U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)


x QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934


For
      the
      quarterly period ended: June
      30, 2007





o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934


For
      the
      transitional period from __________________ to __________________





**Commission
      File No. 000-28543**





**THORIUM
      POWER, LTD.**





(Name
      of
      Small Business Issuer in Its Charter)





NEVADA
            
            91-1975651(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)





8300
                Greensboro Drive, Suite 800
              McLean,
                Virginia 22102
            
            703.918.4904(Address
                of Principal
              Executive
                Office)
            
            (Issuer
                Telephone No. Including
              Area
                Code)





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





Yes x No
o




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





Yes
oNo
x





The
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of August 3, 2007 are as follows:





Class
                of Securities
            
            Shares
                OutstandingCommon
                Stock, $0.001 par value
            
            297,945,650





Transitional
      Small Business Disclosure Format (check one): Yes o No x





**ITEM
      1. FINANCIAL STATEMENTS**









**Thorium
      Power, Ltd.**


**(A
      Development Stage Company)**


**Consolidated
      Balance Sheets**





**(Unaudited)**
            
            **(Audited)****June
                30,**
            
            **December
                31****2007**
            
            **2006****ASSETS****Currrent
                Assets**Cash
                and cash equivalents
            
            $
            7,674,955
            
            $
            10,927,775Prepaid
                expenses & other current assets
            
            
            106,667
            
            
            394,443Total
                Current Assets
            
            
            7,781,622
            
            
            11,322,218Property
                Plant and Equipment -net
            
            
            17,148
            
            
            21,290**Other
                Assets**Patent
                costs - net
            
            
            217,875
            
            
            217,875Security
                deposits
            
            
            2,049
            
            
            2,049Total
                Other Assets
            
            
            219,924
            
            
            219,924**Total
                Assets**
            
            $
            **8,018,694**
            
            $
            **11,563,432****Liabilities
                and Stockholders' Equity****Current
                Liabilities**Current
                portion long term debt
            
            $
            4,516
            
            $
            4,739Accounts
                payable and accrued liabilities
            
            
            571,999
            
            
            1,121,083Other
                current liabilities
            
            
            0
            
            
            347,690Warrant
                liability
            
            
            0
            
            
            1,132,440Total
                Current Liabilities
            
            
            576,515
            
            
            2,605,952Notes
                Payable - long term
            
            
            8,142
            
            
            10,433**Total
                Liabilities**
            
            
            584,656
            
            
            2,616,385Commitments
                and contingencies - note 9**Common
                Stock with Registration Rights**Common
                      Stock subject to continuing registration, $0.001 par value,
                      36,659,837
                      shares issued and outstanding at December 31, 2006 - note
                      6
            
            
            0
            
            
            12,041,373**Stockholders'
                Equity (Deficiency)**Preferred
                stock, $0.001 par value, 50,000,000 authorized shares, no shares
                issued
                and outstanding
            
            
            0
            
            
            0Common
                stock, $0.001par value, 500,000,000 authorized, 297,945,650 shares
                issued
                and 297,095,650 shares outstanding at June 30, 2007 and 257,292,000
                shares
                outstanding at December 31, 2005
            
            
            297,946
            
            
            257,292Additional
                paid in capital - stock and stock equivalents
            
            
            39,754,503
            
            
            23,148,560Deficit
                accumulated during the development stage
            
            
            (32,423,591
            )
            
            (27,177,989
            )Common
                stock reserved for issuance, 1,000,000 shares at June 30, 2007 and
                4,000,000 shares at December 31, 2006
            
            
            350,000
            
            
            1,200,000Accumulated
                other comprehensive income
            
            
            19,518
            
            
            18,861Deferred
                stock compensation
            
            
            (308,489
            )
            
            (285,200
            )Treasury
                stock - 850,000 shares
            
            
            (255,850
            )
            
            (255,850
            )**Total
                Stockholders' Equity (Deficiency)**
            
            
            7,434,038
            
            
            (3,094,326
            )**Total
                Liabilities and Stockholders' Equity (Deficiency)**
            
            $
            **8,018,694**
            
            $
            **11,563,432**


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


4





**Thorium
      Power, Ltd.**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Operations and Comprehensive Loss**


**(Unaudited)**


Six Months Ended
                June 30,
              
              Three
                  Months Ended
                June 30,
              
              Cumulative
                Period from
                January 8, 1992
                (Inception)to
                June 30,2007
              
              2006
              
              2007
              
              2006
              
              2007Revenue:
              
              $
              
              $
              
              $
              
              $
              
              $License
                  revenue
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              624,985Total
                  Revenue
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              624,985Operating
                  ExpensesGeneral
                  and administrative
              
              
              2,793,733
              
              
              346,795
              
              
              1,265,340
              
              
              15,822
              
              
              15,974,363Research
                  and development expenses
              
              
              155,471
              
              
              10,000
              
              
              129,402
              
              
              10,000
              
              
              4,055,960Stock-based
                  compensation
              
              
              2,454,734
              
              
              0
              
              
              1,119,217
              
              
              0
              
              
              13,816,351Total
                  Operating Loss
              
              
              5,403,938
              
              
              356,795
              
              
              2,513,959
              
              
              25,822
              
              
              33,221,689Other
                  (Income) and ExpensesGain
                  on fair value of warrant derivatives
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              (1,902,286
              )Other
                  income/expense
              
              
              (216,936
              )
              
              5,553
              
              
              (104,350
              )
              
              4,687
              
              
              (363,765
              )Stock
                  settlement expense
              
              
              37,160
              
              
              0
              
              
              37,160
              
              
              0
              
              
              129,420Registration
                  right expense
              
              
              21,440
              
              
              0
              
              
              21,440
              
              
              0
              
              
              375,146Warrant
                  expense
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              963,387Contribution
              
              
              0
              
              
              550,000
              
              
              0
              
              
              550,000
              
              
              0Total
                  Other Income and Expenses
              
              
              (158,336
              )
              
              555,553
              
              
              (45,750
              )
              
              554,687
              
              
              (798,098
              )Net
                  Loss
              
              $
              5,245,602
              
              $
              912,348
              
              $
              2,468,209
              
              
              580,509
              
              $
              32,423,591Other
                  Comprehensive Income (Loss)Unrealized
                  Gain Marketable Securities
              
              
              657
              
              
              0
              
              
              (8,063
              )
              
              0Total
                  Comprehensive Loss
              
              $
              5,246,259
              
              $
              912,348
              
              $
              2,476,272
              
              
              580,509Net
                  Loss Per Common Share, Basic and diluted
              
              $
              0.02
              
              $
              0.01
              
              $
              0.01
              
              
              0.01Weighted
                  Average Number of shares outstanding for the period used to compute
                  per
                  share data
              
              
              295,979,377
              
              
              113,079,179
              
              
              296,784,409
              
              
              115,718,996




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


5





**Thorium
      Power, Ltd.**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Cash Flows**


**(Unaudited)**





6 Months Ended
                
                June 30,
            
            Cumulative amounts
                January 8, 1992
                (Inception)2007
            
            2006
            
            to
                June 30, 2007Operating
                ActivitiesNet
                Loss for the period
            
            $
            (5,245,602
            )
            $
            (912,348
            )
            $
            (32,423,591
            )Adjustments
                to reconcile net loss from operations to net cash used in operating
                activities:Shares
                issued for other than cash for payment of expenses
            
            
            2,645,051
            
            
            0
            
            
            14,094,916Gain
                on fair value of warrant liability
            
            
            0
            
            
            0
            
            
            (1,902,286
            )Depreciation
                and Amortization
            
            
            4,142
            
            
            12,926
            
            
            361,353Gain
                or loss on disposition of assets
            
            
            0
            
            
            0
            
            
            86,855Warrant
                Expense
            
            
            0
            
            
            0
            
            
            963,387Settlement
                Expense
            
            
            0
            
            
            0
            
            
            92,260Allocated
                general and administrative expenses - contributed capital
            
            
            0
            
            
            0
            
            
            290,769Changes
                in non-cash operating working capital items:Prepaid
                expenses and other current assets
            
            
            287,776
            
            
            5,290
            
            
            10,717Accounts
                payable, accrued liabilities and other current liabilities
            
            
            (941,672
            )
            
            (464,814
            )
            
            79,296Intercompany
                receivable
            
            
            0
            
            
            (264,741
            )
            
            0Other
                assets
            
            
            0
            
            
            0
            
            
            5,518Net
                Cash (Used In) Operating Activities
            
            
            (3,250,305
            )
            
            (1,623,687
            )
            
            (18,340,806
            )Investing
                ActivitiesPurchase
                of equipment
            
            
            0
            
            
            (4,682
            )
            
            (285,145
            )Proceeds
                from the sale of equipment
            
            
            0
            
            
            0
            
            
            13,583Acquisition
                of patents
            
            
            0
            
            
            (6,664
            )
            
            (411,669
            )Other
                assets
            
            
            0
            
            
            0
            
            
            (7,567
            )Net
                Cash (Used In) Investing Activities
            
            
            0
            
            
            (11,346
            )
            
            (690,798
            )Financing
                ActivitiesProceeds
                from Issue of common shares
            
            
            0
            
            
            2,193,774
            
            
            14,498,016Capitalization
                of Share Issue costs
            
            
            0
            
            
            0
            
            
            (441,553
            )Payments
                on notes payable and other
            
            
            (2,515
            )
            
            (2,383
            )
            
            12,656Proceeds
                of loan - related party
            
            
            0
            
            
            0
            
            
            384,690Repayment
                of loan - related party
            
            
            0
            
            
            (28,430
            )
            
            (239,659
            )Purchase
                of treasury stock
            
            
            0
            
            
            0
            
            
            (255,850
            )Other
            
            
            0
            
            
            0
            
            
            5,850Cash
                acquired in recapitalization of Thorium Power Inc.
            
            
            0
            
            
            0
            
            
            12,742,408Net
                Cash Provided By Financing Activities
            
            $
            (2,515
            )
            $
            2,162,961
            
            $
            26,706,558Net
                Increase In Cash and Cash Equivalents
            
            $
            (3,252,820
            )
            $
            527,928
            
            $
            7,674,955Cash
                and Cash Equivalents, Beginning Of Period
            
            
            10,927,775
            
            
            285
            
            
            0Cash
                and Cash Equivalents, End Of Period
            
            $
            7,674,955
            
            $
            528,213
            
            $
            7,674,955Supplemental
                Disclosure of Cash Flow InformationCash
                paid during the year:Interest
                paid
            
            $
            524
            
            $
            1,253
            
            $
            3,493Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -Non-cash
                transactionsConversion
                of liabilities to equity
            
            $
            1,410,884
            
            $
            4,100
            
            $
            1,514,084




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


6


**Thorium
      Power, Ltd.**


**(A
      Development Stage Company)**


**Notes
      to the Consolidated Financial Statements**




1.  BASIS
      OF PRESENTATION





The
      unaudited financial information of Thorium Power Ltd. (the “Company”) and
      subsidiaries furnished herein has been prepared by the Company pursuant to
      the
      rules and regulations of the Securities and Exchange Commission (the “SEC”) and
      reflects all adjustments, which in the opinion of management are necessary
      to
      fairly state the Company's interim financial position and the results of its
      operations for the periods presented. Certain information and note disclosures
      normally included in financial statements prepared in accordance with GAAP
      have
      been condensed or omitted from these statements pursuant to such rules and
      regulations and, accordingly, this report on Form 10-QSB should be read in
      conjunction with the Company's financial statements and notes thereto included
      in the Company's Form 10-KSB for the fiscal year ended December 31, 2006. The
      Company assumes that the users of the interim financial information herein
      have
      read or have access to the audited financial statements for the preceding fiscal
      year and that the adequacy of additional disclosure needed for a fair
      presentation may be determined in that context. Accordingly, footnote
      disclosure, which would substantially duplicate the disclosure contained in
      the
      Company's Form 10-KSB for the fiscal year ended December 31, 2006, has been
      omitted. The results of operations for the six and three-month periods ended
      June 30, 2007 are not necessarily indicative of results for the entire fiscal
      year ending December 31, 2007.








2.  NATURE
      OF OPERATIONS AND MERGER WITH THORIUM POWER INC.




Radkowsky
      Thorium Power Corp., incorporated in the state of Delaware on January 8, 1992
      (“Inception”), changed its name to Thorium Power, Inc. in Apri1 2001. Thorium
      Power, Inc. is engaged in the development, promotion and marketing of its three
      patented nuclear fuel designs: (1) Thorium/uranium nuclear fuel, (2)
      Thorium/reactor-grade plutonium disposing fuel, and (3) Thorium/weapons-grade
      plutonium disposing fuel. These fuels are designed to be used in existing light
      water reactors. Presently, we are focusing most of our efforts on demonstrating
      and testing our nuclear fuel technology for the Russian designed VVER-1000
      reactors.





Once
      our
      reactor fuels are further developed and tested, we plan to license our
      intellectual property rights to fuel fabricators, nuclear generators, and
      governments for use in commercial light water nuclear reactors, or sell the
      technology to a major nuclear company or government contractor or some
      combination of the two. We anticipate having our technology fully developed
      for
      VVER-1000 reactors and our fuel tested in a VVER-1000 operating reactor by
      the
      end of 2010. Presently all our research, testing and demonstration activities
      are being conducted in Russia. Our research operations are subject to various
      political, economic, and other risks and uncertainties inherent in
      Russia.





Our
      nuclear fuel process is dependent on the ability of suppliers of the mineral
      thorium, to provide it to our future customers on a timely basis and also on
      favorable pricing terms. The loss of certain principal suppliers of thorium
      or a
      significant reduction in thorium availability from principal suppliers could
      have a material adverse effect on the future operating results of the
      Company.




7





We
      participate in a highly regulated industry that is characterized by governmental
      regulation. Our results of operations are affected by a wide variety of factors
      including general economic conditions, decreases in the use or public favor
      of
      nuclear power, the ability of our technology, the viability to safeguard the
      production of nuclear power and safeguarding our patents and intellectual
      property from competitors. Due to these factors, we may experience substantial
      period-to-period fluctuations in our future operating results.





Operations
      to date have been devoted primarily to continued development of our fuel
      designs, filing for certain patents relating to our technology, developing
      strategic relationships within the nuclear industry, securing political and
      some
      financial support from the United States and Russian governments, and
      administrative functions. We, therefore, based on our current operations,
      prepare our accompanying consolidated financial statements as a Development
      Stage Enterprise.





3.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





a)
      Consolidation




These
      financial statements include the accounts of Thorium Power, Ltd. (a Nevada
      corporation) and our wholly-owned subsidiary, Thorium Power, Inc. (a Delaware
      corporation).





On
      October 6, 2006, a merger took place between Thorium Power, Ltd. and Thorium
      Power, Inc. For financial reporting purposes, this merger transaction was
      recorded as a recapitalization of Thorium Power, Inc. , whereby Thorium Power,
      Inc. is deemed to be the continuing surviving entity for accounting purposes,
      but through reorganization, has deemed to have adopted the capital structure
      of
      Thorium Power, Ltd. Accordingly, all references to common shares of Thorium
      Power Inc.’s common stock have been restated to reflect the equivalent number of
      Thorium Power, Ltd.’s common shares.




All
      significant intercompany transactions and balances have been eliminated in
      consolidation.




b)
      Use of
      Estimates




The
      preparation of 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 disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenue and expenses
      during the reporting period. Actual results could differ from those
      estimates.





These
      consolidated financial statements include some amounts that are based on
      management's best estimates and judgments. The most significant estimates relate
      to valuation of stock grants, stock options and stock purchase warrants, and
      various contingent liabilities. These above-mentioned estimates and others
      may
      be adjusted as more current information becomes available, and any adjustment
      could be significant in future reporting periods.




8




c)
      Prior
      Year Reclassifications




Certain
      reclassifications have been made to our prior years' financial statements in
      order to conform to the current year presentation. On our Statement of
      Operations, certain general and administrative expenses were combined into
      the
      one expense caption called general and administrative expenses. These
      reclassifications had no effect on previously reported results of operations
      or
      accumulated deficit of Thorium Power, Inc.





d)
      Warrants – Adoption of New Accounting Pronouncement




Warrants
      issued in conjunction with equity financing were accounted for under the
      Emerging Issues Task Force FSP (“EITF”) Issue No. 00-19, `Accounting for
      Derivative Financial Instruments Indexed to and Potentially Settled in a
      Company's Own Stock'. In December 2006, the FASB approved FSP EITF 00-19-2
      Accounting for Registration Payment Arrangements, which establishes the standard
      that contingent obligations to make future payments under a registration rights
      arrangement shall be recognized and measured separately in accordance with
      Statement 5 and FASB Interpretation No. 14, Reasonable Estimation of the
      Amount of a Loss. The Company has evaluated the effect of how FSP EITF 00-19-2
      and FSP EITF Topic D-98 affected these accompanying financial statements. The
      adoption of FSP EITF 00-19-2 accounting pronouncement on January 1, 2007 changed
      the classification of the warrant liability, total $1,132,440 at January 1,
      2007, to stockholders’ equity (additional paid in capital).





4.  Financial
      Status and Going Concern Considerations - June 30, 2007




Management
      anticipates, based on its current projected working capital requirements, that
      it will have enough working capital funds to sustain its current operations
      at
      its current operating level, until sometime during the first calendar quarter
      of
      2008. The Company will therefore need to raise additional capital in 2007,
      either by having future issuances of its stock or incurring debt in 2007 in
      order to provide the additional working capital funds required to continue
      its
      operations into 2008 and beyond.





5.  Research and
      Development Costs





Research
      and development costs, amounted to $ 155,471 and $10,000 for the six months
      ended June 30, 2007 and 2006 respectively, and $129,402 and $10,000 for the
      three months ended June 30, 2007 and 2006 respectively, and $4,055,960 from
      January 8, 1992 (Inception) to June 30, 2007





6.
      Stockholders' Equity





Total
      Common stock outstanding at June 30, 2007 was 297,095,650. There were also
      850,000 shares that were held as Treasury stock at June 30, 2007, bringing
      the
      total number of shares issued to 297,945,650. At June 30, 2007, there were
      21,779,544 stock purchase warrants and 33,869,910 stock options outstanding,
      all
      totaling 352,745,104 of total stock and stock equivalents outstanding June
      30,
      2007.





a).
      Common Stock Issued With Registration Rights - Temporary Equity Reclassified
      to
      Permanent Equity at June 30, 2007





On
      May 4,
      2006, the Company completed a private placement with certain investors in which
      it sold an aggregate of 36,659,837 units, consisting of 36,659,837 shares of
      its
      restricted common stock and 18,329,98 common stock purchase warrants for
      $15,580,431. Each unit consists of one share of common stock and one-half of
      a
      share purchase warrant. Each whole warrant entitles the holder of the warrant
      to
      acquire one additional share of common stock at a price of $0.65 per share
      and
      expires twelve months from the closing date of the subscription expiration
      date
      or term subsequently extended 6 months.




9





Under
      the
      terms of the sale, the investors were granted registration rights in which
      the
      Company agreed to timely file a registration statement to register the common
      shares and the shares underlying the warrants, obtain effectiveness of the
      registration statement by the SEC on or before September 1, 2006, and maintain
      the effectiveness of this registration statement for a pre-set time thereafter.
      In the event the Company failed to timely perform under the registration rights
      agreement, the Company agreed to pay the investors liquidated damages in an
      amount equal to 2% of the aggregate amount invested by the investors for each
      30-day period or pro rata for any portion thereof following the date by which
      the registration statement should have been effective. The initial registration
      statement was timely filed, however it was not declared effective by the SEC
      within the allowed time. Accordingly, the Company was liable to the investors
      for liquidated damages under the registration rights agreement.




The
      EITF
      is currently reviewing the accounting for securities with liquidated damages
      clauses as stated in EITF 05-04, The Effect of a Liquidated Damages Clause
      on a
      Freestanding Financial Instrument subject to EITF 00-19. There are currently
      several views as to how to account for this type of transaction and the EITF
      has
      not yet reached a consensus. In accordance with EITF 00-19, Accounting for
      Derivative Financial Instruments Indexed To, and Potentially Settled in the
      Company's Own Stock, and EITF 05-04, because of the potential liquidated damages
      for failure to obtain and maintain an effective registration statement is
      substantial, the value of the common stock subject to such registration rights
      should be classified as temporary equity. Additionally, in accordance with
      EITF
      00-19 and the terms of the above warrants, the fair value of the warrants was
      recorded as a liability, with an offsetting reduction to shareholders' equity.
      The warrant liability is initially measured at fair value using the Black
      Scholes option pricing model, and was then re-valued at each reporting date,
      with changes in the fair value reported as non-cash charges or credits to
      earnings reported as gain/loss on fair value of warrant
      derivatives.




The
      SEC
      concluded that under EITF 00-19, common stock and warrants subject to
      registration rights where significant liquidated damages could be required
      to be
      paid to the holder of the instrument in the event the issuer fails to maintain
      the effectiveness of a registration statement for a preset time period, the
      common stock subject to such liquidated damages does not meet the tests required
      for shareholders' equity classification, and accordingly must be reflected
      between liabilities and shareholders' equity in the balance sheet until the
      conditions are eliminated. In analyzing instruments under EITF 00-19, the
      likelihood or probability related to the failure to maintain an effective
      registration statement is not a factor.





Based
      on
      the above interpretation, as of May 4, 2006, the Company classified $12,041,373
      for the value of common stock subject to registration rights as temporary equity
      instead of shareholders' equity. In addition, the Company measured the initial
      fair value of the warrants on May 4, 2006 at $3,539,058 and classified at that
      date the fair value of the warrants as warrant liability instead of
      shareholders' equity.




10




At
      the
      end of each reporting period, the value of these warrants was re-measured based
      on the fair value of the underlying shares, and changes to the warrant liability
      and related “gain or loss in fair value of the warrants” was recorded as a
      non-cash charge or credit to earnings. The warrant liability was reclassified
      to
      shareholders' equity when the Company adopted a new accounting pronouncement
      FSP
      EITF 00-19-2 as mentioned above in 2007.





The
      SEC
      has recently issued further guidance on EITF Topic No. D-98 (financial statement
      classification of securities issued between permanent equity and temporary
      equity), and this SEC staff guidance specifically mentions that registration
      payment arrangements are considered to be a separate unit of account, and these
      registration payment arrangements are now accounted for in accordance with
      FASB
      Staff Position FSP EITF 00-19-2 as a contingent obligation and not part of
      the
      classification of equity. Therefore the SEC staff has generally concluded that
      the classification of financial instruments between permanent equity and
      temporary equity should not take into account the registration payment
      arrangement. The Company has no registration payment liabilities as of June
      30,
      2007. Based on the above, the Company classified $12,041,373 for the value
      of
      common stock subject to registration rights as permanent equity instead of
      temporary equity at June 30, 2007.





b)
      Share-based Compensation





The
      Company has in place a stock-based compensation plan to reward for services
      rendered by officers, directors, employees and consultants. On July 17, 2006,
      the Company amended this stock plan. The Company has reserved 75,000,000 shares
      of common stock of its unissued share capital for the stock plan. Other
      limitations are as follows:




i).
            No
                more than 37,500,000 options can be granted for the purchase of restricted
                common shares.




ii).
            No
                more than 8,000,000 options can be granted to any one
                person.




iii).
            No
                more than 5,000,000 options can be granted to any one person for
                the
                purchase of restricted common
                shares.





On
      January 1, 2006, the Company adopted FAS-123R. In March 2005, the SEC staff
      expressed their views with respect to FAS-123R in Staff Accounting Bulletin
      No.
      107, Share-Based Payment (“SAB 107”). SAB 107 provides guidance on valuing
      options. Prior to January 1, 2006, the Company accounted for share-based
      payments under the recognition and measurement provisions of APB Opinion No.
      25,
      Accounting for Stock Issued to Employees (“APB 25”), and related
      Interpretations, as permitted by FAS-123. In accordance with APB 25, no
      compensation cost was required to be recognized for options granted that had
      an
      exercise price equal to the market value of the underlying common stock on
      the
      date of grant. The Company adopted FAS-123R using the
      modified-prospective-transition method. Under that transition method,
      compensation cost recognized in future interim and annual reporting periods
      includes: a) compensation cost for all share-based payments granted prior to,
      but not yet vested as of January 1, 2006, based on the grant-date fair value
      estimated in accordance with the original provisions of FAS-123, and b)
      compensation cost for all share-based payments granted subsequent to January
      1,
      2006, based on the grant-date fair value estimated in accordance with the
      provisions of FAS-123R.




11




The
      adoption of FAS-123R had no effect on cash flow from operations or cash flow
      from financing activities for the three months ended June 30, 2007. FAS-123R
      requires the cash flows from tax benefits resulting from tax deductions in
      excess of the compensation cost recognized for those options (“excess tax
      benefits”) to be classified as financing cash flows. Prior to the adoptions of
      FAS-123R, excess tax benefits would have been classified as operating cash
      inflows. The Company has not recognized, and does not expect to recognize
      in the near future, any tax benefit related to stock-based compensation costs
      as
      a result of the full valuation allowance on our net operating loss carry
      forwards.





The
      Company recognizes share-based compensation expense for all service-based awards
      with graded vesting schedules on a straight-line basis over the requisite
      service period for the entire award. Initial accruals of compensation expense
      are based on the estimated number of shares for which requisite service is
      expected to be rendered. Estimates are revised if subsequent information
      indicates that forfeitures will differ from previous estimates, and the
      cumulative effect on compensation cost of a change in the estimated forfeitures
      is recognized in the period of the change.





For
      awards with service conditions and graded vesting that were granted prior to
      the
      adoption of FAS-123R, the Company estimates the requisite service period and
      the
      number of shares expected to vest and recognize compensation expense for each
      tranche on a straight-line basis over the estimated requisite service period
      of
      the award or over a period ending with an employee's eligible retirement date,
      if earlier. Adjustments to compensation expense as a result of revising the
      estimated requisite service period are recognized prospectively.





Total
      stock options outstanding at June 30, 2007 were 33,869,910 and 16,269,922 of
      these total options were vested at June 30, 2007.





Stock
      option transactions to the employees, directors, advisory board members and
      consultants are summarized as follows:





June
                30, 2007**Stock
                Options Outstanding**Outstanding –
                Beginning of Period
            
            
            34,578,993Issued
            
            
            5,686,412Expired
            
            
            (6,395,495
            )Forfeited
            
            
            -Outstanding
                end of the period
            
            
            33,869,910Options
                excercisable at the end of the period
            
            
            16,269,922




The
      above
      table includes options issued and outstanding as of June 30, 2007 from Thorium
      Power, Ltd. as follows:





i).
            A
                total of 4,700,000 non-qualified 10 year options have been issued
                by
                Thorium Power, Ltd., to advisory board members at exercise prices
                of $0.25
                to $0.64 per share.




12




ii).
            A
                total of 6,000,000 non-qualified 5 year options have been issued
                to
                advisory board members.




iii).
            A
                total of 17,403,654 non-qualified 2 year, 5 year and 10 year options
                have
                been issued to directors and officers of the Company, at exercise
                prices
                of $0.30 to $0.80 per share. From this total, 7,200,000 options were
                issued to Chief Executive Officer who is also a director, on February
                14,
                2006, with a remaining contractual life of 8.8 years. On January
                16, 2007
                our Chief Executive Officer was issued 1,486,412 options to replace
                the
                same number of stock options he was granted from Thorium Power, Inc,
                prior
                to the merger, that were expiring January 2007. The exercise price
                of
                these options was increased from its original strike price of $0.39
                per
                share to $0.50 per share with a new contractual life of 2 years.
                Also from
                the total options cited above, 1 million options were issued to our
                Chief
                Operating Officer, pursuant to an employment agreement, on February
                1,
                2007 at an exercise price of $0.35 per share, vesting over 4 years
                with
                the first 6 months vesting on August 1, 2007, with a contractual
                term of
                10 years.





The
      following table provides certain information with respect to the
      above-referenced stock options that are outstanding and exercisable at June
      30,
      2007:





Stock Options Outstanding
            
            Stock Options Vested**Exercise Prices**
            
            **Number of**
              **Awards**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life – Years**
            
            **Number of**
              **Awards**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$0.16
                - $0.25
            
            
            8,266,256
            
            
            5.08
            
            
            6,432,924
            
            $
            0.18$0.30-$0.39
            
            
            3,192,242
            
            
            5.94
            
            
            1,010,299
            
            $
            0.33$0.45-$0.51
            
            
            13,211,412
            
            
            5.92
            
            
            5,593,363
            
            $
            0.48$0.64-$0.80
            
            
            9,200,000
            
            
            8.68
            
            
            3,233,336
            
            $
            0.77Total
            
            
            33,869,910
            
            
            6.15
            
            
            16,269,922
            
            $
            0.47





Assumptions
      used in the Black Scholes option-pricing model are as follows:





The
      aggregate intrinsic value of stock options outstanding at June 30, 2007 was
      $
      790,016 of which $ 735,016 relates to vested awards. Intrinsic value is
      calculated based on the difference between the exercise price of the underlying
      awards and the quoted price of our common stock as of the reporting date ($0.28
      per share as of June 30, 2007)





**June
                30, 2007**Average
                risk-free interest rate
            
            
            4.18%
                - 4.45%Average
                expected life
            
            
            5
                yearsExpected
                volatility
            
            
            96%
                - 275%Expected
                dividends
            
            
            0%




13




During
      the six and three months ended June 30, 2007, $ 2,454,734 and $ 1,119,217
      respectively was recorded as stock-based compensation expense in the statement
      of operations. The result of all the above stock option grants included in
      stock-based compensation in the statement of operations, totaled $2,128,023
      and
      $951,000 respectively, for the six and three months ended June 30, 2007
      (non-deductible for tax purposes, may provide a tax deduction for the Company
      when exercised). Stock compensation to executive officers totaled $29,167.
      This
      compensation was recorded as a result of the issuance of 1 million shares of
      restricted stock to the Company’s new Chief Operating Officer, pursuant to an
      employment agreement entered into effective February 1, 2007. These shares
      vest
      monthly over a 36 month period and the exercise price was $0.35 per share on
      the
      date of the agreement. This stock issuance resulted in a total stock
      compensation expense of $350,000, to be recognized over a 36 month period
      starting February 1, 2007. For the six and three months ended June 30, 2007,
      $48,611 and $19,444 respectively of this total compensation amount was
      recognized as stock compensation expense and the remaining amount $301,389
      was
      recorded as deferred stock compensation, a contra equity account on the balance
      sheet. [Some stock volatility factors used by the Company for five option grants
      in its fiscal year ended June 30, 2006 were calculated for Black Scholes using
      the term of the option, which is general practice, as opposed to using the
      announcement date of the merger, January 5, 2006, which was later determined
      to
      be a more applicable date range, as the announcement date was the date the
      stock
      market reflected the merger in the valuation of the Company's stock. This
      difference in these volatility factors for these five option grants is not
      material to these financial statements, therefore, no current adjustment to
      the
      volatility factors was made to these financial statements for these five option
      grants and we have decided to continue to use these factors for future expense
      recognition of options under SFAS #123R.




c).
      Warrants





At
      June
      30, 2007, there were 21,779,544 warrants outstanding.





At
      June
      30, 2007 the range of warrant prices for shares under warrants and the
      weighted-average remaining contractual life are as follows:




**Warrants Outstanding**
              **and Exercisable****Warrants -
                Exercise Price**
            
            **Number of**
              **Warrants**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life – Years**$0.39
            
            
            1,345,460
            
            
            0.65$0.50
                (Assumed from Thorium Power Ltd.)
            
            
            2,104,166
            
            
            0.25$0.65
                (Assumed from Thorium Power Ltd.)
            
            
            18,329,918
            
            
            0.35Total
            
            
            21,779,544
            
            
            0.36




14




The
      investors in the March 30, 2006 and May 4, 2006 private placements received
      detachable warrants for the purchase of 2,104,166 and 18,329,918 shares of
      common stock, respectively, which were valued at $281,117 and $3,539,058,
      respectively. For purposes of estimating the intrinsic fair value of each
      warrant as of dates of the private placements, the Company utilized the Black
      Scholes option-pricing model. The Company estimated the fair value of the
      warrants assuming no expected dividends and the following weighted-average
      assumptions:





**June
                30, 2007**Average
                risk-free interest rate
            
            
            2.86%
                - 4.30%Average
                expected life
            
            
            1
                yearExpected
                volatility
            
            
            142%
                - 153%Expected
                dividends
            
            
            0%






d).
      Common Stock and Warrants reserved for Future Issuance





Common
      stock and warrants reserved for future issuance consists of:





**Shares
                  of**
                **Common**
                **Stock**
            
            **Stock**
                **Purchase**
                **Warrants**
            
            **Amount**Stock-based
                Compensation
            
            
            1,000,000
            
            
            0
            
            $
            350,000




7.  Income
      Taxes





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities recognized for financial reporting
      and the amounts recognized for income tax purposes. The significant components
      of deferred tax assets (at a 40% effective tax rate) as of June 30, 2007 are
      as
      follows:





Total
              Amount
            
            Deferred
              Tax
                Asset
              Amount**Assets**Stock-based
                compensation
            
            
            4,472,034
            
            
            1,788,814Approximate
                net operating loss
            
            
            27,914,397
            
            
            11,165,759Less:
                valuation allowance
            
            
            (32,386,431
            )
            
            (12,954,573
            )$
            -
            
            
            -





Management
      believes that it is more likely than not that the forecasted taxable income
      will
      not be sufficient to utilize the tax carryforwards of approximately $27,914,397,
      before its expiration in 2012 to and 2027 to fully recover the asset. As a
      result, the amount of the deferred tax assets considered realizable was reduced
      100% by a valuation allowance. In the near term, if estimates of future taxable
      income are increased, such an increase will change the valuation allowance.
      The
      Company has no other deferred tax assets or liabilities. The Company will also
      be subject to limitations under Internal Revenue Code Section 382 regarding
      the
      use of its net operating loss carryforwards in future tax years.





8.  Research
      Agreement




The
      Company has recently reached an agreement with Federal State Unitary Enterprise
      “Red Star”, a Russian government owned entity, on all terms of a contract
      whereby Thorium Power's seed and blanket fuel designs will undergo further
      irradiation testing with the goal of moving toward deployment within full-sized
      commercial reactors. The Company is also working on finalizing a
      Cooperative Research Agreement and a Joint Venture agreement with Red Star.
      These agreements are subject to approval by the Russian Federal Agency for
      Atomic Energy (RosAtom), which the Company expects to be completed during 2007.




9.  Commitments
      and Contingencies





Firm
      Price Commitments




15


The
      Company entered into a firm price commitment agreement with the University
      of
      Texas of the Permian Basin (“UTPB”), in connection with its participation in the
      pre-conceptual design phase for the construction of a high-temperature test
      and
      research reactor in Texas. The agreement had created a commitment by the Company
      for a minimum of $1.25 million financial contribution toward the project. A
      minimum payment of $50,000 on the agreement was due and paid on February 22,
      2006, with 10 additional conditional contributions totaling $1.2 million due
      by
      December 31, 2006. A total of $550,000 has been paid as of December 31, 2006
      and
      these amounts were recorded as donations, under the caption general and
      administrative expenses.




The
      terms
      of this agreement allow either party to terminate the agreement at any time
      upon
      giving written notice of termination. The Company, after having further detailed
      discussions with UTPB regarding the use of the $550,000 donations that were
      made
      to UTPB in 2006 and the terms of the agreement, it was understood between the
      parties that if future donations were to be given, they would be given at the
      discretion of Thorium Power based on the future use of these funds. 
Therefore, it is management's assessment and opinion, that under the terms
      of
      this agreement, the Company has no further obligations to fund the additional
      $675,000 to UTPB project; any future funding will be made at the discretion
      of
      Thorium Power, subject to the condition that the proceeds are directed by UTPB
      to the Company’s nuclear research or other development work related to its
      Thorium based fuel designs, as agreed to by the parties.




COMMITMENTS
      AND CONTRACTUAL OBLIGATIONS





The
      Company has employment agreements with its executive officers, the terms of
      which expire at various times. Such agreements provide for minimum compensation
      levels, as well as incentive bonuses that are payable if specified management
      goals are attained. Under each of the agreements, in the event the officer's
      employment is terminated (other than voluntarily by the officer or by the
      Company for cause or upon the death of the officer), the Company, if all
      provisions of the employment agreements are met, is committed to pay certain
      benefits, including specified monthly severance.




16


**FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report on Form 10-QSB contains forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,”
“project,” “target,” “optimistic,” “intend,” “aim,” “will” or similar
      expressions are intended to identify forward-looking statements. Such statements
      include, among others, those concerning our expected financial performance
      and
      strategic and operational plans, as well as all assumptions, expectations,
      predictions, intentions or beliefs about future events. These statements are
      based on the beliefs of our management as well as assumptions made by and
      information currently available to us and reflect our current view concerning
      future events. As such, they are subject to risks and uncertainties that could
      cause our results to differ materially from those expressed or implied by such
      forward-looking statements. Such risks and uncertainties include, among many
      others: our significant operating losses; our limited operating history;
      uncertainty of capital resources; the speculative nature of our business; our
      ability to successfully implement new strategies; present and possible future
      governmental regulations; operating hazards; competition; the loss of key
      personnel; any of the factors in the “Risk Factors” section of the Company’s
      Annual Report on Form 10-KSB; other risks identified in this Report; and any
      statements of assumptions underlying any of the foregoing. You should also
      carefully review other reports that we file with the SEC. The Company assumes
      no
      obligation and does not intend to update these forward-looking statements,
      except as required by law.





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**





*The
      following analysis discusses changes in the financial condition and results
      of
      operations of Thorium Power, Ltd. and it’s subsidiary, Thorium Power, Inc., at
      and for the six months ended on June 30, 2007 and 2006, and should be read
      in
      conjunction with our unaudited consolidated financial statements and the notes
      thereto.*





***General
      Overview***





On
      October 6, 2006, we acquired Thorium Power, Inc. through a merger transaction.
      Thorium Power, Inc. has patented proprietary nuclear fuel designs for potential
      future use in existing commercial nuclear power plants. The merger was accounted
      for as a reverse merger and Thorium Power, Inc. is being treated as the
      accounting acquiror.




We
      are a
      development stage company. We are primarily engaged in the development of
      proprietary nuclear fuel designs which we intend ultimately to introduce for
      sale into three markets: (1) nuclear fuel designs for use in commercial nuclear
      power plants, (2) nuclear fuel designs for reactor-grade plutonium disposition,
      and (3) nuclear fuel designs for weapons-grade plutonium disposition. These
      fuel
      designs are primarily for use in existing or future VVER-1000 light water
      reactors. We have also been conducting research and development relating to
      a
      variant of these nuclear fuel designs for use in existing pressurized water
      reactors (PWR).




Our
      future customers may include nuclear fuel fabricators and/or nuclear power
      plants, and/or the U.S. or foreign governments.




To
      date,
      our operations have been devoted primarily to the development and demonstration
      of our nuclear fuel designs, developing strategic relationships within and
      outside of the nuclear power industry, securing political and financial support
      from the U.S. and Russian governments, the filing of patent applications and
      related administrative functions. We do not currently have any revenues from
      our
      activities in this area and expect that we will not generate licensing revenues
      from this business for several years, until our fuel designs can be fully tested
      and demonstrated and we obtain the proper approvals to use our nuclear fuel
      designs in nuclear reactors. Future revenues could be generated through the
      licensing of our technology and also by providing other services in the nuclear
      power industry. Accordingly, we prepare our financial statements as a
      development stage company in accordance with FASB Statement No. 7, “Accounting
      and Reporting by Development Stage Enterprises.”




17




***Material
      Opportunities and Challenges***




We
      believe that a major opportunity for us is the possibility that our fuel
      designs, which are currently in the research and development stage, will be
      used
      in the manufacturing of nuclear fuel utilized in many existing light water
      nuclear reactors. Light water reactors are the dominant reactor types currently
      in use in the world and fuels for such reactors constitute the majority of
      the
      commercial market for nuclear fuel. Our focus is on three different types,
      or
      variants, of thorium fuel designs. The first is designed to provide reactor
      owner-operators with an economically viable alternative fuel that will not
      generate weapons-usable plutonium in the spent fuel. The second is designed
      to
      dispose of reactor-grade plutonium that has been extracted from spent fuel
      from
      commercial rectors and stockpiled in Russia, Western Europe, the U.S., Japan
      and
      other countries. The third is designed to dispose of weapons-grade plutonium
      that is stockpiled in Russia and the United States. All three of these fuel
      variants are expected to have additional benefits, including reduced volume
      and
      reduced long-term radio-toxicity of spent fuel for the same amount of
      electricity generated, as compared with the uranium fuels that are currently
      used in light water reactors and as compared with mixed
      oxide (MOX) fuel, a mixture of uranium oxide and recovered plutonium oxide
      which
      is a recycling technology used by a small number of nuclear power
      plants.




Our
      nuclear fuel designs have never been demonstrated in a full-size commercial
      reactor. Our planned demonstration of the fuels in a VVER-1000 reactor in Russia
      would provide operating experience that is critical to reactor owners and
      regulatory authorities. We believe that once the fuels have been demonstrated
      in
      the VVER-1000 reactor, this can help convince other light water reactor
      operators around the world to accept our thorium fuel designs.




We
      believe that our greatest challenge will be acceptance of these fuel designs
      by
      nuclear power plant operators, which have in the past been hesitant to be the
      first to use a new type of nuclear fuel. In addition, our fuel designs would
      require regulatory approval by relevant nuclear regulatory authorities, such
      as
      the Nuclear Regulatory Commission in the United States or its equivalent
      agencies in other countries, before they can be used in commercial reactors.
      The
      regulatory review process, which is outside of our control, may take longer
      than
      expected and may delay a rollout of the fuel designs into the market. Management
      believes that demonstration of one of the Company’s fuel designs in a commercial
      nuclear reactor would make deployment of the other designs easier due to the
      many similarities that exist among all of our fuel designs.





***Plan
      of Operation***





At
      June
      30, 2007, our total assets were approximately $8,018,694 of which $7,674,955
      was
      cash. Liabilities as of June 30, 2007 totaled approximately $584,656. We had
      a
      working capital surplus of $7,205,107 at June 30, 2007.





Management
      presently expects that our present working capital will meet our
      foreseeable working capital needs for the next 8 to 10 months from the date
      of
      this filing of the Form 10-QSB. Our current average monthly projected working
      capital requirements, excluding the $5 million of research and development
      expenses we expect to incur in Russia over the next 12-15 months, as mentioned
      below, is approximately $500,000 per month (including approximately $100,000
      per
      month for payroll and payroll-related fringe benefits). We will need to raise
      additional capital by way of an offering of equity securities, an offering
      of
      debt securities, or by obtaining financing through a bank or other entity
      sometime in 2007 in order to insure we have the necessary working capital
      available to continue our operations in 2008. That financing, however, may
      not
      be available or we may not be able to obtain that financing on terms acceptable
      to us. If additional funds are raised through the issuance of equity securities,
      there may be a significant dilution in the value of our outstanding common
      stock.




Over
      the
      next 12-15 months we expect to incur approximately $5 million in research and
      development expenses related to the development of our proprietary nuclear
      fuel
      designs. Of the $5 million, the cost of seed and blanket fuel fabrication
      equipment that would be purchased and used to fabricate trial seed and blanket
      fuel rods is expected to be approximately $2 million and the cost of nuclear
      materials used in fabrication of trial seed and blanket fuel rods is estimated
      at about $850,000. We expect to incur these expenses after we have reached
      a
      formal agreement with Russian nuclear entities that will grant us licensing
      and
      other rights to use such technologies or intellectual property developed by
      the
      Russian entities. Any such agreement would require formal review and approval
      by
      the Russian Federal Agency for Atomic Energy (RosAtom). We expect this agreement
      to be finalized and submitted for formal approval to RosAtom within the next
      several months and these research expenses to be in the range of approximately
      $2 million to $2.5 million for fiscal 2007, but it is possible that such
      expenses could be less or more than those amounts. We spent approximately
      $35,000 for research and development in 2006 and $155,471 for the six months
      ended June 30, 2007.




18




Over
      the
      next 3 years, we expect that our research and development activities will be
      primarily focused on testing and demonstration of our thorium/uranium and
      thorium/reactor-grade plutonium disposing fuel designs. The main objective
      of
      this research and development phase is to prepare for full-scale demonstration
      of our nuclear fuel technology in an operating commercial VVER-1000 reactor
      in
      Russia. Key research and development activities will include: (1) Scaling up
      the
      fuel fabrication process to full length (10 feet) rods used in commercial
      VVER-1000 reactors, (2) Validating thermal hydraulic performance of full size
      (10 feet) seed and blanket fuel assembly, (3) Performing post-irradiation
      examination of seed and blanket fuel samples that have been irradiated in a
      research reactor to confirm fuel performance, and (4) Obtaining final regulatory
      approvals for insertion of fuel in VVER-1000 commercial reactors. As this
      research and development program relates to commercial applications of our
      fuel
      technology and retaining ownership or control over as much key intellectual
      property as we possibly can is critical to the long-term success of our
      licensing business model, our plan is to fully fund these research and
      development activities ourselves. At the same time, we do not currently plan
      to
      fund research, testing and demonstration of our thorium/weapons-grade plutonium
      disposing fuel, which can only be used in the U.S.-Russia
      government-to-government weapons-grade plutonium disposition program and has
      no
      commercial applications. Hence, funding for any future research and development
      activities on this fuel design would have to be provided by the U.S. government
      or other stakeholders.





Additionally,
      we anticipate increasing our payroll and related fringe benefits costs in our
      fiscal year ended December 31, 2007, as we are looking to hire a permanent
      Chief
      Financial Officer in 2007 to add to our management team.




***Results
      of Operations***





Six
      Months Ended June 30, 2007





We
      had no
      revenues during the six months ended June 30, 2007.





Our
      total
      operating expenses for the six months ended June 30, 2007 were
      $5,403,938 **** consisting
      of:





·
            $2,454,734
                of stock based compensation;


·
            $1,185,030****in
                professional fees consisting of


o
            $320,625
                of legal fees


o
            $387,696
                of public and government relations


o
            $138,678
                of audit and accounting fees


o
            $338,031
                of other professional and consulting
                fees


·
            $779,562****of
                payroll and payroll related
                expenses


·
            $155,471
                of research and development
                expenses;


·
            $829,141****in
                other general and administrative
                expenses.





Other
      income and expense was $158,336 of net other income for the six months ended
      June 30, 2007. This consists primarily of interest income earned of $216,936.





Our
      net
      loss was $5,245,602 and $912,348 **** for
      the
      six months ended June 30, 2007 and 2006, respectively. Our cumulative loss
      from
      January 8, 1992 to June 30, 2007 was $32,423,591.





19





Six
      Months Ended June 30, 2006





We
      had no
      revenues in 2006.





Our
      total
      operating expenses for the six months ended June 30, 2006 was
      $356,795 **** consisting
      of:





·
            $10,000
                of research and development expenses


·
            $346,795
                in other general and administrative expenses consisting of


o
            $147,400****of
                payroll and payroll related
                expenses


o
            $306,822
                of professional fees


o
            $10,000
                of research and development
                expenses


o
            $147,314
                of other general and administrative expenses


o
            The
                above increases were offset by an allocation of these expenses to
                Thorium
                Power Ltd. by Thorium Power Inc., for expenses incurred on behalf
                of
                Thorium Power Ltd. by Thorium Power Inc. prior to the merger on October
                6,
                2006, total of $264,741





Other
      income and expense was $555,553 of net other expenses for the six months ended
      June 30, 2006. This consists primarily of contributions made to the University
      of Texas of the Permian Basin of $550,000 and $4,500 of foreign currency
      translation loss.





Three
      Months Ended June 30, 2007





We
      had no
      revenues during the three months ended June 30, 2007.





Our
      total
      operating expenses for the three months ended June 30, 2007 were
      $2,513,959 **** consisting
      of:





·
            $1,119,217
                of stock based compensation;


·
            $640,455****in
                professional fees consisting of


o
            $252,000
                of legal fees


o
            $200,381
                of public and government relations


o
            $58,477
                of audit and accounting fees


o
            $129,597
                of other professional and consulting
                fees


·
            $301,882****of
                payroll and payroll related
                expenses


·
            $129,402
                of research and development
                expenses


·
            $323,003****in
                other general and administrative
                expenses.





Other
      income and expense was $45,750 of net other income for the three months ended
      June 30, 2007. This consists primarily of interest income earned of $104,350.
      Our net loss was $2,468,209 and $580,509 for the three months ended June 30,
      2007 and 2006, respectively.




Three
      Months Ended June 30, 2006





We
      had no
      revenues during the three months ended June 30, 2006.





Our
      total
      operating expenses for the three months ended June 30, 2006 was
      $25,822 **** consisting
      of:





·
            $10,000****of
                research and development expenses;
                and


·
            $15,822****of
                general and administrative
                expenses.




***Liquidity
      and Capital Resources***




As
      of
      June 30, 2007 and December 31, 2006, we had cash and cash equivalents of $
      7,674,955 **** and
      $10,927,775, respectively. During the quarter ended June 30, 2007, we set up
      a
      separate account (“R&D Account”) and designated $5 million of our total cash
      to be held in this R&D Account. The following table provides detailed
      information about our net cash flow for all financial statements periods
      presented in this Report.




20




**Cash
      Flow**





**Six
                Months Ended June 30,****2007**
            
            **2006**Net
                cash (used in) operating activities
            
            $
            (3,250,305
            )
            $
            (1,623,687
            )Net
                cash (used in) investing activities
            
            $
            0
            
            $
            (11,346
            )Net
                cash provided (used by) financing activities
            
            $
            (2,515
            )
            $
            2,162,961Net
                cash (outflow) inflow
            
            $
            (3,252,820
            )
            $
            527,928





*Operating
      Activities* :




Net
      cash
      used for operating activities was $3,250,305 **** for
      the
      six months ended June 30, 2007, which is an increase of $1,626,618 **** from
      the
      $1,623,687 **** net
      cash
      used for operating activities for the same period in 2006. This increase was
      mainly due to an increase in our operating expenses and an increase in our
      net
      loss for the period.




*Investing
      Activities* :




Net
      cash
      used for investing activities in the six months ended June 30, 2007 was $0,
      which is a decrease of $11,346 **** from
      net
      cash used for investing activities of $11,346 **** in
      the
      same period of 2006 due to a decrease in the purchase of equipment of $4,682
      and
      a decrease in patent costs of $6,664.




*Financing
      Activities* :




Net
      cash
      used by financing activities in the six months ended June 30, 2007 totaled
      $2,515 **** as
      compared to $2,162,961 provided by financing activities in the same period
      of
      2006. This decrease of the cash provided by financing activities was mainly
      attributable to the decrease in proceeds from the issuance of common stock
      of
      approximately $2.2 million.




While
      management expects these proceeds will meet our foreseeable needs for the next
      8-10 months, we will need to raise additional capital by way of an offering
      of
      equity securities, an offering of debt securities, or by obtaining financing
      through a bank or other entity. If we need to obtain additional financing,
      that
      financing may not be available or we may not be able to obtain that financing
      on
      terms acceptable to us. If additional funds are raised through the issuance
      of
      equity securities, there may be a significant dilution in the value of our
      outstanding common stock.





***Off
      Balance Sheet Arrangements***




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





***Seasonality***




Our
      business has not been subject to any material seasonal variations in operations,
      although this may change in the future.




***Inflation***




As
      a
      development stage company, our business, revenues and operating results have
      not
      been affected in any material way by inflation.




21




***Critical
      Accounting Policies***




The
      SEC
      issued Financial Reporting Release No. 60, "Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies" suggesting that companies provide
      additional disclosure and commentary on their most critical accounting policies.
      In Financial Reporting Release No. 60, the SEC has defined the most critical
      accounting policies as the ones that are most important to the portrayal of
      a
      company's financial condition and operating results, and require management
      to
      make its most difficult and subjective judgments, often as a result of the
      need
      to make estimates of matters that are inherently uncertain. Based on this
      definition, we have identified the following significant policies as critical
      to
      the understanding of our financial statements.




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make a variety of estimates and
      assumptions that affect (i) the reported amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities as of the date of the financial
      statements and (ii) the reported amounts of revenues and expenses during the
      reporting periods covered by the financial statements.




Our
      management expects to make judgments and estimates about the effect of matters
      that are inherently uncertain. As the number of variables and assumptions
      affecting the future resolution of the uncertainties increase, these judgments
      become even more subjective and complex. Although we believe that our estimates
      and assumptions are reasonable, actual results may differ significantly from
      these estimates. Changes in estimates and assumptions based upon actual results
      may have a material impact on our results of operation and/or financial
      condition. We have identified certain accounting policies that we believe are
      most important to the portrayal of our current financial condition and results
      of operations. Our significant accounting policies are disclosed in Note 2
      to
      the Consolidated Financial Statements included in the Annual Report on Form
      10-KSB filed with the Commission on March 20, 2007.





Deferred
      tax assets and liabilities




We
      will
      recognize the expected future tax benefit from deferred tax assets when the
      tax
      benefit is considered to be more likely than not of being realized. Assessing
      the recoverability of deferred tax assets requires management to make
      significant estimates related to expectations of future taxable income.
      Estimates of future taxable income are based on forecasted cash flows and the
      application of existing tax laws in each jurisdiction. To the extent that future
      cash flows and taxable income differ significantly from estimates, our ability
      to realize deferred tax assets could be impacted. Additionally, future changes
      in tax laws in the jurisdictions in which we operate could limit our ability
      to
      obtain the future tax benefits.





Accounting
      for Stock Based Compensation, Stock Options and Warrants Granted to Employees
      and Nonemployees




We
      adopted the provisions of SFAS 123R, which requires the use of the fair value
      method of accounting for share-based compensation. Under the fair value based
      method, compensation cost related to employee stock options or similar equity
      instruments is measured at the grant date based on the value of the award and
      is
      recognized over the service period, which is usually the vesting period. SFAS
      123R also requires measurement of cost of a liability-classified award based
      on
      its current fair value.  The fair value of the liability-classified award
      will be subsequently remeasured at each reporting date through the settlement
      date.  Change in fair value during the requisite service period will be
      recognized as compensation cost over that period.  We determine fair value
      using the Black-Scholes model. Under this model, certain assumptions, including
      the risk-free interest rate, the expected life of the options and the estimated
      fair value of our ordinary shares and the expected volatility, are required
      to
      determine the fair value of the options. If different assumptions had been
      used,
      the fair value of the options would have been different from the amount we
      computed and recorded, which would have resulted in either an increase or
      decrease in the compensation expense.





The
      options were valued using the Black-Scholes option pricing model. The
      assumptions used were as follows: volatility of 96% to 275%, a risk-free
      interest rate of 4.18% to 4.45%, dividend yield of 0% and an exercise term
      of
      one to five years.




22




**ITEM
      3A(T). CONTROLS AND PROCEDURES**




Our
        management, with the participation of our chief executive officer and chief
        financial officer, Mr. Seth Grae and Mr. Larry Goldman,
        respectively, evaluated the effectiveness of our disclosure controls and
        procedures. The term “disclosure controls and procedures,” as defined in Rules
        13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
        procedures of a company that are designed to ensure that information required
        to
        be disclosed by a company in the reports, such as this report, that it files
        or
        submits under the Exchange Act is recorded, processed, summarized and reported,
        within the time periods specified in the SEC’s rules and forms. Disclosure
        controls and procedures include, without limitation, controls and procedures
        designed to ensure that information required to be disclosed by a company
        in the
        reports that it files or submits under the Exchange Act is accumulated and
        communicated to the company’s management, including its principal executive and
        principal financial officers, as appropriate to allow timely decisions regarding
        required disclosure. Management recognizes that any controls and procedures,
        no
        matter how well designed and operated, can provide only reasonable assurance
        of
        achieving their objectives and management necessarily applies its judgment
        in
        evaluating the cost-benefit relationship of possible controls and procedures.
        Based on that evaluation, Mr. Grae and Mr. Goldman concluded that as
        of June 30, 2007, and as of the date that the evaluation of the effectiveness
        of
        our disclosure controls and procedures was completed, our disclosure controls
        and procedures were effective to satisfy the objectives for which they are
        intended.
 
 There
        were no changes in our internal control over financial reporting identified
        in
        connection with the evaluation performed that occurred during the fiscal
        quarter
        ended June 30, 2007 covered by this report that has materially affected or
        is
        reasonably likely to materially affect, our internal control over financial
        reporting.


23





**PART
      II**


**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. We are currently not aware
      of any such legal proceedings or claims that we believe will have a material
      adverse affect on our business, financial condition or operating results.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES OR USE OF
      PROCEEDS**





There
      were no unregistered sales of equity securities in the six months ended June
      30,
      2007.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





There
      were no defaults upon senior securities in the six months ended June 30,
      2007.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





No
      matters were submitted to a vote of security holders in the six months ended
      June 30, 2007.





**ITEM
      5. OTHER INFORMATION**





N/A





**ITEM
      6. EXHIBITS**





The
      following exhibits are filed with this report, except those indicated as having
      previously been filed with the SEC and are incorporated by reference to another
      report, registration statement or form. As to any shareholder of record
      requesting a copy of this report, we will furnish any exhibit indicated in
      the
      list below as filed with this report upon payment to us of our expenses in
      furnishing the information.





***Exhibit***
              ***Number***
            
            ***Description***3.1
            
            Articles
                of Incorporation (incorporated by reference from the Company’s
                Registration Statement on Form 10-SB filed on December 17,
                1999).3.2
            
            By-laws
                (incorporated by reference from the Company’s Current Report on Form 8-K
                filed on September 18, 2006).4.1
            
            2005
                Compensation Plan for Outside Consultants of Custom Brand Networks,
                Inc.
                dated March 1, 2005 (incorporated by reference from the Company’s
                Registration Statement on Form S-8 filed on March 10,
                2005).4.2
            
            2005
                Augmented Compensation Plan for Outside Consultants of the Company
                dated
                August 15, 2005 (incorporated by reference from the Company’s Registration
                Statement on Form S-8 filed on August 19, 2005).4.3
            
            2006
                Stock Plan (incorporated by reference to Exhibit 10.1 of the current
                report of the Company on Form 8-K filed February 21,
                2006)10.1
            
            Employment
                Agreement, dated February 1, 2007, between the Company and Erik Hallstrom
                (incorporated by reference to Exhibit 10.1 of the current report
                of the
                Company on Form 8-K filed February 1, 2007).31.1*
            
            Rule
                13a-14(a)/15d-14(a) Certification - Principal Executive
                Officer31.2*
            
            Rule
                13a-14(a)/15d-14(a) Certification - Principal Accounting
                Officer32*
            
            Section
                1350 Certifications


______________


*
      Filed
      Herewith




24


SIGNATURES





In
      accordance with section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      Registrant caused this Report on Form 10-QSB to be signed on its behalf by
      the
      undersigned, thereto duly authorized individual.





Date:
      August 9, 2007


THORIUM
              POWER,
              LTD.By:
            /s/ Seth
              GraeSeth
              GraeChief
                Executive Officer,
              President
                and Director  25




**EXHIBIT
      INDEX**


***Exhibit***
                ***Number***
              
              ***Description***3.1
              
              Articles
                  of Incorporation (incorporated by reference from the Company’s
                  Registration Statement on Form 10-SB filed on December 17,
                  1999).3.2
              
              By-laws
                  (incorporated by reference from the Company’s Current Report on Form 8-K
                  filed on September 18, 2006).4.1
              
              2005
                  Compensation Plan for Outside Consultants of Custom Brand Networks,
                  Inc.
                  dated March 1, 2005 (incorporated by reference from the Company’s
                  Registration Statement on Form S-8 filed on March 10,
                  2005).4.2
              
              2005
                  Augmented Compensation Plan for Outside Consultants of the Company
                  dated
                  August 15, 2005 (incorporated by reference from the Company’s Registration
                  Statement on Form S-8 filed on August 19, 2005).4.3
              
              2006
                  Stock Plan (incorporated by reference to Exhibit 10.1 of the current
                  report of the Company on Form 8-K filed February 21,
                  2006)10.1
              
              Employment
                  Agreement, dated February 1, 2007, between the Company and Erik
                  Hallstrom
                  (incorporated by reference to Exhibit 10.1 of the current report
                  of the
                  Company on Form 8-K filed February 1, 2007).31.1*
              
              Rule
                  13a-14(a)/15d-14(a) Certification - Principal Executive
                  Officer31.2*
              
              Rule
                  13a-14(a)/15d-14(a) Certification - Principal Accounting
                  Officer32*
              
              Section
                  1350 Certifications


______________


*Filed
      Herewith




26