**Thorium      Power Ltd**

**Interim      Balance Sheet**

**September      30, 2006**

|                                                                                                                                         |   | **(Unaudited)** |        |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|-------------|
| **ASSETS**                                                                                                                                   |   |            |        |
| **CURRENT                ASSETS**                                                                                                            |   |            |        |
| Cash                and cash equivalents                                                                                                     |   | $               | 56,169      |   |
| Prepaid                expenses and other current assets                                                                                     |   |            | 9           |   |
| Due                from Novastar Resources Ltd.                                                                                              |   |            | 505,824     |   |
|                                                                                                                                         |   |            |        |   |
| **Total                Current Assets**                                                                                                      |   |            | 562,002     |   |
|                                                                                                                                         |   |            |        |   |
| **PROPERTY,                PLANT AND EQUIPMENT**                                                                                             |   |            |        |   |
| Property,                plant and equipment                                                                                                 |   |            | 47,057      |   |
| Accumulated                depreciation                                                                                                      |   |            | (21,420     | ) |
|                                                                                                                                         |   |            |        |   |
| **Total                Property, Plant and Equipment**                                                                                       |   |            | 25,637      |   |
|                                                                                                                                         |   |            |        |   |
| **OTHER                ASSETS**                                                                                                              |   |            |        |   |
| Patent                costs - net of accumulated amortization of $206,839                                                                    |   |            | 204,830     |   |
| Security                deposits                                                                                                             |   |            | 7,567       |   |
|                                                                                                                                         |   |            |        |   |
| **Total                Other Assets**                                                                                                        |   |            | 212,397     |   |
|                                                                                                                                         |   |            |        |   |
| **TOTAL                ASSETS**                                                                                                              |   | $               | 800,037     |   |
|                                                                                                                                         |   |            |        |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                |   |            |        |   |
|                                                                                                                                         |   |            |        |   |
| **CURRENT                LIABILITIES**                                                                                                       |   |            |        |   |
| Current                portion of long-term debt                                                                                             |   |            | 3,217       |   |
| Accrued                expenses and accounts payable                                                                                         |   |            | 600,665     |   |
| Note                payable                                                                                                                  |   |            | -           |   |
| Other                current liabilities                                                                                                     |   |            | 101         |   |
|                                                                                                                                         |   |            |        |   |
| **Total                Current Liabilities**                                                                                                 |   |            | 603,982     |   |
|                                                                                                                                         |   |            |        |   |
| **LONG-TERM                LIABILITIES**                                                                                                     |   |            |        |   |
| Note                payable                                                                                                                  |   |            | 12,657      |   |
|                                                                                                                                         |   |            |        |   |
| **Total                Liabilities**                                                                                                         |   |            | 616,640     |   |
|                                                                                                                                         |   |            |        |   |
| **STOCKHOLDERS'                EQUITY**                                                                                                      |   |            |        |   |
| Common                Stock-$.05 par value-authorized 20,000,000 shares; issued and outstanding                116,236,578 equivalent shares |   |            | 226,778     |   |
| Common                stock and warrants - Additonal paid-in capital                                                                         |   |            | 16,797,554  |   |
| Deficit                accumulated during the development stage                                                                              |   |            | (16,840,935 | ) |
|                                                                                                                                         |   |            |        |   |
| **Total                Stockholders' Equity**                                                                                                |   |            | 183,397     |   |
|                                                                                                                                         |   |            |        |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                |   | $               | 800,037     |   |

----

**Thorium      Power Ltd**

**Interim      Statements of Operations**

**September      30, 2006**

|                                                                      |   |                             |       |                             |   | **Cumulative**                   |   |
|---------------------------------------------------------------------------|--------|----------------------------------|------------|----------------------------------|--------|----------------------------------|--------|
|                                                                      |   |                             |       |                             |   | **From**                         |   |
|                                                                      |   | **For                the nine**  |       | **For                the three** |   | **Inception**                    |   |
|                                                                      |   | **months                ended**  |       | **months                ended**  |   | **Through**                      |   |
|                                                                      |   | **September                30,** |       | **September                30,** |   | **September                30,** |   |
|                                                                      |   | **2006**                         |       | **2006**                         |   | **2006**                         |   |
|                                                                      |   | **(Unaudited)**                  |       | **(Unaudited)**                  |   | **(Unaudited)**                  |   |
| **Revenue**                                                               |   |                             |       |                             |   |                             |   |
| License                revenue                                            |   | $                                | -          |                             |   | -                                |   | $ | 624,985 |   |
|                                                                      |   |                             |            |                             |   |                                  |   |   |  |   |
| **Total                Revenue**                                          |   |                             | -          |                             |   | -                                |   |   | 624,985 |   |
|                                                                      |   |                             |       |                             |   |                             |   |   |   |   |
| **Costs                and expenses**                                     |   |                             |       |                             |   |                             |   |   |   |   |
| Research                and development                                   |   |                             | 10,000     |                             |   | 0                                |   |   | 3,902,158 |   |
| Salaries                                                                  |   |                             | 221,100    |                             |   | 73,700                           |   |   | 3,726,114 |   |
| Professional                fees                                          |   |                             | 694,531    |                             |   | 509,682                          |   |   | 2,757,656 |   |
| Allocated                expenses - Thorium Power, Ltd.                   |   |                             | (505,824   | )                                |   | (505,824                         | )      |   | (505,824 | ) |
| Other                selling, general and administrative expenses         |   |                             | 287,658    |                             |   | 124,591                          |   |   | 4,723,838 |   |
|                                                                      |   |                             |       |                             |   |                             |   |   |   |   |
| **Total                operating expenses**                               |   |                             | 707,465    |                             |   | 202,149                          |   |   | 14,603,942 |   |
| Loss                from operations                                       |   |                             | 707,465    |                             |   | 202,149                          |   |   | 13,978,957 |   |
|                                                                      |   |                             |       |                             |   |                             |   |   |   |   |
| **Other                (income) expenses**                                |   |                             |       |                             |   |                             |   |   |   |   |
| Interest                (income) expense - net                            |   |                             | 4,508      |                             |   | 4,508                            |   |   | (103,634 | ) |
| Other                (income) expense                                     |   |                             | (200       | )                                |   | 0                                |   |   | (359 | ) |
| Foreign                currency translation                               |   |                             | 4,500      |                             |   | 4,500                            |   |   | 4,500 |   |
| Stock                based compensation                                   |   |                             | 105,000    |                             |   | 105,000                          |   |   | 2,334,871 |   |
| Settlement                costs                                           |   |                             | -          |                             |   | 0                                |   |   | 76,600 |   |
| Contributions                                                             |   |                             | 550,000    |                             |   | 0                                |   |   | 550,000 |   |
|                                                                      |   |                             |       |                             |   |                             |   |   |  |   |
| **Net                Loss**                                               |   | $                                | 1,371,273  |                             |   | 316,157                          |   | $ | 16,840,935 |   |
|                                                                      |   |                             |       |                             |   |                             |   |   |   |   |
| Basic                and diluted net loss per share                       |   |                             | 0.01       |                             |   | 0.00                             |   |   |   |   |
| Number                of equivalent shares used to compute per share data |   |                             | 98,818,395 |                             |   | 98,818,395                       |   |   |   |   |

----

**Thorium      Power Ltd**

**Interim      Statements of Cash Flows**

**September      30, 2006**

|                                                                     |   |                              |       |  **Cumulative**                   |   |
|--------------------------------------------------------------------------|--------|----------------------------------------|------------|----------------------------------------|--------|
|                                                                     |   |  **For                the nine**  |       |  **From**                         |   |
|                                                                     |   | **months**                             |       |  **Inception**                    |   |
|                                                                     |   |  **ended**                        |       |  **Through**                      |   |
|                                                                     |   |  **September                30,** |       |  **September                30,** |   |
|                                                                     |   | **2006**                               |       | **2006**                               |   |
|                                                                     |   | **(Unaudited)**                        |       | **(Unaudited)**                        |   |
| **Cash                flows from operating activities:**                 |   |                              |       |                              |   |
| Net                (loss)                                                |   | $                                      | (1,371,273 | )                                      | $      | (16,840,935 | ) |
| Adjustments                to reconcile net (loss) to net cash           |   |                                   |       |                                   |   |   |   |
| provided                by (used by) operating activities:               |   |                                   |       |                                   |   |   |   |
| Write-off                of foreign patent, including amortization       |   |                                   | -          |                                   |   | 75,000 |   |
| Depreciation                and amortization                             |   |                                   | 19,584     |                                   |   | 290,909 |   |
| (Gain)                loss on disposition of fixed assets                |   |                                   | -          |                                   |   | 86,855 |   |
| Issuance                of stock in exchange for technology and services |   |                                   | -          |                                   |   | 88,250 |   |
| Due                from Novastar Resources, Ltd.                         |   |                                   | (505,824   | )                                      |   | (505,824 | ) |
| Stock                based compensation                                  |   |                                   | 105,000    |                                   |   | 2,334,870 |   |
| (Increase)                decrease in prepaid and other expenses         |   |                                   | 6,271      |                                   |   | (9 | ) |
| Increase                (decrease) in accrued and other expenses         |   |                                   | (338,010   | )                                      |   | 600,767 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Net                cash used by operating activities                     |   |                                   | (2,084,252 | )                                      |   | (13,870,117 | ) |
|                                                                     |   |                                   |       |                                   |   |   |   |
| **Cash                flows from investing activities:**                 |   |                                   |       |                                   |   |   |   |
| Patent                costs                                              |   |                                   | (6,664     | )                                      |   | (411,669 | ) |
| Security                deposits                                         |   |                                   | -          |                                   |   | (7,567 | ) |
| Fixed                assets                                              |   |                                   | (10,961    | )                                      |   | (285,145 | ) |
| Loans                granted - related parties                           |   |                                   | -          |                                   |   | (160,365 | ) |
| Repayment                of loans - related parties                      |   |                                   | -          |                                   |   | 160,365 |   |
| Proceeds                from sale of fixed assets                        |   |                                   | -          |                                   |   | 13,583 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Net                cash used by investing activities                     |   |                                   | (17,626    | )                                      |   | (690,799 | ) |
|                                                                     |   |                                   |       |                                   |   |   |   |
| **Cash                flows from financing activities:**                 |   |                                   |       |                                   |   |   |   |
| Proceeds                from issuance of stock                           |   |                                   | 2,202,673  |                                   |   | 14,498,011 |   |
| Proceeds                from loans - related parties                     |   |                                   | 4,100      |                                   |   | 388,790 |   |
| Repayment                of loans - related parties                      |   |                                   | (45,931    | )                                      |   | (285,590 | ) |
| Proceeds                from loan from payroll service                   |   |                                   | -          |                                   |   | 42,663 |   |
| Repayment                of loan from payroll service                    |   |                                   | -          |                                   |   | (42,663 | ) |
| Net                changes in current portion of long-term debt          |   |                                   | (918       | )                                      |   | 3,217 |   |
| Proceeds                from issuance of long-term debt                  |   |                                   | -          |                                   |   | 18,082 |   |
| Principal                repayments of long-term debt                    |   |                                   | (2,161     | )                                      |   | (5,426 | ) |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Net                cash provided by financing activities                 |   |                                   | 2,157,763  |                                   |   | 14,617,084 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Net                increase in cash and cash equivalents                 |   |                                   | 55,886     |                                   |   | 56,169 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Cash                and cash equivalents - beginning of period           |   |                                   | 283        |                                   |   | - |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Cash                and cash equivalents - end of period                 |   | $                                      | 56,169     |                                   | $      | 56,169 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Supplemental                disclosures                                  |   |                                   |       |                                   |   |   |   |
| Cash                paid - interest                                      |   | $                                      | 687        |                                   | $      | 5,497 |   |
|                                                                     |   |                                   |       |                                   |   |   |   |
| Non-Cash                Transactions:                                    |   |                                   |       |                                   |   |   |   |
| Conversion                of debt to equity                              |   |                                   | 4,100      |                                   |   | 103,200 |   |

----