*Table
        of Contents*







**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




x
            Quarterly
                report pursuant Section 13 or 15(d) of the Securities Exchange Act
                of
                1934


For
      the
      quarterly period ended June 30, 2008




 ̈
            Transition
                report pursuant Section 13 or 15(d) of the Securities Exchange Act
                of
                1934


For
      the
      transition period from _______ to _______.




**Commission
      file number 000-1321517**




**STRATOS
      RENEWABLES CORPORATION**


(Exact
      name of small business issuer as specified in its charter)






**Nevada**
              (State
                or other jurisdiction of incorporation ororganization)
            
            **20-1699126**
              (I.R.S.
                Employer Identification No.)**9440
                Little Santa Monica Blvd., Suite 401**
              **Beverly
                Hills, California**
              (Address
                of principal executive offices)
            
            **90210**
              (Zip
                Code)




**(310)
      402-5901**


(Registrant’s
      telephone number, including area code)




**N/A**


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




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes   ̈  No  x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
      accelerated filer  ̈   Accelerated
      filer  ̈


Non-accelerated
      filer  ̈   Smaller
      reporting company x


(Do
      not
      check if a smaller reporting company)




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes   ̈  No  x





As
      of
      August 14, 2008, the Company had 61,282,398 outstanding shares of common
      stock.




The
      aggregate market value of the voting common stock held by non-affiliates of
      the
      registrant as of August 18, 2008 was approximately $33,975,487 (computed based
      on the closing sale price of the common stock at $1.30 per share as of such
      date). Shares of common stock held by each officer and director and each person
      owning more than ten percent of the outstanding common stock have been excluded
      in that such persons may be deemed to be affiliates. This determination of
      the
      affiliate status is not necessarily a conclusive determination for other
      purposes.












*Table
        of Contents*





TABLE
      OF CONTENTS




**Part
                I – FINANCIAL INFORMATION**
            
            3Item
                1. Financial Statements
            
            3Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            
            21Item
                3. Quantitative and Qualitative Disclosures About
                Market Risk
            
            31Item
                4. Controls and Procedures
            
            31**PART
                II - OTHER INFORMATION**
            
            31Item
                1. Legal Proceedings
            
            31Item
                1A. Risk Factors
            
            31Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            31Item
                3. Defaults Upon Senior Securities
            
            33Item
                4. Submission of Matters to a Vote of Security
                Holders
            
            33Item
                5. Other Information
            
            33Item
                6. Exhibits
            
            34




2
 *Table
          of Contents*


**Part
      I – FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Consoldiated
      Balance Sheets**




**June 30,**
            
            **December 31,****2008**
            
            **2007**(unaudited)**ASSETS**CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            306,756
            
            $
            3,357,417Debt
                issuance costs
            
            
            15,205
            
            
            56,948Prepaid
                consulting expenses
            
            
            199,542
            
            
            155,020TOTAL
                CURRENT ASSETS
            
            
            521,503
            
            
            3,569,385PLANT
                AND EQUIPMENT, net
            
            
            4,948,274
            
            
            4,600,923LAND
                DEPOSITS
            
            
            321,052
            
            
            —VAT
                RECEIVABLE
            
            
            1,139,387
            
            
            899,567OTHER
                ASSETS
            
            
            103,260
            
            
            21,711TOTAL
                ASSETS
            
            $
            7,033,476
            
            $
            9,091,586**LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIESAccounts
                payable
            
            $
            1,655,760
            
            $
            173,032Accrued
                interest
            
            
            104,442
            
            
            39,248Other
                payables
            
            
            326,010
            
            
            84,648Accrued
                interest and redemption premium
            
            
            576,910
            
            
            670,150Convertible
                promissory notes, net of debt discount of $462,283 and $552,369 for
                June
                30, 2008 and December 31, 2007, respectively
            
            
            962,717
            
            
            2,495,631Accrued
                beneficial converstion liability
            
            
            415,166
            
            
            250,938Accrued
                warrant liablity
            
            
            1,648,698
            
            
            1,164,501TOTAL
                CURRENT LIABILITIES
            
            
            5,689,703
            
            
            4,878,148STOCKHOLDERS'
                EQUITYPreferred
                stock; $0.001 par value; 50,000,000 shares authorized; 8,571,429
                and
                7,142,857 shares issued and outstanding as of June 30, 2008 and December
                31, 2007, respectively
            
            
            8,572
            
            
            7,143Common
                stock; $0.001 par value; 250,000,000 shares authorized; 61,282,398
                and
                57,666,794 shares issued and outstanding as of June 30, 2008 and
                December
                31, 2007, respectively
            
            
            61,283
            
            
            57,667Additional
                paid-in capital
            
            
            8,330,274
            
            
            5,721,864Other
                comprehensive income
            
            
            76,360
            
            
            14,021Deficit
                accumulated during the development stage
            
            
            (7,132,716
            )
            
            (1,587,257
            )TOTAL
                STOCKHOLDERS' EQUITY
            
            
            1,343,773
            
            
            4,213,438TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            7,033,476
            
            $
            9,091,586





The
      accompanying notes are an integral part of these consolidated financial
      statements.




3
 *Table
          of Contents*




**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Statement
      of Operations and Other Comprehensive Loss**




**For the period**
            
            **For the period****from inception**
            
            **from inception****Three Months Ended June 30,**
            
            **Six Months Ended**
            
            **(February 27, 2007)**
            
            **(February 27, 2007)****2008**
            
            **2007**
            
            **June 30, 2008**
            
            **to June 30, 2007**
            
            **to June 30, 2008**(unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)REVENUE
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —COST
                OF REVENUE
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —GROSS
                PROFIT
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —OPERATING
                EXPENSESConsulting
                fees
            
            
            362,318
            
            
            —
            
            
            1,107,788
            
            
            —
            
            
            1,252,572General
                and administrative
            
            
            651,238
            
            
            —
            
            
            1,533,202
            
            
            —
            
            
            2,053,981Professional
                fees
            
            
            466,448
            
            
            —
            
            
            1,138,391
            
            
            —
            
            
            1,239,002Wages
            
            
            713,898
            
            
            —
            
            
            1,145,274
            
            
            —
            
            
            1,356,202TOTAL
                OPERATING EXPENSES
            
            
            2,193,902
            
            
            —
            
            
            4,924,655
            
            
            —
            
            
            5,901,757OTHER
                INCOME (EXPENSES)Amortization
                of debt discounts and debt issuance costs
            
            
            (98,941
            )
            
            —
            
            
            (708,258
            )
            
            —
            
            
            (1,317,575
            )Interest
                and financing costs
            
            
            187,522
            
            
            —
            
            
            (541,757
            )
            
            —
            
            
            (1,263,219
            )Change
                in value of beneficial conversion feature
            
            
            279,833
            
            
            —
            
            
            273,656
            
            
            —
            
            
            897,708Change
                in value of warrant liability
            
            
            277,657
            
            
            —
            
            
            486,917
            
            
            —
            
            
            582,889Other
            
            
            25,546
            
            
            —
            
            
            130,512
            
            
            —
            
            
            130,512TOTAL
                OTHER EXPENSES, net
            
            
            671,617
            
            
            —
            
            
            (619,954
            )
            
            —
            
            
            (1,230,109
            )LOSS
                FROM OPERATIONS
            
            
            (1,522,285
            )
            
            —
            
            
            (5,544,609
            )
            
            —
            
            
            (7,131,866
            )INCOME
                TAX PROVISION
            
            
            50
            
            
            —
            
            
            850
            
            
            —
            
            
            850NET
                LOSS
            
            $
            (1,522,335
            )
            $
            —
            
            $
            (5,545,459
            )
            $
            —
            
            $
            (7,132,716
            )PREFERRED
                STOCK DIVIDEND
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            471,765NET
                LOSS ATTIRUBTED TO COMMON STOCKHOLDERS
            
            
            (1,522,335
            )
            
            —
            
            
            (5,545,459
            )
            
            —
            
            
            (7,604,481
            )OTHER
                COMPREHENSIVE INCOMEForeign
                currency translation (loss) gain
            
            
            (624,472
            )
            
            —
            
            
            62,339
            
            
            —
            
            
            76,360COMPREHENSIVE
                INCOME
            
            $
            (2,146,807
            )
            $
            —
            
            $
            (5,483,120
            )
            $
            —
            
            $
            (7,528,121
            )LOSS
                PER COMMON SHARE - BASIC AND DILUTED
            
            $
            (0.03
            )
            $
            —
            
            $
            (0.09
            )
            $
            —
            
            $
            (0.15
            )WEIGHTED
                  AVERAGE COMMON EQUIVALENT SHARES OUTSTANDING - BASIC AND
                  DILUTED
            
            
            60,229,333
            
            
            —
            
            
            59,529,968
            
            
            —
            
            
            51,519,400





The
      accompanying notes are an integral part of these financial
      statements.




4
 *Table
          of Contents*




**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Statement
      of Stockholders' Equity**





**Deficit****Accumulated****Additonal**
            
            **Other**
            
            **During the**
            
            **Total****Preferred Stock**
            
            **Common Stock**
            
            **Paid-in**
            
            **Comprehensive**
            
            **Development**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Gain (loss)**
            
            **Stage**
            
            **Equity****Balance,
                February 27, 2007**
            
            
            **—**
            
            **$**
            **—**
            
            
            **—**
            
            **$**
            **—**
            
            **$**
            **—**
            
            **$**
            **—**
            
            **$**
            **—**
            
            **$**
            **—**Purchase
                of shares for cash
            
            
            
            
            
            
            
            
            45,000,000
            
            
            45,000
            
            
            (44,666
            )
            
            
            
            
            
            
            
            334Shares
                issued in connection with reverse merger transaction
            
            
            
            
            
            
            
            
            10,000,000
            
            
            10,000
            
            
            (9,789
            )
            
            
            
            
            
            
            
            211Common
                stock issued for cash
            
            
            
            
            
            
            
            
            2,666,794
            
            
            2,667
            
            
            1,442,065
            
            
            
            
            
            
            
            
            1,444,732Preferred
                stock issued for cash
            
            
            7,142,857
            
            
            7,143
            
            
            
            
            
            
            
            
            4,334,254
            
            
            
            
            
            
            
            
            4,341,397Gain
                on translation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            14,021
            
            
            
            
            
            14,021Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,587,257
            )
            
            (1,587,257
            )**Balance,
                December 31, 2007**
            
            
            **7,142,857**
            
            
            **7,143**
            
            
            **57,666,794**
            
            
            **57,667**
            
            
            **5,721,864**
            
            
            **14,021**
            
            
            **(1,587,257**
            **)**
            
            **4,213,438**Issuance
                of common stock and warrants for cash
            
            
            —
            
            
            —
            
            
            2,267,782
            
            
            2,268
            
            
            1,129,217
            
            
            —
            
            
            —
            
            
            1,131,485Cashless
                        exercise of warrants (71,429 warrants exercised for 38,360
                        shares)
            
            
            —
            
            
            —
            
            
            38,360
            
            
            38
            
            
            (38
            )
            
            —
            
            
            —
            
            
            —Issuance
                of preferred stock and warrants for cash
            
            
            1,428,572
            
            
            1,429
            
            
            —
            
            
            —
            
            
            611,405
            
            
            —
            
            
            —
            
            
            612,834Conversion
                of convertible notes to common stock
            
            
            —
            
            
            —
            
            
            1,166,605
            
            
            1,167
            
            
            815,457
            
            
            —
            
            
            —
            
            
            816,624Issuance
                of common stock and warrants cash
            
            
            —
            
            
            —
            
            
            142,857
            
            
            143
            
            
            52,369
            
            
            —
            
            
            —
            
            
            52,512Gain
                on translation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            62,339
            
            
            —
            
            
            62,339Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,545,459
            )
            
            (5,545,459
            )**Balance,
                June 30, 2008 (unaudited)**
            
            
            **8,571,429**
            
            **$**
            **8,572**
            
            
            **61,282,398**
            
            **$**
            **61,283**
            
            **$**
            **8,330,274**
            
            **$**
            **76,360**
            
            **$**
            **(7,132,716**
            **)**
            **$**
            **1,343,773**





The
      accompanying notes are an integral part of these financial
      statements.




5
 *Table
          of Contents*




**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Statement
      of Cash Flows**




**For the period**
            
            **For the period****from inception**
            
            **from inception****Six Months Ended**
            
            **(February 27, 2007)**
            
            **(February 27, 2007)****June 30, 2008**
            
            **to June 30, 2007**
            
            **to June 30, 2008**(unaudited)
            
            (unaudited)
            
            (unaudited)CASH
                FLOW FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (5,545,459
            )
            $
            —
            
            $
            (7,132,716
            )Adjustment
                to reconcile net loss to net cash used in operating
                activities:Amortization
                of debt discounts and debt issuance costs
            
            
            708,258
            
            
            —
            
            
            1,317,575Depreciation
                and amortization
            
            
            11,872
            
            
            —
            
            
            13,966Change
                in value of beneficial conversion feature
            
            
            (273,656
            )
            
            —
            
            
            (897,708
            )Change
                in value of warrant liability
            
            
            (486,917
            )
            
            —
            
            
            (582,889
            )Amortization
                of prepaid consulting
            
            
            171,583
            
            
            —
            
            
            223,255Changes
                in operating assets and liabilities:Other
                assets
            
            
            (80,921
            )
            
            —
            
            
            (101,789
            )Accounts
                payable
            
            
            1,358,937
            
            
            —
            
            
            1,529,556Interest
                payable
            
            
            132,644
            
            
            —
            
            
            171,892Other
                payables
            
            
            231,192
            
            
            —
            
            
            312,554Accrued
                interest and redemption premium
            
            
            417,604
            
            
            —
            
            
            1,087,754Net
                cash used in operating activities
            
            
            (3,354,863
            )
            
            —
            
            
            (4,058,550
            )CASH
                FLOW FROM INVESTING ACTIVITIES:Purchases
                of plant and equipment
            
            
            (630,875
            )
            
            —
            
            
            (5,235,513
            )VAT
                receivable
            
            
            (229,570
            )
            
            —
            
            
            (1,094,227
            )Cash
                acquired with acquisition
            
            
            —
            
            
            —
            
            
            211Net
                cash used in investing activities
            
            
            (860,445
            )
            
            —
            
            
            (6,329,529
            )CASH
                FLOW FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock
            
            
            1,685,794
            
            
            —
            
            
            3,552,884Proceeds
                from sale of preferred stock
            
            
            1,000,000
            
            
            —
            
            
            6,000,000Payment
                of offerings costs associated with common and preferred
                stock
            
            
            (145,000
            )
            
            —
            
            
            (401,593
            )Proceeds
                from issuance of convertible debenture
            
            
            1,350,000
            
            
            —
            
            
            4,398,000Payment
                of offerings costs associated with convertible debenture
            
            
            (17,500
            )
            
            —
            
            
            (131,397
            )Payment
                of convertible debt
            
            
            (2,723,000
            )
            
            —
            
            
            (2,723,000
            )Net
                cash provided by financing activities
            
            
            1,150,294
            
            
            —
            
            
            10,694,894Effect
                of exchange rate changes on cash and cash equivalents
            
            
            14,353
            
            
            —
            
            
            (59
            )NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (3,050,661
            )
            
            —
            
            
            306,756CASH
                AND CASH EQUIVALENTS, Beginning of period
            
            
            3,357,417
            
            
            —
            
            
            —CASH
                AND CASH EQUIVALENTS, End of period
            
            $
            306,756
            
            $
            —
            
            $
            306,756SUPPLEMENTAL
                DISCLOSURES OF CASH FLOWS INFORMATION:Interest
                paid
            
            $
            —
            
            $
            —
            
            $
            —Income
                taxes paid
            
            $
            850
            
            $
            —
            
            $
            850SUPPLEMENTAL
                NON-CASH INVESTING AND FINANCING ACTIVITIES:Costs
                associated with acquisition:Beneficial
                conversion feature associated with convertible debenture
            
            $
            —
            
            $
            —
            
            $
            874,990Issuance
                of warrants in acquisition
            
            $
            —
            
            $
            —
            
            $
            229,748Acquisition
                of shell company
            
            $
            —
            
            $
            —
            
            $
            211Issuance
                of common stock for conversion of principal and interest
            
            $
            816,624
            
            $
            —
            
            $
            816,624





The
      accompanying notes are an integral part of these financial
      statements.


6
 *Table
          of Contents*




**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





**Note
      1 - Organization and Basis of Presentation**




The
      unaudited consolidated financial statements have been prepared by Stratos
      Renewables Corporation, formerly New Design Cabinets, Inc. (the “Company”),
      pursuant to the rules and regulations of the Securities Exchange Commission.
      The
      information furnished herein reflects all adjustments (consisting of normal
      recurring accruals and adjustments) which are, in the opinion of management,
      necessary to fairly present the operating results for the respective periods.
      Certain information and footnote disclosures normally present in annual
      consolidated financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been omitted
      pursuant to such rules and regulations. These consolidated financial statements
      should be read in conjunction with the audited consolidated financial statements
      and footnotes included in the Company’s Annual Report on Form 10-KSB. The
      results for the six months ended June 30, 2008 are not necessarily indicative
      of
      the results to be expected for the full year ending December 31,
      2008.




Organization
      and line of business




The
      Company was incorporated in the State of Nevada on September 29, 2004. Stratos
      del Peru S.A.C. was incorporated in Lima, Peru, on February 27, 2007 with the
      name of Estratosfera del Perú S.A.C. On July 11, 2007, the general meeting of
      shareholders agreed to change the Company’s name to its current one, Stratos del
      Peru S.A.C. (“Stratos del Peru”), which was officially registered with the Tax
      Administration on October 11, 2007.




On
      November 14, 2007, Stratos del Peru entered into a share exchange agreement
      (“Share Exchange”) with the Company. Pursuant to the agreement, the Company
      issued 45,000,000 shares of its common stock to the former security holders
      of
      Stratos del Peru in exchange for 999, or 99.9%, of the issued and outstanding
      shares of common stock of Stratos del Peru. Upon closing the Share Exchange,
      the
      Company had 55,000,000 shares of common stock issued and outstanding as a result
      of the issuance of 45,000,000 shares of common stock to the former security
      holders of Stratos del Peru. Effective November 20, 2007, the Company amended
      its articles of incorporation to change the name of the corporation from “New
      Design Cabinets, Inc.” to “Stratos Renewables Corporation.”




The
      Share
      Exchange is deemed to be a reverse acquisition under the purchase method of
      accounting. As the acquired entity, Stratos del Peru is regarded as the
      predecessor entity as of November 14, 2007. Accordingly, the merger of the
      Company and Stratos del Peru was recorded as a recapitalization of Stratos
      del
      Peru, with Stratos del Peru being treated as the continuing entity and the
      management and board of directors of Stratos del Peru were appointed as officers
      and directors of the Company. The accompanying consolidated statement of
      operations presents the amounts as if the acquisition occurred on February
      27,
      2007 (date of inception for Stratos del Peru).




Additionally,
      in connection with the reverse merger transaction, the Company conducted a
      private placement of common stock, preferred stock and convertible promissory
      notes totaling approximately $10 million.




The
      Company’s business objectives are the purchase, sale, production, distribution,
      marketing, transport, warehousing, mixture, exports and imports of all kinds
      of
      products derived from hydrocarbons and bio-fuels, being solids, liquids or
      gases. The Company is currently a development stage company under the provisions
      of Statement of Financial Accounting Standards (“SFAS”) No. 7 as it has not
      commenced generating revenue. The Company’s offices and administrative
      headquarters are located in Lima, Peru.




Basis
      of presentation




The
      accompanying consolidated financial statements are presented in US dollars
      and
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America. The accompanying consolidated financial
      statements include the accounts of Stratos Renewables Corporation and its 99.99%
      owned subsidiaries. All intercompany accounts and transactions have been
      eliminated within the consolidation.


7
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





Minority
      interest




Minority
      interest has not been presented on the consolidated balance sheet due to
      accumulated losses which exceed the minority stockholders equity. In accordance
      with Accounting Principles Board Opinion No. 18, the minority interest has
      been
      written down to zero on the accompanying balance sheet.




Foreign
      currency translation




The
      reporting currency of the Company is the US dollar. The Company uses its local
      currency, Peruvian Nuevos Soles (PEN) as its functional currency. Such financial
      statements were translated into U.S. Dollars (USD) in accordance with Statement
      of Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency
      Translation,” with the PEN as the functional currency. Assets and liabilities
      are translated using the exchange rates prevailing at the balance sheet date.
      Translation adjustments resulting from this process are included in accumulated
      other comprehensive income in the consolidated statement of stockholders’
equity. Transaction gains and losses that arise from exchange rate fluctuations
      on transactions denominated in a currency other than the functional currency
      are
      included in the results of operations as incurred.




The
      Company recorded translation gains of $62,339 and $14,021 for the six months
      ended June 30, 2008 and for the period from February 27, 2007 (date of
      inception) through December 31, 2007, respectively. Translation adjustments
      included in the balance sheet were $76,360 and $14,021 at June 30, 2008 and
      December 31, 2007, respectively. Asset and liability amounts at June 30, 2008
      and December 31, 2007 were translated at 2.967 and 2.997 PEN to $1.00 USD,
      respectively. Equity accounts were stated at their historical rate. The average
      translation rate applied to the statement of operations for the six months
      ended
      June 30, 2008 was 2.982 PEN to $1.00 USD. Cash flows are also translated at
      average translation rates for the period; therefore, amounts reported on the
      statement of cash flows will not necessarily agree with changes in the
      corresponding balances on the balance sheet.




**Note
      2 - Summary of Significant Accounting Policies**




Use
      of
      estimates




The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenue and
      expenses during the reporting periods. Actual results could differ from these
      estimates.




Cash
      and cash equivalents




For
      purposes of the statements of cash flows, the Company defines cash equivalents
      as all highly liquid debt instruments purchased with a maturity of three months
      or less.




Concentration
      of credit risk




Cash
      includes cash on hand and demand deposits in accounts maintained within Peru
      and
      the United States. Cash is a financial instrument that subjects the Company
      to
      concentration of credit risk. The Company maintains balances at financial
      institutions which, from time to time, may exceed Federal Deposit Insurance
      Corporation insured limits for the banks located in the United States. Balances
      at financial institutions within Peru are not covered by insurance. As of June
      30, 2008 and December 31, 2007, the Company had deposits in excess of federally
      insured limits totaling $245,331 and $3,403,946, respectively. The Company
      has
      not experienced any losses in such accounts and believes it is not exposed
      to
      any significant risks on its cash in bank accounts.




The
      Company will extend credit based on an evaluation of the customer’s financial
      condition, generally without collateral. Exposure to losses on receivables
      is
      principally dependent on each customer’s financial condition. The Company will
      monitor its exposure for credit losses and will maintain allowances for
      anticipated losses, as required.


8
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





VAT
      receivable




At
      June
      30, 2008 and December 31, 2007, the Company recognized a VAT (value added tax)
      receivable of $1,139,387 and $899,567, respectively, in Peru. VAT is charged
      at
      a standard rate of 19% and the Company obtains income tax credits for VAT paid
      in connection with the purchase of capital equipment and other goods and
      services employed in its operations. The Company is entitled to use the credits
      against its Peruvian income tax liability or to receive a refund credit against
      VAT payable or sales. As the Company does not anticipate incurring either a
      Peruvian tax or a VAT liability during the next fiscal year, the receivable
      was
      classified as a long-term asset.




Plant
      and equipment




Plant
      and
      equipment are stated at historical cost and are depreciated using the
      straight-line method over their estimated useful lives ranging from 4 to 10
      years. The useful life and depreciation method are reviewed periodically to
      ensure that the depreciation method and period are consistent with the
      anticipated pattern of future economic benefits. Expenditures for maintenance
      and repairs are charged to operations as incurred while renewals and betterments
      are capitalized. Gains and losses on disposals are included in the results
      of
      operations.




Impairment
      of long-lived assets




The
      Company follows the guidance of Statement of Financial Accounting Standards
      No.
      144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets. The Company periodically evaluates the carrying
      value of long-lived assets to be held and used in accordance with SFAS 144.
      SFAS
      144 requires impairment losses to be recorded on long-lived assets used in
      operations when indicators of impairment are present and the undiscounted cash
      flows estimated to be generated by those assets are less than the assets’
carrying amounts. In that event, a loss is recognized based on the amount by
      which the carrying amount exceeds the fair market value of the long-lived
      assets. Loss on long-lived assets to be disposed of is determined in a similar
      manner, except that fair market values are reduced for the cost of disposal.
      Based on its review, the Company believes that, as of June 30, 2008, there
      were
      no significant impairments of its long-lived assets.




Income
      taxes




The
      Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
      for Income Taxes.” Deferred taxes are provided on the liability method whereby
      deferred tax assets are recognized for deductible temporary differences, and
      deferred tax liabilities are recognized for taxable temporary differences.
      Temporary differences are the differences between the reported amounts of assets
      and liabilities and their tax bases. Deferred tax assets are reduced by a
      valuation allowance when, in the opinion of management, it is more likely than
      not that some portion or all of the deferred tax assets will not be
      realized. Deferred tax assets and liabilities are adjusted for the effects
      of
      changes in tax laws and rates on the date of enactment. The income tax rate
      applicable to Peruvian companies is 30%. If the Company distributes its earnings
      fully or partially, it shall apply an additional rate of 4.1% on the distributed
      amount, which will be borne by the shareholders, as long as they are individuals
      or companies non-domiciled in Peru. The 4.1% tax will be borne by the Company
      and will apply on any amount or payment in kind subject to income tax that
      may
      represent an indirect disposition not subject to subsequent tax control,
      including amounts debited to expenses and undeclared revenues. As from January
      1, 2007 the tax payer must liquidate and pay the 4.1% tax directly together
      with
      its monthly obligations without the requirement of a previous tax audit by
      the
      Tax Administration.




The
      Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
      Taxes”, during 2007. A tax position is recognized as a benefit only if it is
“more likely than not” that the tax position would be sustained in a tax
      examination, with a tax examination being presumed to occur. The amount
      recognized is the largest amount of tax benefit that is greater than 50% likely
      of being realized on examination. For tax positions not meeting the “more likely
      than not” test, no tax benefit is recorded. The adoption had no affect on the
      Company’s financial statements.


9
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





Basic
      and Diluted Losses per share




The
      Company reports earnings per share in accordance with SFAS No. 128, “Earnings
      per Share.” Basic earnings per share is computed by dividing the net income by
      the weighted average number of common shares available. Diluted earnings per
      share is computed similar to basic earnings per share except that the
      denominator is increased to include the number of additional common shares
      that
      would have been outstanding if the potential common shares had been issued
      and
      if the additional common shares were dilutive. All preferred shares, warrants,
      and options were excluded from the diluted loss per share due to the
      anti-dilutive effect.




Accrued
      warrant liability and accrued beneficial conversion feature




Pursuant
      to EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company’s Own Stock”, the Company has recorded the
      fair value of all outstanding warrants as an accrued warrant liability since
      the
      Company’s convertible promissory notes are convertible into an undetermined
      number of shares of common stock. As a result, the Company may not have enough
      authorized shares to satisfy the exercise of its outstanding warrants. In
      addition, the fair value of the beneficial conversion feature associated with
      the convertible promissory notes is recorded as an accrued beneficial conversion
      liability




Fair
      value of financial instruments




On
      January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements.
      SFAS
      No. 157 defines fair value, establishes a three-level valuation hierarchy for
      disclosures of fair value measurement and enhances disclosures requirements
      for
      fair value measures. The carrying amounts reported in the balance sheets for
      receivables and current liabilities each qualify as financial instruments and
      are a reasonable estimate of fair value because of the short period of time
      between the origination of such instruments and their expected realization
      and
      their current market rate of interest. The three levels are defined as
      follow:




·
            Level
                1 inputs to the valuation methodology are quoted prices (unadjusted)
                for
                identical assets or liabilities in active
                markets.




·
            Level
                2 inputs to the valuation methodology include quoted prices for similar
                assets and liabilities in active markets, and inputs that are observable
                for the asset or liability, either directly or indirectly, for
                substantially the full term of the financial
                instrument.





·
            Level
                3 inputs to the valuation methodology are unobservable and significant
                to
                the fair value measurement.





The
      Company analyzes all financial instruments with features of both liabilities
      and
      equity under SFAS 150, “Accounting for Certain Financial Instruments with
      Characteristics of Both Liabilities and Equity,” SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities” and EITF 00-19, “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock.”




The
      Company’s beneficial conversion liability is carried at fair value totaling
      $415,166 and $250,938, as of June 30, 2008 and December 31, 2007, respectively.
      The Company carries its warrants at fair value totaling $1,648,698 and
      $1,164,501 as of June 30, 2008 and December 31, 2007, respectively. The Company
      used Level 2 inputs for its valuation methodology for the beneficial conversion
      liability, and warrant liability, and their fair values are determined by using
      the Black Scholes option pricing model based on various
      assumptions.




10
 *Table
          of Contents*


**Stratos
        Renewables Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**




Fair Value
              As of
              June 30, 2008
            
            Fair Value Measurements at June 30, 2008
              Using Fair Value HierarchyLiabilities
            
            
            
            Level 1
            
            Level
                2
            
            Level
                3Beneficial
                conversion liability
            
            $
            415,166
            
            
            
            
            $
            415,166Warrant
                liability
            
            $
            1,648,698
            
            
            
            
            $
            1,648,698




The
      Company recognized a gain of $273,656 and $279,833, on the beneficial conversion
      liability for the six and three months ended June 30, 2008, respectively. The
      Company recognized a gain of $486,917 and $277,657 on the warrant liability
      for
      the six and three months ended June 30, 2008, respectively.




The
      Company did not identify any other non-recurring assets and liabilities that
      are
      required to be presented on the balance sheet at fair value in accordance with
      SFAS No. 157.




Recently
      issued accounting pronouncements




In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
      enterprise accounts for the acquisition of a business. SFAS No. 141
      (Revised 2007) requires an acquiring entity to recognize all the assets acquired
      and liabilities assumed in a transaction at the acquisition-date fair value,
      with limited exceptions, and applies to a wider range of transactions or events.
      SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
      after December 15, 2008 and early adoption and retrospective application is
      prohibited. The Company believes adopting SFAS No. 141R will significantly
      impact its financial statements for any business combination completed after
      December 31, 2008.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which is an amendment of Accounting Research
      Bulletin (“ARB”) No. 51.  This statement clarifies that a
      noncontrolling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements.  This statement changes the way the consolidated
      income statement is presented, thus requiring consolidated net income to be
      reported at amounts that include the amounts attributable to both parent and
      the
      noncontrolling interest.  This statement is effective for the fiscal
      years, and interim periods within those fiscal years, beginning on or after
      December 15, 2008.  Based on current conditions, the Company does not
      expect the adoption of SFAS 160 to have a significant impact on its results
      of
      operations or financial position.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective as of the beginning
      of an entity’s first fiscal year that begins after November 15, 2007. The
      Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect
      the option to measure the fair value of eligible financial assets and
      liabilities.




In
      June
      2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
      Nonrefundable Advance Payments for Goods or Services Received for use in Future
      Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
      nonrefundable advance payments for goods or services that used or rendered
      for
      research and development activities should be expensed when the advance payment
      is made or when the research and development activity has been performed.
      Management is currently evaluating the effect of this pronouncement on financial
      statements.




In
      June
      2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether
      an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF
      No. 07-5”). This Issue is effective for financial statements issued for fiscal
      years beginning after December 15, 2008, and interim periods within those fiscal
      years. Early application is not permitted. Paragraph 11(a) of Statement of
      Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging
      Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the
      definition of a derivative but is both (a) indexed to the Company’s own
      stock and (b) classified in stockholders’ equity in the statement of
      financial position would not be considered a derivative financial instrument.
      EITF No.07-5 provides a new two-step model to be applied in determining whether
      a financial instrument or an embedded feature is indexed to an issuer’s own
      stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception.
      The Company believes adopting this statement will have a material impact on
      the
      financial statements because among other things, any option or warrant
      previously issued and all new issuances denominated in US dollars will be
      required to be carried as a liability and marked to market each reporting
      period.


11
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





In
      April
      2008, the FASB issued 142-3 “Determination of the useful life of Intangible
      Assets”, which amends the factors a company should consider when developing
      renewal assumptions used to determine the useful life of an intangible asset
      under SFAS142. This Issue is effective for financial statements issued for
      fiscal years beginning after December 15, 2008, and interim periods within
      those
      fiscal years. SFAS 142 requires companies to consider whether renewal can be
      completed without substantial cost or material modification of the existing
      terms and conditions associated with the asset. FSP 142-3 replaces the previous
      useful life criteria with a new requirement—that an entity consider its own
      historical experience in renewing similar arrangements. If historical experience
      does not exist then the Company would consider market participant assumptions
      regarding renewal including 1) highest and best use of the asset by a market
      participant, and 2) adjustments for other entity-specific factors included
      in
      SFAS 142. The Company is currently evaluating the impact that adopting SFAS
      No.142-3 will have on its financial statements





**Note
      3 - Development Stage Company and Going Concern**




The
      Company is a new development stage company and is subject to risks and
      uncertainties that include: new product development, actions of competitors,
      reliance on the knowledge and skills of its employees to be able to service
      customers, and availability of sufficient capital and a limited operating
      history. Accordingly, the Company presents its consolidated financial statements
      in accordance with the accounting principles generally accepted in the United
      States of America that apply in establishing new operating enterprises. As
      a
      development stage enterprise, the Company discloses the deficit accumulated
      during the development stage and the consolidated accumulated statement of
      operations and cash flows from inception of the development stage to the date
      on
      the current balance sheet. Contingencies exist with respect to this matter,
      the
      ultimate resolution of which cannot presently be determined.




The
      accompanying consolidated financial statements have been prepared in conformity
      with generally accepted accounting principles in the United States of America,
      which contemplates continuation of the Company as a going concern. However,
      the
      Company has not generated any operating revenue and has working capital
      deficits, which raises substantial doubt about its ability to continue as a
      going concern.




In
      view
      of these matters, realization of certain of the assets in the accompanying
      balance sheet is dependent upon continued operations of the Company, which
      in
      turn is dependent upon the Company’s ability to meet its financial requirements,
      raise additional capital, and the success of its future operations.




In
      the
      six months ended June 30, 2008, management raised approximately $4 million
      in
      debt and equity capital and is attempting to raise additional debt and equity
      capital. Management believes that this plan provides an opportunity for the
      Company to continue as a going concern.




**Note
      4 - Plant and Equipment**




Plant
      and
      equipment consist of the following:


12
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**


**Description**
              
              June 30, 2008
              
              December 31, 2007Sugar
                  plant
              
              $
              4,598,264
              
              $
              4,552,247Buildings
                  and leasehold improvements
              
              
              62,284
              
              
              —Vehicles
              
              
              2,441
              
              
              2,416Computer
                  equipment
              
              
              111,627
              
              
              48,439Construction
                  in progress
              
              
              158,503
              
              
              —Other
              
              
              29,287
              
              
              —4,962,406
              
              
              4,603,102Accumulated
                  depreciation
              
              
              (14,132
              )
              
              (2,179
              )Plant
                  and equipment, net
              
              $
              4,948,274
              
              $
              4,600,923


Depreciation
      expense amounted to $11,872 and $7,945 for the six and three months ended June
      30, 2008, respectively.




During
      2008, the Company had construction in progress related to the construction
      of
      the Company’s industrial lot and sugar mill and compost plant layout that will
      be completed during January 2009 and November 2008, respectively. Total
      estimated project completion costs for these projects amount to
      $7,000,000.





Due
      to
      significant modifications to the sugar plant, the plant is currently not in
      service and is not being depreciated.





During
      the six month period ended June 30, 2008, the Company made initial payments
      of
      $321,052 to unaffiliated third parties towards the acquisition of rights to
      both
      agricultural and industrial land.




**Note
      5 - Stockholders’ Equity**




*Common
      Stock Private Placement*




Immediately
      following the above mentioned Share Exchange under Note 1, the Company entered
      into a private placement (“Private Placement”) and issued an aggregate of
      2,666,794 shares of common stock and warrants to purchase an aggregate of
      1,333,396 shares of common stock. The issuance of 2,666,794 shares of common
      stock has been included as a component in the accompanying consolidated
      Statement of Stockholders’ Equity. The aggregate gross proceeds raised by the
      Company in connection with the Private Placement were $1,867,090. Each share
      of
      common stock was sold to investors at $0.70 per share. The fair value of the
      warrants amounted to $352,268. The fair value was computed using the
      Black-Scholes model under the following assumptions: (1) expected life of 1
      year; (2) volatility of 100%; and (3) risk free interest of 5.0%. The warrants
      expire after five (5) years from the date of issuance and are exercisable at
      $0.75 per share, subject to adjustment in certain circumstances.




*Series
      A Preferred Stock Private Placement*




Immediately
      following the above mentioned Share Exchange, the Company completed a Series
      A
      Private Placement (“Series A Private Placement”) and issued to MA Green
      7,142,857 shares of Series A Preferred Stock and warrants to purchase 1,785,714
      shares of common stock. The issuance of 7,142,857 shares of Preferred Stock
      has
      been included as a component in the accompanying Statement of Stockholders’
Equity. The gross proceeds raised by the Company in connection with the Series
      A
      Private Placement were $5,000,000. Each share of Series A Preferred Stock was
      sold at $0.70 per share. The warrants expire five (5) years from the date of
      issuance and are exercisable at $0.75 per share, subject to adjustment in
      certain circumstances. The Company’s Chairman of the Board of Directors, Steven
      Magami, is the manager of MA Green.


13
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





The
      fair
      value of the 1,785,714 warrants issued with the Series A Private Placement
      was
      $471,765. The fair value was computed using the Black-Scholes model under the
      following assumptions: (1) expected life of 1 year; (2) volatility of 100%,
      (3)
      risk free interest of 5.0% and (4) dividend rate of 0%. In addition, since
      this
      convertible preferred stock is convertible into shares of common stock at a
      one
      to one ratio an embedded beneficial conversion feature was recorded as a
      discount to additional paid in capital in accordance with Emerging Issues Task
      Force No. 00-27, “Application of Issue No. 98-5 to Certain Convertible
      Instruments.” The intrinsic value of the beneficial conversion feature was
      $471,765. The beneficial conversion feature is considered a deemed dividend,
      but
      the Company has an accumulated deficit; therefore, the entry is not recorded
      as
      the accounting entry would be both a debit and a credit to additional paid
      in
      capital.





*Grey
      K Private Placement*





On
      April
      18, 2008, the Company completed a private placement of the Company’s securities
      (the “Grey K Private Placement”) to three accredited investors, Grey K LP, a
      Delaware limited partnership, Grey K Offshore Fund, Ltd., a Cayman Island exempt
      company, and Grey K Offshore Leveraged Fund, Ltd., a Cayman Island exempt
      company (collectively, “Grey K”), consisting of the sale of an aggregate of
      1,428,572 shares of Series A preferred stock at a purchase price of $0.70 per
      share, which are convertible into shares of the Company’s common stock. Grey K
      also received warrants to purchase up to an aggregate of 357,143 shares of
      common stock. The warrants have a five-year term and an exercise price of $0.75
      per share. The purchasers were also granted certain demand and piggyback rights
      with respect to the shares of common stock underlying the Series A preferred
      stock and the warrants. In connection with the Grey K Private Placement, the
      Company received gross proceeds of $1,000,000, less a funding fee paid to Grey
      K
      equal to 2% of the purchase price paid and other expenses. The Company believes
      the securities were issued in reliance from exemptions from registration
      pursuant to Section 4(2) or Regulation D under the Securities Act.





The
      fair
      value of the 357,143 warrants issued with the Grey K Private Placement was
      $142,166. The fair value was computed using the Black-Scholes model under the
      following assumptions: (1) expected life of 2.5 years; (2) volatility of 100%,
      (3) risk free interest of 2.35% and (4) dividend rate of 0%. In addition, since
      this convertible preferred stock is convertible into shares of common stock
      at a
      one to one ratio an embedded beneficial conversion feature was recorded as
      a
      discount to additional paid in capital in accordance with Emerging Issues Task
      Force No. 00-27, “Application of Issue No. 98-5 to Certain Convertible
      Instruments.” The intrinsic value of the beneficial conversion feature was
      $145,854. The beneficial conversion feature is considered a deemed dividend,
      but
      the Company has an accumulated deficit; therefore, the entry is not recorded
      as
      the accounting entry would be both a debit and a credit to additional paid
      in
      capital.





*Bridge
      Financing*




Immediately
      following the above mentioned Share Exchange, the Company entered into a Note
      and Warrant Purchase Agreement (“Bridge Financing”) with investors and issued an
      aggregate of $3,048,000 in convertible promissory notes and warrants to purchase
      an aggregate of 870,858 shares of common stock. The convertible promissory
      notes
      issued in connection with the Bridge Financing bear interest at 10% per annum.
      The bridge note holders received one (1) warrant to purchase one (1) share
      of
      common stock, at an exercise price of $0.75 per share, for every $3.50 invested
      in the Company in connection with the Bridge Financing. The aggregate gross
      proceeds raised by the Company in connection with the Bridge Financing were
      approximately $3.0 million. The warrants will expire three (3) years from the
      closing date of Bridge Financing. Total interest and premium expense for the
      period ended June 30, 2008 amounted to $475,166.




Further,
      upon the earlier to occur of (i) three (3) months from the closing date of
      the
      Bridge Financing (the “Maturity Date”), and (ii) the consummation a PIPE
      financing with institutional investors for at least $25 million, net of offering
      expenses (the “PIPE”), the bridge note holders are entitled to repayment (in
      cash or in common stock) equal to 25% to 30% in excess of the principal and
      accrued interest then due and outstanding under the terms of the notes (the
      “Repayment Amount”). The bridge note holders entitled to a Repayment Amount of
      25% in excess of the principal and accrued interest due under the terms of
      the
      notes will receive a 5% origination fee as consideration for making loans to
      the
      Company. The bridge note holders entitled to a Repayment Amount of 30% in excess
      of the principal and accrued interest due under the terms of the notes will
      not
      be entitled to an origination fee. Upon the earlier to occur of the Maturity
      Date or the consummation of the PIPE, the bridge note holders will have the
      right to convert (in whole or in part) 110% of the Repayment Amount into shares
      of common stock of the Company at the fair market value of each share of common
      stock, or at the price per share of common stock sold to investors in the PIPE,
      as the case may be.


14
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**




Per
      EITF
      00-19, paragraph 4, these convertible promissory notes do not meet the
      definition of a “conventional convertible debt instrument” since the debt is not
      convertible into a fixed number of shares.  The debt can be converted into
      common stock at a conversions price that is a percentage of the market price;
      therefore the number of shares that could be required to be delivered upon
      “net-share settlement” is essentially indeterminate.  Therefore, the
      convertible promissory notes are considered “non-conventional,” which means that
      the detachable warrants and the conversion feature must be bifurcated from
      the
      debt and shown as a separate derivative liability.




A
      portion
      of the $3,048,000 proceeds from the convertible promissory notes were allocated
      to the detachable warrants. The fair value of the 870,858 warrants issued in
      connection with this transaction was $229,748. The fair value was determined
      using the Black-Scholes option pricing model and the following
      assumptions:  term of 1 year, a risk free interest rate
      of 5.0%, a dividend yield of 0% and volatility of 100%. In addition
      the fair value of the beneficial conversion feature associated with the
      convertible promissory notes was $874,990. Both the value assigned to the
      warrants ($229,748) and the beneficial conversion feature ($874,990) is recorded
      as debt discounts and will be amortized over the terms of the convertible
      promissory notes. For the period ended June 30, 2008, the Company amortized
      $552,369 of the aforesaid debt discounts as other expense in the accompanying
      consolidated statements of operations. For
      the
      period ended June 30, 2008, the Company issued 357,143 shares for the principal
      conversion of $250,000, issued 703,407 shares for the conversion of interest
      and
      premium of $492,385, and issued 106,055 shares for the 10% share conversion
      premium of $74,239. The interest and premium that is outstanding at June 30,
      2008 related to these notes is $620,135.





*Common
      Stock*




On
      March
      7, 2008, the Company closed on $1,587,447 of its $10 million private placement.
      Pursuant to this financing, the Company issued an aggregate of 2,267,782 shares
      of common stock at a purchase price of $0.70 per share and warrants to purchase
      an aggregate of 1,133,888 shares of common stock with an exercise price of
      $0.75
      per share. The fair value of the warrants amounted to $294,360. The fair value
      was computed using the Black-Scholes model under the following assumptions:
      (1)
      expected life of 1 year; (2) volatility of 100%; and (3) risk free interest
      of
      3.0%. The warrants expire after five (5) years from the date of issuance and
      are
      exercisable at $0.75 per share, subject to adjustment in certain
      circumstances.





On
      June
      26, 2008, the Company closed on an additional $100,000 of its $10 million
      private placement, pursuant to which it issued an aggregate of 142,857 shares
      of
      common stock at a purchase price of $0.70 per share and warrants to purchase
      an
      aggregate of 71,428 shares of common stock with an exercise price of $0.75
      per
      share. The fair value of the warrants amounted to $37,488. The fair value was
      computed using the Black-Scholes model under the following assumptions: (1)
      expected life of 2.5 years; (2) volatility of 100%; and (3) risk free interest
      of 3.44%. The warrants expire after five (5) years from the date of issuance
      and
      are exercisable at $0.75 per share, subject to adjustment in certain
      circumstances.


15
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**


*Warrants*
  The
        following is a summary of the warrant activity:
  Outstanding
                  at December 31, 2007
              
              
              4,739,968Granted
              
              
              2,380,106Forfeited
              
              
              —Exercised
              
              
              (71,429
              )Outstanding
                  at June 30, 2008 (unaudited)
              
              
              7,048,645





Following
      is a summary of the status of warrants outstanding at June 30,
      2008:





Outstanding Warrants
            
            Exercisable WarrantsAverage
            
            
            
            Average
            
            
            
            AverageExercise
            
            
            
            Remaining
            
            
            
            RemainingPrice
            
            Warrants
            
            Contractual Life
            
            Warrants
            
            Contractual Life$
            0.70
            
            
            750,000
            
            
            4.39
            
            
            541,667
            
            
            4.39$
            0.75
            
            
            5,980,998
            
            
            4.23
            
            
            5,605,998
            
            
            4.20$
            0.85
            
            
            317,647
            
            
            4.92
            
            
            317,647
            
            
            4.92Total
            
            
            7,048,645
            
            
            
            
            
            6,465,312





**Note
      6 - Convertible Promissory Notes**




On
      November 14, 2007, the Company entered into a Note and Warrant Purchase
      Agreement (“Bridge Financing”) with investors and issued an aggregate of
      $3,048,000 in convertible promissory notes and warrants to purchase an aggregate
      of 870,858 shares of common stock. The convertible promissory notes issued
      in
      connection with the Bridge Financing bear interest at 10% per annum. The bridge
      note holders received one (1) warrant to purchase one (1) share of common stock,
      at an exercise price of $0.75 per share, for every $3.50 invested in the Company
      in connection with the Bridge Financing. The aggregate gross proceeds raised
      by
      the Company in connection with the Bridge Financing were approximately $3.0
      million. On March 26, 2008, the Company entered into an Amendment to Convertible
      Promissory Note (“Amendment”) with investors related to the $3,048,000
      Convertible Promissory Notes. Pursuant to the Amendment, the maturity dates
      of
      the Convertible Promissory Notes were extended from February 14, 2008 to April
      30, 2008.





During
      2008, the Company made principal re-payments in the total amount of $2,723,000
      towards the $3,048,000 convertible promissory notes. For the period ended June
      30, 2008, the Company issued 357,143 shares of common stock in the Company
      for
      the principal conversion of $250,000, issued 703,407 shares of common stock
      in
      the Company for the conversion of interest and premium of $492,385, and issued
      106,055 shares of common stock in the Company for the 10% share conversion
      premium of $74,239. The interest and premium that is outstanding at June 30,
      2008 related to these notes is $620,135. As
      of
      June 30, 2008, we received extensions on all of our notes except for $217,545,
      which were subsequently paid off, in addition to all of the remaining notes,
      except for $219,000 which were extended through September 30,
      2008.





In
      the
      six months ended June 30, 2008, the Company issued unsecured convertible
      promissory notes in the principal amount of $1,350,000, and warrants to purchase
      up to 317,647 shares of common stock of the Company, to three unaffiliated
      third
      party investors. The Company received gross proceeds of $1,350,000, less fees
      of
      $17,500 of the purchase price paid and other expenses. The notes mature at
      various times between November 23, 2008 and December 06, 2008, and bear interest
      at the rate of 12 % per annum, payable in full at maturity. If at least $25.0
      million is not raised by the Company on or before the applicable maturity date,
      the Company will have an additional 3 months (extending the maturity date)
      to
      repay the note holders in full before the notes are in default. If the notes
      are
      not paid on or before the applicable maturity date, the Company will pay the
      interest rate plus 2% per annum and increasing by 2% per annum each 30 days
      thereafter until the extended maturity date; provided that in no event will
      the
      annual interest rate exceed 18%. The note holders will be entitled to receive
      115% of the sum of the original principal and accumulated interest (the
“Repayment Amount”), if the note holders choose to be repaid in cash on maturity
      date. The note holders will have the option to convert 110% of the Repayment
      Amount into shares of common stock at $0.70 per share. The note holders will
      also be paid a monitoring fee of 5% of the original principal amount of the
      note. If the note is not paid on or before the maturity date (as extended),
      the
      Company will issue to the note holders shares of the common stock equal to
      5% of
      the then unpaid portion of the original principal amount divided by $0.85,
      on
      each of the dates that are 7, 8 and 9 months from the date of issuance. The
      warrants expire 5 years from their various dates of issuance, and have an
      exercise price of $0.85 per share. They also contain a cashless exercise
      provision.


16
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





The
      Bridge Financing did not meet the definition of a “conventional convertible debt
      instrument” Per EITF 00-19, paragraph 4, since the debt is not convertible into
      a fixed number of shares.  The debt can be converted into common stock at a
      conversions price that is a percentage of the market price; therefore the number
      of shares that could be required to be delivered upon “net-share settlement” is
      essentially indeterminate.  Therefore, the $1,350,000 convertible
      promissory notes are also considered “non-conventional,” which means that the
      detachable warrants and the conversion feature must be bifurcated from the
      debt
      and shown as a separate derivative liability.





A
      portion
      of the $1,350,000 proceeds from the convertible promissory notes were allocated
      to the detachable warrants. The fair value of the 317,647 warrants issued in
      connection with this transaction was $121,045. The fair value was determined
      using the Black-Scholes option pricing model and the following
      assumptions:  term of 2.5 years, a risk free interest rate
      of 2.73%, a dividend yield of 0% and volatility of 100%.





In
      addition the fair value of the beneficial conversion feature associated with
      the
      convertible promissory notes was $437,884. Both the value assigned to the
      warrants ($121,045) and the beneficial conversion feature ($437,884) is recorded
      as debt discounts and will be amortized over the terms of the convertible
      promissory notes. For the period ended June 30, 2008, the Company amortized
      $96,646 of the aforesaid debt discounts as other expense in the accompanying
      consolidated statements of operations.





The
      Company has recorded interest expense of $72,887 for the six months ended June
      30, 2008. This expense consists of interest of $19,396 and the accretion of
      premium and monitoring fee of $53,491.





A
      summary
      of the convertible promissory notes and related discounts is below:





Unsecured**Description**
            
            Bridge Financing
            
            Convertible Notes
            
            CombinedBalance at December 31, 2007
            
            $
            3,048,000
            
            $
            —
            
            $
            3,048,000Debt
                discounts
            
            
            (552,369
            )
            
            —
            
            
            (552,369
            )Balance
                at December 31, 2007, net
            
            
            2,495,631
            
            
            —
            
            
            2,495,631Payments
                made
            
            
            (2,723,000
            )
            
            —
            
            
            (2,723,000
            )Amortization
                of debt discount
            
            
            552,369
            
            
            —
            
            
            552,369Conversion
                of notes for shares
            
            
            (250,000
            )
            
            —
            
            
            (250,000
            )Issuance
                of additional notes
            
            
            —
            
            
            1,350,000
            
            
            1,350,000Debt
                discounts
            
            
            —
            
            
            (462,283
            )
            
            (462,283
            )Balance
                at June 30, 2008, net (unaudited)
            
            $
            75,000
            
            $
            887,717
            
            $
            962,717





**Note
      7 - Intercompany Promissory Note**




In
      connection with the Share Exchange, the Company agreed to lend Stratos del
      Peru
      $5.5 million pursuant to the terms of a Promissory Note, dated as of November
      14, 2007 (the “Promissory Note”). The Promissory Note is unsecured, bears
      interest at a rate of 4.39% compounded annually and must be repaid in full
      on or
      before November 14, 2014. As of June 30, 2008 and December 31, 2007 there is
      $151,485 and $30,181 of accrued interest, respectively. These amounts have
      been
      eliminated in consolidation in the June 30, 2008 and December 31, 2007 financial
      statements.


17
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**




**Note
      8 - Income taxes**




Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial statement purposes
      and
      the amounts used for income tax purposes. The Company has incurred net operating
      losses in Peru and the United States for income tax purposes for the year ended
      December 31, 2007. The net operating loss carry forwards amounted to $3,131,111
      and $2,917,567 for Peru and the United States, respectively which may be
      available to reduce future years’ taxable income. These carry forwards will
      expire, if not utilized through 2011 and 2027 for Peru and the United States,
      respectively. Management believes that the realization of the benefits from
      these losses appears uncertain due to the Company’s limited operating history
      and continuing losses for United States income tax purposes. Accordingly, the
      Company has provided a 100% valuation allowance on the deferred tax asset
      benefit to reduce the asset to zero. The net change in the valuation allowance
      for the period ended June 30, 2008 was an increase of $1,811,821. Management
      will review this valuation allowance periodically and make adjustments as
      warranted.




Significant
      components of the Company’s deferred tax assets and liabilities at June 30, 2008
      are as follows:


Peru
              
              U.S.
              
              TotalDeferred
                  tax assets (liabilities):Net
                  operating loss carryforwards
              
              $
              3,131,111
              
              $
              2,917,567
              
              $
              6,048,678Deferred
                  tax assets, net
              
              
              939,333
              
              
              1,249,886
              
              
              2,189,219Valuation
                  allowance
              
              
              (939,333
              )
              
              (1,249,886
              )
              
              (2,189,219
              )Net
                  deferred tax assets
              
              $
              —
              
              $
              —
              
              $
              —





A
      reconciliation of the statutory income tax rate and the effective income tax
      rate for the period from inception (February 27, 2007) to June 30, 2008 is
      as
      follows:




Peru
            
            U.S.Statutory
                income tax rate
            
            
            30
            %
            
            43
            %Valuation
                allowance
            
            
            (30
            )%
            
            (43
            )%Effective
                income tax rate
            
            
            0
            %
            
            0
            %





**Note
      9 - Commitments and contingencies**





The
      Company entered into a four year lease agreement for office space in Lima,
      Peru
      for monthly payments of $6,179. The lease began in January, 2008. The Company
      recorded rent expense of $18,537 and $37,074 for the three and six months ended
      June 30, 2008.





The
      aggregate minimum annual lease commitments for the operating leases extending
      beyond one year are as follows:




Period Ending June 30,
                
                Amount2009
                
                $
                74,1482010
                
                
                74,1482011
                
                
                74,1482012
                
                
                37,074$
                259,518




18
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





**Note 10
      - Related party transactions**




On
      March
      10, 2008, Stratos Peru entered into a services agreement with Iberocons S.A.
      or
      Iberocons, pursuant to which Iberocons has agreed to conduct a feasibility
      analysis of using desalinated sea water as part of the irrigation process for
      our greenfields. The agreement terminated on April 29, 2008. During the six
      month period ended June 30, 2008, the Company paid $33,000 for the services.
      Iberocons owns 5% of ACM, and Mr. Salas is a 10% owner of Iberocons.




On
      January 7, 2008, Stratos Peru entered into a Services Agreement with
      Agribusiness Consulting & Management Peru SAC, or ACM, pursuant to which ACM
      agreed to provide consulting services to Stratos Peru for 45 days, including
      updating the use of funds for Phase I and structuring a financial model for
      the
      simulation of various scenarios regarding Stratos’ ethanol production. Pursuant
      to the agreement, ACM is to receive compensation in the amount of approximately
      $99,000 for the services provided. Antonio Salas, the Chief Executive Officer
      of
      our Company and of Stratos Peru owns 95% of ACM, and the Chief Executive Officer
      of ACM is Gissela Camminati, who is the wife of Mr. Salas. Mr. Salas was also
      a
      former member of the Board of Directors of ACM. As of June 30, 2008, the Company
      incurred total consulting expenses of approximately $368,000 from this related
      party. Total payables owed to this related party were approximately $220,000
      as
      of June 30, 2008.




As
      discussed in Note 5, the Company completed a Series A Private Placement and
      issued to MA Green 7,142,857 shares of Series A preferred stock and warrants
      to
      purchase 1,785,714 shares of common stock. The gross proceeds raised by the
      Company in connection with the Series A Private Placement were $5,000,000.
      The
      Company’s Chairman of the Board of Directors, Steven Magami, is the manager of
      MA Green.





**Note
      11 - Subsequent Events**




*Bridge
      Financing*





In
      July
      2008, the Company made the final principal re-payments of $75,000 towards the
      $3,048,000 convertible promissory notes issued on November 14, 2007 and paid
      $401,135 towards interest and premiums. The total interest and premiums due
      after the payments were made is $219,000.





*Issuance
      of $350,000 Unsecured Convertible Promissory Note*





On
      October 18, 2007, Stratos del Peru, entered into an asset purchase agreement
      (the “Asset Purchase Agreement”) and an escrow agreement (the “Escrow
      Agreement”) with Gabinete Técnico de Cobranzas S.A.C., a Peruvian corporation
      (“Gabinete”), pursuant to which Stratos Peru acquired certain assets and rights
      from Gabinete relating to the Estrella del Norte sugar mill located in the
      province of Chepen, Peru. Stratos Peru paid approximately $4.5 million plus
      a
      value added tax of 19% to acquire the sugar mill. Of the purchase price, Stratos
      Peru held back $350,000 (the “Holdback”), representing approximately 7.74% of
      the purchase price, which was placed into an escrow contingencies account with
      Banco Continental in Lima, Peru (the “Escrow Account”).





On
      July
      1, 2008, Stratos Peru and the Company agreed to release the Holdback to the
      Company, subsequent to which the Company issued Gabinete an unsecured
      convertible promissory note in the principal amount of $350,000, for the Company
      to use as working capital. The parties have also terminated the Escrow Agreement
      in order to transfer the funds from the Escrow Account to the Company as
      consideration for the note. If any liability issues arise with respect to the
      sugar mill, the amount will be offset from or against amounts payable by the
      Company to Gabinete under the note.





The
      note
      will mature on October 30, 2009, and bears interest at the rate of 8% per annum,
      payable at the maturity date. Gabinete has the option to convert 110% of the
      repayment amount into units of the Company at $0.70 per unit, with each unit
      consisting of (i) one share of common stock and (ii) one half of a warrant
      to
      purchase shares of the Company’s common stock at an exercise price of $0.75 per
      share, with a five-year term and cashless exercise provision.


19
 *Table
          of Contents*


**Stratos
      Renewables Corporation**


**(A
      Development Stage Company)**


**Notes
      to Consolidated Financial Statements**


**(Unaudited)**





*Convertible
      Note Financing*





During
      July, 2008, the Company issued unsecured convertible promissory notes in the
      principal amount of $500,000, and warrants to purchase up to 117,645 shares
      of
      common stock of the Company, to four unaffiliated third party investors. The
      Company received gross proceeds of $500,000, less fees of $30,000 of the
      purchase price paid and other expenses. The notes mature six months from
      issuance and bear interest at the rate of 12% per annum, payable in full at
      maturity. If at least $25.0 million is not raised by the Company on or before
      the applicable maturity date, the Company will have an additional 3 months
      (extending the maturity date) to repay the note holders in full before the
      notes
      are in default. If the notes are not paid on or before the applicable maturity
      date, the Company will pay the interest rate plus 2% per annum and increasing
      by
      2% per annum each 30 days thereafter until the extended maturity date; provided
      that in no event will the annual interest rate exceed 18%. The note holders
      will
      be entitled to receive 115% of the sum of the original principal and accumulated
      interest (the “Repayment Amount”), if the note holders choose to be repaid in
      cash on maturity date. The note holders will have the option to convert 110%
      of
      the Repayment Amount into shares of common stock at $0.70 per share. The note
      holders will also be paid a monitoring fee of 5% of the original principal
      amount of the note. If the note is not paid on or before the maturity date
      (as
      extended), the Company will issue to the note holders shares of the common
      stock
      equal to 5% of the then unpaid portion of the original principal amount divided
      by $0.85, on each of the dates that are 7, 8 and 9 months from the date of
      issuance. The warrants expire 5 years from their various dates of issuance,
      and
      have an exercise price of $0.85 per share. They also contain a cashless exercise
      provision.





*Issuance
      of $2,000,000 Secured Convertible Promissory Note*





On
      July
      25, 2008, the Company completed a financing pursuant to which the Company issued
      a secured convertible promissory note, in the principal amount of $2,000,000,
      and warrants to purchase up to 714,286 shares of common stock of the Company,
      to
      Whitebox Hedged High Yield Partners, LP, a British Virgin Islands limited
      partnership. The Company received gross proceeds of $2,000,000, less fees of
      10%
      of the purchase price paid and other expenses. The Company intends to use the
      proceeds as working capital. The note matures on December 31, 2009 or if the
      note holder elects to accelerate the maturity date, July 23, 2009. The note
      bears interest at the rate of 12 % per annum, payable in full at the maturity
      date.





So
      long
      as any principal or interest remains outstanding under the note, the note holder
      will have the right to participate in debt or equity financings undertaken
      by
      the Company, up to a maximum of 25% of the amounts raised by the Company in
      any
      such financing, on the same terms as the other participants of such financing.





The
      note
      may be prepaid by the Company in whole but not in part from time to time. If
      the
      note is prepaid by the Company more than 30 days prior to the maturity date,
      the
      Company has agreed to pay the note holder a prepayment fee equal to 25% of
      the
      sum of the principal amount of the note and all accrued and unpaid interest.
      The
      note holder will have the option to convert all of the unpaid principal and
      accrued and unpaid interest on the note plus any prepayment fee, if applicable,
      into shares of common stock of the Company at a conversion price of $0.70 per
      share. Under certain circumstances, such as in the event of the sale of
      securities of the Company at a price less than $0.70 per share, the conversion
      price will be subject to adjustment. Upon the occurrence of any event of
      default, in addition to all amounts owing to the note holder under the note
      becoming due and payable in full, the Company will pay to the note holder an
      additional sum of $100,000.




The
      warrants have a five-year term and an exercise price of $0.75 per share. The
      warrants also contain certain provisions for the adjustment of the exercise
      price in the event that during the term of the warrants, the Company sells
      securities below the current exercise price of $0.75. This could result in
      an
      exercise price of less than $0.75 per share. The warrants also contain a
      cashless exercise provision.





The
      Company has also agreed to provide the note holder with piggyback registration
      rights, pursuant to which the Company will use its best efforts to register
      the
      shares issuable upon the conversion of the note and the exercise of the warrants
      in the event that it proposes to register any of its securities under the
      Securities Act of 1933, prior to July 25, 2010.





The
      note
      is secured by 100% of the shares owned by the Company in its wholly owned U.S.
      subsidiary and its two Peruvian subsidiaries.





20
 *Table
          of Contents*




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




*Certain
      statements in this Quarterly Report on Form 10-Q, or the Report, are
“forward-looking statements.” These forward-looking statements include, but are
      not limited to, statements about the plans, objectives, expectations and
      intentions of Stratos Renewables Corporation, a Nevada corporation (referred
      to
      in this Report as “we,” “us,” “our” or “registrant”) and other statements
      contained in this Report that are not historical facts. Forward-looking
      statements in this Report or hereafter included in other publicly available
      documents filed with the Securities and Exchange Commission, or the Commission,
      reports to our stockholders and other publicly available statements issued
      or
      released by us involve known and unknown risks, uncertainties and other factors
      which could cause our actual results, performance (financial or operating)
      or
      achievements to differ from the future results, performance (financial or
      operating) or achievements expressed or implied by such forward-looking
      statements. Such future results are based upon management’s best estimates based
      upon current conditions and the most recent results of operations. When used
      in
      this Report, the words “expect,” “anticipate,” “intend,” “plan,” “believe,”
“seek,” “estimate” and similar expressions are generally intended to identify
      forward-looking statements, because these forward-looking statements involve
      risks and uncertainties. There are important factors that could cause actual
      results to differ materially from those expressed or implied by these
      forward-looking statements, including our plans, objectives, expectations and
      intentions and other factors that are discussed under the section entitled
“Risk
      Factors,” in this Report and in our Annual Report on Form 10-KSB for the year
      ended December 31, 2007.*




*The
      following discussion and analysis summarizes our plan of operation for the
      next
      twelve months, our results of operations for the six months ended June 30,
      2008
      and changes in our financial condition from our year ended December 31, 2007.
      The following discussion should be read in conjunction with the Management’s
      Discussion and Analysis or Plan of Operation included in our Annual Report
      on
      Form 10-KSB for the year ended December 31, 2007.*




**Overview**




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our consolidated financial
      statements and related notes included in our annual report on Form 10-KSB for
      the year ended December 31, 2007 filed with the Securities and Exchange
      Commission on April 15, 2008.  This discussion and analysis contains
      forward-looking statements that involve risks, uncertainties, and
      assumptions.  The actual results may differ materially from those
      anticipated in these forward-looking statements as a result of certain factors,
      including but not limited to the risks discussed in this report.




We
      intend
      to engage in the business of producing, processing and distributing sugarcane
      ethanol in Peru. Ethanol is a renewable energy source that provides significant
      economic and environmental benefits when mixed with gasoline and used as motor
      fuel.




**Critical
      Accounting Policies and Estimates**




Our
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations section discusses our financial statements, which have been prepared
      in accordance with accounting principles generally accepted in the United States
      of America. The preparation of the financial statements requires management
      to
      make estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. On an on-going basis,
      management evaluates its estimates and judgments, including those related to
      revenue recognition, recoverability of intangible assets, and contingencies
      and
      litigation. Management bases its estimates and judgments on historical
      experience and on various other factors that are believed to be reasonable
      under
      the circumstances, the results of which form the basis for making judgments
      about the carrying value of assets and liabilities that are not readily apparent
      from other sources. Actual results may differ from these estimates under
      different assumptions or conditions. The most significant accounting estimates
      inherent in the preparation of our financial statements include estimates as
      to
      the appropriate carrying value of certain assets and liabilities which are
      not
      readily apparent from other sources, primarily the valuation of our fixed assets
      and the recoverability of our VAT receivable. The methods, estimates and
      judgments we use in applying these most critical accounting policies have a
      significant impact on the results we report in our financial
      statements.




21
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          of Contents*




*Impairment
      of long-lived assets*




We
      follow
      the guidance of Statement of Financial Accounting Standards No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets,” or SFAS 144, which
      addresses financial accounting and reporting for the impairment or disposal
      of
      long-lived assets. We periodically evaluate the carrying value of long-lived
      assets to be held and used in accordance with SFAS 144. SFAS 144 requires
      impairment losses to be recorded on long-lived assets used in operations when
      indicators of impairment are present and the undiscounted cash flows estimated
      to be generated by those assets are less than the assets’ carrying amounts. In
      that event, a loss is recognized based on the amount by which the carrying
      amount exceeds the fair market value of the long-lived assets. Loss on
      long-lived assets to be disposed of is determined in a similar manner, except
      that fair market values are reduced for the cost of disposal. Based on our
      review, we believe that, as of June 30, 2008, there were no significant
      impairments of long-lived assets.




**Plan
      of Operations**




*Overview*




This
      current report contains forward-looking statements that involve significant
      risks and uncertainties. The following discussion, which focuses on our plan
      of
      operation through the commencement of operations of our plant, consists almost
      entirely of forward-looking information and statements. Actual events or results
      may differ materially from those indicated or anticipated, as discussed in
      the
      section entitled “Forward Looking Statements.” This may occur as a result of
      many factors, including those set forth in the section entitled “Risk
      Factors.”




Upon
      consummation of the Share Exchange, we commenced our business plan to develop
      ethanol and sugar products through the cultivation, harvesting and processing
      of
      sugarcane in low cost growing locations. From a strategic value perspective,
      our
      management believes a geographic focus in Peru will be a key component in
      achieving our goals.




Our
      business plan consists of two phases. Phase I will primarily be focused on
      establishing our initial ethanol production facilities and infrastructure.
      Phase
      II will primarily be focused on expanding our operations in strategic
      locations.




Phase
      I




Phase
      I
      of our business plan is comprised of five components:




·
            mill
                and distillery acquisition, expansion and
                modification;





·
            seedling
                production;





·
            land
                sourcing;





·
            field
                installment; and





·
            conducting
                feasibility studies and generating a business plan for Phase
                II.





*Mill
      and distillery acquisition, expansion and modification*




On
      October 18, 2007, Stratos Peru entered into an asset purchase agreement with
      Gabinete Tecnico de Cobranzas S.A.C., or Gabinete, pursuant to which it acquired
      certain assets and rights relating to the Estrella del Norte sugar mill located
      in the province of Chepen, Peru, or the Sugar Mill. Stratos Peru paid
      approximately $4.5 million plus a value added tax of 19% to acquire the Sugar
      Mill.  Of the purchase price, we held back $350,000, or the Holdback,
      representing approximately 7.74% of the purchase price, into an escrow
      contingencies account with Banco Continental in Lima, Peru.  The Holdback
      is to protect us in the event Gabinete fails to fulfill certain tax obligations
      relating to the equipment for the years 2002 through 2007, the equipment is
      lost
      or damaged while in transit from Gabinete, the equipment is not delivered to
      us,
      or certain representations made by Gabinete in the asset purchase agreement
      are
      discovered to be false.





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On
      July
      1, 2008, we agreed to release the Holdback, subsequent to which we issued
      Gabinete an unsecured convertible promissory note in the principal amount of
      $350,000, for the Company to use as working capital. The parties have also
      terminated the Escrow Agreement in order to transfer the funds from the Escrow
      Account to us as consideration for the note. If any liability issues arise
      with
      respect to the sugar mill, the amount will be offset from or against amounts
      payable by our Company to Gabinete under the note.





The
      note
      will mature on October 30, 2009, and bears interest at the rate of 8% per annum,
      payable at the maturity date. Gabinete has the option to convert 110% of the
      repayment amount into units of the Company at $0.70 per unit, with each unit
      consisting of (i) one share of common stock and (ii) one half of a warrant
      to
      purchase shares of the Company’s common stock at an exercise price of $0.75 per
      share, with a five-year term and cashless exercise provision.




We
      plan
      to relocate the Sugar Mill and to acquire and install a distillery unit to
      adjoin it for the production of ethanol. Additionally, we plan to upgrade the
      Sugar Mill’s capacity to crush sugarcane from 500 tons of including the value
      added tax sugarcane per day to 1,100 tons of sugarcane per day. We estimate
      that
      we will need a total of $9.6 million in investment and working capital to
      overhaul, expand and relocate the Sugar Mill, acquire the distillery and conduct
      operations at the mill and distillery through the first quarter of 2009.




On
      December 4, 2007 we entered into an agreement with a member of our advisory
      board, for his services in providing us with a plan for us to hire a contractor
      to dismantle, repair and overhaul the equipment from the Sugar Mill. He will
      also provide us with engineering studies in order to determine the maximum
      capacity of sugar cane processing of the Sugar Mill and to establish the process
      layout and technical specifications that will be required for new machinery
      and
      equipments.




On
      February 27, 2008, Stratos Peru entered into an agreement with Panka S.A.C.
      to
      provide us with a basic engineering plan and new layout of the Sugar Mill after
      the overhauling of the Sugar Mill.




On
      March
      12, 2008, Stratos Peru entered into an agreement, the CWE Agreement, with
      CWE.  The CWE Agreement relates to the relocation of the Sugar Mill to the
      Industrial Lot, that we have obtained the rights to in the Lambayeque
      region. Under the terms of the CWE Agreement, we engaged CWE to clean, remove
      and disassemble equipment located at the Sugar Mill.   We have agreed
      to pay CWE a service fee of approximately $150,000, payable in
      installments.  In connection with the payment of the service fee, CWE
      issued two promissory notes in favor of Stratos Peru, each in the amount of
      $8,330 pursuant to which Stratos Peru could collect such amount in the event
      that CWE did not complete the project according to the timetable. The Notes
      had
      a due date of May 22, 2008; however, Stratos Peru never exercised its rights
      under the Notes.  The CWE Agreement terminated on June 9, 2008 and we are
      negotiating a new agreement with CWE to complete the project.




In
      March
      2008, we began the dismantling of all of the equipment. We anticipate that
      the
      dismantling will be complete by the end of 2008.




After
      modifying and expanding the Sugar Mill, we plan to use approximately 40% of
      its
      capacity to produce raw sugar to be sold in the local wholesale markets, and
      60%
      of its capacity to produce an estimated 4.8 million gallons of ethanol a
      year.




On
      May 3,
      2008, we entered into a lease with an unaffiliated third party in order to
      obtain the rights to use 24,000 hectares of undeveloped land in Peru, of which
      15,000 hectares are plantable land.




*Seedling
      Production*




The
      second component of Phase I will be to establish a high quality seedling
      production program to supply our planned intensive planting program scheduled
      to
      commence during Phase II of our business strategy. We intend to lease a plot
      of
      land in the Piura region, which we believe is an ideal location with respect
      to
      its climate and surrounding environment, to establish a sugarcane seedling
      nursery.




23
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          of Contents*




On
      February 6, 2008, Stratos Peru entered into a services agreement with
      Biotecnologia Del Peru S.A.C, or Biotecnologia, to establish a pilot seedling
      laboratory, or Pilot Laboratory. They are in the process of studying various
      breeds of genetic material and have advised us which breed will generate the
      most elite sugar cane plantlets.




*Land
      Sourcing*




The
      fourth component of Phase I will be to secure land for sugarcane production
      from
      three potential sources: small and medium private land lots; peasant community
      land lots; and state owned land lots. The most important factors in locating
      land suitable for sugarcane production are water supply, soil composition,
      climate, distance from the Sugar Mill and access to roads and other
      services.




*Field
      Installment*




The
      fifth
      component, as part of our main objective to be the market leader in sustainable
      low-cost ethanol production, will be to take advantage of our “greenfield”
position to use only sophisticated crop management techniques to ensure maximum
      yield with high sucrose and inverted sugar content. The Peruvian coast is ideal
      for these modern farming techniques, as water and nutrient content can be
      managed due to the sandy soil and irrigation equipment to be installed.  To
      ensure the maximum benefit from the genetically cleaned sugar varieties that
      we
      intend to install on our comparatively low-cost land, significant investment
      will go into channeling water to the sites from national irrigation projects
      and
      on field irrigation installation with back-up water supply, and land preparation
      to ensure the longevity and productivity of the fields which includes
      grading, leveling, initial nutrient and organic material installation, and
      field
      layout.




*Conducting
      feasibility studies and generating a business plan for Phase
      II*




The
      final
      component of Phase I will initially involve hiring a consultant to conduct
      a
      feasibility study based on the information provided by our land sourcing
      efforts. The study will focus on generating cost estimates and designs based
      on
      analyzing the climactic, water, soil, topography and irrigation characteristics
      of the properties identified by our land sourcing team. Following the completion
      of the feasibility study, we will create a comprehensive business plan for
      Phase
      II consisting of an overview of the industry, a market analysis, competitive
      analysis, marketing plan, management plan and financial plan. We will also
      perform a port feasibility study, which if successful, will optimize our
      distribution of ethanol and reduce our operation costs for distribution to
      world
      markets.




Our
      goal
      is to have all of the components of Phase I completed by early 2009 so that
      we
      can begin executing Phase II.




Phase
      II




Phase
      II
      of our business plan will consist of our expansion in strategic locations along
      the northern Peruvian coast and the cultivation of our own sugarcane supplies
      to
      be used for production. In connection with Phase II, we anticipate raising
      and
      investing funds over an additional $700 million in order to plant sugarcane
      on 48,000 hectares of raw land, and acquire and operate a total of four mills
      with attached ethanol distilleries, with expandable capacities and distribution
      port infrastructure. By the fourth quarter of 2014, it is our goal to be able
      to
      process a total of 25,000 tons of sugarcane per day, and produce approximately
      180 million gallons of anhydrous ethanol annually.




We
      expect
      to initiate Phase II in 2009. The mill and distillers we plan to establish
      in
      Phase II will be located in regions that we have selected based on our extensive
      research of agro climatic conditions, hydrology, basic services, logistic
      supplies and social environment. We plan to establish the four locations in
      two
      stages.





24
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          of Contents*




*Stage
      One*




During
      the first stage, which will begin in the third quarter of 2009, we plan
      to prepare and plant sugarcane on 12,000 hectares of land located
      along the northern Peruvian coast, and will conduct the required feasibility
      studies for the additional 12,000 hectares of land.  We estimate that
      the total cost for Stage One will be approximately $400 million.




*Stage
      Two*




During
      the second stage, which will begin in the second quarter of 2011, we plan to
      plant the second 12,000 hectares of land located along the northern
      Peruvian coast. We estimate that the total cost for this stage will be
      approximately $355 million.




**Trends
      and Uncertainties**




Our
      future growth will be dependent initially on our ability to establish reliable
      sources of sugarcane for the operation of the Sugar Mill, and going forward,
      on
      our ability to develop our own supplies of sugarcane. Additionally, we must
      be
      successful in establishing seedling, compost and land sourcing programs in
      order
      to allow us to develop a consistent, reliable and cost-effective long-term
      supply of sugarcane.




We
      will
      require a significant amount of additional capital in the future to sufficiently
      fund our operations. We may not be able to obtain additional capital on terms
      favorable to us or at all. We expect to increase our operating expenses over
      the
      coming years. We estimate that Phase I of our business plan, which is currently
      in effect, will cost a total of approximately $37 million. Furthermore, we
      estimate that will need over an additional $700 million to fund our
      expansion during the course of Phase II of our operations, which is set to
      commence during 2009 and continue for five years thereafter.




Most
      of
      our operations, including the Sugar Mill, the land we have obtained the rights
      to and the land we propose to obtain the rights to on which to grow our
      sugarcane supplies, are located in Peru. Although we believe that conducting
      operations in Peru will provide us with significant competitive advantages,
      we
      will also be subject to risks not typically associated with ownership of United
      States companies.




**Financing**




To
      date,
      we have had negative cash flows from operations and we have been dependent
      on
      sales of our equity securities and debt financing to meet our cash requirements.
      We expect this situation to continue for the foreseeable future. We anticipate
      that we will have negative cash flows from operations during our fiscal year
      ended December 31, 2008.




Given
      that we are a development stage company and have not generated any revenues
      to
      date, our cash flow projections are subject to numerous contingencies and risk
      factors beyond our control, including our ability to manage our expected growth,
      complete construction of our proposed plant and commence operations. We can
      offer no assurance that our company will generate cash flow sufficient to meet
      our cash flow projections or that our expenses will not exceed our projections.
      If our expenses exceed estimates, we will require additional monies during
      the
      next twelve months to execute our business plan.




There
      are
      no assurances that we will be able to obtain funds required for our continued
      operation. There can be no assurance that additional financing will be available
      to us when needed or, if available, that it can be obtained on commercially
      reasonable terms. If we are not able to obtain additional financing on a timely
      basis, we will not be able to meet our other obligations as they become due
      and
      we will be forced to scale down or perhaps even cease the operation of our
      business.




There
      is
      substantial doubt about our ability to continue as a going concern as the
      continuation of our business is dependent upon obtaining further long-term
      financing, completion of our proposed plant and successful and sufficient market
      acceptance of our products once developed and, finally, achieving a profitable
      level of operations. The issuance of additional equity securities by us could
      result in a significant dilution in the equity interests of our current
      stockholders. Obtaining commercial loans, assuming those loans would be
      available, will increase our liabilities and future cash
      commitments.




25
 *Table
          of Contents*




**Liquidity
      and Capital Resources**




*Cash
      Flows from Financing Activities*




There
      are
      no assurances that we will be able to obtain further funds required for our
      continued operations. We intend to pursue various financing alternatives to
      meet
      our immediate and long-term financial requirements. There can be no assurance
      that additional financing will be available to us when needed or, if available,
      that it can be obtained on commercially reasonable terms. If we are not able
      to
      obtain additional financing on a timely basis, we will be unable to conduct
      our
      operations as planned, and we will not be able to meet our other obligations
      as
      they become due. In such event, we will be forced to scale down or perhaps
      even
      cease our operations.




Historically,
      we have met our immediate and long-term financial requirements primarily through
      the sale of common stock and other convertible equity securities. In 2007 and
      the first quarter of 2008, we conducted the following private placements of
      our
      securities:




Private
      Placement of Common Stock




On
      November 14, 2007, we completed a private placement for our
      securities, or Private Placement, pursuant to which we issued an aggregate
      of
      2,666,794 shares of common stock and warrants to purchase an aggregate of
      1,333,396 shares of common stock. We raised $1,867,090 aggregate gross proceeds
      in connection with the Private Placement. We sold to investors each share of
      common stock at $0.70 per share. The fair value of the warrants amounted to
      $352,268. We computed the fair value using the Black-Scholes model under the
      following assumptions: (1) expected life of 1 year; (2) volatility of 100%;
      and
      (3) risk free interest of 5.0%. The warrants expire after five (5) years from
      the date of issuance and are exercisable at $0.75 per share, subject to
      adjustment in certain circumstances.




On
      March
      7, 2008 we closed on $1,587,447 of our $10 million private placement. Pursuant
      to this financing, we issued an aggregate of 2,267,782 shares of common stock
      at
      a purchase price of $0.70 per share and warrants to purchase an aggregate of
      1,133,888 shares of common stock with an exercise price of $0.75 per share.
      The
      fair value of the warrants amounted to $294,360. We computed the fair value
      using the Black-Scholes model under the following assumptions: (1) expected
      life
      of 1 year; (2) volatility of 100%; and (3) risk free interest of 3.0%. The
      warrants expire after five (5) years from the date of issuance and are
      exercisable at $0.75 per share, subject to adjustment in certain
      circumstances.





On
      June
      26, 2008, we closed on an additional $100,000 of our $10 million private
      placement, pursuant to which we issued an aggregate of 142,857 shares of common
      stock at a purchase price of $0.70 per share and warrants to purchase an
      aggregate of 71,428 shares of common stock with an exercise price of $0.75
      per
      share. The fair value of the warrants amounted to $37,488. The fair value was
      computed using the Black-Scholes model under the following assumptions: (1)
      expected life of 2.5 years; (2) volatility of 100%; and (3) risk free interest
      of 2.73%. The warrants expire after five (5) years from the date of issuance
      and
      are exercisable at $0.75 per share, subject to adjustment in certain
      circumstances.





Series
      A Preferred Stock Private Placement




On
      November 14, 2007 we completed a Series A private placement, or Series A Private
      Placement, pursuant to which we issued to MA Green 7,142,857 shares of Series
      A
      Preferred Stock and warrants to purchase 1,785,714 shares of common stock.
      We
      raised $5,000,000 gross in connection with the Series A Private Placement.
      We
      sold each share of Series A Preferred Stock at $0.70 per share. The warrants
      expire five (5) years from the date of issuance and are exercisable at $0.75
      per
      share, subject to adjustment in certain circumstances. Our Chairman of the
      Board
      of Directors, Steven Magami, is the manager of MA Green.




The
      fair
      value of the 1,785,714 warrants issued with the Series A Private Placement
      was
      $471,765. The fair value was computed using the Black-Scholes model under the
      following assumptions: (1) expected life of 1 year; (2) volatility of 100%,
      (3)
      risk free interest of 5.0% and (4) dividend rate of 10%. In addition, since
      this
      convertible preferred stock is convertible into shares of common stock at a
      one-to-one ratio (unless the conversion occurs upon the consummation of a
      financing or financings in an aggregate amount of $25 million), an embedded
      beneficial conversion feature was recorded as a discount to additional paid
      in
      capital in accordance with Emerging Issues Task Force No. 00-27, “Application of
      Issue No. 98-5 to Certain Convertible Instruments.” The intrinsic value of the
      beneficial conversion feature was $471,765. The beneficial conversion feature
      is
      considered a deemed dividend, but the Company has an accumulated deficit;
      therefore, the entry is not recorded as the accounting entry would be both
      a
      debit and a credit to additional paid in capital.




26
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          of Contents*


On
      April
      18, 2008, we completed a private placement of the Company’s securities (the
“Grey K Private Placement”) to three accredited investors, Grey K LP, a Delaware
      limited partnership, Grey K Offshore Fund, Ltd., a Cayman Island exempt company,
      and Grey K Offshore Leveraged Fund, Ltd., a Cayman Island exempt company
      (collectively, “Grey K”), consisting of the sale of an aggregate of 1,428,572
      shares of Series A preferred stock at a purchase price of $0.70 per share,
      which
      are convertible into shares of common stock. Grey K also received warrants
      to
      purchase up to an aggregate of 357,143 shares of common stock. The warrants
      have
      a five-year term and an exercise price of $0.75 per share. The purchasers were
      also granted certain demand and piggyback rights with respect to the shares
      of
      common stock underlying the Series A preferred stock and the warrants. In
      connection with the Grey K Private Placement, we received gross proceeds of
      $1,000,000, less a funding fee paid to Grey K equal to 2% of the purchase price
      paid and other expenses.





The
      fair
      value of the 357,143 warrants issued with the Grey K Private Placement was
      $142,166. The fair value was computed using the Black-Scholes model under the
      following assumptions: (1) expected life of 2.5 years; (2) volatility of 100%,
      (3) risk free interest of 2.35% and (4) dividend rate of 0%. In addition, since
      this convertible preferred stock is convertible into shares of common stock
      at a
      one to one ratio an embedded beneficial conversion feature was recorded as
      a
      discount to additional paid in capital in accordance with Emerging Issues Task
      Force No. 00-27, “Application of Issue No. 98-5 to Certain Convertible
      Instruments.” The intrinsic value of the beneficial conversion feature was
      $145,854. The beneficial conversion feature is considered a deemed dividend,
      but
      the Company has an accumulated deficit; therefore, the entry is not recorded
      as
      the accounting entry would be both a debit and a credit to additional paid
      in
      capital.





Bridge
      Financing




We
      entered into a Note and Warrant Purchase Agreement on November 14, 2007, or
      Bridge Financing, with investors and issued an aggregate of $3,048,000 in
      convertible promissory notes and warrants to purchase an aggregate of 870,858
      shares of common stock. The convertible promissory notes issued in connection
      with the Bridge Financing bear interest at 10% per annum. The bridge note
      holders received one (1) warrant to purchase one (1) share of common stock,
      at
      an exercise price of $0.75 per share, for every $3.50 invested in the Company
      in
      connection with the Bridge Financing. We raised $3.0 million aggregate gross
      proceeds in connection with the Bridge Financing. The warrants will expire
      three
      (3) years from the closing date of Bridge Financing. Total interest expense
      at
      December 31, 2007 amounted to $56,125. On March 26, 2008, the Company entered
      into an Amendment to Convertible Promissory Note (“Amendment”) with investors
      related to the $3,048,000 Convertible Promissory Notes. Pursuant to the
      Amendment, the maturity dates of the Convertible Promissory Notes were extended
      from February 14, 2008 to April 30, 2008.





During
      the six months ended June 30, 2008, we made principal re-payments in the total
      amount of $2,723,000 towards the $3,048,000 convertible promissory notes. For
      the period ended June 30, 2008, we issued 357,143 shares of common stock in
      the
      Company for the principal conversion of $250,000, issued 703,407 shares of
      common stock in the Company for the conversion of interest and premium of
      $492,385, and issued 106,055 shares of common stock in the Company for the
      10%
      share conversion premium of $74,239. The interest and premium that is
      outstanding at June 30, 2008 related to these notes is $620,135. Previously,
      the
      Company, in error, disclosed in a filing on June 4, 2008, that all of these
      amounts had been previously paid. As of June 30, 2008, we received extensions
      on
      all of our notes except for $217,545, which were subsequently paid off, in
      addition to all of the remaining notes, except for $219,000 which were extended
      through September 30, 2008.





27
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          of Contents*





*Issuance
      of $350,000 Unsecured Convertible Promissory Note*





On
      October 18, 2007, we entered into an asset purchase agreement and an escrow
      agreement with Gabinete Técnico de Cobranzas S.A.C., a Peruvian corporation
      pursuant to which we acquired certain assets and rights from Gabinete relating
      to the Estrella del Norte sugar mill located in the province of Chepen, Peru.
      we
      paid approximately $4.5 million plus a value added tax of 19% to acquire the
      sugar mill. Of the purchase price, we held back $350,000, representing
      approximately 7.74% of the purchase price, which was placed into an escrow
      contingencies account with Banco Continental in Lima, Peru.





On
      July
      1, 2008, we agreed to release the holdback, subsequent to which we issued
      Gabinete an unsecured convertible promissory note in the principal amount of
      $350,000, for us to use as working capital. The parties have also terminated
      the
      escrow agreement in order to transfer the funds from the escrow account to
      us as
      consideration for the note. If any liability issues arise with respect to the
      sugar mill, the amount will be offset from or against amounts payable by us
      to
      Gabinete under the note.





The
      note
      will mature on October 30, 2009, and bears interest at the rate of 8% per annum,
      payable at the maturity date. Gabinete has the option to convert 110% of the
      repayment amount into our units at $0.70 per unit, with each unit consisting
      of
      (i) one share of common stock and (ii) one half of a warrant to purchase shares
      of our common stock at an exercise price of $0.75 per share, with a five-year
      term and cashless exercise provision.





*Convertible
      Note Financing*





Between
      May 23, 2008 and July 18, 2008, we issued unsecured convertible promissory
      notes
      in the principal amount of $1,850,000, and warrants to purchase up to 435,292
      shares of common stock of the Company, to four unaffiliated third party
      investors. We received gross proceeds of $1,850,000, less fees of $47,500 of
      the
      purchase price paid and other expenses. The notes mature six months from
      issuance and bear interest at the rate of 12% per annum, payable in full at
      maturity. If at least $25.0 million is not raised by us on or before the
      applicable maturity date, we will have an additional 3 months (extending the
      maturity date) to repay the note holders in full before the notes are in
      default. If the notes are not paid on or before the applicable maturity date,
      we
      will pay the interest rate plus 2% per annum and increasing by 2% per annum
      each
      30 days thereafter until the extended maturity date; provided that in no event
      will the annual interest rate exceed 18%. The note holders will be entitled
      to
      receive 115% of the sum of the original principal and accumulated interest,
      if
      the note holders choose to be repaid in cash on maturity date. The note holders
      will have the option to convert 110% of the repayment amount into shares of
      common stock at $0.70 per share. The note holders will also be paid a monitoring
      fee of 5% of the original principal amount of the note. If the note is not
      paid
      on or before the maturity date (as extended), we will issue to the note holders
      shares of the common stock equal to 5% of the then unpaid portion of the
      original principal amount divided by $0.85, on each of the dates that are 7,
      8
      and 9 months from the date of issuance. The warrants expire 5 years from their
      various dates of issuance, and have an exercise price of $0.85 per share. They
      also contain a cashless exercise provision.





*Issuance
      of $2,000,000 Secured Convertible Promissory Note*





On
      July
      25, 2008, we completed a financing pursuant to which the Company issued a
      secured convertible promissory note, in the principal amount of $2,000,000,
      and
      warrants to purchase up to 714,286 shares of our common stock, to Whitebox
      Hedged High Yield Partners, LP, a British Virgin Islands limited partnership.
      We
      received gross proceeds of $2,000,000, less fees of 10% of the purchase price
      paid and other expenses. We intend to use the proceeds as working capital.
      The
      note matures on December 31, 2009 or if the note holder elects to accelerate
      the
      maturity date, July 23, 2009. The note bears interest at the rate of 12 % per
      annum, payable in full at the maturity date.





So
      long
      as any principal or interest remains outstanding under the note, the note holder
      will have the right to participate in debt or equity financings undertaken
      by
      us, up to a maximum of 25% of the amounts raised by us in any such financing,
      on
      the same terms as the other participants of such financing.





We
      may
      prepay the note in whole but not in part from time to time. If we prepay the
      note more than 30 days prior to the maturity date, we have agreed to pay the
      note holder a prepayment fee equal to 25% of the sum of the principal amount
      of
      the note and all accrued and unpaid interest. The note holder will have the
      option to convert all of the unpaid principal and accrued and unpaid interest
      on
      the note plus any prepayment fee, if applicable, into shares of our common
      stock
      at a conversion price of $0.70 per share. Under certain circumstances, such
      as
      in the event of the sale of our securities at a price less than $0.70 per share,
      the conversion price will be subject to adjustment. Upon the occurrence of
      any
      event of default, in addition to all amounts owing to the note holder under
      the
      note becoming due and payable in full, we will pay to the note holder an
      additional sum of $100,000.





28
 *Table
          of Contents*


The
      warrants have a five-year term and an exercise price of $0.75 per share. The
      warrants also contain certain provisions for the adjustment of the exercise
      price in the event that during the term of the warrants, we sell securities
      below the current exercise price of $0.75. This could result in an exercise
      price of less than $0.75 per share. The warrants also contain a cashless
      exercise provision.





We
      have
      also agreed to provide the note holder with piggyback registration rights,
      pursuant to which we will use our best efforts to register the shares issuable
      upon the conversion of the note and the exercise of the warrants in the event
      that it proposes to register any of its securities under the Securities Act
      of
      1933, prior to July 25, 2010.




*Cash
      Used for Investing Activities*




On
      October 18, 2007, we signed a purchase-sale contract with Gabinete Técnico de
      Cobranza S.A.C., and have acquired certain assets that are part of the
      Sugar Mill. This purchase price was $5,382,328:




·
            $5,032,328
                by bank draft issued to the order of Gabinete Técnico de Cobranza S.A.C.;
                and





·
            $350,000
                to be deposited in a bank account in order to guarantee payment of
                any
                contingency that may arise from this transaction, which subsequently
                was
                converted into a convertible promissory
                note.




We
      acquired certain assets from Gabinete Técnico de Cobranza S.A.C. as part of its
      overall business strategy to purchase, sale, produce, distribute, market,
      transport, warehouse, export and import of all kinds of products derives from
      hydrocarbons and bio-fuels.




The
      following table summarizes the fair values of the assets acquired and
      liabilities assumed at the date of acquisition:  The fair values are
      determined based on an appraisal:


Plant
                  and equipment
              
              $
              4,522,965VAT
                  receivable
              
              
              859,363Purchase
                  price
              
              $
              5,382,328




We
      have determined that the discounted cash flows generated by the
      exploitation of the Sugar Mill will suffice to cover the carrying value of
      the
      assets acquired in this acquisition.




The
      Sugar
      Mill did not have any operations for the past several years.




**Off-Balance
      Sheet Arrangements**




Our
      company has no outstanding off-balance sheet guarantees, interest rate swap
      transactions or foreign currency contracts. Neither our company nor our
      operating subsidiary engages in trading activities involving non-exchange traded
      contracts.




**Recently
      Issued Accounting Pronouncements**




In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations.” SFAS No. 141 (Revised 2007) changes how a reporting
      enterprise accounts for the acquisition of a business. SFAS No. 141
      (Revised 2007) requires an acquiring entity to recognize all the assets acquired
      and liabilities assumed in a transaction at the acquisition-date fair value,
      with limited exceptions, and applies to a wider range of transactions or events.
      SFAS No. 141 (Revised 2007) is effective for fiscal years beginning on or
      after December 15, 2008 and early adoption and retrospective application is
      prohibited.




29
 *Table
          of Contents*




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements”, which is an amendment of Accounting Research
      Bulletin (“ARB”) No. 51.  This statement clarifies that a
      noncontrolling interest in a subsidiary is an ownership interest in the
      consolidated entity that should be reported as equity in the consolidated
      financial statements.  This statement changes the way the consolidated
      income statement is presented, thus requiring consolidated net income to be
      reported at amounts that include the amounts attributable to both parent and
      the
      noncontrolling interest.  This statement is effective for the fiscal
      years, and interim periods within those fiscal years, beginning on or after
      December 15, 2008.  Based on current conditions, the Company does not
      expect the adoption of SFAS 160 to have a significant impact on its results
      of
      operations or financial position.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. This Statement permits entities to
      choose to measure many financial assets and financial liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS No. 159 is effective as of the beginning
      of an entity’s first fiscal year that begins after November 15, 2007. The
      Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect
      the option to measure the fair value of eligible financial assets and
      liabilities.




In
      June
      2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
      Nonrefundable Advance Payments for Goods or Services Received for use in Future
      Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
      nonrefundable advance payments for goods or services that used or rendered
      for
      research and development activities should be expensed when the advance payment
      is made or when the research and development activity has been performed.
      Management is currently evaluating the effect of this pronouncement on financial
      statements.





In
      June
      2008, the FASB issued Emerging Issues Task Force Issue 07-5 “Determining whether
      an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF
      No. 07-5”). This Issue is effective for financial statements issued for fiscal
      years beginning after December 15, 2008, and interim periods within those fiscal
      years. Early application is not permitted. Paragraph 11(a) of Statement of
      Financial Accounting Standard No 133 “Accounting for Derivatives and Hedging
      Activities” (“SFAS 133”) specifies that a contract that would otherwise meet the
      definition of a derivative but is both (a) indexed to the Company’s own
      stock and (b) classified in stockholders’ equity in the statement of
      financial position would not be considered a derivative financial instrument.
      EITF No.07-5 provides a new two-step model to be applied in determining whether
      a financial instrument or an embedded feature is indexed to an issuer’s own
      stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception.
      The Company believes adopting this statement will have a material impact on
      the
      financial statements because among other things, any option or warrant
      previously issued and all new issuances denominated in US dollars will be
      required to be carried as a liability and marked to market each reporting
      period.





In
      April
      2008, the FASB issued 142-3 “Determination of the useful life of Intangible
      Assets”, which amends the factors a company should consider when developing
      renewal assumptions used to determine the useful life of an intangible asset
      under SFAS142. This Issue is effective for financial statements issued for
      fiscal years beginning after December 15, 2008, and interim periods within
      those
      fiscal years. SFAS 142 requires companies to consider whether renewal can be
      completed without substantial cost or material modification of the existing
      terms and conditions associated with the asset. FSP 142-3 replaces the previous
      useful life criteria with a new requirement—that an entity consider its own
      historical experience in renewing similar arrangements. If historical experience
      does not exist then the Company would consider market participant assumptions
      regarding renewal including 1) highest and best use of the asset by a market
      participant, and 2) adjustments for other entity-specific factors included
      in
      SFAS 142. The Company is currently evaluating the impact that adopting SFAS
      No.142-3 will have on its financial statements




30
 *Table
          of Contents*




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**




Not
      applicable.




**Item
      4. Controls and Procedures**





Evaluation
      of Disclosure Controls and Procedures




As
      of
      June 30, 2008, we carried out an evaluation of the effectiveness of the design
      and operation of our “disclosure controls and procedures” (as defined in the
      Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with
      the
      participation of our management, including our Chief Executive Officer and
      our
      Chief Financial Officer.  Based upon that evaluation, we concluded that our
      disclosure controls and procedures are effective.




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act are recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms.  Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the Exchange Act is
      accumulated and communicated to management to allow timely decisions regarding
      required disclosure.




During
      the quarter ended June 30, 2008, there were no changes in our internal control
      over financial reporting that have materially affected our internal control
      over
      financial reporting.




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings**




None




**Item
      1A. Risk Factors**




In
      addition to the other information set forth in this Report, you should carefully
      consider the factors discussed in the section entitled “Risk Factors” in our
      Annual Report on Form 10-KSB for the year ended December 31, 2007, which to
      our
      knowledge have not materially changed. Those risks, which could materially
      affect our business, financial condition or future results, are not the only
      risks we face. Additional risks and uncertainties not currently known to us
      or
      that we currently deem to be immaterial also may materially adversely affect
      our
      business, financial condition and/or operating results.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




*Private
      Placement of Common Stock and Warrants*





On
      March
      7, 2008, we closed on $1,587,447 of our $10 million private placement. Pursuant
      to the March 2008 Financing, we issued an aggregate of 2,267,782 shares of
      common stock at a purchase price of $0.70 per share and warrants to purchase
      an
      aggregate of 1,133,888 shares of common stock with an exercise price of $0.75
      per share. On June 26, 2008, we closed on an additional $100,000 of our $10
      million private placement, pursuant to which we issued an aggregate of 142,857
      shares of common stock at a purchase price of $0.70 per share and warrants
      to
      purchase an aggregate of 71,428 shares of common stock with an exercise price
      of
      $0.75 per share. The warrants have a “cashless” exercise provision, expire five
      years from the date of issuance, and are exercisable at $0.75 per share, subject
      to adjustment under certain circumstances. The common stock and warrants issued
      in connection with this financing were not registered under the Securities
      Act
      and were issued in reliance upon exemptions set forth in Section 4(2),
      Regulation D and/or Regulation S of the Securities Act. Our determination with
      regard to the applicable exemptions from registration was based on the
      representations of the investors, which included, in pertinent part, that such
      investors were either: (a) “accredited investors” within the meaning of Rule 501
      of Regulation D promulgated under the Securities Act, or (b) not a “U.S. person”
as such term is defined in Rule 902(k) of Regulation S under the Securities
      Act,
      and that the investors understood that the securities may not be sold or
      otherwise disposed of without registration under the Securities Act or an
      applicable exemption therefrom.




31
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          of Contents*




*Private
      Placement of Series A Preferred Stock and Warrants*





On
      April
      18, 2008, we completed a private placement of the Company’s securities to Grey
      K, consisting of the sale of an aggregate of 1,428,572 shares of Series A
      preferred stock at a purchase price of $0.70 per share, which are convertible
      into shares of the Company’s common stock. Grey K also received warrants to
      purchase up to an aggregate of 357,143 shares of common stock. The warrants
      have
      a five (5)year term and an exercise price of $0.75 per share. The purchasers
      were also granted certain demand and piggyback rights with respect to the shares
      of common stock underlying the Series A preferred stock and the warrants. In
      connection with this private placement, we received gross proceeds of
      $1,000,000, less a funding fee paid to Grey K equal to 2% of the purchase price
      paid and other expenses. The Company believes the securities were issued in
      reliance from exemptions from registration pursuant to Section 4(2) or
      Regulation D under the Securities Act.





*Issuance
      of $350,000 Unsecured Convertible Promissory Note*





On
      October 18, 2007, we entered into an asset purchase agreement and an escrow
      agreement with Gabinete Técnico de Cobranzas S.A.C., a Peruvian corporation
      pursuant to which we acquired certain assets and rights from Gabinete relating
      to the Estrella del Norte sugar mill located in the province of Chepen, Peru.
      we
      paid approximately $4.5 million plus a value added tax of 19% to acquire the
      sugar mill. Of the purchase price, we held back $350,000, representing
      approximately 7.74% of the purchase price, which was placed into an escrow
      contingencies account with Banco Continental in Lima, Peru.





On
      July
      1, 2008, we agreed to release the holdback, subsequent to which we issued
      Gabinete an unsecured convertible promissory note in the principal amount of
      $350,000, for us to use as working capital. The parties have also terminated
      the
      escrow agreement in order to transfer the funds from the escrow account to
      us as
      consideration for the note. If any liability issues arise with respect to the
      sugar mill, the amount will be offset from or against amounts payable by us
      to
      Gabinete under the note.





The
      note
      will mature on October 30, 2009, and bears interest at the rate of 8% per annum,
      payable at the maturity date. Gabinete has the option to convert 110% of the
      repayment amount into our units at $0.70 per unit, with each unit consisting
      of
      (i) one share of common stock and (ii) one half of a warrant to purchase shares
      of our common stock at an exercise price of $0.75 per share, with a five-year
      term and cashless exercise provision. The Company believes the securities were
      issued in reliance from exemptions from registration pursuant to Section 4(2)
      or
      Regulation D under the Securities Act.





*Unsecured
      Convertible Note Financing*





Between
      May 23, 2008 and July 18, 2008, we issued unsecured convertible promissory
      notes
      in the principal amount of $1,850,000, and warrants to purchase up to 435,292
      shares of common stock of the Company, to four unaffiliated third party
      investors. We received gross proceeds of $1,850,000, less fees of $47,500 of
      the
      purchase price paid and other expenses. The notes mature six months from
      issuance and bear interest at the rate of 12% per annum, payable in full at
      maturity. If at least $25.0 million is not raised by us on or before the
      applicable maturity date, we will have an additional 3 months (extending the
      maturity date) to repay the note holders in full before the notes are in
      default. If the notes are not paid on or before the applicable maturity date,
      we
      will pay the interest rate plus 2% per annum and increasing by 2% per annum
      each
      30 days thereafter until the extended maturity date; provided that in no event
      will the annual interest rate exceed 18%. The note holders will be entitled
      to
      receive 115% of the sum of the original principal and accumulated interest,
      if
      the note holders choose to be repaid in cash on maturity date. The note holders
      will have the option to convert 110% of the repayment amount into shares of
      common stock at $0.70 per share. The note holders will also be paid a monitoring
      fee of 5% of the original principal amount of the note. If the note is not
      paid
      on or before the maturity date (as extended), we will issue to the note holders
      shares of the common stock equal to 5% of the then unpaid portion of the
      original principal amount divided by $0.85, on each of the dates that are 7,
      8
      and 9 months from the date of issuance. The warrants expire 5 years from their
      various dates of issuance, and have an exercise price of $0.85 per share. They
      also contain a cashless exercise provision. The Company believes the securities
      were issued in reliance from exemptions from registration pursuant to Section
      4(2) or Regulation D under the Securities Act.




32
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          of Contents*




*Issuance
      of $2,000,000 Secured Convertible Promissory Note*





On
      July
      25, 2008, we completed a financing pursuant to which the Company issued a
      secured convertible promissory note, in the principal amount of $2,000,000,
      and
      warrants to purchase up to 714,286 shares of our common stock, to Whitebox
      Hedged High Yield Partners, LP, a British Virgin Islands limited partnership.
      We
      received gross proceeds of $2,000,000, less fees of 10% of the purchase price
      paid and other expenses. We intend to use the proceeds as working capital.
      The
      note matures on December 31, 2009 or if the note holder elects to accelerate
      the
      maturity date, July 23, 2009. The note bears interest at the rate of 12 % per
      annum, payable in full at the maturity date.





So
      long
      as any principal or interest remains outstanding under the note, the note holder
      will have the right to participate in debt or equity financings undertaken
      by
      us, up to a maximum of 25% of the amounts raised by us in any such financing,
      on
      the same terms as the other participants of such financing.





We
      may
      prepay the note in whole but not in part from time to time. If we prepay the
      note more than 30 days prior to the maturity date, we have agreed to pay the
      note holder a prepayment fee equal to 25% of the sum of the principal amount
      of
      the note and all accrued and unpaid interest. The note holder will have the
      option to convert all of the unpaid principal and accrued and unpaid interest
      on
      the note plus any prepayment fee, if applicable, into shares of our common
      stock
      at a conversion price of $0.70 per share. Under certain circumstances, such
      as
      in the event of the sale of our securities at a price less than $0.70 per share,
      the conversion price will be subject to adjustment. Upon the occurrence of
      any
      event of default, in addition to all amounts owing to the note holder under
      the
      note becoming due and payable in full, we will pay to the note holder an
      additional sum of $100,000.





The
      warrants have a five-year term and an exercise price of $0.75 per share. The
      warrants also contain certain provisions for the adjustment of the exercise
      price in the event that during the term of the warrants, we sell securities
      below the current exercise price of $0.75. This could result in an exercise
      price of less than $0.75 per share. The warrants also contain a cashless
      exercise provision.





We
      have
      also agreed to provide the note holder with piggyback registration rights,
      pursuant to which we will use our best efforts to register the shares issuable
      upon the conversion of the note and the exercise of the warrants in the event
      that it proposes to register any of its securities under the Securities Act
      of
      1933, prior to July 25, 2010.





The
      note
      is secured by 100% of the shares owned by the Company in its wholly owned U.S.
      subsidiary and its two Peruvian subsidiaries.





The
      Company believes the securities were issued in reliance from exemptions from
      registration pursuant to Section 4(2) or Regulation D under the Securities
      Act.





**Item
      3. Defaults Upon Senior Securities**




None




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




No
      matters were submitted to our stockholders, through the solicitation of proxies
      or otherwise, during the six months ended June 30, 2008.




**Item
      5. Other Information**




We
      entered into an employment agreement with Steven Magami for his services as
      our
      Chairman of the Board of Directors, effective May 15, 2008. The term of the
      agreement is for two years, ending on May 14, 2010, with automatic renewals
      of
      one year periods, subject to termination with 90 days notice by Mr. Magami
      or
      the Company. Pursuant to the terms of the agreement, we have agreed to pay
      Mr.
      Magami an annual salary of $250,000. In addition to his annual salary, Mr.
      Magami will be eligible for a bonus to be determined for each $50,000,000 of
      capital raised by the Company from November 14, 2007 through the term of his
      agreement.




33
 *Table
          of Contents*




**Item
      6. Exhibits**




The
        following is a complete list of exhibits filed as part of the Annual Report
        on
        Form 10-Q, some of which are incorporated herein by reference from the reports,
        registration statements and other filings of the issuer with the Securities
        and
        Exchange Commission, as referenced below:




Exhibit
                Number
            
            Description10.14
            
            Employment
                Agreement by and between Stratos del Peru, S.A.C., a Peruvian corporation
                and Carlos Antonio Salas Vinatea, dated November 5, 2007 and Addendum
                dated January 23, 2008(1)10.15
            
            Employment
                Agreement by and between Stratos del Peru, S.A.C. , a Peruvian corporation
                and Eduardo Aza Santillana, dated October 15, 2007(1)


10.16
            
            Employment
                Agreement by and between Stratos del Peru, S.A.C., a Peruvian corporation
                and Julio Cesar Antonio Alonso, dated November 5, 2007(1)10.22
            
            Escrow
                Account Termination Agreement between Stratos del Peru, S.A.C., a
                Peruvian
                corporation and Gabinete Técnico de Cobranzas S.A.C., a Peruvian
                corporation, dated July 1, 2008(2)10.23
            
            Unsecured
                Convertible Note Purchase Agreement between Stratos Renewables Corporation
                and Gabinete Técnico de Cobranzas S.A.C., a Peruvian corporation, dated
                July 1, 2008(2)10.24
            
            Unsecured
                Convertible Promissory Note issued to Gabinete Técnico de Cobranzas
                S.A.C., a Peruvian corporation by Stratos Renewables Corporation,
                dated
                July 1, 2008(2)10.25
            
            Form
                of Unsecured Convertible Note Purchase Agreement re: $1.8M
                Financing(2)10.26
            
            Form
                of Unsecured Convertible Promissory Note re: $1.8M Financing(2)10.27
            
            Form
                of Warrant re: $1.8M Financing(2)10.28
            
            Secured
                Convertible Promissory Note and Warrant Purchase Agreement between
                Stratos
                Renewables Corporation and Whitebox Hedged High Yield Partners, LP,
                dated
                July 25, 2008(2)10.29
            
            Secured
                Convertible Promissory Note issued to Whitebox Hedged High Yield
                Partners,
                LP by Stratos Renewables Corporation, dated July 25, 2008(2)10.30
            
            Warrant
                issued to Whitebox Hedged High Yield Partners, LP, by Stratos Renewables
                Corporation, dated July 25, 2008(2)31.1
            
            Certifications
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002(1)31.2
            
            Certifications
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002(1)32.1
            
            Certifications
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002(1)32.2
            
            Certifications
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002(1)





(1)
            Filed
                herewith.


(2)
            Filed
                in the Company’s Form 8K, dated August 4,
                2008.




34
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          of Contents*




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**STRATOS
                RENEWABLES CORPORATION**Date:
                August 19, 2008
            
            By:
            /s/
                Carlos Antonio Salas VinateaCarlos
                Antonio Salas Vinatea,Chief
                  Executive OfficerDate:
                August 19, 2008
            
            By:
            /s/
                Julio Cesar AlonsoJulio
                Cesar Alonso,Chief
                Financial Officer




35