**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10−Q**





(Mark
      One)


**x** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**


For
      the
      quarterly period ended: September 30, 2008





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


For
      the
      transition period from ____________ to _____________




Commission
      File Number: 000-28543




**THORIUM
                POWER, LTD.**(Exact
                name of registrant as specified in its charter)





Nevada
            
            91-1975651(State
                or other jurisdiction of
            
            (I.R.S.
                Empl. Ident. No.)incorporation
                or organization)





1600
                Tysons Boulevard, Suite 550McLean,
                VA 22102(Address
                of principal executive offices, Zip
                Code)





(571)
                730-1200(Registrant’s
                telephone number, including area
                code)




(Former
                Name, Former Address and Former Fiscal Year if Changed Since Last
                Report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the 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  ̈





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





Large
                Accelerated Filer ̈
            Accelerated
                Filer ̈Non-Accelerated
                Filer ̈(Do
                not check if a smaller reporting company)
            Smaller
                reporting companyx





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 September 30, 2008 is as follows:





Class
                of Securities
            
            Shares
                OutstandingCommon
                Stock, $0.001 par value
            
            301,395,310





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








**ITEM
      1. FINANCIAL STATEMENTS**





**THORIUM
      POWER, LTD.**





**UNAUDITED
      FINANCIAL STATEMENTS**





**SEPTEMBER
      30, 2008 AND 2007**





**TABLE
      OF CONTENTS**





**Page**CondensedConsolidated
                Balance Sheets
            2Unaudited
                CondensedConsolidated
                Statements of Operations and Comprehensive Loss
            3Unaudited
                CondensedConsolidated
                Statements of Cash Flows
            4Unaudited
                CondensedConsolidated
                Statement of Changes in Stockholders’ Equity
            5Notes
                to Unaudited Consolidated Financial Statements
            6
                -14




1




**Thorium
      Power Ltd.**


**Condensed
      Consolidated Balance Sheets**


**September**
              
              **December
                  31****2008**
              
              **2007****(Unaudited)****ASSETS****Current
                  Assets**Cash
                  and cash equivalents
              
              $
              10,360,068
              
              $
              9,907,691Accounts
                  receivable - reimbursable project costs
              
              
              759,929
              
              
              —Prepaid
                  expenses & other current assets
              
              
              115,586
              
              
              204,035Deferred
                  project costs
              
              
              —
              
              
              371,631Total
                  Current Assets
              
              
              11,235,583
              
              
              10,483,357Property
                  Plant and Equipment -net
              
              
              211,281
              
              
              30,676**Other
                  Assets**Marketable
                  securities - available for sale
              
              
              2,127,429
              
              
              0Patent
                  costs - net
              
              
              217,875
              
              
              217,875Security
                  deposits
              
              
              140,467
              
              
              2,049Total
                  Other Assets
              
              
              2,485,771
              
              
              219,924**Total
                  Assets**
              
              $
              **13,932,635**
              
              $
              **10,733,957****Liabilities
                  and Stockholders' Equity****Current
                  Liabilities**Accounts
                  payable and accrued liabilities
              
              $
              3,010,118
              
              $
              2,122,649Current
                  portion long term debt
              
              
              —
              
              
              4,651Customer
                  deposit and other current liabilities
              
              
              —
              
              
              1,206,875Deferred
                  revenue
              
              
              3,270,000
              
              
              3,793,125Total
                  Current Liabilities
              
              
              6,280,118
              
              
              7,127,300Notes
                  Payable - long term
              
              
              —
              
              
              5,782**Total
                  Liabilities**
              
              
              6,280,118
              
              
              7,133,082**Stockholders'
                  Equity**Preferred
                  stock, $0.001 par value, 50,000,000 authorized shares, no shares
                  issued
                  and outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001par value, 500,000,000 authorized, 301,395,310 shares
                  issued
                  and outstanding at September 30, 2008 and 299,014,182 shares issued
                  and
                  outstanding at December 31, 2007
              
              
              301,395
              
              
              299,014Additional
                  paid in capital - stock and stock equivalents
              
              
              46,744,676
              
              
              41,791,735Accumulated
                  Deficit
              
              
              (39,563,035
              )
              
              (38,630,572
              )Common
                  stock reserved for issuance, 484,055 shares and 2,000,000 shares
                  at
                  September 30, 2008 and December 31, 2007, respectively
              
              
              114,787
              
              
              590,000Accumulated
                  other comprehensive income
              
              
              463,862
              
              
              30,143Deferred
                  stock compensation
              
              
              (409,168
              )
              
              (479,445
              )**Total
                  Stockholders' Equity**
              
              
              7,652,517
              
              
              3,600,875**Total
                  Liabilities and Stockholders' Equity**
              
              $
              **13,932,635**
              
              $
              **10,733,957**




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




2


**Thorium
      Power Ltd.**


**Condensed
      Consolidated Statements of Operations and Comprehensive Loss**





Nine
                Months Ended
            
            Three
                Months EndedSeptember
                30,
            
            September
                30,(Unaudited)
            
            (Unaudited)2008
            
            2007
            
            2008
            
            2007Revenue:Consulting
                revenue
            
            $
            14,863,125
            
            $
            —
            
            $
            6,746,500
            
            $
            —Cost
                of Consulting Services Provided
            
            
            5,246,875
            
            
            —
            
            
            1,862,309
            
            
            —Gross
                Margin
            
            
            9,616,250
            
            
            —
            
            
            4,884,191
            
            
            —Operating
                ExpensesGeneral
                and administrative
            
            
            5,595,881
            
            
            3,907,464
            
            
            2,478,894
            
            
            1,113,731Research
                and development expenses
            
            
            497,228
            
            
            297,064
            
            
            211,779
            
            
            141,593Stock-based
                compensation
            
            
            4,172,007
            
            
            3,582,344
            
            
            1,384,828
            
            
            1,127,610Total
                Operating Expenses
            
            
            10,265,116
            
            
            7,786,872
            
            
            4,075,501
            
            
            2,382,934Operating
                income (loss)
            
            
            (648,866
            )
            
            (7,786,872
            )
            
            808,690
            
            
            (2,382,934
            )Other
                Income and (Expenses)Interest
                income
            
            
            162,293
            
            
            301,824
            
            
            19,113
            
            
            84,888Realized
                loss on marketable securities
            
            
            (438,750
            )
            
            —
            
            
            —
            
            
            —Other
                expenses
            
            
            —
            
            
            (58,600
            )
            
            —
            
            
            —Total
                Other Income and Expenses
            
            
            (276,457
            )
            
            243,224
            
            
            19,113
            
            
            84,888Net
                income (loss) before income taxes
            
            
            (925,323
            )
            
            (7,543,648
            )
            
            827,803
            
            
            (2,298,046
            )Income
                taxes
            
            
            7,140
            
            
            —
            
            
            (24,799
            )
            
            —Net
                income (loss)
            
            
            (932,463
            )
            
            (7,543,648
            )
            
            852,602
            
            
            (2,298,046
            )Other
                  Comprehensive Income Unrealized gain marketable
                  securities
            
            
            433,719
            
            
            3,274
            
            
            437,234
            
            
            3,931Total
                Comprehensive Income (Loss)
            
            $
            (498,744
            )
            $
            (7,540,374
            )
            $
            1,289,836
            
            $
            (2,294,115
            )Net
                Income (Loss) Per Common Share, Basic and diluted
            
            $
            0.00
            
            $
            (0.03
            )
            $
            0.00
            
            $
            (0.01
            )Weighted
                Average Number of shares outstanding for the period used to compute
                per
                share data
            
            
            300,406,299
            
            
            296,297,409
            
            
            299,615,349
            
            
            296,170,196





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




3


**Thorium
      Power Ltd.**


**Condensed
      Consolidated Statements of Cash Flows**





Nine
                Months EndedSeptember
                30,(Unaudited)2008
            
            2007Operating
                Activities:Net
                Loss
            
            $
            (932,463
            )
            $
            (7,543,648
            )Adjustments
                to reconcile net loss from operations to net cash used in operating
                activities:Shares
                issued for other than cash for payment of expenses
            
            
            4,500,411
            
            
            3,735,500Depreciation
                and amortization
            
            
            11,593
            
            
            6,213Amortization
                of deferred revenue - net
            
            
            (523,125
            )
            
            0Amortization
                of deferred project costs
            
            
            5,246,875
            
            
            0Realized
                loss on marketable securities
            
            
            433,719
            
            
            0Settlement
                Expense
            
            
            0
            
            
            37,161Changes
                in non-cash operating working capital items:Accounts
                receivable - reimbursable project costs
            
            
            (759,929
            )
            
            0Prepaid
                expenses and other current assets
            
            
            88,449
            
            
            307,013Security
                deposits
            
            
            (138,418
            )
            
            0Accounts
                payable, accrued liabilities and other current liabilities
            
            
            (319,406
            )
            
            (999,311
            )Deferred
                project costs
            
            
            (4,875,244
            )
            
            0Net
                Cash Provided By (Used In) Operating Activities
            
            
            2,732,462
            
            
            (4,457,072
            )Investing
                Activities:Purchase
                of office equipment
            
            
            (192,198
            )
            
            —Other
            
            
            —
            
            
            3,274Net
                Cash Provided By (Used In) Investing Activities
            
            
            (192,198
            )
            
            3,274Financing
                Activities:Proceeds
                from issue of common shares
            
            
            49,975
            
            
            —Payments
                on notes payable and other
            
            
            (10,433
            )
            
            (3,685
            )Net
                Cash Provided By (Used In) Financing Activities
            
            
            39,542
            
            
            (3,685
            )Net
                Increase (Decrease) In Cash and Cash Equivalents
            
            
            2,579,806
            
            
            (4,457,483
            )Cash
                and Cash Equivalents, Beginning of Period
            
            
            9,907,691
            
            
            10,927,775Reclassification
                of cash equivalents to marketable securities - available for
                sale
            
            
            (2,127,429
            )
            
            —Cash
                and Cash Equivalents, End of Period
            
            $
            10,360,068
            
            $
            6,470,292Supplemental
                Disclosure of Cash Flow InformationCash
                paid during the year:Interest
                paid
            
            $
            40
            
            $
            524Income
                taxes paid
            
            $
            31,939
            
            $
            —Non-cash
                transactions:Conversion
                of liabilities to equity
            
            $
            0
            
            $
            1,410,884





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


4





**Thorium
      Power Ltd.**


**Condensed
      Consolidated Statements of Changes in Stockholders’ Equity**


**For
      Nine Months Ended September 30, 2008 (Unaudited) and Year Ended December 31,
      2007**





StockAdditional
            
            
            
            Committed
            
            Accumulated
            
            DeferredCommon
                Stock
            
            Paid-in
            
            Accumulated
            
            Future
            
            Comprehensive
            
            Stock
            
            Treasury
                Stock
            
            Stockholders’Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Issuance
            
            Income
            
            Compensation
            
            Shares
            
            Amount
            
            EquityBalance
                - December 31, 2006
            
            
            257,291,709
            
            $
            257,292
            
            $
            23,148,560
            
            $
            (27,177,989
            )
            $
            1,200,000
            
            $
            18,861
            
            $
            (285,200
            )
            
            (850,000
            )
            $
            (255,850
            )
            $
            (3,094,326
            )Issuance
                of stock for services
            
            
            808,916
            
            
            809
            
            
            232,678
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            233,487Issuance
                of stock for payment of liabilities
            
            
            714,120
            
            
            714
            
            
            277,727
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            278,441Stock
                based compensation - shares committed for future issuance and
                issued
            
            
            2,350,000
            
            
            2,350
            
            
            866,150
            
            
            
            
            
            (1,200,000
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            (331,500
            )Stock
                Option Expense
            
            
            
            
            
            
            
            
            3,991,317
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,991,317Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            (11,452,583
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11,452,583
            )Unrealized
                gains on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            11,282
            
            
            
            
            
            
            
            
            
            
            
            11,282Amortization
                of deferred stock compensation costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            395,755
            
            
            
            
            
            
            
            
            395,755Reclassification
                of warrant liability to additional paid in capital
            
            
            
            
            
            
            
            
            1,132,444
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,132,444Cashless
                exercise of stock options and warrants
            
            
            888,534
            
            
            888
            
            
            (888
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            0Retirement
                of treasury stock
            
            
            (850,000
            )
            
            (850
            )
            
            (255,000
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            850,000
            
            
            255,850
            
            
            0Stock
                settlement - merger
            
            
            128,139
            
            
            128
            
            
            37,032
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            37,160Stock
                based compensation - officers, directors and employees
            
            
            1,022,927
            
            
            1,023
            
            
            357,002
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            358,025Reclassification
                of temporary equity to permanent equity
            
            
            36,659,837
            
            
            36,660
            
            
            12,004,713
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,041,373Stock
                based compensation - shares committed for future issuance
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            590,000
            
            
            
            
            
            (590,000
            )
            
            
            
            
            
            
            
            0Balance
                - December 31, 2007
            
            
            299,014,182
            
            $
            299,014
            
            $
            41,791,735
            
            $
            (38,630,572
            )
            $
            590,000
            
            $
            30,143
            
            $
            (479,445
            )
            
            —
            
            
            —
            
            $
            3,600,875Unrealized
                loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            433,719
            
            
            
            
            
            
            
            
            
            
            
            433,719Exercise
                of stock options
            
            
            320,350
            
            
            320
            
            
            49,655
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            49,975Stock
                option expense
            
            
            
            
            
            
            
            
            4,009,315
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,009,315Stock
                based compensation - officers, directors and employees
            
            
            60,778
            
            
            61
            
            
            305,971
            
            
            
            
            
            114,787
            
            
            
            
            
            (114,787
            )
            
            
            
            
            
            
            
            306,032Amortization
                of deferred stock compensation costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            185,064
            
            
            
            
            
            
            
            
            185,064Shares
                issued
            
            
            2,000,000
            
            
            2,000
            
            
            588,000
            
            
            
            
            
            (590,000
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            0Net
                loss for the period
            
            
            
            
            
            
            
            
            
            
            
            (932,463
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (932,463
            )Balance
                September 30, 2008
            
            
            301,395,310
            
            $
            301,395
            
            $
            46,744,676
            
            $
            (39,563,035
            )
            $
            114,787
            
            $
            463,862
            
            $
            (409,168
            )
            
            —
            
            $
            —
            
            $
            7,652,517





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




5





**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





1.  BASIS
      OF
      PRESENTATION AND NATURE OF OPERATIONS





Basis
      of
      presentation





The
      accompanying unaudited condensed consolidated financial statements of the
      Company and its subsidiary have been prepared in accordance with the rules
      and
      regulations of the Securities and Exchange Commission (the “SEC”) including the
      instructions to Form 10-Q and Regulation S-X. Certain information and note
      disclosures normally included in financial statements prepared in accordance
      with generally accepted accounting principles in the United States of America
      have been condensed or omitted from these statements pursuant to such rules
      and
      regulation and, accordingly, they do not include all the information and notes
      necessary for comprehensive consolidated financial statements and should be
      read
      in conjunction with our audited consolidated financial statements for the year
      ended December 31, 2007, included in our Annual Report on Form 10-K for the
      year
      ended December 31, 2007.





In
      the
      opinion of the management of the Company, all adjustments, which are of a normal
      recurring nature, necessary for a fair statement of the results for the
      three-month and nine-month periods have been made. Results for the interim
      periods presented are not necessarily indicative of the results that might
      be
      expected for the entire fiscal year.




Nature
      of
      Operations





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. On
      February 14, 2006, Novastar Resources Ltd. (“Novastar”), now called Thorium
      Power Ltd., entered into an Agreement and merged on October 6, 2006 with Thorium
      Power, Inc. (Collectively after the merger, all entities are
      referred to as the “Company" or “Thorium”). Thorium is engaged in two
      business segments. The first business segment is the development, promotion
      and
      marketing of its patented nuclear fuel designs: (1) thorium/uranium nuclear
      fuel
      and (2) thorium/reactor-grade plutonium disposing fuel. The Company also has
      a
      conceptual design of a thorium/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. Operations to date in this business
      segment have been devoted primarily to continued development of our fuel
      designs, filing for certain patents related to our technology, developing
      strategic relationships within the nuclear power industry, and securing
      political as well as some financial support from the United States and Russian
      governments.





Our
      business model expanded in 2007 and our second business segment is providing
      consulting and strategic advisory services to companies and governments planning
      to create or expand electricity generation capabilities using nuclear power
      plants. We have to date secured four contracts with successively larger values
      for consulting and strategic advisory services in the United Arab Emirates
      (“UAE”). We started working on our first consulting project with the Executive
      Affairs Authority (“EAA”) of Abu Dhabi, one of the member Emirates of the UAE in
      December 2007 and completed this first consulting project in March 2008. We
      secured our second consulting project with the EAA in March 2008 and completed
      our second project in June 2008. On August 1, 2008, we signed separate
      consulting services agreements with two government entities to be formed by
      Abu
      Dhabi. Under these two new agreements, we are to provide consulting and
      strategic advisory services over a contract term of five years starting from
      June 23, 2008, with automatic renewals of these contracts for one year periods,
      see note 2c below.





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 the final design of our fuel
      technology for VVER-1000 reactors and demonstration of our fuel in a VVER-1000
      operating reactor to commence in the next three to five years. 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.


6





**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





The
      Company’s future operations and earnings will depend on the results of the
      Company’s operations in foreign countries. There can be no assurance that the
      Company will be able to successfully conduct such operations, and a failure
      to
      do so would have a material adverse effect on the Company’s financial position,
      results of operations, and cash flows. Also, the success of the Company’s
      operations will be subject to numerous contingencies, some of which are beyond
      management’s control. These contingencies include general and regional economic
      conditions, prices for the Company’s services, competition, and changes in
      regulations. Because the Company is dependent on international operations,
      particularly in one country right now, the Company will be subject to various
      additional political, economic, and other uncertainties.





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 ability 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.





Based
      on
      the revenue we earned from our consulting contracts that we entered into in
      2007
      and 2008, we are no longer a development stage company in 2008, as we now have
      our ongoing consulting and strategic advisory services business segment, having
      recognized revenue earned in each of the quarters of 2008.





2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES




a)
      Consolidation




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




All
      significant intercompany transactions and balances have been eliminated in
      consolidation. We anticipate forming several foreign branch offices during
      the
      fourth quarter of 2008, which will be consolidated in our December 31, 2008
      consolidated financial statements.




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 and stock options, the net operating loss
      carry-forward, cost estimates relating to our consulting contracts, and the
      valuation allowance for deferred taxes 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.





c)
      Revenue Recognition





*Revenue* —at
      the
      present time we are deriving all of our revenue from our consulting and
      strategic advisory services business segment, by offering services to foreign
      governments planning to create or expand electricity generation capabilities
      using nuclear power plants. Our fee structure for each client engagement is
      dependent on a number of variables, including the size of the client, the
      complexity, the level of the opportunity for us to improve the client’s
      electrical generation capabilities using nuclear power plants, and other
      factors. The accounting policy we use to recognize revenue depends on the terms
      of the specific contract. All of our consulting contracts mentioned below are
      with the EAA of Abu Dhabi, one of the member Emirates of the UAE, and the
      related entities to be formed: Emirates Nuclear Energy Corporation (“ENEC”) and
      Federal Authority for Nuclear Regulation (“FANR”).


7





**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





Revenue
      Recognition – Completed Performance Model





All
      of
      the Company's revenues recognized for the first quarter of 2008 were recognized
      under the completed performance model of revenue recognition for our first
      consulting project with EAA (Road Map). The consulting fee under this contract
      could have been refundable to our client, under the provisions of this contract,
      if we would have breached the contract, such as not deliver the final report
      to
      the foreign government. We received our fee for this contract in December 2007,
      in advance of our billing in March 2008. The total consulting revenue recognized
      under this contract during the three months ended March 31, 2008, was
      $3,793,125.





Revenue
      Recognition—Fixed-Fee Consulting Services





We
      recognize revenue associated with fixed-fee service contracts in accordance
      with
      the proportional performance method, measured by the percentage of costs
      (primarily labor) incurred to date as compared to the estimated total costs
      (primarily labor) for each contract. When a loss is anticipated on a contract,
      the full amount of the anticipated loss is recognized immediately. Our
      management uses its judgment concerning the estimation of the total costs to
      complete the contract considering a number of factors, including the experience
      of the personnel that are performing the services, and the overall complexity
      of
      the project. Should changes in management’s estimates be required, due to
      business conditions that cause the actual financial results to differ
      significantly from management's present estimates, revenue recognized in future
      periods could be adversely affected.





All
      of
      the Company’s revenues for the second quarter of 2008 were derived from the
      completion of the defined contract deliverables required from the second
      consulting contract entered into in March 2008 with the EAA, and completed
      in
      June 2008. This contract called for on-going consulting services from March
      2008
      through June 22, 2008. We started work on this project in April 2008. All
      revenue earned under this contract, $4,285,000 (which was received in April
      2008), was recognized ratably during the second quarter of 2008.





Substantially
      all of the Company’s revenue in the amount of $6,746,500 for the third quarter
      of 2008, has been derived from the two consulting contracts we entered into
      in
      August 2008, for consulting services rendered and to be rendered from June
      23,
      2008 through December 31, 2008. These contracts provide for a total payment
      of
      $17.4 million, with $10 million paid by the EAA on behalf of two new
      governmental agencies to be formed ($5 million paid on behalf of each entity,
      a
      total of $10 million received in September 2008), and the remaining total
      balance of $7.4 million to be paid by each of the new governmental entities
      equally, upon their formation. These new government entities will be called
      the
      Emirates Nuclear Energy Corporation (“ENEC”) and the Federal Authority for
      Nuclear Regulation (“FANR”). We will provide strategic advisory services to both
      of these entities during the five year term of these agreements. Under these
      agreements, revenue is being derived from a fixed professional fee agreement.
      We
      discuss our consulting work periodically with the EAA to review the work
      performed to date, and to plan the scope of future work to be performed.





Once
      the
      company's thorium-based nuclear fuel designs have advanced to a commercially
      usable stage, the company will seek to license our technology to major
      government contractors or nuclear companies, working for the US and other
      governments. We expect that our revenue from license fees will be recognized
      on
      a straight-line basis over the expected period of the related license
      term.





d)
      Segment Reporting





The
      Company uses the “management approach” in determining reportable operating
      segments. The management approach considers the internal organization and
      reporting used by the Company's chief operating decision maker for making
      operating decisions and assessing performance, as the source for determining
      the
      Company's reportable segments. The Company has determined that the Company
      has
      two operating segments as mentioned above and defined by SFAS 131, “Disclosures
      about Segments of an Enterprise and Related Information”. The two reporting
      business segments are our technology business and our consulting and strategic
      advisory services business.





e) ** Deferred
      Project Costs





All
      costs
      directly related to producing the work under the agreements with the UAE, such
      as consulting costs, other professional fees and various administrative support
      and other costs, are capitalized as deferred project costs (current asset on
      the
      accompanying balance sheet). Deferred project costs are then recognized or
      amortized to an expense captioned, “cost of consulting services provided” (on
      the accompanying statement of operations), when the revenue is to be recognized
      or when the project is completed. Total deferred project costs that were charged
      to expense or cost of consulting services provided for the three months and
      nine
      months ended September 30, 2008, were $1,862,309 and $5,246,875, respectively.
      Indirect corporate overhead incurred that was not allocated to the consulting
      and strategic advisory services business segment, is being reported as general
      and administrative expenses in the financial statements and in note 4 to these
      financial statements (Business Segments), as unallocated corporate overhead
      costs. At September 30, 2008, and December 31, 2007, capitalized deferred
      project costs totaled $0 and $371,631, respectively.


8





**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





Travel
      costs and other reimbursable costs under the contract were offset, in accordance
      with the consulting agreements, against the balance sheet account captioned
      “customer deposit account”, until the total amount advanced by the customer for
      reimbursable costs was depleted in 2008. The customer deposit account was money
      advanced to us for reimbursable expenses that were incurred in accordance with
      the contracts with the EAA. At December 31, 2007, the customer deposit account
      was presented as a current liability on the balance sheet. The total travel
      and
      other reimbursable expenses charged for these consulting contracts that have
      not
      been reimbursed to us, are being presented on the balance sheet as accounts
      receivable in the amount of $759,929 at September 30, 2008. The deferred revenue
      balance at September 30, 2008 of $3,270,000 is presented separately, which
      represents the unearned balance of the $10 million deposit received from the
      EAA
      in September 2008, for the consulting work to be performed under the ENEC and
      FANR contracts mentioned above.





f)
      Cash
      and Cash Equivalents reclassified to Marketable Securities





Fair
      Value Measurements:


We
      adopted SFAS No. 157, “Fair Value Measurements,” effective January 1, 2008 for
      financial assets and liabilities measured on a recurring basis. SFAS No. 157
      applies to all financial assets and financial liabilities that are being
      measured and reported on a fair value basis. In February 2008, the FASB issued
      FSP No.157-2, which delayed the effective date of SFAS No. 157 by one year
      for
      non-financial assets and liabilities. On October 10, 2008, FSP FAS 157-3 was
      issued to clarify SFAS No. 157. As defined in SFAS No. 157, fair value is the
      price that would be received to sell an asset or paid to transfer a liability
      in
      an orderly transaction between market participants at the measurement date
      (exit
      price). SFAS No. 157 requires disclosure that establishes a framework for
      measuring fair value and expands disclosure about fair value measurements.
      The
      statement requires that fair value measurements be classified and disclosed
      in
      one of the following categories:





Level
                1:
            
            Unadjusted
                quoted prices in active markets that are accessible at the measurement
                date for identical, unrestricted assets or liabilities. We consider
                active
                markets as those in which transactions for the assets or liabilities
                occur
                with sufficient frequency and volume to provide pricing information
                on an
                ongoing basis.Level
                2:
            
            Quoted
                prices in markets that are not active, or inputs that are observable,
                either directly or indirectly, for substantially the full term of
                the
                asset or liability. This category includes those derivative instruments
                that we value using observable market data. Substantially all of
                these
                inputs are observable in the marketplace throughout the full term
                of the
                derivative instrument, and can be derived from observable data or
                supported by observable levels at which transactions are executed
                in the
                marketplace. Instruments in this category include non-exchange traded
                derivatives such as over-the-counter commodity price swaps, investments,
                and interest rate swaps.





9


**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





Level
                3:
            
            Measured
                based on prices or valuation models that require inputs that are
                both
                significant to the fair value measurement and less observable from
                objective sources (i.e., supported by little or no market activity).





As
      of
      September 30, 2008, we continued to hold approximately $1.6 million of auction rate securities
      that are classified at a Level 3 fair value measurement. These securities,
      which
      were recorded at the fair value at September 30, 2008, were subsequent to
      September 30, 2008, guaranteed at face value by the financial institution
      holding these securities. Based on the fact that we recovered our full cost
      basis in these auction rate securities, we have accordingly reported the fair
      value of these securities at their full cost basis of $2,127,429 at
      September 30, 2008 believeing
      that as of that
      date
      a knowledgeable purchaser would have anticipated the guarantee based on the
      reported negotiations between the financial institution and
      regulators.




Unrealized
      gains and losses and the related deferred income tax effects are excluded from
      earnings and reported as a separate component of stockholders’ equity, other
      comprehensive income (loss). Realized gains or losses are computed based on
      specific identification of the securities sold. Our fourth quarter results
      will
      reflect the full redemption of these auction rate securities by this financial
      institution, and the previous realized loss recorded on these auction rate
      securities of $438,750, will be reversed through the income statement in
      the fourth quarter 2008.





The
      reclassification of cash to marketable securities available-for-sale was
      recorded on the cash flow statement for the nine months ended September 30,
      2008
      in the amount of $2,127,429, due to the illiquidity of these auction rate
      securities in 2008, and reduced the cash at the beginning of the period on
      the
      statement of cash flows from $9,907,691 to $8,232,842 (a decrease of
      $1,674,849). These marketable securities have various maturities
      ($800,000 – mature 6/1/30, $825,000 – mature 12/15/39, and $485,000
      mature 10/1/08). All of these securities have been redeemed at their full face
      value or cost basis, in October 2008.





The
      Company’s investments in these marketable securities are classified as
      available-for-sale securities under FAS-115, Accounting for Certain Investments
      in Debt and Equity Securities. The unrealized gain (loss) reported on all
      securities for the three months and nine months ended September 30, 2008 was
      $437,234 and $433,719, respectively, which is being recorded in other
      comprehensive income and loss for the three and nine months ended September
      30,
      2008.





3. FINANCIAL
      STATUS OF THE COMPANY – SEPTEMBER 30, 2008





The
      company is currently updating its strategic plan for 2009 to determine its
      future cash needs. 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
      in
      2009. In support of the Company’s longer-term business plan, the Company 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 to finance its research and development expenditures. The Company may
      also need to raise additional capital sooner to support its overhead operation
      if the consulting and strategic advisory services business becomes
      non-sustaining.





4. BUSINESS
      SEGMENTS





The
      Company has two principal operating segments, which are (1) technology and
      (2)
      consulting and strategic advisory services. These operating segments were
      determined based on the nature of the operations and the services offered.
      Operating segments are defined as components of an enterprise about which
      separate financial information is available that is evaluated regularly by
      the
      chief operating decision-maker, in deciding how to allocate resources and in
      assessing performance. The Company’s chief executive officer, chief operating
      officer, and chief financial officer have been identified as the chief operating
      decision makers. The Company’s chief operating decision makers direct the
      allocation of resources to operating segments based on the profitability, the
      cash flows, and the business plans of each respective segment.





The
      Company evaluates performance based on several factors, of which the primary
      financial measure is business segment income before taxes. The accounting
      policies of the business segments are the same as those described in “Note 1:
      Summary of Significant Accounting Policies.” There is no allocation of corporate
      level assets or certain corporate expenses even though they contribute to both
      segments. The following tables show the operations of the Company’s reportable
      segments for the nine months and three months ended September 30, 2008. In
      2007,
      the company was a development stage company, so we did not provide any
      consulting services and all expenses in 2007 were considered to be corporate
      expenses, other than research and development expenses of $141,593 and $297,064,
      for the three months and nine months ended September 30, 2007.


10





**Thorium
      Power Ltd.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**For
      the Nine Months Periods Ended September 30, 2008 and 2007**





Consulting
            
            Technology
            
            Corporate
                and EliminationsSeptember
                30, 2008
            
            September
                30, 2008
            
            September
                30, 2008
            
            Total9
                Months
            
            3
                Months
            
            9
                Months
            
            3
                Months
            
            9
                Months
            
            3
                Months
            
            9
                Months
            
            3
                MonthsRevenue
            
            
            14,863,125
            
            
            6,746,500
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            14,863,125
            
            
            6,746,500Segment
                Profit (Loss)- Before Tax
            
            
            9,616,250
            
            
            4,884,191
            
            
            (954,365
            )
            
            (376,733
            )
            
            (9,594,348
            )
            
            (3,654,856
            )
            
            (932,463
            )
            
            852,602Total
                Assets
            
            
            —
            
            
            
            
            
            217,875
            
            
            
            
            
            13,714,760
            
            
            
            
            
            13,932,635Property
                Additions
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            192,198
            
            
            192,198
            
            
            192,198
            
            
            192,198Interest
                Expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            40
            
            
            —
            
            
            40
            
            
            —Depreciation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            11,593
            
            
            8,126
            
            
            11,593
            
            
            8,126





5. RESEARCH AND
      DEVELOPMENT COSTS





Research
      and development costs, included in the statement of operations amounted to
      $211,779 and $497,228 for the three months and nine months ended September
      30,
      2008, respectively. Total cumulative expense has amounted to $5,180,541 from
      January 8, 1992 (date of inception of Thorium Power, Inc.) to September 30,
      2008. For segment reporting, the Company has included certain costs for the
      technology segment that are reported in the statement of operations under
      general and administrative and stock based compensation operating expenses.
      These additional costs which total $164,954 and $457,138 for the three months
      and nine months ended September 30, 2008 respectively are mostly related to
      compensation paid to employees and consultants supporting our research and
      development activities.





6. STOCKHOLDERS'
      EQUITY





Total
      Common stock outstanding at September 30, 2008 was 301,395,310. At September
      30,
      2008, there were 52,051,764 stock options outstanding and 484,055 shares of
      common stock reserved for future issuance to our new employees pursuant to
      their
      employment agreements, all totaling 353,931,129 of total stock and stock
      equivalents outstanding at September 30, 2008.




a) Common
      Stock Issuances –





On
      March
      14, 2008, 320,350 stock options that were assumed in the merger and held by
      one
      consultant were exercised at a strike price of $.156 per share for total
      consideration of $49,975. Accordingly, 320,350 shares of the company’s common
      stock were issued in accordance with this option agreement. On May 13, 2008,
      60,778 shares were issued to our directors in accordance with their respective
      director agreements for serving as directors, valued at approximately $0.33
      per
      share for a total value of $20,000, for services rendered. In September 2008,
      a
      total of 2,000,000 shares that had been reserved for future issuance to our
      chief operating officer and chief financial officer were issued.





b)
      Share-based Compensation





Total
      stock options outstanding at September 30, 2008 were 52,051,764 of which
      33,658,501 of these options were vested at September 30, 2008.


11


**Thorium
        Power Ltd.**
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 **For
        the Nine Months Periods Ended September 30, 2008 and
        2007**


Stock
      option transactions to the employees, directors, advisory board members and
      consultants are summarized as follows for September 30, 2008:





2008**Stock
                Options Outstanding**Beginning
                of the Year
            
            
            51,354,656Granted
            
            
            1,542,458Exercised
            
            
            (320,350
            )Forfeited
            
            
            (525,000
            )Outstanding
                end of the period
            
            
            52,051,764Options
                exercisable at the end of the period
            
            
            33,658,501




The
      above
      table includes options issued as of September 30, 2008 as follows:





i).
            
            A
                total of 12,037,500 non-qualified 5-10 year options have been issued
                by
                Thorium Power, Ltd., and are outstanding, to advisory board members
                at
                exercise prices of $0.25 to $0.64 per share.ii).
            
            A
                total of 32,918,662 2-10 year options have been issued to directors,
                officers and employees of the Company and are outstanding, at exercise
                prices of $0.156 to $0.83 per share. From this total, 18,619,906
                options
                are outstanding to the Chief Executive Officer who is also a director,
                with remaining contractual lives of .3-9.2 years. All other options
                issued
                have a remaining contractual life ranging from .2 years to 9.9
                years.iii).
            
            A
                total of 7,095,602 non-qualified 3-10 year options have been issued
                and
                are outstanding to consultants of the Company, at exercise prices
                of $0.16
                to $0.5 per share.




The
      following table provides certain information with respect to the
      above-referenced stock options that are outstanding and exercisable at September
      30, 2008:


Stock Options Outstanding
                
                Stock Options Vested**Exercise
                    Prices**
                
                **Weighted**
                  **Average**
                  **Remaining**
                  **Contractual
                    Life**
                  **-
                    Years**
                
                **Number
                    of**
                  **Awards**
                
                **Number
                    of**
                  **Awards**
                
                **Weighted**
                  **Average**
                  **Exercise
                    Price**$0.16
                    - $0.29
                
                
                4.4
                
                
                18,221,029
                
                
                13,787,017
                
                $
                0.18$0.30
                    - $0.44
                
                
                7.1
                
                
                7,228,555
                
                
                3,092,799
                
                $
                0.34$0.445-$0.63
                
                
                5.5
                
                
                17,402,180
                
                
                9,920,344
                
                $
                0.47$0.64-$0.80
                
                
                7.4
                
                
                9,200,000
                
                
                6,858,341
                
                $
                0.76Total
                
                
                5.7
                
                
                52,051,764
                
                
                33,658,501
                
                $
                0.40





The
      aggregate intrinsic value of stock options outstanding at September 30, 2008
      was
      $0 of which $0 related 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 ($0.15 per share
      as of
      September 30, 2008)




12


**Thorium
        Power Ltd.**
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 **For
        the Nine Months Periods Ended September 30, 2008 and
        2007**




During
      the three months and nine months ended September 30, 2008, $1,733,234 and
      $4,500,412 respectively was recorded as stock-based compensation expense in
      the
      statement of operations (stock based compensation in the amount of $308,405
      to
      employees and others providing revenue generating services, was presented in
      the
      financial statements as cost of consulting services, for the quarter ended
      September 30, 2008). The result of all the above stock option grants that
      occurred after January 1, 2006 for Thorium Power Inc and stock option grants
      for
      Thorium Power Ltd that were recorded in the statement of operations totaled
      $1,626,502 and $4,295,348 for the three months and nine months ended September
      30, 2008 respectively (non-deductible for tax purposes, may provide a tax
      deduction for the Company when exercised).





Stock
      compensation to two executive officers totaled $590,000, as a one-time stock
      grant pursuant to employment agreements that they entered into in 2007, was
      recorded to deferred stock compensation (total 2 million shares were issued
      in
      September 2008). The Company will issue additional shares of common stock of
      127,626, which was granted in May 2008 to 3 employees that resulted in $36,373
      of deferred stock compensation, and 356,429 shares granted to 8 employees in
      August 2008, that resulted in $78,414 of deferred stock compensation. The
      amortization of deferred stock compensation, recorded as stock based
      compensation for the three months and nine months ended September 30, 2008
      was
      $86,732 and $185,065, respectively. The remaining stock-based compensation
      was
      issued to two directors, as mentioned above, which resulted in recording $20,000
      of director fees.





e).
      Warrants





There
      were 512,556 warrants outstanding as of June 30, 2008, that expired in August
      2008. There no warrants outstanding as of September 30, 2008.




f).
      Common Stock reserved for Future Issuance





Common
      stock reserved for future issuance consists of





**Shares
                of**
            
            **Stock****Common**
            
            **Purchase****Stock**
            
            **Warrants**
            
            **Amount**Stock-based
                Compensation
            
            
            484,055
            
            
            0
            
            $
            114,787







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 September 30, 2008
      are as follows:




Total Amount
            
            Deferred Tax
              Asset Amount**Assets**Stock-based
                compensation
            
            $
            11,006,061
            
            $
            4,402,464Approximate
                net operating loss  carryforward
            
            
            10,000,000
            
            
            4,000,000Less:
                valuation allowance
            
            
            (21,006,161
            )
            
            (8,402,464
            )$
            -
            
            $
            -





The
      Company has net operating loss carry forward for federal and state tax purposes
      with substantially all of the net operating losses expected to expire unused
      or
      not be available to offset future taxable income, due to the Internal Revenue
      Code Section 382 limitation for the ownership change that occurred on October
      6,
      2006. As a result, the amount of the deferred tax assets considered realizable
      was reduced 100% by a valuation allowance. In the near term, the company will
      compute the actual Internal Revenue Code Section 382 limitation which will
      change the reported net operating loss carry forward estimated at $10,000,000,
      and the valuation allowance shown above. The Company has no other deferred
      tax
      assets or liabilities.




13


**Thorium
        Power Ltd.**
 **Notes
        to Unaudited Condensed Consolidated Financial Statements**
 **For
        the Nine Months Periods Ended September 30, 2008 and
        2007**




The
      company had paid income taxes in the amount of $31,939 as many of the company’s
      operating expenses in its 2006 tax year were classified under the internal
      revenue code as start-up costs which were not deductible for tax purposes,
      and
      the company had interest income that was taxable for tax purposes. This tax
      amount is not included in the above deferred tax asset information as it is
      deemed not significant at September 30, 2008. The Company filed a refund claim
      to the IRS in 2008 for the federal taxes paid.





8. RESEARCH
      AGREEMENT





On
      December 27, 2007, Thorium Power, Inc. (“TPI”), a wholly-owned subsidiary of the
      Company, entered into an agreement for ampoule irradiation testing (the
“Agreement”) with the Russian Research Centre “Kurchatov Institute”
(“Kurchatov”). The ampoule irradiation testing program has been ongoing since
      2002 pursuant to earlier agreements between TPI and Kurchatov. Under the
      Agreement TPI agreed to compensate Kurchatov for irradiation testing of TPI’s
      proprietary nuclear fuel designs conducted in 2006 and 2007. Pursuant to the
      Agreement, TPI is obligated to pay to Kurchatov $410,000 (liability accrued
      September 30, 2008 and December 31, 2007), and Kurchatov is obligated to
      transfer to TPI the worldwide rights in all of the test data generated in the
      course of the irradiation testing of TPI’s proprietary nuclear fuel designs in
      2006 and 2007. Kurchatov agrees not to use, in any manner, the work product
      associated with such testing or exercise any rights associated therewith without
      the written consent of TPI. Further, Kurchatov is obligated to provide to TPI
      and its affiliates specified information and documentation for audit purposes,
      and to obtain any and all permits from Russian governmental entities which
      may
      be required in order for Kurchatov to perform under the Agreement. In addition
      to this agreement, there are consulting agreements with several consultants
      working on various projects for the company, which total approximately $15,000
      per month.





9. COMMITMENTS
      AND CONTINGENCIES





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.





The
      Company moved from its prior office facility and has entered into an agreement
      to lease new office space, under the terms of a sublease with a term of 65
      months commencing August 1, 2008. Under the terms of the sublease, the lease
      payments are inclusive of pass-through costs, which include real estate taxes
      and standard operating expenses. As of September 30, 2008, the Company has
      paid
      the security deposit related to this sublease agreement in the amount of
      $120,486. The Company pays monthly rental fees in the amount of $40,162 in
      the
      first year of the sublease agreement, and payments increase by a factor of
      4%
      each year thereafter. The Company may terminate this agreement by providing
      60
      days notice to the Sublessor.





**FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report on Form 10-Q 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-K; 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.




14




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





The
      following discussion should be read in conjunction with our financial
      statements, together with the notes to those statements, included elsewhere
      in
      this report. The following discussion contains forward-looking statements that
      involve risks, uncertainties, and assumptions such as statements of our plans,
      objectives, expectations, and intentions. Our actual results may differ
      materially from those discussed in these forward-looking statements because
      of
      the risks and uncertainties inherent in future events.





**General
      Overview**





We
      are a
      developer of proprietary nuclear fuel designs and a provider of nuclear energy
      consulting services, each of which will be described in the following
      sections.





***Consulting
      and Strategic Advisory Services Business Segment***





For
      the
      nine months ended September 30, 2008, substantially all of our revenue came
      from
      consulting agreements, with the Executive Affairs Authority (“EAA”), a
      government agency of Abu Dhabi, one of the member Emirates of the United Arab
      Emirates (“UAE”). The contracts involved the evaluation of a domestic nuclear
      energy program. We were first retained by the EAA on November 30, 2007 to
      provide consulting services designed to produce a roadmap that would constitute
      the first phase of a feasibility study (“Roadmap”) for a prospective program to
      deploy civilian nuclear power plants within the UAE, by acting as strategic
      advisor for the entity responsible for managing nuclear energy related
      activities in the UAE. The Roadmap contract agreement called for a $5 million
      upfront payment for professional fees and expenses, for a 15 week effort to
      develop a roadmap with recommendations related to timelines, as well as
      organizational structure and priorities for subsequent phases of the country’s
      future nuclear energy program. We completed the Roadmap project in March 2008
      and then entered into a larger follow-on consulting agreement (“Quickstart”).
      The terms of the Quickstart project called for an upfront payment of
      professional fees to Thorium Power of $4.3 million. We completed work on the
      Quickstart project in June 2008. For these agreements, certain reimbursable
      expenses that were repaid to us were capped at 20% of the total professional
      fees and were billed separately to the EAA.





On
      August
      1, 2008, we entered into two separate consulting services agreements with two
      governmental entities to be formed in the UAE, and a side agreement with the
      EAA. The first agreement is with the Emirates Nuclear Energy Corporation
      (“ENEC”), an Abu Dhabi entity that, upon formation, will be responsible for
      implementing the country’s nuclear energy infrastructure. We provide strategic
      advisory services regarding the development and management of ENEC (the “ENEC
      Agreement”). Under the second agreement with the Federal Authority for Nuclear
      Regulation (“FANR”), which upon formation, will be the independent nuclear
      regulatory agency in the UAE, we provide strategic advisory services regarding
      the development and management of FANR (the “FANR Agreement” and collectively
      with the ENEC Agreement, the “Agreements”). Pursuant to the Agreements, we will
      be paid $8.9 million from ENEC and $8.5 million from FANR (aggregate of $17.4
      million) for professional fees related to our strategic advisory services
      performed from June 23, 2008 through December 31, 2008. In addition, we will
      be
      compensated for expenses which are capped at 20% of professional fees. The
      term
      of these Agreements is five years, with automatic renewal for one year periods
      unless otherwise terminated pursuant to the provisions of these Agreements.
      A
      Side Letter with the EAA provided that upon execution of these Agreements,
      the
      EAA would pay us $10 million of the aggregate $17.4 million ($10,000,000 was
      received in September 2008), with the remaining $7.4 million due under both
      of
      these agreements to be paid equally, by ENEC and FANR upon their formation.
      Of
      the $10 million payment by the EAA, $5 million was deemed to be made as a
      partial payment from ENEC and FANR, under each of these Agreements. Potential
      adjustments to our billings for future periods under the two new Agreements
      will
      depend on detailed work-plans which will typically be discussed and agreed
      between us and our clients on a quarterly basis during project reviews.





Revenue
      from the Roadmap contract was recognized during our first fiscal quarter of
      2008, when the work on the contract was substantially completed. We recognized
      revenue related to the Quickstart project ratably over the term of the agreement
      as this contract called for on-going consulting services from March 2008 through
      June 2008. Under the August 1, 2008 Agreements, revenues are being derived
      from
      fixed professional fee agreements. Therefore, we are recognizing revenue under
      the proportional performance method of revenue recognition. Going forward,
      we
      may enter into additional consulting contracts to provide support and assistance
      to other commercial and governmental entities that are looking to develop and
      expand their nuclear power industry capabilities and infrastructure. In future
      consulting engagements we expect that revenues may be derived either from fixed
      professional fee agreements or from fees generated through hourly rates billed
      on a time and expense basis. Our current strategy in the consulting services
      business is focused on the following:




15




Primarily:
      Further strengthening the relationship with our existing clients in the UAE
      and
      increasing the revenue potential by providing additional consulting and
      strategic advisory services; and





Secondarily:
      Expanding our client base by further penetrating our markets and attracting
      new
      clients with similar needs as our existing clients, and also enhancing and
      extending our services, including the creation of new service offerings.





Our
      most
      significant expense related to our consulting and strategic advisory services
      business segment is the cost of services before reimbursable expenses, which
      generally relates to costs associated with generating consulting revenues,
      and
      includes employee payroll expenses and benefits, contractor compensation, vendor
      compensation, marketing expenses, and direct costs of training and recruiting
      the consulting staff. Consultant compensation consists of salaries, incentive
      compensation, and benefits. As revenues are generated from services performed
      by
      our permanent staff and contractors, our success depends on attracting,
      retaining and motivating talented, creative and experienced professionals at
      all
      levels.





***Technology
      Business Segment***





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





Our
      future customers may include nuclear fuel fabricators, 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, and the filing of patent applications
      including related administrative functions.





While
      we
      do not currently have any direct revenues from our research and development
      activities regarding our proprietary nuclear fuel technology, 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, we are utilizing
      certain common corporate capabilities in both our technology and consulting
      businesses. We believe we can leverage our general nuclear technology, business
      and regulatory expertise as well as industry relationships, to optimize our
      technology development plans and create integrated advisory services with the
      highest levels of expertise and experience in the nuclear power industry.
      Additionally, our knowledge of and credibility in addressing proliferation
      related issues that we have developed over many years, benefit our new
      consulting business. Our advisory services include a focus on non-proliferation,
      safety and operational transparency of nuclear power programs.





**Material
      Opportunities and Challenges**





***Consulting
      and Strategic Advisory Services***





Our
      emergence in the field of nuclear energy consulting is in direct response to
      the
      need for independent assessments, and highly qualified and integrated strategic
      advisory services for countries looking to establish nuclear energy programs,
      while still providing a blueprint for safe, clean, efficient and cost-effective
      non-proliferative nuclear power. We offer full-scope planning and strategic
      advisory services for new and existing markets, and offer such services without
      a bias towards or against any reactor vendor or fuel technology. We believe
      that
      there are significant opportunities available to provide services to governments
      that are dedicated to non-proliferative, safe, and transparent nuclear
      programs.




16




Our
      major
      challenge in pursuing our business is that the decision making process for
      nuclear power programs typically involves careful consideration by many parties,
      and therefore requires significant time. Also, many of the potential clients
      that could benefit from our services are in regions of the world where tensions
      surrounding nuclear energy are high, or in countries where public opinion plays
      an important role. Domestic and international political pressure may hinder
      our
      efforts to provide nuclear energy services, regardless of our focus on
      non-proliferative nuclear power.





***Proprietary
      Nuclear Fuel Technology Development***





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 in the future. 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 two
      different types, or variants, of thorium-based 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 reactors and stockpiled in Russia,
      Western Europe, the U.S., Japan, and other countries. We also have developed
      a
      conceptual design for a fuel 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.





We,
      through our wholly owned subsidiary Thorium Power, Inc., have been developing
      relations with relevant entities within the United States and Russian
      governments for over fourteen years. Thorium Power, Inc., in cooperation with
      these governments, has been demonstrating its fuel designs in a research reactor
      in Russia for over four years. Independent analyses of the technology have
      been
      performed, including a May 2005 report by the International Atomic Energy Agency
      (the “IAEA”) and an April 2005 report by Westinghouse Electric Company LLC
      (“Westinghouse”). The IAEA and Westinghouse analyses were positive, and
      management believes that they can help lead to the favorable reception of our
      nuclear fuel designs in the future.





We
      are
      also working with Russian nuclear research institutes and Russian nuclear
      regulatory authorities, to have one or more of the fuel designs demonstrated
      in
      a Russian VVER-1000 reactor within the next three to four years, if we are
      able
      to obtain necessary support and enter into agreements with the Russian
      government and Russian research institutes. We believe that it will be necessary
      to enter into commercial arrangements with one or more major nuclear fuel
      fabricators, which in many cases are also nuclear fuel vendors, as a
      prerequisite to having our fuel designs widely deployed in global
      markets.





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-based fuel
      designs.





We
      have
      also been conducting research and development related to a variant of these
      nuclear fuel designs for use in existing and future Western pressurized water
      reactors (PWR).





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. We believe
      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.




17




Thorium
      Power, Inc. has been building relationships with companies and organizations
      in
      the nuclear power industry for several years. We will attempt to cause some
      or
      all of these companies and organizations to work in a consortium or a joint
      venture type arrangement with us in the future, however, we may not be able
      to
      develop any such consortium or arrangement in the near term or at all. The
      companies that we have identified for potential relationships have existing
      contracts with nuclear power plant owner-operators, under which they supply
      nuclear fuel branded with their name to such nuclear power plants. We will
      attempt to cause these nuclear fuel vending companies to provide their nuclear
      power plant operating customers with fuels that are designed with our
      technology. To do so, we will need to enter into agreements with one or more
      of
      these companies. Without such arrangements it would be more difficult for us
      to
      license our fuel designs because, in addition to the reputations, guarantees,
      services, and other benefits that these nuclear fuel vendors provide when
      selling fuel to nuclear power plant operators, they also often have multi-year
      fuel supply contracts with the reactor operators. These multi-year fuel supply
      contracts act as a barrier to entry into the market, such that it can be almost
      impossible to penetrate some markets for nuclear fuel without working with
      a
      nuclear fuel vendor that can support long term contracts. If we are successful
      in demonstrating our fuel designs in Russia and in continuing to build
      relationships with nuclear fuel vendors, we believe it may lead to one or more
      of these major companies in the nuclear power industry working with us in
      producing and selling our nuclear fuel designs to commercial reactor operators
      and governments.




***Business
      Segments and Periods Presented***




Prior
      to
      January 1, 2008, we operated as a single reportable segment. As a result of
      the
      formation of our consulting and strategic advisory services business segment
      in
      December 2007, and based on a review of SFAS No. 131, Disclosures about Segments
      of an Enterprise and Related Information, we have determined that we now operate
      in two business segments starting in 2008; the "technology business" and the
      "consulting and strategic advisory services business." We present our segment
      information along the same lines that our chief executive, chief operating
      officer and chief financial officer review our operating results in assessing
      performance and allocating resources.




We
      have
      provided a discussion of our results of operations on a consolidated basis
      and
      have also provided certain detailed segment information for each of our business
      segments below for the nine months and three months ended September 30, 2008,
      in
      order to provide a meaningful discussion of our business segments.




Consulting
            
            Technology
            
            Corporate and EliminationsSeptember 30, 2008
            
            September 30, 2008
            
            September 30, 2008
            
            Total9 Months
            
            3 Months
            
            9 Months
            
            3 Months
            
            9 Months
            
            3 Months
            
            9 Months
            
            3 MonthsRevenue
            
            
            14,863,125
            
            
            6,746,500
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            14,863,125
            
            
            6,746,500Segment
                Profit (Loss)- Before Tax
            
            
            9,616,250
            
            
            4,884,191
            
            
            (954,365
            )
            
            (376,733
            )
            
            (9,594,348
            )
            
            (3,654,856
            )
            
            (932,463
            )
            
            852,602Total
                Assets
            
            
            —
            
            
            
            
            
            217,875
            
            
            
            
            
            13,714,760
            
            
            
            
            
            13,932,635Property
                Additions
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            192,198
            
            
            192,198
            
            
            192,198
            
            
            192,198Interest
                Expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            40
            
            
            —
            
            
            40
            
            
            —Depreciation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            11,593
            
            
            8,126
            
            
            11,593
            
            
            8,126




**Factors
      Affecting the Comparability of Business Segment Results**




As
      discussed above, the formation of our consulting and strategic advisory services
      business segment at the end of 2007 (December 2007), impacts the comparability
      of our results of segment operations for the three months and nine months ended
      September 30, 2008 versus the three months and nine months ended September
      30,
      2007, as we were not performing consulting services during the three months
      and
      nine months ended September 30, 2007, therefore we are not showing comparative
      2007 figures in the business segment information above.




18




***Consulting
      and Strategic Advisory Services Business***





At
      the
      present time, all of our $6,746,500 of revenue for the three months ended
      September 30, 2008 and $14,863,125 for the nine months ended September 30,
      2008
      is derived from our consulting and strategic advisory services business segment,
      by offering services to foreign governments planning to create or expand
      electricity generation capabilities using nuclear power plants benefiting from
      thorium-based or other nuclear fuels. Our fee type and structure that we offer
      for each client engagement is dependent on a number of variables, including
      the
      complexity, the level of the opportunity for us to improve the client’s
      electricity generation capabilities using nuclear power plants, and other
      factors. All of the Company's revenues for the three months and nine months
      ended September 30, 2008, have been derived from the completion of the Roadmap
      and Quickstart projects and our continuing work under the August 1 Agreements,
      with the EAA, and upon formation, the ENEC and FANR. The cost of consulting
      services provided are $1,862,309 for the three months ended September 30, 2008
      and $5,246,875 for the nine months ended September 30, 2008, which consists
      primarily of direct labor consulting expenses and other labor support costs
      incurred. Other indirect corporate overhead incurred was not allocated to the
      consulting and strategic advisory services business segment, and is reported
      above in the business segment information chart as unallocated corporate
      overhead costs.





Based
      on
      the completion of the Roadmap and Quickstart projects and the August 1, 2008
      Agreements, we are no longer a development stage company in 2008.





***Technology
      Business***





Over
      the
      next 12 to 18 months we expect to incur approximately $3-5 million in research
      and development expenses related to the development of our proprietary nuclear
      fuel designs. We expect to incur these expenses after we have entered into
      formal agreements 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 have spent
      approximately $497,228 for research and development so far in 2008, and a
      cumulative amount from the date of our inception (January 8, 1992, date of
      inception of Thorium Power Inc.) to September 30, 2008 of $5,180,541. In
      addition we incurred approximately $457,000 in salary, benefits and other
      general and administrative support costs for the nine months ended September
      30,
      2008. We have established an office in Moscow and leased office space to support
      our research and development activities in Russia, as of May 1,
      2008.





Over
      the
      next several years, we expect that our research and development activities
      will
      increase and 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)
      Continuing capsule irradiation testing of seed and blanket fuel samples in
      a
      research reactor, and performing post-irradiation examination of fuel samples
      that have reached the target burn-up level 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.




19




***Financial
      Status***





At
      September 30, 2008, our total assets were approximately $13.9 million and total
      liabilities as of September 30, 2008, were approximately $6.3 million. We had
      a
      working capital surplus of approximately $5 million at September 30, 2008.
      Accounts payable and accrued liabilities balance as of September 30, 2008
      equaled $3,010,118, an increase of approximately $887,000 since December 31,
      2007. These liabilities have increased due to the increased volume caused
      principally by the growth of our consulting and strategic advisory services
      business.





Since
      the
      year ended December 31, 2007, our consulting revenues have improved our total
      cash plus marketable securities available for sale substantially to $12.5
      million as of September 30, 2008, due to the $4.3 million received in April
      2008
      as pre-payment for the Quickstart consulting contract that we entered into
      in
      March 2008, and the $10 million received in September 2008, per the terms of
      the
      Side Agreement to the August 1, 2008 Agreements, as mentioned above. Pursuant
      to
      the August 1, 2008 Agreements, the Company is being paid a total of $8.9 million
      from ENEC and $8.5 million from FANR (aggregate amount of $17.4 million, of
      which we received $10,000,000 in September 2008), for professional fees and
      services performed during the period from June 23, 2008 through December 31,
      2008. The remaining $7.4 million that is due under the Agreements will be paid,
      equally, by ENEC and FANR upon their formation.





In
      support of our longer-term business plan for our technology business segment,
      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 to finance our overhead and research and development
      expenditures. We will also need to raise capital to support our technology
      business if the consulting and strategic advisory services business becomes
      non-sustaining. Our current average monthly projected working capital
      requirements for the company, excluding the $3-5 million of research and
      development expenses we expect to incur in Russia over the next 12–18 months is
      approximately $1,000,000 per month. This financing will need to take place
      in
      2009, to ensure that we have the necessary working capital to continue our
      business operations through 2009 and beyond. It is important to note 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. To support this financing activity, we are exploring
      transaction opportunities that could simultaneously create strategic industry
      and market alliances for the company, to support our operations in 2009 and
      beyond.




**Consolidated
      Results of Operations**





***Comparison
      of the Three Months Ended September 30, 2008 to September 30,
      2007***





The
      following table summarizes certain aspects of the Company’s consolidated results
      of operations for the three months ended September 30, 2008 compared to the
      three months ended September 30, 2007.





**Three Months Ended****September 30,****2008**
            
            **2007**
            
            **Change $**
            
            **Change %****Consulting
                Revenues**
            
            $
            6,746,500
            
            $
            —
            
            $
            6,746,500
            
            
            N/A**Cost
                of services provided**Consulting
                expenses
            
            
            1,553,904
            
            
            —
            
            
            1,553,904
            
            
            N/A%
                of total revenues
            
            
            23
            %Stock-based
                compensation
            
            
            308,405
            
            
            —
            
            
            308,405
            
            
            N/A%
                of total revenues
            
            
            5
            %**Gross
                profit**
            
            
            4,884,191
            
            
            —
            
            
            4,884,191
            
            
            N/A%
                of total revenues
            
            
            72
            %**Operating
                Expenses**General
                and administrative
            
            
            2,478,894
            
            
            1,113,731
            
            
            1,365,163
            
            
            123
            %%
                of total revenues
            
            
            37
            %
            
            N/AResearch
                and development
            
            
            211,779
            
            
            141,593
            
            
            70,186
            
            
            50
            %%
                of total revenues
            
            
            3
            %
            
            N/AStock-based
                compensation
            
            
            1,384,828
            
            
            1,127,610
            
            
            257,218
            
            
            23
            %%
                of total revenues
            
            
            21
            %
            
            N/ATotal
                Operating Income/(Loss)
            
            
            808,690
            
            
            (2,382,934
            )
            
            3,191,624
            
            
            134
            %%
                of total revenues
            
            
            12
            %
            
            N/AOther
                Income and (Expenses)Interest
                income/expense, other
            
            
            19,113
            
            
            84,888
            
            
            (65,775
            )
            
            (77
            )%%
                of total revenues
            
            
            0
            %
            
            N/ANet
                Income/(Loss)-before income taxes
            
            $
            827,803
            
            $
            (2,298,046
            )
            $
            3,125,849
            
            
            136
            %%
                of total revenues
            
            
            12
            %
            
            N/A




20




Revenues





The
      increase in revenues for the three months ended September 30, 2008, as compared
      to the same period in 2007, is primarily due to us coming out of the development
      stage with our consulting and strategic advisory services business segment.
      We
      earned revenue for the three months ended September 30, 2008, and we will earn
      additional consulting revenues in the final quarter of 2008 from the August
      1,
      2008 consulting contracts, mentioned above.





Cost
      of Services Provided





The
      increase in the cost of services for the three months ended September 30, 2008
      is due to expenses related to the consulting, professional, administrative
      and
      other costs that were incurred to perform work on our consulting projects in
      Abu
      Dhabi. We will incur additional consulting and other support expenses related
      to
      the August 1, 2008 Agreements.





General
      and Administrative Expenses





The
      increase in the general and administrative expenses for the three months ended
      September 30, 2008 is primarily due to an increase in corporate consulting
      costs
      that are recorded as administrative expenses of approximately $234,000, (from
      $107,829 in 2007 to $341,806 in 2008) and an increase of approximately $728,000
      in employee wages and benefits due to the increase in wages, and also the
      increase in the number of employees hired. We have also increased expenses
      for
      rent, computer equipment and office supplies, by approximately $255,000, as
      we
      have moved to a larger office space and provided computer equipment and other
      supplies to new employees. We expect our general and administrative expenses
      to
      increase in future periods due to the expansion of our consulting and strategic
      advisory services business segment and the hiring of new officers, employees
      and
      consultants to help further develop and support our (1) consulting and strategic
      advisory services and (2) technology business segments.





Research
      and Development Costs





The
      increase in research and development costs for the nine months ended September
      30, 2008 is due to the increase in the scope of work for our research and
      development activities in Russia. We expect that our research and development
      expenses will increase in the future periods.




21




Stock-Based
      Compensation





The
      increase in stock based compensation for the three months ended September 30,
      2008, is due to the long-term incentive stock options and stock that were
      granted under our stock plan to our executives, directors, advisors and
      employees at the end of 2007,which are now being expensed as these grants are
      vesting in 2008 and in future years. Stock based incentives have also been
      offered to attract new employees in 2008, due to our expansion to meet the
      demands of contracts with our current customer, and anticipated future business
      with new customers.





Other
      Income and Expense





The
      decrease in other income and expense for the three months ended September 30,
      2008 is due to the decrease in interest income earned on our idle
      cash.





***Comparison
      of the Nine Months Ended September 30, 2008 to September 30,
      2007***





The
      following table summarizes certain aspects of the Company’s consolidated results
      of operations for the nine months ended September 30, 2008 compared to the
      nine
      months ended September 30, 2007:





**Nine Months Ended****September 30,****2008**
            
            **2007**
            
            **Change $**
            
            **Change %****Consulting
                Revenues**
            
            $
            14,863,125
            
            
            
            
            $
            $14,863,125
            
            
            N/A**Cost
                of services provided**Consulting
                expenses
            
            
            4,938,470
            
            
            
            
            
            4,938,470
            
            
            N/A%
                of total revenues
            
            
            33
            %Stock-based
                compensation
            
            
            308,405
            
            
            
            
            
            308,405
            
            
            N/A%
                of total revenues
            
            
            2
            %**Gross
                profit**
            
            
            9,616,250
            
            
            
            
            
            9,616,250
            
            
            N/A%
                of total revenues
            
            
            65
            %**Operating
                Expenses**General
                and administrative
            
            
            5,595,881
            
            
            3,907,464
            
            
            1,688,417
            
            
            43
            %%
                of total revenues
            
            
            38
            %
            
            N/AResearch
                and development expenses
            
            
            497,228
            
            
            297,064
            
            
            200,164
            
            
            67
            %%
                of total revenues
            
            
            3
            %
            
            N/AStock-based
                compensation
            
            
            4,172,007
            
            
            3,582,344
            
            
            589,663
            
            
            16
            %%
                of total revenues
            
            
            28
            %
            
            N/ATotal
                Operating Loss
            
            
            (648,866
            )
            
            (7,786,872
            )
            
            7,138,006
            
            
            (92
            )%%
                of total revenues
            
            
            4
            %
            
            N/AOther
                Income and (Expenses)Interest
                income/expense, other
            
            
            (276,457
            )
            
            243,224
            
            
            (519,681
            )
            
            (212
            )%%
                of total revenues
            
            
            (2
            )%
            
            N/A**Net
                loss - before income taxes**
            
            $
            (925,323
            )
            $
            (7,543,648
            )
            $
            6,618,325
            
            
            (88
            )%%
                of total revenues
            
            
            (6
            )%
            
            N/A





Revenues





The
      increase in revenues in the amount of $14,863,125 for the nine months ended
      September 30, 2008, as compared to the same period in 2007, is primarily due
      to
      us coming out of the development stage with our consulting and strategic
      advisory services business segment by completing the Roadmap and Quickstart
      projects, and by providing consulting and strategic advisory services under
      the
      August 1 Agreements. The term of the August 1 Agreements is five years, with
      automatic renewals of these contracts for one year periods.




22




Cost
      of Services Provided





The
      increase in the cost of services for the nine months ended September 30, 2008
      is
      due to the expenses related to the consulting, professional, administrative
      and
      other costs that were incurred to complete the work performed on our Roadmap
      and
      Quickstart consulting projects, and to provide consulting and strategic advisory
      services under the August 1 Agreements. We will incur additional consulting
      and
      other support expenses as we continue working on the consulting agreements
      that
      we entered into on August 1, 2008.





General
      and Administrative Expenses





The
      increase in the general and administrative expenses for the nine months ended
      September 30, 2008 is primarily due to an increase in corporate consulting
      costs
      and professional fees of approximately $542,000, (from $1,439,190 in 2007 to
      $1,980,831 in 2008) and an increase of approximately $902,000 in employee wages
      and benefits, due to the increase in wages and also the increase in the number
      of employees hired to support both business segments. Rental expense has
      increased by approximately $196,000, as we moved to larger office facilities
      to
      accommodate our growth. We expect our general and administrative expenses to
      increase in future periods due to the expansion of our consulting and strategic
      advisory services business segment and the hiring of new officers, employees
      and
      consultants to help further develop and support both our (1) consulting and
      strategic advisory services and (2) technology business segments.





Research
      and Development Costs





The
      increase in research and development costs for the nine months ended September
      30, 2008 is due to the increase in the scope of work for our research and
      development activities both in Russia and elsewhere. We expect that our research
      and development expenses will increase in the future periods.





Stock-Based
      Compensation





The
      increase in stock based compensation for the nine months ended September 30,
      2008 is due to the long-term incentive stock options and stock that were granted
      under our stock plan to our executives, directors, advisors and employees at
      the
      end of 2007, which is now being expensed as these grants are vesting in 2008
      and
      in future years. Additional stock based incentives have been offered to attract
      new employees in 2008, due to expansion to meet the demands of contracts with
      our current customer, and anticipated future business with new customers. We
      expect that our stock based compensation will increase in future periods due
      to
      the granting of additional stock options and stock to attract new executives
      and
      consultants, as well as granting stock options and stock to our current
      executives, directors, consultants and other support staff.





Other
      Income and Expense





The
      decrease in other income and expense for the nine months ended September 30,
      2008, is due to the decrease in interest income earned on our idle cash balances
      and the realized loss on marketable securities. Due to the lack of liquidity
      in
      2008 for auction rate securities held by the Company, we concluded that the
      carrying value of these investments was higher than its fair value as of
      September 30, 2008. Accordingly, these auction rate securities were recorded
      at
      their estimated fair value of $1,674,849 (total realized loss of $438,750 for
      the nine months ended September 30, 2008). The Company considered this to be
      an
      other-than-temporary reduction in the carrying value of these auction rate
      securities at June 30, 2008. Accordingly, the loss associated with these auction
      rate securities of $438,750 was recorded as a recognized loss on investments
      in
      the Company’s consolidated statement of operations and we classified these
      investments as a non-current asset on its consolidated balance sheet. The
      financial institution that sold these securities and was holding the securities
      on our behalf, informed us that it would redeem these securities at their full
      face value, and did redeem these securities in October 2008. As such, the
      realized loss of $438,750 will be reversed in the fourth quarter financial
      statements.




23




**Liquidity
      and Capital Resources**





As
      of
      September 30, 2008, we had a total of cash and cash equivalents of $10,360,068.
      The following table provides detailed information about our net cash flow for
      all financial statements periods presented in this Report.




**Cash
      Flow**




**Nine
                Months Ended September 30,****2008**
            
            **2007**Net
                cash provided by(used in) operating activities
            
            $
            2,732,462
            
            $
            (4,457,072
            )Net
                cash provided by(used in) investing activities
            
            
            (192,198
            )
            
            3,274Net
                cash provided by(used in) financing activities
            
            
            39,542
            
            
            (3,685
            )Net
                cash inflow (outflow)
            
            $
            2,579,806
            
            $
            (4,457,483
            )





*Operating
      Activities*




Net
      cash
      provided by operating activities was $2,732,462 for the nine months ended
      September 30, 2008, compared to $4,457,072 net cash used in operating activities
      for the same period in 2007. This increase in funds provided by our operating
      activities was primarily due to (1) the cash received from the Quickstart
      consulting agreement of $4,285,000, received in April 2008, and (2) the
      $10,000,000 advance payment received in September 2008 under the August 1
      Agreements. The cash received of $3,793,125 for fees earned from our first
      consulting agreement, the Roadmap consulting agreement that was completed in
      March 2008, was received in December 2007 as a full prepayment prior to the
      start of the Roadmap consulting contract, and this amount (recorded as deferred
      revenue at December 31, 2007) was recorded as cash received in the our statement
      of cash flows for the year ended December 31, 2007 (and is not included in
      the
      statement of cash flows for the nine months ended September 30, 2008 nor in
      the
      above liquidity chart for the nine months ended September 30, 2008). This
      increase in the cash provided by operation activities was offset by an increase
      in our cost of services provided to perform these contracts, which was paid
      to
      our employees and consultants in order to provide the necessary services related
      to these consulting projects. The other changes to the operating activities
      cash
      flows are mentioned above in the consolidated results of operations section
      regarding expenses incurred for general and administrative expenses, and items
      mentioned in the other income and expense.




*Financing
      Activities*




Net
      cash
      provided by financing activities in the nine months ended September 30, 2008
      totaled $39,542, as compared to cash used of $3,685 in the same period of 2007.
      This increase in the cash provided by financing activities was mainly
      attributable to money received from the exercise of stock options in the amount
      of $49,975. This increase in cash provided by our financing activities was
      offset by an increase in our payments of our notes payable in the amount of
      $10,433.




Management
      expects that the proceeds from our consulting agreements that have been received
      to date, as well as the expected proceeds in the amount of $7.4 million,
      remaining under the two new consulting agreements we entered into in August
      2008, will meet our foreseeable working capital needs for our current operations
      until sometime in 2009. However, 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 to support our longer term
      business plan. We will also need to raise capital to support our overhead
      operation if the consulting and strategic advisory services business becomes
      non-sustaining. 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.




24




***Seasonality***




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




***Inflation***




Our
      business, revenues and operating results have not been affected in any material
      way by inflation.





***Critical
      Accounting Policies and Estimates***




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-K
      filed with the Commission on March 27, 2008.





Accounting
      for Stock Based Compensation, Stock Options and Warrants Granted to Employees
      and Non-employees




We
      adopted SFAS 123(R), as of January 1, 2006. SFAS 123(R) replaced the existing
      requirements under SFAS No. 123, Accounting for Stock Based Compensation, and
      Accounting Principles Board Opinion No. 25, Accounting for Stock-based
      Compensation to Employees, or APB 25. According to SFAS 123(R), all forms of
      share-based payments to employees, including employee stock options and employee
      stock purchase plans, are treated the same as any other form of compensation
      by
      recognizing the related cost in the statement of income.




Under
      SFAS 123(R), stock-based compensation expense is measured at the grant date
      based on the fair value of the award, and the expense is recognized ratably
      over
      the award's vesting period. For all grants made, we recognize compensation
      cost
      under the straight-line method.




We
      measure the fair value of stock options on the date of grant using a
      Black-Scholes option-pricing model which requires the use of several estimates,
      including:




•
the
      volatility of our stock price;


•
the
      expected life of the option;


•
risk
      free interest rates; and


•
      expected dividend yield.




25




Prior
      to
      the completion of our merger in October 2006, we had limited historical
      information on the price of our stock as well as employees' stock option
      exercise behavior for stock options issued prior to the merger. As a result,
      we
      could not rely on historical experience alone to develop assumptions for stock
      price volatility and the expected life of options. As such, our stock price
      volatility was estimated with reference to our historical stock price for the
      time period before the merger, from the date the announcement of the merger
      was
      made. We utilized the closing prices of our publicly-traded stock from the
      announcement date in January 2006 to determine our volatility and will continue
      to use our historical stock price closing prices to determine our volatility
      in
      2008.




The
      expected life of options is based on internal studies of historical experience
      and projected exercise behavior. We estimate expected forfeitures of stock-based
      awards at the grant date and recognize compensation cost only for those awards
      expected to vest. The forfeiture assumption is ultimately adjusted to the actual
      forfeiture rate. Estimated forfeitures are reassessed in subsequent periods
      and
      may change based on new facts and circumstances. We utilize a risk-free interest
      rate, which is based on the yield of U.S. treasury securities with a maturity
      equal to the expected life of the options. We have not and do not expect to
      pay
      dividends on our common shares.




The
      options were valued using the Black-Scholes option pricing model. The
      assumptions used were as follows: volatility of 96% to 284%, a risk-free
      interest rate of 3.4% to 5.24%, dividend yield of 0% and an exercise term of
      two
      to ten years.




*Income
      Taxes*




We
      account for income taxes using the liability method in accordance with SFAS
      No.109 Accounting for Income Taxes, which requires the recognition of deferred
      tax assets or liabilities for the tax-effected temporary differences between
      the
      financial reporting and tax bases of our assets and liabilities and for net
      operating loss and tax credit carry forwards. The tax expense or benefit for
      unusual items, prior year tax exposure items or certain adjustments to valuation
      allowances are treated as discrete items in the interim period in which the
      events occur.




On
      January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, or FIN
      48. FIN 48 addresses the determination of whether tax benefits claimed or
      expected to be claimed on a tax return should be recorded in the financial
      statements. Under FIN 48, we may recognize the tax benefit from an uncertain
      tax
      position only if it is more likely than not that the tax position will be
      sustained on examination by the taxing authorities, based on the technical
      merits of the position. As a result of the implementation of FIN 48, we did
      not
      recognize any current tax liability for unrecognized tax benefits. We do not
      believe that there are any unrecognized tax positions that would have a material
      effect on the net operating losses disclosed. We have estimated the amount
      of
      our net operating loss carry-forwards and we currently have engaged tax
      professionals to evaluate the amount of net operating loss carry-forward
      available to us to offset future taxable income, under Internal Revenue Code
      Section 382.




*Revenue
      Recognition from Consulting Contracts*





We
      believe one of our critical accounting policies is revenue recognition from
      our
      consulting contracts. We are currently primarily deriving our revenue from
      fees
      by offering consulting and strategic advisory services to foreign commercial
      and
      government owned entities planning to create or expand electricity generation
      capabilities, using nuclear power plants. Our fee type and structure for each
      client engagement depend on a number of variables, including the size of the
      client, the complexity, the level of the opportunity for us to improve the
      client’s electricity generation capabilities using nuclear power plants, and
      other factors.





We
      recognized the revenues for our first consulting project which we completed
      in
      March 2008, using the completed performance model. We recognized the revenues
      from our second consulting contract in our second fiscal quarter of 2008 as
      the
      consulting services were performed. The two consulting agreements that we
      entered into in August 2008 are fixed fee service contracts. We recognize
      revenue associated with fixed-fee service contracts in accordance with the
      proportional performance method, measured by the percentage of costs (primarily
      labor) incurred to date as compared to the estimated total costs (primarily
      labor) for each contract. When a loss is anticipated on a contract, the full
      amount of the anticipated loss is recognized immediately. Our management uses
      its judgment concerning the estimation of the total costs to complete the
      contract considering a number of factors, including the experience of the
      personnel that are performing the services, and the overall complexity of the
      project. Should changes in management’s estimates be required, due to business
      conditions that cause the actual financial results to differ significantly
      from
      management's present estimates, revenue recognized in future periods could
      be
      adversely affected.




26




We
      recognize revenue in accordance with SEC Staff Accounting Bulletin or SAB,
      No. 104, Revenue Recognition. We recognize revenue when all of the
      following conditions are met:





1.  There
      is
      persuasive evidence of an arrangement;





2.  The
      service has been provided to the customer;




3.  The
      collection of the fees is reasonably assured; and




4.  The
      amount of fees to be paid by the customer is fixed or determinable.




In
      situations where contracts include client acceptance provisions, we do not
      recognize revenue until such time as the client has confirmed its acceptance.




Intangibles




As
      presented on the accompanying balance sheet, we had patents with a net book
      value of $217,875 as of September 30, 2008. There are many assumptions and
      estimates that may directly impact the results of impairment testing, including
      an estimate of future expected revenues, earnings and cash flows, and discount
      rates applied to such expected cash flows in order to estimate fair value.
      We
      have the ability to influence the outcome and ultimate results based on the
      assumptions and estimates we choose for testing. To mitigate undue influence,
      we
      set criteria that are reviewed and approved
      by various levels of management. The determination of whether or not intangible
      assets have become impaired involves a significant level of judgment in the
      assumptions. Changes in our strategy or market conditions could significantly
      impact these judgments and require adjustments to recorded amounts of intangible
      assets.




Marketable
      Securities




The
      Company’s investments in auction rate marketable securities are classified as
      available-for-sale securities under FAS-115, Accounting for Certain Investments
      in Debt and Equity Securities. These securities are reported at their fair
      market value, with unrealized holding gains and losses reported in other
      comprehensive income. Due to the lack of liquidity for auction rate securities
      held by the Company in 2008, we concluded that the carrying value of these
      investments was higher than its fair value as of September 30, 2008.
      Accordingly, these auction rate securities were recorded at their estimated
      fair
      value, based on the criteria provided by SFAS 157, Fair Value
      Measurements.





In
      October 2008, the Financial Accounting Standards Board issued FSP FAS 157-3,
      Determining the Fair Value of a Financial Asset When the Market for That Asset
      is Not Active, in order to clarify SFAS 157. FSP FAS 157-3 was issued due to
      charges that SFAS 157 is at least at part responsible for the crisis in the
      U.S.
      and world economies. FSP FAS 157-3 re-asserts that when a market is inactive,
      management is not required to use distressed prices as the basis for fair value
      measurement and should apply the income approach to fair value, which discounts
      estimated cash flows considering credit and default risk, and results in a
      Level
      3 classification, as the inputs are not observable. In October 2008, the auction
      rate securities held by the Company were redeemed at face value by the financial
      institution that had sold the securities, and the losses reported in the
      Consolidated Statements of Operations and Comprehensive Income (Loss) for the
      nine months ended September 30, 2008,  will be reversed in the fourth
      quarter 2008. Based
      on
      the fact that we recovered our full cost basis in these auction rate securities,
      we have accordingly reported the fair value of these securities at their full
      cost basis at September 30, 2008, believing that as of that date a knowledgeable
      purchaser would have anticipated the guarantee based on the reported
      negotiations between the financial institution and
      regulators





**ITEM
      4T.****CONTROLS
      AND PROCEDURES.**





***Disclosure
      Controls and Procedures***





As
      required by Rule 13a-15 under the Exchange Act, we carried out an evaluation
      of
      the effectiveness of the design and operation of our disclosure controls and
      procedures, as of the end of the period covered by this report on Form 10-Q.
      This evaluation was carried out under the supervision and with the participation
      of our management, including our President and Chief Executive Officer, and
      our
      Chief Financial Officer. Based upon that evaluation, management concluded that
      our disclosure controls and procedures are effective to ensure that information
      required to be disclosed in the reports that it files or submits under the
      Exchange Act is accumulated and communicated to management (including the chief
      executive officer and chief financial officer) to allow timely decisions
      regarding required disclosure and that our disclosure controls and procedures
      are effective to give reasonable assurance that the information required to
      be
      disclosed by us in reports that we file under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      rules and forms of the SEC.




27




There
      were no changes in our internal control over financial reporting identified
      in
      connection with the evaluation performed that occurred during the period covered
      by this report that have materially affected or are reasonably likely to
      materially affect, our internal control over financial reporting.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act 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 in
      our
      reports filed under the Exchange Act is accumulated and communicated to
      management, including the Company’s Chief Executive and acting Chief Financial
      Officer as appropriate, to allow timely decisions regarding required disclosure.





***Internal
      Controls Over Financial Reporting***





Section
      404 of the Sarbanes-Oxley Act of 2002 requires that management document and
      test
      the Company’s internal control over financial reporting and include in this
      Quarterly Report on Form 10-Q a report on management’s assessment of the
      effectiveness of our internal control over financial reporting.





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Rule 13a-15(f)
      of
      the Exchange Act. Under the supervision and with the participation of our
      management, including our Chief Executive Officer and Chief Financial Officer,
      we conducted an evaluation of the effectiveness of our internal control over
      financial reporting based upon the framework in Internal Control—Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (“COSO”). Based on that evaluation, our management concluded that our
      internal control over financial reporting is effective, as of September 30,
      2008, and was effective during the entire quarter ended September 30,
      2008.




**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
      1A. Risk Factors**





Risk
      factors are normally included in financial statements prepared in accordance
      with generally accepted accounting principles in the United States of America
      but have been omitted from these statements pursuant to such rules and
      regulation and, accordingly, they do not include all the information and notes
      necessary for comprehensive consolidated financial statements and should be
      read
      in conjunction with our audited consolidated financial statements for the year
      ended December 31, 2007, included in our Annual Report on Form 10-K for the
      year
      ended December 31, 2007.




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





There
      were no unregistered sales of equity securities during the fiscal quarter ended
      September 30, 2008.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





There
      were no defaults upon senior securities during the fiscal quarter ended
      September 30, 2008.




28


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





No
      matters were submitted to a vote of security holders during the fiscal quarter
      ended September 30, 2008.





**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
            
            Nuclear
                Energy Program Consulting and Strategic Advisory Agreement by and
                between
                Emirates Nuclear Energy Corporation and Thorium Power, Ltd., dated
                August
                1, 2008 (incorporated by reference to Exhibit 10.1 of the current
                report
                of the Company on Form 8-K filed August 1, 2008).10.2
            
            Nuclear
                Regulatory Consulting and Strategic Advisory Agreement by and between
                the
                Federal Authority for Nuclear Regulation and Thorium Power, Ltd.,
                dated
                August 1, 2008 (incorporated by reference to Exhibit 10.2 of the
                current
                report of the Company on Form 8-K filed August 1,
                2008).10.3
            
            Side
                Letter by and between the Abu Dhabi Executive Affairs Authority and
                Thorium Power, Ltd., dated August 1, 2008 (incorporated by reference
                to
                Exhibit 10.3 of the current report of the Company on Form 8-K filed
                August
                1, 2008).10.4
            
            Amendment
                No.1 to Agreement for Ampoule Irradiation Testing in 2006-2007, dated
                July
                31, 2008, between Thorium Power, Inc. and Russian Research Centre
                Kurchatov Institute. (English Translation) (incorporated by reference
                to
                Exhibit 10.1 of the current report of the Company on Form 8-K filed
                August
                4, 2008).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




29




SIGNATURES





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





Date:
      November 13, 2008





THORIUM
      POWER, LTD.





By:
            /s/
                Seth GraeSeth
                GraeChief
                Executive Officer,President
                and Director




30




**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
            
            Nuclear
                Energy Program Consulting and Strategic Advisory Agreement by and
                between
                Emirates Nuclear Energy Corporation and Thorium Power, Ltd., dated
                August
                1, 2008 (incorporated by reference to Exhibit 10.1 of the current
                report
                of the Company on Form 8-K filed August 1, 2008).10.2
            
            Nuclear
                Regulatory Consulting and Strategic Advisory Agreement by and between
                the
                Federal Authority for Nuclear Regulation and Thorium Power, Ltd.,
                dated
                August 1, 2008 (incorporated by reference to Exhibit 10.2 of the
                current
                report of the Company on Form 8-K filed August 1,
                2008).10.3
            
            Side
                Letter by and between the Abu Dhabi Executive Affairs Authority and
                Thorium Power, Ltd., dated August 1, 2008 (incorporated by reference
                to
                Exhibit 10.3 of the current report of the Company on Form 8-K filed
                August
                1, 2008).10.4
            
            Amendment
                No.1 to Agreement for Ampoule Irradiation Testing in 2006-2007, dated
                July
                31, 2008, between Thorium Power, Inc. and Russian Research Centre
                Kurchatov Institute. (English Translation) (incorporated by reference
                to
                Exhibit 10.1 of the current report of the Company on Form 8-K filed
                August
                4, 2008).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




31