Form
10-Q





SES SOLAR
INC. - SESI





Filed:
May 17, 2010 (period: March 31, 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
      SECTION13 OR15(d)OFTHE SECURITIESEXCHANGE ACT OF
      1934





FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2010





OR





o
            TRANSITION REPORT PURSUANT TO
      SECTION13 OR15(d)OFTHE SECURITIESEXCHANGE 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
filero    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 May
17, 2010 is 73,984,168 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
                  
                  12ITEM
      3.
                  QUALITATIVE
      AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
                  
                  19ITEM
      4T.
                  CONTROLS
      AND PROCEDURES
                  
                  19PART
      II
                  OTHER
      INFORMATION
                  
                  20ITEM
      2.
                  UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                  
                  20ITEM
      6.
                  EXHIBITS
                  
                  21





PART I – FINANCIAL
INFORMATION





ITEM
1. FINANCIAL
STATEMENTS





SES
SOLAR INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(in
$, except per share amounts)





March
      31,
                    2010
                    (unaudited)
                  
                  
                  December
      31st
                    2009ASSETS
      (in $)Current
      Assets:Cash
      and cash equivalents
                  
                  
                  562,785
                  
                  
                  
                  311,372Receivables,
      net of allowance for doubtful accounts of $ 0 at March 31, 2010 and
      December 31, 2009.
                  
                  
                  11,904
                  
                  
                  
                  12,205Due
      from related party
                  
                  
                  89,840
                  
                  
                  
                  92,112Inventory
                  
                  
                  446,285
                  
                  
                  
                  457,570Work
      in progress
                  
                  
                  10,184
                  
                  
                  
                  3,131,865Other
      current assets
                  
                  
                  159,457
                  
                  
                  
                  303,986Total
      current assets
                  
                  
                  1,280,455
                  
                  
                  
                  4,309,110Long-Term
      Assets:Advance
      payments for machinery
                  
                  
                  362,163
                  
                  
                  
                  385,795Advance
      payments for certification
                  
                  
                  113,432
                  
                  
                  
                  113,432Total
      other long-term assets
                  
                  
                  475,595
                  
                  
                  
                  499,227Property,
      Plant and Equipment, at cost,
                  
                  
                  630,240
                  
                  
                  
                  646,177Building
      construction
                  
                  
                  18,314,813
                  
                  
                  
                  18,429,669Less
      accumulated depreciation and amortization
                  
                  
                  (483,683
                  )
                  
                  
                  (484,026
                  )Total
      fixed assets
                  
                  
                  18,461,370
                  
                  
                  
                  18,591,820Total
      long-term assets
                  
                  
                  18,936,965
                  
                  
                  
                  19,091,047Total
      Assets
                  
                  
                  20,217,420
                  
                  
                  
                  23,400,157LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Short-term
      loan
                  
                  
                  1,030,741
                  
                  
                  
                  3,234,172Construction
      loan
                  
                  
                  12,883,348
                  
                  
                  
                  13,111,439Accounts
      payable
                  
                  
                  2,378,491
                  
                  
                  
                  3,452,094Billings
      in excess of cost and estimated earnings
                  
                  
                  1,327,466
                  
                  
                  
                  571,466Total
      current liabilities
                  
                  
                  17,620,046
                  
                  
                  
                  20,369,171Long-Term
      Liabilities:Loan
      payable
                  
                  
                  182,790
                  
                  
                  
                  218,559Construction
      loan
                  
                  
                  841,140
                  
                  
                  
                  862,407Total
      long-term liabilities
                  
                  
                  1,023,930
                  
                  
                  
                  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
      outstanding  as of December 31, 2009)
                  
                  
                  73,081
                  
                  
                  
                  73,081Additional
      paid in Capital
                  
                  
                  8,050,093
                  
                  
                  
                  8,050,093Accumulated
      other comprehensive lossTranslation
      Adjustment
                  
                  
                  (608,846
                  )
                  
                  
                  (689,618
                  )Year
      end Accumulated Deficit
                  
                  
                  (5,917,649
                  )
                  
                  
                  (5,459,979
                  )Less:
      Cost of common stock in treasury, 97,000 shares
                  
                  
                  (23,235
                  )
                  
                  
                  (23,557
                  )Total
      stockholders’ equity
                  
                  
                  1,573,444
                  
                  
                  
                  1,950,020Total
      Liabilities and Stockholders’ Equity
                  
                  
                  20,217,420
                  
                  
                  
                  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)





Three
      Months Ended March 31,2010
                
                
                2009(unaudited)
                
                
                (unaudited)Revenue:Revenue
                
                
                0
                
                
                
                1,022,416Cost
      of goods sold (exclusive of depreciation shown separately
      below)
                
                
                0
                
                
                
                (706,912
                )Costs
      and Expenses:Personnel
                
                
                144,759
                
                
                
                154,644Rent
      and Leases Expenses
                
                
                24,774
                
                
                
                46,297Research
      and Development
                
                
                61,776
                
                
                
                61,039Other
      General and Administrative Expenses
                
                
                57,572
                
                
                
                155,144Depreciation
      and amortization
                
                
                11,680
                
                
                
                23,690Total
      costs and expenses
                
                
                300,561
                
                
                
                440,814Other
      Income and Expense:Interest
      expense
                
                
                (12,162
                )
                
                
                (8,636
                )Other
      gain
                
                
                1,056
                
                
                
                0Foreign
      Exchange Loss
                
                
                (146,003
                )
                
                
                (492,431
                )Total
      other income and expenses (Loss)
                
                
                (157,109
                )
                
                
                (501,067
                )Loss
      before taxes from continuing operations
                
                
                (457,670
                )
                
                
                (626,377
                )Income
      taxes
                
                
                0
                
                
                
                0Net
      Loss from continuing operations
                
                
                (457,670
                )
                
                
                (626,377
                )Income
      (Loss) from discontinued operations before taxes
                
                
                0
                
                
                
                0Income
      taxes
                
                
                0
                
                
                
                0Net
      Income (Loss) from discontinued operations
                
                
                0
                
                
                
                0Net
      Loss
                
                
                (457,670
                )
                
                
                (626,377
                )Other
      Comprehensive Loss/Income:Translation
      adjustment
                
                
                81,094
                
                
                
                219,302Comprehensive
      loss
                
                
                (376,576
                )
                
                
                (407,075
                )Basic
      and diluted Weighted Average Shares
                
                
                72,984,168
                
                
                
                73,081,168Basic
      and diluted Net Loss per Share from continuing operations
                
                
                (0.006
                )
                
                
                (0.009
                )Basic
      and diluted Net Income (Loss) per Share from discontinuing
      operations
                
                
                0
                
                
                
                0Basic
      and diluted Net Loss Per Share
                
                
                (0.006
                )
                
                
                (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)





Three
      Months Ended March 31,2010
                
                
                2009(unaudited)
                
                
                (unaudited)Cash
      Flows from Operating Activities:Net
      loss
                
                
                (457,670
                )
                
                
                (626,377
                )Adjustments
      to reconcile net loss to cash used in operating
activities:Depreciation
      and amortization
                
                
                11,680
                
                
                
                23,690Changes
      in operating assets and liabilities:(Increase)
      decrease in:Receivables,
      including Due from Related Party
                
                
                0
                
                
                
                (148,578
                )Inventory
                
                
                0
                
                
                
                1,121,185Other
      current assets
                
                
                138,033
                
                
                
                110,823Increase
      (decrease) in:Accounts
      payable and accrued expenses
                
                
                115,413
                
                
                
                46,911Work
      in progress/billings in excess of cost and estimated
    earnings
                
                
                2,742,738
                
                
                
                (1,364,533
                )Net
      cash used in (provided by) operating activities
                
                
                2,550,194
                
                
                
                (836,879
                )Cash
      Flows from Investing Activities:Property,
      plants and equipment
                
                
                (348,245
                )
                
                
                (1,227,464
                )Net
      cash used in investing activities
                
                
                (348,245
                )
                
                
                (1,227,464
                )Cash
      Flows from Financing Activities:Treasury
      shares
                
                
                0
                
                
                
                (16,496
                )Proceed
      from loans
                
                
                95,971
                
                
                
                1,292,279Repayment
      of loans
                
                
                (2,169,818
                )
                
                
                0Net
      cash provided by (used in) financing activities
                
                
                (2,073,847
                )
                
                
                1,275,783Increase
      (decrease) in cash and cash equivalents
                
                
                128,102
                
                
                
                (788,560
                )Effect
      of exchange rate changes on cash
                
                
                123,311
                
                
                
                427,573Cash
      and cash equivalents, beginning of the quarter
                
                
                311,372
                
                
                
                765,694Cash
      and cash equivalents, end of the quarter
                
                
                562,785
                
                
                
                404,707Supplemental
      cash flow informationCash
      paid for interest
                
                
                12,162
                
                
                
                8,636Supplemental
      disclosure of non-cash operating and investing activitiesNon
      cash transaction, Property, plants and equipment in account
      payable
                
                
                1,885,115
                
                
                
                354,345





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 $457,670, generated a positive cash flow from operations of
$2,550,194, and had a working capital deficiency of $16,339,591 as of March 31,
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 March 31, 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 $562,785 for the quarter ended March 31,
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.





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 March 31, 2010, the
Company had short-term loans totaling $13.9 million, of which $12.9 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 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 November 7, 2009.  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 currently negotiating with ScanE to extend the maturity
dates of the loans dated November 3, 2003 and July 1, 2009 until March 31, 2012
and July 1, 2010, respectively.  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.


4


SES
SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





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.





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$
                    
                    
                    1.05650
                    
                    
                    
                    1.14468





2010
                    
                    
                    2009Balance
      Sheet period-end rates
                    
                    CHF
                    
                    
                    CHF$
                    
                    
                    1.06424
                    
                    
                    
                    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 March 31, 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.





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 three months ended March 31, 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.


5


SES
SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Three Months
      Ended
                      March
31,2010
                    
                    
                    2009Basic
      Weighted average shares outstanding
                    
                    
                    72,984,168
                    
                    
                    
                    73,081,168Diluted
      weighted average shares outstanding
                    
                    
                    72,984,168
                    
                    
                    
                    73,081,168





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 March 31, 2010 balance sheet date, the warrants
were not yet exercised. Due to the Company’s net loss, the calculation of the
effect of common stock equivalents due to the issuance of the warrants is
excluded because of anti-dilution.





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
three months ended March 31, 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 March
31, 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 March
31, 2010 and 2009, the Company capitalized $159,648 and $106,922 of interest,
respectively.





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 105-10-65 (prior authoritative literature: SFAS No.
168, “The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles—a replacement of FASB Statement No. 162”). On the
effective date of this standard, FASB Accounting Standards Codification (ASC)
will become the source of authoritative U.S. accounting and reporting standards
for nongovernmental entities, in addition to guidance issued by the SEC. FASB
ASC significantly changes the way financial statement preparers, auditors, and
academics perform accounting research but is not intended to change GAAP. This
statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. FASB ASC 105-10-65 was adopted by the
Company as of July 1, 2009 and the principal impact on our financial statements
is limited to disclosures, as all future references to authoritative accounting
literature will be referenced in accordance with the Codification. In order to
ease the transition to the Codification, the Company is providing the
Codification cross-reference alongside the references to the standards issued
and adopted prior to the adoption of the Codification.





In May
2009, the FASB issued Statement of FASB ASC 855 (prior authoritative literature:
FAS No. 165, “Subsequent Events,”), which establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before the financial statements are issued or are available to be issued.
FASB ASC 855 provides guidance on the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial
statements, the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements
and the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The Company adopted FASB ASC 855 during
the second quarter of 2009, and its application had no impact on the Company’s
condensed consolidated financial statements. See Note 13 herein.





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 August
2009, the FASB issued ASC 820-10 (which amends Fair Value Measurements and
Disclosures – Overall) to provide guidance on the fair value measurement of
liabilities. This update requires clarification for circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using one or more of the
following techniques: 1) a valuation technique that uses either the quoted price
of the identical liability when traded as an asset or quoted prices for similar
liabilities or similar liabilities when traded as an asset; or 2) another
valuation technique that is consistent with the principles in FASB ASC 820 such
as the income and market approach to valuation. The amendments in this update
also clarify that when estimating the fair value of a liability, a reporting
entity is not required to include a separate input or adjustment to other inputs
relating to the existence of a restriction that prevents the transfer of the
liability. This update further clarifies that if the fair value of a liability
is determined by reference to a quoted price in an active market for an
identical liability, that price would be considered a Level 1 measurement in the
fair value hierarchy. Similarly, if the identical liability has a quoted price
when traded as an asset in an active market, it is also a Level 1 fair value
measurement if no adjustments to the quoted price of the asset are required.
This update is effective for our fourth quarter 2009. The adoption of ASC 820-10
did not impact the Company's results of operations, financial position, or cash
flow.





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 505 to its accounting for
distributions to shareholders with components of stock and cash. This new
guidance clarifies that the stock portion of a distribution to shareholders that
allows them to elect to receive cash or shares with a potential limitation on
the total amount of cash that all shareholders can elect to receive in the
aggregate is considered a share issuance. This guidance is effective for interim
and annual periods ending on or after December 15, 2009, and should be applied
on a retrospective basis. There was no impact from adoption of this guidance
since we have never declared dividends on our common stock.





In
January 2010, the FASB issued amendment ASC 810 to its accounting and reporting
for decreases in ownership of a subsidiary. This amendment clarifies the scope
of the decrease in ownership provisions in the consolidation – overall subtopic
and related guidance. This amendment is effective beginning in the period that
an entity adopts the FASB’s guidance on Noncontrolling Interests in
Consolidated Financial Statements,which was effective January 1, 2009
for us. 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.


6


SES
SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





5.
Inventory





Inventory
is summarized as follows:





March
      31,
                      2010
                    
                    
                    December
      31,
                      2009$
                    
                    
                    $Raw
      Materials and Others
                    
                    
                    247,166
                    
                    
                    
                    253,416Finished
      Goods
                    
                    
                    199,119
                    
                    
                    
                    204,154Total
      Inventory
                    
                    
                    446,285
                    
                    
                    
                    457,570





6. Property, Plant and
Equipment





Property,
plant and equipment is summarized as follows:





March
      31,
                            2010
                          
                          
                          December
      31,
                            2009$
                          
                          
                          $Machinery
      and equipment
                          
                          
                          529,184
                          
                          
                          
                          542,565Office
      furniture and equipment
                          
                          
                          86,599
                          
                          
                          
                          88,789Vehicles
                          
                          
                          14,457
                          
                          
                          
                          14,823Equipment
                          
                          
                          630,240
                          
                          
                          
                          646,177Building
      construction
                          
                          
                          18,314,813
                          
                          
                          
                          18,429,669Property
      and equipment
                          
                          
                          18,945,053
                          
                          
                          
                          19,075,846Less
      accumulated depreciation and amortization
                          
                          
                          (483,683
                          )
                          
                          
                          (484,026
                          )Property,
      Plant and Equipment, net
                          
                          
                          18,461,370
                          
                          
                          
                          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
                      
                      March 31, 2010
                      
                      
                      December
      31,2009$
                      
                      
                      $State
      Department of Energy Geneva (Switzerland) (1)
                      
                      
                      66,947
                      
                      
                      
                      68,640Banque
      Cantonale de Genève (1)
                      
                      
                      8,118,201
                      
                      
                      
                      8,225,799Banque
      Cantonale de Genève
                      
                      
                      119,788
                      
                      
                      
                      131,581Banque
      Cantonale de Genève
                      
                      
                      0
                      
                      
                      
                      2,168,604State
      Department of Energy Geneva (Switzerland) (1)
                      
                      
                      4,698,200
                      
                      
                      
                      4,817,000State
      Department of Energy Geneva (Switzerland)
                      
                      
                      910,953
                      
                      
                      
                      933,98713,914,089
                      
                      
                      
                      16,345,611





Long-Term
      Loans
                    
                    March 31, 2010
                    
                    
                    December
      31, 2009$
                    
                    
                    $Banque
      Cantonale de Genève
                    
                    
                    182,790
                    
                    
                    
                    218,559State
      Department of Energy Geneva (Switzerland)
                    
                    
                    841,140
                    
                    
                    
                    862,4071,023,930
                    
                    
                    
                    1,080,966Total
      loans as at March 31, 2010
                    
                    
                    14,938,019
                    
                    
                    
                    17,426,577





Year
                        
                        Repayments$2010
                        
                        
                        13,914,0892011
                        
                        
                        128,3842012
                        
                        
                        126,8162013
                        
                        
                        38,3932014
                        
                        
                        39,927Thereafter
                        
                        
                        690,410Total
                        
                        
                        14,938,019





(1) Loans
totaling $12,883,348, 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.


7


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 March 31, 2010, this loan
carried a principal balance of CHF969,470 ($910,953).  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
March 31, 2010, the principal balance on this loan was $908,087, thereof $66,947
is reflected as short-term loan and $841,140 as long-term loan,
respectively.


8


SES
SOLAR INC. AND SUBSIDIARIES


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





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. The Company is in negotiations with ScanE to further extend the maturity
date of this loan to July 2010. As of March 31, 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 March 31, 2010 was $4,698,200. 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 —Derecognition,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, theCompany 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 July 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 March 31, 2010, the Company had used CHF8,639,693
($8,118,201) 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 March 31, 2010, the principal balance had been reduced to
approximately $21,852, thereof $9,031 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 March 31, 2010, the principal balance had been
reduced to approximately $188,086, thereof $75,306 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
(approximately $2,428), which amount includes principal and interest of 3.72%.
The first installment was paid in October 2009, and as of March 31, 2010, the
principal balance had been reduced to approximately $68,173, thereof $26,360 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 March 31, 2010, the principal balance had been reduced
to approximately $24,467, thereof $9,091 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
                                
                                March 31, 2010
                                
                                
                                December
      31, 2009$
                                
                                
                                $Work
      in progress
                                
                                
                                10,184
                                
                                
                                
                                3,131,865Prepayments
      from customers
                                
                                
                                (1,327,466
                                )
                                
                                
                                (571,466
                                )(1,317,282
                                )
                                
                                
                                2,560,399





9.
Commitments and Contingencies





Operating Leases - lease
expenses for the three months ended March 31, 2010 and 2009 were $24,774 and
$46,297, respectively.





The
following table presents future minimum lease commitments (concerning the lease
of vehicles) under operating leases at March 31, 2010 :





Operating
      Leases2010
                
                
                32,5842011
                
                
                43,8022012
                
                
                25,755Total
                
                
                102,141





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 term
ended on February 28, 2010 and was automatically renewed at the same conditions
for another 12 months.





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.


9


SES
SOLAR INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 The
following are the lease commitments:
  Use of Land$2010
                    
                    
                    51,1592011
                    
                    
                    68,2112012
                    
                    
                    68,2112013
                    
                    
                    68,2112014
                    
                    
                    68,211Thereafter
                    
                    
                    3,512,890Total
                    
                    
                    3,836,893
 
 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 ($18,472) (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
March 31, 2010, the Company has an outstanding purchase order of EUR448,600
($603,606) 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 ($362,163) for the purchase of this machine. The
balance due will be paid upon delivery of the machine.
 
 10.
Business Segments
  As of
March 31, 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 March 31, 2010, the Company repurchased 97,000 shares in the amount of
$23,235.
 
 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.
  During
the quarter ended March 31, 2010, no warrants were exercised.
  10
  SES
SOLAR INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
 (Unaudited)
 
 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.
  11
  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 plan is 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. 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.
 
 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.
  12
  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.
  13
  During
the three month period ended March 31, 2010, we incurred capital expenditures of
$348,245 to construct our new manufacturing facility. We also continued sales of
our custom solar panels and solar tiles to customers during the three month
period ended March 31, 2010, generating revenue of $0 and a net loss of
$457,670.
 
 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 $362,163. 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.
  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.”
  14
  Selected
Financial Data
  Balance Sheets
                        
                        March 31,
                          2010
                        
                        
                        December 31,
                          2009(unaudited)
                        
                        
                        (audited)in
      $Total
      current assets
                        
                        
                        1,280,455
                        
                        
                        
                        4,309,110Total
      long-term assets
                        
                        
                        18,936,965
                        
                        
                        
                        19,091,047Total
      current liabilities
                        
                        
                        17,620,046
                        
                        
                        
                        20,369,171Total
      long-term liabilities
                        
                        
                        1,023,930
                        
                        
                        
                        1,080,966Total
      liabilities and stockholders' equity
                        
                        
                        20,217,420
                        
                        
                        
                        23,400,157
 
 Statement
of Operations (unaudited)
  For the three months ended
                          March 31,2010
                        
                        
                        2009in
      $Revenues
                        
                        
                        0
                        
                        
                        
                        1,022,416Total
      cost of goods sold (exclusive of depreciation, shown separately
      below)
                        
                        
                        0
                        
                        
                        
                        (706,912
                        )Personnel
                        
                        
                        (144,759
                        )
                        
                        
                        (154,644
                        )Rent
      and lease expenses
                        
                        
                        (24,774
                        )
                        
                        
                        (46,297
                        )Research
      and development
                        
                        
                        (61,776
                        )
                        
                        
                        (61,039
                        )Depreciation
      and amortization
                        
                        
                        (11,680
                        )
                        
                        
                        (23,690
                        )General
      and administrative expenses
                        
                        
                        (57,572
                        )
                        
                        
                        (155,144
                        )Interest
      expense
                        
                        
                        (12,162
                        )
                        
                        
                        (8,636
                        )Other
      gain
                        
                        
                        1,056
                        
                        
                        
                        0Foreign
      exchange loss
                        
                        
                        (146,003
                        )
                        
                        
                        (492,431
                        )Loss
      before taxes from continuing operations
                        
                        
                        (457,670
                        )
                        
                        
                        (626,377
                        )Income
      Taxes
                        
                        
                        (0
                        )
                        
                        
                        (0
                        )Net
      Loss from continuing operations
                        
                        
                        (457,670
                        )
                        
                        
                        (626,377
                        )Income
      from discontinued operations before taxes
                        
                        
                        0
                        
                        
                        
                        0Income
      Taxes
                        
                        
                        0
                        
                        
                        
                        0Net
      Income (Loss) from discontinued operations
                        
                        
                        0
                        
                        
                        
                        0Net
      Loss
                        
                        
                        (457,670
                        )
                        
                        
                        (626,377
                        )Other
      comprehensive income: translation adjustment
                        
                        
                        81,094
                        
                        
                        
                        219,302Comprehensive
      loss
                        
                        
                        (376,576
                        )
                        
                        
                        (407,075
                        )
  15
  RESULTS
OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED MARCH 31, 2010 AND
2009
  Net
Loss
  Our net
loss for the three months ended March 31, 2010 was $457,670 compared to a net
loss of $626,377 for the three months ended March 31, 2009. The decrease in net
loss for the three months ended March 31, 2010 compared to 2009 is due largely
to a reduction by $346,428 in foreign exchange loss due to a decrease in the
exchange rate of the US dollar against the Swiss franc and reduction of the
operating expenses of $140,253, partially offset by a reduction in general and
administrative expenses of $97,572.
  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 March 31, 2010, no projects were
completed compared to $1,022,416 for the three months ended March 31, 2009; and,
therefore, no cost of goods sold were recorded for the three months ended March
31, 2010 compared to cost of goods sold of $706,912 for the three months ended
March 31, 2009.
  Operating
Expenses
 
 Operating
expenses for the three months ended March 31, 2010 were $300,561 compared to
$440,814 for three months ended March 31, 2009, which represents a 32% 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.
 
 The
majority of the decrease resulted from reduced general and administrative
expenses (decrease of $97,572, of which $86,222 correspond to decrease of legal
fees due to renegotiation), rent and lease expenses (decrease of $21,523) and
depreciation and amortization expenses (decrease of $12,010).
  Other
Income (Expense)
  Interest
expense increased to $12,162 for the three months ended March 31, 2010 compared
to $8,636 for the three months ended March 31, 2009. For the three months ended
March 31, 2010, we have incurred interest expense of $3,100 in connection with
financing of the production equipment.
 
 Foreign
exchange loss for the three months ended March 31, 2010 was $146,003 compared to
$492,431 for the three months ended March 31, 2009. We conduct our business and
incur substantially all of our costs in Swiss francs (CHF). The reduction in
foreign exchange loss is due primarily to the decrease in the exchange rate of
the US dollar, which is the company’s reporting currency, against the Swiss
franc. See Note 4 to the accompanying financial
statements.
 
 Net
Income (Loss) from Discontinued Operations, net of tax
 
 There
were no expenses for the presented period.
 
 Liquidity
and Capital Resources
  Our
principal cash requirements are for operating expenses, including research and
development, personnel, consulting, accounting, and legal
costs.
  16
  As
of March 31, 2010, we had negative working capital of $16,339,591 compared with
negative working capital of $16,060,061 as of December 31, 2009, and our cash
and cash equivalents increased to $562,785 as of March 31, 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
March 31, 2010, we had accounts payable of $2,378,491 compared to $3,452,094 as
of December 31, 2009. This large decrease is primarily the result of amounts
owed to creditors for construction costs related to our manufacturing facility
($1,736,426) and our work in progress ($70,334).
  As March
31, 2010, we had short-term debt in the amount of $13,914,089 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 $2,292,707 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 March 31, 2010, this
loan carried a principal balance of CHF969,470 ($910,953). 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 us a credit facility of CHF1.0 million to
finance the construction of our 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,
we 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 March 31, 2010, the principal balance on this loan was $908,087,
thereof $66,947 is reflected as short-term loan and $841,140 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.  We are currently in
negotiations with ScanE to further extend the maturity date of this loan until
July 2010. As of March 31, 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 March 31, 2010 was $4,698,200.
 
 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 July 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 March 31, 2010, the Company had used CHF8,639,693
($8,118,201) 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.
  17
  On July
22, 2009, we 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 March 31, 2010, the principal balance had been reduced to
approximately $21,852, thereof $9,031 is reflected as short term
loan.
 
 On August
13, 2009, we entered into a loan agreement with BCGE for CHF245,557 to finance
the certification of our 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 March 31, 2010, the principal balance had been
reduced to approximately $188,086, thereof $75,306 is reflected as short term
loan.
 
 On
September 15, 2009, we 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 March 31, 2010, the principal balance had been
reduced to approximately $68,173, thereof $26,360 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, we 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 March 31, 2010, the principal balance had been reduced to
approximately $24,467, thereof $9,091 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 March 31, 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.
  Operating
Activities
  Net cash
provided by operating activities was $2,550,194 for the three months ended March
31, 2010 compared to $836,879 of net cash used in operating activities for the
three months ended March 31, 2009. Work in progress/billings in excess of
cost and estimated earnings increased to $1,317,282 (credit balance) due to
ongoing projects compared to $39,372 (credit balance) during the same period in
2009.
  18
  There was
no cash used in or provided by discontinued operating activities for the quarter
ended March 31, 2010 and 2009
 .
 Investing
Activities
  Net cash
used in investing activities was $348,245 during the three months ended
March 31, 2010 compared to $1,227,464 during the three months ended March
31, 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 $362,163. 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 negative $2,073,847 for the three months ended
March 31, 2010 compared to $1,275,783 net cash provided by financing activities
for the three months ended March 31, 2009.  The decrease in financing
activities is due to bank loans received from BCGE to build the new facility and
to finance the construction of a new solar power plant for $258,700. During
three months ended March 31, 2010, the Company used $95,971 of such
financing. In addition, we also used $39,211 to pay down certain loans
relating to equipment production and certification and reimburse a loan
amounting to $2,292,707 received from BCGE on September 18, 2009.
  There was
no cash used in or provided by discontinued financing activities for the quarter
ended March 31, 2010 and 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 March
31, 2010, we had an outstanding purchase order of EUR448,600 ($603,606) 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.
  19
 
 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 March 31, 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 - A summary of
the Company’s purchases of shares of its common stock for the three months ended
March 31, 2010 is as follows:
  Maximum Numberof Shares (orTotal Number of
                    
                    
                    ApproximateShares Purchased
                    
                    
                    Dollar Value)Total Number
                    
                    
                    Average
                    
                    
                    as Part of Publicly
                    
                    
                    that Mayof Shares
                    
                    
                    Price Paid
                    
                    
                    Announced Plans
                    
                    
                    Yet be PurchasedPurchased(1)
                    
                    
                    per Share ($)
                    
                    
                    or Programs
                    
                    
                    Under the PlansJanuary
      1 — January 31, 2009
                    
                    
                    1,000
                    
                    
                    
                    0.2373
                    
                    
                    
                    —
                    
                    
                    
                    —February
      1 — February 28, 2009
                    
                    
                    35,000
                    
                    
                    
                    0.2676
                    
                    
                    
                    —
                    
                    
                    
                    —March
      1 — March 31, 2009
                    
                    
                    31,000
                    
                    
                    
                    0.2223
                    
                    
                    
                    —
                    
                    
                    
                    —April
      1 – April 30, 2009
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —May
      1 – May 31, 2009
                    
                    
                    10,000
                    
                    
                    
                    0.2429
                    
                    
                    
                    —
                    
                    
                    
                    —June
      1 – June 30, 2009
                    
                    
                    10,000
                    
                    
                    
                    0.2064
                    
                    
                    
                    —
                    
                    
                    
                    —July
      1 – July 31, 2009
                    
                    
                    10,000
                    
                    
                    
                    0.1939
                    
                    
                    
                    —
                    
                    
                    
                    —Total
                    
                    
                    97,000
                    
                    
                    $
                    0.2364
                    
                    
                    
                    —
                    
                    
                    $
                    —
  (1)
              During the months indicated
      above, the Company, through a broker, purchased 97,000 shares of its
      common stock, par value $0.001, in open market transactions. The Company
      may, at its discretion, engage in future share repurchases, although no
      formal repurchase plan or program has been adopted by the company at this
      time.
  20
 
 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.
  21
 
 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:
      May 17, 2010
                
                SES
      SOLAR INC.
                  (Registrant)Dated:
      May 17, 2010
                By:
                /s/ SANDRINE CRISAFULLISandrine
      CrisafulliChief
      Financial Officer and Chief Operating Officer(principal
      financial officer and principal accountingofficer)
  22