**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




xQUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the quarterly period ended June 30, 2008ORoTRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the transition period from ________________ to
                ________________





Commission
      file number: **333-64840**





**CELSIA
      TECHNOLOGIES INC.**


(Exact
      Name of Registrant as Specified in Its Charter)




**Nevada**
            
            **91-2015441**(State
                or Other Jurisdiction of
            
            (IRS
                EmployerIncorporation
                or Organization)
            
            Identification
                No.)**1395
                Brickell Avenue, Suite 800, Miami Florida**
            
            **33131**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)


**(305)
      529-6290**




(Registrant’s
      Telephone Number, Including Area Code)




**None**


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




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




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




Large accelerated filer o
            Accelerated filer oNon-accelerated filer o
              (Do not check if a smaller
              reporting company)
            Smaller reporting company x





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




Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.





Class
            
            Outstanding
                at August 12, 2008Common
                Stock, $.01 par value per share
            
            85,823,638
                shares




**TABLE
        OF CONTENTS**


PART
                  I. FINANCIAL INFORMATIONItem
                  1. Financial StatementsConsolidated
                  Balance Sheets as of June 30, 2008 (unaudited) andDecember
                  31, 2007
              
              
              1Consolidated
                  Statements of Operations (unaudited) for the threemonth
                  and six month periods ended June 30, 2008 and 2007
              
              
              2Consolidated
                  Statements of Cash Flows (unaudited) for the sixmonth
                  periods ended June 30, 2008 and 2007
              
              
              3Notes
                  to Consolidated Financial Statements
              
              
              4
                  -10Item
                  2. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
              
              
              11Item
                  3. Quantitative and Qualitative Disclosures about Market
                  Risk
              
              
              15Item
                  4T. Controls and Procedures
              
              
              15PART
                  II. OTHER INFORMATIONItem
                  1. Legal Proceedings
              
              
              17Item
                  2. Submission of Matters to a Vote of Security Holders
              
              
              17Item
                  3. Exhibits
              
              
              18Signatures
              
              
              19




i





**FORWARD-LOOKING
      STATEMENTS**





Some
      of
      the statements under ‘‘Business,’’ ‘‘Management’s Discussion and Analysis of
      Financial Condition and Results of Operations,’’ “Results of Operations” and
      elsewhere in this Quarterly Report on Form 10-Q constitute forward-looking
      statements within the meaning of the Private Securities Litigation Reform Act
      of
      1995. These statements relate to future events or our strategy, future
      operations, future financial position, future revenues, projected costs,
      prospects, and the plans and objectives of management and involve known and
      unknown risks, uncertainties and other factors that may cause our or our
      industry’s actual results, levels of activity, performance or achievements to be
      materially different from any future results, levels of activity, performance
      or
      achievements expressed, implied or inferred by these forward-looking statements.
      In some cases, you can identify forward-looking statements by terminology such
      as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘would,’’ ‘‘expects,’’ ‘‘plans,’’
‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’
‘‘potential’’ or ‘‘continue’’ or the negative of such terms and other comparable
      terminology.





Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we do not know whether we can achieve positive future results,
      levels of activity, performance, or goals. Actual events or results may differ
      materially. We caution readers not to place undue reliance on any
      forward-looking statements, which speak only as of the date made, and advise
      readers that forward-looking statements involve various risks and uncertainties.
      We undertake no obligation to update any of the forward-looking statements
      after
      the date of this Quarterly Report to conform to those statements to reflect
      the
      occurrence of unanticipated events, except as required by applicable
      law.









**PART
      I.**


**FINANCIAL
      INFORMATION**





**Item
              1.**
            **Financial
                Statements**.




Celsia
        Technologies, Inc. and Subsidiaries
 Consolidated
          Balance Sheet
 (US
            Dollars)


June
                  30,
                2008
              
              December
                  31, 2007(unaudited)AssetsCurrent
                  AssetsCash
                  and cash equivalents
              
              $
              1,605,255
              
              $
              3,046,624Receivable
              
              
              551,326
              
              
              298,799Inventory
              
              
              88,521
              
              
              74,465Prepaid
                  expenses
              
              
              78,525
              
              
              45,661Other
              
              
              37,300
              
              
              31,785Total
                  current assets
              
              
              2,360,927
              
              
              3,497,334Guarantee
                  deposits
              
              
              23,545
              
              
              26,157Advance
                  payments
              
              
              133,640
              
              
              154,287Furniture
                  and equipment, net (note 1)
              
              
              697,871
              
              
              639,947Deferred
                  Financing Costs (note 1)
              
              
              1,366,438
              
              
              1,721,630Royalty
                  Advance (note 3)
              
              
              -
              
              
              -Intangible
                  Assets, net (note 3)
              
              
              89,630
              
              
              85,049Total
                  assets
              
              $
              4,672,051
              
              $
              6,124,404Liabilities
                  and Stockholders' Equity (Deficit)Current
                  liabilitiesAccounts
                  payable
              
              $
              588,480
              
              $
              282,055Bond
                  Payable (note 4)
              
              
              286,602
              
              
              322,582Accrued
                  expensesPayroll
                  and Related
              
              
              676,917
              
              
              652,917Other
              
              
              608,022
              
              
              576,917Other
              
              
              42,289
              
              
              26,545Total
                  current liabilities
              
              
              2,202,310
              
              
              1,861,016Convertible
                  Debenture, net of $3,255,420 as of June 30, 2008 and $4,092,051
                  as of
                  December 31, 2007 unamortized discount (note 6)
              
              
              5,642,363
              
              
              4,400,796Accrual
                  for Employee Retirement Benefits (note 3)
              
              
              94,618
              
              
              86,683Total
                  liabilities
              
              
              7,939,291
              
              
              6,348,495Stockholders'
                  Equity (Deficit) (note 6 & 7)Preferred
                  Stock, Series A; $.001 par value; 30,000,000 shares authorized;
                  22,032,963
                  as of June 30, 2008 and 22,320,598 as of December 31, 2007 issued
                  and
                  outstanding
              
              
              22,033
              
              
              22,321Preferred
                  Stock, Series B; $.001 par value; 7,000,000 shares authorized;
                  3,063,402
                  as of June 30, 2008 and December 31, 2007 issued and outstanding
              
              
              3,063
              
              
              3,063Common
                  stock; $.001 par value; 500,000,000 shares authorized; 85,823,638
                  as of
                  June 30, 2008 and 85,273,680 as of December 31, 2007 issued and
                  outstanding
              
              
              85,824
              
              
              85,273Common
                  stock subscribed
              
              
              6,158
              
              
              6,158Additional
                  paid-in-capital
              
              
              40,150,827
              
              
              40,032,066Other
                  comprehensive loss
              
              
              (90,108
              )
              
              (80,478
              )Accumulated
                  (deficit)
              
              
              (43,445,037
              )
              
              (40,292,494
              )Total
                  stockholders' equity (deficit)
              
              
              (3,267,240
              )
              
              (224,091
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              4,672,051
              
              $
              6,124,404
 See
          accompanying notes to consolidated financial statements


1




Celsia
        Technologies, Inc. and Subsidiaries
 Consolidated
          Statements of Operations
 (US
            Dollars)


Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30,
              
              June
                  30,2008
              
              2007
              
              2008
              
              2007Revenue
              
              $
              414,358
              
              $
              199,332
              
              $
              720,046
              
              $
              298,655Costs
                  and expensesCost
                  of Sales
              
              
              447,716
              
              
              381,400
              
              
              742,441
              
              
              547,938Selling
                  and Administrative expenses
              
              
              680,261
              
              
              585,342
              
              
              1,420,816
              
              
              1,542,304Depreciation
              
              
              19,922
              
              
              45,757
              
              
              36,891
              
              
              89,231Amortization
                  of deferred financing cost (note 1)
              
              
              177,596
              
              
              79,111
              
              
              370,896
              
              
              84,164Miscellaneous
                  (income) expense
              
              
              12,607
              
              
              4,289
              
              
              24,319
              
              
              4,952Total
                  costs and expenses
              
              
              1,338,102
              
              
              1,095,899
              
              
              2,595,363
              
              
              2,268,589Operating
                  (loss)
              
              
              (923,744
              )
              
              (896,567
              )
              
              (1,875,317
              )
              
              (1,969,934
              )Other
                  income (expenses)Financing
                  Expense (note 6)
              
              
              -
              
              
              (6,060,564
              )
              
              (177,956
              )
              
              (6,060,564
              )Interest
                  and other income
              
              
              17,535
              
              
              66,645
              
              
              101,074
              
              
              39,345Interest
                  expense (notes 5 and 6)
              
              
              (567,223
              )
              
              (169,907
              )
              
              (1,200,344
              )
              
              (185,963
              )Total
                  other income (expenses)
              
              
              (549,688
              )
              
              (6,163,826
              )
              
              (1,277,226
              )
              
              (6,207,182
              )Net
                  (loss)
              
              $
              (1,473,432
              )
              $
              (7,060,393
              )
              $
              (3,152,543
              )
              $
              (8,177,116
              )Dividend
                  on Series A Preferred Stock (note 7)
              
              $
              (96,679
              )
              $
              (41,144
              )
              $
              (194,621
              )
              $
              (41,144
              )Deemed
                  Dividend on Series A & B Preferred Stock
              
              
              
              
              $
              (652,318
              )
              
              
              
              $
              (652,318
              )Net
                  Loss Attributable to Common Shareholders
              
              $
              (1,570,111
              )
              $
              (7,753,855
              )
              $
              (3,347,164
              )
              $
              (8,870,578
              )Net
                  Loss per Share:Basic
                  and Diluted
              
              $
              (0.02
              )
              $
              (0.14
              )
              $
              (0.04
              )
              $
              (0.19
              )Weighted
                  Average Shares Outstanding
              
              
              85,502,822
              
              
              54,809,238
              
              
              85,439,597
              
              
              45,646,974




See
      accompanying notes to consolidated financial statements




2


Celsia
      Technologies, Inc. and Subsidiaries


Consolidated
          Statements of Cash Flows
 (US
            Dollars)




June
                  30,2008
              
              2007Cash
                  flows from operating activities:Net
                  (loss)
              
              $
              (3,152,543
              )
              $
              (8,177,116
              )Adjustments
                  to reconcile net (loss) to net cash (used) by
                  operating activities:Depreciation
              
              
              36,891
              
              
              89,231Amortization
                  of Deferred Financing Costs
              
              
              370,896
              
              
              84,164Issuance
                  of Common Stock for Debenture Principal and Interest Conversion
              
              
              12,438Interest
                  on Convertible Debt
              
              
              -
              
              
              112,935Issuance
                  of warrants for service
              
              
              -
              
              
              75,229Amortization
                  of Debt Discount
              
              
              836,632
              
              
              -Accrete
                  Interest on Convertible Debenture
              
              
              404,936
              
              
              -Financing
                  Expense
              
              
              -
              
              
              6,060,564Stock
                  Based Compensation
              
              
              109,848
              
              
              183,025Changes
                  to certain other accounts:Receivable
              
              
              (252,527
              )
              
              (117,022
              )Inventory
              
              
              (14,056
              )
              
              3,634Advance
                  payments
              
              
              20,647
              
              
              18,091Prepaid
                  expenses
              
              
              (32,864
              )
              
              18,748Accounts
                  payable
              
              
              306,425
              
              
              (112,797
              )Accrued
                  expenses
              
              
              55,105
              
              
              (299,328
              )Accrual
                  for Employee Retirement Benefits
              
              
              7,935
              
              
              (18,004
              )Other
              
              
              (58,929
              )
              
              (10,955
              )Net
                  cash (used) by operating activities
              
              
              (1,349,166
              )
              
              (2,089,601
              )Cash
                  flows from investing activities:Guarantee
                  Deposits
              
              
              2,612
              
              
              (22,727
              )Purchase
                  of furniture and equipment
              
              
              (94,815
              )
              
              (51,855
              )Net
                  cash (used) by investing activities
              
              
              (92,203
              )
              
              (74,582
              )Cash
                  flows from financing activities:Deferred
                  Finance Charge
              
              
              -
              
              
              (1,107,966
              )Proceeds
                  from Issuance of Convertible Debt
              
              
              -
              
              
              8,000,000Net
                  cash provided by financing activities
              
              
              -
              
              
              6,892,034Net
                  (decrease) increase in cash and cash equivalents
              
              
              (1,441,369
              )
              
              4,727,851Cash
                  and cash equivalents - beginning of period
              
              $
              3,046,624
              
              $
              295,400Cash
                  and cash equivalents - end of period
              
              $
              1,605,255
              
              $
              5,023,251Supplemental
                  cash flow disclosureNoncash
                  financing activityDuring
                  2008 and 2007 the Company recorded stock compensationarrangements
                  for certain employees and directors
              
              $
              109,848
              
              $
              132,111During
                  2008 Preferred Shares were converted into Common Shares
              
              $
              288
              
              $
              -During
                  2008, the Company recorded a premium given to the Debenture Holdersas
                  a Financing Expense
              
              $
              177,956
              
              $
              -During
                  2007, the Company recorded a premium on the conversion ofissued
                  notes payable to convertible debenture as a deferred finance charge
              
              $
              -
              
              $
              115,000During
                  2007, the Company issued warrants to placement agentsfor
                  convertible debenture as a deferred finance charge
              
              $
              -
              
              $
              355,328




See
        accompanying notes to consolidated financial statements
 3




Celsia
        Technologies, Inc. and Subsidiaries


Notes
      to
      Consolidated Financial Statements


June
      30,
      2008




**Note
        1 - Summary of significant accounting policies**
  **Organization**


Celsia
        Technologies, Inc. (the "Company" or "Celsia"), a US Corporation incorporated
        in
        the State of Nevada, is formerly known as iCurie, Inc. Celsia's
        operations consist of research, development, and commercialization of
        next-generation cooling solutions. The Company was founded in 2000 to address
        the emerging heat problem that
        now
        threatens the development of higher-performing microelectronic products.
        Celsia
        is taking its innovative thermal
        management technology from the laboratory to high volume manufacturing, and
        operating as both a
        licensor of the technology and a vertically integrated provider of customized
        applications.




The
        Company's corporate headquarters is located in Miami, Florida, USA with
        subsidiaries in London, United Kingdom, Seoul, South Korea, and Taipei,
        Taiwan. During 2007, the Company relocated its Design and Manufacturing
        operations from Seoul, Korea to Taipei, Taiwan. Celsia's
        operations in Seoul, Korea remain as a sales and administrative office for
        the
        region. The Company's patented NanoSpreaderTM is
        a
        completely new alternative to conventional cooling devices. By utilizing
        a nano
        scale environment, the laws of physics
        are manipulated enabling our cooling technology to be thinner, lighter and
        deliver significantly higher thermal conductivity
        (heat transfer capacity) versus conventional options such as Heat Pipes.
        And, we
        can supply our plate-shaped
        heat spreaders in virtually any shape that a design engineer requires. As
        a
        result, customers are able to achieve
        improved product performance without trading off size, weight or cost
        considerations.




Celsia's
        subsidiaries consist of (i) Celsia Technologies UK Limited ("UK Subsidiary"),
        a
        United Kingdom Company formerly
        known as iCurie Lab Holdings Limited, (ii) Celsia Technologies Korea, Inc.
        ("Korea Subsidiary"), a Korean Company
        formerly known as iCurie Lab, Inc, and (iii) Celsia Technologies Taiwan,
        Inc.
        ("Taiwan Subsidiary"). In
        consolidation, all significant intercompany balances and transactions have
        been
        eliminated.




**Financial
        reporting**




The
        Company prepares its financial statements in conformity with accounting
        principles generally
        accepted in the United States of America, which require management to make
estimates
        and assumptions that affect the reported amounts in the financial statements.
        Although
        these statements are based on management's best knowledge of current events
        and actions that the Company may undertake in the future, actual results
        could
differ
        from those estimates.




Significant
        estimates required to be made by management include the valuation of equity
        securities issued, registration rights, intangible
        assets,


and
        accounting for convertible debentures.




**Going
        Concern**




The
        accompanying financial statements have been prepared assuming the Company will
        continue as a going concern, which contemplates the realization of assets
        and satisfaction
        of liabilities in the normal course of business. The Company and its subsidiaries
        have recently commenced limited revenue producing operations and have sustained
        accumulated losses of approximately $43.4 and $40.3 million as of June 30,
        2008
        and December 31, 2007, respectively. The
        Company and its Subsidiaries have funded operations through equity and debt
        financing since
        inception. All these factors raise substantial doubt over the Company's ability
        to
        continue as a going concern.




**Cash
        and Cash Equivalents**




Cash
        and
        cash equivalents include all cash balances and highly liquid investments, including
        time deposits, which are readily convertible into known amounts of
        cash
        and have an original maturity dates of three months or less. The Company and
        its
        Subsidiary's cash and cash equivalents are maintained in banks and financial
        institutions in the United States, United Kingdom, South Korea, and Taiwan,
        and
        they have not experienced
        any losses on their cash balances.




**Inventory**




Inventory
        consists of finished goods ready to be sold to customers. Inventories are
        carried at the lower of
        cost
        or market value.




**Investment**




The
        UK
        Subsidiary owns 527,000 shares of an entity formerly affiliated through common
        management. These
        shares have been fully reserved and carry a book value of $0 as of June 30,
        2008
        and December 31, 2007.




**Revenue
        recognition**




The
        Company's policy is to record revenue as earned when the following attributes
        are met:




-
            Persuasive
                evidence of a sale arrangement exists;-
            Delivery
                has occurred to the customers;-
            The
                sales price to the customer is fixed or determinable;
                and-
            Collection
                is reasonably assured.




The
        Company recognized revenues of $720,046 and $298,655 for the six months
        ended June
        30,
        2008 and 2007, respectively, from customer orders for test samples and
        commercial deliveries.




4




**Deferred
        financing costs**




In
        connection with obtaining debt financing as described in Note 6, the Company
        incurred legal and other related
        fees. Deferred financing costs incurred in connection with long-term financing amounted
        to $2,131,150 and are being amortized on a straight-line basis over
        the
        stated term of the loan. Amortization expense for the six months ended June
        30,
        2008 and 2007 amounted
        to $370,896 and $84,164, respectively.




**Furniture
        and equipment**




Furniture
        and equipment are summarized as follows:




June
                30,
            
            December
                31,2008
            
            2007Vehicles
            
            $
            49,554
            
            $
            73,331Machinery
            
            
            682,778
            
            
            596,505Furniture
                and fixtures
            
            
            403,360
            
            
            429,1481,135,692
            
            
            1,098,984Accumulated
                depreciation
            
            
            (437,821
            )
            
            (459,037
            )$
            697,871
            
            $
            639,947




Furniture
        and equipment are stated at cost. Major renewals and betterments, which prolong
        the useful life or enhance the value of assets, are apitalized.
        Depreciation is computed
        using the straight-line method over the estimated life of five years for machinery
        and equipment, furniture and fixtures, and vehicles. Depreciation expense
        for the six months ended June 30, 2008 and 2007 amounted to $36,891 and
        $89,231, respectively.




**Net
        Loss per Share**


Basic
        Loss per share is computed by dividing net loss attributable to common
        shareholders for the period
        by
        the weighted-average number of common shares outstanding during the period.
        Diluted earnings
        per share is computed by dividing net earnings by the weighted-average number
        of
        shares plus


the
          dilutive effect of convertible debt and preferred shares and outstanding
          options
          and warrants. Approximately
          22 million and 3 million shares to be issued upon conversion of Series
          A and
          Series B Preferred
          Shares, respectively, were excluded from the calculation of diluted earnings
          per
          share for the periods ended
          June 30, 2008 and 2007, respectively, because they were anti-dilutive.Approximately
          136 million and 65 million shares to be issued upon conversion of the
          convertible debentures were excluded from thecalculation
          of diluted earnings per share as of June 30, 2008 and 2007, respectively,
          because they were anti-dilutive.
  **Long-lived
            assets**


Long-lived
        assets are reviewed for impairment whenever events or changes in
        circumstances indicate that the carrying amount of the assets may not
        be


recoverable.
        When the aggregate undiscounted future cash flows is less than the
        carrying value of the asset, an impairment loss is recognized, based on the fair
        value of the asset.




**Business
        risks**




The
        Company is subject to the risks associated with start-up and high growth
companies
        such as the risks of raising adequate capital, producing profitable operations,
        and operating in various countries throughout the
        world.




**Foreign
        currency translatio**
 
 The
        reporting and functional currency of the Company and
        its UK Subsidiary is the U.S. Dollar, while the functional
        currency of the Korea and Taiwan subsidiaries are the Korean Won and the
        New
        Taiwanese Dollar, respectively.
  The
          assets and liabilities of the Korea and Taiwan Subsidiaries have been translated
          into U.S. Dollars at
          the
          prevailing period-end rate of exchange, while the related income and expense
          items were translated
          at the average rate of exchange during the period. The resulting translation
          adjustments
          are accumulated in a separate component of stockholders' equity
          (deficit).
  The
            Company follows Financial Accounting Standards No. 130 (SFAS 130) "Reporting Comprehensive
            Income." SFAS 130 requires a Company to report comprehensive income
            (loss) and its components in a full set of financial statements. Comprehensiveincome
            (loss) includes the change in equity during a period from transactions
            and other
            events and circumstances from non-owner sources, such as unrealized gains
(losses)
            on foreign currency translation adjustments. Changes in unrealized foreign
currency
            translation gains (losses) for the six months ended June 30, 2008 and
            2007
            amounted
 to
                      ($9,630) and ($18,982), respectively. Accordingly, comprehensive
                      loss for the
                      six months ended
                      June 30, 2008 and 2007 amounted to $3,162,173 and $8,196,098,
                      respectively.




**Fair
        value of financial instruments**




The
        Company's cash, receivables, accounts payable, short-term debt, bonds payable,
        and the face amount of its convertible debentures represent
        financial instruments whose carrying amounts reasonably approximate their
        fair
        value.




**Recent
        accounting pronouncements**


In
        September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
        No. 157, “Fair Value Measurements” (“SFAS 157”), which provides guidance
for
        measuring the fair value of assets and liabilities, as well as requires expanded
        disclosures about fair value measurements. SFAS
        157
        indicates that fair value should be determined based on the assumptions
        marketplace participants would use in pricing
        the asset or liability, and provides additional guidelines to consider in
        determining the market-based measurement.SFAS
        No.
        157 is effective for fiscal years beginning after November 15, 2007.The
        adoption of this standard did not have a material effect on the Company’s
        results of operations or financial position.  In
            February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
            Financial Assets and Financial Liabilities” (“SFAS
            159”). SFAS 159 permits all entities to choose to measure eligible items
            at fair
            value at specified election dates.SFAS
            No.
            159 is effective for fiscal years beginning after November 15, 2007.The
            adoption of this standard did not have a material effect on the Company’s
            results of operations or financial position.  5
  In
                December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
                141(R)”), which replaces SFAS 141. SFAF
                141(R) requires assets and liabilities acquired in a business combination,
                contingent consideration, and certain acquired contingencies to
                be
                measured at their fair values as of the date of acquisition. SFAS
                141(R) also
                requires that acquisition-related costs and restructuring costs
                be
                recognized separately from the business combination. SFAS 141(R)
                is effective
                for fiscal years beginning after December 15, 2008 and
                will
                be effective for business combinations entered into after January
                1, 2009.




In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements, an Amendment ARB
        No.
        51” (“SFAS 160”). SFAS 160 clarifies the accounting for noncontrolling interests
        and establishes accounting and reporting standards
        for the noncontrolling interest in a subsidiary, including classification
        as a
        component of equity. SFAS 160 is effective for fiscal
        years beginning after December 15, 2008. The Company does not currently have
        any
        minority interests. In
        March
        2008, the FASB issued SFAS No. 161 “Disclosure about Derivative Instruments and
        Hedging Activities - an amendment of FASB statements No. 133”
        (“SFAS 161”) which provides revised guidance for enhanced disclosures about how
        and why an entity uses derivative instruments, how derivative instruments
        and related hedged items are accounted for under FAS 133, and how derivative
        instruments and the related hedged items affect and entity’s financial
        position, financial performance and cash flows. SFAS 161 is effective for
        the
        Company’s fiscal year beginning January 1, 2009. The Company does
        not
        currently have any derivative instruments and is not involved in any hedging
        activities.




In
        May
        2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Acceptable
        Accounting Principles” (“SFAS 162”). SFAS 162 identifies
        the source of accounting principles and the framework for selecting the
        principles to be used in the preparation of financial statements
        of non-governmental entities that are presented in conformity with generally
        accepted accounting principles in the United States. This statement
        is effective 60 days following the SEC’s approval of the Public Company
        Accounting Oversight Board amendments to AU Section 411, “The
        Meaning of Present Fairly in Conformity with Generally Accepted Accounting
        Principles”. Although the Company will continue to evaluate the
        application of SFAS 162, the Company does not currently believe the adoption
        of
        SFAS 162 will have a material impact on its consolidated financial
        statements.
  **Note
          2 - Income Taxes**
 The
          Company recognizes deferred tax assets and liabilities created by temporary differences
          between the financial statement and tax basis of assets and liabilities. Deferred
          tax assets and liabilities are computed on such temporary differences, including
          available net operating loss carry forwards and tax credits, by applying enacted
          statutory tax rates applicable to the years when such differences are expected
          to reverse. A valuation allowance is provided on deferred tax assets to
          the
extent
          that it is more likely than not that such deferred tax assets will not
          be
          realized.




The
        Company currently operates in the United States, while its Subsidiaries operate
        in the United Kingdom South
        Korea, and Taiwan. Operating loss carry forwards in the United States
        approximated $6,800,000 at
        December 31, 2007, and can be carried forward for 20 years, expiring in the
        years 2025-2027. Operating
        loss carryforwards in the United Kingdom approximated $5,000,000
        at December
        31, 2007, and can be carried forward indefinitely, provided the Company (i)
        doesn't cease operations and (ii) doesn't change its business
        nature, while
        operating loss carryforwards in South Korea approximated $6,300,000 at December
        31, 2007, and expire in the years 2008-2012. At December 31, 2007, the Company
        has
        a deferred tax asset of approximately $5,600,000 and has recorded a full
        valuation allowance against
        the deferred tax asset resulting from these tax loss carry
        forwards.




**Note
        3 - Commitments and Contingencies**




**Operating
        Leases**




The
        Company has a lease in Seoul, Korea for its Sales and Administrative office
        which expires in October 2009. The
        Company has a lease in Taipei, Taiwan for its Design and Manufacturing Center
        which expires in September 2009. As
        of
        December 31, 2007, the minimum future rental commitments under all
        non-cancelable operating leases with terms
        greater than one year, are as follows:




Year
                Ending December 31,2008
            
            $
            100,5992009
            
            $
            77,953$
            178,552


**Employment
        contracts**




The
        Company has entered into employment agreements with some of its officers
        /
        employees for terms ranging between
        one and two years. Under the terms of the contracts these officers / employees
        are entitled to minimum compensation
        of approximately $274,000 in 2008. Other employees contracts have expired
        and
        are employed at will with
        no
        minimum compensation.
  On
          August
          15, 2007, the Company entered into an agreement with Core Strategies, LLC
          (“Core
          Strategies”) which
          provides services of several Core Strategies partners including Joseph
          Formichelli as Chief Executive Officer of the Company
          on a full-time basis, and a marketing and sales executives on a part-time
          basis. The
          agreement is effective from August 15, 2007 through August 14, 2009. The
          Company
          pays Core Strategies $20,000 permonth
          and
          has issued 8,000,000 warrants to purchase the Company’s common
          stock.
  **Accrual
          for Employment Retirement Benefits**




The
        Company has recorded a liability of $94,618 and $86,683 as of June 30, 2008
        and
        December 31, 2007, respectively, for employment retirement b enefits.
        The Company believes that this liability will not be paid within the current
        year, and it has therefore been recorded as a long term
        liability.




**Royalty
        Agreement**




On
        May
        18, 2005, the UK Subsidiary entered into a Royalty Agreement with CHL Investment
        Partnership ("CHL") and Hansen
        Gray & Company, Inc. ("Hansen Gray"). The terms of the agreement call for a
        payment of 1.14%
        and
        0.86% of revenue to CHL and Hansen Gray, respectively, once the UK Subsidiary's
        revenue exceeds $25
        million. The agreement is terminated once the aggregate payment to CHL and
        Hansen Gray totals $50 million. During
        2005, the Company paid a Royalty Advance to Hansen Gray totaling
        $500,000.




6


On
      July
      18, 2007, the Company and AMF Capital, Inc. (formerly known as Hansen Gray
&
Company, Inc) (“AMF”) entered into a Settlement Agreement and Release pursuant
      to which the Company and AMF resolved certain claims of AMF against the Company.
      Pursuant to the Settlement Agreement, the Company paid a Royalty advance of
      $100,000 in cash to AMF and issued to AMF a warrant to purchase 1,000,000 shares
      of common stock of the Company at an exercise price of $0.88 per share, and
      AMF
      released the Company from any and all claims except for certain specified
      contractual rights as set forth in the Settlement Agreement. The Company has
      recorded a full valuation allowance resulting from these prepaid
      royalties.




CHL
        is an
        organization in which Dr. Jeong Hyun Lee (a former director of the Company)
        holds an interest in.Hansen Gray is an entity in which Alan Miller (a former
        director of the Company) holds an interest in.




**Intangible
        Assets**


In
          April
          2007, Celsia acquired certain assets and liabilities together with two
          sales
          executives and a thermal management customer base from CheongNam International
          Co. Ltd. ("CNIT"), a Korean entity, for approximately $70,000. The Company
          has
          recorded assets of approximately $88,000, liabilities of approximately
          $82,000
          and intangible asset (which is the value assigned to the acquired customer
          list)
          of approximately $64,000. The Company is amortizing this customer list
          over 36
          months.




The
        Company has also recorded an intangible asset for costs incurred with filing
        approved patents and trademarks of approximately $34,000.


**Registration
        Rights**


The
            Company entered into a registration rights agreement with the holders
            of the
            Series B Preferred shares dated December 16, 2005. Under the terms of
            the
            Registration Rights Agreement, the Company was required to use its best
            efforts
            to file a Registration Statement covering the underlying Common Stock
            within six
            months after the Company's Registration Statement on Form SB-2 (SEC File
            No. 333-128856) was declared effective. The Company was required to
            maintain the effectiveness of the Initial Registration Statement through
            the
            first anniversary of the Closing Date and was to use its best efforts
            to
            maintain the effectiveness of the Initial Registration Statement through
            the
            second anniversary of the Closing Date. This agreement was amended on
            May 25,
            2007 to reflect the subordination of rights under this agreement to the
            registration rights agreement entered into by the Company on May 25,
            2007 as
            described below.




The
        Company entered into a registration rights agreement with the Convertible
        Debenture Holders dated May 25, 2007 (see Note 6). Under the terms of the
        registration rights agreement, the Company is required to file a Registration
        Statement (the "Initial Registration Statement") covering the Common Stock
        (i) into which the Debentures are convertible and (ii) for which the
        Warrants and Placement Agent Warrants are exercisable (collectively, the
        “Registrable Securities”) within 30 days of a demand by Debenture Holders or
        within six (6) months after the Closing Date. If the Initial Registration
        Statement is not filed on or prior to its Filing Date, or in certain other
        circumstances, the Company shall pay to each Debenture Holder an amount in
        cash
        equal to 1.0% of the aggregate purchase price paid by such Debenture Holder
        pursuant to the Purchase Agreement for any unregistered securities then held
        by
        such Debenture Holder. The Company has fulfilled its requirements by filing
        the
        Registration Statement on Form SB-2 (SEC File No. 333-147564) which was declared
        effective on December 11, 2007.


**Litigation**
  On
          October 19, 2007, the Company's former President, CEO, and Board of Director,
          filed a lawsuit in the Miami-Dade County Circuit Court claiming failure
          to pay
          bonuses, severance, and other benefits in connection with his previously
          reported termination by the Company. The Company has filed a motion to
          Compel
          Arbitration and Stay Proceedings as provided by the employment contract
          with the
          Company. On April 16, 2008, the court granted the Company's motion and
          ordered (i) that the Plaintiff commence arbitration in accordance with
          the terms
          of the employment agreement within six (6) months of the date of the order
          and
          (ii) all proceedings are stayed until the conclusion of the arbitration
          proceedings.  Pursuant to the court order, if arbitration is not timely
          commenced the action will be dismissed. The Company believes the employee's
          claims are without merit and intends to defend the action vigorously. The
          settlement of this action is not expected to have a material impact on
          the
          Company's financial position.




**Note
        4 - Bond payable**




The
        bond
        payable (Won 300 million) at June 30, 2008 and December 31, 2007, was issued
        to
        a third party in December 2002 and matures in December 2007. The bond carries
        no
        interest and has been discounted using a 7% interest rate. The bond payable
        is
        summarized as follows:




June
                  30,
              
              December
                  31,2008
              
              2007Face
                  Amount
              
              $
              286,602
              
              $
              322,582Less:
                  Discount
              
              
              (93,926
              )
              
              (93,926
              )Plus:
                  Amortization of discount
              
              
              93,926
              
              
              93,926Carrying
                  value
              
              $
              286,602
              
              $
              322,582




**Note
        5 - Notes Payable**


On
        February 20, 2007 and April 20, 2007, the Company issued Secured Convertible
        Promissory Notes (the “Notes”) in an aggregate principal amount of $1,000,000
        and $150,000, respectively, to certain purchasers (the “Noteholders”) pursuant
        to the terms of Securities Purchase Agreements dated as of February 20, 2007
        by
        and between the Company and the Noteholders. The Notes carry an annual interest
        rate of 10%, with all principal and accrued interest being due and payable
        on
        June 20, 2007; provided, however, that upon the terms and subject to the
        conditions of the Notes, all outstanding principal and interest on the Notes
        will automatically convert into securities of the Company issued pursuant
        to a
        Company financing meeting certain conditions (a “Qualified Financing”), if such
        Qualified Financing is effectuated on or prior to June 20, 2007. All principal
        and accrued interest on the Notes shall become payable prior to
        June 20, 2007 upon certain events of default relating to, among
        things, the bankruptcy or dissolution of the Company, the sale of substantially
        all of the Company’s assets and certain breaches by the Company of the terms and
        conditions of the Notes and related agreements. The obligations evidenced by the
        Notes were secured by a pledge of substantially all of the Company’s assets,
        including the capital stock of Celsia Technologies UK Limited and Celsia
        Technologies Korea, Inc. In connection with the issuance of the Notes, the
        Company’s former Chief Executive Officer and former Chief Financial Officer had
        agreed to transfer approximately 735,000 shares of Company common stock held
        by
        such executives to the Noteholders in the event that a Qualified Financing
        does
        not occur on or prior to June 20, 2007.




On
        May
        25, 2007, the Company issued Convertible Debentures which met the conditions
        of
        a Qualified Financing.The Notes, totaling principal of $1,150,000, interest
        of
        $27,847, and a 10% premium on principal totaling $115,000, were automatically
        converted into the Convertible Notes (see Note 6). Upon completion of the
        transaction, the 735,000 shares of Company common stock pledged by the Company's
        former Chief Executive Officer and former Chief Financial Officer were returned
        to them.


7




**Note
        6 - Convertible Debentures**


On
          May
          25, 2007, the Company issued 8% Secured Convertible Debentures due May
          25, 2010
          (the “Debentures”) in the aggregate principal amount of $8,142,847 to certain
          individuals and entities, together with warrants exercisable for a total
          of
          70,752,778 shares of the Company’s common stock at a price of $0.144, for an
          aggregate of $6,850,000 in cash and the surrender of previously outstanding
          promissory notes of the Company totaling $1,292,847 (see Note 5). The Company
          used the Black Scholes option-pricing model to value the warrants issued
          to the
          Debenture Holders and applied it to the principal amount to determine the
          convertible debt discount. The Company will amortize the discount over
          the life
          of the Debenture (36 months).




On
        August
        17, 2007, the Company issued an additional 8% Secured Convertible Debenture
        due
        May 25, 2010 in the principal amount of $350,000, together with a warrant
        to
        purchase 2,800,000 shares of the Company’s common stock at a price of $0.144,
        for $350,000 in cash, on the same terms as the Company’s debentures and warrants
        issued on May 25, 2007.




On
        January 1, 2008, the Company elected to accrete to, and increase, the
        outstanding principal amount due under the Debenture by $404,936 pursuant
        to the
        terms of the Debenture.
 
 The
        convertible debentures payable is summarized as follows:


June
                  30,
              
              December
                  31,2008
              
              2007Face
                  Amount
              
              $
              8,897,783
              
              $
              8,492,847Less:
                  Discount
              
              
              (5,062,256
              )
              
              (5,062,256
              )Plus:
                  Amortization of discount
              
              
              1,806,836
              
              
              970,205Carrying
                  value
              
              $
              5,642,363
              
              $
              4,400,796




The
        sale
        of Debentures and Warrants (the “Debenture Offering”) was effected pursuant to a
        Securities Purchase Agreement dated as of May 25, 2007 between the Company
        and
        the Debenture Holders (the “Purchase Agreement”). In connection with the
        Debenture Offering, the Company entered into a Security Agreement and
        Registration Rights Agreement, each dated as of May 25, 2007, with the Debenture
        Holders (see Note 3).
 
 In
        connection with the Debenture Offerings, the placement agents (i) received
        a
        cash fee of approximately $618,000 and (ii) are entitled to receive warrants
        to
        purchase 5,120,000 shares of the Company’s common stock at a price of $0.144.
        The Company has recorded payments to the placement agents as a deferred cost
        (see Note 1).
 
 As
        part
        of the debt financing, each holder of Series A & B Preferred Stock who
        certified their status as an accredited investor was issued 2.19 shares of
        Common Stock for each share of Preferred Stock held. The Company has recorded
        a
        financing expense of $6,060,564 representing the fair value of the 50,504,696
        shares of Common Stock issued as an inducement to the Series A & B Preferred
        Shareholders to consent to the convertible
        debenture. As of December 31, 2007, 46,517,737 shares of Common Stock have
        been
        issued and the remaining 3,986,959 shares have been recorded as Common Stock
        subscribed. As part of the same consent, the holders of the Series A & B
        Preferred shares agreed to modify the terms of the preferred stock to eliminate
        their seniority to the Debenture holders in regards to the sale or liquidation
        of the Company, forfeit any unpaid and undeclared dividends through May 24,
        2007, lower the dividend rate on the Series A Preferred Stock to two percent
        per
        annum (2%) going forward, and eliminate certain additional rights of the
        preferred stock. In addition, the holders of the Series A & B Preferred
        shares waived any future anti-dilution rights.
 
 Upon
        issuing the Debentures, the Company triggered certain anti-dilution provisions
        in the Company's warrants which lowered the conversion price and increased
        the
        number of shares the warrant is convertible for. The Company used the
        Black-Scholes option-pricing model to determine the fair market value of
        the
        adjusted warrants and recorded a deemed dividend of $652,318 (see note
        7).
 
 The
        Debenture Holders shall be entitled to receive interest on the aggregate
        unconverted and then outstanding principal amount of their Debentures at
        the
        rate of 8% per annum, payable quarterly, in cash or Common Stock at the
        discretion of the Company, and subject to certain limitations and restrictions.
        The Debentures are secured by substantially all of the Company’s assets. The
        Debenture Holders have the right to convert the Debentures at any time into
        shares of Common Stock at an initial conversion price of $0.125. The exercise
        price of the Warrants and Placement Agent Warrants are $.144 per share. The
        initial conversion price of the Debentures and the exercise price of the
        Warrants and Placement Agent Warrants are subject to adjustment upon certain
        events.
 
 The
        Company triggered adjustments to the conversion price of the Debenture and
        the
        exercise price of the Warrants as a result of the Company's financial results
        for the period ending September 30, 2007, which became effective November
        15,
        2007.The Debenture Holders now have the right to convert the Debentures at
        any
        time into shares of Common Stock at a conversion price of $0.0625. The number
        of
        Warrants issued to the Debenture Holders and the Placement Agents increased
        to
        147,105,556 and 10,240,000, respectively, and the exercise price was reduced
        to
        $0.072 per share.
 The
        Company used the Black Scholes option-pricing model to value the adjusted
        warrants issued to the Debenture Holders and applied it to the principal
        amount
        to determine the convertible debt discount which totaled $5,062,256. The
        Company
        will amortize the discount over the life of the Debenture (36 months). During
        the six months ended June 30, 2008, the Company amortized $836,632 of the
        debt
        discount into interest expense. As a result of the adjustment to the conversion
        price, the Company has recognized a beneficial conversion feature and recorded
        a
        Financing Expense totaling $3,430,591 during the year ended December 31,
        2007.
 
 On
        March
        26, 2008, the Company obtained consent from more than 70% of the Debenture
        Holders to modify the terms of the Debentures to provide that, in lieu of
        making
        the interest payments due thereunder in cash or in shares of common stock
        of the
        Company on the interest payment due dates, the interest payments shall accrue
        and be paid in full in cash on May 25, 2010, the Debenture maturity date. 
As an incentive to provide the consent, the Company shall distribute to the
        Debenture Holders a one time distribution equal to the value of 2% of the
        outstanding principal amount due under the Debentures as of March 31, 2008
        totaling approximately $178,000, which will be paid in cash on the maturity
        date.   Each Debenture Holder shall have the right, in its sole
        discretion, to convert any accrued but unpaid interest on the principal amount
        due under the Debentures into shares of common stock of the Company at the
        applicable Interest Conversion Rate at any time prior to the maturity
        date.
 
 During
        the six month period ended June 30, 2008, the Company issued 160,000 shares
        of
        common stock for the conversion of $10,000 in Debentures principal and issued
        97,925 shares of common stock for the conversion of $2,350 in accrued
        interest.




8
 **Note
              7 - Stockholders' equity**
 **Capital
                stock**
 At
                  June
                  30, 2008 and December 31, 2007, the Company had an authorized number
                  of shares
                  of 500,000,000 Common Shares and 100,000,000 of Preferred Shares,
                  30,000,000 of
                  which has been designated as Preferred Series A Shares and 7,000,000
                  of which
                  has been designated Preferred Series B Shares. As of June 30, 2008,
                  the total
                  issued and outstanding shares were 85,823,638 Common Shares, 22,032,963
                  Preferred Series A Shares, and 3,063,402 Preferred Series B Shares.
                  As of
                  December 31, 2007, the total issued and outstanding shares were
                  85,273,680
                  Common Shares, 22,320,598 Preferred Series A Shares, and 3,063,402
                  Preferred
                  Series B Shares.
  During
            the years ended December 31, 2007, 740,907 shares of Preferred Series
            A were
            converted to Common Shares, respectively, at a rate of 1:1.
 During
            the six months ended June 30, 2008, 287,635 shares of Preferred Series
            A were
            converted to Common Shares, respectively, at a rate of 1:1.
  **Share
          Exchange Agreement and Series A Offering**
 Effective
            as of July 11, 2005, the Company issued 20,995,239 shares of Series A
            Preferred
            Stock, together with warrants exercisable for a total of 6,441,895 shares
            of the
            Company's common stock at prices ranging from $0.88 - $1.32, to various
            parties
            in exchange for approximately $12.48 million in cash (at a cash price
            of $0.88
            per share of Series A Preferred Stock) and the transfer of $4.6 million
            of
            previously issued promissory notes issued by various parties. (These
            transactions are collectively referred as the “Series A Offering").
 
 In
            connection with the Series A Offering, the Company entered into a Registration
            Rights Agreement dated as of July 11, 2005 with the Company's shareholders,
            Series A Shareholders, and certain additional parties. Under the terms
            of the
            Registration Rights Agreement, if a registration statement is not filed
            within
            60 days of July 11, 2005 or declared effective within 120 days of July
            11, 2005
            (each a "Non-registration Event"), then for each 30 day period during
            the
            pendancy of such a Non-Registration Event, the company is required to
            pay to the
            selling shareholders liquidated damages in an amount equal to one percent
            (1%)
            of the aggregated price such selling shareholders paid for the Company's
            series
            A Preferred stock (deemed to be $0.88 per share), which the company may
            pay in
            cash or additional shares of series A Preferred Stock (valued at $0.88
            per
            share), at the company's option. The registration statement was filed
            on October
            6, 2005 and was declared effective in April 2006. On August 10, 2006,
            the
            Company issued 970,550 Series A Preferred Shares valued at $902,611 to
            Preferred
            Series A Share Holders in settlement of the Non-Registration Events.
            This
            agreement was amended on May 25, 2007 to reflect the subordination of
            rights
            under this agreement to the registration rights agreement entered into
            by the
            Company on May 25, 2007 (see Note 3).
  **Terms
          of Series A Preferred**
  Subject
          and subordinate to the liquidation rights of the Company’s Secured Convertible
          Promissory Noteholders, the holders of the Series A Preferred shall be
          entitled to receive in preference to the holders of the Series B and Common
          Stock a per share amount equal to $0.88 plus any accrued, unpaid dividends,
          in
          the event of any sale or dissolution of the Company. The holders of the
          Series A Preferred have the right to convert the Series A Preferred at
          any time into shares of Common Stock at an initial conversion rate of 1:1,
          as
          defined. At the option of the Company, if certain criteria as defined in
          the
          agreement are met, the Series A Preferred can be converted into Common
          Stock.
 
 Prior
          to
          May 25, 2007, the holders of Series A Preferred Stock were entitled to
          receive
          cumulative, compounding dividends at a rate of eight percent (8%) per annum
          as,
          when and if declared by the Board of Directors of the Company. The dividends
          may
          be paid in cash or shares of Series A Preferred Stock (valued at original
          issue
          price) at the sole discretion of the Company. Holders of Series A Preferred
          Stock also receive on an as-converted basis any distributions paid on the
          common
          stock. No dividends may be paid on common stock unless all unpaid cumulative
          dividends on the Series A Preferred Stock are paid. On August 10, 2006,
          the
          Company issued approximately 1,700,000 shares of Series A Preferred Stock
          as
          dividends to all holders of record on July 11, 2006, valued at approximately
          $1,500,000. As of May 25, 2007, the Series A Preferred Stock consented
          to waive
          any unpaid and undeclared dividends which resulted in the elimination of
          approximately $1,172,000 in accumulated, unpaid and undeclared dividends
          (see
          Note 6). In addition, the Series A Preferred Shareholders consented to
          lower the
          compounding dividend rate to two percent (2%) per annum. As of March 31,
          2007,
          accumulated, undeclared dividends on the Series A Preferred Shares totaled
          approximately $339,400.
  **Terms
          of Series B Preferred**
  Subject
          and subordinate to the liquidation rights of the Company’s Secured Convertible
          Promissory Noteholders and Series A Preferred Stock, the holders of the
          Series B Preferred shall be entitled to receive in preference to the holders
          of
          the Common Stock a per share amount equal to $1.00, in the event of any
          sale or
          dissolution of the Company. The holders of the Series B Preferred have the
          right to convert the Series B Preferred at any time into shares of Common
          Stock at an initial conversion rate of 1:1, as defined. At the option of
          the
          Company, if certain criteria as defined in the agreement are met, the
          Series B Preferred can be converted into Common Stock. Holders of the
          Series B Preferred Stock receive on an as-converted basis any distributions
          paid
          on the Common Stock.
  **Stock
          Compensation**
 Through
            June 30, 2008 and 2007, the Company has granted approximately 4.6 and
            6.6
            million, respectively, of its common stock to employees and others, of
            which
            approximately 4.4 and 4.3 million, respectively, common shares have vested.
            These shares issuances were valued between $0.07-0.50 based upon management's
            estimate of the fair value of the common stock on the date of issuance.
            These
            stocks grants have certain vesting provisions through May 2009. For the
            six
            months ended June 30, 2008 and 2007, approximately 0 and 156,000 shares,
            respectively, vested and a charge to compensation expense of $9,500 and
            $102,904, respectively, was recorded. The remaining unvested shares valued
            at
            approximately $19,000 are being amortized over their respective vesting
            periods.
  **Employee
          Stock Options**
 On
            January 1, 2006, the Company adopted the fair value recognition provisions
            of
            Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based
            Payment,” using the modified prospective method. For the six months ended June
            30, 2008 and 2007, the Company recognized stock-based compensation of
            $100,348
            and $83,206, respectively. The Company considers voluntary termination
            behavior
            as well as trends of actual option forfeitures when estimating its forfeiture
            rate. Given the limited history of outstanding options, the Company has
            estimated a 0% forfeiture rate and has only recorded actual forfeitures
            as
            incurred.
 
 Stock
            options issued under the Company’s Long-term Incentive Plans are granted with an
            exercise price equal or greater than the market price of the Company’s stock at
            the date of grant and expire ten years from the date of grant. These
            options
            generally vest over a two- or three-year period. During the six months
            ended
            June 30, 2008 and 2007, the Company issued 2.2 million and 0 options,
            respectively, to purchase common stock.
 
 The
            fair
            value of each option granted is estimated on the date of grant using
            the
            Black-Scholes option-pricing method. Given its limited trading history,
            the
            Company used volatility from companies in the same industry. The Company
            estimated the expected option life and the expected forfeiture rate.
            The
            risk-free rate is based on the U.S. Treasury yield curve in effect at
            the time
            of grant for the estimated life of the option. The Company has not made
            any
            dividend payments on common stock nor does it have plans to pay dividends
            in the
            foreseeable future. The following assumptions were used to estimate the
            fair
            value of options granted during the noted periods using the Black-Scholes
            option-pricing model:
  2008
                
                2007Risk
                    free interest rate
                
                
                5.00
                %
                
                7.33-8.25
                %Expected
                    Term (years)
                
                
                5
                
                
                5Expected
                    volatility
                
                
                100.00
                %
                
                100.00
                %Dividend
                    Yield
                
                
                0.00
                %
                
                0.00
                %
 9
  Information
          about all employee options outstanding is as follows:
  For
                      the six months ended June 30,
                  
                  **2008**
                  
                  **2007****Weighted
                      Average**
                  
                  
                  
                  **Weighted
                      Average****Shares**
                  
                  **Exercise
                      Price**
                  
                  **Shares**
                  
                  **Exercise
                      Price**Options
                      Outstanding at beginning of period
                  
                  
                  16,117,500
                  
                  $
                  0.15
                  
                  
                  3,176,015
                  
                  $
                  0.79Granted
                  
                  
                  2,200,000
                  
                  $
                  0.0625
                  
                  
                  0
                  
                  $
                  -Cancelled
                  
                  
                  0
                  
                  $
                  -
                  
                  
                  (104,000
                  )
                  $
                  0.88Options
                      Outstanding at end of period
                  
                  
                  18,317,500
                  
                  $
                  0.14
                  
                  
                  3,072,015
                  
                  $
                  0.79
  As
              of
              June 30, 2008, a total of 6,566,473 employee stock options are exercisable
              and
              the unamortized stock compensation is $273,008.
  **Warrants
              to Purchase Common Stock**
 During
          2005, the Company issued various warrants to various parties in connection
          with
          the Series A and B Offerings. On May 25, 2007, upon issuing the Debentures,
          the
          Company triggered certain anti-dilution provisions in these warrant agreements
          which lowered the conversion price and increased the number of shares the
          warrant is convertible for. The Company used the Black-Scholes option-pricing
          model to determine the fair market value of the adjusted warrants and recorded
          a
          deemed dividend of $652,318. The tables below show the effect of the repriced
          warrants and increase in the number of shares.
 
 On
          September 11, 2006, the Company issued warrants to purchase 1,500,000 of
          Celsia
          common stock to a third party as part of a distribution agreement. As part
          of
          the same agreement, the Company received warrants to purchase 500,000 shares
          of
          the distributors common stock. The warrants vest 25% in December 2006,
          25% in
          December 2007, and 50% contingent upon achievement of volume thresholds.
          The
          agreement was executed with the intention that the value of each warrant
          to be
          materially similar in value. Management has estimated the fair market value
          of
          both issuances using the Black-Scholes Option pricing model and has valued
          the
          warrant issuance to them at approximately $220,000. The Company has recorded
          an
          expense totaling approximately $139,000 related to this issuance as of
          December
          31, 2007. No value was assigned to the warrants received by the
          Company.
 
 On
          May
          25, 2007, the Company issued warrants to purchase 70,752,778 shares of
          Celsia
          common stock to the Debenture Holders (see Note 6). The Company valued
          the
          warrants to determine the discount on the debenture. In addition, the Company
          become obligated to issue warrants to purchase 5,120,000 shares of Celsia
          common
          stock to the Placement Agents and recorded $355,328 as deferred
          charges.
 
 On
          July
          18, 2007, the Company issued AMF Capital, Inc. a warrant to purchase 1,000,000
          shares of common stock of the Company at an exercise price of $0.88 per
          share as
          part of a settlement (see Note 3). The Company recorded an expense of $32,700
          for the issuances.
 
 On
          August
          17, 2007, the Company issued warrants to purchase 2,800,000 of Celsia common
          stock to the Debenture Holders (see Note 6). The Company valued the warrants
          to
          determine the discount on the debenture.
 
 The
          Company triggered adjustments to the exercise price of the Debenture Warrants
          as
          a result of the Company's financial results for the period ending September
          30,
          2007, which became effective on November 15, 2007. The number of Warrants
          issued
          to the Debenture Holders and the Placement Agents increased to 147,105,556
          and
          10,240,000, respectively, and the exercise price was reduced to $0.072
          per
          share.  The
          Company recorded a deferred charge of $521,216 for the additional warrants
          issued to the placement agent.
 
 During
          the year ended December 31, 2007, the Company issued warrants to purchase
          1,300,000 shares of common stock to a consultant and recorded $59,410 as
          a
          consulting expense. During the year ended December 31, 2007, the Company
          issued
          1,440,000 shares of common stock and warrants to purchase 720,000 in
          satisfaction of a $90,000 outstanding liability.
  A
          summary
          of the issued and outstanding warrants are as follows:
  **Old**
                
                **Old**
                
                **Anti-Dilution**
                
                **Anti-Dilution****Exercise**
                
                **#
                    of Warrants**
                
                **Exercise**
                
                **#
                    of Warrants**
                
                **#
                    of Warrants**
                
                **Expiration****Price**
                
                **Outstanding**
                
                **Price**
                
                **Outstanding**
                
                **Exercisable**
                
                **Date**$
                    0.072
                
                
                720,000
                
                
                n/a
                
                
                n/a
                
                
                720,000
                
                
                December
                    2012$
                    0.11
                
                
                1,300,000
                
                
                n/a
                
                
                n/a
                
                
                1,300,000
                
                
                December
                    2012$
                    0.144
                
                
                78,672,778
                
                $
                0.072
                
                
                157,345,556
                
                
                157,345,556
                
                
                May
                    2012$
                    0.32
                
                
                1,500,000
                
                
                n/a
                
                
                n/a
                
                
                750,000
                
                
                September
                    2011$
                    0.88
                
                
                1,000,000
                
                
                n/a
                
                
                n/a
                
                
                1,000,000
                
                
                July
                    2012$
                    0.88
                
                
                681,018
                
                $
                0.144
                
                
                681,018
                
                
                681,018
                
                
                July
                    2009$
                    0.88
                
                
                1,186,820
                
                $
                0.36
                
                
                2,862,308
                
                
                2,862,308
                
                
                July
                    2010$
                    1.09
                
                
                1,097,142
                
                $
                0.36
                
                
                2,646,027
                
                
                2,646,027
                
                
                July
                    2010$
                    1.10
                
                
                2,759,357
                
                $
                0.45
                
                
                6,789,387
                
                
                6,789,387
                
                
                July
                    2010$
                    1.32
                
                
                2,759,357
                
                $
                0.53
                
                
                6,882,126
                
                
                6,882,126
                
                
                July
                    2010$
                    1.50
                
                
                772,190
                
                $
                0.60
                
                
                1,941,836
                
                
                1,941,836
                
                
                December
                    2010$
                    3.00
                
                
                765,850
                
                $
                1.16
                
                
                1,986,069
                
                
                1,986,069
                
                
                December
                    2010181,134,327
                
                
                184,904,327
  **Warrants
            to Purchase Preferred Stock**
  During
            2005, the Company issued various warrants to placement agents in connection
            with
            the Series A and B
            Offerings. A summary of these warrants are as follows:
 **Old**
                
                **Old**
                
                **New**
                
                **New****Exercise**
                
                **#
                    of Warrants**
                
                **Exercise**
                
                **#
                    of Warrants**
                
                **#
                    of Warrants**
                
                **Expiration****Price**
                
                **Outstanding**
                
                **Price**
                
                **Outstanding**
                
                **Exercisable**
                
                **Date**$
                    0.88
                
                
                1,364,528
                
                $
                0.144
                
                
                1,364,528
                
                
                1,364,528
                
                
                July
                    2010$
                    1.50
                
                
                210,000
                
                $
                0.144
                
                
                210,000
                
                
                210,000
                
                
                December
                    20101,574,528
                
                
                1,574,528
  10


**Item
                    2.**
                **Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operations**




*The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our consolidated financial
      statements and the notes thereto appearing elsewhere in this Quarterly Report
      on
      Form 10-Q.*




*Business*




Our  business
      strategy is to become a leader in researching, developing and commercializing
      next-generation cooling solutions which are focused on the computer, flat panel
      display, LED-lighting, and communications industries. We develop, manufacture,
      market, sell and/or license our patented thermal management products and
      technology to original equipment manufacturers (OEM’s), third party
      design/manufacturers and to total solution providers in the thermal management
      business. We believe that our products absorb, transport and dissipate heat
      more
      efficiently than current heat-pipe/heat-sink cooling solutions. Our unique
      cooling device uses patented combinations of liquid and vapor layers to manage
      liquid and vapor at very high speeds through micro-channels within the
      assemblies.




We
      develop and commercialize technology and have succeeded in achieving several
      design wins with major suppliers of graphics and memory solutions sold at both
      retail and into branded end products. We engage with such companies who find
      our
      technology an attractive solution to their thermal management needs. We believe
      that we provide better performance than competing technologies at a competitive
      price. Use of our products allows the OEM’s and solution providers to either
      offer higher performance or run their systems cooler. We expect design wins
      in
      all of our target markets, which include LED’s, Graphics Chips, high end CPUs,
      communications equipment and memory applications.




We
      expect
      our product development, and project management activities to continue to be
      driven by commercial opportunities and undertaken as a result of potential
      customers requesting test units. The test orders that we receive from potential
      customers are fulfilled either by (1) modification of already
      commercialized products or (2) new solutions designed together with input
      from the potential customer. The majority of our R&D resources are dedicated
      to meeting and quoting on potential customer's requirements with an objective
      of
      commercial opportunities which will be available in quantities, to end users,
      within a three to four quarter time period.




We
      are
      managed by a team of professionals with significant operational and thermal
      solutions experience and knowledge. Our executive officers also have extensive
      experience with industry leaders in all of the major market segments we are
      engaged with, where improved cooling of electronic devices is a major
      competitive advantage. We intend to leverage this extensive experience and
      our
      relationships within such sectors to execute on our core strategy and build
      significant long-term value for our stockholders.




In
      December 2007, we relocated our engineering and pilot line facilities from
      Korea
      to Taiwan. Our Korean staff and facilities were downsized to a sales and
      administrative support function only. The net result is a more responsive unit
      in Taiwan at lower costs. Any
      capital expenditures over the next twelve months will be focused on
      complementing this new Taiwan pilot plant with specific volume related equipment
      and on specific research and development related test equipment. All investments
      will be driven by commercialization opportunities, customer driven projects,
      and/or commercial volumes.




11




Our
      product test orders have led to
      several related test product deliveries ,
      as well
      as commercial orders. Test products
      are used by potential customers to examine our products’ features and
      compatibility with customer products. Although such testing procedures can
      involve numerous steps and significant timelines, in several instances our
      test
      products have advanced beyond the test phases and been incorporated into
      commercial products. The mix between sample order deliveries and commercial
      deliveries continues to increase in favor of commercial deliveries. Once our
      products are shipped to our customers, we have no additional commitment in
      order
      to recognize revenues.




***Results
      of Operations***




**Three
      Months Ended June 30, 2008 Compared to Three Months Ended June 30,
      2007**




We
      have
      produced revenues of $414,358 for the three months ended June 30, 2008 compared
      to $199,332 for the three months ended June 30, 2007. The increase in revenues
      is a result of customers paying for test samples and commercial deliveries.
      Cost
      of sales for the three months ended June 30, 2008 were $447,716 compared to
      $381,400 for the same period for the fiscal year 2007. This increase is
      attributable to increased production activity originating from an increasing
      demand for our products.




We
      are
      currently operating with strict cost controls in order to manage our
      commercialization process. A majority of our expenses for the three months
      ended
      June 30, 2008 and 2007 were from selling and administrative expenses. The
      selling and administrative expenses for the three months ended June 30, 2008
      were $680,261 compared to $585,342 for the same period in fiscal 2007. The
      main
      costs are personnel costs, professional fees, and travel expenses. We reversed
      a
      portion of our executive bonus accrual from prior periods of approximately
      $400,000 that was not going to materialize during the three months ended June
      30, 2007. Adjusted for the expense reversal, the gross expenses were
      approximately $985,000 for the three months ended June 30, 2007. The decrease
      in
      expenses is due to a company wide initiative to reduce expenses and
      personnel.




**Six
      Months Ended June 30, 2008 Compared to Six Months Ended June 30,
      2007**




We
      have
      produced revenues of $720,046 for the six months ended June 30, 2008 compared
      to
      $298,655 for the six months ended June 30, 2007. The increase in revenues is
      a
      result of customers paying for test samples and commercial deliveries. Cost
      of
      sales for the six months ended June 30, 2008 were $742,441 compared to $547,938
      for the same period for the fiscal year 2007. This increase is attributable
      to
      increased production activity originating from an increasing demand for our
      products.




We
      are
      currently operating with strict cost controls in order to manage our
      commercialization process. A majority of our expenses for the six months ended
      June 30, 2008 and 2007 were from selling and administrative expenses. The
      selling and administrative expenses for the six months ended June 30, 2008
      were
      $1,420,816 compared to $1,542,304 for the same period in fiscal 2007. The main
      costs are personnel costs, professional fees, and travel expenses. We reversed
      a
      portion of our executive bonus accrual from prior periods of approximately
      $400,000 that was not going to materialize during the six months ended June
      30,
      2007. Adjusted for the expense reversal, the gross expenses were approximately
      $1,942,000 for the six months ended June 30, 2007. The decrease in expenses
      is
      due to a company wide initiative to reduce expenses and personnel.




12




***Liquidity
      and Capital Resources***




Our
      main
      source of liquidity and funding for our operations has historically been from
      monies raised from various financings. During fiscal 2007, we raised an
      aggregate amount of $8,492,847 in cash through the issuance of the debentures.
      At June 30, 2008, our operational cash outflow was approximately $300,000 per
      month. Our main use of cash relates to product development driven by customer
      projects and general and administrative expenses.




On
      May
      25, 2007, we obtained funds through the issuance of our debentures in the
      aggregate amount of $8,142,847, of which $6,850,000 was paid in cash and the
      remainder through the surrender of our previously outstanding promissory notes.
      On August 17, 2007, we issued an additional debenture in the principal amount
      of
      $350,000 on the same terms as our debentures issued on May 25, 2007. Both
      issuances were accompanied by warrants to purchase our common stock. The
      debentures mature and become due on May 25, 2010.




In
      connection with the debenture financing, we incurred legal, due diligence,
      and
      placement agent fees of approximately $2,131,000. We have recorded these
      expenses as deferred charges and these expenses will be amortized over the
      length of the loan period. We have recorded amortization of deferred financing
      costs of approximately $370,896 for the six months ended June 30, 2008.  Additionally,
      we recorded an interest expense of approximately $1.2 million for the six months
      ended June 30, 2008.  Approximately
      $847,000 in interest expense results from amortization of a debt discount
      recorded based upon the fair value of the warrants issued to the debenture
      holders and has no cash impact on us. The remaining $355,000 pertains to the
      debenture financing.




On
      March
      26, 2008, we obtained consent from more than 70% of the debenture holders to
      modify the terms of the debentures to provide that, in lieu of making the
      interest payments due thereunder in cash or in shares of our common stock on
      the
      interest payment due dates, the interest payments shall accrue and be paid
      in
      full in cash on May 25, 2010, the debenture maturity date. As an incentive
      to
      provide the consent, we shall distribute to the debenture holders a one time
      distribution equal to the value of 2% of the outstanding principal amount due
      under the debentures as of March 31, 2008 totaling approximately $178,000,
      which
      will be paid in cash on the maturity date. Each debenture holder shall have
      the
      right, in its sole discretion, to convert any accrued but unpaid interest on
      the
      principal amount due under the debentures into shares of our common stock at
      the
      applicable interest conversion rate at any time prior to the maturity date.




Based
      on
      our current operating plan, we anticipate using our cash mainly to continue
      commercialization efforts and to expand the distribution network for our
      technology solutions. The main cash uses will be for sales and marketing,
      general and administrative, and research and development expenses. Investments
      will be focused on product development and manufacturing. All investments will
      be driven by commercialization opportunities. Our total cash needs for the
      next
      twelve months following July 1, 2008 is estimated to be approximately $2.4
      million. The main portion of such cash need is for sales activities, operating
      expenses and cost of sales. A smaller portion of our cash need is for
      investments in manufacturing and R&D. We currently believe that our cash
      balances and anticipated cash flows from operations will be sufficient to meet
      our normal operating needs through December 2008. We
      expect
      to fund our operations including capital costs and the costs of any necessary
      implementation of technological innovations through cash generated from
      operations and additional financing .  While
      we
      expect to raise the necessary funds, there can be no assurance that we will
      be successful. We have a $286,602 note payable to a strategic partner that
      matured in 2007. As of the date of this filing, no payment demand has been
      received.




13




The
      ratio
      between current assets and current liabilities at June 30, 2008 was
      approximately 1.07 to 1.0.




Our
      future liquidity and capital resource requirements will depend on many factors,
      including, but not limited to the following trends and uncertainties we face:




·
            Our
                operations continue to depend upon the continuing business of our
                existing
                customers and our ability to attract new
                customers;




·
            We
                experience competition in our industry and continuing technological
                changes;




·
            We
                compete with a number of larger companies who have greater resources
                than
                those of ours;




·
            We
                compete on the basis of industry knowledge, products, services, price,
                technological advances and system functionality and performance;
                and




·
            Our
                ability to raise additional capital for
                operations.




***Critical
      Accounting Policies and***  ***Estimates***




We
      prepare our financial statements in conformity with accounting principles
      generally accepted in the United States of America, which require management
      to
      make estimates and assumptions that affect the reported amounts in the financial
      statements. Although these statements are based on management’s best knowledge
      of current events and actions that we may undertake in the future, actual
      results could differ from those estimates. Significant estimates required to
      be
      made by management include the valuation of 1) equity securities issued,
      2) registration rights, 3) intangible assets, and 4) accounting
      for convertible debentures.




***Recent
      Accounting Pronouncements***




See
      Note
      1 of the Notes to Consolidated Financial Statements included in Item 1 of this
      Quarterly Report for Recent Accounting Pronouncements.




***Off-Balance
      Sheet Arrangements***




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





14




***M*** ***arket
      Risks***




We
      operate in the United States, the United Kingdom, Taiwan, and South Korea,
      each
      of which has its own currency. This may cause us to experience and be exposed
      to
      different market risks such as changes in interest rates and currency
      deviations.




Our
      business is not seasonal and the effect of inflation on our revenue and
      operating results was not significant.




**Item
              3.**
            **Quantitative
                and Qualitative Disclosures about Market Risk**.




We
      are a
      small reporting company and this Item is not applicable
      to us .




**Item
              4.T.**
            **Controls
                and Procedures**.




***Disclosure
      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, or 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 or
      submitted under the Exchange Act is accumulated and communicated to management,
      including our chief executive officer and chief financial officer, as
      appropriate to allow timely decisions regarding disclosure.




Our
      management, including our principal executive officer and principal financial
      officer, evaluated the effectiveness of the design and operation of our
      disclosure controls and procedures as of June 30, 2008 and concluded that
      the disclosure controls and procedures were not effective, because certain
      deficiencies involving internal controls constituted a material weakness as
      discussed below. The material weakness identified did not result in the
      restatement of any previously reported financial statements or any other related
      financial disclosure, nor does management believe that it had any effect on
      the
      accuracy of our financial statements for the current reporting
      period.







***Management’s
      Report on Internal Control Over Financial Reporting***




Management
      is responsible for establishing and maintaining adequate “internal control over
      financial reporting” as defined in Rules 13a-15(f) and 15d-15(f) under the
      Exchange Act. Internal control over financial reporting refers to the process
      designed by, or under the supervision of, our Chief Executive Officer and Chief
      Financial Officer, and effected by our Board of Directors, management and other
      personnel, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles, and
      includes those policies and procedures that:




15




(i)
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our assets;




(ii)
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that receipts and expenditures are being
                made
                only in accordance with authorizations of our management and directors;
                and




(iii)
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on our financial statements.




Our
      management, including our principal executive officer and principal financial
      officer, has used the framework set forth in the report entitled “Internal
      Control— Integrated Framework” published by the Committee of Sponsoring Organizations of the
      Treadway Commission to conduct an evaluation of the effectiveness of our
      internal control over financial reporting. Based on its evaluation, our
      management concluded that our internal control over financial reporting was
      not
      effective because certain deficiencies involving internal controls constituted
      a
      material weakness. A material weakness is a deficiency, or a combination of
      control deficiencies, in internal control over financial reporting such that
      there is a reasonable possibility that a material misstatement of our interim
      financial statements will not be prevented or detected on a timely basis.




Our
      material weakness in its internal control over financial reporting relates
      to
      the monitoring and review of work performed by our Chief Financial Officer
      in
      the preparation of financial statements, footnotes and financial data provided
      to the our registered public accounting firm in connection with the annual
      audit. All of our financial reporting is carried out by our Chief Financial
      Officer. This lack of accounting staff results in a lack of segregation of
      duties necessary for an effective system of internal control. The material
      weakness identified did not result in the restatement of any previously reported
      financial statements or any other related financial disclosure, nor does
      management believe that it had any effect on the accuracy of our financial
      statements for the current reporting period.




In
      order
      to mitigate this material weakness to the fullest extent possible, all quarterly
      financial reports are reviewed by the Chief Executive Officer as well as the
      audit committee for reasonableness. All unexpected results are investigated.
      At
      any time, if it appears that any control can be implemented to continue to
      mitigate such weaknesses, it is immediately implemented. We intend to implement
      appropriate procedures for monitoring and review of work performed by our Chief
      Financial Officer.




***Changes
      in Internal Control over Financial Reporting***




There
      were no changes in our internal control over financial reporting that occurred
      during our last fiscal quarter that have materially affected, or are reasonably
      likely to materially affect, our internal control over financial
      reporting.




16




**PART
      II.**


**OTHER
      INFORMATION**




**Item
              1.**
            **Legal
                Proceedings**




On
      October 19, 2007, our former President, CEO, and Board of Director, filed a
      lawsuit in the Miami-Dade County Circuit Court claiming failure to pay bonuses,
      severance, and other benefits in connection with his previously reported
      termination by us. We have filed a motion to Compel Arbitration and Stay
      Proceedings as provided by the employment contract with us. On April 16, 2008,
      the court granted our motion and ordered (i) that the Plaintiff commence
      arbitration in accordance with the terms of the employment agreement within
      six
      (6) months of the date of the order and (ii) all proceedings are stayed until
      the conclusion of the arbitration proceedings.  Pursuant to the court
      order, if arbitration is not timely commenced the action will be dismissed.
      We
      believe the employee's claims are without merit and intends to defend the action
      vigorously. The settlement of this action is not expected to have a material
      impact on our financial position.




**Item
              2.**
            **Submission
                of Matters to a Vote of Security Holders**.




In
      connection with the Annual Meeting of Stockholders held on June 24, 2008, the
      following matters were submitted to a vote of the security holders during the
      period covered by this Quarterly Report:




1.
              Election
                  of seven Directors to serve until the next annual meeting of stockholders
                  or until their successors are duly elected and
                  qualified.





Director
            For
            WithheldAlan
                Benaim
            47,000,951
            318,273Carl
                Caricari
            47,000,951
            318,273Joseph
                Formichelli
            47,000,951
            318,273Greg
                Osborn
            46,196,653
            1,122,571Charles
                Resnick
            47,000,951
            318,273Peter
                Rugg
            47,000,951
            318,273Ronald
                Willis
            47,000,951
            318,273


2.
              Amend
                  and Restate our 2005 Stock Incentive Planto
                  increase the number of shares issuable
                  under the plan from 30,000,000 to 50,000,000 shares of common
                  stock.


For
            Against
            Abstain46,326,376
            193,550
            799,298




3.
              Amend
                  our Articles of Incorporation to increase the number of
                  authorizedshares of
                  common stock from 500,000,000 to 750,000,000 shares of common
                  stock.




For
            Against
            Abstain46,313,176
            206,750
            799,298




4.
              Amendment
                  of our Articles of Incorporation which will effect a reverse split
                  of our
                  common
                  stock by a ratio of not less than one-for-five and not more that
                  one-for-twenty at any time prior to June 10, 2010, with the exact
                  ratio to
                  be set at a whole number within this range to be determined by
                  our Board
                  of Directors in its sole
                  discretion.




For
            Against
            Abstain47,234,991
            74,233
            10,000




17





5.
              Ratification
                  of the appointment of PKF, Certified Public Accountants, as our
                  independent registered public accounting firm for the fiscal year
                  ending
                  December 31, 2008.





For
            Against
            Abstain47,302,724
            6,500
            10,000








**Item
              3.**
            **Exhibits**.




Exhibit Number
              Exhibit




31.1
              Certification
                  pursuant toRules
                  13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of
                  1934, as
                  amended.


31.2
            Certification
                pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities
                Exchange Act of 1934, as amended.




32.1
            Certification
                pursuant to 18 U.S.C. Section 1350.




32.2
            Certification
                pursuant to 18 U.S.C. Section 1350.




18




**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.




**CELSIA
                TECHNOLOGIES, INC**.Date: August
              14, 2008
            By:
            /s/ Joseph
              C.
              FormichelliJoseph
              C. FormichelliChief
              Executive Officer




By:
              /s/ Jorge
                A.
                FernandezJorge
                A. FernandezChief
                Financial Officer




19




**EXHIBIT
      INDEX**




The
      following exhibits are filed as part of this Form 10-Q




**Exhibit
                No.**
            **Description**




31.1
            Certification
                of Chief Executive Officer Pursuant to Rules 13a - 14(a) and 15d
                - 14(a)
                under the Securities Exchange Act of 1934, as
                amended.




31.2
            Certification
                of Chief Financial Officer Pursuant to Rules 13a - 14(a) and 15d
                - 14(a)
                under the Securities Exchange Act of 1934, as
                amended.




32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C. Section
                1350.




32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. Section
                1350.




20