Form
10-Q





SES SOLAR
INC. - SESI





Filed:
August 11, 2010 (period: June 30, 2010)





Quarterly
report which provides a continuing view of a company's financial
position





UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
10-Q





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





FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2010





OR





o
            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 000-21571







SES
SOLAR INC.





(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)





Delaware
            
            33-0860242(STATE
      OR OTHER JURISDICTION OF
            
            (IRS
      EMPLOYERINCORPORATION
      OR ORGANIZATION)
            
            IDENTIFICATION
      NUMBER)





129,
route de Saint-Julien, 1228 Plan-les-Ouates, Geneva, Switzerland


(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES)





+41-22-884-1484


(REGISTRANT'S
TELEPHONE NUMBER, INCLUDING AREA CODE)





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports); and (2) has been subject to such filing requirements for
the past 90 days. Yes      þ      No     
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such
files).    Yes        o  No    
o





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





Large accelerated filer  o
                    Accelerated filer o
                    Non-accelerated filer        o
                    Smaller reporting company     þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes   o     No    
þ





The
number of shares outstanding of each of the issuer's classes of stock as of
August 11 2010 is 72,984,168 shares of common stock, par value $.001 per share.





TABLE OF CONTENTS




PagePART
      I
                                
                                FINANCIAL
      INFORMATION
                                
                                1ITEM
      1.
                                
                                FINANCIAL
      STATEMENTS
                                
                                1ITEM
      2.
                                
                                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                
                                16ITEM
      3.
                                
                                QUALITATIVE
      AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
                                
                                24ITEM 4T.
                                
                                CONTROLS
      AND PROCEDURES
                                
                                24PART
      II
                                
                                OTHER
      INFORMATION
                                
                                25ITEM
      2.
                                
                                UNREGUNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                                
                                25ITEM
      6.
                                
                                EXHIBITS
                                
                                26





PART
I  – 
FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS





SES SOLAR INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(in
$, except per share amounts)


June
      30,
                  2010
                  (unaudited)
                
                
                December
      31st
                  2009ASSETS
      (in $)Current
      Assets:Cash
      and cash equivalents
                
                
                310,292
                
                
                
                311,372Receivables,
      net of allowance for doubtful accounts of $ 0 at June 30, 2010 and
      December 31, 2009.
                
                
                31,522
                
                
                
                12,205Due
      from related party
                
                
                88,124
                
                
                
                92,112Inventory
                
                
                437,760
                
                
                
                457,570Work
      in progress
                
                
                0
                
                
                
                3,131,865Other
      current assets
                
                
                137,505
                
                
                
                303,986Total
      current assets
                
                
                1,005,203
                
                
                
                4,309,110Long-Term
      Assets:Advance
      payments for machinery
                
                
                328,588
                
                
                
                385,795Advance
      payments for certification
                
                
                113,432
                
                
                
                113,432Total
      other long-term assets
                
                
                442,020
                
                
                
                499,227Property,
      Plant and Equipment, at cost,
                
                
                618,200
                
                
                
                646,177Building
      construction
                
                
                18,302,817
                
                
                
                18,429,669Less
      accumulated depreciation and amortization
                
                
                (485,413
                )
                
                
                (484,026
                )Total
      fixed assets
                
                
                18,435,604
                
                
                
                18,591,820Total
      long-term assets
                
                
                18,877,624
                
                
                
                19,091,047Total
      Assets
                
                
                19,882,827
                
                
                
                23,400,157LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Short-term
      loan
                
                
                1,012,178
                
                
                
                3,234,172Construction
      loan
                
                
                12,731,799
                
                
                
                13,111,439Accounts
      payable
                
                
                2,510,336
                
                
                
                3,452,094Billings
      in excess of cost and estimated earnings
                
                
                821,646
                
                
                
                571,466Total
      current liabilities
                
                
                17,075,959
                
                
                
                20,369,171Long-Term
      Liabilities:Loan
      payable
                
                
                149,216
                
                
                
                218,559Construction
      loan
                
                
                825,069
                
                
                
                862,407Total
      long-term liabilities
                
                
                974,285
                
                
                
                1,080,966Stockholders’
      Equity:Common
      stock, $0.001 par value; 100,000,000 shares authorized; 73,081,168 shares
      issued and 72,984,168 outstanding (73,081,168 shares issued and 72,984,168
      outstanding  as of December 31, 2009)
                
                
                73,081
                
                
                
                73,081Additional
      paid in Capital
                
                
                8,050,093
                
                
                
                8,050,093Accumulated
      other comprehensive lossTranslation
      Adjustment
                
                
                (567,374
                )
                
                
                (689,618
                )Year
      end Accumulated Deficit
                
                
                (5,699,660
                )
                
                
                (5,459,979
                )Less:
      Cost of common stock in treasury, 97,000 shares
                
                
                (23,557
                )
                
                
                (23,557
                )Total
      stockholders’ equity
                
                
                1,832,583
                
                
                
                1,950,020Total
      Liabilities and Stockholders’ Equity
                
                
                19,882,827
                
                
                
                23,400,157





See
accompanying summary of accounting policies and the notes to the financial
statements.


1


SES SOLAR INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


(in
$, except per share amounts)





For
      the Three Months
                                          Ended
      June 30,
                                        
                                        
                                        For
      the Six Months
                                          Ended
      June 30,2010
                                          (unaudited)
                                        
                                        
                                        2009
                                          (unaudited)
                                        
                                        
                                        2010
                                          (unaudited)
                                        
                                        
                                        2009
                                          (unaudited)Revenue:Revenue
                                        
                                        
                                        1,376,752
                                        
                                        
                                        
                                        238,854
                                        
                                        
                                        
                                        1,376,752
                                        
                                        
                                        
                                        1,261,270Cost
      of goods sold (exclusive of depreciation shown separately
      below)
                                        
                                        
                                        (712,846
                                        )
                                        
                                        
                                        (158,263
                                        )
                                        
                                        
                                        (712,846
                                        )
                                        
                                        
                                        (865,175
                                        )Costs
      and Expenses:Personnel
                                        
                                        
                                        135,538
                                        
                                        
                                        
                                        154,223
                                        
                                        
                                        
                                        280,297
                                        
                                        
                                        
                                        308,867Rent
      and Leases Expenses
                                        
                                        
                                        51,534
                                        
                                        
                                        
                                        27,063
                                        
                                        
                                        
                                        76,308
                                        
                                        
                                        
                                        73,360Research
      & Development
                                        
                                        
                                        57,843
                                        
                                        
                                        
                                        63,438
                                        
                                        
                                        
                                        119,619
                                        
                                        
                                        
                                        124,477Other
      General & Administrative Expenses
                                        
                                        
                                        91,429
                                        
                                        
                                        
                                        150,966
                                        
                                        
                                        
                                        149,001
                                        
                                        
                                        
                                        306,110Depreciation
      and amortization
                                        
                                        
                                        10,743
                                        
                                        
                                        
                                        21,678
                                        
                                        
                                        
                                        22,423
                                        
                                        
                                        
                                        45,368Total
      costs and expenses
                                        
                                        
                                        347,087
                                        
                                        
                                        
                                        417,368
                                        
                                        
                                        
                                        647,648
                                        
                                        
                                        
                                        858,182Other
      Income and Expense:Interest
      expense
                                        
                                        
                                        (12,976
                                        )
                                        
                                        
                                        (8,962
                                        )
                                        
                                        
                                        (25,138
                                        )
                                        
                                        
                                        (17,598
                                        )Other
      gain
                                        
                                        
                                        23,616
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        24,672
                                        
                                        
                                        
                                        0Foreign
      exchange gain/(loss)
                                        
                                        
                                        (109,470
                                        )
                                        
                                        
                                        329,352
                                        
                                        
                                        
                                        (255,473
                                        )
                                        
                                        
                                        (163,079
                                        )Total
      other income and expenses (Loss)
                                        
                                        
                                        (98,830
                                        )
                                        
                                        
                                        320,390
                                        
                                        
                                        
                                        (255,939
                                        )
                                        
                                        
                                        (180,677
                                        )Income
      (loss) before taxes
                                        
                                        
                                        217,989
                                        
                                        
                                        
                                        (16,387
                                        )
                                        
                                        
                                        (239,681
                                        )
                                        
                                        
                                        (642,764
                                        )Income
      taxes
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0Net
      income (loss)
                                        
                                        
                                        217,989
                                        
                                        
                                        
                                        (16,387
                                        )
                                        
                                        
                                        (239,681
                                        )
                                        
                                        
                                        (642,764
                                        )Other
      Comprehensive income (loss):Translation
      adjustment
                                        
                                        
                                        41,150
                                        
                                        
                                        
                                        (158,449
                                        )
                                        
                                        
                                        122,244
                                        
                                        
                                        
                                        60,853Comprehensive
      income (loss)
                                        
                                        
                                        259,139
                                        
                                        
                                        
                                        (174,836
                                        )
                                        
                                        
                                        (117,437
                                        )
                                        
                                        
                                        (581,911
                                        )Basic
      and diluted weighted average shares
                                        
                                        
                                        72,984,168
                                        
                                        
                                        
                                        73,007,279
                                        
                                        
                                        
                                        72,984,168
                                        
                                        
                                        
                                        73,044,224Basic
      and diluted net income (loss) per
      share
                                        
                                        
                                        0.003
                                        
                                        
                                        
                                        (0.0002
                                        )
                                        
                                        
                                        (0.003
                                        )
                                        
                                        
                                        (0.009
                                        )





See
accompanying summary of accounting policies and the notes to the financial
statements.


2


SES SOLAR INC. AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(in
$, except per share amounts)





Six
      Months Ended June 30,2010
                                            
                                            
                                            2009(unaudited)
                                            
                                            
                                            (unaudited)Cash
      Flows from Operating Activities:Net
      income (loss)
                                            
                                            
                                            (239,681
                                            )
                                            
                                            
                                            (642,764
                                            )Adjustments
      to reconcile net loss to cash used in operating
activities:Depreciation
      and amortization
                                            
                                            
                                            22,423
                                            
                                            
                                            
                                            45,368Changes
      in operating assets and liabilities:(Increase)
      decrease in:Receivables,
      including Due from Related Party
                                            
                                            
                                            (19,916
                                            )
                                            
                                            
                                            (111,643
                                            )Inventory
                                            
                                            
                                            0
                                            
                                            
                                            
                                            1,137,658Other
      current assets
                                            
                                            
                                            153,871
                                            
                                            
                                            
                                            202,565Increase
      (decrease) in:Accounts
      payable and accrued expenses
                                            
                                            
                                            167,195
                                            
                                            
                                            
                                            (34,895
                                            )Work
      in progress/billings in excess of cost and estimated
    earnings
                                            
                                            
                                            2,234,231
                                            
                                            
                                            
                                            (1,156,723
                                            )Net
      cash used in (provided by) operating activities
                                            
                                            
                                            2,318,123
                                            
                                            
                                            
                                            (560,434
                                            )Cash
      Flows from Investing Activities:Property,
      plants and equipment
                                            
                                            
                                            (387,803
                                            )
                                            
                                            
                                            (2,014,310
                                            )Advance
      payments for machinery/certification
                                            
                                            
                                            0
                                            
                                            
                                            
                                            (12,557
                                            )Net
      cash used in investing activities
                                            
                                            
                                            (387,803
                                            )
                                            
                                            
                                            (2,026,867
                                            )Cash
      Flows from Financing Activities:Treasury
      shares
                                            
                                            
                                            0
                                            
                                            
                                            
                                            (21,304
                                            )Proceed
      from loans
                                            
                                            
                                            0
                                            
                                            
                                            
                                            2,115,908Repayment
      of loans
                                            
                                            
                                            (2,149,545
                                            )
                                            
                                            
                                            0Net
      cash provided by (used in) financing activities
                                            
                                            
                                            (2,149,545
                                            )
                                            
                                            
                                            2,094,604Increase
      (decrease) in cash and cash equivalents
                                            
                                            
                                            (219,225
                                            )
                                            
                                            
                                            (492,697
                                            )Effect
      of exchange rate changes on cash
                                            
                                            
                                            218,145
                                            
                                            
                                            
                                            123,166Cash
      and cash equivalents, beginning of the period
                                            
                                            
                                            311,372
                                            
                                            
                                            
                                            765,694Cash
      and cash equivalents, end of the period
                                            
                                            
                                            310,292
                                            
                                            
                                            
                                            396,163Supplemental
      cash flow informationCash
      paid for interest
                                            
                                            
                                            25,138
                                            
                                            
                                            
                                            17,598Supplemental
      disclosure of non-cash operating and investing activitiesNon
      cash transaction, Property, plants and equipment in account
      payable
                                            
                                            
                                            1,960,180
                                            
                                            
                                            
                                            850,978





See
accompanying summary of accounting policies and the notes to the financial
statements.


3


SES SOLAR INC. AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





1.
Organization and Nature of Operations





Organization
- SES SOLAR INC. (the “Company,” “SES USA,” “our,” “we” and “us”) is the result
of a reverse acquisition accomplished on September 27, 2006 between SES USA, a
Delaware company, which had no operations and net assets of $39,069, and Société
d’Energie Solaire SA (“SES Switzerland”), a Swiss company. SES USA acquired all
of the outstanding shares of SES Switzerland. For accounting purposes, the
acquisition has been treated as a recapitalization of SES Switzerland with SES
Switzerland as the acquirer (reverse acquisition). SES Switzerland acquired
10,668,000 shares of SES USA in the transaction. The historical financial
statements prior to September 27, 2006 are those of SES Switzerland. The reverse
acquisition resulted in a change of control of SES USA, with the former
stockholders of SES Switzerland owning approximately 70% of SES USA and SES
Switzerland becoming a wholly owned subsidiary of SES USA.





SES
Switzerland was formed in 2001 for the purpose of researching, developing,
manufacturing and selling innovative products to the solar photovoltaic market.
From its inception, SES Switzerland has focused primarily on manufacturing and
installing silicon photovoltaic solar cell panels. The principal source of
revenue for the Company has been the sale of photovoltaic panels in turn-key
installations, manufactured in-house or purchased from subcontractors, to
electric utilities, local government agencies and private
households.





In 2008,
the Company formed a second Swiss wholly owned subsidiary, SES Prod SA (“SES
Prod”), which is also located in Geneva. It is expected that in the future, all
of the Company’s manufacturing activities now being conducted by SES Switzerland
will be conducted by SES Prod. At such time, SES Switzerland’s primary activity
will be managing the Company’s manufacturing facility.





2.
Plan of Operations





The
Company has experienced losses from operations and anticipates incurring losses
in the near future. The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. The Company incurred a
net loss of $239,681, generated a positive cash flow from operations of
$2,318,123, and had a working capital deficiency of $16,070,756 as of June 30,
2010. These matters raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.





The
Company has financed the construction of its manufacturing facility with
construction loans (Note 7). The Company intends to convert these construction
loans into a long term mortgage immediately after completion of the facility.
Since the manufacturing facility has not been completed as of June 30, 2010, no
construction loans have been converted into mortgages.





The
Company's ability to continue its operations and market and sell its products
and services will depend on its ability to convert the construction loans into
mortgages and to obtain additional financing. If the Company is unable to obtain
such financing, the Company may not be able to continue its business. Any
additional equity financing may be dilutive to shareholders, and debt financing,
if available, will increase expenses and may involve restrictive covenants. The
Company will be required to raise additional capital on terms that are
uncertain, especially in light of current capital market conditions. Under these
circumstances, if the Company is unable to obtain additional capital or is
required to raise it on undesirable terms, its financial condition could be
adversely impacted





The
Company’s cash and cash equivalents are $310,292 for the quarter ended June 30,
2010.  Based on the Company’s business plan it needs additional
funding from external sources of approximately $5 million to fund anticipated
operating expenses and the completion of the manufacturing
facility.





The
Company’s current business plan includes the development of a new assembly line
based on its proprietary technology and the construction of a manufacturing
facility in the suburbs of Geneva, Switzerland to produce solar modules and
solar tiles at a lower cost. These activities require that the Company design
and manufacture prototype panels, have them approved in accordance with European
and other standards, manufacture them in series and sell them in the primary
markets for solar photovoltaic cells. Costs incurred in manufacturing prototype
panels have been expensed as research and development costs.




The
Company does not believe that it can achieve profitability until development,
implementation, and commercialization of new products manufactured through the
new assembling process are operational.




4


The
Company has a significant amount of debt, and several loans that it has entered
into have either matured or will soon be maturing. As of June 30, 2010, the
Company had short-term loans totaling $13.7 million, of which $12.7 had been
used to finance construction of the new manufacturing facility. If the Company
is unable to successfully negotiate extensions of the maturity dates of these
loans or if it is unable to repay them, then the parties with whom it has
entered into these loans may declare the Company in default and opt to exercise
certain security interests that the Company has granted them. Certain of these
loans are secured by junior mortgages on the manufacturing facility or by shares
of common stock that the Company has agreed to hold in escrow.





One such
loan with State Department of Energy Geneva (Switzerland) (“ScanE”), dated
November 3, 2003, in the original amount of $911,810 matured on March 31,
2010.  Another loan with ScanE, dated July 1, 2009, in the amount of
CHF5 million matured on July 7, 2010.  A CHF8.5 million construction
credit loan that the Company entered into with Banque Cantonale de Genève
(“BCGE”), dated December 20, 2006, matures upon the completion of the
manufacturing facility, but no later than December 31, 2008, and as a result,
this loan has also matured. In the past, the Company has successfully negotiated
with its existing lenders for the extension of additional credit to finance
ongoing construction at its manufacturing facility as well as for extensions of
the maturity dates of the construction related loans with them.  To
this end, the Company is regularly negotiating with ScanE to extend the maturity
dates of the loans until the manufacturing facility is completed and the
construction loans have been refinanced and consolidated. The Company is also
negotiating with BCGE to postpone repayment of the loan dated December 20, 2006
until such time as the manufacturing facility is completed and the construction
loans have been refinanced and consolidated.





The
Company is in current negotiations with lenders to refinance of all its existing
construction credit facilities relating to its manufacturing facility, with the
objective being to consolidate all such credit facilities under one single loan
guaranteed by a mortgage on the building. As part of these negotiations, the
Company must demonstrate that the rental income from a portion of the facility
will be sufficient to secure interests on this single loan. Based on current
market rates, the Company must rent 50% of the facility to secure the
refinancing. The Company is in ongoing negotiations with several interested
third parties to rent part of the facility, and therefore believes it will be
able to refinance its existing credit facilities under a single consolidated
loan within the next six months.





3.
Basis of Presentation





The
consolidated interim financial statements included herein are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. The consolidated interim financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.





These
consolidated interim financial statements reflect all normal recurring
adjustments that, in the opinion of management, are necessary for fair
presentation of the information contained herein. These consolidated interim
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2009. The Company adheres to the same accounting
policies in the preparation of its interim financial statements. As permitted
under generally accepted accounting principles (“GAAP”), interim accounting for
certain expenses, including income taxes, are based on full year assumptions.
Such amounts are expensed in full in the year incurred. For interim financial
reporting purposes, income taxes are recorded based upon estimated annual income
tax rates.





4. Summary of Significant Accounting
Policies





The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, SES Switzerland and SES Prod. All significant
inter-company accounts and transactions have been eliminated in the
consolidation.





All
amounts are presented in U.S. dollars ($) unless otherwise
stated.


5


The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying disclosures.  Although these
estimates are based on management’s knowledge of current events and actions that
the Company may undertake in the future, actual results may differ from such
estimates.





Foreign Currency Translation- The reporting currency of SES USA is the U.S. dollar ($) whereas its
wholly owned subsidiaries’ functional currency is the Swiss Franc (CHF). The
financial statements of the wholly owned subsidiaries are translated to U.S.
dollar equivalents under the current method in accordance with FASB ASC 830,
“Foreign Currency Matters” (prior authoritative literature: SFAS No.52,“Foreign
Currency Translation”). Assets and liabilities are translated into U.S. dollar
equivalents at rates of exchange in effect at the balance sheet date. Average
rates for the year are used to translate revenues and expenses. The cumulative
translation adjustment is reported as a component of accumulated other
comprehensive income (loss). Foreign currency differences from inter-company
receivables and payables are recorded as Foreign Exchange Gains/Losses in the
Statement of Operations.





The
exchange rates used for translating the financial statements are listed
below:





Average Rates
                                  
                                  2010
                                  
                                  
                                  2009CHF
                                  
                                  
                                  CHF$
                                  
                                  
                                  1.08108
                                  
                                  
                                  
                                  1.12770





2010
                              
                              
                              2009Balance
      Sheet period-end rates
                              
                              CHF
                              
                              
                              CHF$
                              
                              
                              1.08496
                              
                              
                              
                              1.03799





Cash Equivalents—The Company
considers all highly liquid debt securities purchased with an original maturity
of three months or less to be cash equivalents.





Receivables and Credit
Policies— The Company’s accounts receivables primarily consists of trade
receivables. Management reviews accounts receivables on a monthly basis to
determine if any receivables will potentially be uncollectible. The Company uses
estimates to determine the amount of the allowance for doubtful accounts
necessary to reduce accounts receivable and unbilled receivables to their
expected net realizable value. The Company estimates the amount of the required
allowance by reviewing the status of past-due receivables and analyzing
historical bad debt trends. Actual collection experience has not varied
significantly from estimates, due primarily to credit policies, collection
experience and the Company’s stability as it relates to its current customer
base. Receivables consist of revenues billed to customers upon achievement of
contractual obligations. Based on the information available, the Company
believes its allowance for doubtful accounts as of June 30, 2010 is
adequate.





Product Inventory—Product
inventory is stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method and includes certain charges directly and
indirectly incurred in bringing product inventories to the point of sale.
Inventory is accounted for at the lower of cost or market, and as a result,
write-offs/write-downs occur due to damage, deterioration, obsolescence, changes
in prices and other causes.





Property and Equipment—Property and equipment is stated at cost. Depreciation is computed using
straight-line method over estimated useful lives of 3 to 20 years. Expenditures
for maintenance and repairs, which do not materially extend the useful lives of
property and equipment, are charged to operations as incurred. When property or
equipment is retired or otherwise disposed of, the property accounts are
relieved of costs and accumulated depreciation and any resulting gain or loss is
recognized.





Long-Lived Assets—The
Company accounts for long-lived assets in accordance with the provisions of FASB
ASC 360, "Property, Plant and Equipment" (prior authoritative literature: SFAS
No.144,“Accounting for the Impairment or Disposal of Long-lived Assets”). The
statement requires the Company to evaluate its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. When the sum of the undiscounted future net
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount, impairment may exist. To determine
the amount of impairment, the Company compares the fair value of the asset to
its carrying value. If the carrying value of the asset exceeds its fair value,
an impairment loss equal to the difference is recognized.


6


Warranties—Since the
Company’s commencement it has had no warranty claims. The Company’s production
was low and components were purchased for photovoltaic installations, all of
which have their own warranties. Since the Company has not yet started producing
its own photovoltaic cells and warranty claims can be thus exercised against its
suppliers, the Company does not believe that discussion of warranties is a
critical accounting policy currently, but this may become so in the
future.





Earnings (Loss) per Share-
Earnings (Loss) per share is presented in accordance with the provisions of FASB
ASC 260 (prior authoritative literature: SFAS No. 128, “Earnings Per Share”).
Basic and diluted loss per share for the six months ended June 30, 2010 does not
include the effects of warrants and is computed by dividing income available to
common stockholders by the weighted average number of shares of common stock
outstanding for the period. Diluted earnings per share reflects, in periods in
which they have a dilutive effect, commitments to issue common stock and common
stock issuable upon exercise of warrants for periods in which the exercise price
of the warrants is lower than the Company’s average share price for the
period.


7


SES SOLAR INC. AND
SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Six
      Months Ended
                  June
      30,2010
                
                
                2009Basic
      Weighted average shares outstanding
                
                
                72,984,168
                
                
                
                73,044,224Diluted
      weighted average shares outstanding
                
                
                72,984,168
                
                
                
                73,044,224





Note: The Company issued
warrants to purchase 1,500,000 shares potentially issuable upon exercise until
November 22, 2010 at an exercise price of $0.90 per share.  See Note
12 herein.  As of the June 30, 2010 balance sheet date, the warrants
were not yet exercised. Despite the Company’s net income for the three months
ended June 30, 2010, the calculation of earnings per share excludes the effect
of common stock equivalents due to the issuance of the warrants because the
Company’s average share price for the period was lower than the exercise price
of the warrants.





Revenue Recognition- The
Company recognizes revenue in accordance with FASB ASC 605, "Revenue
Recognition" (prior authoritative literature: SAB 104,“Revenue Recognition”),
which requires that four basic criteria be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or
services rendered; (3) the seller's price to the buyer is fixed and
determinable; and (4) collection is reasonably assured.





Revenues
and profits from general management of construction-type contracts are
recognized on the completed-contract method and therefore when the project is
completed. A contract is considered complete when all costs except insignificant
items have been incurred and the installation is operating according to
specifications or has been accepted by the customer. Contract costs include all
direct materials and labor costs and those indirect costs related to contract
performance, such as indirect labor, supplies, tools, repairs and depreciation
costs. Costs in excess of amounts billed are classified as current assets under
Work in Progress. Billings in excess of cost are classified under current
liabilities as Billings in Excess of Cost and Estimated Earnings. Any
anticipated losses on contracts are charged to operations as soon as they are
determinable. No unbilled revenue has been recognized so far.





For the
six months ended June 30, 2010 and 2009, the Company had no billed or unbilled
amount representing claims or other similar items subject to uncertainty
concerning their determination or ultimate realization. Amounts outstanding as
at quarter end are expected to be collected subsequent to June 30,
2010.





Research and Development Costs—Research and development costs are expensed as incurred. Research and
development costs are not disclosed separately in the Notes to the Financial
Statements, but are disclosed separately in the Income Statement.





Income Taxes—The Company
follows FASB ASC 740, “Income Taxes” (prior authoritative literature: SFAS No.
109,“Accounting for Income Taxes”), which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the period in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense (benefit)
is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities. The Company’s tax basis for
assets and liabilities is identical for the financial statements and tax
reporting. Accordingly, the only deferred tax position is the benefit with
respect to the net operating loss. The Company records a valuation allowance to
reduce the deferred tax asset to the amount that is estimated to be more likely
than not to be realized.





Comprehensive Income- The
Company accounts for comprehensive income according to FASB ASC 220
“Comprehensive Income” (prior authoritative literature: SFAS No. 130,“Reporing
Comprehensive Income”). Effective for fiscal years beginning after December 15,
1997, ASC 200 states that comprehensive income is net income, plus certain other
items that are recorded directly to shareholders’ equity such as foreign
currency translation adjustments and unrealized gains (losses) on marketable
securities.





Capitalization of Interest-
The Company capitalizes interest on projects that qualify for interest
capitalization under FASB ASC 835-20 (prior authoritative literature: SFAS No.
34, "Capitalization of Interest Costs")  as amended. Capitalized
interest is included within construction in progress. For the period ended June
30, 2010 and 2009, the Company capitalized $255,368 and $265,215 of interest,
respectively.


8


Fair Value of Financial Instruments—The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying
amounts of cash and cash equivalents, receivables, accounts payable and accrued
liabilities approximate fair value because of the short-term maturities of these
instruments. The fair value of the long-term debt is estimated based on
anticipated interest rates which management believes would currently be
available to the Company  for similar issues of debt, taking into
account the current credit risk of the Company and the other market factors. The
fair value approximates carrying value of the long-term debt.





Impact
of Recently Issued Accounting Pronouncements





In June
2009, the FASB issued ASC 470 (prior authoritative literature: EITF Issue No.
09-1, “Accounting for Own-Share Lending Arrangements in Contemplation of
Convertible Debt Issuance” (“EITF 09-1”)), which clarifies that share lending
arrangements that are executed in connection with convertible debt offerings or
other financings should be considered debt issuance costs. This new standard is
effective for us beginning on January 1, 2010. There was no impact from the
adoption of this guidance on our consolidated financial position or results of
operations.





In
December 2009, the FASB issued ASC 810-10 regarding improvements to financial
reporting by enterprises involved with variable interest entities. The new
guidance provides an amendment to its consolidation guidance for variable
interest entities and the definition of a variable interest entity and requires
enhanced disclosures to provide more information about an enterprise’s
involvement in a variable interest entity. This amendment also requires ongoing
assessments of whether an enterprise is the primary beneficiary of a variable
interest entity and is effective for us January 1, 2010. There was no impact
from the adoption of this guidance on our consolidated financial position or
results of operations.





In
January 2010, the FASB issued amendment ASC 820 regarding improving disclosures
about fair value measurements. This new guidance requires some new disclosures
and clarifies some existing disclosure requirements about fair value
measurement. The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances and
settlements in the roll forward of activity in Level 3 fair value measurements.
Those disclosures are effective for fiscal years beginning after December 15,
2010 and for interim periods within those fiscal years. There was no impact from
the adoption of this guidance on our consolidated financial position or results
of operations.





Recent
Accounting Pronouncements Not Yet Effective





In
October 2009, the FASB issued amendment ASC 605 to its accounting guidance on
revenue arrangements with multiple deliverables. This new accounting guidance
addresses the unit of accounting for arrangements involving multiple
deliverables and how consideration should be allocated to separate units of
accounting, when applicable. This guidance will be effective for fiscal years
beginning on or after June 15, 2010. Early adoption is permitted. This guidance
will not have a material impact on our consolidated financial position or
results of operations.





In
October 2009, the FASB issued amendment ASC 985 to its accounting guidance on
certain revenue arrangements that include software elements. The new accounting
guidance excludes from software revenue recognition all tangible products
containing both software and non-software components that function together to
deliver the product’s essential functionality. This guidance will be effective
for fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. This guidance must be adopted in the same period that the company
adopts the amended accounting for arrangements with multiple deliverables
described in the preceding paragraph. This guidance will not have a material
impact on our consolidated financial position or results of
operations.


9


SES
SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





5.
Inventory





Inventory
is summarized as follows:





June
      30,
                  2010
                
                
                December 31,
                  2009$
                
                
                $Raw
      Materials and Others
                
                
                242,444
                
                
                
                253,416Finished
      Goods
                
                
                195,316
                
                
                
                204,154Total
      Inventory
                
                
                437,760
                
                
                
                457,570





6.
Property, Plant and Equipment





Property,
plant and equipment is summarized as follows:





June
      30,
                        2010
                      
                      
                      December 31,
                        2009$
                      
                      
                      $Machinery
      and equipment
                      
                      
                      519,075
                      
                      
                      
                      542,565Office
      furniture and equipment
                      
                      
                      84,945
                      
                      
                      
                      88,789Vehicles
                      
                      
                      14,180
                      
                      
                      
                      14,823Equipment
                      
                      
                      618,200
                      
                      
                      
                      646,177Building
      construction
                      
                      
                      18,302,817
                      
                      
                      
                      18,429,669Property
      and equipment
                      
                      
                      18,921,017
                      
                      
                      
                      19,075,846Less
      accumulated depreciation and amortization
                      
                      
                      (485,413
                      )
                      
                      
                      (484,026
                      )Property,
      Plant and Equipment, net
                      
                      
                      18,435,604
                      
                      
                      
                      18,591,820





The
company has defined the following useful lives for fixed assets: Machinery and
equipment: 8 years, Office furniture and equipment: 3 (IT equipment) to 5 years
(office furniture), Vehicles: 4 years.





7.
Borrowings Under Revolving Credit Facility, Short and Long-Term
Loans





Short-Term Loans
                
                June
      30,
                  2010
                
                
                December 31,
                  2009$
                
                
                $State
      Department of Energy Geneva (Switzerland) (1)
                
                
                65,669
                
                
                
                68,640Banque
      Cantonale de Genève (1)
                
                
                8,057,680
                
                
                
                8,225,799Banque
      Cantonale de Genève
                
                
                118,627
                
                
                
                131,581Banque
      Cantonale de Genève
                
                
                0
                
                
                
                2,168,604State
      Department of Energy Geneva (Switzerland) (1)
                
                
                4,608,450
                
                
                
                4,817,000State
      Department of Energy Geneva (Switzerland)
                
                
                893,551
                
                
                
                933,98713,743,977
                
                
                
                16,345,611


10





Long-Term
      Loans
                
                June
      30,
                  2010
                
                
                December 31,
                  2009$
                
                
                $Banque
      Cantonale de Genève
                
                
                149,216
                
                
                
                218,559State
      Department of Energy Geneva (Switzerland) (1)
                
                
                825,069
                
                
                
                862,407974,285
                
                
                
                1,080,966Total
      loans
                
                
                14,718,262
                
                
                
                17,426,577





Year
                      
                      Repayments$2010
                      
                      
                      13,743,9772011
                      
                      
                      95,8502012
                      
                      
                      124,3942013
                      
                      
                      37,6592014
                      
                      
                      39,165Thereafter
                      
                      
                      677,217Total
                      
                      
                      14,718,262





(1) Loans
totaling $13,556,868, relating to amounts used to finance construction of the
Company’s manufacturing facility. The Company intends to refinance such loans on
a long-term basis upon completion of the facility. Negotiations are underway
with several banking institutions interested in granting a long-term mortgage
facility.


11


SES SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





On
November 3, 2003, the Company entered into a loan with ScanE in the amount of up
to $911,810. The loan bears interest at 4%. As of June 30, 2010, this loan
carried a principal balance of CHF969,470 ($893,551).  In connection
with entry into this loan, the Company agreed to escrow 10,000,000 shares of its
common stock issued to certain of its stockholders to secure
repayment.  See Note 12 herein.  Although this loan matured
on March 31, 2010, the Company is in current discussions with ScanE to extend
the maturity date until March 31, 2012.





On
January 21, 2004, ScanE granted the Company a credit facility of CHF1.0 million
to finance the construction of its new manufacturing facility. Release of the
proceeds from this credit facility was contingent upon satisfaction of certain
conditions, which were achieved as of November 13, 2007. As of January 8, 2008,
the Company had utilized the full amount of this loan, which has a fixed annual
interest rate of 4%. The loan has a duration of  20 years and is
secured by a mortgage certificate of CHF1.0 million on
the   manufacturing facility. The loan is paid in 20-equal annual
installments of CHF73,581, which amount includes principal and interest. As of
June 30, 2010, the principal balance on this loan was $890,738, thereof $65’669
is reflected as short-term loan and $825,069 as long-term loan,
respectively.




On
October 27, 2008, the Company signed a six month credit facility for CHF5.0
million with ScanE to finance improvements on the manufacturing facility. The
loan is secured by a fourth ranked mortgage on the facility.  On July
1, 2009, the Company entered into an amendment to the credit facility pursuant
to which ScanE agreed to extend the maturity date to November 7, 2009 and to
reduce the  interest rate from 4% to 3% per annum, commencing May 7,
2009. On May 10, 2010, the Company entered into an amendment to the credit
facility pursuant to which ScanE agreed to extend the maturity date to July 7,
2010. The Company is regularly negotiating with ScanE to extend the maturity
dates of the loans until the manufacturing facility is completed and the
construction loans have been refinanced and consolidated. As of June 30, 2010,
the full amount of the loan had been used to finance ongoing construction at the
facility. The principle balance on this loan as of June 30, 2010 was $4,608,450.
As a result of the interest rate reduction, the Company evaluated the remaining
cash flows of this facility under FASB ASC 470-50-40, Debt — Modifications and
Extinguishments — De-recognition, to determine if the
facility had been substantially modified as defined by the guidance. Our
analysis indicated that the fair value of the new loan facility was not
materially different from the principal amount of the previous loan facility. As
a result, the Company did not record any income or loss from this modification of the
loan agreement.





SES
Switzerland entered into a Construction Credit Agreement with BCGE, dated
December 20, 2006, in the amount of CHF4.8 million, to finance construction of
the manufacturing facility. The loan was amended on November 13, 2007 and
increased from CHF4.8 million to CHF8.5 million. Pursuant to the amended
agreement, the full amount of the loan must be drawn down by the date
construction is completed on the manufacturing facility (expected to occur in
Summer 2010), but in any event, no later than December 31, 2008. Because
construction is still ongoing, the Company is in negotiations with BCGE to
postpone repayment of this loan until August 2010, at which time the Company
anticipates that it will be in a position to refinance and consolidate this and
its other construction-related credit agreements into a single long-term
loan.  As of June 30, 2010, the Company had used CHF8,742,289
($8,057,680) of the loan. The loan bears interest at a rate of 3.75% and is
secured by a second lien exclusive mortgage certificate of CHF9.0 million on the
manufacturing facility.





On July
22, 2009, the Company entered into a loan agreement with BCGE for CHF29,430 to
finance production equipment. The loan has a duration of 36 months and is
reimbursed in 36-equal monthly installments of CHF871, which amount includes
principal and interest of 4.54%. The first installment was paid in August 2009,
and as of June 30, 2010, the principal balance had been reduced to approximately
$19,257, thereof $8,957 is reflected as short term loan.





On August
13, 2009, the Company entered into a loan agreement with BCGE for CHF245,557 to
finance the certification of its SwissTile® product. The loan has a duration of
36 months and is reimbursed in 36-equal monthly installments of CHF7,188, which
amount includes principal and interest of 3.8%. The first installment was paid
in September 2009, and as of June 30, 2010, the principal balance had been
reduced to approximately $166,285, thereof $74,560 is reflected as short term
loan.





On
September 15, 2009, the Company entered into a separate loan agreement with BCGE
for CHF86,200 to finance certain production equipment. The loan has a duration
of 36 months and is reimbursed in 36-equal monthly installments of CHF2,520,
which amount includes principal and interest of 3.72%. The first installment was
paid in October 2009, and as of June 30, 2010, the principal balance had been
reduced to approximately $60,495, thereof $26,094 is reflected as short term
loan.


12


On
October 7, 2009, the Company entered into a loan agreement with BCGE for
CHF29,947 to finance production equipment. The loan has a duration of 36 months
and is reimbursed in 36-equal monthly installments of CHF885, which amount
includes principal and interest of 4.48%. The first installment was paid in
November 2009, and as of June 30, 2010, the principal balance had been reduced
to approximately $21,807, thereof $9,016 is reflected as short term
loan.





8.
Work in Progress/Billings in Excess of Cost and Estimated Earnings





Work in Progress/Billings in Excess of Cost
      and Estimated Earnings
                
                June
      30,
                  2010
                
                
                December 31,
                  2009$
                
                
                $Work
      in progress
                
                
                0
                
                
                
                3,131,865Prepayments
      from customers
                
                
                (821,646
                )
                
                
                (571,466
                )(821,646
                )
                
                
                2,560,399





9.
Commitments and Contingencies





Operating Leases- lease
expenses for the six months ended June 30, 2010 and 2009 were $47,541 and
$73,360, respectively.





The
following table presents future minimum lease commitments (concerning the lease
of vehicles) under operating leases at June 30, 2010 :





Operating
      Leases2010
                
                
                21,2532011
                
                
                42,8072012
                
                
                25,169Total
                
                
                89,229





In
addition to the amounts disclosed above, SES Switzerland has an operating lease
for its office located at 129 Route de Saint-Julien, Plan-les-Ouates,
Switzerland (a suburb of Geneva). The rent is CHF54,084 per year. The lease will
terminate on August 31, 2010.





SES
Switzerland also leased a 1,654 square meter industrial facility in Härkingen,
Switzerland. The lease was terminated on February 28, 2009. The global charge
for the period January 1, 2009 to February 28, 2009 was CHF10,631
($9,819).





On May
27, 2005, we received authorization from the State of Geneva to build our
manufacturing facility on property located in Plan-les-Ouates, Switzerland, and
we obtained a lease for the land in February 2007. The lease is for 60 years
commencing on July 1, 2006.


13


SES SOLAR INC. AND
SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





The
following are the lease commitments:




Use of Land$2010
                
                
                33,3302011
                
                
                66,6612012
                
                
                66,6612013
                
                
                66,6612014
                
                
                66,661Thereafter
                
                
                3,433,019Total
                
                
                3,732,993





SES
Switzerland has no non-cancellable operating leases.




Employment Agreements—As at
quarter end, SES Switzerland and SES Prod employed 3 employees and 2 executive
officers. The terms of employment are supplemented by Swiss Commercial Law,
which requires in case of termination of the contract, a minimum of one month’s
notice the first year, 2 months’ paid notice the second year and 3 months’ paid
notice of termination thereafter. Ms. Crisafulli and Mr. Erné have written
employment agreements.




Flannel
Management sarl has a consulting agreement with SES Switzerland effective
October 1, 2006. Flannel Management sarl receives a monthly consulting fee of
CHF20,000 ($18,500) (using exchange rate set forth in Note 4 to the Consolidated
Financial Statements hereto). The contract is for a 10-year term and if earlier
terminated, the Company nevertheless pays the consulting fees for the remainder
of the term. One of Flannel Management sarl’s consultants is Philippe
Crisafulli, the husband of Sandrine Crisafulli, Chief Financial Officer of SES
USA and SES Switzerland.





Litigation—The Company is
from time to time subject to routine litigation incidental to its business.
There are no such litigation currently pending.




Capital Commitments- At June
30, 2010, the Company has an outstanding purchase order of EUR448,600 ($547,648)
for the future construction of a new machine to be used in the new plant for
solar module production. The Company has made an advance payment of
EUR269,160 ($328,588) for the purchase of this machine. The balance due will be
paid upon delivery of the machine.





10.
Business Segments




As of
June 30, 2010, all of the Company’s operations were conducted through its wholly
owned subsidiaries, SES Switzerland and SES Prod, and were limited to the
assembly and installation of PV panels in Switzerland.





11.  Discontinued
Operations





In 2010,
there was no income or expense from discontinued operations (same thing in
2009).





12.  Stockholders'
Equity





Common Stock— The Company
has 100,000,000 shares of common stock authorized, par value $0.001 per share,
and 73,081,168 shares issued and 72,984,168 shares outstanding.





Treasury Stock- The Company
purchased shares of its common stock, par value $0.001, in the open market. As
of June 30, 2010, the Company held 97,000 shares in the amount of
$23,557.





On
November 22, 2006, the Company issued warrants to purchase 1,500,000 shares of
common stock at an exercise price of $0.90 per share (the “Warrant Shares”). The
warrants expire four (4) years after the date of issuance.


14




During
the quarter ended June 30, 2010, no warrants were exercised.





In
connection with the closing of the share exchange agreement with SES Switzerland
and the stockholders thereof whereby the Company agreed to acquire SES
Switzerland, the Company entered into, among other agreements, the Long Term
Escrow Agreement, dated September 1, 2006, with Christiane Erné, Jean-Christophe
Hadorn (our former CEO and director), and Claudia Rey. Pursuant to the terms of
the Long Term Escrow Agreement, the Company agreed to escrow 10,000,000 shares
of common stock issued to Ms. Erné (9,000,000 shares), Mr. Hadorn (500,000
shares) and Ms. Rey (500,000 shares) in order to secure partial repayment of its
loan dated November 3, 2003 with ScanE, which shares remain in escrow under the
Long Term Escrow Agreement, and which are included in earnings per
share.





13.
Subsequent Events





The
Company evaluates events and transactions that occur after the balance sheet
date as potential subsequent events. This evaluation was performed through
the date on which the Company’s financial statements were issued.




15





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





The
following discussion should be read in conjunction with the consolidated audited
financial statements and related notes accompanying this Annual Report on Form
10-K. As used herein, the terms “company,” “SES USA,” “our,” “we,” and “us”
refer to SES Solar Inc. and its subsidiaries on a consolidated basis, and the
terms “SES Switzerland” and “SES Prod” refer to our wholly owned subsidiaries,
unless the context requires otherwise.





We are a
Delaware corporation based in Geneva, Switzerland engaged in the business of
designing, engineering, producing and installing solar modules and solar tiles
for generating electricity. We have developed a new assembly technology for
solar tiles that allows for higher quality electrical contacts, better
performance and reduced costs resulting from our proprietary automation
processes. We are constructing a manufacturing facility that will include
assembly lines based on our proprietary technology to complete the development
and testing of our new products. To date, while we have been engaged in
developing and testing our new solar panel assembly technology, we have been
developing the sales and distribution portions of our business by selling solar
tiles manufactured and produced by us and third parties and by responding to
quotations for our solar tiles to electric companies, local governmental
agencies and private home owners.





Our
business was commenced in 2001 by SES Société d’Energie Solaire SA (“SES
Switzerland”), a Swiss-based developer of solar panels and solar roof tiles. On
September 27, 2006, our parent company, SES USA, completed a share exchange
agreement with SES Switzerland in which SES Switzerland became our wholly owned
subsidiary. We then abandoned our previous Internet based auction website
business and the SES Switzerland business of designing, engineering, producing,
and installing solar panels or modules and solar tiles became the sole business
of the combined company. In July 2008, we formed a second wholly owned
subsidiary, SES Prod, to conduct our manufacturing operations. Because SES USA
and its subsidiaries on a consolidated basis are the successor business to SES
Switzerland, and because the operations and assets of SES Switzerland and SES
Prod represent our entire business and operations from the closing date of the
share exchange agreement, the following discussion and analysis is based on SES
Switzerland’s and SES Prod’s financial results for the relevant
periods.





Overview




This
overview addresses our plan of operation and the trends, events, and
uncertainties that have been identified by our management as those that we
believe are reasonably likely to materially affect the comparison of historical
operating results reported herein to either past period results or to future
operating results.





We have
developed and patented a new assembly technology for solar modules and solar
tiles. Our business plan includes the completion of a new assembly line based on
our proprietary technology, using a manufacturing facility in the suburbs of
Geneva, Switzerland that is currently under construction to produce solar
modules and solar tiles at a lower cost. We believe this new facility will
enable us to produce solar photovoltaic (“PV”) modules that are larger than
three square meters.




To
implement our business plan, we will need to complete the design of the solar
modules and solar tiles, manufacture and test the prototype panels, have them
approved in accordance with European and other standards, manufacture them in
series and sell them in major markets in Europe and eventually other countries
around the world. Our initial plan to complete the manufacturing facility and
commence full scale production and sale of our new products between the second
and the third quarters of 2010 is delayed of a few months due to additional
testing of the production process. Once our manufacturing capabilities are fully
operational, we will have available a product line consisting of our
SunTechTile® and SwissTile® solar tiles and, in
the future, PV solar modules




Historically,
we have relied upon third-party vendors to supply us with component parts, such
as PV cells, in order to manufacture and produce our products. While we await
completion of our facility and work to bring our fully automated production
lines into operation, we have reconfigured our production capabilities to
manufacture our solar products on a manual and semi-manual production basis and
in partnership with subcontractors.




To date,
we have generated only limited revenue from the sale of solar modules and solar
tiles manufactured by us and third parties and the related engineering services
required to design and install the same.


16





Once our
manufacturing capabilities are fully operational, we will have available a
product line consisting of our SunTechTile® and SwissTile® solar tiles and, in
the future, PV solar modules. Historically, we have relied upon third-party
vendors to supply us with component parts, such as PV cells, in order to
manufacture and produce our products.





We have
experienced operating losses from our early stage operations, which have
involved developing and testing our new solar panel technology and commencement
of the sales and distribution portions of our business by selling custom solar
modules and solar tiles using an early stage technology. We anticipate incurring
additional operating losses over the next few years as we complete the
development, testing, prototypes and licensing of our new products and commence
production. Our research and development costs and the costs incurred in
manufacturing prototypes have been expensed to date. We do not believe that we
can achieve profitability until development, implementation and
commercialization of our solar products manufactured through our new assembling
processes are operational.




We
believe the demand for solar modules and solar tiles will ultimately be
substantial. According to the Energy Information Administration, global demand
for electricity is expected to increase from 18 trillion kilowatt hours in 2006
to 32 trillion kilowatt hours in 2030. Over time, supply constraints, rising
electricity prices, dependence on foreign countries for fuel feedstock and
environmental concerns could limit the ability of many conventional sources of
electricity and other alternative sources to supply this rapidly expanding
global demand. According to the U.S. Department of Energy, solar energy is the
only source of renewable power with a large enough resource base to supply a
significant percentage of the world’s electricity needs over the next several
decades.





However,
in the near term there are significant competitive concerns with solar energy.
As the cost of producing electricity from grid connected PV installations is
higher than the current cost of electricity from fossil or nuclear plants, the
PV market relies heavily on government subsidies and regulation concerning
independent power producers. These regulations favor PV electricity in some, but
not all, countries. Existing regulations are subject to change due to local
political factors affecting the energy market, especially in Europe, where the
process has been ongoing for 10 years. The major PV market in Europe is Germany,
where the EEG law governs. We expect France will play an increasing role in the
future due to current law. Other countries, including Italy, Spain and Greece,
have similar but less favorable laws. The PV market is heavily dependent on
public policies and, as a result, such policies present the greatest
uncertainties for our products. Reductions of the feed-in tariff in Germany by
8% per year could affect our sales. Spain decreased its subsidies by 75% during
2008. Without continued and/or enhanced governmental support in the form of
favorable laws and subsidies, the projected growth of the PV market will not
exist, which could hurt our results of operations.





Our
primary market for our SwissTile® product is Switzerland, which enacted a
feed-in tariff that became effective May 2008. This tariff has 10 different
values depending on PV integration and size. Due to the properties of our
SwissTile® product, we believe that it will receive the highest value, which
will be favorable for us.





Due to
overwhelming demand, final subsidy decisions by the relevant Swiss grid
authority regarding remuneration for electricity generated by solar power
installations have been delayed. As a result of this delay, many of our
prospective and potential solar power production customers have postponed new
solar power installations as they await determination by the Swiss grid
authority whether their respective installations will qualify for remuneration.
The tariff will decrease for new entrants by 8% every year starting in
2010.





Despite
the significant growth of the PV market over the past several years, solar
electricity still represents only a small fraction of the supply of electricity.
So long as governments and the market are focused on the ability of
manufacturers to develop new technologies that reduce the cost of solar
electricity, we believe that the demand for solar energy products will continue
to grow significantly. This growth projection is based on continued governmental
support, on the success of such manufacturing efforts to reduce the gap between
the cost of solar electricity and more conventional and established methods of
generating electricity, and on other developments affecting the world energy
markets. In addition to the uncertainties associated with government subsidies
and these other factors, it is also possible that breakthrough technologies
might emerge in other areas that will reduce demand for new solar energy
products. Furthermore, even within the solar energy sector, it is possible that
developments in thin films or nanoscience could reduce the cost of PV cells or
that future shortages in the supply of polysilicon, an essential raw material in
the production of our PV cells, could impact our proposed new products and
adversely affect our plan of operation.




We are in
ongoing discussions with strategic partners, including cell manufacturers, PV
line manufacturers and special machine manufacturers to assist us with our new
technology for module assembly. We are also progressing with the final stages of
construction at our new manufacturing facility, which is expected to be
completed during Summer 2010.


17





During
the three month period ended June 30, 2010, we incurred capital expenditures of
$576,493 to construct our new manufacturing facility. We also continued sales of
our custom solar panels and solar tiles to customers during the six month period
ended June, 2010, generating revenue of $1,376,752 and a net loss of
$239,681.





Based on
current and planned custom installation projects that will be completed during
fiscal year 2010, we believe that our cash flows used in operating activities
for the remainder of fiscal year 2010 will be greater than our cash flows used
in operating activities during 2009. In light of these operating activities, we
believe that our operating expenses in fiscal year 2010 will be approximately $2
million, which we anticipate financing through revenue generated from operating
income and with available cash and credit facilities. Management anticipates
total capital expenditures of approximately $20 million for the new
manufacturing facility, of which we have already financed $18.3 million, and $2
million for the assembly lines and related machinery, of which we have already
financed $328,588. Depending on our production requirements, we may also require
up to an additional $11 million during the next 12 months to finance the
purchase of raw materials to be used in the production of 2MW of solar tiles. We
anticipate financing the remaining capital expenditures on the manufacturing
facility and assembly lines using available cash, loans and lines of credit, as
well as a planned debt consolidation and refinancing of the construction loans
owed on the facility. We will also require additional financing in order to
purchase raw materials and expand our operations once our manufacturing facility
is fully operational. We do not presently have any definitive agreements in
place to secure any such financings or debt consolidation. The Company is
contemplating the possibility to sell the building which is currently under
construction. If the building can be sold at its current market price the
Company would be able to pay back all existing construction loans and be able to
use the excess cash to finance operating activities for 2010 and further. In any
case, the building would only be sold provided that the contract contains a
provision for a lease necessary to be able to operate own manufacturing
lines.




We expect
to continue to experience losses from operations until we can generate
significant revenue from manufacturing our new products. As a result of our
continuing need to expand our operations and develop and market our new
products, we expect to continue to need additional capital over the long-term in
order to continue as a going concern. See “Liquidity and Capital
Resources.”




18




Selected
Financial Data




Balance Sheets
                  
                  June 30,
                    2010
                  
                  
                  December 31,
                    2009(unaudited)
                  
                  
                  (audited)in
      $Total
      current assets
                  
                  
                  1,005,203
                  
                  
                  
                  4,309,110Total
      long-term assets
                  
                  
                  18,877,624
                  
                  
                  
                  19,091,047Total
      current liabilities
                  
                  
                  17,075,959
                  
                  
                  
                  20,369,171Total
      long-term liabilities
                  
                  
                  974,285
                  
                  
                  
                  1,080,966Total
      liabilities and stockholders' equity
                  
                  
                  19,882,827
                  
                  
                  
                  23,400,157





Statement
of Operations (unaudited)




For the three months ended
                      June 30,2010
                    
                    
                    2009in
      $Revenues
                    
                    
                    1,376,752
                    
                    
                    
                    238,854Total
      cost of goods sold (exclusive of depreciation, shown separately
      below)
                    
                    
                    (712,846
                    )
                    
                    
                    (158,263
                    )Personnel
                    
                    
                    (135,538
                    )
                    
                    
                    (154,223
                    )Rent
      and lease expenses
                    
                    
                    (51,534
                    )
                    
                    
                    (27,063
                    )Research
      and development
                    
                    
                    (57,843
                    )
                    
                    
                    (63,438
                    )Depreciation
      and amortization
                    
                    
                    (10,743
                    )
                    
                    
                    (21,678
                    )General
      and administrative expenses
                    
                    
                    (91,429
                    )
                    
                    
                    (150,966
                    )Interest
      expense
                    
                    
                    (12,976
                    )
                    
                    
                    (8,962
                    )Other
      gain
                    
                    
                    23,616
                    
                    
                    
                    0Foreign
      exchange gain (loss)
                    
                    
                    (109,470
                    )
                    
                    
                    329,352Income
      (Loss) before taxes
                    
                    
                    217,989
                    
                    
                    
                    (16,387
                    )Income
      Taxes
                    
                    
                    (0
                    )
                    
                    
                    (0
                    )Net
      income (loss)
                    
                    
                    217,989
                    
                    
                    
                    (16,387
                    )Other
      comprehensive income (loss): translation adjustment
                    
                    
                    41,150
                    
                    
                    
                    (158,449
                    )Comprehensive
      income (loss)
                    
                    
                    259,139
                    
                    
                    
                    (174,836
                    )





RESULTS
OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED JUNE 30, 2010 AND
2009




Net
Loss




Our net
income for the three months ended June 30, 2010 was $217,989 compared to a net
loss of $16,387 for the three months ended June 30, 2009.The change to net
income for the three months ended June 30, 2010 from a net loss for the three
months ended June 30, 2009 is largely attributable to a larger margin on sold
projects together with a reduction of the operating expenses of
$70,281.





Revenue
and Cost of Goods Sold





We
recognize revenue on the completed-contract method, and therefore when projects
are completed. During the three months ended June 30, 2010, we completed three
projects and generated total revenue of $1,376,752 compared to $238,854 for the
three months ended June 30, 2009. Cost of goods sold for the three months ended
June 30, 2010 was $712,846 compared to cost of goods sold of $158,263 for the
three months ended June 30, 2009.




Operating
Expenses





Operating
expenses for the three months ended June 30, 2010 were $347,087 compared to
$417,368 for three months ended June 30, 2009, which represents a 17% decrease.
Personnel, rent, research and development, general and administrative, and
depreciation and amortization expenses constitute the components of our
operating expenses. We expect that as we continue to implement our business
plan these expenses will increase accordingly.


19




The
majority of the decrease resulted from reduced general and administrative
expenses (decrease of $59,537), personnel expenses (decrease of $18,685) and
depreciation and amortization expenses (decrease of $10,935).




Other
Income (Expense)




Interest
expense increased to $12,976 for the three months ended June 30, 2010 compared
to $8,962 for the three months ended June 30, 2009. For the three months ended
June 30, 2010, we have incurred interest expense of $2,754 in connection with
financing of the production equipment.





Foreign
exchange loss for the three months ended June 30, 2010 was $109,470 compared to
a foreign exchange profit of $329,352 for the three months ended June 30, 2009.
We conduct our business and incur substantially all of our costs in Swiss francs
(CHF). The unfavorable result of foreign exchange is due primarily to the
decrease of the Swiss Franc against US dollar which is the company’s reporting
currency. See Note 4 to the accompanying financial
statements.


20





Statement of Operations
                  (unaudited)
                
                For the Six Months Ended
                  June 30,2010
                
                
                2009in
      $Total
      revenues
                
                
                1,376,752
                
                
                
                1,261,270Total
      cost of goods sold (exclusive of depreciation shown separately
      below)
                
                
                (712,846
                )
                
                
                (865,175
                )Personnel
                
                
                (280,297
                )
                
                
                (308,867
                )Rent
      and lease expenses
                
                
                (76,308
                )
                
                
                (73,360
                )Research
      and development
                
                
                (119,619
                )
                
                
                (124,477
                )Depreciation
      and amortization
                
                
                (22,426
                )
                
                
                (45,368
                )General
      and administrative expenses
                
                
                (149,001
                )
                
                
                (306,110
                )Interest
      expense
                
                
                (25,138
                )
                
                
                (17,598
                )Other
      gain
                
                
                24,672
                
                
                
                0Foreign
      exchange gain (loss)
                
                
                (255,473
                )
                
                
                (163,079)Loss
      before taxes
                
                
                (255,939
                )
                
                
                (180,677)Taxes
                
                
                0
                
                
                
                0Net
      income (loss)
                
                
                (239,681
                )
                
                
                (642,764)Other
      comprehensive income: translation adjustment
                
                
                122,244
                
                
                
                60,853Comprehensive
      income (loss)
                
                
                (117,437
                )
                
                
                (581,911)





RESULTS
OF OPERATIONS - COMPARISON OF SIX MONTHS ENDED JUNE 30, 2010 AND
2009





Net
Loss




Our net
loss for the six months ended June 30, 2010 was $239,681 compared to a net loss
of $642,764 for the six months ended June 30, 2009. The decrease in net loss for
the six months ended June, 2010 compared to 2009 is largely attributable to a
larger margin on sold projects together with a reduction of the operating
expenses of $210,534.





Revenues
and Cost of Goods Sold




We
recognize revenue on the completed-contract method, and therefore when projects
are completed. During the six months ended June 30, 2010, we completed three
projects and generated total revenue of $1,376,752 compared to $1,261,270 for
the six months ended June 30, 2009.





Cost of
goods sold for the six months ended June 30, 2010 was $712,846 compared to cost
of goods sold of $865,175 for the six months ended June 30, 2009.  The
decrease in cost of good sold for the six months ended June 30, 2010 is entirely
attributable to the projects completed during the period.





Operating
Expenses





Operating
expenses for the six months ended June 30, 2010 were $647,651 compared
to $858,182 for the six months ended June 30, 2009, which represents a 25%
decrease. Personnel, rent, research and development, general and administrative
expenses, and depreciation and amortization expenses constitute the components
of our operating expenses.




The
majority of the decrease resulted from reduced general and administrative
expenses (decrease of $157,109), personnel costs to develop the activities of
our new subsidiary (decrease of $28,570) and an decrease of $22,942 in
depreciation and amortization expense.




We expect
that as we continue to implement our business plan these expenses will increase
accordingly.


21


Other
Income (Expense)





Interest
expense increased to $25,138 for the six months ended June 30, 2010 compared to
$17,598 for the six months ended June 30, 2009. For the six months ended June
30, 2010, we have incurred interest expense of $5,784 in connection with
financing of the production equipment.





Foreign
exchange loss for the six months ended June 30, 2010 was $255,473 compared to a
foreign exchange loss of $163,079 for the six months ended June 30, 2009. Our
wholly owned subsidiaries conduct substantially all of their business and incur
substantially all of their costs in Swiss francs.  The unfavorable
result of foreign exchange is due primarily to the decrease of the Swiss Franc
against US dollar which is the company’s reporting currency,. See Note 4 to
the accompanying financial statements.





Liquidity
and Capital Resources




Our
principal cash requirements are for operating expenses, including research and
development, personnel, consulting, accounting, and legal costs.




As of
June 30, 2010, we had negative working capital of $16,070,756 compared with
negative working capital of $16,060,061 as of December 31, 2009, and our cash
and cash equivalents decreased to $310,292 as of June 30, 2010 compared to
$311,372 as of December 31, 2009. This increase in negative working capital is
the result of advance financing for work in progress together with continuing
financing of our new manufacturing facility. We believe that our negative
working capital situation is temporary, as we expect in the near term to
restructure our construction financing arrangements into longer term loans with
more favorable terms.





As of
June 30, 2010, we had accounts payable of $2,510,336 compared to $3,452,094 as
of December 31, 2009. This balance is primarily composed of creditors for
construction costs related to our manufacturing facility ($1,794,837) and our
work in progress ($94,911).




As June
30, 2010, we had short-term debt in the amount of $13,743,977 compared to
$16,345,611 as of December 31, 2009 The decrease relates mainly to the
reimbursement in March 9, 2010 of a loan amounting to $2,240,580 received from
BCGE on September 18, 2009.





We
currently have several loans outstanding with the Geneva (Switzerland) State
Department of Energy (“ScanE”) and with Banque Cantonale de Genève (“BCGE”)
:




ScanE
Loans





On
November 3, 2003, the Company entered into a loan with ScanE in the amount of up
to $911,810. The loan bears interest at 4%. As of June 30, 2010, this loan
carried a principal balance of CHF969,470 ($893,551).  In connection
with entry into this loan, the Company agreed to escrow 10,000,000 shares of its
common stock issued to certain of its stockholders to secure
repayment.  See Note 12 herein.  Although this loan matured
on March 31, 2010, the Company is in current discussions with ScanE to extend
the maturity date until March 31, 2012.





On
January 21, 2004, ScanE granted the Company a credit facility of CHF1.0 million
to finance the construction of its new manufacturing facility. Release of the
proceeds from this credit facility was contingent upon satisfaction of certain
conditions, which were achieved as of November 13, 2007. As of January 8, 2008,
the Company had utilized the full amount of this loan, which has a fixed annual
interest rate of 4%. The loan has a duration of  20 years and is
secured by a mortgage certificate of CHF1.0 million on
the   manufacturing facility. The loan is paid in 20-equal annual
installments of CHF73,581, which amount includes principal and interest. As of
June 30, 2010, the principal balance on this loan was $890,738, thereof $65’669
is reflected as short-term loan and $825,069 as long-term loan,
respectively.





On
October 27, 2008, we signed a six month credit facility for CHF5.0 million with
ScanE to finance improvements on the manufacturing facility. The loan is secured
by a fourth ranked mortgage on the facility.  On July 1, 2009, we entered
into an amendment to the credit facility pursuant to which ScanE agreed to
extend the maturity date to November 7, 2009 and to reduce the  interest
rate from 4% to 3% per annum, commencing May 7, 2009. On May 10, 2010, the
Company entered into an amendment to the credit facility pursuant to which ScanE
agreed to extend the maturity date to July 7, 2010. The Company is regularly
negotiating with ScanE to extend the maturity dates of the loans until the
manufacturing facility is completed and the construction loans have been
refinanced and consolidated. As of June 30, 2010, the full amount of the
loan had been used to finance ongoing construction at the facility. The
principle balance on this loan as of June 30, 2010 was $4,608,450.




22


BCGE Loans




Our
wholly owned subsidiary, SES Switzerland, entered into a Construction Credit
Agreement with BCGE, dated December 20, 2006, in the amount of CHF4.8
million to finance construction of the manufacturing facility. The loan was
amended on November 13, 2007 and increased from CHF4.8 million to CHF8.5
million. Pursuant to the amended agreement, the full amount of the loan must be
drawn down by the date construction is completed on the manufacturing facility,
but in any event, no later than December 31, 2008. Because construction is still
ongoing, we are in negotiations with BCGE to postpone repayment of this loan
until August 2010, at which time we anticipate being able to refinance and
consolidate this and our other construction-related credit agreements into a
single long-term loan. As of June 30, 2010, the Company had used CHF8,742,289
($8,057,680) of the loan. The loan bears interest at a rate of 3.75% and is
secured by a second lien exclusive mortgage certificate of CHF9.0 million on the
manufacturing facility.





On July
22, 2009, the Company entered into a loan agreement with BCGE for CHF29,430 to
finance production equipment. The loan has a duration of 36 months and is
reimbursed in 36-equal monthly installments of CHF871, which amount includes
principal and interest of 4.54%. The first installment was paid in August 2009,
and as of June 30, 2010, the principal balance had been reduced to approximately
$19,257, thereof $8,957 is reflected as short term loan.





On August
13, 2009, the Company entered into a loan agreement with BCGE for CHF245,557 to
finance the certification of its SwissTile® product. The loan has a duration of
36 months and is reimbursed in 36-equal monthly installments of CHF7,188, which
amount includes principal and interest of 3.8%. The first installment was paid
in September 2009, and as of June 30, 2010, the principal balance had been
reduced to approximately $166,285, thereof $74,560 is reflected as short term
loan.





On
September 15, 2009, the Company entered into a separate loan agreement with BCGE
for CHF86,200 to finance certain production equipment. The loan has a duration
of 36 months and is reimbursed in 36-equal monthly installments of CHF2,520,
which amount includes principal and interest of 3.72%. The first installment was
paid in October 2009, and as of June 30, 2010, the principal balance had been
reduced to approximately $60,495, thereof $26,094 is reflected as short term
loan.





On
September 18, 2009, the Company entered into a construction credit facility with
BCGE for up to CHF3.0 million to finance the construction of a new solar power
plant, which will be sold to a third party upon completion.  In
relation with this project, the Company has received advance payments used to
fully reimburse the existing loan on March 9, 2010.





On
October 7, 2009, the Company entered into a loan agreement with BCGE for
CHF29,947 to finance production equipment. The loan has a duration of 36 months
and is reimbursed in 36-equal monthly installments of CHF885, which amount
includes principal and interest of 4.48%. The first installment was paid in
November 2009, and as of June 30, 2010, the principal balance had been reduced
to approximately $21,807, thereof $9,016 is reflected as short term
loan.





Our
ability to meet our financial commitments in the near term will be primarily
dependent upon revenue from the future sale of our manufactured solar modules
and from the continued sale of our solar tiles and the related engineering
services required to design and install the same as well as from the continued
extension of credit from existing or new lenders and the successful
implementation of our planned debt consolidation and refinancing of our existing
construction loans.





We are in
ongoing negotiations with lenders to refinance all of our existing construction
credit facilities relating to our manufacturing facility, with the objective
being to consolidate all such credit facilities under a single loan guaranteed
by a mortgage on the building. As part of these negotiations, we must
demonstrate that the rental income from a portion of the facility will be
adequate to secure interests on this single consolidated loan. Based on current
market rates, we must rent 50% of the facility to secure the refinancing. We are
currently in negotiations with several interested third parties to rent part of
the facility, and therefore we believe we will be able to refinance our existing
credit facilities under a single consolidated loan within the next six
months.





If
we are unable to secure additional financing and successfully implement our
planned debt consolidation and refinancing of our existing construction loans,
management does not believe that our cash and cash equivalents, cash provided by
operating activities, and the cash available from existing loans and lines of
credit will be sufficient to meet our working capital requirements for the next
twelve months, and we will not be able to continue as a going concern. Due to
our current financial situation and history of losses, there is substantial
doubt about our ability to continue as a going concern, as discussed in Note 2
to our financial statements for the quarter ended June 30, 2010. If our
future revenues do not increase significantly to a level sufficient to cover our
net losses, we will continue to need to raise additional funds to expand our
operations. In addition, we may need to raise funds sooner than anticipated to
respond to competitive pressures, to develop new or enhanced products or
services, to fund our expansion or to make acquisitions. We may not be able
to find financing on acceptable terms or at all. However, the Company is
contemplating the possibility to sell the building which is currently under
construction. If the building can be sold at its current market price the
Company would be able to pay back all existing construction loans and be able to
use the excess cash to finance operating activities for 2010 and further. In any
case, the building would only be sold provided that the contract contains a
provision for a lease necessary to be able to operate own manufacturing
lines.


23





Operating
Activities




Net cash
provided by operating activities was $2,318,123 for the six months ended June
30, 2010 compared to $(560,434) of net cash used in operating activities for the
six months ended June 30, 2009. Net amount between advances received from
customers and work in progress for related projects increased to
$(821,646)  compared to $(285,343) for the same preceding period.
..




Investing
Activities




Net cash
used in investing activities was $576,493 during the six months ended June 30,
2010 compared to $2,026,867 during the six months ended June 30, 2009. The
decrease in investing activities is mostly due to reduced investments for the
construction of the manufacturing plant.





Management
anticipates total capital expenditures of approximately $20 million for the new
manufacturing facility of which we have already financed $18.3 million and $2
million for the assembly lines and related machinery, of which we have already
financed $328,588. In addition, and depending on our production requirements, we
may require during the next 12 months up to an additional $11 million to finance
the purchase of raw materials to be used in the production of 2 MWs of solar
tiles.




Financing
Activities




Net cash
used in financing activities was $(1,960,855) for the six months ended June 30,
2010 compared to $2,094,604 net cash provided by financing activities for the
six months ended June 30, 2009. The favorable financing activities were achieved
by using cash generated by client’s advances and terminated projects. During six
months ended June 30, 2010, the Company used $188,690 of such financing for
interests on loans. In addition, we also used $67,379 to pay down certain
loans relating to equipment production and certification and reimburse a loan
amounting to $2,240,580 received from BCGE on September 18, 2009.




Off-Balance
Sheet Arrangements




We have
no outstanding derivative financial instruments, interest rate swap transactions
or foreign currency contracts. We do not engage in trading activities involving
non-exchange traded contracts.





At June
30, 2010, we had an outstanding purchase order of EUR448,600 ($547,648) for the
future construction of a new machine to be used in the new plant for solar
module production. We made an advance payment of EUR269,160 for the
purchase of this machine. The balance due will be paid upon delivery of the
machine.





ITEM 3.  QUALITATIVE AND QUANTITATIVE
DISCLOSURES ABOUT MARKET RISK




Not
applicable to “smaller reporting companies” under Item 305(e) of Regulation
S-K.





ITEM 4T.  CONTROLS AND
PROCEDURES




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in company reports filed or
submitted under the Securities Exchange Act of 1934 (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 company reports filed under the Exchange Act, is
accumulated and communicated to management, including the company’s principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.





24


As of the
end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, of our disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that the
company’s disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and which also
are effective in ensuring that information required to be disclosed by the
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including the
Company’s Chief Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosure.





CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING




There was
no change in our internal control over financial reporting that occurred during
the fiscal quarter ended June 30, 2010 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





PART II  –  OTHER INFORMATION





ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





Treasury Stock-
The  Company holds 97,000 shares of its common stock. For the six
months ended June 30, 2010, there were no purchases or sales of treasury
shares.




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ITEM 6.  EXHIBITS




Exhibits31.1
              
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




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SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




Dated:
      August 11, 2010
                
                SES
      SOLAR INC.
                  (Registrant)Dated:
      August 11, 2010
                By:
                /s/
      SANDRINE CRISAFULLISandrine
      CrisafulliChief
      Financial Officer and Chief Operating
                  Officer(principal
      financial officer and principal
                  accountingofficer)




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