UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON, D.C.
20549







FORM 10-Q




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




FOR THE QUARTERLY PERIOD ENDED JUNE 30,
2009




OR




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




FOR THE TRANSITION PERIOD
FROM _______ to _______




COMMISSION FILE NUMBER
000-21571







SES SOLAR INC.





(EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER)




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




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


(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)





+41-22-884-1484


(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)




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




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).    YesoNoo





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




Large accelerated
filer ̈Accelerated
filer ̈Non-accelerated
filer ̈Smaller
reporting companyþ




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





The number of shares outstanding of each
of the issuer's classes of stock as of August 14, 2009 is 72,994,168 shares of
common stock, par value $.001 per share.


Table of Contents


TABLE OF
CONTENTS




PagePART I
                                FINANCIAL
      INFORMATION
                                
                                1ITEM
      1.
                                FINANCIAL
      STATEMENTS
                                
                                1ITEM
      2.
                                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
      OF OPERATIONS
                                
                                13ITEM
      3.
                                QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET
      RISK
                                
                                21ITEM
      4T.
                                CONTROLS AND
      PROCEDURES
                                
                                21PART
      II
                                OTHER
      INFORMATION
                                
                                22ITEM
      2.
                                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS
                                
                                22ITEM
      6.
                                EXHIBITS
                                
                                23


Table of Contents


PART
I–FINANCIAL
INFORMATION




ITEM
1.FINANCIAL
STATEMENTS




SES SOLAR INC. AND
SUBSIDIARIES


CONSOLIDATED BALANCE
SHEETS


(in $, except per
share amounts)


June 30,
                        2009
                      
                      
                      December 31,
                        2008(unaudited)ASSETS (in
    $)Current
    Assets:Cash and cash
      equivalents
                      
                      
                      396,163
                      
                      
                      
                      765,694Receivables, net of allowance for
      doubtful accounts of $0 for the periods ended 2009 and
      2008
                      
                      
                      127,638
                      
                      
                      
                      12,001Due from related
      party
                      
                      
                      88,069
                      
                      
                      
                      90,573Inventory
                      
                      
                      437,489
                      
                      
                      
                      1,665,699Other current
      assets
                      
                      
                      202,058
                      
                      
                      
                      424,186Total current
      assets
                      
                      
                      1,251,417
                      
                      
                      
                      2,958,153Long-Term
      Assets:Advance payments for
      machinery
                      
                      
                      391,170
                      
                      
                      
                      379,446Total other long-term
      assets
                      
                      
                      391,170
                      
                      
                      
                      379,446Property, Plan and Equipment, at
      cost
                      
                      
                      594,258
                      
                      
                      
                      600,389Building
      construction
                      
                      
                      15,950,038
                      
                      
                      
                      13,449,460Less accumulated depreciation and
      amortization
                      
                      
                      (464,606
                      )
                      
                      
                      (429,351
                      )Total fixed
      assets
                      
                      
                      16,079,690
                      
                      
                      
                      13,620,498Total long-term
      assets
                      
                      
                      16,470,860
                      
                      
                      
                      13,999,944Total
assets
                      
                      
                      17,722,277
                      
                      
                      
                      16,958,097LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      Liabilities:Short-term
    loan
                      
                      
                      5,530,768
                      
                      
                      
                      4,769,635Construction
      loan
                      
                      
                      7,193,415
                      
                      
                      
                      5,137,555Accounts
      payable
                      
                      
                      1,182,602
                      
                      
                      
                      526,168Billings in excess of cost and
      estimated earnings
                      
                      
                      285,343
                      
                      
                      
                      1,448,590Total current
      liabilities
                      
                      
                      14,192,128
                      
                      
                      
                      11,881,948Long-Term
      Liabilities:Loan
payable
                      
                      
                      0
                      
                      
                      
                      918,389Construction
      loan
                      
                      
                      858,017
                      
                      
                      
                      882,413Total long-term
      liabilities
                      
                      
                      858,017
                      
                      
                      
                      1,800,802Stockholders'
      Equity:Common stock, $0.001 par
      value;
                      
                      
                      73,081
                      
                      
                      
                      73,081100,000,000 shares
      authorized;73,081,168 shares issued and
      72,994,168 outstandingAdditional paid-in
      capital
                      
                      
                      8,050,093
                      
                      
                      
                      8,050,093Accumulated other comprehensive
      income (loss)Translation
      adjustment
                      
                      
                      (542,152
                      )
                      
                      
                      (603,005
                      )Year end accumulated
      deficit
                      
                      
                      (4,887,586
                      )
                      
                      
                      (4,244,822
                      )Less: Cost of common stock in
      treasury, 87,000 shares
                      
                      
                      (21,304
                      )
                      
                      
                      0Total stockholders'
      equity
                      
                      
                      2,672,132
                      
                      
                      
                      3,275,347Total Liabilities and
      Stockholders' Equity
                      
                      
                      17,722,277
                      
                      
                      
                      16,958,097




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


1
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS


(in $, except per share
amounts)





For the Three
      Months
                                                Ended June
    30,
                                              
                                              
                                              For the Six
      Months
                                                Ended June
    30,2009
                                                (unaudited)
                                              
                                              
                                              2008
                                                (unaudited)
                                              
                                              
                                              2009
                                                (unaudited)
                                              
                                              
                                              2008
                                                (unaudited)Revenue:Revenue
                                              
                                              
                                              238,854
                                              
                                              
                                              
                                              32,592
                                              
                                              
                                              
                                              1,261,270
                                              
                                              
                                              
                                              32,592Cost of goods sold (exclusive of
      depreciation shown separately below)
                                              
                                              
                                              (158,263
                                              )
                                              
                                              
                                              (1,757
                                              )
                                              
                                              
                                              (865,175
                                              )
                                              
                                              
                                              (1,757
                                              )Costs and
      Expenses:Personnel
                                              
                                              
                                              154,223
                                              
                                              
                                              
                                              143,816
                                              
                                              
                                              
                                              308,867
                                              
                                              
                                              
                                              282,243Rent and leases
      expenses
                                              
                                              
                                              27,063
                                              
                                              
                                              
                                              39,552
                                              
                                              
                                              
                                              73,360
                                              
                                              
                                              
                                              76,303Research &
      Development
                                              
                                              
                                              63,438
                                              
                                              
                                              
                                              67,755
                                              
                                              
                                              
                                              124,477
                                              
                                              
                                              
                                              220,587Other General & Administrative
      Expenses
                                              
                                              
                                              150,966
                                              
                                              
                                              
                                              204,316
                                              
                                              
                                              
                                              306,110
                                              
                                              
                                              
                                              405,358Depreciation and
      amortization
                                              
                                              
                                              21,678
                                              
                                              
                                              
                                              18,435
                                              
                                              
                                              
                                              45,368
                                              
                                              
                                              
                                              34,302Total costs and
      expenses
                                              
                                              
                                              417,368
                                              
                                              
                                              
                                              473,874
                                              
                                              
                                              
                                              858,182
                                              
                                              
                                              
                                              1,018,793Other Income and
      Expense:Interest
      expense
                                              
                                              
                                              (8,962
                                              )
                                              
                                              
                                              (101,854
                                              )
                                              
                                              
                                              (17,598
                                              )
                                              
                                              
                                              (219,997
                                              )Interest
    income
                                              
                                              
                                              0
                                              
                                              
                                              
                                              16,544
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              39,189Foreign exchange
      gain/(loss)
                                              
                                              
                                              329,352
                                              
                                              
                                              
                                              (58,020
                                              )
                                              
                                              
                                              (163,079
                                              )
                                              
                                              
                                              337,523Total other income
      (loss)
                                              
                                              
                                              320,390
                                              
                                              
                                              
                                              (143,330
                                              )
                                              
                                              
                                              (180,677
                                              )
                                              
                                              
                                              156,715Income (loss) before taxes from
      continuing operations
                                              
                                              
                                              (16,387
                                              )
                                              
                                              
                                              (586,369
                                              )
                                              
                                              
                                              (642,764
                                              )
                                              
                                              
                                              (831,243
                                              )Income
taxes
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0Net income (loss) from continuing
      operations
                                              
                                              
                                              (16,387
                                              )
                                              
                                              
                                              (586,369
                                              )
                                              
                                              
                                              (642,764
                                              )
                                              
                                              
                                              (831,243
                                              )Income (loss) from discontinued
      operations before taxes (Note 9)
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,299,507
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,331,856Income
taxes
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0Net income (loss) from
      discontinued operations
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,299,507
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,331,856Net income
      (loss)
                                              
                                              
                                              (16,387
                                              )
                                              
                                              
                                              713,138
                                              
                                              
                                              
                                              (642,764
                                              )
                                              
                                              
                                              500,613Other Comprehensive income
      (loss):Translation
      adjustment
                                              
                                              
                                              (158,449
                                              )
                                              
                                              
                                              102,407
                                              
                                              
                                              
                                              60,853
                                              
                                              
                                              
                                              (250,296
                                              )Comprehensive income
      (loss)
                                              
                                              
                                              (174,836
                                              )
                                              
                                              
                                              815,545
                                              
                                              
                                              
                                              (581,911
                                              )
                                              
                                              
                                              250,317Basic and diluted weighted average
      shares
                                              
                                              
                                              73,007,279
                                              
                                              
                                              
                                              73,081,168
                                              
                                              
                                              
                                              73,044,224
                                              
                                              
                                              
                                              73,081,168Basic and diluted net income
      (loss) per share from continuing operations
                                              
                                              
                                              (0.0002
                                              )
                                              
                                              
                                              (0.008
                                              )
                                              
                                              
                                              (0.009
                                              )
                                              
                                              
                                              (0.011
                                              )Basic and diluted net income
      (loss) per share from discontinuing operations
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0.018
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0.018Basic and diluted net income
      (loss) per share
                                              
                                              
                                              (0.0002
                                              )
                                              
                                              
                                              0.010
                                              
                                              
                                              
                                              (0.009
                                              )
                                              
                                              
                                              0.007





For 2008 amounts
have been reclassified to reflect discontinued operations.





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


2
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH
FLOWS


(in $, except per share
amounts)


Six Months Ended June
      30,2009
                      
                      
                      2008(unaudited)
                      
                      
                      (unaudited)Cash Flows from Operating
      Activities:Net income
      (loss)
                      
                      
                      (642,764
                      )
                      
                      
                      500,613Adjustments to reconcile net loss
      to cash used in operating activities:Depreciation and
      amortization
                      
                      
                      45,368
                      
                      
                      
                      135,880Gain on sale of power
      plant
                      
                      
                      0
                      
                      
                      
                      (1,185,704
                      )Changes in operating assets and
      liabilities:(Increase) decrease
      in:Receivables, including Due from
      Related Party
                      
                      
                      (111,643
                      )
                      
                      
                      (202,555
                      )Inventory
                      
                      
                      1,137,658
                      
                      
                      
                      (1,010,838
                      )Other current
      assets
                      
                      
                      202,565
                      
                      
                      
                      418,025Deferred
      Expenses
                      
                      
                      0
                      
                      
                      
                      120,000Increase (decrease)
      in:Accounts payable and accrued
      expenses
                      
                      
                      (34,895
                      )
                      
                      
                      124,690Billings in excess of cost and
      estimated earnings
                      
                      
                      (1,156,723
                      )
                      
                      
                      402,272Net cash used in operating
      activities
                      
                      
                      (560,434
                      )
                      
                      
                      (697,617
                      )Cash Flows from Investing
      Activities:Proceed on sale of solar
      plant
                      
                      
                      0
                      
                      
                      
                      4,970,752Property, plants and
      equipment
                      
                      
                      (2,014,310
                      )
                      
                      
                      (6,001,074
                      )Advance payments for
      machinery
                      
                      
                      (12,557
                      )
                      
                      
                      0Net cash used in investing
      activities
                      
                      
                      (2,026,867
                      )
                      
                      
                      (1,030,322
                      )Cash Flows from Financing
      Activities:Treasury
    shares
                      
                      
                      (21,304
                      )
                      
                      
                      0Repayment/Proceed of
      loans
                      
                      
                      2,115,908
                      
                      
                      
                      6,216,608Bank loan
                      
                      
                      0
                      
                      
                      
                      (1,383,347
                      )Net cash provided by financing
      activities
                      
                      
                      2,094,604
                      
                      
                      
                      4,833,261Increase (decrease) in cash and
      cash equivalents
                      
                      
                      (492,697
                      )
                      
                      
                      3,105,322Effect of exchange rate changes on
      cash
                      
                      
                      123,166
                      
                      
                      
                      (120,355
                      )Cash and cash equivalents,
      beginning of the quarter
                      
                      
                      765,694
                      
                      
                      
                      3,429,033Cash and cash equivalents, end of
      the quarter
                      
                      
                      396,163
                      
                      
                      
                      6,414,000Supplemental cash flow
      informationCash paid for
      interest
                      
                      
                      17,598
                      
                      
                      
                      219,997Supplemental disclosure of
      non-cash operating and investing activitiesNon cash transaction, Property,
      plants and equipment in account payable
                      
                      
                      850,978
                      
                      
                      
                      395,351




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


3
 Table of Contents


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 ($642,764) and a negative cash flow from operations of ($560,434),
and had a working capital deficiency of ($12,940,711) at June 30, 2009. 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 6). The Company intends to convert these construction
loans into a long term mortgage immediately after completion of the facility.
Since the manufacturing facility has not been completed as of June 30, 2009, 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 the Company's 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 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 the Company to design and
manufacture prototype panels, have them approved in accordance with European and
other standards, manufacture in series and sell them in the primary markets for
solar photovoltaic cells. Costs incurred in manufacturing prototype panels have
been expensed as research and development costs.





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


4
 Table of Contents


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,
2008. The Company adheres to the same accounting policies in 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 the Company’s wholly owned
subsidiaries’ functional currency is the Swiss Franc (CHF). The financial
statements of SES Switzerland and SES Prod are translated to U.S. dollar
equivalents under the current method in accordance with 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
                
                2009
                
                2008CHF
                
                CHF$
                
                
                1.12770
                
                
                1,04873




2009
                
                2008Balance Sheet period-end
      rates
                
                CHF
                
                CHF$
                
                
                1.08564
                
                
                1.05562




Earnings (Loss) per
Share- Earnings (Loss) per
share is presented in accordance with the provisions of SFAS No. 128,
“Earnings Per Share.” Basic and diluted loss per share for the six months ended
June 30, 2009 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
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





Six Months
      Ended
                  June
      30,2009
                
                2008Basic weighted average shares
      outstanding
                
                
                73,044,224
                
                
                73,081,168Diluted weighted average shares
      outstanding
                
                
                73,044,224
                
                
                73,081,168





Note: Due to the net loss, the calculation
of the effect of common stock equivalents due to issuance of warrants is
excluded because of anti-dilution. The number of shares of common stock listed
as beneficially owned by one stockholder includes 1,500,000 shares of common
stock potentially issuable upon exercise of 1,500,000 common share purchase
warrants. Each common share purchase warrant is exercisable until November 22,
2010 at an exercise price of $0.90 per share. As of the June 30, 2009 balance
sheet date, no warrants had been exercised. Also, they are not
included in the computation of diluted loss per share because their effect was
anti-dilutive.





Revenue
Recognition- The Company
recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition" ("SAB 104"). SAB 104 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 thus far.




For the six months ended June 30, 2009
and 2008, the Company had no billed or unbilled amount representing claims or
other similar items subject to uncertainty concerning their determination or
ultimate realization.





Between January 2008 and June 2008, the
Company recognized sales of photovoltaic electricity produced by solar modules
on the roof (hereinafter, the “Solar Plant”) of its new manufacturing facility
to a local electricity provider in Geneva. Revenue from such sales were
recognized monthly based on the amount of electricity produced. As further
explained below, such revenue has ceased due to the sale of the Solar Plant as
of June 30, 2008.





Capitalization of Interest - The Company
capitalizes interest on projects that qualify for interest capitalization under
Statement of Financial Accounting Standards (SFAS) No. 34, Capitalization
of Interest Costs,  as amended (FAS 34). Capitalized interest is
included within construction in progress. For the period ended June 30,
2009 and 2008, the Company capitalized $265,215 and $92,500 of interest,
respectively. Capitalization for the year ended December 31, 2008 was
$205,886.





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, inventory, 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 December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations.” SFAS 141(R) requires all business
combinations completed after the effective date to be accounted for by applying
the acquisition method (previously referred to as the purchase method).
Companies applying this method will have to identify the acquirer, determine the
acquisition date and purchase price and recognize at their acquisition date fair
values of the identifiable assets acquired, liabilities assumed, and any
non-controlling interests in the acquirer. In the case of a bargain purchase the
acquirer is required to reevaluate the measurements of the recognized assets and
liabilities at the acquisition date and recognize a gain on that date if an
excess remains. SFAS 141(R) becomes effective for fiscal periods beginning after
December 15, 2008. This statement did not have an effect on the Company's
financial statements.




6
 Table of Contents




SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





In December 2007, the FASB issued
Financial Accounting Standard No. 160, Non-controlling Interests in Financial
Statements—an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that a
non-controlling interest in a subsidiary be reported as equity and the amount of
net income specifically attributable to the non-controlling interest be
identified in the financial statements. It also calls for consistency in the
manner of reporting changes in the parent’s ownership interest and requires fair
value measurement of any non-controlling equity investment retained in a
deconsolidation. SFAS 160 was adopted by the Company effective January 1, 2009
and did not have a significant effect on the Company’s financial
statements.





In February 2008, the FASB issued Staff
Position (FSP) FAS 157-2, Effective Date of FASB Statement No. 157, which defers
the implementation for the non-recurring financial assets and liabilities from
fiscal years beginning after November 15, 2007 to fiscal years beginning after
November 15, 2008. The provisions of SFAS 157 will be applied prospectively. The
statement provisions effective as of January 1, 2008, do not have a material
effect on the Company’s financial position and results of operations. The
adoption of as of January 1, 2009 the remaining provisions did not have a
material effect on the Company’s financial position and results of
operations.





In March 2008, the FASB issued SFAS No.
161, "Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133" (“SFAS 161”). SFAS 161 amends and expands
the disclosure requirements of SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities" (“SFAS 133”), by requiring enhanced disclosures about
how and why an entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for under SFAS 133 and its related
interpretations, and how derivative instruments and related hedged items affect
an entity's financial position, financial performance, and cash flows. SFAS 161
requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of, and gains and
losses on, derivative instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. SFAS 161 was adopted by the
Company as of January 1, 2009 and did not have an impact on the Company’s
results of operations, cash flows or financial positions.




In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement), which was effective beginning with our first quarter 2009
financial reporting. The FSP requires retrospective application to all periods
presented and does not grandfather existing debt instruments. The adoption of
this statement did not impact our results of operations, financial position, or
cash flows.




In April
2009, the FASB issued FASB Staff Position (FSP) FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, which was
effective beginning with our second quarter financial reporting. The FSP
provides additional guidance for estimating fair value when the volume and level
of activity for the asset and liability have significantly decreased and
provides guidance on identifying circumstances that indicate a transaction is
not orderly. The FSP amends FAS 157 to require interim disclosures of the
valuation techniques and related inputs used to measure fair value and any
changes to those valuation techniques and inputs. The FSP also provides
additional guidance on defining the major categories of equity and debt
securities measured at fair value in meeting the disclosure requirements of FAS
157. The adoption of the FSP did not have a material impact on the Company’sresults of
operations, financial position, or cash flows.




In April
2009, the FASB issued FSP FAS 107-1, which amends SFAS No. 107,Disclosures About
Fair Value of Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends Accounting
Principles Board (APB) No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting periods.
FSP FAS 107-1 was effective for interim reporting periods ending after June 15,
2009. The adoption of the FSP did not have a material impact on the Company’sresults of
operations, financial position, or cash flows.


In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which was effective beginning with our
second quarter financial reporting. The FSP amends existing guidance for
determining whether an other-than-temporary impairment of debt securities has
occurred and enhances existing disclosures with regard to other-than-temporary
impairment for debt and equity securities. The adoption of the FSP did not
impact the Company’sresults of operations, financial position, or cash flows.




In May
2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 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. SFAS No. 165
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 SFAS No. 165
during the second quarter of 2009, and its application had no impact on the
Company’s condensed consolidated financial statements. The Company evaluated
subsequent events through the date the accompanying financial statements were
issued, which was August 6, 2009.




In June
2009, the Financial Accounting Standards Board (FASB) issued FAS 167, Amendments to FASB Interpretation
No. 46(R), which changes the approach to determining the primary
beneficiary of a variable interest entity (“VIE”) and requires companies to more
frequently assess whether they must consolidate VIEs. This new standard is
effective for us beginning on January 1, 2010. The Company does not believe
this statement will have an impact on its consolidated financial
statements.


7
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





5. Inventory




Inventory is summarized as
follows:




Six
                  Months Ended
                  June
      30,
                  2009
                
                Twelve
                  Months Ended
                  December 31,
                  2008$
                
                $Raw Materials and
      Others
                
                
                242,294
                
                
                1,473,540Finished
    Goods
                
                
                195,195
                
                
                192,159Total
    Inventory
                
                
                437,489
                
                
                1,665,699





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




Short-Term
      Loans
                
                Six
                  Months Ended
                  June
      30,2009
                
                
                Twelve
                  Months Ended
                  December 31,
      2008$
                
                
                $State Department of Energy Geneva
      (Switzerland)
                
                
                32,170
                
                
                
                33,085Banque Cantonale de Genève
      (1)
                
                
                7,193,415
                
                
                
                5,137,555State Department of Energy Geneva
      (Switzerland) (1)
                
                
                4,605,600
                
                
                
                4,736,550State Department of Energy Geneva
      (Switzerland)
                
                
                892,998
                
                
                
                012,724,183
                
                
                
                9,907,190




Long-Term
    Loans
                
                Six
                  Months Ended
                  June
      30,2009
                
                
                Twelve
                  Months Ended
                  December 31, 2008$
                
                
                $Banque Cantonale de
      Genève
                
                
                0
                
                
                
                0State Department of Energy Geneva
      (Switzerland)
                
                
                0
                
                
                
                918,389State Department of Energy Geneva
      (Switzerland)
                
                
                858,017
                
                
                
                882,413858,017
                
                
                
                1,800,802Total loans as at June 30,
      2009
                
                
                13,582,200
                
                
                
                11,707,992


8
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)




Year
                              
                              Repayments$2009Short-term loans
      (1)
                              
                              
                              11,799,015Long-term
    loans
                              
                              
                              32,1702010Maturing short-term
      loans
                              
                              
                              892,998Partial payment of long-term
      loans
                              
                              
                              33,4582011Long-term
    loans
                              
                              
                              34,7952012Long-term
    loans
                              
                              
                              36,1872013Long-term
    loans
                              
                              
                              37,636Thereafter
                              
                              
                              715,941Total
                              
                              
                              13,582,200





(1)  Short-term loans 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.





On
November 3, 2003, SES Switzerland received a loan from the Geneva (Switzerland)
State Department of Energy (“ScanE”) of up to CHF1,000,000 ($921,116). The loan
bears interest at a rate of 4%. SES Switzerland used CHF969,470 ($892,998) of
this loan as of June 30, 2009 and CHF969,470 ($918,389) as of December 31, 2008.
This loan matured on March 31, 2008. On April 2, 2008, the Company filed a
request with ScanE to renew the loan for a period of 24 months on the same terms
and conditions. By decision dated May 19, 2008, ScanE accepted the Company’s
request that the loan be extended for a period of 24 months on the same terms
and conditions. The new maturity date for the loan is March 31, 2010. Pursuant
to the Canton Geneva Escrow Agreement dated September 15, 2006, Christiane Erne,
Jean-Christophe Hadorn and Claudia Rey personally pledged 10,000,000 of their
issued SES USA shares common of common stock as a guarantee for the original
loan entered into on November 6, 2003. These shares now serve as a guarantee for
the renewed loan dated May 19, 2008. The Company does not currently have any
plans to repay the loan before its March 31, 2010 maturity date.




On
January 21, 2004, ScanE granted the Company a credit facility of CHF1,000,000
($921,116) to finance the construction of the Company’s new manufacturing
facility. Release of these loan proceeds was contingent upon the Company
satisfying certain conditions precedent, which were satisfied as of November 13,
2007. As of January 8, 2008, the Company had utilized the full amount of the
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 CHF1,000,000 ($921,116) on
the manufacturing facility. The loan is reimbursed in 20-equal annual
installments of CHF73,581 (approximately $67,777), which include principal and
interest. The first installment was paid in December 2008 thus reducing the
principal to approximately $890,187.


9
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





SES
Switzerland also has a Construction Credit Agreement with Banque Cantonale de
Genève (“BCGE”) dated December 20, 2006 in the amount of CHF4,800,000
($4,421,355), which is used to finance construction of the new manufacturing
facility. The loan was amended on November 13, 2007 and increased from
CHF4,800,000 to CHF8,500,000 ($7,829,483). Pursuant to the amended agreement,
the full amount of the loan must be drawn down no later than the date
construction is completed on the new manufacturing facility, which
is  expected to occur during the third or fourth quarter of 2009. The
Company used CHF7,809,423 ($7,193,415) of the loan as of June 30, 2009 and
CHF5,423,310 ($5,137,555) as of December 31, 2008. The loan bears interest at a
rate of 3.75% and is secured by a second lien exclusive mortgage certificate of
CHF9,000,000 ($8,290,041) on the manufacturing facility.





On
October 27, 2008, the Company signed a six month credit facility with ScanE for
CHF5,000,000 ($4,605,600) to finance improvements on the manufacturing facility.
The loan, which matured on April 27, 2009, is secured by a fourth ranked
mortgage on the building. On July 1, 2009, ScanE extended the maturity date
of the credit facility for an additional six months, commencing May 7,
2009.  The Company also successfully negotiated a reduction in the
interest rate from 4% to 3% per annum, also commencing May 7,
2009.  As of June 30, 2009, the full amount of the loan had been used
to finance improvements to the manufacturing facility.





7.
Commitments and Contingencies




Operating Leases - Lease
expenses for the six months ended June 30, 2009 and 2008 were $73,360 and
$76,303, respectively.




The
following table presents future minimum lease commitments (concerning the lease
of vehicles) under operating leases at June 30, 2009:




Operating Leases2009
                
                
                25,5102010
                
                
                40,6542011
                
                
                41,0382012
                
                
                24,129Total
                
                
                131,331




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 ($47,960) per year. The
lease term ended on February 28, 2009. The lease has been renewed with the same
conditions for the next 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 CHF6,919
($6,135).




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.


10
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)





The following are the Company’s lease
commitments:




Use of Land$2009
                
                
                31,9522010
                
                
                63,9052011
                
                
                63,9052012
                
                
                63,9052013
                
                
                63,905Thereafter
                
                
                3,355,000Total
                
                
                3,642,572





The
Company has no non-cancellable operating leases.




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




Capital Commitments - At June
30, 2009, the Company has an outstanding purchase order of EUR448,600 ($630,216)
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 ($378,127) for the purchase of this machine. The balance due will be
paid upon delivery of the machine. At June 30, 2009, the Company had purchase
agreements signed for the building of the new plant for CHF7,467,483
($6,878,415). Of the above amount, advance payments totaling CHF6,906,595
($6,361,723) had been made as of July 1, 2009, and the remaining amount will be
paid at the end of completion of construction.





8.
Business Segments




As of
June 30, 2009, 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 photovoltaic panels in Switzerland. Commencing
January 2008, the Company sold electricity produced by its Solar Plant to a
local utility in Geneva. As previously reported, the Solar Plant was sold in
June 2008. As a result, the Company’s operations are again limited to the
assembly and installation of photovoltaic panels.





9.Discontinued
Operations





As noted
above, the Company sold its Solar Plant in June 2008. The balance sheet and
income statement have been retrospectively adjusted to reflect the effects of
discontinued operations. The Company sold photovoltaic electricity produced by
the Solar Plant to a local electricity provider in Geneva based on a 20-year
contract. This contract was cancelled on June 30, 2008 due to the sale of the
Solar Plant.





The Solar
Plant had been operational since the end of 2007.  For the six months
ended June 30, 2009, revenue totaled $0 due to the sale of this activity in June
2008. For the six months ended June 30, 2008, this discontinued activity
generated income of $1,331,856 (gain on disposal of $1,185,704, revenue of
$247,730 and expenses of $101,578). In 2009 there was no income or expense from
discontinued operations.





10.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 72,994,168 outstanding.





Treasury Stock - The Company
purchased shares of its common stock, par value $0.001, in the open market. As
of June 30, 2009, the Company repurchased 87,000 shares in the amount of
$21,304.





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 warrants expire on November 22, 2010, four (4)
years after the date of issuance.





During the six-month period ended June
30, 2009, no stock purchase warrants were exercised.


11
 Table of Contents


SES SOLAR INC. AND
SUBSIDIARY


NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Warrant transactions consisted of the
following during the quarter ended June 30, 2009 :





Exercisable
                    Warrants
                  
                  Exercise
                    PriceWarrants outstanding as of
      December 31, 2008
                  
                  1,500,000
                  
                  $
                  0.90Warrants granted as consideration
      for agent’s fee
                  
                  0
                  
                  $
                  0Exercise of
      warrants
                  
                  0
                  
                  $
                  0Warrants outstanding as of June
      30, 2009
                  
                  1,500,000
                  
                  $
                  0.90





Warrants outstanding expire as
follows:





Warrants
                
                
                ExerciseYear
                
                Expiring
                
                
                Price2010
                
                
                1,500,000
                
                
                $
                0.901,500,000




11. Fair Value
Measurements




SFAS 157
establishes a three-tier fair value hierarchy, which prioritizes the inputs used
in measuring fair value. These tiers include: Level 1, defined as observable
inputs such as quoted prices in active markets; Level 2, defined as inputs other
than quoted prices in active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its own
assumptions.





12. Subsequent
Events




Other than as disclosed herein, no major
events have occurred since June 30, 2009.


12
 Table of Contents


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 included  in our Annual Report on Form
10-K for the fiscal year ended December 31, 2008.The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results may differ materially from those anticipated in
these forward-looking statements, including those set forth in our 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 development 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 during the third or fourth quarter of 2009. 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.





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.


13
 Table of Contents


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, and 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, over 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. While we expect that decisions will be made
during 2009 and that we will have at least one large installation approved by
the Swiss grid authority in 2009, any additional significant delays could impact
our projected growth plans. The tariff will decrease for new entrants by 8%
every year starting in 2010.





Worldwide, annual installations by
the PV industry grew from 0.4GW in 2002 to 4.0GW in 2008, and cumulative
installed capacity reached approximately 12GW at the end of
2008.  Despite this growth, solar electricity still represents 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 operational during the third
or fourth quarter of 2009.


14
 Table of Contents


During
the six month period ended June 30, 2009, we incurred capital expenditures of
$2,026,867 to construct our new manufacturing facility. We also continued sales
of our custom solar panels and SwissTile® solar tiles to customers during the
six month period ended June 30, 2009, generating revenue of $1,261,270 and
incurring a net loss of $642,764.





Based
on current and planned projects that will be completed during fiscal year 2009,
we believe that our cash flows used in operating activities for the remainder of
fiscal year 2009 will be greater than our cash flows used in operating
activities during 2008. In light of these operating activities, we believe that
our operating expenses in fiscal year 2009 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 $18 million for the new manufacturing
facility, of which we have already financed $15.9 million, and $2 million for
the assembly lines and related machinery, of which we have already financed
$391,000. Depending on our production requirements, we may also require up to an
additional $11 million to finance the purchase of raw materials to be used in
the production of 2MWs 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 existing 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 anydefinitive 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.”


15
 Table of Contents


Selected Financial
Data




Balance
    Sheets
                          
                          June 30,
                            2009
                          
                          
                          December 31,
                            2008(unaudited)
                          
                          
                          (audited)in $Total
      current assets
                          
                          
                          1,251,417
                          
                          
                          
                          2,958,153Total
      long-term assets
                          
                          
                          16,470,860
                          
                          
                          
                          13,999,944Total
      current liabilities
                          
                          
                          14,192,128
                          
                          
                          
                          11,881,948Total
      long-term liabilities
                          
                          
                          858,017
                          
                          
                          
                          1,800,802Total
      liabilities and stockholders' equity
                          
                          
                          17,722,277
                          
                          
                          
                          16,958,097





Statement
of Operations (unaudited)




For the three months ended
                                                  June 30,2009
                                                
                                                
                                                2008in
      $Revenues
                                                
                                                
                                                238,854
                                                
                                                
                                                
                                                32,592Total
      cost of goods sold (exclusive of depreciation, shown separately
      below)
                                                
                                                
                                                (158,263
                                                )
                                                
                                                
                                                (1,757
                                                )Personnel
                                                
                                                
                                                154,223
                                                
                                                
                                                
                                                143,816Rent
      and lease expenses
                                                
                                                
                                                27,063
                                                
                                                
                                                
                                                39,552Research
      and development
                                                
                                                
                                                63,438
                                                
                                                
                                                
                                                67,755Depreciation
      and amortization
                                                
                                                
                                                21,678
                                                
                                                
                                                
                                                18,435General
      and administrative expenses
                                                
                                                
                                                150,966
                                                
                                                
                                                
                                                204,316Interest
      expense
                                                
                                                
                                                (8,962
                                                )
                                                
                                                
                                                (101,854
                                                )Interest
      income
                                                
                                                
                                                0
                                                
                                                
                                                
                                                16,544Foreign
      exchange gain  (loss)
                                                
                                                
                                                329,352
                                                
                                                
                                                
                                                (58,020
                                                )Total
      other income (expense)
                                                
                                                
                                                320,390
                                                
                                                
                                                
                                                (143,330
                                                )Loss
      before taxes from continuing operations before taxes
                                                
                                                
                                                (16,387
                                                )
                                                
                                                
                                                (586,369
                                                )Income
      Taxes
                                                
                                                
                                                0
                                                
                                                
                                                
                                                0Net
      Income (Loss) from continuing operations
                                                
                                                
                                                (16,387
                                                )
                                                
                                                
                                                (586,369
                                                )Income
      from discontinued operations before taxes
                                                
                                                
                                                0
                                                
                                                
                                                
                                                1,299,507Income
      Taxes
                                                
                                                
                                                0
                                                
                                                
                                                
                                                0Net
      Income (Loss) from discontinued operations
                                                
                                                
                                                0
                                                
                                                
                                                
                                                1,299,507Net
      Income (Loss)
                                                
                                                
                                                (16,387
                                                )
                                                
                                                
                                                713,138Other
      comprehensive income: translation adjustment
                                                
                                                
                                                (158,449
                                                )
                                                
                                                
                                                102,407Comprehensive
      income (loss)
                                                
                                                
                                                (174,836
                                                )
                                                
                                                
                                                815,545


16
 Table of Contents


RESULTS OF OPERATIONS - COMPARISON OF
THREE MONTHS ENDED JUNE 30, 2009 AND 2008




Net Loss




Our
net loss for the three months ended June 30, 2009 was $16,387 compared to net
income of $713,138 for the three months ended June 30, 2008. The change from net
income for the three months ended June 30, 2008 to a net loss for the three
months ended June 30, 2009 is largely attributable to income of $1,299,507
generated from discontinued operations for the three months ended June 30, 2008
(See Note 9 to the unaudited financial statements attached hereto), partially
offset by a foreign exchange gain of $329,352 due to favorable exchange rate
conditions between the Swiss franc and the U.S. dollar and a reduction in
interest expense during the three month period ended June 30, 2009.





Revenue
and Cost of Goods Sold




We
recognize revenue on the completed-contract method, and therefore when projects
are completed. During the three months ended June 30, 2009, we completed one
project and generated total revenue of $238,854 compared to $32,592 for the
three months ended June 30, 2008.





Cost of
goods sold for the three months ended June 30, 2009 was $158,263 compared to
cost of goods sold of $1,757 for the three months ended June 30,
2008.  The increase in cost of good sold for the three months ended
June 30, 2009 is entirely attributable to the project completed during the
period.





Operating
Expenses




Operating
expenses for the three months ended June 30, 2009 were $417,368 compared
to $473,874 for the three months ended June 30, 2008, which represents a
12% decrease. Personnel, rent, research and development, general and
administrative expenses, and depreciation and amortization expenses constitute
the components of our operating expenses.




The
majority of the decrease resulted from reduced research and development expenses
(decrease of $4,317), general and administrative expenses (decrease of $53,350),
and rent and leases expenses (decrease of $12,489), offset by a slight increase
in personnel costs to develop the activities of our new subsidiary (increase of
$10,407) and an increase of $3,243 in depreciation and amortization
expense.





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




Other
Income (Expense)




Interest
expense decreased to $8,962 for the three months ended June 30, 2009 compared to
$101,854 for the three months ended June 30, 2008. The decrease resulted from
the receipt of $600 in proceeds from the sale of the Solar Plant, which had
remained outstanding since such sale, and approximately $28,200 to our cancelled
credit line with UBS.  Additionally, the company capitalized higher
interest expenses compared to the prior year period.





Interest
income for the three months ended June 30, 2009 was $0 compared to $16,544 for
the three months ended June 30, 2008.  Interest income earned during
the three months ended June 30, 2008 was received from time
deposits.




Foreign
exchange gain for the three months ended June 30, 2009 was $329,352 compared to
a foreign exchange loss of $58,020 for the three months ended June 30, 2008. Our
wholly owned subsidiaries conduct substantially all of their business and incur
substantially all of their costs in Swiss francs.  The foreign
exchange gain for the three months ended June 30, 2009 is due to improved
currency exchange rate conditions between the Swiss franc and the U.S. dollar,
which is the company’s reporting currency.  See Note 4 to the
accompanying unaudited financial statements.





Net
Income (Loss) from Discontinued Operations, net of tax





The Solar
Plant had been operational since the end of 2007.  For the three
months ended June 30, 2009, we generated no revenue and incurred no expenses
from the Solar Plant, as it was sold in June 2008. For the three months ended
June 30, 2008, this discontinued activity generated income of $1,299,507 (gain
on disposal of $1,185,704, revenue of $164,592 and expenses of
$50,789).


17
 Table of Contents





Statement
      of Operations
                                              (unaudited)
                                            
                                            For the Six Months
      Ended
                                              June 30,2009
                                            
                                            
                                            2008in $Total
    revenues
                                            
                                            
                                            1,261,270
                                            
                                            
                                            
                                            32,592Total cost of goods sold
      (exclusive of depreciation shown separately below)
                                            
                                            
                                            (865,175
                                            )
                                            
                                            
                                            (1,757
                                            )Personnel
                                            
                                            
                                            308,867
                                            
                                            
                                            
                                            282,243Rent and lease
      expenses
                                            
                                            
                                            73,360
                                            
                                            
                                            
                                            76,303Research and
      development
                                            
                                            
                                            124,477
                                            
                                            
                                            
                                            220,587Depreciation and
      amortization
                                            
                                            
                                            45,368
                                            
                                            
                                            
                                            34,302General and administrative
      expenses
                                            
                                            
                                            306,110
                                            
                                            
                                            
                                            405,358Interest
      expense
                                            
                                            
                                            (17,598
                                            )
                                            
                                            
                                            (219,997
                                            )Interest
    income
                                            
                                            
                                            0
                                            
                                            
                                            
                                            39,189Foreign exchange gain
      /(loss)
                                            
                                            
                                            (163,079
                                            )
                                            
                                            
                                            337,523Total other income
      (expense)
                                            
                                            
                                            (180,677
                                            )
                                            
                                            
                                            156,715Taxes
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0Net income (loss) from continuing
      operations
                                            
                                            
                                            (642,764
                                            )
                                            
                                            
                                            (831,243
                                            )Income from discontinued
      operations
                                            
                                            
                                            0
                                            
                                            
                                            
                                            1,331,856Taxes
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0Net income (loss) from
      discontinued operations
                                            
                                            
                                            0
                                            
                                            
                                            
                                            1,331,856Net income
      (loss)
                                            
                                            
                                            (642,764
                                            )
                                            
                                            
                                            500,613Other comprehensive income:
      translation adjustment
                                            
                                            
                                            60,853
                                            
                                            
                                            
                                            (250,296
                                            )Comprehensive income
      (loss)
                                            
                                            
                                            (581,911
                                            )
                                            
                                            
                                            250,317




RESULTS OF OPERATIONS - COMPARISON OF
SIX MONTHS ENDED JUNE 30, 2009 AND 2008





Net Income (Loss)




Our net
loss for the six months ended June 30, 2009 was $642,764 compared to a net
income of $500,613 for the six months ended June 30, 2008. The change from net
income for the six months ended June 30, 2008 to a net loss for the six months
ended June 30, 2009 was due to $500,602 of adverse foreign exchange rate
conditions between the Swiss franc and the U.S. dollar, partially offset by a
reduction in research and development, general and administrative expense and
interest expense during the six month period ended June 30, 2009. In addition,
we generated income from discontinued operations for the six months ended June
30, 2008 of $1,331,856 (See Note 9 to the unaudited financial statements
attached hereto).





Revenues
and Cost of Goods Sold




We
recognize revenue on the completed-contract method, and therefore when projects
are completed. During the six months ended June 30, 2009, we completed two
projects and generated total revenue of $1,261,270 compared to $32,592 for the
six months ended June 30, 2008.





Cost of
goods sold for the six months ended June 30, 2009 was $865,175 compared to cost
of goods sold of $1,757 for the six months ended June 30, 2008.  The
increase in cost of good sold for the six months ended June 30, 2009 is entirely
attributable to the projects completed during the period.


18
 Table of Contents


Operating Expenses





Operating
expenses for the six months ended June 30, 2009 were $858,182 compared
to $1,018,793 for the six months ended June 30, 2008, which represents a
16% decrease. Personnel, rent, research and development, general and
administrative expenses, and depreciation and amortization expenses constitute
the components of our operating expenses.




The
majority of the decrease resulted from reduced research and development expenses
(decrease of $96,110), general and administrative expenses (decrease of
$99,248), and rent and leases expenses (decrease of $2,943), offset by a slight
increase in personnel costs to develop the activities of our new subsidiary
(increase of $26,624) and an increase of $11,066 in depreciation and
amortization expense.




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





Other
Income (Expense)





Interest
expense decreased to $17,598 for the six months ended June 30, 2009 compared to
$219,997 for the six months ended June 30, 2008. The decrease resulted from the
receipt of $54,000 in proceeds from the sale of the Solar Plant, which had
remained outstanding since such sale, approximately $54,000 to our cancelled
credit line with UBS.  Additionally, the company capitalized higher
interest expenses compared to the prior year period.




Interest
income for the six months ended June 30, 2009 was $0 compared to $39,189 for the
six months ended June 30, 2008.  Interest income earned during the six
months ended June 30, 2008 was received from time deposits.




Foreign
exchange loss for the six months ended June 30, 2009 was $163,079 compared to a
foreign exchange gain of $337,523 for the six months ended June 30, 2008. Our
wholly owned subsidiaries conduct substantially all of their business and incur
substantially all of their costs in Swiss francs.  The foreign
exchange loss is due to adverse currency exchange rate conditions between the
Swiss franc and the U.S. dollar, which is the company’s reporting
currency.  See Note 4 to the accompanying unaudited financial
statements.





Net
Income (Loss) from Discontinued Operations, net of tax





The Solar
Plant had been operational since the end of 2007.  For the six months
ended June 30, 2009, we generated no revenue and incurred no expenses from the
Solar Plant, as it was sold in June 2008.  For the six months ended
June 30, 2008, this discontinued activity generated income of $1,331,856 (gain
on disposal of $1,185,704, revenue of $247,730 and expenses of
$101,578).





Liquidity
and Capital Resources




Our
principal cash requirements are for operating expenses, including consulting,
accounting and legal costs, staff costs, and accounts payable.





As of
June 30, 2009, we had negative working capital of $12,940,711 compared
with negative working capital of $8,923,795 as of December 31, 2008, and
our cash and cash equivalents decreased to $396,163 as of June 30, 2009 compared
to $765,694 as of December 31, 2008. This increase in negative working capital
is partially the result of decreased billings in excess of cost and estimated
earnings over the comparable periods and use of available funds to finance our
new manufacturing facility.





As of
June 30, 2009, we had accounts payable of $1,182,602 compared to $526,168as of December 31, 2008.
This increase is the result of amounts owed to creditors for construction costs
relating to our manufacturing facility.


19
 Table of Contents


At June
30, 2009, we had short-term debt in the amount of $5,530,768 compared to
$4,769,635 as of December 31, 2008.





We
believe that our current negative working capital situation is temporary, as we
expect in the near term to restructure our capital financing arrangements into
longer term loans with more favorable terms.




We
currently have several loans outstanding with ScanE. On November 3, 2003, SES
Switzerland received a loan from the Geneva (Switzerland) State Department of
Energy (“ScanE”) of up to CHF1,000,000 ($921,116). The loan bears interest at a
rate of 4%. SES Switzerland used CHF969,470 ($892,998) of this loan as of June
30, 2009, and CHF969,470 ($918,389) as of December 31, 2008. The new maturity
date for the loan is March 31, 2010. Pursuant to the Canton Geneva Escrow
Agreement dated September 15, 2006, Christiane Erne, Jean-Christophe Hadorn and
Claudia Rey personally pledged 10,000,000 of their issued SES USA shares common
of common stock as a guarantee for the original loan entered into on November 6,
2003. These shares now serve as a guarantee for the renewed loan dated May 19,
2008. The company does not currently have any plans to repay the loan before its
March 31, 2010 maturity date.





On
January 21, 2004, ScanE granted us a credit facility of CHF1,000,000 ($921,116)
to finance the construction of our new manufacturing facility. Release of these
loan proceeds was contingent upon us satisfying certain conditions, which were
satisfied 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
CHF1,000,000 ($921,116) on the manufacturing facility. The loan is paid in
20-equal annual installments of CHF73,581 (approximately $67,777), which include
principal and interest. The first installment was paid in December 2008 thus
reducing the principal to approximately $890,187.





On
October 27, 2008, we signed a six month credit facility with ScanE for
CHF5,000,000 ($4,605,600) to finance improvements on the manufacturing facility.
The loan, which matured on April 27, 2009, is secured by a fourth ranked
mortgage on the building. On July 1, 2009, ScanE extended the maturity date
of the credit facility for an additional six months, commencing May 7,
2009.  We also successfully negotiated a reduction in the interest
rate from 4% to 3% per annum, also commencing May 7, 2009.  As of June
30, 2009, the full amount of the loan had been used to finance improvements to
the manufacturing facility.





SES
Switzerland also has a Construction Credit Agreement with Banque Cantonale de
Genève (“BCGE”) dated December 20, 2006 in the amount of CHF4,800,000
($4,421,355), which is used to finance construction of the new manufacturing
facility. The loan was amended on November 13, 2007 and increased from
CHF4,800,000 to CHF8,500,000 ($7,829,483). Pursuant to the amended agreement,
the full amount of the loan must be drawn down no later than the date
construction is completed on the new manufacturing facility, which
is  expected to occur during the third or fourth quarter of 2009. We
used CHF7,809,423 ($7,193,415) of the loan as of June 30, 2009 and CHF5,423,310
($5,137,555) as of December 31, 2008. The loan bears interest at a rate of 3.75%
and is secured by a second lien exclusive mortgage certificate of CHF9,000,000
($8,290,041) on the manufacturing facility.





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. Management continues to
anticipate total capital expenditures of approximately $18 million for our new
manufacturing facility, of which we have already financed $15.9 million, and $2
million for the assembly lines and related machinery, of which we have already
financed $391,000.  In addition, and depending on our production
requirements, we may need 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
2 MWs of solar tiles.





If we
are unable to secure additional financing and successfully implement our
planned debt consolidation and refinancing of the construction loans owed on our
new facility, management does not believe that our cash and cash equivalents,
cash provided by operating activities, and the cash available from existing
loans will be sufficient to meet our working capital requirements for the next
12 months, and we will not be able to continue as a going concern.  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 in
response to competitive pressures, to develop new or enhanced products or
services, and to fund our expansion or make acquisitions. We may not be
able to secure financing on acceptable terms or at all.




Operating
Activities




Net cash
used in operating activities was $560,434 for the six months ended June 30, 2009
compared to $697,617 of net cash used in operating activities for the six months
ended June 30, 2008. In local currency, use of funds for operating
activities was larger during this period compared to the same period in 2008.
However, exchange rate volatility has greatly offset the difference. Billings in
excess of cost and estimated earnings decreased by $1,156,723 due to completion
of projects and the resulting recognition of revenue. Inventory of our
SwissTile® product decreased by $1,137,658 for the same reason.




20
 Table of Contents





Investing
Activities




Net cash
used in investing activities was $2,026,867 during the six months ended June 30,
2009 compared to $1,030,322 during the six months ended June 30, 2008. Although
the investment in capital assets was significantly higher in the previous
period, the total amount of investing activities was reduced by the gain on the
sale of the Solar Plant in June 2008.





Financing
Activities




Net cash
provided by financing activities was $2,094,604 for the six months ended June
30, 2009 compared to $4,833,261 for the six months ended June 30,
2008.   The decrease in financing activities is due to bank loans
received from BCGE and ScanE to build the new facility. During the six months
ended June 30, 2009, we utilized $2,115,908 of such financing.  In
addition, we also used $21,304 of available cash during the six months ended
June 30, 2009 to repurchase 87,000 shares of our common stock in open market
transactions.  See “— Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.”





Off-Balance Sheet
Arrangements




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





At June
30, 2009, we had an outstanding purchase order of EUR448,600 ($630,216) for the
future construction of a new machine to be used in the manufacturing facility
for solar module production. The company has made an advance
payment of EUR269,160 ($378,127) for the purchase of this machine. The
balance due will be paid upon delivery of the machine. At June 30, 2009, we had
purchase agreements signed for the building of the new plant for CHF7,467,483
($6,878,415). Of this amount, advance payments totaling CHF6,906,595
($6,361,723) had been made as of July 1, 2009, with the remaining amount to be
paid upon completion of construction, currently projected before year end
2009.





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.


21
 Table of Contents


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 quarter ended June 30,
2009 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





A summary of our repurchases of shares
of our common stock for the six months ended June 30, 2009 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
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —Total
                                                                
                                                                
                                                                87,000
                                                                
                                                                
                                                                $
                                                                0.2412
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                $
                                                                —




(1)
                
                During the six month period ended
      June 30, 2009, the company, through a broker, repurchased 87,000 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.


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ITEM
6.EXHIBITS




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


23
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SIGNATURES




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




Dated: August 14,
      2009
              
              SES
      SOLAR INC.
                (Registrant)Dated: August 14,
      2009
              By:
              /s/ SANDRINE
      CRISAFULLISandrine
      Crisafulli
                Chief Financial Officer and Chief
      Operating Officer
                (principal financial officer and
      principal accounting
                officer)