**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**









**FORM
      10-KSB**




x
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the fiscal year ended December 31, 2006**o
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the transition period from _______ to
                _______.****Commission
                File Number: 33-64840****CELSIA
                TECHNOLOGIES, INC.***(Name
                of Small Business Issuer in its Charter)***Nevada**
              *(State
                of Incorporation)*
            
            **91-2015441**
              (*I.R.S.
                  Employer*
                *Identification
                  No.*)**1395
                Brickell Avenue**
              **Suite
                800**
              **Miami,
                Florida**
              (*Address
                of principal executive offices*)
            
            **33131**
              (*Zip
                Code)***Issuer’s
                telephone number:****(305)
                529-6290****Securities
                registered under Section 12(b) of the Exchange
                Act:****None****Securities
                registered under Section 12(g) of the Exchange
                Act:****None**





Check
                whether the issuer (1) filed all reports required to be filed by
                Section 13 or 15(d) of the Exchange Act during the past
                12 months (or for such shorter period that the registrant was
                required to file such reports), and (2) has been subject to such
                filing
                requirements for the past 90 days. YesRNo£Check
                if there is no disclosure of delinquent filers in response to
                Item 405 of Regulation S-B contained in this form, and no disclosure
                will be contained, to the best of registrant’s knowledge, in definitive
                proxy or information statements incorporated by reference in Part III
                of this Form 10-KSB or any amendment to this Form 10-KSB.RIndicate
                by check mark whether the registrant is a shell company (as defined
                in
                rule 12b-2 of the Exchange Act).
              Yes£NoRThe
                issuer’s revenues for the fiscal year ended December 31, 2006 were
                $104,085.The
                aggregate market value of the voting common stock held by non-affiliates
                computed by reference to the price at which the stock was last sold
                as
                quoted on the OTC Bulletin Board (OTCBB), as of March 14, 2007
                was approximately $6,548,767.The
                number of shares of common stock outstanding as of March 14, 2007
                was
                36,382,038.**DOCUMENTS
                INCORPORATED BY REFERENCE****None.**Transitional
                Small Business Disclosure Format (check one): Yes£NoR










**TABLE
      OF CONTENTS**




**Part
                I**Item
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            17Item
                3.
            Legal
                Proceedings
            17Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            17**Part
                II**Item
                5.
            Market
                For Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            17Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            19Item
                7.
            Financial
                Statements
            23Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            23Item
                8A.
            Controls
                and Procedures
            23Item
                8B.
            Other
                Information
            23**Part
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            23Item
                10.
            Executive
                Compensation
            26Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Shareholder Matters
            30Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            32Item
                13.
            Exhibits
            34Item
                14.
            Principal
                Accountant Fees and Services
            34







**FORWARD-LOOKING
      STATEMENTS**




This
      report contains forward-looking statements within the meaning of Section 21E
      of
      the Securities Exchange Act of 1934. Such forward-looking statements involve
      risks and uncertainties, including, among other things, statements regarding
      our
      business strategy, future revenues and anticipated costs and expenses. Such
      forward-looking statements include, among others, those statements including
      the
      words “expects,” “anticipates,” “intends,” “believes” and similar language. Our
      actual results may differ significantly from those projected in the
      forward-looking statements. Factors that might cause or contribute to such
      differences include, but are not limited to, those discussed in Item 6
“Management’s Discussion and Analysis or Plan of Operation.” You are cautioned
      not to place undue reliance on the forward-looking statements, which speak
      only
      as of the date of this report. We undertake no obligation to publicly release
      any revisions to the forward-looking statements or reflect events or
      circumstances taking place after the date of this document.




**PART
      I**




**Item
      1.** **Description
      of Business**




***Company
      Overview***




In
      this
      report, unless the context requires otherwise, (1) “Celsia,” “we,” “our,” “us”
and “the Company” refer to Celsia Technologies, Inc., a Nevada corporation
      formerly known as iCurie, Inc., and its subsidiaries, including without
      limitation, Celsia Technologies UK Limited, a United Kingdom company formerly
      known as iCurie Lab Holdings Limited (“Celsia UK”), and Celsia Technologies
      Korea, Inc., a Korean company formerly known as iCurie Lab Inc. (“Celsia
      Korea”), (2) “iCurie” refers to iCurie, Inc., which was the name of Celsia
      Technologies, Inc. prior to September 2006, and (3) “Cedar Mountain” refers to
      Cedar Mountain Distributors, Inc., which was the name of iCurie, Inc. prior
      to
      the July 8, 2005 share exchange described herein.




We
      want
      to become a world leader in developing and commercializing next-generation
      cooling solutions for the personal computer, flat panel display, LED-lighting,
      and communications industries. We develop, manufacture, market, sell and/or
      license our patented thermal management cooling devices. We believe that our
      wafer-thin products absorb, transport and dissipate heat more rapidly than
      current heat-pipe/heat-sink cooling solutions. Our unique cooling device uses
      microfluidic physics to move liquid at very high speeds through micro-channels
      within thin panels.




We
      have
      been provided with non-economic support and advice from the United Kingdom’s
      Trade and Investment Global Entrepreneur Program, a UK government organization
      that identifies and assists global enterprises that are planning to locate
      to
      the United Kingdom or have operations in the UK. This program reviews hundreds
      of company applications annually and selects only a limited number of companies
      to work with.




The
      current industry-leading cooling technology solutions, heat-pipes/heat-sinks,
      were developed when PC processors such as the Pentium I® & Pentium II®, with
      much lower speeds and cooling demands, were the industry standards. With the
      rapid development of faster processors, such as the later Intel Pentium® series,
      the cooling industry has produced many versions of the limited heat-pipe and/or
      heat-sink. However, this aging technology is becoming less effective as faster
      processors produce increased heat levels. Battery life is substantially eroded
      in laptops due to heat and the energy required to operate one or more cooling
      systems. We believe our solutions offer lighter, thinner, smaller, faster,
      more
      efficient and less energy-consuming products. Moreover, we believe that our
      coolers will be more cost efficient than conventional coolers.






1




***Corporate
      History***




The
      Company was incorporated in Nevada under the name KNETX Skates Corporation
      on
      December 23, 1999, and changed its name to Cedar Mountain Distributors, Inc.
      on
      June 9, 2000. Prior to July 8, 2005, the Company was a public “shell” company
      with nominal assets. On July 8, 2005, Cedar Mountain entered into a “share
      exchange” with the shareholders of Celsia UK (a company formed in the United
      Kingdom in March 2004), whereby the shareholders of Celsia UK exchanged all
      of
      the outstanding common shares of Celsia UK for common stock of Cedar Mountain.
      The common stock of Cedar Mountain issued to Celsia UK’s shareholders in the
      share exchange represented approximately 95% of Cedar Mountain’s outstanding
      common stock. Therefore, as a result of the share exchange, the shareholders
      of
      Celsia UK acquired control of Cedar Mountain, Celsia UK became a wholly owned
      subsidiary of Cedar Mountain, Cedar Mountain succeeded to the business and
      operations of Celsia UK and the management of Celsia UK assumed similar
      management positions with Cedar Mountain. To reflect this succession and
      continuation of the business of Celsia UK (then known as iCurie Lab Holdings
      Limited), Cedar Mountain’s name was changed to iCurie, Inc.




Celsia
      UK
      acquired its intellectual property from Celsia Korea in March 2004, and acquired
      an 80.2% equity interest in Celsia Korea (a company formed in South Korea in
      2000) in December 2004. Celsia UK acquired the remaining 19.8% of Celsia Korea
      on September 1, 2005. Therefore, as a result of the acquisition, Celsia Korea
      became a wholly owned subsidiary of Celsia UK. This transaction was described
      in
      our 8-K filed with the SEC on September 1, 2005.




On
      March
      13, 2006, iCurie, Inc. and its subsidiaries began operating under the brand
      name
      Celsia Technologies. In September 2006, the Company changed its corporate name
      to Celsia Technologies, Inc.




***Industry
      Overview***




The
      thermal management industry is an estimated $5 billion business annually. We
      are
      focused on initially commercializing our cooling solutions in four different
      markets. These targeted markets are: the PC, the LED lighting, the flat panel
      display, and the communication and entertainment markets.




Adaptation
      of new technologies (such as LED technology), as well as stronger and more
      powerful micro processors, are important factors that are expected to increase
      demand for new and more efficient thermal solutions.




In
      addition to our targeted markets, we anticipate subsequent deployment of our
      technology in numerous markets, such as medical equipment, air conditioning,
      energy equipment, defense and automotive markets.






2




***Technology
      Overview***




Our
      product portfolio is based on registered and pending patents in microfluidic
      technology. We believe that our technology enables higher performance than
      current cooling systems, with no noise or vibrations, and can be commercially
      manufactured using well-known processes at a cost less than traditional cooling
      products. Our technologies are designed to be used as a stand-alone cooling
      solution, or as part of a cooling system.




***Market
      Information***




As
      the PC
      industry uses ever more-powerful chips, including video chips, cooling has
      become an increasingly critical issue, yet there have been few technological
      innovations in this area. The industry is highly fragmented, the market need
      is
      significant, and we believe we have a very competitive technology. As a result,
      we believe we can capture a significant share of the PC cooling
      industry.




The
      marketability of our product spans basically over all industries where heat
      emission calls for cooling. However, there are four industries where we clearly
      believe that our technology can rapidly become the product of choice. These
      industries are the PC, flat panel display, the LED-lighting, and the
      communication and entertainment industries. Companies in these industries need
      components with higher performance; are used to managing complex supply chains;
      and are willing to accept breakthrough technologies to gain competitive
      supremacy. In a later stage, we also intend to address numerous market segments
      like the home appliances, automotive, aerospace, air conditioning, medical
      and
      energy equipment, and defense industries.




We
      intend
      to address our target markets with a model that incorporates a mix of licensing
      arrangements, through which we can enter certain markets indirectly through
      the
      efforts of third parties, direct product sales and sales together with
      complementing distribution partners. We believe this distribution strategy,
      together with a manufacturing strategy based on outsourcing and manufacturing
      partnership, will enable us to rapidly gain market share without large
      investments in marketing resources or in manufacturing capacity.




***Commercialization***




We
      are
      currently employing three parallel sales models to take our cooling technology
      to the market.




The
      first
      is a licensing model, which we use in specific industries or industry segments.
      We believe that giving licensing partners exclusive rights in certain specific
      areas represents an expedient way of creating certain revenues with relatively
      low financial risks. We believe that this model will also help to create
      visibility and credibility for our technology in other industries. We plan
      to
      pursue this sales alternative when we can find synergies between our technology
      and our partners’ manufacturing capabilities. We have entered into two strategic
      patent license and sales exclusivity partnerships, one with Asia Vital
      Components (AVC) and one with Yeh-Chiang Technology Corp (YCTC).




The
      second sales model is through direct sales activities, either through an
      internal Celsia sales force or through joint ventures. We believe that the
      direct sales model will help increase our revenues, but may also entail
      increased financial risks. We plan to pursue this strategy when a technology
      shift is taking place in a particular industry that can be taken advantage
      of by
      us, or when an industry is fragmented and barriers to entry are low. Under
      this
      model, we plan to manage our supply, manufacturing, and distribution chains
      through sub contractors or by utilizing the manufacturing expertise of our
      supply partners. This strategy has resulted in several test orders together
      with
      a limited number of commercial orders to the Company.






3




The
      third
      sales model is through distribution partnerships, where we partner with strong
      industry leaders in our target markets. This sales model is designed to serve
      as
      a strong complement, and faster method, of selling our cooling devices to the
      market place. Pursuant to this strategy, we have entered into (i) a sales and
      development agreement with Graftech AET (ii) a sales agent contract with
      Kubo Kinzoku and (iii) a distribution agreement with Lighting Science Group
      in
      the US.




***Competition***




Although
      we believe that our technology represents the next generation cooling solution
      in our target markets, we face and will continue to face intense competition.
      This competition consists of companies attempting to develop and market products
      similar to ours, as well as products incorporating alternative technologies.
      Although we believe that we have a degree of market exclusivity with respect
      to
      some of our products due to registered or pending intellectual property rights,
      there can be no guarantees that competitors will not successfully market
      products similar to ours, whether or not such products may infringe on our
      intellectual property rights. Even if we are ultimately successful in
      challenging competitors’ use of our intellectual property, any such challenge
      will likely be both expensive and time consuming, and our competitive position
      could be adversely affected notwithstanding successful legal actions to enforce
      our intellectual property rights.




In
      addition, there are several alternative technologies currently being developed
      and marketed to address the same market demands as our products. Although we
      believe our technologies provides a highly competitive solution when compared
      to
      alternative technologies, it is possible that the market may adopt one of these
      alternative technologies, which may in turn become a recognized industry
      standard. Wide market adoption of one or more of these alternative technologies
      would have an adverse affect on our competitive position. In addition, we may
      also face competition from technologies not yet developed, whether such future
      technologies address the cooling issues directly or indirectly through the
      development of products, which produce less heat and therefore do not require
      an
      improved cooling solution.




In
      addition to the various forms of competition faced by us, it is likely that
      many
      of our competitors will be much larger and better capitalized than we are,
      with
      substantially more resources to devote to the development, manufacture, and
      sales of cooling technology solutions. Such competitors may also benefit from
      existing relationships and reputations within the PC, flat panel display, the
      LED lighting, and communication and entertainment industries.




***Management
      Team***




Our
      senior management is led by Hakan Wretsell, our Chief Executive Officer, and
      Michael Karpheden, our Chief Financial and Operating Officer. Other members
      of
      our management team, which include Dr. Jae-Joon Choi, Ph.D., our Chief
      Technology Officer, and George Meyer, our Chief Marketing Officer, consist
      of
      senior level executives who have extensive experience in management, business
      development, marketing and sales, and systems development. In addition to our
      management team, we believe we have assembled a highly capable and active Board
      of Directors. Furthermore, we have established a strong Advisory Board with
      professionals with extensive industry experience.






4




***Product
      & Technology Solutions***




*Key
      Technologies*




Our
      technologies utilize nano or micro scale environments, wherein the laws of
      physics are manipulated to create very competitive cooling solutions. These
      technologies create heat management products with higher performance, no noise,
      no vibrations, and with no or very limited positioning impact (upside-down
      etc.). The products are lightweight and have an ultra thin design. The products
      do not require a pump or external energy source to operate.




We
      have
      defined two technology paths. Our original Micro Cooling System (MCS)
      technology, branded as iCurie Cooled®, and NanoSpreader TechnologyTM. We believe
      both technologies have great potential in the market, but each has its different
      technical and commercial challenges.




*iCurie
      Cooled® (MCS)*




This
      technology is used to create a cooling device that is a millimeter thin copper
      plate, into which specially designed micro and nano channels have been
      structured. Liquid coolant (distilled water) is placed into the micro and nano
      channels through a process known as VCS- Vacuum, Charge and Sealing. The heat
      source (CPU or other) is placed adjacent to the copper plate (as are traditional
      CPU coolers). When heat is generated, the liquid coolant absorbs the heat in
      a
      very short period of time (less than 0.02 sec). The heat causes the liquid
      coolant to change to vapor. The vapor is rapidly transported through the micro
      and nano channels. The vapor is changed back to liquid by rapidly dissipating
      the heat. The liquid coolant then returns to the heat source at a low
      temperature and is ready to repeat the process. The pressure gradients created
      by the conversion of the coolant between liquid and vapor states “pump” the
      coolant through the micro and nano channels as part of a continuous
      process.




We
      have
      been granted patents relating to our iCurie Cooled® technology in the United
      States, Korea, Japan, China, Russia, and Taiwan. In addition, we currently
      have
      pending patent applications relating to the iCurie Cooled® technology in
      Singapore, Brazil, India, and the 17 member countries of the European
      Union.




*Nano
      Spreader TechnologyTM* (NST)




Many
      of
      the working principles in the NST are the same as in the MCS. The configuration
      and the structuring of the NST give us significant advantages in regards to
      time
      to market. By working with different material layers between the plates, we
      can
      avoid physical segmentation and etching. This impacts the performance and the
      economy of the product. NST has a more flexible design, can cool multi sources
      and is more suitable when cooling larger areas. In addition, the NST is designed
      to be an integrated part of a Printed Circuit Board (PCB). The NST is protected
      by several pending Company patents.






5




*Iceon
      1000C Desktop Cooler*




The
      Company’s Iceon 1000C Desktop CPU cooler incorporates Celsia’s patented
      technology to form the basis for what the Company believes is the highest
      performance cooler in its class on the market today. Iceon 1000C is composed
      of
      Celsia’s NanoSpreaders, a pure aluminum base plate and a set of pure copper fins
      that are bonded together to assure a high efficiency heat transfer from the
      CPU
      to air. Because of this design, the Iceon can use a slow speed fan making it
      a
      nearly silent cooling system. The Iceon 1000C and its components are covered
      by
      multiple pending patents.




*Iceon
      1000CG Graphic card cooler*




The
      Company’s Iceon 1000CG is similar to the Iceon 1000C, based on Celsia’s patented
      Nano spreader technology, and gives the user performance and sound level
      advantages. The Iceon 1000CG includes a fan package and Celsia’s thin and light
      heat spreader technology. This combination allows for low fan speed, which
      gives
      low sound levels and increased fan life. The Iceon 1000CG and its components
      are
      covered by multiple pending patents.




*Current
      Technology Focus*




Management
      is currently focusing on the NST opportunity because we believe this technology
      offers a faster, more straightforward way to commercialization. In addition,
      we
      believe the NST offers potential customers an economical alternative. All
      current product and customer projects are based on the NST, which is where
      the
      main part of our resources is being allocated.




***Sales
      and Marketing***




*Sales*




We
      execute our commercialization strategy either by interacting directly with
      the
      potential customer (direct sales), or indirectly through partnerships (licensing
      or distribution partners), as described under “Commercialization”
above.




The
      Company manages all customer opportunities in projects where our sales and
      engineering resources are deployed. The projects are initiated either through
      direct contacts with the customer, through our strategic partners or through
      customer inquiries generated through marketing activities such as public
      relations.




We
      are
      currently managing between 30 to 40 customer projects. Our projects are being
      managed through different stages, starting with initial designs, samples and
      quotes, and ending with design wins and commercial purchase orders. We have
      projects in all stages as well as in all of our targeted markets. We have also
      received and executed several commercial orders.




*Marketing*




We
      plan
      to tailor and adapt our technology and product portfolio to our target markets.
      Our management believes that our product offers very competitive performance
      to
      existing alternatives, and can be manufactured at a similar or lower cost
      tha n those
      alternatives. This gives us numerous alternatives in regards to marketing
      messages and competitive positioning. Regardless of the competitive environment,
      we feel confident going to the market with business proposals that are lowering
      barriers to entry. We plan to utilize price-performance trade-offs to rapidly
      create partnerships and make in-roads to targeted markets.






6




The
      marketing strategy will be a combination of different marketing initiatives.
      We
      plan to base this strategy on a business-to-business marketing approach, where
      value is primarily determined by business economic use and large-unit
      transactions are the norm. The marketing philosophy, however, will go beyond
      a
      fixation on transactions, which very often leads to lost customers and low
      brand
      awareness in the short-term. Our ambition is to build a mutually advantageous
      long-term relationship with the customers, not just sell a product. This calls
      for knowing the customer well enough to deliver relevant products in a timely
      fashion and meeting their specific needs.




We
      plan
      to employ an overall marketing strategy, which will include initiatives such
      as
      advertising, public relations, and customer relations management, as well as
      a
      strong focus on corporate identity. The critical aspect is to convey the
      strengths and values of the products to potential customers, such as superior
      performance, no noise, no vibrations, environmental friendliness, and reduced
      size. We plan to accomplish this through strong direct marketing programs to
      potential customers. In addition, we believe that product marketing and
      advertising through specialized computer magazines will be an important
      component in our strategy. Trade shows on a worldwide basis will be part of
      the
      long-term marketing strategy to ensure visibility in the market
      place.




We
      plan
      to build value through marketing based assets, such as brand, customer and
      employee relationships, channel relationship, supplier relationship, and
      intellectual capital. Our strategy is to minimize our ownership of physical
      assets. We aim to effectively employ and manage outsourced manufacturing
      capacity. Our belief is that value creation derives from building intellectual
      capital instead of owning fixed assets such as factories, buildings, etc.
      However, we do expect to own limited manufacturing capacity to enable shipment
      of sample products, supply initial series volume, and help to ensure our control
      of the manufacturing process.




On
      March
      13, 2006, the Company re-branded itself as “Celsia Technologies,” which reflects
      its ambition to establish the Company’s unique technology under a strong brand
      in the thermal management marketplace. The Company changed its corporate name
      to
      reflect this re-branding in September 2006.




*Manufacturing
      Operations*




During
      2006, test and sample units were provided to several potential customers in
      our
      targeted industries. The samples have been produced in our own pilot plant,
      which was inaugurated in September 2005. During 2006, the Company continued
      to
      ship sample and test units to numerous potential customers. The Company has
      also
      received commercial orders and has executed several commercial shipments. In
      addition, a significant portion of our test orders generated revenues during
      2006.




Our
      product does not call for a complex manufacturing set up, the number of
      components is very limited, and we have identified key manufacturing partners.
      One important criterion has been a thorough knowledge in manufacturing of
      thermal management products.






7




We
      also
      believe that the manufacturing capacity of our strategic licensing and
      manufacturing partners, AVC and YCTC, will supply the main part of the capacity
      necessary for expected 2007 volumes.




***Research
      and Development Expenditures***




Research
      and development expenditures were approximately $747,000 and $809,000 for the
      years ended 2006 and 2005, respectively.





***Employees***




As
      of
      December 31, 2006, Celsia had 39 employees. 34 of our 39 employees are located
      at the Company’s Korea office.




***Financing
      Activities***




*Share
      Exchange and Series A Offering*




*Overview*




Effective
      as of July 8, 2005, Cedar Mountain entered into a Share Exchange Agreement
      with the shareholders of Celsia UK and certain additional parties. Immediately
      prior to the execution of the Share Exchange Agreement, 3,050,001 shares of
      Cedar Mountain common stock, par value $0.001 per share, were cancelled pursuant
      to agreements between Cedar Mountain and certain shareholders of Cedar Mountain
      (including the then sole officer and director of Cedar Mountain) for an
      aggregate consideration of $214,000. After the cancellation, Cedar Mountain
      had
      1,350,023 common shares outstanding. Upon the consummation of the transactions
      contemplated by the Share Exchange Agreement on July 8, 2005,
      (i) Cedar Mountain acquired all of the outstanding shares of Celsia UK
      (resulting in Celsia UK becoming a wholly owned subsidiary of Cedar Mountain),
      (ii) Cedar Mountain issued 24,935,047 shares of common stock to the
      shareholders of Celsia UK and certain of their assigns, which represented
      94.864% of the issued and outstanding shares of Cedar Mountain common stock,
      (iii) the sole director and executive officer of Cedar Mountain resigned,
      (iv) directors and officers associated with Celsia UK were appointed as
      directors and officers of the Company, (v)  Amended and Restated Articles
      of Incorporation of Cedar Mountain were approved and filed which, among other
      things, changed the name of Cedar Mountain to iCurie, Inc., and designated
      30,000,000 shares of Series A Preferred Stock, par value $0.001 per share;
      and (vi) the new directors approved and adopted Amended and Restated Bylaws
      of Celsia.




Effective
      as of July 11, 2005, the Company issued 20,995,239 shares of Series A
      Preferred Stock, together with warrants exercisable for a total of 6,441,874
      shares of our common stock, to various parties (referred to in this report
      as
      the “Series A Shareholders”) in exchange for approximately $12.48 million
      in cash (at a cash price of $0.88 per share of Series A Preferred Stock) and
      the
      transfer to us on the terms described herein of $4.6 million of previously
      issued promissory notes issued by various parties (we refer to these
      transactions collectively as the “Series A Offering”). The Series A
      Offering was effectuated pursuant to Subscription Agreements (in the case of
      cash sales) and a Preferred Stock Purchase Agreement (in the case of the
      issuance of Series A Preferred Stock for promissory notes) between Celsia and
      the stock recipients, each effective as of July 11, 2005. In connection with
      the
      Series A Offering, we also entered into a Registration Rights Agreement
      dated as of July 11, 2005 with Celsia UK shareholders, Series A Shareholders,
      and certain additional parties (the “Registration Rights Agreement”), as
      described in this section under “Registration Rights Agreement.”




8




Pursuant
      to the Share Exchange Agreement, the Company agreed to assume the obligations
      of
      Celsia UK under a Placement Agent Agreement between Celsia UK, Indigo Securities
      LLC, and Axiom Capital Management Inc. (we refer to Indigo and Axiom
      collectively as the “Placement Agent”), pursuant to which the Placement Agent
      was compensated by us for its services in connection with the Share Exchange
      Agreement and the Series A Offering, as described in this section under
“Compensation to Placement Agent.” In connection with the Share Exchange
      Agreement and Series A Offering, the Company also granted warrants exercisable
      for a total of 270,000 shares of our common stock to a party that identified
      Cedar Mountain as a potential participant in the share exchange.




In
      connection with the share exchange and Series A Offering, (i) our executive
      officers entered into employment agreements as described under Item 10
“Executive Compensation,” (ii) we advanced a major shareholder $500,000
      payable under a pre-existing revenue sharing agreement and entered into certain
      related transactions with such shareholder, (iii) we cancelled a $1.1 million
      promissory note made by an executive officer in exchange for 1.25 million shares
      of our common stock owned by such officer, (iv) an option for 440,000 shares
      of
      Celsia UK common stock held by an executive officer was cancelled in exchange
      for a warrant to purchase 1,097,142 shares of our common stock, (v) our
      executive officers were paid certain accrued but previously unpaid salaries
      in
      cash and shares of our common stock and (vi) an executive officer agreed to
      indemnify us against certain potential liabilities related to our
      then-contemplated acquisition of 19.2% of Celsia Korea (which was subsequently
      acquired on September 1, 2005). Additional information regarding the matters
      set
      forth in (ii) - (vi) above is set forth under Item 12 “Certain Relationships and
      Related Transactions.”




The
      above
      transactions were reported and described in the Company’s Form 8-K dated July 8,
      2005, as amended.




*Description
      of Note Conversion*




Pursuant
      to the Preferred Stock Purchase Agreement, secured convertible interim
      promissory notes (the “Notes”) which were issued by Celsia UK and two of its
      shareholders, Hansen Gray & Company, Inc. and Dr. Jeong-Hyun Lee, in the
      aggregate principal amount of $4,600,000, were exchanged for approximately
      6,810,000 shares of Series A Preferred Stock. The number of shares of Series
      A
      Preferred Stock issued in the Note conversion equaled the approximate number
      derived by dividing (i) $4,100,000 principal amount of the Notes by $0.66,
      and
      (ii) $500,000 principal amount of the Notes by approximately $0.83, representing
      a twenty-five percent (25%) and five percent (5%) discount from the cash
      offering price of the Series A Preferred Stock, respectively. The shares of
      Series A Preferred Stock issued upon conversion of the Notes have the same
      rights, preferences and privileges as all other shares of Series A Preferred
      Stock.






9




*Compensation
      to Placement Agreement*




In
      connection with the share exchange and Series A Offering, the Placement Agent
      received (i) a cash fee of approximately $1.248 million, equal to ten percent
      (10%) of the aggregate gross cash proceeds received from the Series A Offering
      from subscribers, (ii) a cash fee of approximately $285,000, representing the
      unpaid portion of fees owed in connection with the original issuance of the
      Notes, (iii) warrants to purchase 1,364,528 shares of Series A Preferred Stock,
      equal to ten percent (10%) of the shares of Series A Preferred Stock purchased
      by subscribers, at an exercise price of $0.88 per share, and (iv) warrants
      to
      purchase 681,018 shares of common stock, at an exercise price of $0.88 per
      share. The Placement Agent additionally was reimbursed for actual out-of-pocket
      expenses incurred in connection with the Share Exchange Agreement and the Series
      A Offering, subject to certain limitations.




*Series
      A Registration Rights Agreement*




*Initial
      Registration* .
      The
      Series A Registration Rights Agreement required us to use our reasonable best
      efforts to file the registration statement by September 8, 2005 and cause the
      registration statement to become effective no later than one hundred and twenty
      (120) days after July 11, 2005. Under the terms of the Series A Registration
      Rights Agreement, if the registration statement was not filed within 60 days
      of
      July 11, 2005 or declared effective within 120 days of July 11, 2005 (each
      a
“Non-Registration Event”), then for each 30 day period during the pendency of
      such a Non-Registration Event, we were required to pay to the purchasers of
      the
      Series A Preferred Stock an amount equal to one percent (1%) of the purchase
      price paid for the Series A Preferred Stock ($0.88 per share), which could
      be
      paid in cash or in shares of Series A Preferred Stock (valued at $0.88 per
      share), at the Company’s option. The registration statement was filed on October
      6, 2005 and the registration statement was declared effective in April 2006.
      As
      a result of the Non-Registration Events, in August 2006, the Company issued
      970,550 shares of Series A Preferred Stock to the purchasers of Series A
      Preferred Stock.




*Demand
      Rights* .
      If the
      initial registration statement does not register all shares of common stock
      as
      required by the Series A Registration Rights Agreement, owners of Series A
      Preferred Stock holding more than $500,000 in value of the securities to be
      registered may require us to use our best efforts to cause such shares to be
      registered on other registrations, subject to certain conditions. We shall
      not
      be obligated to affect more than two (2) registrations under these demand right
      provisions.




*Piggy-Back
      Rights* .
      If the
      initial registration statement does not register all shares of common stock
      as
      required by the Series A Registration Rights Agreement, owners of Series A
      Preferred Stock shall be entitled to “piggy back” registration rights on all
      registrations of the Company or on any demand registrations of any other
      investor, subject to certain conditions and the right of the Company and its
      underwriters to reduce the number of shares proposed to be registered in view
      of
      market conditions.




*S-3
      Rights* .
      If the
      initial registration statement does not register all shares of common stock
      as
      required by the Series A Registration Rights Agreement, owners of Series A
      Preferred Stock shall be entitled to unlimited demand registrations on Form
      S-3
      (if available to the Company) subject to certain conditions, so long as such
      registered offerings are not less than $500,000.






10




*Expenses* .
      The
      Company shall bear registration expenses (exclusive of underwriting discounts
      and commissions) of the initial registration and all such demands, piggy backs,
      and S-3 registrations (including the expense of one special counsel for all
      Series A Preferred Stock selling shareholders).




*Hansen
      Gray/CHL* .
      The
      common stock of the Company held by Hansen Gray & Company, Inc. and CHL
      Investment Partnership (prior shareholders of Celsia UK) will not be registered,
      although such parties do have the right to demand registration of their common
      stock beginning six (6) months and twelve (12) months, respectively, after
      the
      effective date of such registration statement. We are required to pay certain
      liquidated damages if we do not register the shares of Hansen Gray &
Company, Inc. and CHL in accordance with these demand rights. The Series A
      Registration Rights Agreement also imposes certain sale restrictions on Hansen
      Gray & Company, Inc. prior to the registration of its shares of our common
      stock.




*Summary
      of Prior Financings*




*December
      2004 Bridge Financing* .
      On
      December 2, 2004, Hansen Gray issued secured convertible promissory notes (the
      “HG Notes”) in the aggregate principal amount of $2,500,000 to various
      purchasers (the “HG Noteholders”). All of the proceeds of the HG Notes were
      distributed to Celsia UK. Upon consummation of the Series A Offering, the
      principal amount of the HG Notes was exchanged for 3,787,863 shares of Series
      A
      Preferred Stock. Upon such exchange, each HG Noteholder received the number
      of
      shares of Series A Preferred Stock equal to the number derived by dividing
      the
      principal amount of the Noteholder’s Note by $0.66 (subject to rounding),
      representing a twenty-five percent (25%) discount from the cash offering price
      per share of the Series A Preferred Stock.




In
      connection with the issuance of the HG Notes, Celsia UK also agreed to issue,
      and in the Series A Offering we did issue, the HG Noteholders five-year warrants
      to purchase an aggregate of 710,214 shares of common stock. Each such warrant
      entitles the holder thereof to purchase the number of shares of common stock
      equal to (i) twenty-five percent (25%) of the aggregate principal amount of
      the applicable HG Note, divided by (ii) 0.88 (subject to rounding), at an
      exercise price per share equal to $0.88. The warrants contain customary
      anti-dilution provisions. As part of the share exchange, Hansen Gray also
      transferred to the HG Noteholders an aggregate of 1,496,103 shares of common
      stock.




Also
      in
      connection with the issuance of the HG Notes, Dr. Lee issued a personal
      promissory note for $1,100,000 to an affiliate of the HG Noteholders. In
      connection with the Series A Offering, the holder of Dr. Lee’s note transferred
      the Note to us in exchange for approximately 1,667,000 shares of Series A
      Preferred Stock. We then cancelled the note in exchange for approximately
      1,250,000 shares of Dr. Lee’s common stock (valued at $0.88 per share for an
      aggregate value of $1,000,000). See Item 12 “Certain Relationships and Related
      Transactions, and Director Independence.”




*2005
      Bridge Financings* .
      On each
      of March 17 and April 25, 2005, Celsia UK issued secured convertible
      promissory notes (the “2005 Notes”) in the principal amount of $500,000 to
      various purchasers (the “2005 Noteholders”), for an aggregate combined issuance
      of $1,000,000. The 2005 Notes ranked senior to all other debt of Celsia UK.
      As
      part of the Series A Offering, the 2005 Notes were exchanged for approximately
      1,355,600 shares of Series A Preferred Stock. Upon such exchange, each 2005
      Noteholder received the number of shares of Series A Preferred Stock equal
      to
      the number derived by dividing the principal amount of the Noteholder’s 2005
      Note and accrued and unpaid interest by (i) $0.66 in the case of the
      $500,000 March 17 note issuance and (ii) approximately $0.83 in the
      case of the $500,000 April 25 note issuance (in each case subject to
      rounding), representing a twenty-five percent (25%) and five percent (5%)
      discount, respectively, from the cash offering price of the Series A Preferred
      Stock.






11




In
      connection with issuance of the 2005 Notes, Celsia UK also agreed to issue,
      and
      in the Series A Offering we did issue, the 2005 Noteholders five-year warrants
      to purchase 482,946 shares of common stock. Each such warrant relating to the
      March 17 note issuance entitles the holder thereof to purchase the number of
      shares of common stock equal to (i) eighty percent (80%) of the aggregate
      principal amount of the applicable 2005 Note, divided by (ii) 0.88 (subject
      to rounding), at an exercise price equal to $0.88 per share (subject to
      rounding). Each such warrant relating to the April 25 note issuance
      entitles the holder thereof to purchase the number of shares of common stock
      equal to (i) five percent (5%) of the aggregate principal amount of the
      applicable 2005 Note, divided by (ii) 0.88 (subject to rounding), at an
      exercise price equal to $0.88 per share. The warrants contain customary
      anti-dilution provisions.




*Additional
      Warrants* .
      Pursuant to the Series A Offering, each recipient of Series A Preferred Stock
      received warrants to purchase a number of shares of common stock equal to
      twenty-five percent (25%) of the number of shares of Series A Preferred Stock
      received (subject to rounding). Fifty percent (50%) of these warrants are
      exercisable at $1.10 per share and fifty percent (50%) are exercisable at $1.32
      per share.




*Series
      B Offering*




*Overview*




On
      December 16, 2005, the Company issued 3,063,402 shares of its newly designated
      Series B Preferred Stock, $0.001 par value per share, to certain individuals
      and
      entities (the “Series B Holders”), together with warrants (the “Series B
      Warrants”) to purchase approximately 1,531,700 shares of the Company’s common
      stock, for an aggregate of $3,063,402 in cash. The Series B Offering was
      effected pursuant to Subscription Agreements between the Company and the Series
      B Holders, each effective as of December 16, 2005. In connection with the Series
      B Offering, the Company entered into the Series B Registration Rights Agreement
      dated as of December 16, 2005 with the Series B Holders and the Series B
      Placement Agents (as defined below). The terms of the Series B Preferred Stock
      are set forth in a Certificate of Designation to the Company’s Amended and
      Restated Articles of Incorporation, which certificate was filed on November
      30,
      2005. Fifty percent (50%) of the Series B Warrants are exercisable at $1.50
      per
      share of common stock and fifty percent (50%) of the Series B Warrants are
      exercisable at $3.00 per share of common stock.




In
      connection with the Series B Offering, Indigo Securities LLC and Bridgehead
      Group Limited (collectively, the “Series B Placement Agents”) and certain of
      their assigns received (i) a cash fee of approximately $216,340, (ii) warrants
      to purchase 210,000 shares of Series B Preferred Stock at $1.50 per share,
      and
      (iii) warrants to purchase 6,340 shares of common stock at $1.50 (collectively,
      the “Series B Placement Agent Warrants”) pursuant to Placement Agent Agreements
      between the Company and each of the Series B Placement Agents.






12




*Series
      B Registration Rights Agreement*




Pursuant
      to the Series B Registration Rights Agreement, the Company is required to file
      a
      registration statement covering the common stock (i) into which the Series
      B
      Preferred Stock is convertible and (ii) for which the Series B Warrants and
      Series B Placement Agent Warrants are exercisable (collectively, the
“Registrable Securities”) within six (6) months after the Company’s Registration
      Statement on Form SB−2 (Registration No. 333−128856) (filed pursuant to the
      Series A Offering and Registration Rights Agreement) is declared effective.
      The
      Company is required to maintain the effectiveness of the registration statement
      through the first anniversary of the Series B Offering and shall use its best
      efforts to maintain its effectiveness through the second anniversary of the
      Series B Offering.




If
      the
      registration statement is not effective at any time during the period beginning
      270 days after the Series B Offering and ending one year after the Series B
      Offering, holders of the Registrable Securities holding more than $500,000
      in
      value of the Registrable Securities may require the Company to use its best
      efforts to cause such shares to be registered. The Company shall not be
      obligated to effect more than two (2) registrations under such demand
      registration provisions.




Subject
      to certain conditions, the holders of the Registrable Securities shall be
      entitled to “piggy back” registration rights on all registrations of the
      Company. Holders of the Registrable Securities shall be entitled to unlimited
      demand registrations on Form S−3 (if available to the Company) so long as such
      registered offerings are not less than $500,000. The Company shall bear
      registration expenses of all such demands, piggy backs, and S−3
      registrations.




***Stock
      Dividends and Amendment to Articles***




In
      the
      third quarter of 2006, the Company declared a dividend of shares of our common
      stock equal to 25% of the number of shares of Series A Preferred Stock and
      Series B Preferred Stock held by holders of record of Series A Preferred Stock
      and Series B Preferred Stock on September 30, 2006 (the “Stock Dividend”),
      resulting in the issuance of 5,798,253 shares of Series A Preferred Stock and
      765,851 shares of Series B Preferred Stock. On August 10, 2006 the Company
      paid
      an 8% Series A stock dividend to Series A shareholders, resulting in the
      issuance of 1,655,746 shares of Series A Preferred Stock.




In
      September 2006, the Company amended its Amended and Restated Articles of
      Incorporation to (i) provide that neither the Stock Dividend nor the
      amendment to the Company’s stock incentive plan to increase the number of shares
      available under such plan to 15 million shares would trigger any conversion
      adjustment or other anti-dilution or pre-emptive rights of the Series A
      Preferred Stock or Series B Preferred Stock and (ii) reflect the Company’s
      name change from “iCurie, Inc.” to “Celsia Technologies, Inc.”




***Subsequent
      Financing***




On
      February 20, 2007, the Company obtained additional funds through the issuance
      of
      $1 million aggregate principal amount of secured convertible promissory notes.
      This transaction was reported and described in the Company’s Form 8-K dated
      February 20, 2007.






13




***Description
      of Capital Stock***




As
      of the
      date of this filing, we have issued and outstanding 36,382,038 shares of common
      stock, 23,061,505 shares of Series A Preferred Stock, and 3,063,402 shares
      of
      Series B Preferred Stock. Our Amended and Restated Articles of Incorporation
      authorize 150,000,000 shares of common stock and 100,000,000 of preferred stock,
      30,000,000 of which has been designated as Series A Preferred Stock and
      7,000,000 of which has been designated as Series B Preferred Stock.




*Common
      Stock*




Holders
      of shares of common stock are entitled to dividends as and when declared by
      our
      Board of Directors from funds legally available therefor, and upon liquidation,
      dissolution or winding-up of the Company are entitled to share ratably in all
      assets remaining after payment of liabilities. We have not paid any dividends
      nor do we anticipate paying any dividends on our common stock in the foreseeable
      future. It is our present policy to retain earnings, if any, for use in the
      development of our business. The holders of shares of common stock do not have
      preemptive rights, are entitled to one vote for each share of common stock
      held
      of record by them, and do not have the right to cumulate their votes for
      election of directors.




*Series
      A Preferred Stock*




Holders
      of the Series A Preferred Stock are entitled to receive cumulative, compounding
      dividends in preference to any dividend on our common stock at an annual rate
      of
      eight percent (8%), payable as, when and if declared by the Company, in cash
      or
      additional shares of Series A Preferred Stock (which shall be valued at the
      original purchase price per share of $0.88) at our option. The holders of Series
      A Preferred Stock are entitled to participate pro rata in any dividends paid
      on
      the common stock on an as-if-converted basis. In the event of any sale,
      bankruptcy or dissolution of the Company, the holders of the Series A Preferred
      Stock are entitled to receive in preference to the holders of the common stock
      a
      per share amount equal to the original purchase price plus any accrued and
      unpaid dividends (the “Liquidation Preference”). After the payment of the
      Liquidation Preference to the holders of the Series A Preferred Stock, the
      remaining assets shall be distributed ratably to the holders of the common
      stock. A merger, acquisition, sale of voting control or sale of substantially
      all of the assets of the Company in which the pre-transaction shareholders
      of
      the Company do not own a majority of the outstanding shares of the surviving
      corporation shall be deemed to be a sale of the Company.




The
      holders of the Series A Preferred Stock have the right to convert the Series
      A
      Preferred Stock and any accrued dividends, at any time, into shares of common
      stock. The initial conversion price is $0.88, subject to adjustment as provided
      below, resulting in an initial conversion rate of 1:1. At our option, the Series
      A Preferred Stock and any accrued dividends shall be converted into common
      stock, at the then applicable conversion price, in the event that (i) the
      holders of at least a majority of the outstanding Series A Preferred Stock
      consent to such conversion; (ii) we receive $50 million of additional equity
      based financing after July 11, 2005; or (iii) the common stock is quoted at
      a
      price per share equal to three (3) times the then current conversion price
      of
      the Series A Preferred Stock for twenty (20) consecutive trading days and such
      shares are traded at an average daily dollar volume of $250,000 (average share
      price times the average volume) during the same twenty (20) day trading
      period.






14




The
      conversion price of the Series A Preferred Stock and the exercise price of
      the
      Company warrants described in this report are subject to a weighted average
      antidilution adjustment to reduce dilution in the event that we issue additional
      equity securities at a purchase price less than the applicable conversion price
      in the case of the Series A Preferred Stock or the applicable exercise price
      in
      the case of the warrants, in each case, subject to certain exceptions. The
      conversion price is also subject to proportional adjustment for stock splits,
      stock dividends, recapitalizations and the like.




The
      Series A Preferred Stock votes together with the common sto c k
      and not
      as a separate class except as specifically provided by their terms or as
      otherwise required by law. Each share of Series A Preferred Stock has a number
      of votes equal to the number of shares of common stock then issuable upon
      conversion of such share of Series A Preferred Stock.




So
      long
      as fifty percent (50%) or more of the Series A Preferred Stock remains
      outstanding, the holders of the Series A Preferred Stock, voting as a separate
      class, shall be entitled to elect two members of our Board of Directors, one
      of
      whom will be an independent director. So long as twenty five percent (25%)
      or
      more (but less than fifty percent (50%)) of the Series A Preferred Stock remain
      outstanding, the holders of the Series A Preferred Stock, voting as a separate
      class, shall be entitled to elect one member of our Board of Directors (whether
      or not independent). The holders of common stock, voting as a separate class,
      are entitled to elect two board members, who currently are Hakan Wretsell and
      Dr. Lee.




The
      consent of the directors elected by the holders of Series A Preferred Stock
      is
      required for any action that (i) alters or changes in a material manner the
      rights, preferences or privileges of the Series A Preferred Stock, (ii)
      increases or decreases the authorized number of shares of common or preferred
      stock, (iii) constitutes the incurrence of indebtedness by the Company which
      possesses rights senior to the Series A Preferred Stock (other than indebtedness
      incurred in the ordinary course of our business, consistent with past practice,
      and certain additional exceptions), (iv) creates (by reclassification or
      otherwise) any new class or series of shares or securities having rights,
      preferences or privileges senior to or on a parity with the Series A Preferred
      Stock, (v) results in the redemption of any shares of common stock (other than
      pursuant to equity incentive agreements with service providers giving us the
      right to repurchase shares upon the termination of services), (vi) results
      in
      any merger, other corporate reorganization, sale of control, or any transaction
      in which all or substantially all of the assets of the Company are sold; except
      in the event that the merger, corporate reorganization, sale of control, or
      sale
      of all or substantially all of the assets of the Company results in the Series
      A
      Preferred Stock receiving three (3) times the amount paid for their Series
      A
      Preferred Stock at original issuance, (vii) amends or waives any provision
      of
      our Articles of Incorporation or Bylaws relative to the Series A Preferred
      Stock, or (viii) increases the authorized size of our board. The consent of
      the
      directors elected by the holders of the Series A Preferred Stock is also
      required for certain additional actions until such time as the registration
      statement of which this prospectus is a part is effective. In addition, (i)
      the
      consent of the holders of the Series A Preferred Stock, voting as a separate
      class, is required in order for us to authorize the issuance of any securities
      ranking senior to, or pari passu with the Series A Preferred Stock as to the
      payment of dividends or liquidation preference, and (ii) following the
      effectiveness of the registration statement of which this prospectus is a part,
      holders of fifty percent (50%) or more of the Series A Preferred Stock issued
      as
      of July 11, 2005 may require us to reincorporate in the State of
      Delaware.






15




*Series
      B Preferred Stock*




Subject
      and subordinate to the liquidation rights of the Series A Preferred Stock,
      in
      the event of any sale of the Company, the holders of the Series B Preferred
      Stock shall be entitled to receive in preference to the holders of the common
      stock a per share amount equal to $1.00 (the “Series B Liquidation Preference”).
      After the payment of the Series B Liquidation Preference to the holders of
      the
      Series B Preferred Stock, the remaining assets of the Company shall be
      distributed ratably to the holders of the common stock. A merger, acquisition,
      sale of voting control or sale of substantially all of the assets of the Company
      in which the pre−transaction shareholders of the Company do not own a majority
      of the outstanding shares of the surviving corporation shall be deemed to be
      a
      sale of the Company.




Subject
      and subordinate to the liquidation rights of the Series A Preferred Stock,
      in
      the event of any bankruptcy filing or dissolution by the Company, the holders
      of
      the Series B Preferred Stock shall be entitled to receive in preference to
      the
      holders of the common stock a per share amount equal to the Series B Liquidation
      Preference. After the payment of the Series B Liquidation Preference to the
      holders of the Series B Preferred Stock, the remaining assets shall be
      distributed ratably to the holders of the common stock, the Series A Preferred
      Stock and the Series B Preferred Stock on a common equivalent
      basis.




The
      holders of the Series B Preferred Stock have the right to convert the Series
      B
      Preferred Stock at any time into shares of common stock at an initial conversion
      rate of 1:1, subject to adjustment as provided below. At the option of the
      Company, the Series B Preferred Stock shall be converted into common stock,
      at
      the then applicable conversion price, in the event that (i) the holders of
      at
      least a majority of the outstanding Series B Preferred Stock consent to such
      conversion; (ii) all of the holders of the outstanding Series A Preferred Stock
      convert to common stock; (iii) the Company receives $15 million of additional
      equity based financing after the Series B Closing Date at three (3) times the
      then current conversion price of the Series B Preferred Stock; or (iv) the
      common stock trades at a price per share equal to three (3) times the then
      current conversion price of the Series B Preferred Stock for 20 consecutive
      trading days and such shares are traded at an average daily dollar volume of
      $250,000 (average share price times the average volume) during the same 20
      day
      trading period.




The
      conversion price of the Series B Preferred Stock and the exercise price of
      the
      Series B Warrants are subject to a weighted average antidilution adjustment
      (based on all outstanding shares of preferred and common stock) to reduce
      dilution in the event that the Company issues additional equity securities
      (other than shares issued pursuant to outstanding and reserved employee options
      and certain other specified issuances) at a purchase price less than the
      applicable conversion price in the case of the Series B Preferred Stock or
      the
      applicable exercise price in the case of the Series B Warrants. The conversion
      price is also subject to proportional adjustment for stock splits, stock
      dividends, recapitalizations and the like.




The
      Series B Preferred Stock vote together with the common stock and not as a
      separate class. Each share of Series B Preferred Stock has a number of votes
      equal to the number of shares of common stock then issuable upon conversion
      of
      such share of Series B Preferred Stock.






16




**Item
      2.** **Description
      of Property**




The
      Company’s U.S. office is currently located in leased space at 1395 Brickell
      Avenue, Suite 800, Miami, Florida 33131, and its phone number is 305-529-6290.
      Celsia Korea, which is the Company’s research, development and manufacturing
      center, is located in Seoul, Korea. The Company’s telephone number in Korea is
      011-82-2-3452-2005 and its fax number is 011-82-2-3452-3650. We believe that
      Korea is an excellent location to recruit highly skilled engineers. The main
      responsibilities of the Korean office are to develop and industrialize the
      planned technology portfolio, lab prototypes and pre-serial manufacturing,
      as
      well as quality control.




We
      currently lease office, research and manufacturing facilities in Seoul, Korea
      and office space in Miami, Florida. Our leased facilities in Korea consist
      of
      approximately 450 square meters of office space and approximately 750 square
      meters of space used as a pilot plant for product manufacturing. Approximate
      monthly rent (including a 10% value added tax) for the Korean office and plant
      is 4,730,000 KWON (approximately $5,100) and 8,527,200 KWON (approximately
      $9,200), respectively. The leases on the office and plant space expire in March
      2008 and July 2007, respectively. Our space in Miami consists of a furnished
      office, which includes secretarial and other amenities at a charge of
      approximately $3,030 per month under a contract expiring May 2007.




**Item
      3.** **Legal
      Proceedings**




None.




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




A
      shareholder consent was submitted to the holders of the Company’s common and
      preferred stock during the fourth quarter of fiscal 2006 to approve (i) an
      increase in the Company’s authorized shares of common stock from 150,000,000 to
      500,000,000 and (ii) certain matters related to a contemplated financing
      transaction which was not consummated. The Company received consents from
      holders of 25,505,811 shares of common stock, representing 70% of the
      outstanding common stock, 11,383,681 shares of Series A Preferred Stock,
      representing 49% of the outstanding Series A Preferred Stock, and 3,000,000
      shares of Series B Preferred Stock, representing 98% of the outstanding Series
      B
      Preferred Stock.




**PART
      II**




**Item
      5.** **Market
      For Common Equity, Related Stockholder** **Matters, and Small Business Issuer Purchases of Equity
      Securities**




***Market
      Information***




Our
      common stock is available for quotation on the Over the Counter Bulletin Board
      maintained by the National Association of Securities Dealers under the symbol
      “CSAT.OB.” There is no assurance that our common stock will continue to be
      quoted or that any liquidity exists for our shareholders. Prior to the share
      exchange and issuance of Series A Preferred Stock in July 2005, although our
      common stock was available for quotation on the Over the Counter Bulletin Board,
      there was no public trading market for our common stock and no public trades
      of
      our common stock reported on the OTC Bulletin Board during the fiscal years
      ended December 31, 2003 and December 31, 2004, and the first two quarters of
      the
      fiscal year ending December 31, 2005. The following table provides the quarterly
      high and low bids per share of common stock reported on the Over the Counter
      Bulletin Board for the last two quarters of 2005 and all four quarters of 2006.
      The following quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission, and may not represent actual transactions. The source
      of this information is NASDAQ Over the Counter Bulletin Board Research
      Reports.






17




**Fiscal
                2005**
            
            **High**
            
            **Low**Third
                Quarter
            
            $
            2.35
            
            $
            1.25Fourth
                Quarter
            
            $
            1.60
            
            $
            1.06




**Fiscal
                2006**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            1.30
            
            $
            0.74Second
                Quarter
            
            $
            0.90
            
            $
            0.35Third
                Quarter
            
            $
            0.70
            
            $
            0.21Fourth
                Quarter
            
            $
            0.25
            
            $
            0.11





***Holders***




As
      of
      March 14, 2007, the approximate number of holders of record of our common stock,
      which is our only class of common equity, is 167. This number does not include
      holders of securities in street name.




***Dividends***




We
      have
      not generated any material revenues nor had net profits on operations. We have
      not paid any cash dividends on our common stock or our preferred stock. The
      declaration and payment of cash dividends in the future will be determined
      by
      our Board of Directors considering the conditions then existing, including
      our
      earnings, financial condition, capital requirements and other
      factors.




18




***Securities
        Authorized for Issuance Under Equity Compensation
        Plans***
  The
        following table provides information as of December 31, 2006 with respect
        to the
        Company’s common shares that may be issued under the Celsia 2005 Stock Incentive
        Plan, which was approved by our shareholders and is our only equity compensation
        plan:




**EQUITY
      COMPENSATION PLAN INFORMATION**




Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
              (a)
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
              (b)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Celsia
                2005 Stock Incentive Plan
            
            
            4,576,015
            
            $
            0.64
            
            
            899,682





**Item
        6.** **Management’s
        Discussion and Analysis or Plan of Operation**




This
      report contains forward looking statements within the meaning of Section 21E
      of
      the Securities Exchange Act of 1934. These forward looking statements are
      subject to certain risks and uncertainties that could cause actual results
      to
      differ materially from historical results or anticipated results, including
      those set forth in this report and the Company’s public filings. The following
      discussion and analysis should be read in conjunction with "Selected Financial
      Data" and the Company's financial statements and notes thereto included
      elsewhere in this report.




***Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations***




Our
      operations include research, development, sales and marketing of our own
      patented technology portfolio as well as operating our pilot plant. During
      2006
      we commercialized our technology and executed several commercial orders. We
      are
      currently involved with many potential customers in several projects designed
      to
      commercially produce and sell our products. Furthermore, technology companies
      face challenges as they develop and manufacture new and more powerful components
      and products, which generate heat and require a solution to dissipate the heat.
      We believe that the heat emission problem has accelerated and is now seriously
      threatening the development of new heat generating products in several
      industries. Our cooling technologies should therefore enable companies to
      develop new products with higher performance, increased efficiency and with
      smaller size. We want to become a world leader in developing and commercializing
      this next generation of cooling solutions for the PC, LED-lighting, flat panel
      display, and the communication and entertainment industries. Management has
      decided to focus the main part of the resources on the Nano Spreader TechnologyTM
(NST). This technology path is meant to be a more economical and faster way
      to
      commercialize our products compared to our MCS technology.




The
      Company signed three sales and distribution contracts and one manufacturing
      and
      distribution contract during 2006, which is in line with our go to market
      strategy. These sales and distribution contracts are with Graftech’s subsidiary
      AET (USA), Kubo Kinzoku (Japan), and Lighting Science Group (USA). The
      manufacturing and distribution contract is with Yeh-Chiang Technology
      Corporation (YCTC). YCTC’s headquarter is in Taiwan. The Company also received
      its largest purchase contract in November 2006 from Daesanit in South Korea,
      which is worth approximately $500,000 in revenues.






19




The
      Company has produced revenues of $104,085 for the twelve months ended December
      31, 2006 compared to $19,132 for the same period last year. The revenues for
      the
      three months ended December 31, 2006 were $48,671. The revenues are a result
      of
      customers paying for test samples, and commercial deliveries. Cost of sales
      for
      the twelve months ended December 31, 2006 were approximately $0.7 million
      compared to $0.1 million for the same period last year. This is attributable
      to
      increased production activity originating from an increasing demand for our
      products.




The
      Company is currently contemplating financing alternatives to raise additional
      capital to support its growth strategy. There can be no assurance that we will
      be able to successfully raise such capital, or that we will be able to
      commercialize our product portfolio without additional funds. The Company is
      working with tight cost controls in order to manage its commercialization
      process and go to market strategy. A majority of our expenses for the twelve
      months ended December 31, 2006 and 2005 were from selling and administrative
      expenses, which include research and development costs. The selling and
      administrative expenses for the twelve months ended December 31, 2006 were
      approximately $6.1 million compared to approximately $6.4 million for the same
      period last year. The main cost drivers are personnel costs, professional fees,
      and travel expenses.




We
      expect
      our product development, and project management activities to continue to be
      driven by commercial opportunities and undertaken as a result of potential
      customers requesting test units. The test orders that we receive from potential
      customers are fulfilled either by 1) modification of already commercialized
      products or 2) new solutions designed together with the potential customer.
      During 2006, the majority of our R&D resources were dedicated to customer
      projects and for the design of products with commercial opportunities. This
      is
      expected to continue during 2007.




We
      expect
      our capital expenditures over the next twelve months to be focused on
      complementing our pilot plant with specific volume related equipment and on
      specific research and development related test equipment. All investments will
      be driven by commercialization opportunities, customer driven projects, and/or
      commercial volumes.




During
      2006, we continued to make progress towards building the Company and
      commercializing our technology. We received product test orders, which have
      led
      to several related test product deliveries. Such test products are used by
      potential customers to examine our products’ features and compatibility with
      customer products. Although such testing procedures can involve numerous steps
      and significant timelines, in several instances our test products have advanced
      beyond the test phases and been incorporated on a limited basis into commercial
      products. The Company has experienced continued commercialization activities,
      especially during the second half of 2006 with several deliveries of test
      samples and also a number of commercial deliveries. The company’s largest
      contract to date is with Daesanit for the Graphic card cooler market, which
      is
      worth approximately $500,000 in revenues.






20




***Liquidity
      and Capital Resources***




Our
      main
      sources of liquidity during 2006 were the approximate $10.0 million in net
      cash
      proceeds generated from our 2005 Series A Preferred Stock offering as well
      as
      the $2.8 million in net proceeds from our Series B offering in 2005. The cash
      outflow for 2006 has been slightly below $500,000 per month, which was
      consistent with our plans and included a pay off of a short-term loan in May
      2006 of $231,683. Our main uses of cash during 2006 have been related to product
      development driven by customer projects, general and administrative expenses
      and, as stated above, a pay off of a short-term loan. Prior to the Series A
      Preferred Stock issuance in July 2005, the Company had limited liquidity and
      approximately $2.5 million in convertible debt.




Based
      on
      our current operating plan, we anticipate using our cash mainly to continue
      commercialization efforts and to expand the distribution network for our
      technology solutions. The main cash uses will be for sales and marketing,
      general and administrative, and research and development expenses. Investments
      will be focused on product development and manufacturing. All investments will
      be driven by commercialization opportunities. The total cash need for the next
      twelve months is estimated to be approximately $5.0 million, starting at January
      1, 2007. The main portion of the cash need is for operating expenses, cost
      of
      sales, and a smaller portion is for investments in manufacturing and R&D. We
      expect to fund these activities through cash generated from operations, and
      through financing that the company is currently contemplating.




The
      ratio
      between current assets and current liabilities at December 31, 2006 was
      approximately 0.32. A large portion of current liabilities relates to expenses
      that have limited cash impact.




Notwithstanding
      the February 2007 note issuance described below, the Company needs to raise
      additional funds in order to continue its operations. There can be no assurance
      that we will be able to obtain the necessary funds in a timely manner or the
      terms on which such funds may be obtained. Since inception, we have not
      generated material revenue from operations and there can be no assurance that
      we
      will generate revenue in the future. We may also determine to raise additional
      capital if such capital can be raised on terms, which we deem
      appropriate.




On
      February 20, 2007, the Company obtained additional funds through the issuance
      of
      $1 million aggregate principal amount of secured convertible promissory notes.




***Significant
      Estimates***




The
      Company prepares its financial statements in conformity with accounting
      principles generally accepted in the United States of America, which require
      management to make estimates and assumptions that affect the reported amounts
      in
      the financial statements. Although these statements are based on management’s
      best knowledge of current events and actions that the Company may undertake
      in
      the future, actual results could differ from those estimates. Significant
      estimates required to be made by management include the valuation of
      1) investments, 2) equity securities issued, 3) prepaid
      royalties, and 4) registration rights.




***Recent
      Accounting Pronouncement***




In
      July
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB
      Statement No. 109 (FIN 48), which provides clarification related to the process
      associated with accounting for uncertain tax positions recognized in
      consolidated financial statements. FIN 48 prescribes a more-likely-than-not
      threshold for financial statement recognition and measurement of a tax position
      taken, or expected to be taken, in a tax return. FIN 48 also provides guidance
      related to, among other things, classification, accounting for interest and
      penalties associated with tax positions, and disclosure requirements. The
      Company is required to adopt FIN 48 on January 1, 2008, although early adoption
      is permitted. Celsia is currently evaluating the impact of adopting FIN 48
      on
      its consolidated financial statements.






21




In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
      No.
      157). Among other requirements, SFAS No. 157 defines fair value and establishes
      a framework for measuring fair value and also expands disclosure about the
      use
      of fair value to measure assets and liabilities. SFAS No. 157 is effective
      beginning the first fiscal year that begins after November 15, 2007. The Company
      is required to adopt SFAS No. 157 on January 1, 2008, although earlier adoption
      is permitted. Celsia is currently evaluating the impact of adopting SFAS No.
      157
      on its consolidated financial statements.




In
      September 2006, FASB issued SFAS No. 158, Employer’s Accounting for Defined
      Benefit Pension and Other Postretirement Plans—an Amendment of FASB Statements
      No. 87, 88, 106 and 132(R). SFAS No. 158 requires an employer that is a business
      entity and sponsors one or more single employer benefit plans to (1) recognize
      the funded status of the benefit in its statement of financial position, (2)
      recognize as a component of other comprehensive income, net of tax, the gains
      or
      losses and prior service costs or credits that arise during the period but
      are
      not recognized as components of net periodic benefit cost, (3) measure defined
      benefit plan assets and obligations as of the date of the employer’s fiscal year
      end statement of financial position and (4) disclose in the notes to financial
      statements additional information about certain effects on net periodic benefit
      cost for the next fiscal year that arise from delayed recognition of the gains
      or losses, prior service costs on credits, and transition asset or obligations.
      The Company plans to adopt SFAS No. 158 effective at the end of the Company’s
      fiscal year ending December 31, 2007. Celsia expects that the adoption of SFAS
      No. 158 will have no effect on its consolidated financial
      statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements”. This bulletin requires
      companies to consider the effect of prior year misstatements for past and
      current financials statements when determining the materiality of these
      misstatements, and to make appropriate adjustments to the financial statements
      and related disclosures accordingly. This requirement is in effect for all
      companies with fiscal years ending on or before November 15, 2006. The
      Company adopted SAB No. 108 during the fourth quarter of 2006. Celsia has
      reviewed its prior year financial statements and determined that no adjustments
      are required for the current year.




***Off-Balance
      Sheet Arrangements***




We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that is material to investors.






22




***Market
      Risks***




The
      Company operates in the United States, the United Kingdom and South Korea,
      each
      of which has its own currency. This may cause the Company to experience and
      be
      exposed to different market risks such as changes in interest rates and currency
      deviations.




**Item
      7.** **Financial
      Statements**




The
      financial statements and report of an independent registered public accounting
      firm are included herein immediately following the signature page to this
      report.




**Item
      8.** **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure**




Previously
      reported in the Company’s 8-K filed with the SEC on September 1,
      2005.




**Item
      8A.**   **Controls
      and Procedures**




Our
      current principal executive officer and principal financial officer evaluated
      the effectiveness of the Company’s disclosure controls and procedures (as
      defined in Rule 15(d)-15(e) under the Exchange Act) as of the end of the period
      covered by this report. Based on this evaluation, the Company’s current
      principal executive officer and principal financial officer have concluded
      that
      the Company’s disclosure controls and procedures are effective in ensuring that
      the information required to be disclosed by the Company in reports that it
      files
      or submits under the Exchange Act is recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and
      forms.




There
      have not been any changes in the Company’s internal control over financial
      reporting during the Company’s fourth fiscal quarter that has materially
      affected, or is reasonably likely to materially affect, the Company’s internal
      control over financial reporting.




Item
      8B.Other
      Information




None.




**PART
      III**




**Item
      9.** **Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act**




The
      following table sets forth certain information about our executive officers
      and
      directors. Messrs. Clarke and Rugg were elected as directors by the holders
      of the Series A Preferred Stock in accordance with the terms of such stock.
      All
      directors and executive officers of the Company have served in such capacities
      since July 2005.




**Name**
            
            **Age**
            
            **Position
                and Offices with the Company**Hakan
                Wretsell
            
            46
            
            Chief
                Executive Officer, President and DirectorMichael
                Karpheden
            
            45
            
            Chief
                Financial Officer, Chief Operating Officer and
                SecretaryDr.
                Jeong-Hyun Lee
            
            42
            
            Director*Alan
                B. Miller
            
            53
            
            DirectorDavid
                H. Clarke
            
            65
            
            DirectorPeter
                Rugg
            
            59
            
            DirectorGregory
                J. Osborn
            
            42
            
            Director




*  Resigned
      effective March 24, 2007




23




***Biographies
      of Executive Officers and Directors***




**Hakan
      Wretsell** has
      been
      Celsia’s Chief Executive Officer since September 1, 2004. Mr. Wretsell
      brings over fifteen years of management experience to Celsia, including
      executive positions with LM Ericsson (NASDAQ: ERICY), one of the largest
      supplier of mobile systems in the world, where he worked in various capacities
      from 1988-2000. Mr. Wretsell served as the Executive Vice President and General
      Manager, Region Americas, from 1998-2000, where he was responsible for
      restructuring Ericsson’s North and Latin American operations, which resulted in
      strong volume growth and generated more than $2.0 billion in annual sales under
      his leadership. Mr. Wretsell currently serves as a director of Teleplus
      Enterprises, Inc. (OTCBB: TLPE).




**Michael
      Karpheden**  has
      been
      Celsia’s Chief Financial and Operating Officer since September 1, 2004. Mr.
      Karpheden served as VP of Finance & Logistics of LM Ericsson, Region
      Americas, consumer products, from 1998-2001. Furthermore, Mr. Karpheden held
      several executive positions in the US, Germany, Russia, and Sweden during his
      twelve-year career with Ericsson. Mr. Karpheden served as Chief Operating
      Officer of Strax Inc., a Latin American leader in the distribution of mobile
      phones and accessories, from 2002-2003, and served as Vice President, Finance
      and Operations, at Strax Inc. from 2001-2002. From 2003-2004, Mr. Karpheden
      served as President and Managing Partner of Business Growth Consultants Inc.
      Mr.
      Karpheden has over fifteen years of international financial and operational
      leadership experience and has extensive experience in finance and corporate
      governance issues. Mr. Karpheden currently serves as a director of Teleplus
      Enterprises, Inc. (OTCBB: TLPE).




**Dr.
      Jeong-Hyun Lee** founded
      Celsia Korea in 2000 and was the Chief Technology Officer of Celsia from
      September 1, 2004 to September 16, 2006. Dr. Lee received his doctorate
      from Case Western University and formerly worked with NASA and Samsung. Dr.
      Lee
      pioneered the core technology that dissipates heat quickly and efficiently
      from
      devices such as PCs, laptops and other chip driven devices.




**Alan
      B. Miller** has over
      twenty-five years of Wall Street and financial expertise, including his tenure
      from 1990 to 2003 as founder and president of Winchester Investment Securities,
      an investment banking and general securities firm based in Overland Park,
      Kansas. Winchester, which had five branches and forty-five registered
      representatives, had participated in private placements, IPOs, market making
      and
      general securities trading. Also from 1990 to 2003, Mr. Miller was
      president and senior analyst of Trendways Wall Street Watch, a stock market
      newsletter and hotline. Mr. Miller has served as vice president of the
      investment firm of Duggan and Co. and began his career as a registered
      representative with Stern Brothers in Kansas City, Missouri where he became
      one
      of the firm’s top producing stockbrokers. Mr. Miller is a director of Hansen
      Gray & Company, Inc, a significant shareholder of the Company.






24




**David
      H. Clarke** retired
      as Chairman of the Board and Chief Executive Officer of Jacuzzi Brands, Inc.
      in
      September 2006, a position he held since 1995. Mr. Clarke was Vice Chairman
      of
      Hanson PLC from 1993 and Deputy Chairman and Chief Executive Officer of Hanson
      Industries, the U.S. arm of Hanson, from 1992. Prior to 1992, Mr. Clarke served
      as President of Hanson Industries. Mr. Clarke is currently Vice Chairman of
      United Pacific Industries, a diversified Hong Kong based (HKSE - 176) company
      with operations in China and the United Kingdom. Mr. Clarke is also a member
      of
      the board of directors of Fiduciary Trust International, a subsidiary of
      Franklin Resources, a company engaged in investment management.




**Peter
      Rugg** is a
      Senior Partner of Tatum Partners, LLP in New York. He has over 30 years of
      diversified business experience with special competence in capital structure
      and
      creative financing alternatives. Mr. Rugg has extensive experience in
      international natural resource businesses and offshore business migration.
      He
      has experience in commercial and investment banking, merger and acquisitions,
      turnaround situations, project finance, and corporate restructuring. Mr. Rugg
      has managed public company financial reporting, investor relations, tax
      compliance and audit, budget and planning and information technology systems
      including relational database, desktop, and multi-currency accounting. He serves
      on the board of Advance Nanotech Inc. (AVNA.OB) and a number of private company
      and charity boards. Mr. Rugg is chairman of the Company’s audit
      committee.




**Gregory
      J. Osborn** is
      a
      partner at Middlebury Alternative Investment Advisors (MAIA). MAIA is also
      FSA
      registered in the UK. Mr. Osborn is a managing partner of IndiGo Ventures,
      LLC.
      Prior to launching IndiGo, Mr. Osborn founded Seed Capital, which provided
      new
      business development, strategic partnering and fundraising services for
      cutting-edge Internet companies, and served as head of business development
      for
      FreeRide.com. His background in finance and investment began on Wall Street,
      working at the headquarters offices of L.F. Rothschild & Co. and Drexel,
      Burnham, Lambert as an Account Executive and as Vice President at Smith Barney
      Harris & Upham, First Vice President at Paine Webber, and Senior Vice
      President of Axiom Capital Management. Mr. Osborn serves on the Board of
      Directors of Powerhouse Technologies Group, Inc., Children of Bellevue and
      ideavillage.com. Mr. Osborn also serves as corporate advisor to Advance Nanotech
      Inc. IndiGo Ventures is an affiliate of Indigo Securities, LLC, which acted
      as
      placement agent for, and received fees from, the Company, as described herein.
      He serves as the Chairman of Tasker Corp (OTCBB: TKER).




***Board
      Composition and Committees***




As
      of
      December 31, 2006, the Company had (6) six Directors on its Board of
      Directors. All members of our Board of Directors will hold office until the
      next
      annual meeting of stockholders and election and qualification of their
      successors.




The
      Board
      of Directors of Celsia has established an Audit Committee consisting of Alan
      B.
      Miller, David H. Clarke and Peter Rugg and has determined that Mr. Rugg,
      chairman of the Audit Committee, is (i) an “audit committee financial expert,”
as defined by SEC’s regulations, and (ii) independent, as defined under SEC
      regulations and the rules of the Nasdaq stock market. The Board of Directors
      of
      Celsia has also established a Compensation Committee consisting of Messrs.
      Miller, Clarke and Rugg.






25




***Code
      of Ethics***




We
      have
      adopted a Code of Business Conduct and Ethics that embodies policies encouraging
      individual and peer integrity, ethical behavior and our responsibilities to
      our
      employees, customers, suppliers, stockholders, and the public, and
      includes:




·
              Prohibiting
                  conflicts of interest (including protecting corporate
                  opportunities)
  ·
              Protecting
                  our confidential and proprietary information and that of our customers
                  and
                  vendors
  ·
              Treating
                  our employees, customers, suppliers and competitors
                  fairly
  ·
              Encouraging
                  full, fair, accurate, timely and understandable
                  disclosure
  ·
              Protecting
                  and properly using company assets
  ·
              Complying
                  with laws, rules and regulations (including insider trading
                  laws)
  ·
              Encouraging
                  the reporting of any unlawful or unethical
                  behavior




The
      code
      applies to every officer, director and employee. We also expect that those
      with
      whom we do business (including our agents, consultants, suppliers and customers)
      will also adhere to the code. All of our officers, directors and employees
      must
      carry out their duties in accordance with the policies set forth in this code
      and with applicable laws and regulations.




***Section
      16(a) Beneficial Ownership Reporting Compliance***




The
      Company does not have a class of securities registered under Section 12 of
      the
      Exchange Act, and therefore Section 16 does not apply to the Company’s
      securities.




**Item
        10.** **Executive
        Compensation**




***Annual
      Compensation***




The
      following table sets forth information for each of our executive officers for
      the fiscal years ended December 31, 2006 and 2005. Because the Company is the
      successor to the business of Celsia UK and Celsia Korea, which it acquired
      on
      July 8, 2005, the information provided below relates to our executive officers’
positions with Celsia UK and Celsia Korea during the periods presented
      below:






26




**SUMMARY
      COMPENSATION TABLE**




**Name
                and Principal Position**
            
            **Year**
            
            **Salary**(1)
              **($)**
            
            **Bonus**(3)
              **($)**
            
            **Stock
                Awards**
              **($)**
            
            **Option
                Awards**
              **($)**
            
            **All
                Other Compensation**(5)
              **($)**
            
            **Total**
              **($)**Hakan
                Wretsell, President and
            
            
            2006
            
            $
            262,500
            
            $
            488,565
            
            $
            40,030
            
            $
            5,969
            
            $
            4,200
            
            $
            801,264Chief
                Executive Officer
            
            
            2005
            
            $
            256,000
            
            $
            66,250
            
            $
            94,842
            
            
            
            
            $
            2,100
            
            $
            322,250Michael
                Karpheden,
            
            
            2006
            
            $
            220,500
            
            $
            221,460
            
            $
            21,445
            (4)
            $
            5,969
            
            $
            4,200
            
            $
            473,574Chief
                Financial and Operating Officer
            
            
            2005
            
            $
            215,000
            
            $
            46,830
            
            $
            49,167
            
            
            
            
            $
            2,100
            
            $
            261.830Dr.
                Jeong Hyun Lee,
            
            
            2006
            
            $
            175,000
            
            
            –
            
            $
            17,156
            
            $
            2,985
            
            
            –
            
            $
            195,141Ph.D.(2)
            
            
            2005
            
            $
            256,000
            
            $
            66,250
            
            $
            57,191
            
            
            
            
            
            –
            
            $
            322,250




(1)
            Certain
                accrued and unpaid salaries were paid at the closing of the Series
                A
                Offering in July 2005. See “Employment Agreements” below and Item 12
                “Certain Relationships and Related Transactions, and Director
                Independence.”




(2)
            Dr.
                Lee resigned from all executive officer positions held in the Company
                and
                its subsidiaries in September 2006 and resigned as a director of
                the
                Company on March 24, 2007.




(3)
            Bonus
                for 2006 has been accrued but not paid. The bonus shall be paid in
                a
                combination of cash, stock grants, and stock
                options.




(4)
            Mr.
                Karpheden forfeited 306,356 shares of common stock on December 31,
                2006.




(5)
            Messrs.
                Wretsell and Karpheden received car allowances as indicated above
                and Dr.
                Lee was provided with a company car at an incremental cost to the
                Company
                of less than $10,000 per year.




***Employment
      Agreements***




Hakan
      Wretsell and Michael Karpheden have each entered into employment agreements
      with
      the Company. The employment agreements are effective until January 1, 2007,
      replaced such officers’ prior employment agreements with Celsia UK, and contain
      customary provisions regarding the ownership and assignment of all intellectual
      property (all of which is and remains our sole property), prohibitions on
      solicitation of customers and employees following termination of employment,
      our
      right to terminate such officers at any time for cause, or without cause upon
      a
      payment equal to six months of such officer’s base salary (plus six month’s
      continuation of certain benefits) and access to broad based Company benefit
      plans. The following chart sets forth certain summary information regarding
      base
      salary, bonus and equity compensation provided in the employment agreements:






27




**Mr.
                Wretsell**
            **Mr.
                Karpheden**Annual
                Salary
            $262,500
            $220,500Closing
                Bonus(1)
            $40,000
                and 45,455 shares of common stock
            $33,600
                and 38,182 shares of common stock2005
                Bonus(2)
            Up
                to 100% of base salary ($262,500)
            Up
                to 60% of base salary ($132,500)2006
                Bonus(2)
            Up
                to 300% of base salary
            Up
                to 180% of base salaryStock
                Grants(3)
            1,633,897
                shares of common stock
            1,143,728
                shares of common stockStock
                options(3)
            326,779
                shares of common stock
            326,779
                shares of common stockAccrued
                Unpaid Salary(4)
            $30,207
                and 34,326 shares of common stock
            $22,708
                and 25,805 shares of common stock




(1)
            Closing
                bonus paid on September 1, 2005




(2)
            Annual
                bonus amounts are determined based on financial and non-financial
                targets.
                Amounts to be paid in a combination of cash, stock options, and shares
                of
                our common stock (valued at then-current market
                price).




(3)
            Options
                and grants vested in full as of December 31, 2006. Options have an
                exercise price of $0.88 per share.




(4)
            Represents
                accrued and unpaid salary for periods prior to the Series A Offering.
                Amounts were paid/issued July 11, 2005. See “Certain Relationships and
                Related Transactions”.




In
      addition to the stock awards reflected above, in 2006 the Company awarded
      Messrs. Wretsell and Karpheden certain additional stock options and restricted
      stock grants as reflected under "Outstanding Equity Awards At Fiscal Year
      End." On March 22, 2007, Messrs, Wretsell and Karpheden entered into
      employment letters with the Company effective January 1, 2007, which set forth
      the terms of their continued employment with the Company from such date. The
      employment letters are described in and attached as exhibits to the Company’s
      Form 8-K dated March 22, 2007.




We
      have
      also adopted the Celsia 2005 Stock Incentive Plan to create a pool of shares
      of
      common stock available for options and other equity grants. The incentive plan
      will be used for attracting and retaining employees, directors and consultants
      and will be granted at fair market value from time to time under the guidance
      and approval of our Board of Directors or its Compensation Committee, if one
      is
      later established. In the third quarter of 2006, the Company and its
      shareholders approved an amendment to the incentive plan to increase the number
      of available shares under the plan from 9,803,380 to 15,000,000.






28




On
      August
      18, 2006, the Company entered into an agreement with Dr. Lee pursuant to which
      Dr. Lee agreed to resign as Chief Technology Officer effective September 16,
      2006. Pursuant to such agreement, the Company agreed to pay Dr. Lee his normal
      salary through August 31, 2006 and to reimburse Dr. Lee for certain business
      related expenses of approximately $91,000. The agreement superseded Dr. Lee’s
      employment agreement entered into by and among Celsia UK, Celsia Korea and
      Dr.
      Lee dated July 11, 2005, as described in the Company’s previous SEC
      filings.




***Outstanding
      Equity Awards***




The
      following table sets forth information relating to outstanding equity awards
      as
      of December 31, 2006:




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END**




**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number
                of Securities Underlying Unexercised Options**
              **(#)**
              **Exercisable**
            
            **Option
                Exercise Price**
              **($)**
            
            **Option
                Expiration Date**
            
            **Number
                of Shares or Units of Stock That Have Not Vested
                (#)**
            
            **Market
                Value of Shares or Units of Stock That Have Not Vested
                ($)**Hakan
                Wretsell
            
            
            326,779
            
            $
            0.88
            
            
            2015
            
            
            1,535,877
            
            $
            276,45881,695
            
            $
            0.19
            
            
            2016Michael
                Karpheden
            
            
            326,779
            
            $
            0.88
            
            
            2015
            
            
            1,129,687
            
            $
            203,34481,695
            
            $
            0.19
            
            
            2016Dr.
                Jeong-Hyun Lee, Ph.D.
            
            
            217,853
            
            $
            0.88
            
            
            2015
            
            
            –
            
            
            –




***Director
      Compensation***




**DIRECTOR
      COMPENSATION**




**Name**
            
            **Fees
                Earned or**
              **Paid
                in Cash**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **Total**
              **($)**Alan
                Miller
            
            $
            8,000
            
            $
            2,750
            
            $
            10,750David
                Clarke
            
            $
            7,000
            
            $
            2,750
            
            $
            9,750Peter
                Rugg
            
            $
            12,000
            
            $
            2,750
            
            $
            14,750Gregory
                Osborn
            
            
            -
            
            
            -
            
            
            -






29




The
      external directors of the Company, Alan Miller, David Clarke, and Peter Rugg,
      each received an option to purchase 100,000 common shares, 50,000 of which
      vested upon issuance in December 2005 as an appointment bonus, and the remaining
      50,000 shall vest quarterly through June 30, 2007. Indigo Ventures LLC, where
      Greg Osborn is a managing partner, receives a monthly fee of $15,000 for
      consulting services. In addition, Mr. Osborn is affiliated with the Placement
      Agent in the Series A Offering and the Series B Placement Agent in the Series
      B
      Offering.




**Item
      11.** **Security
      Ownership of Certain Beneficial Owners and Management and Related Shareholder
      Matters**




The
      following table sets forth, as of March 14, 2007, information regarding the
      beneficial ownership of shares of our common stock by each person known by
      us to
      own five percent or more of the outstanding shares of our common stock, by
      each
      of our executive officers, by each of our directors, and by all executive
      officers and directors as a group. Beneficial ownership of shares is determined
      in accordance with SEC rules and generally includes any shares over which a
      person exercises sole or shared voting or investment power. The information
      set
      forth below, including ownership percentages and voting power percentages,
      is
      based on an aggregate of 36,382,038 shares of common stock outstanding as of
      March 14, 2007. All shares of common stock underlying Series A Preferred
      Stock or Series B Preferred Stock owned by each person and common stock
      underlying warrants, stock options or other stock-based awards that are
      presently exercisable or exercisable within 60 days of the date of this
      prospectus by each person are deemed to be outstanding and beneficially owned
      by
      the person holding the Series A Preferred Stock or Series B Preferred Stock,
      stock options, warrants, and other stock-based awards respectively, for the
      purpose of computing the ownership percentage of that person, but are not
      considered outstanding for the purpose of computing the percentage ownership
      of
      any other person.




Unless
      otherwise indicated, to our knowledge, each person listed in the table below
      has
      sole voting and investment power with respect to the shares shown as
      beneficially owned by such person, except to the extent applicable law gives
      spouses shared authority. Except as otherwise noted, each shareholder’s address
      is c/o Celsia Technologies, Inc., 1395 Brickell Avenue, Suite 800, Miami,
      Florida, 33131.




**NON-MANAGEMENT
      BENEFICIAL OWNERS**




**Name
                and Address**
              **of
                Beneficial Owner**
            
            **Amount
                and Nature of**
              **Beneficial
                Owner**
            
            **Percent
                of**
              **Class**Hansen
                Gray & Company, Inc.
              6100
                Neil Road, Suite 500
              Reno,
                Nevada 89511
            
            8,629,376
            
            23.72%CHL
                Investment Partnership
              475-1
                Gwachundong, Gwachun Shi,
              Gyeong
                Gi Do,
              Republic
                of Korea 427-080
            
            2,493,505
            
            6.85%Gryphon
                Master Fund, LP(1)
              100
                Crescent Court, Suite 475
              Dallas,
                Texas 75201
            
            4,534,090
            
            11.29%Invision
                Company Ltd.(2)
              CPG
                Primatrust SA, 12, rue de Saint-Victor
              1206
                Geneva, Switzerland
            
            5,250,000
            
            12.84%GSSF
                Master Fund, LP(3)
              100
                Crescent Court, Suite 475
              Dallas,
                Texas 75201
            
            2,575,394
            
            6.69%





30




**OFFICERS
      AND DIRECTORS**




**Name
                of Beneficial Owner**
            
            **Amount
                and Nature of**
              **Beneficial
                Ownership**
            
            **Percent
                of**
              **Class**Jeong
                Hyun Lee, Ph.D.(4)
            
            12,663,326
            
            33.59%Hakan
                Wretsell(5)
            
            2,587,880
            
            6.95%Michael
                Karpheden(6)
            
            1,630,573
            
            4.40%Greg
                Osborn(7)
            
            422,221
            
            1.15%Peter
                Rugg(8)
            
            178,191
            
            0.49%David
                Clarke(9)
            
            93,750
            
            0.26%Alan
                Miller(10)
            
            93,750
            
            0.26%Officers
                and Directors as a Group(11)
            
            17,669,691
            
            44.30%




(1)
            Includes
                3,081,818 shares of Series A Preferred Stock, 770,454 shares of
                common stock and warrants to purchase 681,818 shares of common
                stock.




(2)
            Includes
                3,000,000 shares of Series B Preferred Stock, 750,000 shares of common
                stock and warrants to purchase 1,500,000 shares of common
                stock.






31




(3)
            Includes
                1,749,711 shares of Series A Preferred Stock, 437,426 shares of common
                stock and warrants to purchase 388,257 shares of common
                stock.




(4)
            Includes
                (i) 11,348,332 shares of common stock, (ii) options to acquire 217,852
                shares of common stock which will be exercisable within sixty (60)
                days
                and (iii) warrants to purchase 1,097,142 shares of common stock.
                Dr. Lee
                is also the sole general partner of CHL Investment Partnership, and
                may be
                deemed to beneficially own the shares held by such
                entity.




(5)
            Includes
                (i) 1,743,509 shares of common stock and (ii) options to acquire
                408,494
                shares of common stock which will be exercisable within sixty (60)
                days
                and (iii) 435,877 shares of common stock which will vest within 60
                days.




(6)
            Includes
                (i) 916,392 shares of common stock and (ii) options to acquire 408,494
                shares of common stock which will be exercisable within sixty (60)
                days
                and (iii) 305,687 shares of common stock which will vest within 60
                days.




(7)
            Includes
                (i) 127,716 shares of common stock, (ii) 211,646 shares of Series
                A
                Preferred Stock and (iii) warrants to purchase 82,859 shares of common
                stock. Mr. Osborn is a Managing Partner of Indigo Ventures LLC, which
                beneficially owns 1,115,843 shares of our common stock (which includes
                warrants to purchase 352,578 shares of common stock and 763,265 shares
                of
                Series A Preferred Stock).




(8)
            Includes
                (i) 25,543 shares of common stock, (ii) 42,328 shares of Series A
                Preferred Stock, (iii) options to acquire 93,750 shares of common
                stock
                which will be exercisable within sixty (60) days and (iv) warrants
                to
                purchase 16,570 shares of common stock.




(9)
            Includes
                options to acquire 93,750 shares of common stock which will be exercisable
                within sixty (60) days. Mr. Clarke is affiliated with GSB Holdings,
                Inc.,
                which beneficially owns 506,665 shares of our common stock (which
                includes
                (i) 153,259 shares of common stock, (ii) 253,975 shares of Series
                A
                Preferred Stock and (iii) warrants to purchase 99,431 shares of common
                stock).




(10)
            Includes
                options to acquire 93,750 shares of common stock which will be exercisable
                within sixty (60) days. Mr. Miller is a director of Hansen Gray &
                Company, Inc., a significant shareholder of the Company, as reported
                above.




(11)
            Seven
                individuals.





**Item
      12.** **Certain
      Relationships and Related Transactions** **,
      and Director Independence**




***Related
      Transactions***




In
      connection with the acquisition of Celsia Korea and its intellectual property
      in
      2004, Celsia UK agreed to pay CHL Investment Partnership and Hansen Gray a
      royalty fee equal to two percent (2%) of Company revenues over $25 million,
      up
      to an aggregate royalty of $50 million. CHL Investment Partnership receives
      fifty-seven percent (57%) and Hansen Gray receives forty-three percent (43%)
      of
      such royalty. This arrangement is documented in a Revenue Share Agreement dated
      as of May 18, 2005. At the closing of the Series A Offering, Hansen Gray
      received a cash advancement of $500,000 against its right to receive these
      royalty payments from us.






32




As
      discussed above in Item 1 “Description of Business - Financing Activities,” Dr.
      Lee issued a promissory note for $1,100,000 to iCurie Bridge Funding, LLC,
      an
      affiliate of the HG Noteholders, in 2004. Pursuant to the Preferred Stock
      Purchase Agreement, iCurie Bridge Funding LLC transferred this note to us in
      exchange for 1,667,000 shares of Series A Preferred Stock (reflecting an
      approximate twenty-five percent (25%) discount from the per share cash offering
      price of $0.88 per share). The Company and Dr. Lee then entered into an
      agreement to, and did, cancel this promissory note in exchange for the transfer
      of 1,250,000 of Dr. Lee’s shares of our common stock to us (valued at $0.88 per
      share). This $1,100,000 note constitutes a portion of the $4,600,000 Note
      conversion referred to in this report.




As
      discussed above in Item 1 “Description of Business - Financing Activities,”
Hansen Gray issued the $2,500,000 of HG Notes to the HG Noteholders in 2004.
      Pursuant to the Preferred Stock Purchase Agreement, the HG Noteholders
      transferred their notes to us in exchange for approximately 3,787,863 shares
      of
      Series A Preferred Stock (reflecting an approximate twenty-five percent (25%)
      discount from the per share cash offering price of $0.88 per share). Hansen
      Gray
      then entered into an agreement with us pursuant to which: (i) Hansen Gray
      cancelled an outstanding note of $1,500,000 previously issued by Celsia UK
      to
      Hansen Gray; (ii) we paid an advance of $500,000 to Hansen Gray from
      amounts payable in the future to Hansen Gray under the Revenue Share Agreement;
      (iii) Hansen Gary executed a $1,500,000 debenture in favor of the Company;
      and
      (iv) secured its obligation under such debenture by its right to receive
      payments under the Revenue Share Agreement. The $2,500,000 in HG Notes, Dr.
      Lee’s $1,100,000 note and the $1,000,000 in 2005 Notes, constitute the
      $4,600,000 Note conversion referred to elsewhere in this report.




Hansen
      Gray had an outstanding promissory note for $525,000 to Donald Jennings, which
      was exchanged for 596,591 shares of our common stock otherwise issuable to
      Hansen Gray pursuant to the share exchange.




Celsia
      UK
      owns 527,000 common shares of Hansen Gray, and Hakan Wretsell and Michael
      Karpheden each own 25,000 common shares and warrants to purchase 129,167 common
      shares of Hansen Gray (which amounts, in the aggregate, represent approximately
      one and a half percent (1.5%) of Hansen Gray’s common shares on a fully diluted
      basis). Dr. Lee owns 2,000,000 common shares of Hansen Gray (which amounts
      to
      approximately 3.33% of Hansen Gray’s common shares on a fully diluted
      basis).




Dr.
      Lee
      held an option exercisable for 440,000 shares of Celsia UK common stock, which
      was converted at the closing of the Series A Offering into a warrant exercisable
      for 1,097,142 shares of our common stock at an exercise price of $1.09 per
      share.




Mr.
      Wretsell, Mr. Karpheden and Dr. Lee were owed aggregate earned but unpaid
      salaries of $60,414, $45,417 and $120,248, respectively, which were paid at
      the
      closing of the Series A Offering. Approximately fifty percent (50%) of these
      amounts were paid in cash and fifty percent (50%) in shares of common stock
      (valued at $0.88 per share solely for such compensation purposes and without
      regard to fair market value).




AVC
      owns
      a convertible bond of Celsia Korea with a current outstanding amount of KWON
      300,000,000 (approximately $300,000) due December 10, 2007. AVC has waived
      its
      conversion and certain other rights under this instrument.




33




As
      reported in our 8-K dated August 26, 2005 and filed with the SEC on September
      1,
      2005, Celsia UK acquired from Mr. Won Gyu Moon the 54,619 shares of common
      stock
      of Celsia Korea (approximately 19.8% of Celsia Korea’s common stock) not
      previously owned by Celsia UK. The purchase price for the shares was
      2,046,638,345 KWON (approximately $1.99 million), plus an amount equal to
      certain transfer taxes in an aggregate amount of approximately 31,009,147 KWON
      (approximately $30,000), for a total amount payable by us of 2,077,647,492
      KWON
      (approximately $2.02 million). Mr. Moon agreed to acquire the Celsia Korea
      shares from Ms. Il Han Kim, the wife of Dr. Jeong Hyun Lee, Ph.D., a
      director of Celsia UK. Ms. Kim in turn agreed to acquire the shares from 14
      individuals and entities (the “Minority Shareholders). The transactions between
      (i) Celsia UK and Mr. Moon, (ii) Mr. Moon and Ms. Kim and (iii) Ms. Kim and
      the
      Minority Shareholders were consummated in one closing process, and neither
      Mr.
      Moon nor Ms. Kim realized any profit or received any commission or other form
      of
      remuneration in connection with the transactions, although Celsia UK agreed
      to
      reimburse such individuals for transfer taxes in the amount referred to
      above.




Indigo
      Ventures LLC, where Greg Osborn is a managing partner, receives a monthly fee
      of
      $15,000 for consulting services.




***Director
      Independence***




Each
      of
      Alan B. Miller, David H. Clarke and Peter Rugg has been determined to be
“independent” under the rules of the Nasdaq stock market.




**Item
      13.** **Exhibits**




A
      list of
      exhibits filed herewith is contained in the exhibit index that immediately
      precedes such exhibits and is incorporated herein by reference.





**Item
      14.** **Principal
      Accountant Fees and Services**




***Audit
      Fees***




The
      aggregate fees billed for professional services rendered by our principal
      accountant for the audit of the Company’s annual financial statements and review
      of the financial statements included in the Company’s Forms 10-QSB or services
      that are normally provided by the accountant in connection with statutory and
      regulatory filings or engagements for fiscal years ended December 31, 2006
      and
      2005 were $105,250 and $85,250, respectively.




***Audit
      Related Fees***




The
      aggregate fees billed for assurance and related services by our principal
      accountant that are reasonably related to the performance of the audit or review
      of our financial statements, other than those previously reported in this Item
      14, for the fiscal years ended December 31, 2006 and 2005 were $4,750 and
      $56,450, respectively.






34




***Tax
      Fees***




The
      aggregate fees billed for professional services rendered by our principal
      accountant for tax compliance, tax advice and tax planning for the fiscal years
      ended December 31, 2006 and 2005 were $9,650 and $0, respectively.




***All
      Other Fees***




The
      aggregate fees billed for products and services provided by the principal
      accountant, other than those previously in this Item 14, for the fiscal years
      ended December 31, 2006 and 2005 were $0 and $0, respectively.




***Board
      of Directors/Audit Committee***




It
      is the
      policy of the Company for all work performed by our principal accountant to
      be
      approved in advance by the Audit Committee (and prior to the Audit Committee’s
      formation in August 2005, the Board of Directors). The Audit Committee approved
      all of the services described above in this Item 14 in advance (other than
      services performed prior to August 2005, which were approved in advance by
      the
      Board of Directors).




35


**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**CELSIA
                TECHNOLOGIES, INC.**Date:
                March 26, 2007
            By:
            /s/
                Hakan WretsellHakan
                Wretsell, President and Chief
              Executive
                Officer (Principal Executive Officer)Date:
                March 26, 2007
            By:
            /s/
                Michael KarphedenMichael
                Karpheden, Chief Financial Officer (Principal Financial and Accounting
                Officer)


In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




Signature
            
            Title
            
            Date/s/
                Hakan Wretsell*
            
            President,
                Chief Executive Officer and Director
            
            March
                26, 2007Hakan
                Wretsell/s/
              Michael
              Karpheden
            
            Chief
              Financial
              Officer
            
            March
                26, 2007Michael
              Karpheden/s/
                Alan B. Miller*
            
            Director
            
            March
                26, 2007Alan
                B. Miller/s/
                David H. Clarke*
            
            Director
            
            March
                26, 2007David
                  H. Clarke/s/
                Peter Rugg*
            
            Director
            
            March
                26, 2007Peter
                Rugg/s/
                Gregory Osborn*
            
            Director
            
            March
                26, 2007Gregory
                Osborn*
                By:/s/ Michael Karpheden
            
            Individually
                and as Attorney-in-Fact
            
            March
                26, 2007Michael
                Karpheden




36


**Supplemental
      Information to be Furnished With Reports Filed Pursuant to Section 15(d) of
      the
      Exchange Act By Non-reporting Issuers:**




No
      annual
      report or proxy material has been sent to security holders of the Company.
      If
      such report or proxy material is furnished to security holders subsequent to
      the
      filing of the annual report on this Form, the registrant shall furnish copies
      of
      such material to the Commission when it is sent to security
      holders.




37


**INDEX
      TO FINANCIAL STATEMENTS**




**Celsia
      Technologies Inc. and Subsidiaries**


**Consolidated
      Financial Statements**


**Years
      Ended December 31, 2006 and 2005**








Page**Report
                of Independent Registered Public Accounting Firm**
            F-1**Financial
                Statements:**Consolidated
                Balance Sheet as of December 31, 2006
            F-2Consolidated
                Statements of Operations for the years ended December 31, 2006 and
                2005
            F-3Consolidated
                Statement of Stockholders' Equity for the years ended December 31,
                2006
                and 2005
            F-4Consolidated
                Statements of Cash Flows for the years ended December 31, 2006 and
                2005
            F-5Notes
                to Consolidated Financial Statements
            F-6-13






38




Report
        of Independent Registered Public Accounting Firm
 
 To
        the
        Board of Directors and Stockholders of
 Celsia
        Technologies, Inc.
 
 We
        have
        audited the consolidated balance sheet of Celsia Technologies, Inc. (formerly
        iCurie, Inc.) as of December 31, 2006, and the related consolidated statements
        of operations, stockholder’s equity (deficit) and cash flows for the years ended
        December 31, 2006 and 2005. These financial statements are the responsibility
        of
        the Company's management. Our responsibility is to express an opinion on
        these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States) . Those standards require that
        we
        plan and perform the audit to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Celsia Technologies,
        Inc. at
        December 31, 2006, and the results of their operations and their cash flows
        for
        the years ended December 31, 2006 and 2005 in conformity with accounting
        principles generally accepted in the United States of America.
 
 As
        described in note 4 of the Notes to the Consolidated Financial Statements,
        Celsia Technologies, Inc. adopted Statement of Financial Accounting Standards
        No. 123(R), “Shared­ Based Payment,” effective January 1, 2006.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As described in note 1, at December 31, 2006
        the
        Company and its subsidiaries have commenced limited revenue producing operations
        and have an accumulated deficit of $23,736,817. These conditions raise
        substantial doubt about the Company’s ability to continue as a going concern.
        The consolidated financial statements do not include any adjustments that
        might
        result from the outcome of this uncertainty. Management’s plans in regard to its
        future operations are also discussed in notes 1 and 6.
 
 **PKF**
 
 Certified
        Public Accountants
 A
        Professional Corporation
 
 March
        23,
        2007
 New
        York,
        NY




F-1




Celsia
                  Technologies, Inc. and SubsidiariesConsolidated
                  Balance Sheetas
                  of December 31, 2006(US
                  Dollars)




AssetsCurrent
                  AssetsCash
                  and cash equivalents
              
              $
              295,400Receivable
              
              
              55,452Inventory
              
              
              128,513Prepaid
                  expenses
              
              
              34,292Other
              
              
              40,627Total
                  current assets
              
              
              554,284Guarantee
                  deposits
              
              
              130,806Advance
                  payments
              
              
              135,103Furniture
                  and equipment, net (note 1)
              
              
              693,972Royalty
                  Advance (note 3)
              
              
              500,000Other
              
              
              25,624Total
                  assets
              
              $
              2,039,789Liabilities
                  and Stockholders' EquityCurrent
                  liabilitiesAccounts
                  payable
              
              $
              420,770Bond
                  Payable (note 5)
              
              
              302,305Accrued
                  expensesPayroll
                  and Related
              
              
              1,293,616Other
              
              
              96,810Other
              
              
              19,624Total
                  current liabilities
              
              
              2,133,125Accrual
                  for Employee Retirement Benefits (note 3)
              
              
              147,112Total
                  liabilities
              
              
              2,280,237Stockholders'
                  equity (deficit) (note 4)Preferred
                  Stock, Series A; $.001 par value; 30,000,000 shares authorized;
                  23,061,505
                  issued and outstanding
              
              
              23,061Preferred
                  Stock, Series B; $.001 par value; 7,000,000 shares authorized;
                  3,063,402
                  issued and outstanding
              
              
              3,063Common
                  stock; $.001 par value; 150,000,000 shares authorized; 36,382,038
                  issued
                  and outstanding
              
              
              36,382Common
                  stock Subscribed
              
              
              3,069Additional
                  paid-in-capital
              
              
              23,549,358Other
                  comprehensive loss
              
              
              (118,564
              )Accumulated
                  (deficit)
              
              
              (23,736,817
              )Total
                  stockholders' equity (deficit)
              
              
              (240,448
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              2,039,789




See
      notes
      to consolidated financial statements




F-2




Celsia
                  Technologies, Inc. and SubsidiariesConsolidated
                  Statements of Operations(US
                  Dollars)




Years
                  EndedDecember
                  31,2006
              
              2005Revenue
              
              $
              104,085
              
              $
              19,132Costs
                  and expensesCost
                  of Sales
              
              
              713,526
              
              
              124,957Selling
                  and Administrative expenses (note 4)
              
              
              6,133,966
              
              
              6,362,542Depreciation
              
              
              34,601
              
              
              95,287Amortization
                  of deferred financing cost (note 1)
              
              
              -
              
              
              311,323Miscellaneous
                  (income) expense
              
              
              (56,071
              )
              
              26,141Total
                  costs and expenses
              
              
              6,826,022
              
              
              6,920,250Operating
                  (loss)
              
              
              (6,721,937
              )
              
              (6,901,118
              )Other
                  income (expenses)Loss
                  on disposal of furniture and equipment
              
              
              (45,900
              )
              
              -Loss
                  on Investment
              
              
              (110,670
              )
              
              (105,903
              )Interest
                  and other income
              
              
              140,208
              
              
              100,324Interest
                  expense (note 5)
              
              
              (29,920
              )
              
              (266,781
              )Total
                  other income (expenses)
              
              
              (46,282
              )
              
              (272,360
              )Net
                  (loss)
              
              $
              (6,768,219
              )
              $
              (7,173,478
              )Dividend
                  on Series A Preferred Stock (Note 4)
              
              $
              (3,447,088
              )
              $
              (651,489
              )Net
                  Loss Attributable to Common Shareholders
              
              $
              (10,215,307
              )
              $
              (7,824,967
              )Net
                  Loss per Share:Basic
                  and Diluted
              
              $
              (0.32
              )
              $
              (0.29
              )Weighted
                  Average Shares OutstandingBasic
                  and Diluted
              
              
              31,509,898
              
              
              26,954,611




See
      notes to consolidated financial
      statements   F-3
  Celsia
                      Technologies, Inc. and SubsidiariesConsolidated
                      Statement of Stockholders' Equityfor
                      the Years Ended December 31, 2006 and
                      2005
  OtherCommon
                      &
                  
                  Additional
                  
                  Common
                  
                  
                  
                  Unearned
                  
                  ComprehensivePreferred
                      Stock
                  
                  Paid-inCapital
                  
                  StockSubscribed
                  
                  OfferingCosts
                  
                  StockCompensation
                  
                  Income(Loss)
                  
                  Accumulated(Deficit)
                  
                  TotalBalance
                      @ December 31, 2004
                  
                  $
                  1
                  
                  $
                  2,478,483
                  
                  $
                  3,000,000
                  
                  $
                  (258,813
                  )
                  $
                  -
                  
                  $
                  (53,355
                  )
                  $
                  (6,468,111
                  )
                  $
                  (1,301,795
                  )Capital
                      stock subscribed
                  
                  
                  1,631,631
                  
                  
                  1,220,199
                  
                  
                  (3,000,000
                  )
                  
                  258,813
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  110,643Debt
                      beneficial conversion feature
                  
                  
                  -
                  
                  
                  192,959
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  192,959Effects
                      of July Recapitalization
                  
                  
                  (1,606,596
                  )
                  
                  1,641,440
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  34,844Issued
                      Preferred stock, series A
                  
                  
                  20,995
                  
                  
                  10,454,336
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,475,331Issued
                      Preferred stock, series B
                  
                  
                  3,063
                  
                  
                  2,835,457
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,838,520Stock
                      compensation (common)
                  
                  
                  4,281
                  
                  
                  339,063
                  
                  
                  167
                  
                  
                  -
                  
                  
                  (114,660
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  228,851Foreign
                      currency translation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (24,077
                  )
                  
                  -
                  
                  
                  (24,077
                  )Net
                      loss for the year
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (7,173,478
                  )
                  
                  (7,173,478
                  )Balance
                      @ December 31, 2005
                  
                  $
                  53,375
                  
                  $
                  19,161,937
                  
                  $
                  167
                  
                  $
                  -
                  
                  $
                  (114,660
                  )
                  $
                  (77,432
                  )
                  $
                  (13,641,589
                  )
                  $
                  5,381,798Apply
                      Deferred Compensation against Paid in Capital
                  
                  
                  -
                  
                  
                  (114,660
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  114,660
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Stock
                      Compensation (Common)
                  
                  
                  (77
                  )
                  
                  281,669
                  
                  
                  2,902
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  284,494Registration
                      Rights Penalty
                  
                  
                  970
                  
                  
                  901,641
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  902,611Series
                      A Dividend
                  
                  
                  1,675
                  
                  
                  1,553,027
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,554,702
                  )
                  
                  -Common
                      Stock Dividend
                  
                  
                  6,563
                  
                  
                  1,765,744
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,772,307
                  )
                  
                  -Foreign
                      currency translation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (41,132
                  )
                  
                  -
                  
                  
                  (41,132
                  )Net
                      loss for the year
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (6,768,219
                  )
                  
                  (6,768,219
                  )Balance
                      @ December 31, 2006
                  
                  $
                  62,506
                  
                  $
                  23,549,358
                  
                  $
                  3,069
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  (118,564
                  )
                  $
                  (23,736,817
                  )
                  $
                  (240,448
                  )
  See
            notes
            to consolidated financial statements
 F-4
 Celsia
                        Technologies, Inc. and SubsidiariesConsolidated
                        Statements of Cash Flows(US
                        Dollars)
  Years
                        EndedDecember
                        31,2006
                    
                    2005Cash
                        flows from operating activities:Net
                        (loss)
                    
                    $
                    (6,768,219
                    )
                    $
                    (7,173,478
                    )Adjustments
                        to reconcile net (loss) to net cash (used)by
                        operating activities:Depreciation
                    
                    
                    34,601
                    
                    
                    95,287Amortization
                    
                    
                    -
                    
                    
                    311,323Beneficial
                        conversion feature on long-term debt
                    
                    
                    -
                    
                    
                    192,959Loss
                        on Investment
                    
                    
                    110,670
                    
                    
                    105,903Finders
                        Fee Settlement
                    
                    
                    -
                    
                    
                    38,219Accrued
                        Registration Rights Penalty settled with Preferred Stock
                    
                    
                    902,611
                    
                    
                    -Stock
                        Based Compensation
                    
                    
                    284,494
                    
                    
                    228,851Loss
                        on Disposal of Furniture and Equipment
                    
                    
                    45,900
                    
                    
                    -Changes
                        to certain other accounts:Receivable
                    
                    
                    40,117
                    
                    
                    (58,570
                    )Inventory
                    
                    
                    (128,513
                    )
                    
                    -Advance
                        payments
                    
                    
                    (10,158
                    )
                    
                    (79,919
                    )Prepaid
                        expenses
                    
                    
                    4,708
                    
                    
                    (34,238
                    )Royalty
                        Advance
                    
                    
                    -
                    
                    
                    (500,000
                    )Accounts
                        payable
                    
                    
                    (34,282
                    )
                    
                    160,486Accrued
                        expenses
                    
                    
                    104,946
                    
                    
                    730,124Accrual
                        for Employee Retirement Benefits
                    
                    
                    147,112
                    
                    
                    -Other
                    
                    
                    (72,249
                    )
                    
                    10,606Net
                        cash (used) by operating activities
                    
                    
                    (5,338,262
                    )
                    
                    (5,972,447
                    )Cash
                        flows from investing activities:Acquisition
                        of Subsidiary
                    
                    
                    -
                    
                    
                    (2,025,344
                    )Deposits
                    
                    
                    (3,430
                    )
                    
                    (78,270
                    )Redemption
                        of short-term financial instrument
                    
                    
                    -
                    
                    
                    19,322Purchase
                        of furniture and equipment
                    
                    
                    (141,191
                    )
                    
                    (551,948
                    )Net
                        cash (used) by investing activities
                    
                    
                    (144,621
                    )
                    
                    (2,636,240
                    )Cash
                        flows from financing activities:Short-term
                        borrowings
                    
                    
                    (231,683
                    )
                    
                    (408,826
                    )Long-term
                        borrowings
                    
                    
                    -
                    
                    
                    1,003,162Deferred
                        financing fees
                    
                    
                    -
                    
                    
                    (100,000
                    )Repurchase
                        of common stock
                    
                    
                    -
                    
                    
                    (214,000
                    )Net
                        proceeds from the issuance of preferred series A stock
                    
                    
                    -
                    
                    
                    12,482,865Net
                        proceeds from the issuance of preferred series B stock
                    
                    
                    -
                    
                    
                    3,063,402Repayment
                        of convertible bond
                    
                    
                    -
                    
                    
                    7,203Offering
                        Costs
                    
                    
                    -
                    
                    
                    (2,234,197
                    )Net
                        cash (used) provided by financing activities
                    
                    
                    (231,683
                    )
                    
                    13,599,609Net
                        (decrease) increase in cash and cash equivalents
                    
                    
                    (5,714,566
                    )
                    
                    4,990,922Cash
                        and cash equivalents - beginning of period
                    
                    
                    6,009,966
                    
                    
                    1,019,044Cash
                        and cash equivalents - end of period
                    
                    $
                    295,400
                    
                    $
                    6,009,966Supplemental
                        cash flow disclosureNoncash
                        financing activityDuring
                        2006 the Company issued Preferred Stock as a PreferredStock
                        Dividend
                    
                    $
                    1,554,702
                    
                    $
                    -During
                        2006 the Company issued Common Stock as a PreferredStock
                        Dividend
                    
                    $
                    1,772,307
                    
                    $
                    -During
                        2006 the Company issued Preferred Stock Series A Sharesto
                        settle the Registration Rights Penalty
                    
                    $
                    902,611
                    
                    $
                    -During
                        2006 and 2005 the Company recorded stock compensationarrangements
                        for certain employees and directors
                    
                    $
                    284,494
                    
                    $
                    343,512During
                        2006 Preferred Shares were converted into Common Shares
                    
                    $
                    560
                    
                    $
                    -During
                        2005 the Company recorded a beneficial conversion featureon
                        certain Long-term debt.
                    
                    
                    -
                    
                    $
                    192,959During
                        2005 the Company converted debt issued by theUK
                        subsidiary into Preferred Stock in the US Parent
                    
                    $
                    -
                    
                    $
                    2,500,000During
                        2005 the Company converted equity issued by theUK
                        subsidiary into Preferred Stock in the US Parent
                    
                    $
                    -
                    
                    $
                    1,000,000During
                        2005 the Company converted a personal promissorynote,
                        collateralized by the Company's Common Stock, intoPreferred
                        Stock in the US Parent
                    
                    $
                    -
                    
                    $
                    1,100,000Cash
                        paid during the year for interest
                    
                    $
                    6,439
                    
                    $
                    43,562
  See
              notes
              to consolidated financial statements
  F-5
  Celsia
                        Technologies, Inc. and SubsidiariesNotes
                        to Consolidated Financial StatementsDecember
                        31, 2006
  **Note
              1 - Summary of significant accounting policies**
 
 **Organization**
 
 Celsia
              Technologies, Inc. (the "Company" or "Celsia"), a US Corporation, is
              formerly
              known as iCurie, Inc. Celsia's operations consist of research, development,
              and
              commercialization of next-generation cooling solutions. The Company
              was founded
              in 2000 to address the emerging heat problem that now threatens the
              development
              of higher-performing microelectronic products. Celsia anticipates being
              the
              first Company
              to take this innovative thermal management technology from the laboratory
              to
              high volume manufacturing, and operate as both a licensor of the technology
              and
              a vertically integrated provider of customized applications.
  The
              Company's corporate headquarters is located in Miami, USA with subsidiaries
              in
              London, United Kingdom and Seoul, South Korea. Our Design and Manufacturing
              operations are based in Seoul. Our patented NanoSpreaderTM is a completely new
              alternative to conventional cooling devices. By utilizing a nano scale
              environment, the laws of physics are manipulated enabling our cooling
              technology
              to be thinner, lighter and deliver significantly higher thermal conductivity
              (heat transfer capacity) versus conventional options such as Heat Pipes.
              And, we
              can supply our plate-shaped heat spreaders in virtually any shape that
              a design
              engineer requires. As a result, customers should be able to achieve
              improved
              product performance without trading off size, weight or cost
              considerations.
 
 Celsia
              Technologies, Inc.'s subsidiaries consist of (i) Celsia Technologies
              UK Limited
              ("UK Subsidiary"), a United Kingdom Company formerly known as iCurie
              Lab
              Holdings Limited, and (ii) Celsia Technologies Korea, Inc. ("Korea
              Subsidiary"),
              a Korean Company
              formerly known as iCurie Lab, Inc. In consolidation, all significant
              intercompany balances and transactions have been eliminated.
 
 **Financial
              reporting**
 
 The
              Company prepares its financial statements in conformity with accounting
              principles generally accepted in the United States of America, which
              require
              management to make estimates and assumptions that affect the reported
              amounts in
              the financial statements. Although these statements are based on management's
              best knowledge of current events and actions that the Company may undertake
              in
              the future, actual results could differ from those estimates.
 
 Significant
              estimates required to be made by management include the valuation of
              investments, prepaid royalties, equity securities issued, and registration
              rights.
 
 **Going
              Concern**
 
 The
              accompanying financial statements have been prepared assuming the Company
              will
              continue as a going concern, which contemplates the realization of
              assets and
              satisfaction of liabilities in the normal course of business. The Company
              and
              its Subsidiaries have recently commenced limited revenue producing
              operations
              and have sustained accumulated losses since inception of approximately
              $23.7
              million. The Company and its Subsidiaries have funded operations through
              equity
              and debt financing since inception. All these factors raise substantial
              doubt
              over the Company's ability to continue as a going concern.
 
 **Cash
              and Cash Equivalents**
 
 Cash
              and
              cash equivalents include all cash balances and highly liquid investments,
              including time deposits, which are readily convertible into known amounts
              of
              cash and have an original maturity of three months or less. The Company
              and its
              Subsidiary's cash and cash equivalents are maintained in banks and
              financial
              institutions in the United States, United Kingdom and South Korea,
              and they have
              not experienced any losses on their cash balances.
 
 **Inventory**
 
 Inventory
              consists of finished goods ready to be sold to customers. Inventories
              are
              carried at the lower of cost or market value.
 
 **Investment**
 
 The
              UK
              Subsidiary owns 527,000 shares of an entity affiliated through common
              management. During 2006, the Company recorded a $110,670 loss on investment
              to
              bring its carry basis down to its estimated net realizable value. These
              shares
              have been fully reserved and carry a book value of $ 0 as of December
              31, 2006.
 
 **Revenue
              recognition**
 
 The
              Company's policy is to record revenue as earned when the following
              attributes
              are met.
  -  Persuasive
              evidence of a sale arrangement exists.
 
 -  Delivery
              has
              occurred to the customers.
 
 -  The
              sales
              price to the customer is fixed or determinable.
 
 -  Collection
              is reasonably assured.
 
 The
              Company recognized revenues of $104,085 and $19,132 for the twelve
              months ended
              December 31, 2006 and 2005, respectively, from customer orders for
              test samples
              and commercial deliveries.
 
 **Deferred
              costs**
 
 In
              connection with obtaining debt and equity financing, the UK subsidiary
              incurred placement
              agent fees from a third party equal to 10% of the amount financed.
              Deferred
              financing costs incurred in connection with long-term financing amounted
              to
              $329,406 and were being amortized on a straight-line basis over the
              stated term
              of the loans. The long-term debt financing arrangement has been converted
              to
              preferred stock and, therefore, the Company has no additional financing
              fees
              related to this transaction. Amortization expense for the year ended
              December
              31, 2006 and 2005 amounted to $0 and $311,323, respectively.
   F-6
  **Furniture
              and equipment**
 
 Furniture
              and equipment at December 31, 2006 are summarized as follows:
  Vehicles
                    
                    $
                    54,157Machinery
                    
                    
                    625,659Furniture
                        and fixtures
                    
                    
                    344,7741,024,590Accumulated
                        depreciation
                    
                    
                    (330,618
                    )$
                    693,972
  Furniture
              and equipment are stated at cost. Major renewals and betterments, which
              prolong
              the useful life or enhance the value of assets, are capitalized. Depreciation
              is
              computed using the straight-line method over the estimated life of
              five years
              for machinery and equipment, furniture and fixtures, and vehicles.
              Depreciation
              expense for the year ended December 31, 2006 and 2005 amounted to $34,601
              and
              $95,287, respectively.
 
 **Net
              Loss per Share**
 
 Basic
              Loss per share is computed by dividing net loss attributable to common
              shareholders for the period by the weighted average number of common
              shares
              outstanding during the period. Diluted earnings per share is computed
              by
              dividing net earnings by the weighted average number of shares plus
              the dilutive
              effect of convertible preferred shares and outstanding options and
              warrants.
              Approximately 23 million and 3 million shares to be issued upon conversion
              of
              Series A and Series B, respectively, Preferred Shares were excluded
              from the
              calculation of diluted earnings per share for the year ended December
              31, 2006,
              respectively, because they were anti-dilutive. Approximately 21 million
              and 3
              million shares to be issued upon conversion of Series A and Series
              B,
              respectively, Preferred Shares were excluded from the calculation of
              diluted
              earnings per share for the year ended December 31, 2005, respectively,
              because
              they were anti-dilutive.
 
 **Long-lived
              assets**
 
 Long-lived
              assets are reviewed for impairment whenever events or changes in circumstances
              indicate that the carrying amount of the assets may not be recoverable.
              When the
              aggregate undiscounted future cash flows is less than the carrying
              value of the
              asset, an impairment loss is recognized, based on the fair value of
              the
              asset.
 
 **Business
              risks**
 
 The
              Company is subject to the risks associated with start-up and high growth
              companies such as the risks of raising adequate capital, producing
              profitable
              operations, and operating in various countries through-out the world.
 
 **Research
              and development costs**
  Research
              and development costs are expensed as incurred and amounted to $747,588
              and
              $809,033 for the years ended December 31, 2006 and 2005, respectively.
 
 **Foreign
              currency translation**
 
 The
              reporting and functional currency of the Company and its UK Subsidiary
              is the
              U.S. Dollar, while the functional currency of Korea Subsidiary is the
              Korean
              Won.
 
 The
              assets and liabilities of the Korea Subsidiary have been translated
              into U.S.
              Dollars at the prevailing period-end rate of exchange, while the related
              income
              and expense items were translated at the average rate of exchange during
              the
              period. The resulting translation adjustments are accumulated in a
              separate
              component of stockholders' equity (deficit).
 
 The
              Company follows Financial Accounting Standards No. 130 (SFAS 130) "Reporting
              Comprehensive Income." SFAS 130 requires a Company to report comprehensive
              income (loss) and its components in a full set of financial statements.
              Comprehensive income (loss) includes the change in equity during a
              period from
              transactions and other events and circumstances from non-owner sources,
              such as
              unrealized gains (losses) on foreign currency translation adjustments.
              Changes
              in unrealized foreign currency translation gains (losses) during 2006
              and 2005
              amounted to $(41,132) and $(24,077), respectively. Accordingly, comprehensive
              loss for the years ended December 31, 2006 and 2005 amounted to $6,809,351
              and
              $7,197,555, respectively.
 
 **Fair
              value of financial instruments**
 
 The
              Company's cash, receivables, accounts payable, short-term debt, and
              bonds
              payable represent financial instruments whose carrying amounts reasonably
              approximate their fair value.
 
 **Recent
              accounting pronouncements**
 
 In
              July
              2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
              No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB
              Statement No. 109 (FIN 48), which provides clarification related to
              the process
              associated with accounting for uncertain tax positions recognized in
              consolidated financial statements. FIN 48 prescribes a more-likely-than-not
              threshold for financial statement recognition and measurement of a
              tax position
              taken, or expected to be taken, in a tax return. FIN 48 also provides
              guidance
              related to, among other things, classification, accounting for interest
              and
              penalties associated with tax positions, and disclosure requirements.
              The
              Company is required to adopt FIN 48 on January 1, 2008, although early
              adoption
              is permitted. Celsia is currently evaluating the impact of adopting
              FIN 48 on
              it's consolidated financial statements.
 
 In
              September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
              (SFAS No.
              157). Among other requirements, SFAS No. 157 defines fair value and
              establishes
              a framework for measuring fair value and also expands disclosure about
              the use
              of fair value to measure assets and liabilities. SFAS No. 157 is effective
              beginning the first fiscal year that begins after November 15, 2007.
              The Company
              is required to adopt SFAS No. 157 on January 1, 2008, although earlier
              adoption
              is permitted. Celsia is currently evaluating the impact of adopting
              SFAS No. 157
              on it's consolidated financial statements.
  F-7
 In
              September 2006, FASB issued SFAS No. 158, *Employer’s Accounting for Defined Benefit Pension and Other Postretirement
              Plans—an Amendment of FASB Statements No. 87, 88, 106 and
              132(R)* .
              SFAS
              No. 158 requires an employer that is a business entity and sponsors
              one or more
              single employer benefit plans to (1) recognize the funded status of
              the benefit
              in its statement of financial position, (2) recognize as a component
              of other
              comprehensive income, net of tax, the gains or losses and prior service
              costs or
              credits that arise during the period but are not recognized as components
              of net
              periodic benefit cost, (3) measure defined benefit plan assets and
              obligations
              as of the date of the employer’s fiscal year end statement of financial position
              and (4) disclose in the notes to financial statements additional information
              about certain effects on net periodic benefit cost for the next fiscal
              year that
              arise from delayed recognition of the gains or losses, prior service
              costs on
              credits, and transition asset or obligations. The Company plans to
              adopt SFAS
              No. 158 effective at the end of the Company’s fiscal year ending December 31,
              2007. Celsia expects that the adoption of SFAS No. 158 will have no
              effect on
              it's consolidated financial statements.
 
 In
              September 2006, the SEC issued Staff Accounting Bulletin No. 108 “Considering
              the Effects of Prior Year Misstatements when
              Quantifying Misstatements in Current Year Financial Statements” *.* This
              bulletin requires companies to consider the effect
              of
              prior year misstatements for past and current financials statements
              when
              determining the materiality of these misstatements, and to make appropriate
              adjustments to the financial statements and related disclosures accordingly.
              This requirement is in effect for all companies with fiscal years ending
              on or
              before November 15, 2006. The Company adopted SAB No. 108 during the
              fourth quarter of 2006. Celsia has reviewed its prior year financial
              statements
              and determined that no adjustments are required for the current
              year.
 
 **Note
              2 - Income Taxes**
 
 The
              Company recognizes deferred tax assets and liabilities created by temporary
              differences between the financial statement and tax basis of assets
              and
              liabilities. Deferred tax assets and liabilities are computed on such
              temporary
              differences, including available net operating loss carry forwards
              and tax
              credits, by applying enacted statutory tax rates applicable to the
              years when
              such differences are expected to reverse. A valuation allowance is
              provided on
              deferred tax assets to the extent that it is more likely than not that
              such
              deferred tax assets will not be realized.
 
 The
              Company currently operates in the United States, while its Subsidiaries
              operate
              in the United Kingdom and South Korea. Operating loss carryforwards
              in the
              United States approximated $8,000,000 at December 31, 2006, and can
              be carried
              forward for 20 years, expiring in the years 2025-2026. Operating loss
              carryforwards in the United Kingdom  approximated $9,000,000 at December
              31, 2006, and can be carried forward indefinitely, provided the Company
              (i)
              doesn't cease operations and (ii) doesn't change its business nature,
              while
              operating loss carryforwards in South Korea approximated $4,300,000
              at December
              31, 2006, and expire in the years 2007-2011. The Company has a deferred
              tax
              asset of approximately $6,700,000 and has recorded a full valuation
              allowance
              against the deferred tax asset resulting from these tax loss
              carry-forwards.
  **Note
              3 - Commitments**
  **Operating
              Leases**
  The
              Company has two leases in Seoul, Korea for its pilot plant, as well
              as for its
              administrative and research office. One
              lease
              expires in March 2008 and the other in July 2007. As of December 31,
              2006, the
              minimum future rental
              commitments under all non-cancelable operating leases with terms greater
              than
              one year, are as follows:
 Year
                          Ending December 31,2007
                      
                      $
                      113,8322008
                      
                      $
                      13,871$
                      127,703
  Rent
              expense for the year ended December 31, 2006 and 2005 amounted to $98,387
              and
              $100,421, respectively.
  F-8
  **Employment
              contracts**
 
 The
              Corporation has entered into employment agreements with 19 of its officers
              /
              employees for terms ranging between one and two years. Under the terms
              of the
              contracts these officers / employees are entitled to minimum compensation
              of
              approximately $1,200,000 in 2007 and $230,000 in 2008. In addition,
              some
              agreements provide for bonuses and stock option based upon performance
              criteria
              as defined in the respective agreements.
 
 **Accrual
              for Employment Retirement Benefits**
 
 The
              Company has recorded a liability of $147,112 at December 31, 2006,
              as a result
              of a recent legal decision by the Korean Supreme Court related to employment
              benefits. The Company believes that this potential liability will not
              be paid
              within the current year, and it has therefore been recorded as a long
              term
              liability.
 
 **Commitments
              to a third party**
 
 According
              to an agreement between the Korea Subsidiary and Sae Han IT, on May
              21,  2004,
              The
              Korea Subsidiary is to provide 25 percent of gross margin to B.A.C.
              Network
              (BAC) from the micro cooling systems business for 3 years from the
              initial sales
              to  include
              only LG Electronics, LGIBM, and others to which LG Electronics and
              LGIBM will
              supply the Company's products. Gross margin is determined based on
              the
              difference between suppliers' unit cost and selling price to purchaser.
              Through
              December 31, 2006, no qualifying sales have occurred.
 
 **Royalty
              Agreement**
 
 On
              May
              18, 2005, the UK Subsidiary entered into a Royalty Agreement with CHL
              Investment
              Partnership ("CHL") and Hansen Gray & Company, Inc. ("Hansen Gray"). The
              terms of the agreement call for a payment of 1.14% and 0.86% of revenue
              to CHL
              and Hansen Gray, respectively, once the UK Subsidiary's revenue exceeds
              $25
              million. The agreement is terminated once the aggregate payment to
              CHL and
              Hansen Gray totals $50 million. During 2005, the Company paid a Royalty
              Advance
              to Hansen Gray totaling $500,000 which is recorded as a royalty advance.
 
 CHL
              is an
              organization in which Dr. Jeong Hyun Lee (the Company's Director) holds
              an
              interest in. Hansen Gray is an entity affiliated through common
              management.
 
 **Registration
              Rights**
 
 The
              Company entered into a registration rights agreement with the Preferred
              Series A
              Share Holders dated July 11, 2005. Under the terms of the Registration
              Rights
              Agreement, if a registration statement is not filed within 60 days
              of July 11,
              2005 or declared effective within 120 days of July 11, 2005 (each a
              "Non-registration Event"), then for each 30 day period during the pendancy
              of
              such a Non- Registration Event, the company is required to pay to the
              selling
              shareholders liquidated damages in an amount equal to one percent (1%)
              of the
              aggregated price such selling shareholders paid for the Company's series
              A
              Preferred stock (deemed to be $0.88 per share), which the company may
              pay in
              cash or additional shares of series A Preferred Stock (valued at $0.88
              per
              share), at the company's option. The registration statement was filed
              on October
              6, 2005 and was declared effective on April 17, 2006. At December 31,
              2005, the
              Company accrued $923,790 as an estimate of the registration rights
              penalty,
              which amount is included in selling and administrative expenses in
              the
              accompanying 2005 financial statements. On August 10, 2006, the Company
              issued
              970,550 Series A Preferred Shares valued at $902,611 to Preferred Series
              A Share
              Holders in settlement of the Registration Rights Penalty. Hansen Gray
              and CHL
              have certain registration rights, and the holders of the Series A Preferred
              Shares have certain continuing rights under this Registration Rights
              Agreement.
  F-9
  The
              Company entered into a registration rights agreement with the preferred
              series B
              share holders dated December 16, 2005. Under the terms of the Registration
              Rights Agreement, the Company is required to use its best efforts to
              file a
              Registration Statement covering the underlying Common Stock within
              six months
              after the Company's Registration Statement on Form SB-2 (SEC File
              No. 333-128856) is declared effective. The Company is required to maintain
              the effectiveness of the Initial Registration Statement through the
              first
              anniversary of the Closing Date and shall use its best efforts to maintain
              the
              effectiveness of the Initial Registration Statement through the second
              anniversary of the Closing Date.
 
 **Note
              4 - Stockholders' equity**
 
 **Capital
              stock**
 
 At
              December 31, 2006, the Company had an authorized number of shares of
              150,000,000
              Common Shares and 100,000,000 of Preferred Shares, 30,000,000 of which
              has been
              designated as Preferred Series A Shares and 7,000,000 of which has
              been
              designated Preferred Series B Shares. The total issued and outstanding
              shares
              were 36,382,402 Common Shares, 23,061,505 Preferred Series A Shares,
              and
              3,063,402 Preferred Series B Shares.
 
 During
              the year ended Deember 31, 2006, 560,030 shares of Preferred Series
              A were
              converted to Common Shares at a rate of 1:1. On September 30, 2006,
              the Company
              issued 6,564,104 common shares (valued at $1,772,307) to Series A and
              Series B
              Preferred Shareholders as a 25% common stock dividend.
 
 **Share
              Exchange Agreement and Series A Offering**
 
 Effective
              as of July 8, 2005, Cedar Mountain Distributors, Inc. entered into
              a Share
              Exchange Agreement with the shareholders of iCurie Lab Holdings Limited,
              a UK
              Company, and certain additional parties. Immediately prior to the execution
              of
              the Share Exchange Agreement 3,050,001 shares of Cedar Mountain common
              stock
              were cancelled (the "Common Stock Cancellation") pursuant to agreements
              between
              Cedar Mountain and certain shareholders of Cedar Mountain (including
              the then
              sole officer and director of Cedar Mountain) for aggregate consideration
              of
              $214,000. After the Common Stock Cancellation, 1,350,023 shares of
              Cedar
              Mountain remained issued and outstanding. Upon the consummation of
              the
              transactions contemplated by the Share Exchange Agreement on July 8,
              2005, (i)
              Cedar Mountain acquired all of the outstanding shares of iCurie UK
              (resulting in
              iCurie UK becoming a wholly owned subsidiary of Cedar Mountain), (ii)
              Cedar
              Mountain issued 24,935,047 shares of common stock to the shareholders
              of iCurie
              UK and certain of their assigns, which represented 94.864% of the issued
              and
              outstanding shares of Cedar Mountain common stock, (iii) the sole director
              and
              executive officer of Cedar Mountain resigned, (iv) directors and officers
              associated with iCurie UK were appointed as directors and officers
              of Cedar
              Mountain, (v) Amended and Restated Articles of Incorporation of Cedar
              Mountain
              were approved and filed which, among other things, changed the name
              of Cedar
              Mountain to iCurie, Inc., and authorized 30,000,000 shares of Series
              A Preferred
              Stock; and (vi) the new directors approved and adopted Amended and
              Restated
              Bylaws of iCurie, Inc.
 
 The
              Share
              Exchange between the shareholders of iCurie UK, a private company,
              with Cedar
              Mountain, a non-operating public shell with nominal assets, was accounted
              for as
              an equity transaction. The stock retained by the shareholders of Cedar
              Mountain
              has been adjusted to reflect the financing transaction with the proceeds
              equal
              to the net asset value of Cedar Mountain immediately prior to the acquisition
              and the equity of iCurie has been adjusted to reflect a recapitalization
              whereby
              the prior retained earnings of Cedar Mountain were eliminated. This
              resulted in
              an adjustment to common stock and
              additional paid in capital to arrive at the net asset value of Cedar
              Mountain of
              $34,844. This amount has been reflected in the statement of stockholder’s equity
              as the effects of the July recapitalization of iCurie. No goodwill
              or other
              intangible asset has been recorded in connection with the share exchange.
              The
              historical financial statements of Cedar Mountain (which has since
              changed its
              name to iCurie, Inc) has become the historical financial statements
              of iCurie
              UK.
 
 Effective
              as of July 11, 2005, iCurie, Inc. issued 20,995,239 shares of Series
              A Preferred
              Stock, together with warrants exercisable for a total of 6,441,895
              shares of
              iCurie, Inc. common stock at prices ranging from $0.88 - $1.32, to
              various
              parties in exchange for approximately $12.48 million in cash (at a
              cash price of
              $0.88 per share of Series A Preferred Stock) and the transfer of $4.6
              million of
              previously issued promissory notes issued by various parties. Certain
              of the
              promissory notes carried beneficial conversion features and as a result,
              during
              the year ended December 31, 2005, the Company recorded additional interest
              expense of $192,959. (These transactions are collectively referred
              as the
“Series A Offering”). The Series A Offering was effectuated pursuant to
              Subscription Agreements (in the case of cash sales) and a Preferred
              Stock
              Purchase Agreement (in the case of the issuance of Series A Preferred
              Stock for
              promissory notes) between iCurie, Inc. and the stock recipients, each
              effective
              as of July 11, 2005. In connection with the Series A Offering, iCurie,
              Inc. also
              entered into a Registration Rights Agreement dated as of July 11, 2005
              with the
              Company's shareholders, Series A Shareholders, and certain additional
              parties
              (see note 3).
 
 In
              addition to the warrants issued together with Series A Preferred Stock,
              681,018
              warrants for common stock and 1,364,528 warrants for preferred (Series
              A) stock
              were issued to placement agents.
 
 Pursuant
              to the Share Exchange Agreement, the Company agreed to assume the obligations
              of
              iCurie UK under a Placement Agent Agreement between iCurie UK, Indigo
              Securities
              LLC and Axiom Capital Management Inc. (Indigo and Axiom are collectively
              referred to as the “Placement Agent”), pursuant to which the Placement Agent was
              compensated by the Company for its services in connection with the
              Share
              Exchange Agreement and the Series A Offering. In connection with the
              Share
              Exchange Agreement and Series A Offering, the Company also granted
              warrants
              exercisable for a total of 270,000 shares of iCurie, Inc. common stock
              to a
              party that identified Cedar Mountain as a potential participant in
              the share
              exchange.
 
 In
              connection with the Share Exchange Closing and Series A Offering, (i)
              certain
              executive officers entered into employment agreements, (ii) iCurie,
              Inc.
              advanced a major shareholder $500,000 (see Note 3) payable under a
              pre-existing
              revenue sharing agreement and entered into certain related transactions
              with
              such shareholder, (iii) iCurie, Inc. cancelled a $1.1 million promissory
              note
              made by an executive officer in exchange for 1.25 million shares of
              common stock
              of the Company owned by such officer, (iv) an option for 440,000 shares
              of the
              Company's common stock held by an executive officer was cancelled in
              exchange
              for a warrant to purchase 1,097,142 shares of iCurie, Inc. common stock,
              (v)
              iCurie, Inc. executive officers were paid certain accrued but previously
              unpaid
              salaries in cash and shares of iCurie, Inc. common stock and (vi) an
              executive
              officer agreed to indemnify iCurie, Inc. against certain liabilities.
  F-10
  **Terms
              of Series A Preferred**
 
 In
              the
              event of any sale or dissolution of the Company, the holders of the
              Series A Preferred shall be entitled to receive in preference to the
              holders of the Series B and Common Stock a per share amount equal to
              $0.88 plus
              any accrued, unpaid dividends. The holders of the Series A Preferred have
              the right to convert the Series A Preferred at any time into shares of
              Common Stock at an initial conversion rate of 1:1, as defined. At the
              option of
              the Company, if certain criteria as defined in the agreement are met,
              the
              Series A Preferred can be converted into Common Stock. The conversion price
              of the Series A Preferred is subject to a weighted average antidilution
              adjustment. The Series A Preferred vote together with the Common Stock and
              not as a separate class. Each share of Series A Preferred has a number of
              votes equal to the number of shares of Common Stock then issuable upon
              conversion of such share of Series A Preferred. So long as 50% or more of
              the Series A Preferred Stock remains outstanding, the holders of the
              Series A
              Preferred Stock are entitled to elect two directors of the Company,
              and so long
              as 25% or more of the Series A Preferred Stock remain outstanding,
              the holders
              of the Series A Preferred Stock are entitled to elect one director
              of the
              Company. The directors elected by the Series A Preferred Stock and
              the holders
              of the Series A Preferred Stock each have approval rights over specified
              corporate actions. Subject to certain exceptions, in the event the
              Company
              proposes to offer or sell any new securities, the Company shall first
              make an
              offering of such new securities to each holder of Series A Preferred
              Stock.
 
 The
              holders of Series A Preferred Stock are entitled to receive cumulative,
              compounding dividends at a rate of eight percent (8%) per annum as,
              when and if
              declared by the Board of Directors of the Company. The dividends may
              be paid in
              cash or shares of Series A Preferred Stock (valued at original issue
              price) at
              the sole discretion of the Company. Holders of Series A Preferred Stock
              also
              receive on an as-converted basis any distributions paid on the common
              stock. No
              dividends may be paid on common stock unless all unpaid cumulative
              dividends on
              the Series A Preferred Stock are paid. On August 10, 2006, the Company
              issued
              approximately 1,700,000 shares of Series A Preferred Stock as dividends
              to all
              holders of record on July 11, 2006, valued at approximately $1,500,000.
              As of
              December 31, 2006, accumulated, undeclared dividends on the Series
              A Preferred
              Shares totaled approximately $770,000.
 
 **Terms
              of Series B Preferred**
 
 Subject
              and subordinate to the liquidation rights of the Company’s Series A
              Preferred Stock, the holders of the Series B Preferred shall be entitled
              to
              receive in preference to the holders of the Common Stock a per share
              amount
              equal to $1.00, in the event of any sale or dissolution of the Company.
              The
              holders of the Series B Preferred have the right to convert the
              Series B Preferred at any time into shares of Common Stock at an initial
              conversion rate of 1:1, as defined. At the option of the Company, if
              certain
              criteria as defined in the agreement are met, the Series B Preferred can be
              converted into Common Stock. The conversion price of the Series B Preferred
              and the exercise price of the Warrants which accompanied the Preferred
              Stock are
              subject to a weighted average antidilution adjustment. The Series B
              Preferred vote together with the Common Stock and not as a separate
              class. Each
              share of Series B Preferred has a number of votes equal to the number of
              shares of Common Stock then issuable upon conversion of such share
              of
              Series B Preferred. The Series B Preferred does not carry any dividend.
 
 **Stock
              Compensation**
 
 During
              the years ended December 31, 2006 and 2005, the Company has granted
              approximately 7.3 million of its common stock to employees and others,
              of which
              approximately 4.2 million common shares have vested. These shares issuances
              were
              valued between $0.07-0.50 based upon management's estimate of the fair
              value of
              the common stock on the date of issuance. These stocks grants have
              certain
              vesting provisions through May 2009. During the year ended December
              31, 2006,
              approximately 1.4 million shares have vested and a charge to compensation
              expense of $148,075 and $228,851 was recorded during the year ended
              December 31,
              2006 and 2005 respectively. The remaining unvested shares totaling
              $576,807 at
              December 31, 2006 will be amortized in future periods.
 
 **Employee
              Stock Options**
 
 On
              January 1, 2006, the Company adopted the fair value recognition provisions
              of
              Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based
              Payment,” using the modified prospective method. Consequently, for the year
              ended December 31, 2006, the Company’s results of operations reflected
              compensation expense for new stock options granted and vested under
              its stock
              incentive plans during the fiscal year 2006 and the unvested portion
              of previous
              stock option grants which vested during the fiscal year 2006. The amount
              recognized in the financial statements related to stock-based compensation
              was
              $150,718 for the year ended December 31, 2006. The Company considers
              voluntary
              termination behavior as well as trends of actual option forfeitures
              when
              estimating its forfeiture rate. Given the limited history outstanding
              options,
              the Company has estimated 0 shares as a forfeiture rate and has only
              recorded
              actual forfeitures as incurred.
 
 Stock
              options issued under the Company’s Long-term Incentive Plans are granted with an
              exercise price equal or greater than the market price of the Company’s stock at
              the date of grant and expire ten years from the date of grant. These
              options
              generally vest over a two- or three-year period. During the year ended
              December
              31, 2006, the Company issued 774,604 options to purchase common stock
              valued at
              $156,952 which vests over a 2 year period. During the year ended December
              31,
              2006, the Company recorded compensation expense of approximately $62,347
              related
              to this issuance.
  The
              fair
              value of each option granted is estimated on the date of grant using
              the Black-
              Scholes option-pricing method. Given its limited trading history, the
              Company
              used volatility from companies in the same industry. The Company estimated
              the
              expected option life and the expected forfeiture rate. The risk-free
              rate is
              based on the U.S. Treasury yield curve in effect at the time of grant
              for the
              estimated life of the option. The Company has not made any dividend
              payments on
              common stock nor does it have plans to pay dividends in the foreseeable
              future.
              The following assumptions were
              used
              to estimate the fair value of options granted during the year ended
              December 31,
              2006 using the Black-Scholes option-pricing model:
  Risk
                        free interest rate
                    
                    7.53-8.25
                    %Expected
                        Term (years)
                    
                    
                    5Expected
                        volatility
                    
                    
                    100.00
                    %Dividend
                        Yield
                    
                    
                    0.00
                    %
   F-11
  Information
              about all employee options outstanding is as follows:
  For
                        the years ended December 31,
                    
                    **2006**
                    
                    **2005****Weighted
                        Average**
                    
                    
                    
                    **Weighted
                        Average****Shares**
                    
                    **Exercise
                        Price**
                    
                    **Shares**
                    
                    **Exercise
                        Price**Options
                        Outstanding at beginning of year
                    
                    
                    2,510,337
                    
                    $
                    0.88
                    
                    
                    0
                    
                    $
                    -Granted
                    
                    
                    774,604
                    
                    $
                    0.53
                    
                    
                    2,510,337
                    
                    $
                    0.88Cancelled
                    
                    
                    (108,926
                    )
                    $
                    0.88
                    
                    
                    0
                    
                    $
                    -Options
                        Outstanding at end of year
                    
                    
                    3,176,015
                    
                    $
                    0.79
                    
                    
                    2,510,337
                    
                    $
                    0.88
  The
              weighted average remaining contractual life of options outstanding
              at December
              31, 2006 was 9 years.
 A
              summary
              of employee options outstanding and employee options exercisable under
              the
              Company's plan is set forth
              below:
  Outstanding
                      
                      Exercisable**Weighted****Average****Remaining**
                      
                      **Weighted**
                      
                      
                      
                      **Weighted****Exercise**
                      
                      **#
                          of Options**
                      
                      **Contractual**
                      
                      **Average**
                      
                      **#
                          of Options**
                      
                      **Average****Price**
                      
                      **Outstanding**
                      
                      **Life**
                      
                      **Exercise
                          Price**
                      
                      **Exercisable**
                      
                      **Exercise
                          Price**$
                          0.19
                      
                      
                      375,890
                      
                      
                      10
                          years
                      
                      $
                      0.19
                      
                      
                      194,778
                      
                      $
                      0.19$
                          0.50
                      
                      
                      125,000
                      
                      
                      9
                          years
                      
                      $
                      0.50
                      
                      
                      46,875
                      
                      $
                      0.50$
                          0.88
                      
                      
                      2,401,411
                      
                      
                      9
                          years
                      
                      $
                      0.88
                      
                      
                      1,842,170
                      
                      $
                      0.88$
                          1.00
                      
                      
                      273,714
                      
                      
                      10
                          years
                      
                      $
                      1.00
                      
                      
                      85,994
                      
                      $
                      1.00
  During
              2005, the Company issued 25,000 options to an external consultant.
              The fair
              market value of these options were determined using the Black-Scholes
              method and were deemed immaterial.
  The
              following table illustrates the pro forma effect on net income (loss)
              if the
Company
              had applied the fair value recognition provisions of FASB Statement
No.
              148,
              "Accounting for Stock-Based Compensation - Transition & Disclosure, 
An
              Amendment to FASB Statement No. 123," to stock-based employee compensation
              in
              2005.
  2005Net
                      loss attributable to common shareholders, as reported
                  
                  $
                  (7,824,967
                  )Add:
                      total stock-based employee compensationexpense
                      included in reported net loss
                  
                  
                  -Deduct:
                      stock-based compensation expensedetermined
                      under the fair value method,net
                      of tax effect, for all employee awards
                  
                  
                  (69,090
                  )Pro
                      forma net loss attributable to common shareholders
                  
                  $
                  (7,894,057
                  )Loss
                      per shareBasic-As
                      reported
                  
                  $
                  (0.29
                  )Basic-Pro
                      Forma
                  
                  $
                  (0.29
                  )
  During
            the year ended December 31, 2005, the Company issued options to acquire
2,510,337
            shares of Common Stock to certain employees and directors at an exercise
            price
            of $0.88. T he
            fair
            value of option grants is estimated as of the date of grant using the
            Black-
Scholes
            option-pricing model with the following assumptions for the grant made
during
            the year ended December 31, 2005:
 Expected
            life of option five (5) years, volatility rate 100%, risk-free interest
            rate ranging between 6.25%-7.15%, and a zero percent (0%) dividend
            yield.
   F-12
  **Warrants
            to Purchase Common Stock**
 During
            2005, the Company issued various warrants to preferred shareholders and
            the
            placement agents in connection with the Series A and B
            Offerings. On September 11, 2006, the Company issued warrants to purchase
            1,500,000 of Celsia common stock to  a
            third
            party as part of a distribution agreement. As part of the same agreement,
            the
            Company received warrants to purchase 500,000 shares
            of
            the distributors common stock. The warrants vest 25% in December 2006,
            25% in
            December 2007, and 50% contingent upon
            acheivement of volume thresholds. The agreement was executed with the
            intention
            that the value of each warrant to be materially similar
            in value. Management has estimated the fair market value of both issuances
            using
            the Black-Scholes and
            has
            valued the issuance to them at approximately $220,000. The Company has
            recorded
            an expense totaling approximately $55,000 related
            to this issuance for the year ended December 31, 2006. No value was assigned
            to
            the warrants received by the Company.
  A
            summary
            of the issued and outstanding warrants are as follows:
  **Exercise**
                  
                  **#
                      of Warrants**
                  
                  **#
                      of Warrants**
                  
                  **Expiration****Price**
                  
                  **Outstanding**
                  
                  **Exercisable**
                  
                  **Date**$
                      0.32
                  
                  
                  1,500,000
                  
                  
                  375,000
                  
                  
                  September
                      2011$
                      0.88
                  
                  
                  1,874,178
                  
                  
                  1,874,178
                  
                  
                  July
                      2010$
                      1.09
                  
                  
                  1,097,142
                  
                  
                  1,097,142
                  
                  
                  July
                      2010$
                      1.10
                  
                  
                  2,759,357
                  
                  
                  2,759,357
                  
                  
                  July
                      2010$
                      1.32
                  
                  
                  2,759,357
                  
                  
                  2,759,357
                  
                  
                  July
                      2010$
                      1.50
                  
                  
                  772,190
                  
                  
                  772,190
                  
                  
                  December
                      2010$
                      3.00
                  
                  
                  765,850
                  
                  
                  765,850
                  
                  
                  December
                      2010
 **Warrants
            to Purchase Preferred Stock**
  During
              2005, the Company issued various warrants to placement agents in connection
              with
              the Series A and B
              Offerings. A summary of these warrants are as
              follows:
  **Exercise**
                    
                    **#
                        of Warrants**
                    
                    **#
                        of Warrants**
                    
                    **Expiration****Price**
                    
                    **Outstanding**
                    
                    **Exercisable**
                    
                    **Date**$
                        0.88
                    
                    
                    1,364,528
                    
                    
                    1,364,528
                    
                    
                    July
                        2010$
                        1.50
                    
                    
                    210,000
                    
                    
                    210,000
                    
                    
                    December
                        2010
 **Note
            5 - Bond payable**
  The
              bond
              payable (Won 300 million) at December 31, 2006, was issued to Asia
              Vital Components
              in December 2002 and matures in December 2007. The bond carries no
              interest and has been discounted using a 7% interest rate. At December
              31,
              2006 the
              unamortized bond discount amounted to $20,291.
  The
              bond
              payable at December 31, 2006 is summarized as follows:
 
 Face
                        Amount
                    
                    $
                    322,597Less:
                        Discount
                    
                    
                    (93,908
                    )Plus:
                        Amortization of discount
                    
                    
                    73,616Carrying
                        value
                    
                    $
                    302,305
 
 Under
              the
              original terms, the bond was convertible into 6,667 shares (an approximate
              2%
              ownership) of common stock in the Korea Subsidiary; however, Asia Vital
              Components has waived its right to convert the bond into common
              stock.
 
 **Note
              6 - Subsequent Event**
 
 On
              February 20, 2007, the Company issued Secured Convertible Promissory
              Notes (the
“Notes”) in an aggregate principal amount of $1,000,000 to certain purchasers
              (the “Noteholders”) pursuant to the terms of Securities Purchase Agreements
              dated as of February 20, 2007 by and between the Company and the Noteholders.
              The Notes carry an annual interest rate of 10%, with all principal
              and accrued
              interest being due and payable on June 20, 2007; provided, however,
              that upon
              the terms and subject to the conditions of the Notes, all outstanding
              principal
              and interest on the Notes will automatically convert into securities
              of the
              Company issued pursuant to a Company financing meeting certain conditions
              (a
“Qualified Financing”), if such Qualified Financing is effectuated on or prior
              to June 20, 2007. All principal and accrued interest on the Notes shall
              become
              payable prior to June 20, 2007 upon certain events of default relating
              to, among things, the bankruptcy or dissolution of the Company, the
              sale of
              substantially all of the Company’s assets and certain breaches by the Company of
              the terms and conditions of the Notes and related agreements. The obligations
              evidenced by the Notes are secured by a pledge of substantially all
              of the
              Company’s assets, including the capital stock of Celsia Technologies UK Limited
              and Celsia Technologies Korea, Inc. In connection with the issuance
              of the
              Notes, the Company’s Chief Executive Officer and Chief Financial Officer have
              agreed to transfer approximately 735,000 shares of Company common stock
              held by
              such executives to the Noteholders in the event that a Qualified Financing
              does
              not occur on or prior to June 20, 2007.


F-13


**EXHIBIT
      INDEX**




**Exhibit
                No.**
            
            **Description**2.1*
            
            Share
                Exchange Agreement dated July 8, 2005, by and among Cedar Mountain
                Distributors, Inc. and the shareholders of iCurie Lab Holdings
                Limited.2.2*
            
            Form
                of Subscription Agreement entered into between Celsia and cash purchasers
                of Series A Preferred Stock.2.3*
            
            Preferred
                Stock Purchase Agreement dated July 11, 2005, by and among Celsia
                and
                purchasers of Series A Preferred Stock exchanging promissory notes
                therefor.2.4*
            
            Share
                Transfer Agreement dated August 26, 2005, by and between iCurie Lab
                Holdings Limited and Mr. Won Gyu Moon.2.5**
            
            Form
                of Subscription Agreement entered into between Celsia and purchasers
                of
                Series B Preferred Stock.3(i).1
            
            Amended
                and Restated Articles of Incorporation of Celsia (incorporated by
                reference to Exhibit 3(i).1 to Celsia’s Quarterly Report on Form 10-QSB
                for the quarterly period ended June 30, 2005).3(i).2**
            
            Certificate
                of Designation to Amended and Restated Articles of Incorporation
                of Celsia
                Technologies, Inc.3(i).3***
            
            Amendment
                to Amended and Restated Articles of Incorporation of Celsia Technologies,
                Inc.3(ii).1
            
            Amended
                and Restated Bylaws of Celsia (Incorporated by reference to Exhibit
                3(ii).1 to Celsia’s Quarterly Report on Form 10-QSB for the quarterly
                period ended June 30, 2005).4.1*
            
            Form
                of Warrant issued to Placement Agents (for common stock, Series A
                Preferred Stock and Series B Preferred Stock).4.2*
            
            Form
                of $0.88 Warrants issued to purchasers of Series A Preferred
                Stock.4.3*
            
            Form
                of $1.10 and $1.32 Warrants issued to purchasers of Series A Preferred
                Stock and $1.50 and $3.00 Warrants issued to purchasers of Series
                B
                Preferred Stock.4.4*
            
            Warrant
                dated July 11, 2005 between Celsia and Dr. Jeong Hyun Lee,
                Ph.D.4.5*+
            
            Celsia
                2005 Stock Incentive Plan.4.6*+
            
            Form
                of Option Grant under Celsia 2005 Stock Incentive Plan.4.7*+
            
            Form
                of Restricted Stock Grant under Celsia 2005 Stock Option Incentive
                Plan.






39






10.1*
            
            Registration
                Rights Agreement dated July 11, 2005 by and between Celsia and certain
                holders of Celsia securities.10.2*
            
            Placement
                Agent Agreement dated March 17, 2005 by and among Axiom Capital Management
                Inc., Indigo Securities, LLC, and iCurie Lab Holdings Limited (the
                “Placement Agent Agreement”).10.3*
            
            Extension
                of Placement Agent Agreement dated May 20, 2005 by and among the
                parties
                to the Placement Agent Agreement.10.4*
            
            Lock-Up
                and Leak-Out Agreement dated July 11, 2005 by and among Celsia, Hakan
                Wretsell, Michael Karpheden, and Dr. Jeong Hyun Lee,
                Ph.D.10.5*+
            
            Employment
                Agreement dated July 11, 2005 by and between iCurie Lab Holdings
                Limited
                and Hakan Wretsell.10.6*+
            
            Employment
                Agreement dated July 11, 2005 by and between iCurie Lab Holdings
                Limited
                and Michael Karpheden.10.7*+
            
            Employment
                Agreement dated July 11, 2005 by and among iCurie Lab Holdings Limited,
                iCurie Lab, Inc. and Dr. Jeong Hyun Lee, Ph.D.10.8*
            
            Revenue
                Share Agreement dated May 18, 2005 by and among iCurie Lab Holdings
                Limited, Hansen Gray & Company, Inc. and CHL Investment
                Partnership.10.9*
            
            Securities
                Purchase Agreement dated July 11, 2005 by and between Celsia and
                Hansen
                Gray & Company, Inc.10.10*
            
            Note
                Cancellation Agreement dated July 11, 2005 by and between Celsia
                and Dr.
                Jeong Hyun Lee, Ph.D.10.11*
            
            Indemnification
                Agreement dated July 11, 2005 by and between Celsia and Dr. Jeong
                Hyun
                Lee, Ph.D.10.12**
            
            Registration
                Rights Agreement dated December 16, 2005 by and among Celsia, holders
                of
                Series B Preferred Stock and certain other parties.10.13**
            
            Patent
                License and Sales Exclusivity Agreement dated November 9, 2005 by
                and
                between iCurie Lab Holdings, Ltd. and Asia Vital Components Co.,
                Ltd.10.14***+
            
            Agreement
                dated August 18, 2006 by and among Celsia Technologies Korea, Inc.,
                Celsia
                Technologies UK Limited, iCurie, Inc. and Dr. Jeong Hyun Lee,
                Ph.D.14**
            
            Code
                of Ethics.21
            
            Subsidiaries
                of Celsia Technologies, Inc.24
            
            Power
                of Attorney.






40




31.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.







***** Included
      as an exhibit to the Company’s Registration Statement on Form SB-2 (SEC File No.
      333−127193), filed with the SEC on October 6, 2005.




**
      Included as an exhibit to the Company’s annual report on Form 10-KSB for the
      fiscal year ended December 31, 2005.




***
      Included as an exhibit to the Company’s quarterly report on Form 10-QSB for the
      fiscal year ended September 30, 2006.




+
      Represents a management contract or compensatory plan or
      arrangement.





41