have no control;   |
|               |                                                                                                                                                                                     |
| Ø   | changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement practices;                                                                               |
|               |                                                                                                                                                                                     |
| Ø   | our reliance on key management personnel;                                                                                                                                                |
|               |                                                                                                                                                                                     |
| Ø   | limitations and restrictions contained in the instruments and agreements governing our indebtedness;                                                                                     |
|               |                                                                                                                                                                                     |
| Ø   | our ability to raise additional capital and secure additional financing;                                                                                                                 |
|               |                                                                                                                                                                                     |
| Ø   | our ability to implement additional financial and management controls, reporting systems and procedures and compliance with Section 404 of the Sarbanes-Oxley Act, as amended; and  |
| Ø   | other risks referenced from time to time in our filings with the SEC and those factors listed in our 2009 Form 10K/A under Item 1A, Risks Factors.                                  |

| ITEM 1 | FINANCIAL STATEMENTS |
|--------|----------------------|

|                                                                                  |   | 6/30/2010 |         |   | 12/31/2009 |   |
|---------------------------------------------------------------------------------------|--------|-----------|--------------|--------|------------|--------|
| ASSETS                                                                                |   |      |         |   |       |   |
| Current Assets:                                                                       |   |      |         |   |       |   |
| Cash                                                                                  |   | $         | --           |   |       | $      | 5,800 |   |
| Assets to be disposed - current                                                       |   |      | --           |   |       |   | 1,646,238 |   |
| Total current assets                                                                  |   |      | --           |   |       |   | 1,652,038 |   |
|                                                                                  |   |      |         |   |       |   |   |   |
| TOTAL ASSETS                                                                          |   | $         | --           |   |       | $      | 1,652,038 |   |
|                                                                                  |   |      |         |   |       |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                  |   |      |         |   |       |   |   |   |
| Current Liabilities:                                                                  |   |      |         |   |       |   |   |   |
| Accounts payable and accrued expenses                                                 |   | $         | 289,485      |   |       | $      | 461,661 |   |
| Accrued interest                                                                      |   |      | 1,142,850    |   |       |   | 838,599 |   |
|  Accrued interest – related party                                          |   |      | --           |   |       |   | 1,718 |   |
| Convertible debentures – related party                                          |   |      | --           |   |       |   | 108,724 |   |
| Loan payable – affiliate                                                        |   |      | 121,561      |   |       |   | -- |   |
|  Liabilities to be disposed - current                                            |   |      | --           |   |       |   | 3,900,716 |   |
| Convertible debentures                                                                |   |      | 6,535,327    |   |       |   | 6,621,400 |   |
| Total current liabilities                                                             |   |      | 8,089,223    |   |       |   | 11,932,818 |   |
|                                                                                  |   |      |         |   |       |   |   |   |
| TOTAL LIABILITIES                                                                     |   |      | 8,089,223    |   |       |   | 11,932,818 |   |
|                                                                                  |   |      |         |   |       |   |   |   |
| Shareholders’ equity (deficit)                                                  |   |      |         |   |       |   |   |   |
| Convertible preferred stock                                                           |   |      |         |   |       |   |   |   |
| Series C convertible, par $0.001, 1,000,000 shares authorized, 921,890                |   |      |         |   |       |   |   |   |
| and 972,042 issued and outstanding, respectively                                      |   |      | 921          |   |       |   | 972 |   |
| Common stock, par $0.0001, 10,000,000,000 authorized (2010), par $0.001; 500,000,000  |   |      |         |   |       |   |   |   |
| authorized (2009); 2,879,307,140 and 482,842,103 issued and outstanding, respectively |   |      | 287,931      |   |       |   | 482,842 |   |
| Additional paid-in capital                                                            |   |      | 127,197,421  |   |       |   | 124,075,672 |   |
| Accumulated deficit                                                                   |   |      | (135,575,496 | )      |       |   | (134,840,265 | ) |
| Total stockholders’ equity (deficit)                                            |   |      | (8,089,223   | )      |       |   | (10,280,780 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (Deficit)                            |   | $         | --           |   |       | $      | 1,652,038 |   |

|                                                                          |   | Three Months Ended |          |   | Six Months Ended |   |
|-------------------------------------------------------------------------------|--------|--------------------|---------------|--------|------------------|--------|
|                                                                          |   | 6/30/10            |          |   | 6/30/09          |   |   | 6/30/10 |   |   | 6/30/09 |   |
|                                                                          |   |               |          |   | (Restated)       |   |   |   |   |   | (Restated) |   |
| Revenue                                                                       |   | $                  | --            |   |             | $      | -- |   |   | $ | -- |   |   | $ | -- |   |
| Cost of revenues                                                              |   |               | --            |   |             |   | -- |   |   |   | -- |   |   |   | -- |   |
| Gross profit                                                                  |   |               | --            |   |             |   | -- |   |   |   |   |   |   |   |   |   |
|                                                                          |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                           |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative expenses                                           |   |               | 80,067        |   |             |   | 12,723 |   |   |   | 167,845 |   |   |   | 34,605 |   |
| Research and development                                                      |   |               | 97,115        |   |             |   | -- |   |   |   | 116,538 |   |   |   | -- |   |
| Total operating expenses                                                      |   |               | 177,182       |   |             |   | 12,723 |   |   |   | 284,383 |   |   |   | 34,605 |   |
| Operating loss                                                                |   |               | (177,182      | )      |             |   | (12,723 | ) |   |   | (284,383 | ) |   |   | (34,605 | ) |
| Other income (expense):                                                       |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Legal settlement                                                              |   |               | --            |   |             |   | -- |   |   |   | -- |   |   |   | (62,500 | ) |
| Interest income                                                               |   |               | --            |   |             |   | 25,548 |   |   |   | -- |   |   |   | 25,548 |   |
| Interest income – related party                                         |   |               | --            |   |             |   | 33,920 |   |   |   | -- |   |   |   | 49,315 |   |
| Change in conversion liabilities                                              |   |               | (44,896       | )      |             |   | (342,032 | ) |   |   | (45,283 | ) |   |   | (342,032 | ) |
| Change in conversion liabilities– related party                         |   |               | 30,092        |   |             |   | (372,138 | ) |   |   | 28,989 |   |   |   | (372,138 | ) |
| Change in fair value of  conversion liabilities                     |   |               | --            |   |             |   | 5,183,296 |   |   |   | -- |   |   |   | 5,183,296 |   |
| Interest expense – related party                                        |   |               | (4,163        | )      |             |   | (44,089 | ) |   |   | (8,682 | ) |   |   | (61,075 | ) |
| Interest expense                                                              |   |               | (115,791      | )      |             |   | (65,772 | ) |   |   | (310,698 | ) |   |   | (103,849 | ) |
| Total other income (expense)                                                  |   |               | (134,759      | )      |             |   | 4,418,734 |   |   |   | (335,674 | ) |   |   | 4,316,565 |   |
| Income (loss) before provision for income taxes                               |   |               | (311,940      | )      |             |   | 4,406,011 |   |   |   |   |   |   |   | 4,281,960 |   |
| Provision/benefit for income taxes                                            |   |               | --            |   |             |   | -- |   |   |   | -- |   |   |   | -- |   |
| Income (loss) from continuing operations                                      |   |               | (311,940      | )      |             |   | 4,406,011 |   |   |   | (620,057 | ) |   |   | 4,281,960 |   |
| Discontinued operations:                                                      |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
|     Loss from discontinued operations                     |   |               | (98,264       | )      |             |   | (473,900 | ) |   |   | (115,174 | ) |   |   | (1,032,413 | ) |
|     Loss on disposal of discontinued operations           |   |               | --            |   |             |   | -- |   |   |   | -- |   |   |   | -- |   |
|         Total discontinued operations |   |               | (98,264       | )      |             |   | (473,900 | ) |   |   | (115,174 | ) |   |   | (1,032,413 | ) |
| Net Income (Loss)                                                             |   | $                  | (410,204      | )      |             | $      | 3,932,111 |   |   | $ | (735,231 | ) |   | $ | 3,249,547 |   |
|                                                                          |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share, basic – continuing operations                |   | $                  | 0.00          |   |             | $      | 0.03 |   |   | $ | 0.00 |   |   | $ | 0.03 |   |
| Earnings (loss) per share, basic – discontinued operations              |   | $                  | 0.00          |   |             | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | (0.01 | ) |
|  Earnings (loss) per share, basic                                        |   | $                  | 0.00          |   |             | $      | 0.03 |   |   | $ | 0.00 |   |   | $ | 0.02 |   |
|                                                                          |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share, diluted – continuing operations              |   | $                  | 0.00          |   |             | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
| Earnings (loss) per share, diluted – discontinued operations            |   | $                  | 0.00          |   |             | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
|  Earnings (loss) per share, diluted                                      |   | $                  | 0.00          |   |             | $      | 0.00 |   |   | $ | 0.00 |   |   | $ | 0.00 |   |
|                                                                          |   |               |          |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average share of common stock outstanding, basic                     |   |               | 2,058,912,431 |   |             |   | 153,423,038 |   |   |   | 1,736,438,252 |   |   |   | 140,586,425 |   |
| Weighted average share of common stock outstanding, dilutive                  |   |               | 2,058,912,431 |   |             |   | 985,582,783 |   |   |   | 1,736,438,252 |   |   |   | 972,746,170 |   |

|                                                                            |   | Six Months Ended 6/30/10 |      |   | Six MonthsEnded 6/30/09 |   |
|--------------------------------------------------------------------------------------|--------|-------------------------------|-----------|--------|-------------------------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES                                                 |   |                          |      |   |                    |   |
| Net income (loss)                                                                    |   | $                             | (735,231  | )      |                    | $      | 3,249,547 |   |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |   |                          |      |   |                    |   |   |   |
| Change in fair value of conversion liabilities                                       |   |                          | 16,295    |   |                    |   | (5,183,296 | ) |
| Change in net assets of disposal group (see NOTE below)                              |   |                          | 106,702   |   |                    |   | (61,792 | ) |
| Expenses paid via issuance of related party debt                                     |   |                          | 227,788   |   |                    |   | -- |   |
| Recognition and accretion of conversion liabilities                                  |   |                          | --        |   |                    |   | 714,170 |   |
| Accretion of interest income to note receivable principal                            |   |                          | --        |   |                    |   | (25,000 | ) |
| Accounts payable and accrued expenses                                                |   |                          | 59,204    |   |                    |   | 1,017,308 |   |
| Accrued interest                                                                     |   |                          | 319,442   |   |                    |   | 115,061 |   |
| Net cash used in operating activities                                                |   |                          | (5,800    | )      |                    |   | (174,003 | ) |
|  CASH FLOWS FROM INVESTING ACTIVITIES                                           |   |                          |      |   |                    |   |   |   |
| Proceeds from related party receivable                                               |   |                          | --        |   |                    |   | 8,021 |   |
| Cash acquired from acquisition                                                       |   |                          | --        |   |                    |   | 266,605 |   |
| Net cash provided by investing activities                                            |   |                          | --        |   |                    |   | 274,626 |   |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Net (decrease) increase in cash                                                      |   |                          | (5,800    | )      |                    |   | 100,623 |   |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Cash at beginning of period                                                          |   |                          | 5,800     |   |                    |   | -- |   |
| Cash at end of period                                                                |   | $                             | --        |   |                    | $      | 100,623 |   |
|  Supplemental disclosure of non-cash investing and financing activities:        |   |                          |      |   |                    |   |   |   |
| Conversion of preferred stock into common stock                                      |   | $                             | 198,136   |   |                    | $      | -- |   |
| Forgiveness of amount owed to related party                                          |   | $                             | 348,069   |   |                    | $      | -- |   |
| Debt conversions into common stock                                                   |   | $                             | 176,029   |   |                    | $      | 77,894 |   |
| Note receivable exchanged for convertible debenture                                  |   | $                             | --        |   |                    | $      | 500,000 |   |
| Assumption of accounts payable by affiliate debenture issuance                       |   | $                             | 231,380   |   |                    | $      | 285,185 |   |
| Settlement of note payable and accrued interest by surrender of PP&E             |   | $                             | 1,586,253 |   |                    | $      | -- |   |
| Cancellation of accounts payable                                                     |   | $                             | --        |   |                    | $      | 926,739 |   |
| Disposition of entity under common control (paid-in capital)                         |   | $                             | 2,361,180 |   |                    | $      | -- |   |
|                                                                                 |   |                          |      |   |                    |   |   |   |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| NOTE: Cash flows from discontinued operations/disposal group were as follows:        |   |                          |      |   |                    |   |   |   |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Operating activities:                                                                |   |                          |      |   |                    |   |   |   |
| Depreciation and amortization                                                        |   | $                             | --        |   |                    | $      | 88,387 |   |
| Bad debt expense                                                                     |   |                          | --        |   |                    |   | 3,767 |   |
| Loss on disposal of equipment                                                        |   |                          | --        |   |                    |   | 14,005 |   |
| Inventory reserve                                                                    |   |                          | --        |   |                    |   | 72,027 |   |
| Change in operating assets/liabilities:                                              |   |                          |      |   |                    |   |   |   |
| Accounts receivable                                                                  |   |                          | --        |   |                    |   | (80,318 | ) |
| Prepaid expenses                                                                     |   |                          | 8,439     |   |                    |   | 23,842 |   |
| Inventory                                                                            |   |                          | --        |   |                    |   | 1,344,119 |   |
| Accounts payable and accrued expenses                                                |   |                          | 2,397     |   |                    |   | (1,271,238 | ) |
| Accrued interest                                                                     |   |                          | 44,325    |   |                    |   | 23,042 |   |
| Deferred revenue                                                                     |   |                          | --        |   |                    |   | (83,242 | ) |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Investing activities:                                                                |   |                          |      |   |                    |   |   |   |
| Proceeds from sale of equipment                                                      |   |                          | --        |   |                    |   | 50,000 |   |
| Purchases of equipment                                                               |   |                          | --        |   |                    |   | (860 | ) |
| Cash released from restrictions                                                      |   |                          | 51,541    |   |                    |   | (261,751 | ) |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Financing activities:                                                                |   |                          |      |   |                    |   |   |   |
| Advances from affiliate                                                              |   |                          | --        |   |                    |   | 24,434 |   |
| Repayments on long term debt                                                         |   |                          | --        |   |                    |   | (8,006 | ) |
|                                                                                 |   |                          |      |   |                    |   |   |   |
| Total change in net assets of disposal group                                         |   | $                             | 106,702   |   |                    | $      | (61,792 | ) |

| NOTE 1 | BASIS OF PRESENTATION |
|--------|-----------------------|

| NOTE 2 | NATURE OF OPERATIONS |
|--------|----------------------|

| NOTE 3 | GOING CONCERN |
|--------|---------------|

| NOTE 4 | SIGNIFICANT ACCOUNTING POLICIES |
|--------|---------------------------------|

| • | Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives.                                                                  |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.       |
| • | Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models. |

|                                  |   | Fair Value |   |
|---------------------------------------|--------|-----------------|--------|
| As of June 30, 2010         |   | Level 1    |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|  Embedded conversion liabilities |   | $               | --     |   |   | $ | -- |   |   | $ | 451,240 |   |   | $ | 451,240 |   |

| Balance of embedded  conversion liability at December 31, 2009 |   |   | 472,045  |   |
|--------------------------------------------------------------------------|--------|--------|----------|--------|
| Reductions in fair value due to principal conversions                    |   |   | (37,100) |   |
| Change in fair value of beneficial conversion features of debentures     |   |   | 16,295   |   |
| Balance at June 30, 2010                                                 |   | $      | 451,240  |   |

| NOTE 5 | STOCKHOLDERS’ EQUITY |
|--------|----------------------------|

| NOTE 6 | FINANCING ARRANGEMENTS |
|--------|------------------------|

| Current portion of convertible debentures:                                  |   |   |      |
|-----------------------------------------------------------------------------|--------|--------|-----------|
| Convertible debenture payable to YA Global Investments issued October 2005  |   | $      | 602,907   |   |
| Convertible debenture payable to YA Global Investments issued June 2007     |   |   | 570,000   |   |
| Convertible debenture payable to YA Global Investments issued February 2006 |   |   | 911,180   |   |
| Convertible debenture payable to YA Global Investments issued June 2009     |   |   | 4,000,000 |   |
| Embedded conversion liabilities                                             |   |   | 451,240   |   |
|   Total current convertible debentures                            |   | $      | 6,535,327 |   |

| NOTE 7 | RELATED PARTY TRANSACTIONS |
|--------|----------------------------|

| NOTE 8 | DISCONTINUED OPERATIONS |
|--------|-------------------------|

|                                              |   | 2010   |     |   | 2009   |   |
|---------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                              |   |   |     |   |   |   |
| Revenues                                          |   | $      | --       |   |   | $      | 1,637,830 |   |
| Cost of revenues                                  |   |   | --       |   |   |   | 1,979,290 |   |
| Gross profit                                      |   |   | --       |   |   |   | (341,460) |   |
| Selling, general and administrative expense       |   |   | 21,123   |   |   |   | 560,031 |   |
|  Impairment of property, plant and equipment |   |   | --  |   |   |   | --  |   |
| Loss from operations                              |   |   | (21,123  | )      |   |   | (901,491 | ) |
|                                              |   |   |     |   |   |   |   |   |
| Interest expense                                  |   |   | (94,051) |   |   |   | (134,270 | ) |
| Other income and expenses, net                    |   |   | --       |   |   |   | 3,348 |   |
| Total other income and expense                    |   |   | (94,051) |   |   |   | (130,922 | ) |
| Income before provision for income taxes          |   |   | (115,174 | )      |   |   | (1,032,413 | ) |
| Total provision for tax                           |   |   | --       |   |   |   | -- |   |
| Net loss                                          |   | $      | (115,174 | )      |   | $      | (1,032,413 | ) |

| NOTE 9 | COMMITMENTS AND CONTINGENCIES |
|--------|-------------------------------|

| NOTE 10 | SUBSEQUENT EVENTS |
|---------|-------------------|

| Ø   | The issuance by Carbonics to NEC of a senior Secured Convertible Debenture dated August 17, 2010 in the principal amount of $27,640,712, in consideration for the acquisition of the membership interest in Westport Energy by Westport Acquisition (the “NEC Debenture”). The NEC Debenture bears interest at the rate of 9% per annum, payable at maturity.  The maturity date for payment of the NEC Debenture is August 31, 2012.  The holder of the NEC Debenture is entitled to convert the principal and accrued interest on the NEC Debenture into common stock of Carbonics at a conversion rate initially equal to $0.0003 per share, subject to adjustment and beneficial ownership limitations as provided for in the NEC Debenture.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The execution and delivery of a Guaranty Agreement dated as of August 17, 2010 (the “Guaranty”) given by (i) Westport Acquisition, (ii) Westport Energy, and (iii) each subsidiary and affiliate of Westport Acquisition or Westport Energy identified therein or hereinafter joined to this Guaranty in favor of NEC, pursuant to which the Guarantors unconditionally and irrevocably guarantee the full payment and performance of all obligations owed or hereafter owing by Carbonics to NEC.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The execution and delivery of a Security Agreement in favor of NEC dated August 17, 2010 by and among (i) Carbonics, (ii) Westport Acquisition, (iii) Westport Energy; and (iv) any subsidiary and affiliate of Carbonics, Westport Acquisition, or Westport Energy identified therein or joined to this agreement in the future (collectively, the “Grantors”), pursuant to which the Grantors granted to NEC security interests in all of the assets and personal property of each Grantor in order to secure the obligations under the NEC Debenture.  |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The execution and delivery of a Pledge and Escrow Agreement dated as of August 17, 2010, by 4 Sea-Sons LLC, a Delaware limited liability company (the “Preferred Shareholder”), Westport Acquisition, Carbonics and each subsidiary, direct and indirect, of Carbonics, Westport Acquisition or the Preferred Shareholder identified therein or joined to this agreement in the future (collectively, the “Pledgors”) in favor of NEC, pursuant to which the Pledgors pledged to NEC as security for the NEC Debenture all (i) securities, membership, partnership or other ownership interests or rights to purchase of the Pledgors identified therein and (ii) all securities, membership, partnership or other ownership interests obtained in the future by a Pledgor  (collectively, the “Pledged Securities”) and (A) all of the Pledgors’ interests in respect of the Pledged Securities and Pledgors’ interests in all profits and distributions to which the Pledgors shall at any time be entitled in respect of such Pledged Securities and (B) to the extent not otherwise included, all proceeds, dividends, warrants, options, rights, instruments, and other property from time to time received or otherwise distributable in respect of or in exchange of any or all of the foregoing.  |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | a Guaranty Agreement in favor of YA Global dated as of August 17, 2010 (the “YA Guaranty”) given by (i) Carbonics, (ii) Westport Acquisition and (iii) Westport Energy (collectively, the “YA Guarantors”), pursuant to which the YA Guarantors unconditionally and irrevocably guarantee the full payment and performance of certain obligations owed or hereafter owing to YA Global in accordance with the terms of the Guaranty Agreement.  |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | a Security Agreement in favor of YA Global dated August 17, 2010 (the “YA Security Agreement”) by and among (i) Carbonics, (ii) Westport Acquisition and (iii) Westport Energy (collectively, the “YA Grantors”), pursuant to which the YA Grantors granted to YA Global security interests in certain assets and personal property of each YA Grantor in order to secure certain obligations owed to YA Global in accordance with the terms of the terms of the Security Agreement.  |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | a Pledge and Escrow Agreement dated as of August 17, 2010 (the “Pledge and Escrow Agreement”), by the Preferred Shareholder, Westport Acquisition, Carbonics and each subsidiary, direct and indirect, of Carbonics, Westport Acquisition or the Preferred Shareholder identified therein or joined to this agreement in the future (collectively, the “YA Pledgors”) in favor of YA Global, pursuant to which the YA Pledgors pledged to YA Global as security for obligations owed to YA Global all (i) securities, membership, partnership or other ownership interests or rights to purchase of the YA Pledgors identified therein and (ii) all securities, membership, partnership or other ownership interests obtained in the future by a YA Pledgor  (collectively, the “YA Pledged Securities”) and (A) all of the YA Pledgors’ interests in respect of the YA Pledged Securities and YA Pledgors’ interests in all profits and distributions to which the YA Pledgors shall at any time be entitled in respect of such YA Pledged Securities and (B) to the extent not otherwise included, all proceeds, dividends, warrants, options, rights, instruments, and other property from time to time received or otherwise distributable in respect of or in exchange of any or all of the foregoing, all in accordance with the terms of the Pledge and Escrow Agreement.  |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|--------|---------------------------------------------------------------------------------------------|

| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|--------|------------------------------------------------------------|

| ITEM 4 | CONTROLS AND PROCEDURES |
|--------|-------------------------|

| ITEM 1 | LEGAL PROCEEDINGS |
|--------|-------------------|

| ITEM 1A | RISK FACTORS |
|---------|--------------|

| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|--------|-------------------------------------------------------------|

| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES |
|--------|---------------------------------|

| ITEM 4 | RESERVED |
|--------|----------|

| ITEM 5 | OTHER INFORMATION |
|--------|-------------------|

| ITEM 6 | EXHIBITS |
|--------|----------|

| Exhibit |                                                                                                                                                       |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                       |
| Number  | Description                                                                                                                                                |
|    |                                                                                                                                                       |
| 31.1    | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  |
| 31.2    | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  |

| By:       /s/ | PAUL MILLERPAUL MILLERPresident and Chief Executive Officer  |
|--------------------------------------------------|-------------------------------------------------------------------|
| Date:                                            | August 23, 2010                                              |
| By:      /s/       | JACQUELINE FLYNNJACQUELINE FLYNNChief Financial Officer      |
| Date:                                            | August 23, 2010                                              |