**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)





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





For
      the
      fiscal year ended December 31, 2006





Or





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





For
      the
      transition period from ____________________ to
      ______________________________.





Commission
      File Number: 000-26027





SMART
      ENERGY SOLUTIONS, INC.


(Name
      of
      small business issuer in its charter)





Nevada
              (State
                or Other Jurisdiction of Incorporation)
            
            20-3353835
              (IRS
                Employer Identification No.)





210
      West Parkway, #7, Pompton Plains, NJ 07444


(Address
      of Principal Executive Offices, Zip Code)





(973)
      248-8008


(Issuer’s
      Telephone Number)





Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to section 12(g) of the Act: Common Stock, $0.001 par
      value





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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  x  No  o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part II of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





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


o
      Yes x No





The
      issuer’s revenues for the fiscal year ended December 31, 2006 were
      $1,968,973.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the average bid and asked price of
      such
      common equity as of March 31, 2007 (a date within the past 60 days) was
      $46,901,930.





The
      number of shares outstanding of the issuer’s class of common stock as of April
      12, 2007 is  76,888,409.





Documents
      Incorporated By Reference:  None





Transitional
      Small Business Issuer Disclosure Format (check one): Yes o No x.










**TABLE
      OF CONTENTS**




PagePART
                IItem
                1. Description of Business
            
            1Item
                2. Description of Property
            
            5Item
                3. Legal Proceedings
            
            5Item
                4. Submission of Matters to a Vote of Security Holders
            
            5PART
                IIItem
                5. Market for Common Equity and Related Stockholder Matters
            
            6Item
                6. Management’s Discussion and Analysis or Plan of
                Operation
            
            11Item
                7. Financial Statements
            
            12Item
                8. Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure
            
            12Item
                8A. Controls and Procedures
            
            12Item
                8B. Other Information
            
            13PART
                IIIItem
                9. Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act
            
            13Item
                10. Executive Compensation
            
            15Item
                11. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            
            21Item
                12. Certain Relationships and Related Transactions, and Director
                Independence.
            
            24Item
                13. Exhibits
            
            28Item
                14. Principal Accountant Fees and Services
            
            30





ii




**PART
      I.**





As
      used
      in this Form 10-KSB, references to the "Company," the "Registrant," "we," “our”
or "us" refer to Smart Energy Solutions, Inc. unless the context otherwise
      indicates *.*





**Forward-Looking
      Statements**





This
      Annual Report on Form 10-KSB contains forward-looking information.
      Forward-looking information includes statements relating to future actions,
      prospective products, future performance or results of current or anticipated
      products, sales and marketing efforts, costs and expenses, interest rates,
      outcome of contingencies, financial condition, results of operations, liquidity,
      business strategies, cost savings, objectives of management of the Company
      and
      other matters. The Private Securities Litigation Reform Act of 1995 provides
      a
“safe harbor” for forward-looking information to encourage companies to provide
      prospective information about themselves without fear of litigation so long
      as
      that information is identified as forward-looking and is accompanied by
      meaningful cautionary statements identifying important factors that could cause
      actual results to differ materially from those projected in the information.
      Forward-looking information may be included in this Annual Report on
      Form 10-KSB or may be incorporated by reference from other documents filed
      with the Securities and Exchange Commission by the Company. You can find many
      of
      these statements by looking for words including, for example, “believes,”
“expects,” “anticipates,” “estimates” or similar expressions in this Annual
      Report on Form 10-KSB or in documents incorporated by reference in this
      Annual Report on Form 10-KSB. Except as otherwise required by applicable
      law, the Company undertakes no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information or future
      events.





The
      Company has based the forward-looking statements relating to the Company’s
      operations on management’s current expectations, estimates and projections about
      the Company and the industry in which it operates. These statements are not
      guarantees of future performance and involve risks, uncertainties and
      assumptions that we cannot predict. In particular, we have based many of these
      forward-looking statements on assumptions about future events that may prove
      to
      be inaccurate. Accordingly, the Company’s actual results may differ materially
      from those contemplated by these forward-looking statements. Any differences
      could result from a variety of factors, including, but not limited to the
      following:


·
            the
                Company’s ability to manufacture, market, and price the Battery Brain
                product;·
            the
                Company’s ability to hire and maintain the personnel necessary to run the
                operations of the Company;·
            the
                level of consumer spending for the Company’s product;·
            the
                success of the Company’s marketing and promotion programs in obtaining
                market acceptance for its product;·
            market
                conditions affecting the prices of the Company’s product;
                and·
            responsiveness
                of both the trade and consumers to the Company’s new product and marketing
                and promotion programs.





**Item
      1. Description of Business**





Our
      History





The
      Company was initially formed in 1999 as a Utah corporation under the name
      Datigen.com, Inc. On August 25, 2005, the Company changed its state of
      incorporation from Utah to Nevada by the merger of the Company with and into
      its
      wholly owned subsidiary, Smart Energy Solutions, Inc., a Nevada corporation.
      As
      a result of such merger, the Company’s name was changed to Smart Energy
      Solutions, Inc. in order to better reflect the Company’s business
      operations.




1





Until
      November 24, 2004, the Company had been involved in various activities,
      including development and marketing of various internet and internet related
      products and services, investment in trust deed notes secured by real property,
      and providing of concrete cutting and finishing services to persons seeking
      to
      comply with certain provisions of the American Disability Act of 1991 that
      require the removal of “trips hazards” from public sidewalks and ramps. On
      November 24, 2004, a majority of the Company’s outstanding common stock was
      purchased by Amir Uziel and six unaffiliated foreign individuals from certain
      of
      the Company’s shareholders, including its then Chief Executive Officer, Joseph
      Ollivier.





Following
      such change in control, the Company ceased all of its prior business operations.
      From November 24, 2004 until March 23, 2005, the Company did not have any
      business operations.





On
      March
      23, 2005, the Company acquired from Purisys, Inc., a New Jersey corporation,
      the
      intellectual property rights and certain other assets relating to a product
      known as the Battery Brain. The Battery Brain is a device that is attached
      to a
      motor vehicle battery for the purpose of protecting the vehicle from battery
      failure and theft. On such date, the Company , Purisys and Aharon Y. Levinas
      executed an Asset Purchase Agreement (the “Agreement”) pursuant to which the
      Company purchased all the intellectual property relating to the Battery Brain
      product and the goodwill associated therewith and certain of the equipment
      relating to the product. The purchased assets did not include the inventory
      which existed as of March 23, 2005 or the molds for the Battery Brain (which
      were located in Italy and China), which were purchased by us for
      $66,487.





The
      consideration paid by the Company for the Battery Brain Assets was (i) the
      issuance to Mr. Levinas, the sole shareholder of Purisys, of the number of
      shares of our common stock which will have constituted, when there will have
      been an aggregate of $1,000,000 invested in the Company, twenty (20%) percent
      of
      all issued and outstanding common stock and (ii) a payment of $100,000. As
      discussed below, subsequent to the acquisition of the Battery Brain Assets,
      the
      Company raised more than the $1,000,000 investment threshold in a private
      placement of units of our securities, and as a result, in August 2005 the
      Company issued to Levinas 10,421,750 shares (representing 20%) of the Company’s
      common stock. Pursuant to the Agreement, we also  agreed
      that if we will have not raised $400,000 prior to June 23, 2005 we would issue
      to Mr. Levinas additional shares of our common stock in an amount equal to
      20%
      of the issued and outstanding shares of the Company; and if less than $400,000
      is raised, then such share amount shall be pro rated based on the actual amount
      invested. We successfully raised more than the $400,000 in the private placement
      of units of our securities and were not required to issue additional shares
      to
      Mr. Levinas.  Pursuant
      to the Agreement, we also agreed to use our best efforts within the next two
      years to (a) consummate an equity raise of not less than $1,500,000 dollars
      at a
      post-money valuation of not less than $12,000,000; provided, that all equity
      raises within 120 days after March 23, 2005 which are based on a post-money
      valuation which is $10,500,000 or greater, shall be counted toward the
      $1,500,000; or (b) generate revenue for the Battery Brain product in the
      aggregate amount of $2,000,000. If we will have not achieved either (a) or
      (b)
      at any time on or prior to March 23, 2007, then Levinas shall be entitled to
      receive additional shares of common stock which equals 20% of the outstanding
      share capital on a fully-diluted basis (calculated as of said date). As further
      discussed below, by November 2005 we had raised an aggregate of $2,749,000
      in a
      private placement of units of our securities; therefore, we achieved our
      obligation to consummate an equity raise of not less than $1,500,000 and Mr.
      Levinas is no longer entitled to receive the additional shares pursuant to
      the
      Agreement.




We
      agreed
      with Levinas to mutually agree to negotiate, in good faith, an agreement
      regarding the registration rights of the Levinas for the shares issued to
      Levinas pursuant to the Agreement; Levinas shall be entitled to equal
      registration rights with our controlling shareholders, pro rata in accordance
      with their holdings, subject to a lock-up agreement. Pursuant to the terms
      of
      the Agreement, our Board of Directors shall consist of five (5) members, and
      Levinas shall be entitled to appoint 40% of the representatives to the Board
      of
      Directors. If
      for
      any reason we cease to manufacture, sell or otherwise cease to be involved
      in
      the Battery Brain product, then Levinas shall have the right to purchase the
      Battery Brain product from us; the price and other terms of such right shall
      be
      negotiated.




2





The
      only
      liabilities we assumed in the transaction are (i) the warranties and service
      of
      any Battery Brain products sold prior to the execution and delivery of the
      Agreement, (ii) any potential claims made by a person who alleges that he
      assisted in developing the Battery Brain product and (iii) any taxes incurred
      as
      a result of the Agreement. If there are any taxes imposed on Purisys and/or
      Levinas as a result of the receipt of our shares, we agreed to lend them the
      amount of liabilities and expenses owed as a result thereof. Said loan shall
      be
      for a period of not less than 10 years.





Following
      the purchase of the Battery Brain, the Company focused on building a management
      team, establishing operations, and entering into contractual arrangements for
      the manufacture and distribution of units of the Battery Brain. The Company
      presently engages in the manufacturing, distribution, and sale of units of
      the
      Battery Brain.





Our
      Principal Products and Markets





The
      Company’s only products are its Battery Brain products. The Battery Brain is a
      small, box-shaped device, whose size and weight is comparable to that of a
      cellular phone. It is attached to the battery of a motor vehicle and performs
      two principal functions for the motor vehicle: prevention of battery failure
      and
      protection from theft. If the Battery Brain is attached to a car battery, and
      the car’s operator leaves the lights on while the car is turned off, the Battery
      Brain will prevent the battery from failing, so that the car can be started
      again without having to recharge such battery. It works by preventing a battery
      from becoming drained below the level necessary for it to function. The Battery
      Brain is able to detect when the battery has reached such point and, upon such
      detection, it automatically disconnects the power from the battery so that
      the
      battery will not be drained any further. In addition, the Battery Brain protects
      the vehicle from being stolen by stopping the battery from powering the engine
      while the car is turned off, thereby preventing a potential thief from “hot
      wiring” the engine, a procedure commonly used by thieves to turn on the
      vehicle’s engine without an engine key.





Different
      versions of the Battery Brain are available, each of which is intended to be
      used with a different type of motor vehicle. As a result, the Battery Brain
      can
      be used on all types of motor vehicles, from passenger cars to light trucks
      to
      heavy trucks, buses, tractors, RVs, motorcycles, boats, handicap vehicles or
      any
      other motor vehicles that rely on batteries.





Sources
      and Availability of Raw Materials; Manufacturing Operations;





The
      Company is not dependent upon a small number of suppliers for the raw materials
      used in the production of the Battery Brain as it expects to have alternative
      sources available and not to encounter any difficulties in obtaining such raw
      materials. The Battery Brain is manufactured on behalf of the Company by third
      party manufacturers. The Company has expanded its manufacturing capabilities
      by
      adding additional third party manufacturing facilities in China and Israel.
      The
      Company is also reviewing opportunities to expand its facilities in Italy and
      establish manufacturing facilities in North America. Such third party
      arrangements give the Company access to state of the art manufacturing
      facilities, maintain strict protection of our proprietary property, enable
      the
      Company to meet the strictest regulation, and provide the flexibility to meet
      the growing demands in each market segment.





Markets;
      Distribution Methods





We
      are
      not dependent upon a small number of customers, as we market the Battery Brain
      to all users of motor vehicles. The Company’s activities have been focused on
      the following nine market segments, each of which have unique requirements:
      Automotive Retail; Automotive Dealers; Automotive Original Equipment
      Manufacturers; Automotive Specialty; Fleets; Military; Heavy Truck/ Bus; Motor
      Home / Recreational Vehicle; Marine.





The
      Company has contracted with various distributors for distribution of the Battery
      Brain products in the United States, Canada, Italy, and Israel. The Company’s
      agreements with its principal distributors are discussed below.




3





On
      January 15, 2006, the Company and Elcart Distribution S.P.A. ("Elcart") entered
      into a distributorship agreement (the "Elcart Agreement"). Pursuant to the
      Elcart Agreement, Elcart was appointed as the exclusive distributor of the
      Company's Type I, Type II, and Type III Battery Brain products in Italy with
      respect to any person other than a person engaged in the business of
      manufacturing motor vehicles and other than a national governmental body. The
      initial term of the Agreement was for a one year period expiring on January
      15,
      2007. The term shall be automatically renewed for successive one year periods
      unless either party delivers to the other party notice of its intent not to
      renew no later than 60 days prior to the expiration of the immediately preceding
      period. The current term of the agreement expires on January 15,
      2008.





On
      June
      22, 2006, the Company and Carter Group, Inc. (“Carter”) entered into three
      separate agreements relating to the distribution of the Company’s Battery Brain
      line of products:





(1)
      Distributorship Agreement. Pursuant to such agreement, Carter was appointed
      as
      the exclusive distributor of the Battery Brain Products to new car dealers
      located in the following territories: Alaska, Florida, Illinois, Indiana,
      Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, Pennsylvania,
      Wisconsin, and all provinces of Canada. The
      term
      of the Distributorship Agreement is for
      a
      three year period expiring on June 22, 2009. The term shall be automatically renewed
      for successive one year periods, unless earlier terminated by the parties.
      Either party may terminate the agreement without cause upon 180 days’ prior
      notice.




(2)
      Profit Sharing and Internet Distribution Agreement. Pursuant to such agreement,
      the Company appointed Carter as the distributor of the Battery Brain Products
      in
      the United States and Canada for sales made over the Internet and also granted
      to Carter a license to use the Company’s domain name of www.batterybrain.com and
      related batterybrain URL’s. Carter is required to use its best efforts to
      promote the sale of the Battery Brain Products via the internet through
      maintenance of a web-site and through on-line advertising web sites. Carter
      also
      agreed to create, update and maintain internet web sites for purposes of
      promoting and selling the Battery Brain Products through the internet. Carter
      agreed to bear and assume all costs and expenses of every kind in connection
      with sales made over the internet. The
      term
      of the Profit
      Sharing and Internet Distribution Agreement is for
      a
      three year period expiring on June 22, 2009. The term shall be automatically renewed
      for successive one year periods, unless earlier terminated by the parties.
      Either party may terminate the agreement without cause upon 180 days’ prior
      notice.





(3)
      Finder’s Agreement. Pursuant to such agreement, Carter agreed to introduce the
      Company to certain automobile manufacturers identified in the agreement for
      the
      purpose of selling to them the Battery Brain Products. In consideration,
      therefor, the Company agreed to pay to Carter a referral fee in connection
      with
      the execution of any agreement for the sale of the Battery Brain Products
      resulting from Carter’s introductions of the automobile manufacturers to the
      Company. Such referral fee is equal to a certain percentage of the gross revenue
      generated by the sale of units of Battery Brain Products to persons introduced
      by Carter to the Company. The
      term
      of the Finder’s Agreement is for
      an
      eighteen month period commencing on June 22, 2006. The term may be renewed
      for
      successive eighteen month periods upon mutual written agreement of the parties
      thereto. Either
      party may terminate the agreement without cause upon 180 days’ prior
      notice.





The
      Company has been approved as a supplier to the U.S. General Services
      Administration. The Company was awarded GSA contract GS-07F-0212T on February
      1,
      2007. This award authorizes the Company to sell products electronically via
      the
      internet to all executive agencies, government corporations, federal agencies,
      federal contractors, fleet managers and the District of Columbia. The Company
      and the U.S. Department of Defense on January 31, 2007 announced that the U.S.
      Army has begun testing the Battery Brain on their Striker Tactical
      Vehicle.





The
      Company also sells units of the Battery Brain to other commercial enterprises,
      including the following; automotive retail distributors, including Canadian
      Tire
      and O’Reilly Auto Parts; new car dealerships in fourteen States within the U.S; marine
      distributors, including Canadian Tire, Overton and Keller Marine; recreational
      vehicle and motor home distributors, including Coast and Stag Parkway; truck
      distributors, including International Truck and Truck Equipment Hawaii; and
      international distributors in Italy, The Netherlands, Australia, New Zealand
      and
      the United Kingdom.




4





Competition





The
      Company expects to have a competitive advantage over competitors having products
      which the market might consider to be similar to the Battery Brain. We feel
      that
      the Battery Brain is differentiated from similar products offered by such
      competitors in various important ways. The Battery Brain is the only product
      of
      its kind that will protect vehicles from battery failure due to the operation
      of
      any electrical accessory, including headlights, radios, trunk lights, interior
      lights, door lights, or due to unknown shorts in the electrical system and
      also
      provide a vehicle anti-theft capability. Similar products offered by competitors
      protect vehicles from battery failure due only to the operation of the
      headlights. The Battery Brain is also easier to install than other competitive
      products. Further, in order to reset the load (the energy source), most other
      competitive products require the operator of the vehicle to lift the hood,
      locate the device, and press a reset knob located on the device. The Battery
      Brain can be operated via a remote control.





Intellectual
      Property





Our
      intellectual property rights in the Battery Brain products are protected by
      a
      patent. The patent does not expire until July 23, 2022.





Employees





The
      Company has 7 employees, of which all are employed full time.





**Item
      2. Properties**





The
      Company leases its executive offices and warehouse facilities, which together
      consist of approximately 5,000 square feet, at 210 West Parkway, #7, Pompton
      Plains, NJ 07444, under a lease for one year term commencing on January 1,
      2007
      and ending on December 31, 2007. The rent due under such lease is $4,300 per
      month. The initial term of the lease will be automatically renewed for an
      additional two year term unless, at least 90 days prior to the expiration of
      the
      initial term, the Company notifies the landlord that it does not desire to
      renew
      the term and pays to the landlord $25,800. The Company believes that its current
      office and warehouse space will be adequate for the foreseeable future.




**Item
      3. Legal Proceedings**





On
      February 1, 2007, the Company commenced an action in the Superior Court of
      New
      Jersey against Superior Automotive Company (“Superior”), a company having an
      address at 1880 Oak Parkway Building 213, Marrietta, GA 30062. The Company
      alleged that Superior failed to perform its obligations under the
      Distributorship Agreement, dated November 30, 2006, between the Company and
      Superior, by failing to pay for products that Superior ordered from the Company.
      The Company seeks damages in the amount of $154,288.26, plus statutory interest
      from February 1, 2007 and costs. On April 3, 2007, Superior filed with the
      Court
      an Answer to the Company’s Complaint, denying that they owe any amounts to the
      Company. Superior also set forth in its Answer three counterclaims: that the
      Company made certain misrepresentations to Superior; that the products sold
      to
      Superior were defective; and that the Company’s subsequent agreements with
      Carter Group, Inc. violated the exclusivity provisions of the Company’s
      Distributorship Agreement with Superior. Superior seeks compensatory damages,
      punitive damages interest, costs, and attorney’s fees, all in an unspecified
      amount. The Company believes that Superior’s defenses and counterclaims have no
      merit.





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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year covered by this report.




5





**PART
      II**





**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**





**Market
      Information**





The
      Company’s common stock has been traded on the Over-The-Counter Bulletin Board
      sponsored by the National Association of Securities Dealers, Inc. under the
      symbol SMGY.OB. The following table sets forth the range of quarterly high
      and
      low closing bids of the common stock as reported on http://finance.yahoo.com
      during the years ending December 31, 2006 and December 31, 2005:


Financial
                  Quarter
              
              Bid
                  Information*Year
              
              Quarter
              
              High
                  Bid
              
              Low
                  Bid2006
              
              
              Fourth
                  Quarter
              
              $
              0.39
              
              $
              0.31Third
                  Quarter
              
              $
              0.42
              
              $
              0.30Second
                  Quarter
              
              $
              0.80
              
              $
              0.43First
                  Quarter
              
              $
              0.93
              
              $
              0.552005
              
              
              Fourth
                  Quarter
              
              $
              1.60
              
              $
              0.40Third
                  Quarter
              
              $
              1.10
              
              $
              0.43Second
                  Quarter
              
              $
              1.01
              
              $
              0.43First
                  Quarter
              
              $
              0.20
              
              $
              0.55





*The
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission and may not represent actual transactions.





**Holders**





On
      April
      12, 2007, there were approximately 209 holders of record of the Company’s common
      stock.





**Dividends**





The
      Company has not declared or paid any cash dividends on its common stock nor
      does
      it anticipate paying any in the foreseeable future. Furthermore, the Company
      expects to retain any future earnings to finance its operations and expansion.
      The payment of cash dividends in the future will be at the discretion of its
      Board of Directors and will depend upon its earnings levels, capital
      requirements, any restrictive loan covenants and other factors the Board
      considers relevant.





6




**Securities
      Authorized for Issuance Under Equity Compensation Plans**





The
      following table presents certain information as of the end of December 31,
      2006
      with respect to compensation plans under which equity securities of the Company
      are authorized for issuance:





Plan
                Category
            
            Number
                of Securities to be Issued Upon Exercise of Outstanding Options,
                Warrants,
                and Rights
              (a)
            
            Weighted-Average
                Exercise Price of Outstanding Options, Warrants, and Rights
              (b)
            
            Number
                of Securities Remaining Available for Future Issuance Under Equity
                Compensation Plans (Excluding Securities Reflected in Column
                (a))
              (c)Equity
                Compensation Plans Approved by Security Holders
            
            
            0
            
            
            0
            
            
            0Equity
                Compensation Plans Not Approved by Security Holders
            
            
            10,223,665
            
            $
            .15
            
            
            1,000,000Total
            
            
            10,223,665
            
            $
            .15
            
            
            1,000,000





2005
      Stock Incentive Plan





On
      November 28, 2005, the board of directors resolved to adopt the 2005 Stock
      Incentive Plan (the "2005 Stock Plan"). In connection with the adoption of
      the
      2005 Stock Plan, the Company reserved 1,000,000 shares of common stock of the
      Company for future issuance under the plan. The 2005 Stock Plan superseded
      all
      previous equity compensation plans of the Company. No equity compensation was
      awarded under any previous equity compensation plans.





**T** he
      purpose of the 2005 Stock Plan is to provide incentives to attract, retain,
      and
      motivate eligible persons whose present and potential contributions are
      important to the success of our Company by offering them an opportunity to
      participate in our future performance through awards of restricted stock and
      stock bonuses. The Stock Plan offers directors, officers and selected key
      employees, advisors and consultants of the Company an opportunity to acquire
      a
      proprietary interest in the success of the Company, to receive compensation,
      or
      to increase such interest, by purchasing shares of the Company’s common stock.
      The Plan provides both for the direct award or sale of shares.





The
      2005
      Stock Plan is to be interpreted and applied by a committee of our Board of
      Directors. The Board’s principal responsibilities are the following: (i)
      designate participants; (ii) determine the type or types of stock awards to
      be
      granted to an eligible employee or other individual under the plan; (iii)
      determine the number of common shares to be covered by awards; (iv) determine
      the terms and conditions of any award; (v) determine whether, to what extent,
      and under what circumstances awards may be settled or exercised, or canceled,
      forfeited or suspended, and the method or methods by which awards may be
      settled, exercised, canceled, forfeited or suspended; (vi) determine
      requirements for the vesting of awards or performance criteria to be achieved
      in
      order for awards to vest; (vii) determine whether, to what extent and under
      what
      circumstances common shares payable with respect to an award under the plan
      shall be deferred either automatically or at the election of the holder thereof
      or of the Board; (viii) interpret and administer the plan and any instrument
      or
      agreement relating to, or award made under, the plan; (ix) establish, amend,
      suspend or waive such rules and regulations and appoint such agents as it shall
      deem appropriate for the proper administration of the plan; and (x) make any
      other determination and take any other action that the Board deems necessary
      or
      desirable for the administration of the plan. Unless otherwise expressly
      provided in the Plan, all designations, determinations, interpretations and
      other decisions under or with respect to the Plan or any Award shall be within
      the sole discretion of the Board, may be made at any time and shall be final,
      conclusive and binding upon all persons, including the Company, any affiliate,
      any participant, any holder or beneficiary of any award, any stockholder and
      any
      employee. No awards under the 2005 Stock Plan shall be granted after December
      31, 2014.





The
      2005
      Stock Plan provides that 1,000,000 shares of the Company’s common stock are
      reserved for stock awards under thereunder. Stock awards may be granted only
      to
      employees or independent contractors (including, officers and directors who
      are
      also employees) of the Company or of an affiliate of the Company.




7





Individual
      Equity Compensation Arrangements





Pursuant
      to a Consulting Agreement, dated October 3, 2005 and amended on October 3,
      2006,
      between the Company and Peter Mateja, our Chief Executive Officer and Director,
      the Company granted to Mr. Mateja 3,000,000 stock options, each of which gives
      Mr. Mateja the right to purchase one share of the Company's common stock for
      $0.15. Such stock options shall vest pro ratably every three months over the
      three year period commencing three months from October 3, 2005. The vested
      stock
      options shall be exercisable until the earlier of five years after vesting
      or
      365 days after Mr. Mateja's termination. All remaining stock options shall
      automatically vest upon the Company's change in control. In lieu of a $50,000
      cash bonus he was entitled to pursuant to the consulting agreement, the Company
      agreed, on October 3, 2006, to issue to Mr. Mateja 150,000 shares of common
      stock and 66,666 stock purchase options, each of which entitles the holder
      thereof to purchase one share of common stock at $0.45.





On
      July
      29, 2005, the Company issued options to each of its directors - Joseph Bahat,
      Jacob Enoch, Amir Uziel, Tamir Levinas, and Aharon Y. Levinas. Such options
      were
      issued pursuant to a separate letter agreement entered into between the Company
      and each director on July 29, 2005. The terms of each letter agreement are
      identical. Pursuant to the Letter Agreements, each director agreed to serve
      as a
      director of the Company until the next Annual Meeting of Shareholders. As
      compensation for his services, each director received options to purchase
      345,000 shares of the common stock of the Company for a price of $0.15 per
      share, exercisable for three years after the date that the stock options vest.
      Such stock options shall vest quarterly over the three year period commencing
      three months from the date of the Letter Agreement, so that 28,750 stock options
      shall vest every three months. In addition, each director shall be paid $4,000
      for each year that he serves as director, payable quarterly in arrears. Each
      director also shall be paid $1,000 for each board or committee meeting at which
      he is physically present.





On
      November 9, 2006, the Company granted an additional 195,000 stock options,
      subject to vesting as described below, to each of the following directors:
      Aharon Y. Levinas, Tamir Levinas, Jacob Enoch, Joseph Bahat, and Amir Uziel.
      Each such stock option entitles the holder thereof to purchase one share of
      common stock for a price of $0.15, exercisable for three years after the date
      that the stock option vests. Such stock options shall vest quarterly over three
      years, commencing on November 9, 2006.





Pursuant
      to an Employment Agreement, dated May 24, 2005 and amended and restated on
      October 25, 2006, between the Company and Edward Braniff, our Chief Financial
      Officer, the Company issued to Edward Braniff options to purchase 1,000,000
      shares of the Company’s common stock at an exercise price of $0.05 per share.
      Such options shall vest shall vest pro ratably every three (3) months over
      three
      (3) year period commencing on May 24, 2005. The vested options shall be
      exercisable until the earlier of 5 years after vesting or 365 days after
      termination of CFO's employment with the Company. In addition, during the fiscal
      year ended December 31, 2006, Mr. Braniff received a bonus consisting of the
      following awards: 100,000 shares of common stock, granted on October 25, 2006;
      50,000 stock options (each entitling Mr. Braniff to purchase one share of common
      stock for $0.30), granted on October 25, 2006; and 33,333 stock options (each
      entitling Mr. Braniff to purchase one share of common stock for $0.45), granted
      on December 31, 2006.





Pursuant
      to an employment agreement, dated March 23, 2005, between the Company and Aharon
      Y. Levinas, our Chief Technology Officer, as amended on April 18, 2005 and
      May
      18, 2005, the Company issued to Mr. Levinas 2,650,000 shares of common stock,
      which shall vest pro ratably every 3 months over a 3-year period commencing
      on
      April 4, 2005. Upon a change of control of the Company, all such shares shall
      automatically be issued simultaneously upon the effective date of the change
      of
      control. The agreement is for a 4-year term, with a base salary of $160,000,
      $200,000, $240,000 and $240,000 for each year of the term. All benefits to
      be
      granted to the individual who will be appointed as our Chief Executive Officer
      shall be granted to Levinas as well, including bonuses and stock options. The
      agreement with Levinas provides that if Levinas is terminated during the 4-year
      term, or is no longer employed by us for any reason during said period,
      including termination for cause or death, we remain obligated to pay the full
      amount of payment due Levinas thereunder.




8





Recent
      Sales of Unregistered Securities; Use of Proceeds from Registered
      Securities .





Between
      December 21, 2006 and January 3, 2007, the Company entered into Regulation
      S
      Subscription Agreements providing for the issuance of an aggregate of 4,453,410
      shares of the Company's common stock to eight non-US persons. The purchase
      price
      paid to the Company for the purchase of such shares was $0.30 per share,
      amounting in the aggregate to $1,336,023. An additional 500,000 shares of the
      Company's common stock were issued to a non-US person as payment of commissions
      earned in connection with the sale of such shares. The shares were offered
      and
      sold pursuant to a placement held under Regulation S promulgated under the
      Securities Act of 1933, as amended. The Company did not make any offers in
      the
      United States, each of the purchasers was outside the United States, and there
      were no selling efforts in the United States.





In
      August
      and September of 2006, the Company issued an aggregate of 184,458 shares of
      its
      common stock in a private placement. Each share was sold for $0.35, and the
      Company received proceeds totaling an aggregate of $225,000. No commissions
      were
      paid in connection with the sale of the shares. The shares were issued pursuant
      to an exemption from registration pursuant to Regulation S promulgated by the
      Securities and Exchange Commission. The purchasers of the shares represented
      to
      the Company that they were non U.S. persons (as defined in Regulation S) and
      were also accredited investors. The Company did not make any offers in the
      United States, each of the purchasers was outside the United States, and there
      were no selling efforts in the United States.





During
      the three months ended September 30, 2006, the Company issued 142,857 shares
      of
      common stock to EGFE, Ltd. Such shares were issued in connection with the
      promissory note, dated May 22, 2006 and amended on March 6, 2007, in the
      principal amount of $500,000, issued by the Company to EGFE, Ltd. Such shares
      were issued pursuant to an exemption from registration pursuant to Section
      4(2)
      of the Securities Act of 1933, as amended, or Regulation D promulgated
      thereunder. EGFE, Ltd. represented its intention to acquire the securities
      for
      investment only and not with view to or for sale in connection with any
      distribution thereof, and appropriate legends were affixed to the share
      certificates issued in such transaction. EGFE, Ltd. had adequate access, through
      its relationships with us, to information about us and was knowledgeable,
      sophisticated and experienced in making investments of this kind.





On
      September 14, 2006, the Company issued to EGFE, Ltd. a demand promissory note,
      in the principal amount of $500,000. In consideration therefor, EGFE, Ltd.
      loaned $500,000 to the Company. Interest on such promissory note will accrue
      at
      the rate of 12% per year. On March 6, 2007, such note was amended and restated
      for the purpose of providing that the entire principal sum and all accrued
      interest due under the promissory note shall be paid on September 30, 2007.
      Such
      promissory note was issued pursuant to an exemption from registration pursuant
      to Section 4(2) of the Securities Act of 1933, as amended, or Regulation D
      promulgated thereunder. EGFE, Ltd. represented its intention to acquire the
      securities for investment only and not with view to or for sale in connection
      with any distribution thereof, and appropriate legends were affixed to the
      share
      certificates issued in such transaction. EGFE, Ltd. had adequate access, through
      its relationships with us, to information about us and was knowledgeable,
      sophisticated and experienced in making investments of this kind.





In
      May
      2006, the Company issued 1,357,142 shares of its common stock in a private
      placement. The purchasers of the shares were non-U.S. accredited investors.
      Each
      share was sold for $0.35. The Company received proceeds totaling an aggregate
      of
      $475,000. No commissions were paid in connection with the sale of
      the
      shares. The shares were issued pursuant to an exemption from registration
      pursuant to Regulation S promulgated by the Securities and Exchange Commission.
      The Company did not make any offers in the United States, each of the purchasers
      was outside the United States, and there were no selling efforts in the United
      States.





In
      May
      2006, the Company issued 100,000 shares of its common stock in a private
      placement. The purchasers of the shares were non-U.S. accredited investors.
      The
      shares were sold as units. Each unit consisted of one share of common stock,
      one
      Class A warrant giving the holder the right to purchase 1 share of stock at
      $0.45, which is exercisable for 1 year from the date of issuance, and one Class
      B warrant giving the holder the right to purchase 1 share of stock for $0.75,
      which is exercisable for 3 years from the date of issuance. Each unit was sold
      for $0.25. The Company received proceeds totaling an aggregate of $25,000.
      No
      commissions were paid in connection with the sale of the units. The units were
      issued pursuant to an exemption from registration pursuant to Regulation S
      promulgated by the Securities and Exchange Commission. The Company did not
      make
      any offers in the United States, each of the purchasers was outside the United
      States, and there were no selling efforts in the United States.




9





On
      May
      22, 2006, the Company issued to EGFE, Ltd. two convertible promissory notes,
      each in the principal amount of $500,000. In consideration therefor, EGFE agreed
      to pay to the Company an aggregate of $1,000,000. Interest on each note will
      accrue at the rate of 15% per annum. The entire principal sum and all accrued
      interest due under each note shall be paid on the maturity date of the
      respective note. The maturity date of one of the notes was originally June
      4,
      2007, but such note was amended on March 6, 2007 for the purpose of extending
      the maturity date to June 4, 2008. The maturity date of the other Note was
      originally May 24, 2007, but such note was amended on March 6, 2007 for the
      purpose of extending the maturity date to May 24, 2008. Pursuant to each
      promissory note, EGFE has the right, at its option, to convert the outstanding
      principal and interest due under the promissory notes to shares of the Company's
      common stock. The number of shares of common stock that shall be issued upon
      conversion will be calculated by dividing the amount of outstanding principal
      and interest that EGFE elects to convert by the conversion price specified
      therein. The conversion price will be calculated as follows: (1) if the Company
      is not in default under the terms of the note, the conversion price shall be
      equal to 95% of the average of the last bid and ask price of the common stock
      as
      quoted on the Over-The-Counter-Bulletin -Board or such other exchange where
      the
      common stock is quoted or listed for the five trading days preceding EGFE's
      election to convert; or (2) if the Company is in default under the terms of
      the
      Note, the conversion price shall be equal to 50% of the of the average of the
      last bid and ask price of the common stock as quoted on the
      Over-The-Counter-Bulletin -Board or such other exchange where the common stock
      is quoted or listed for the five trading days preceding EGFE, Ltd.'s election
      to
      convert.





In
      March
      2006, the Company issued 200,000 shares of its common stock upon the exercise
      of
      warrants previously issued in its private placement. Each share was sold for
      $0.45. The Company received proceeds totaling an aggregate of $90,000. No
      commissions were paid in connection with the exercise of the warrants. The
      warrants were previously issued pursuant to an exemption from registration
      pursuant to Regulation S promulgated by the Securities and Exchange Commission.
      The Company did not make any offers in the United States, each of the purchasers
      was outside the United States, and there were no selling efforts in the United
      States.





On
      January 24, 2006, the Company issued 60,000 shares to each of the following
      persons: Amir Uziel; Tamir Levinas; Shiri Levinas; Yoram Drucker; Lavi Krasney;
      and David Lubin. Such shares were issued in consideration for consulting
      services rendered to the Company. The shares were offered and issued pursuant
      to
      an exemption from registration pursuant to Section 4(2) of the Securities Act
      of
      1933, as amended, or Regulation D promulgated thereunder. The recipients of
      such
      shares were our officers, directors, or consultants and had access to all of
      the
      information which would be required to be included in a registration statement,
      and the transaction did not involve a public offering.





On
      January 9, 2006, the Company issued shares to the following persons in the
      amount set forth next to their name: Yair Alon - 26,250; Guy Bahat - 50,000;
      Daniel Levi - 40,000; Dov Reznik - 143,750. Such shares were issued in
      consideration for services rendered to the Company. The shares were offered
      and
      issued pursuant to an exemption from registration pursuant to Section 4(2)
      of
      the Securities Act of 1933, as amended, or Regulation D promulgated thereunder.
      The recipients of such shares were our officers, directors, or consultants
      and
      had access to all of the information which would be required to be included
      in a
      registration statement, and the transaction did not involve a public offering.





Purchases
      of equity securities by the issuer and affiliated purchasers .





None.




10




**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation**





The
      following management's discussion and analysis of financial condition and
      results of operations should be read in conjunction with our audited financial
      statements and notes thereto contained elsewhere in this report.





**Results
      of Operation**





Fiscal
      Year Ended December 31, 2006 Compared to Fiscal Year Ended December 31,
      2005





During
      the year ended December 31, 2005, the Company began sales of the Battery Brain
      product. The Company recorded revenues of $151,257 during 2005 from the sales
      of
      its Battery Brain product compared to $1,818,973 in 2006. The cost of sales
      for
      the Battery Brain was $78,167 in 2005 compared to $1,184,889 in 2006. The
      Company’s revenues and cost of sales increased primarily as a result of its
      extensive marketing programs, including its trade shows and private label
      programs.





The
      Company's 2005 general and administrative expenses totaling $615,441 consisted
      primarily of professional fees of $131,262, travel costs of $150,538, and
      administrative payroll of $251,427. The Company paid or accrued the legal and
      accounting fees as it completed the necessary SEC filings and audits for the
      purchase of the Battery Brain business. The Company incurred consulting fees
      of
      $1,178,791 to help develop strategy, screen and recruit key executives, fill
      interim management positions and complete the roll out of the Battery Brain
      product. The Company also paid $546,107 in marketing and advertising expense
      during the year. The marketing and advertising costs were related to developing
      a marketing plan and marketing materials for the Company.





The
      Company's 2006 general and administrative expenses totaling $1,520,223 consisted
      primarily of research and development expenses of $128,296, travel costs of
      $401,734, and administrative payroll of $500,714. The increased expenses were
      the result of the Company’s efforts to create increased public awareness of its
      products and to prepare to handle the resulting increase in sales. The Company
      incurred consulting fees of 1,178,791 and $3,517,992 to help develop strategy,
      screen and recruit key executives, fill interim management positions, and
      complete the roll out of the Battery Brain product in 2005 and 2006,
      respectively. These consulting fees are primarily paid in shares of the
      Company’s common stock or in stock purchase options because the Company has
      limited cash for such expenditures. The Company also paid $546,107 and $437,125
      in marketing and advertising expense during 2005 and 2006. The marketing and
      advertising costs were related to developing a marketing plan and marketing
      materials for the Company.





The
      Company recorded a net loss of $2,519,577 or $0.05 per share for the year of
      2005 compared to a net loss of $5,328,496 or $0.08 per share in 2006. Excluding
      non cash expenses incurred through common stock issued and options granted,
      the
      Company would have incurred a net loss of $1,849,912 or $0.03 per share and
      $2,189,849 or $0.04 per share in 2005 and 2006, respectively. The Company
      expects that it will continue to be necessary to grant options and issue common
      stock for services in 2007.





Fiscal
      Year Ended December 31, 2005 Compared to Fiscal Year Ended December 31,
      2004





During
      the year ended December 31, 2005, the Company began sales of the Battery Brain
      product. The Company recorded revenues of $151,257 during 2005 from the sales
      of
      its Battery Brain product. The cost of sales for the Battery Brain was $78,167
      in 2005. The Company’s revenues and cost of sales in 2004 elated to its
      discontinued operations.





The
      Company's 2005 general and administrative expenses totaling $615,441 consisted
      primarily of professional fees of $131,262, travel costs of $150,538, and
      administrative payroll of $251,427. The Company paid or accrued the legal and
      accounting fees as it completed the necessary SEC filings and audits for the
      purchase of the Battery Brain business. The Company incurred consulting fees
      of
      $1,178,791 to help develop strategy, screen and recruit key executives, fill
      interim management positions and complete the roll out of the Battery Brain
      product. The Company also paid $546,107 in marketing and advertising expense
      during the year. The marketing and advertising costs were related to developing
      a marketing plan and marketing materials for the Company. All of the operating
      expenses for the year ended December, 2004 related to its discontinued
      operations.




11





The
      Company recorded a net loss of $ 2,471,601 or $0.04 per share for the year
      of
      2005 compared to income of $108,183 or $0.09 per share in 2004 from its
      discontinued operations.





**Liquidity
      and Capital Resources**





The
      Company believes that it will need approximately $2,000,000 for its operations
      for the next twelve months. As
      of
      December 31, 2006, the Company had $963,627 in cash and believes that such
      funds
      will not be sufficient to satisfy the Company's cash requirements for the next
      twelve (12) months. From January 1, 2007 to March 31, 2007 t he
      Company has raised an additional $1,433,214 from the issuance of additional
      securities of the Company. The Company has also renegotiated the three notes
      held by EGFE. Each note has been extended for an additional 12 months. The
      Company also has the opportunity to raise additional capital from the exercise
      of warrants issued during previous private placements. There is no assurance
      that the warrant holders will exercise the warrants or that the funds needed
      will be raised. Our
      plans
      to deal with this uncertainty include raising additional capital or entering
      into a strategic arrangement with a third party. There can be no assurance
      that
      our plans can be realized. There can be no assurance that we will be able to
      obtain additional financing if and when needed or that, if available, financing
      will be on acceptable terms. Additional equity financings may be dilutive to
      holders of our common stock and debt financing, if available, and may involve
      significant payment obligations and covenants that restrict how we operate
      our
      business.





**Off
      Balance Sheet Arrangements.**





None





**Item
      7. Financial Statements**





The
      financial statements are set forth immediately following the signature
      page.





**Item
      8.**  **Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None





**Item
      8A. Controls and Procedures**





Disclosure
      Controls and Procedures





Based
      on
      an evaluation under the supervision and with the participation of the Company's
      management as of a date within the end of the period covered by this Annual
      Report on Form 10-KSB, the Company's chief executive officer and chief financial
      officer has concluded that the Company's disclosure controls and procedures
      (as
      defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”) are effective to ensure that information
      required to be disclosed by the Company in reports that it files or submits
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in Securities and Exchange Commission rules and
      forms.





On
      March
      29, 2007, we learned as part of our conducting accounting procedures for year
      end December 31, 2006 that we had not recorded the liability for our outstanding
      stock options correctly on our December 31, 2005 Financial Statements. The
      stock
      options issued were identified and reviewed in the text of the Company’s Annual
      Report on Form 10-KSB filed on April 7, 2006 but the value of the liability
      for
      the stock options was understated by $312,784. Accordingly our financial
      statements as of December 31, 2005 have been restated. These adjustments would
      change the reported loss from operations in 2005 from $2,206,793 to
      $2,519,577.




12





There
      were no significant changes in the Company's internal controls or in other
      factors that could significantly affect these controls subsequent to the date
      of
      their evaluation. There were no significant deficiencies or material weaknesses,
      and therefore there were no corrective actions taken. However, the design of
      any
      system of controls is based in part upon certain assumptions about the
      likelihood of future events and there is no certainty that any design will
      succeed in achieving its stated goal under all potential future considerations,
      regardless of how remote.





Internal
      Controls Over Financial Reporting





There
      have not been any changes in the Company’s internal controls over financial
      reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
      the Exchange Act) during the Company’s most recent fiscal year that have
      materially affected, or are reasonably likely to materially affect, the
      Company’s internal controls over financial reporting.





**Item
      8B. Other Information**





None





**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a)**  **of
      the Exchange Act**





**Directors,
      Executive Officers, Promoters, and Control Persons**





The
      following table sets forth the names, ages, and positions with the Company
      for
      each of the directors and officers of the Company as of March 30, 2006.


**Name**
              
              **Age**
              
              **Positions
                  and Offices**Peter
                  Mateja
              
              56
              
              CEO
                  and DirectorEdward
                  Braniff
              
              57
              
              CFOAharon
                  Y. Levinas
              
              60
              
              CTO
                  and DirectorJoseph
                  Bahat
              
              75
              
              ChairmanJacob
                  Enoch
              
              57
              
              DirectorTamir
                  Levinas
              
              35
              
              DirectorMichael
                  Ben-Ari
              
              47
              
              DirectorGuy
                  Moshe
              
              55
              
              Director
  13





The
      directors of the Company have been elected to serve until the next annual
      meeting of stockholders and until their successor(s) have been elected and
      qualified. Officers are appointed by the Board of Directors and serve at the
      discretion of the Board. Aharon
      Y. Levinas is the father of Tamir Levinas. There are no proceedings to which
      any
      director, officer or affiliate of the Company, any owner of record or
      beneficially of more than 5% of any class of voting securities of the Company,
      or security holder is a party adverse to the Company or has a material interest
      adverse to the Company. None of our directors or officers has been affiliated
      with any company that has filed for bankruptcy within the last five years.





The
      following is a brief account of each nominee’s education and business experience
      during the past five years, and any other directorships held in reporting
      companies:





*Pete
      Mateja* .
      Mr.
      Mateja has been our Chief Executive Officer since October 3, 2005 and our
      Director since February 26, 2007. Mr. Mateja was the President and Chief
      Executive Officer of Home and Park Motorhomes, a manufacturer of camper vans
      having revenues exceeding $100,000,000. Mr. Mateja has been president and chief
      executive officer and has held general management positions in automotive,
      medium and heavy duty truck, RV, fire truck and body building manufacturers
      as
      well as industrial manufacturers. He has led companies to significant revenue,
      market share and earnings improvements. Mr. Mateja has led manufacturers such
      as
      Navistar International Corporation Canada, E - One Canada, Amerock Canada and
      SuperPac/Frink. He is also a former president of the Automotive Parts'
      Manufacturers' Association.





*Edward
      Braniff* .
      Mr.
      Braniff has been our Chief Financial Officer since May 24, 2005. He worked
      for
      AT&T for 27 years, he has a strong operational background, having held
      finance positions in Regulatory reporting, Assistant Treasurer, Assistant
      Controller and the CFO for International and Operational Divisions. Since
      leaving AT&T in 1998 Mr. Braniff has worked as a consultant to major
      corporations. He has been the CFO and then the COO for The Global TeleExchange
      in Virginia, (1999-2000). The Cedar Group PLC (2001-2003),a British based Public
      Company providing global software and consulting services.





*Aharon
      Y. Levinas* .
      Mr.
      Levinas was appointed as the Chief Technology Officer and a director of the
      Company as of March 23, 2005. Mr. Levinas is the sole shareholder of Purisys,
      Inc., a New Jersey corporation which Mr. Levinas established over 10 years
      ago.
      Mr. Levinas’ sole business activities for the last 10 years has been the
      development and establishment of the Battery Brain product.





*Joseph
      Bahat* .
      Mr.
      Bahat established and directed a Honda distributorship in Israel, served as
      the
      Chairman and Chief Executive Officer of Hertz International Franchisee in
      Israel, been the Managing Director of Hertz Rent aCar (Israel) Ltd., and been
      the manager of Ford Distributor in Israel. He is currently a member of the
      board
      of directors of the United Mizrahi Bank. He is also serving as the Vice
      President of the Israeli Federation of the Chamber of Commerce, a member of
      the
      Israel British Business Counsel, a Chairman of Mosdot House, and as Economic
      Ambassador of the Ministry of Commerce & Industry.





*Jacob
      Enoch* .
      Mr.
      Enoch has been the President of Korean Motors Israel- KIA Distributor Israel
      since June 2004. Since January 2004, he also has been serving as the Chairman
      of
      the Board of Directors of the Israeli Car Importers Association. Since December
      2003, he has been serving as a member of the board of directors of Alliance
      Tire
      Company in Israel. In 2001 and 2000, he served as a member of the board of
      directors of Europcar Israel. Prior to 2000, Mr. Enoch was engaged in managerial
      positions with various automobile rental agencies and automobile distributors
      over the course of more than three decades. Mr. Enoch received an MBA in
      Marketing from Jerusalem University in Jerusalem, Israel, and a Bec in
      Mechanical Engineering from Tel Aviv University in Tel Aviv,
      Israel.





*Tamir
      Levinas* .
      Mr.
      Levinas was appointed as a director of the Company as of March 23, 2005. Since
      1998 he has been the head of Technical Development of Internet Gold (Nasdaq:
      IGLD), where he is responsible for managing all aspects of the technical
      department activities, project management and engineering, as well as being
      responsible for technical vendor relations and procurement. Mr. Levinas received
      a B.A. in Business and Information Technology Management from Inter-Disciplinary
      Center in Herzelia, Israel in 2004.




14





*Guy
      Moshe* .
      Mr.
      Moshe was appointed as our director on February 26, 2007. He obtained his BSC
      in
      Electrical Engineering from Technion, Israel Institute of Technology in Haifa,
      Israel. From 2004 until 2007, he served as the Executive Director of Mentor
      Graphics, based in Wilsonville, Oregon. Mr. Moshe also served as Executive
      Director for the Mentor Development Center in Israel, where he established
      the
      Mentor Design Center and managed the ESL business in the DCS division. From
      2002
      until 2004, he was President and CEO of Summit Design, Inc., of Burlington,
      MA,
      and General Manager of Summit Israel and Acting Vice President for World Wide
      Sales.





*Michael
      Ben-Ari* .
      Mr.
      Ben-Ari was appointed as our director on February 26, 2007. He holds an MBA
      in
      finance and marketing from Tel Aviv University and a BA from Brandeis
      University. He has over 15 years experience in the international financial
      services industry, and brings extensive management experience, including
      financing, banking and marketing skills developed in previously held positions.
      Mr. Ben-Ari is presently a director of Brainstorm Cell Therapeutics Inc., an
      SEC
      reporting company. In 1999, he established EGFE, Ltd., a company specializing
      in
      alternative investments for international clients, and has been its sole owner
      and manager since such date. Prior to founding EGFE, he held management
      positions in Bank Leumi, Israel's second largest bank, and in Supersol, Israel's
      second largest supermarket chain.





**Audit
      Committee Financial Expert**





The
      Board
      of Directors has not established an audit committee and does not have an audit
      committee financial expert.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934 requires officers and Directors
      of
      the Company and persons who own more than ten percent of a registered class
      of
      the Company's equity securities to file reports of ownership and changes in
      their ownership with the Securities and Exchange Commission, and forward copies
      of such filings to the Company. We believe, based solely on our review of the
      copies of such forms and other written representations to us, that during the
      fiscal year ended December 31, 2006, all reporting persons complied with
      all applicable Section 16(a) filing requirements.





**Code
      of Ethics**





The
      Company has not adopted a Code of Ethics.





**Item
      10. Executive Compensation**





**Summary
      Compensation**





Pete
      Mateja





Pete
      Mateja has been serving as our Chief Executive Officer since October 3, 2005,
      and as a director since February 26, 2007. The terms of his compensation are
      set
      forth in his consulting agreement, dated October 3, 2005, which was renewed
      and
      amended upon its expiration as of October 3, 2006. Prior to the renewal of
      such
      consulting agreement, Mr. Mateja was entitled to the following as compensation
      for his services: an annual base salary of $150,000; an annual bonus of up
      to
      $50,000 based on the Company's performance and meeting established objectives
      which shall be submitted by Mr. Mateja and approved by the Company's board
      of
      directors; and 3,000,000 stock options, each of which gives Mr. Mateja the
      right
      to purchase one share of the Company's common stock for $0.15. Such stock
      options shall vest pro ratably every three months over the three year period
      commencing three months from October 3, 2005. The vested stock options shall
      be
      exercisable until the earlier of five years after vesting or 365 days after
      Mr.
      Mateja's termination. All remaining stock options shall automatically vest
      upon
      the Company's change in control.




15





Following
      the renewal and amendment of the consulting agreement on October 3, 2006, Mr.
      Mateja’s annual base salary has been increased to $170,000. In addition,
      commencing as of October 3, 2006, he is entitled to $700 per month as
      reimbursement for accommodation expenses incurred by him. The Company also
      agreed that, if the Company terminates Mr. Mateja’s engagement without cause it
      will continue to pay him under normal payroll practices for the next six months
      immediately following such termination.





During
      the fiscal year ended December 31, 2006, Mr. Mateja received $155,000 in salary.
      He also received $2,100 as reimbursement for accommodation expenses. In lieu
      of
      the $50,000 cash bonus he was entitled to pursuant to the consulting agreement,
      the Company agreed, on October 3, 2006, to issue to Mr. Mateja 150,000 shares
      of
      common stock and 66,666 stock purchase options, each of which entitles the
      holder thereof to purchase one share of common stock at $0.45 until 2011. In
      addition, 1,000,000 of the stock options granted to him pursuant to the
      consulting agreement dated October 3, 2005 vested during the fiscal year ended
      December 31, 2006.





During
      the fiscal year ended December 31, 2005, Mr. Mateja received $37,500 in salary.
      He received no other compensation during such fiscal year.





Edward
      Braniff





From
      June
      27, 2005 until October 2, 2005, the Company did not have a Chief Executive
      Officer and Edward Braniff, our Chief Financial Officer, was the most senior
      executive officer of our Company. Mr. Braniff has been serving as our Chief
      Financial Officer since May 24, 2005 pursuant to an Employment Agreement, dated
      May 24, 2005 and amended and restated as of October 25, 2006. Prior to the
      amendment and restatement of such employment agreement, Mr. Braniff was entitled
      to the following as compensation for services: $140,000, as base salary; an
      annual bonus of $50,000 based on performance; and options to purchase 1,000,000
      shares of the Company’s common stock at an exercise price of $0.05 per share.
      Such options shall vest shall vest pro ratably every three months over three
      year period commencing on May 24, 2005. The vested options shall be exercisable
      until the earlier of 5 years after vesting or 365 days after the termination
      of
      Mr. Braniff’s employment with the Company





Following
      the amendment and restatement of Mr. Braniff’s employment agreement on October
      25, 2006, his salary has been increased to $145,000. Mr. Braniff continues
      to be
      entitled to a bonus of up to $50,000 based on performance. In addition, Mr.
      Braniff is entitled to an additional bonus as follows: for each $1,000,000
      in
      revenues above $1,200,000 earned by the Company during the fiscal year ended
      December 31, 2006, the Company shall pay to Mr. Braniff the following: (a)
      50,000 stock options, each of which shall give him the right to purchase one
      share of common stock for $0.45; (b) a cash payment equal to $10,000; and (c)
      a
      cash payment equal to 2.5% of the Company’s EBIT for the fiscal year ending
      December 31, 2006.





During
      the fiscal year ended December 31, 2006, Mr. Braniff received $143,000 in salary
      and a bonus consisting of the following awards: 100,000 shares of common stock,
      granted on October 25, 2006; 50,000 stock options (each entitling Mr. Braniff
      to
      purchase one share of common stock for $0.30), granted on October 25, 2006;
      and
      33,333 stock options (each entitling Mr. Braniff to purchase one share of common
      stock for $0.45), granted on December 31, 2006. In addition, during the fiscal
      year ended December 31, 2006, 333,333 of the stock options granted on May 24,
      2005 vested.





Aharon
      Y. Levinas





Aharon
      Y.
      Levinas has been our Chief Technology Officer since March 23, 2005 pursuant
      to
      an employment agreement, dated as of such date, as amended on April 18, 2005
      and
      May 18, 2005. The agreement is for a 4-year term, with a base salary of
      $160,000, $200,000, $240,000 and $240,000 for each year of the term. In
      addition, the Company granted to Mr. Levinas 2,650,000 shares of common stock,
      which shall vest pro ratably every 3 months over a 3-year period commencing
      on
      April 4, 2005. Upon a change of control of the Company, all such shares shall
      automatically be issued simultaneously upon the effective date of the change
      of
      control. All benefits to be granted to the individual who will be appointed
      as
      our Chief Executive Officer shall be granted to Levinas as well, including
      bonuses and stock options. The agreement with Levinas provides that if Levinas
      is terminated during the 4-year term, or is no longer employed by us for any
      reason during said period, including termination for cause or death, we remain
      obligated to pay the full amount of payment due Levinas thereunder. During
      the
      fiscal year ended December 31, 2006, Mr. Levinas received $190,000 in salary
      and
      66,666 stock options (each entitling the holder thereof to purchase one share
      of
      common stock for $0.45). In addition, during the fiscal year ended December
      31,
      2006, 833,333 shares of common stock granted to Mr. Levinas on April 4, 2005
      vested. Mr. Levinas has also been a Director of the Company since March 23,
      2005
      and has received additional compensation for his services rendered in his
      capacity as Director, as discussed below in the section entitled “Compensation
      of Directors.”




16





The
      following table sets forth information concerning the compensation paid or
      earned during the fiscal years ended December 31, 2006 and 2005 for services
      rendered to our Company in all capacities by the following persons: (i) all
      individuals who served as the principal executive officer or acting in a similar
      capacity during the fiscal year ended December 31, 2006, regardless of
      compensation level; (ii)
      all
      individuals who served as officers at December 31, 2006 and whose total
      compensation exceeded $100,000 during the fiscal year ended December 31, 2006;
      and (iii) up to two additional individuals who served as officers during the
      fiscal year ended December 31, 2006 and whose total compensation exceeded
      $100,000 during the fiscal year ended December 31, 2006, regardless of whether
      they were serving as officers at the end of such fiscal year.


**SUMMARY
                  COMPENSATION TABLE**Name
                  and principal position(a)
              
              Year
                (b)
              
              Salary
                  ($)
                (c)
              
              Bonus
                  ($)
                (d)
              
              Stock
                Awards
                  ($)
                (e)
              
              Option
                  Awards ($)
                (f)
              
              Non-Equity
                  Incentive Plan Compensation ($)
                (g)
              
              Nonqualified
                  Deferred Compensation Earnings ($)
                (h)
              
              All
                  Other Compensation ($)
                (i)
              
              Total
                  ($)
                (j)Pete
                  Mateja,
              
              
              2006
              
              
              155,000
              
              
              69,025
              (2)
              
              0
              
              
              517,515
              (4)
              
              0
              
              
              0
              
              
              2,100
              (3)
              
              743,640CEO(1)
              
              
              2005
              
              
              37,500
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              37,500Edward
                  Braniff,
              
              
              2006
              
              
              143,333
              
              
              56,140
              (6)
              
              0
              
              
              134,390
              (7)
              
              0
              
              
              0
              
              
              0
              
              
              333,863CFO(5)
              
              
              2005
              
              
              115,600
              
              
              0
              
              
              0
              
              
              67,195
              (7)
              
              0
              
              
              0
              
              
              0
              
              
              182,795Aharon
                  Y. Levinas,
              
              
              2006
              
              
              190,000
              
              
              0
              
              
              0
              
              
              398,067
              (9)(10)
              
              0
              
              
              0
              
              
              0
              
              
              588,067CTO(8)
              
              
              2005
              
              
              142,000
              
              
              0
              
              
              0
              
              
              189,521
              (10)
              
              0
              
              
              0
              
              
              0
              
              
              331,521





(1)
      Mr.
      Mateja has been serving as our Chief Executive Officer since October 3, 2005
      and
      as our director since February 26, 2007.




(2)
      Represents the value of 150,000 shares of common stock and 66,666 stock purchase
      options (each of which entitles the holder thereof to purchase one share of
      common stock at $0.45), which were granted to Mr. Mateja in lieu of a cash
      bonus
      on October 3, 2006. The value of such shares amounted to $50,000, based on
      a
      value of $0.30 per share. The value of such stock options was based on a
      Black-Scholes Model value of $19,025.




(3)
      Pursuant to Mr. Mateja’s consulting agreement, from and after October 3, 2006,
      he is entitled to $700 per month as reimbursement for accommodation expenses
      incurred by him.




(4)
      Represents the value of 3,000,000 stock options granted to Mr. Mateja on October
      3, 2005, subject to vesting as described below. Each option gives Mr. Mateja
      the
      right to purchase one share of the Company's common stock for $0.15. Such stock
      options shall vest pro ratably every three months over the three year period
      commencing three months from October 3, 2005. The vested stock options shall
      be
      exercisable until the earlier of five years after vesting or 365 days after
      Mr.
      Mateja's termination. All remaining stock options shall automatically vest
      upon
      the Company's change in control. The value of such stock options was based
      on a
      Black-Scholes Model value of $517,515.




17




(5)
      Mr.
      Braniff has been serving as our Chief Financial Officer since May 24, 2005.




(6)
      During the fiscal year ended December 31, 2006, Mr. Braniff received a bonus
      consisting of the following awards: 100,000 shares of common stock, granted
      on
      October 25, 2006, whose value amounted to $30,000, based on $0.30 per share;
      50,000 stock options (each entitling Mr. Braniff to purchase one share of common
      stock for $0.30), granted on October 25, 2006, whose value was based on a
      Black-Scholes Model value of $16,627; and 33,333 stock options (each entitling
      Mr. Braniff to purchase one share of common stock for $0.45), granted on May
      31,
      2006, whose value was based on a Black-Scholes Model value of $9,513.




(7)
      Represents the value of 1,000,000 stock options granted to Mr. Braniff on May
      24, 2005, subject to vesting as described below. Each stock option entitles
      Mr.
      Braniff to purchase one share of the Company’s common stock at an exercise price
      of $0.05. Such options shall vest shall vest pro ratably every three months
      over
      three year period commencing on May 24, 2005. The vested options shall be
      exercisable until the earlier of 5 years after vesting or 365 days after the
      termination of Mr. Braniff’s employment with the Company. The value of such
      stock options was based on a Black-Scholes Model value of $ 134,390.




(8)
      Mr.
      Levinas has been serving as our Chief Technology Officer since March 23, 2005.




(9)
      Includes the value of 66,666 stock options (each entitling the holder thereof
      to
      purchase one share of common stock for $0.45), which were granted to Levinas
      on
      October 3, 2006. The value of such stock options was based on a Black-Scholes
      Model value of $ 19,025.




(10)
      Includes the value of 2,650,000 shares of common stock granted to Mr. Levinas,
      which shall vest pro ratably every 3 months over a 3-year period commencing
      on
      April 4, 2005. Such shares were issued in consideration for services rendered
      by
      Mr. Levinas pursuant to his employment agreement with the Company, dated March
      23, 2005, as amended on April 18, 2005 and May 18, 2005. The value of such
      shares was based on a Black-Scholes Model value of $ 379,042.





**Outstanding
      Equity Awards**





The
      table
      set forth below presents certain information concerning unexercised options,
      stock that has not vested, and equity incentive plan awards for each named
      executive officer above outstanding as of December 31, 2006.


**OUTSTANDING
                  EQUITY AWARDS AT FISCAL YEAR-END**
 
 OPTION
                  AWARDS
              
              STOCK
                  AWARDSName
                (a)
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Exercisable
                (b)
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Unexer-
                cisable
                (c)
              
              Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options
                (#)
                (d)
              
              Option
                  Exer-
                cise
                  Price
                ($)
                (e)
              
              Option
                  Expira-
                tion
                  Date
                (f)
              
              Number
                  of Shares or Units of Stock That Have Not Vested
                (#)
                (g)
              
              Mark-
                et
                  Value of Shares or Units of Stock That Have Not Vested
                ($)
                (h)
              
              Equity
                  Incentive Plan Awards: Number of Unearned Shares, Units or Other
                  Rights
                  That Have Not Vested
                (#)
                (i)
              
              Equity
                  Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                  Units or
                  Other Rights That Have Not Vested
                (#)
                (j)Pete
                  Mateja
              
              
              3,000,000
              (1)
              
              0
              
              
              0
              
              
              0.15
              
              
              *
              (1)
              
              2,000,000
              
              
              1,035,030
              
              
              0
              
              
              066,666
              (2)
              
              0
              
              
              0
              
              
              0.45
              
              
              10/26/11
              
              
              0
              
              
              0
              
              
              0
              
              
              0Edward
                  Braniff
              
              
              1,000,000
              (3)
              
              0
              
              
              0
              
              
              0.05
              
              
              *
              (3)
              
              500,000
              
              
              201,585
              
              
              0
              
              
              050,000
              (4)
              
              0
              
              
              0
              
              
              0.30
              
              
              10/26/11
              
              
              0
              
              
              0
              
              
              0
              
              
              033,333
              (5)
              
              0
              
              
              0
              
              
              0.45
              
              
              10/26/11
              
              
              0
              
              
              0
              
              
              0
              
              
              0Aharon
                  Y. Levinas
              
              
              66,666
              (6)
              
              0
              
              
              0
              
              
              0.45
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              02,650,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              1,325,002
              (7)
              
              568,583
              
              
              0
              
              
              0





(1)
      Pursuant to an Employment Agreement, dated October 3, 2005 and amended on
      October 3, 2006, between our Company and Pete Mateja, our Chief Executive
      Officer and Director, we granted to Mr. Mateja 3,000,000 stock options granted,
      subject to vesting as described below. Each option gives Mr. Mateja the right
      to
      purchase one share of the Company's common stock for $0.15. Such stock options
      shall vest pro ratably every three months over the three year period commencing
      three months from October 3, 2005. The vested stock options shall be exercisable
      until the earlier of five years after vesting or 365 days after Mr. Mateja's
      termination. All remaining stock options shall automatically vest upon the
      Company's change in control. As of December 31, 2006, 1,000,000 of such stock
      options had vested.




18




(2)
      On
      October 3, 2006, the Company granted to Mr. Mateja 66,666 stock purchase
      options, each of which entitles the holder thereof to purchase one share of
      common stock at $0.45 until 2011.




(3)
      Pursuant to an Employment Agreement, dated May 24, 2005, between our Company
      and
      Edward Braniff, our Chief Financial Officer, we granted to Mr. Braniff 1,000,000
      stock options, subject to vesting as described below. Each stock option entitles
      Mr. Braniff to purchase one share of the Company’s common stock at an exercise
      price of $0.05. Such options shall vest shall vest pro ratably every three
      months over three year period commencing on May 24, 2005. The vested options
      shall be exercisable until the earlier of 5 years after vesting or 365 days
      after the termination of Mr. Braniff’s employment with the Company. All
      remaining stock options shall automatically vest upon the Company's change
      in
      control. As of December 31, 2006, 500,000 of the stock options had
      vested.




(4)
      On
      October 25, 2006, Mr. Braniff 50,000 stock options (each entitling Mr. Braniff
      to purchase one share of common stock for $0.30) in lieu of a cash
      bonus.




19




(5)
      On
      December 31, 2006, Mr. Braniff received 33,333 stock options (each entitling
      Mr.
      Braniff to purchase one share of common stock for $0.45 as a bonus pursuant
      to
      his employment agreement, dated May 24, 2005 and amended and restated on October
      25, 2006.




(6)
      On
      October 3, 2006, the Company granted to Mr. Levinas 66,666 stock options (each
      entitling the holder thereof to purchase one share of common stock for $0.45).




(7)
      Pursuant to an Employment Agreement, dated March 23, 2005, between our Company
      and Aharon Y. Levinas, our Chief Technology Officer, as amended on April 18,
      2005 and May 18, 2005, we granted to Mr. Levinas 2,650,000 shares of common
      stock, which shall vest pro ratably every 3 months over a 3-year period
      commencing on April 4, 2005. Upon a change of control of the Company, all such
      shares shall automatically be issued simultaneously upon the effective date
      of
      the change of control. As of December 31, 2006, 1,324,998 of such shares had
      vested.





**Compensation
      of Directors**





The
      terms
      of the compensation paid to each director of the Company are set forth in a
      letter agreement which is separately entered into between the Company and each
      of its directors. All of the following individuals, who served as a director
      of
      the Company during the fiscal year ended December 31, 2006, entered into their
      letter agreements on July 29, 2005: Aharon Y. Levinas, Tamir Levinas, Jacob
      Enoch, Joseph Bahat, and Amir Uziel. The terms of each such letter agreement
      are
      identical. Pursuant to such letter agreement, each director agreed to serve
      as a
      director of the Company until the next Annual Meeting of Shareholders. The
      director may be removed from his position at any time by the affirmative vote
      of
      the majority of the directors or the affirmative vote of the majority of the
      Company's shareholders. The director may resign at any time. As compensation
      for
      his services, each director shall be paid $4,000 for each year that he serves
      as
      director, payable quarterly in arrears. In addition, each director shall be
      paid
      $1,000 for each board or committee meeting at which he is physically present.
      Each director shall also receive options to purchase 345,000 shares of the
      common stock of the Company for a price of $0.15 per share, exercisable for
      three years after the date that the stock options vest. Such stock options
      shall
      vest quarterly over three years, commencing from the date of the letter
      agreement, so that 28,750 stock options shall vest every three months. If the
      Company undergoes a change in control, all stock options shall vest
      automatically upon the date of such change in control.





On
      November 9, 2006, we also granted an additional 195,000 stock options, subject
      to vesting as described below, to each of the following directors: Aharon Y.
      Levinas, Tamir Levinas, Jacob Enoch, Joseph Bahat, and Amir Uziel. Each such
      stock option entitles the holder thereof to purchase one share of common stock
      for a price of $0.15, exercisable for three years after the date that the stock
      option vests. Such stock options shall vest quarterly over three years,
      commencing on November 9, 2006.





Each
      of
      the following directors entered into their letter agreements on February 26,
      2007, the date that they were appointed as directors: Pete Mateja, Guy Moshe,
      and Michael Ben-Ari. Pursuant to their letter agreements, each director agreed
      to serve as a director of the Company until the next annual meeting of the
      Company’s shareholders. As compensation for his services, each such director
      shall be paid $4,000 for each year that he serves as director. In addition,
      he
      shall be paid $1,000 for each board or committee meeting at which he is
      physically present. He shall also receive 540,000 common stock purchase options,
      which shall vest on a quarterly basis over the three year period following
      the
      date of the letter agreement, so that 45,000 common stock purchase options
      shall
      vest every three months during such period. Each such common stock purchase
      option shall entitle the holder thereof to purchase one share of the common
      stock of the Company for a price of $0.35 per share, and it shall be exercisable
      for three years after the date that such option vests. If the Company undergoes
      a change in control, all stock options shall vest automatically upon the date
      of
      such change in control.




20





The
      following table sets forth certain information regarding the compensation paid
      to our Directors during the fiscal year ended December 31, 2006. The value
      of
      the stock options set forth below was based on a Black-Scholes Model value
      of
      $56,068 for each Director.





**COMPENSATION
                OF DIRECTORS**Name
              (a)
            
            Fees
                Earned or Paid in Cash
              ($)
              (b)
            
            Stock
                Awards ($)
              (c)
            
            Option
                Awards ($)
              (d)
            
            Non-Equity
                Incentive
              Plan
                Compensation
              ($)
              (e)
            
            Non-Qualified
                Deferred Compensation Earnings
              ($)
              (f)
            
            All
              Other
                Compensation ($)
              (g)
            
            Total
                ($)
              (j)Aharon
                Y. Levinas
            
            
            6,000
            
            
            0
            
            
            56,068
            
            
            0
            
            
            0
            
            
            0
            
            
            62,068Amir
                Uziel
            
            
            32,000
            
            
            0
            
            
            56,068
            
            
            0
            
            
            0
            
            
            0
            
            
            88,068Joseph
                Bahat
            
            
            7,500
            
            
            0
            
            
            56,068
            
            
            0
            
            
            0
            
            
            0
            
            
            63,568Jacob
                Enoch
            
            
            7,500
            
            
            0
            
            
            56,068
            
            
            0
            
            
            0
            
            
            0
            
            
            63,568Tamir
                Levinas
            
            
            68,000
            
            
            0
            
            
            56,068
            
            
            0
            
            
            0
            
            
            0
            
            
            104,068





**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table lists, as of April 12, 2007, the number of shares of Common
      Stock beneficially owned by (i) each person or entity known to the Company
      to be
      the beneficial owner of more than 5% of the outstanding common stock; (ii)
      each
      officer and director of the Company; and (iii) all officers and directors as
      a
      group. Information relating to beneficial ownership of common stock by our
      principal stockholders and management is based upon information furnished by
      each person using “beneficial ownership” concepts under the rules of the
      Securities and Exchange Commission. Under these rules, a person is deemed to
      be
      a beneficial owner of a security if that person has or shares voting power,
      which includes the power to vote or direct the voting of the security, or
      investment power, which includes the power to vote or direct the voting of
      the
      security. The person is also deemed to be a beneficial owner of any security
      of
      which that person has a right to acquire beneficial ownership within 60 days.
      Under the Securities and Exchange Commission rules, more than one person may
      be
      deemed to be a beneficial owner of the same securities, and a person may be
      deemed to be a beneficial owner of securities as to which he or she may not
      have
      any pecuniary beneficial interest. Except as noted below, each person has sole
      voting and investment power.




21





The
      percentages below are calculated based on 76,888,409 shares of Common Stock
      issued and outstanding as of April 12, 2007. Unless otherwise provided, the
      address of each person listed in the following table is c/o Smart Energy
      Solutions, Inc., 210 West Parkway, #7, Pompton Plains, NJ 07444.





Name
                of Beneficial Owner
            
            Title
                Of Class
            
            Amount
                and Nature of Beneficial Ownership
            
            Percent
                of Class**5%
                Owners:**EGFE,
                Ltd.
            
            Common
            
            5,059,141(1)
            
            6.6%**Directors
                and Executive Officers:**Peter
                Mateja
            
            Common
            
            1,761,666(2)(3)(4)
            
            2.2%Edward
                Braniff
            
            Common
            
            850,000(5)(6)
            
            1.1%Michael
                Ben-Ari
            
            Common
            
            6,212,074(7)(8)(9)(10)
            
            7.7%Moshe
                Guy
            
            NA
            
            45,000(10)
            
            Less
                than 1%Joseph
                Bahat
            
            Common
            
            345,750(11)
                (12)
            
            Less
                than 1%Jacob
                Enoch
            
            Common
            
            345,750(11)(12)
            
            Less
                than 1%Aharon
                Y. Levinas
            
            Common
            
            12,488,883(11)(12)(13)(14)
            
            15.7%Tamir
                Levinas
            
            Common
            
            2,293,750(11)(12)
            
            3.0%All
                directors andexecutive
                officers as agroup
                (8 persons)
            
            Common
            
            24,342,873(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(13)(14)
            
            30.0%





(1)
      Includes 3,320,802 shares of common stock issuable upon conversion of three
      convertible promissory notes issued in 2006 by the Company to EGFE, Ltd., each
      in the principal amount of $500,000. The sole owner and manager of EGFE, Ltd.
      is
      Michael Ben-Ari, our director. In consideration therefor, EGFE agreed to pay
      to
      the Company an aggregate of $1,500,000. Pursuant to each promissory note, EGFE
      has the right, at its option, to convert the outstanding principal and interest
      due under the promissory notes to shares of the Company's common stock. The
      number of shares of common stock that shall be issued upon conversion will
      be
      calculated by dividing the amount of outstanding principal and interest that
      EGFE elects to convert by the conversion price specified therein. The conversion
      price will be calculated as follows: (1) if the Company is not in default under
      the terms of the note, the conversion price shall be equal to 95% of the average
      of the last bid and ask price of the common stock as quoted on the
      Over-The-Counter-Bulletin -Board or such other exchange where the common stock
      is quoted or listed for the five trading days preceding EGFE's election to
      convert; or (2) if the Company is in default under the terms of the Note, the
      conversion price shall be equal to 50% of the of the average of the last bid
      and
      ask price of the common stock as quoted on the Over-The-Counter-Bulletin -Board
      or such other exchange where the common stock is quoted or listed for the five
      trading days preceding EGFE, Ltd.'s election to convert. For purposes hereof,
      the conversion price has been calculated to be $ .57, which amount is equal
      to
      95% of the average of the last bid and ask price of the common stock as quoted
      on the Over-The-Counter-Bulletin -Board on March 21, 2007.





(2)
      Includes 1,500,000 shares of common stock issuable upon exercise of stock
      options granted to Mr. Mateja and vested pursuant to a Consulting Agreement,
      dated October 3, 2005, between the Company and Peter Mateja. Each stock option
      provides to Mr. Mateja the right to purchase one share of the Company's common
      stock for $0.15. Pursuant to such Consulting Agreement, the Company had granted
      to Mr. Mateja 3,000,000 such stock options, which shall vest pro ratably every
      three months over the three year period commencing three months from October
      3,
      2005. As of May 3, 2007, 1,500,000 stock options will have vested and shall
      be
      exercisable, and 1,500,000 stock options will not have vested and shall not
      be
      exercisable.





(3)
      Includes 150,000 shares of common stock and 66,666 shares of common stock
      issuable upon exercise of 66,666 stock purchase options, each of which entitles
      the holder thereof to purchase one share of common stock at $0.45, which were
      granted to Mr. Mateja on October 3, 2006.




22





(4)
      Includes 45,000 shares of common stock issuable upon exercise of stock options
      granted to Mr. Mateja and vested pursuant to a letter agreement, dated February
      26, 2007, as partial compensation for services rendered by such person in his
      capacity as a director of the Company. Pursuant to such letter agreement, Mr.
      Mateja was granted a total of 540,000 stock options, which shall vest quarterly
      over the three year period commencing on the date of the agreement. As of May
      26, 2007, 45,000 stock options will have vested and shall be exercisable, and
      495,000 stock options will not have vested and shall not be exercisable. Each
      such stock option entitles the holder thereof to purchase one share of common
      stock of the Company for a price of $0.35 per share. The options are exercisable
      for three years after the date that the stock options vest.





(5)
      Includes 666,667 shares of common stock issuable upon exercise of stock options
      granted to Mr. Braniff pursuant to an Employment Agreement, dated May 24, 2005,
      between the Company and Edward Braniff. Each stock option provides to Mr.
      Braniff the right to purchase one share of the Company’s common stock at an
      exercise price of $0.05 per share. The vested options shall be exercisable
      until
      the earlier of 5 years after vesting or 365 days after termination of Mr.
      Braniff’s employment with the Company. The options were issued in consideration
      for Mr. Braniff’s services rendered to the Company in his capacity as Chief
      Financial Officer. Mr. Braniff is entitled to an additional 333,333 stock
      options pursuant to said employment agreement, of which 83,333 shares shall
      vest
      quarterly over the balance of the three year period, which commenced on May
      24,
      2005.





(6)
      Includes 100,000 shares and 50,000 stock options (each entitling Mr. Braniff
      to
      purchase one share of common stock for $0.30), granted on October 25, 2006,
      and
      33,333 stock options (each entitling Mr. Braniff to purchase one share of common
      stock for $0.45), granted on May 31, 2006.





(7)
      Includes 5,059,141 shares of common stock beneficially owned by EGFE, Ltd.,
      whose sole owner and manager is Michael Ben-Ari (c *f.* Note 1
      above).





(8)
      Includes 293,250 shares of common stock owned by EGFE Israel, Ltd., a
      wholly-owned subsidiary of EGFE, Ltd., whose sole owner and manager is Michael
      Ben-Ari.




(9)
      Includes 528,969 shares of common stock owned by Pink Carnation Ltd., whose
      sole
      owner and manager is Michael Ben-Ari.





(10)
      Includes 45,000 shares of common stock issuable upon exercise of stock options
      granted to such person pursuant to a letter agreement, dated February 26, 2007,
      as partial compensation for services rendered by such person in his capacity
      as
      a director of the Company. Pursuant to the letter agreement, such person was
      granted a total of 540,000 stock options, which shall vest quarterly over the
      three year period commencing on the date of the agreement. As of May 26, 2007,
      45,000 stock options will have vested and shall be exercisable, and 495,000
      stock options will not have vested and shall not be exercisable. Each such
      stock
      option entitles the holder thereof to purchase one share of common stock of
      the
      Company for a price of $0.35 per share. The options are exercisable for three
      years after the date that the stock options vest.




(11)
      Includes 201,250 shares of common stock issuable upon exercise of stock options
      granted to such person pursuant to a letter agreement entered into with such
      person on July 29, 2005, as partial compensation for services rendered by such
      person in his capacity as a Director of the Company. Each option entitles the
      holder thereof to purchase one share of common stock of the Company for a price
      of $0.15 per share. The options are exercisable for three years after the date
      that the stock options vest. Such person is entitled to an additional 143,750
      stock options pursuant to said letter agreement, of which 28,750 shall vest
      quarterly over the balance of the three year period, which commenced on July
      29,
      2005.





(12)
      Includes 32,500 shares of common stock issuable upon exercise of stock options
      granted to such person pursuant to an action taken at the Board Meeting on
      November 9, 2006, as partial compensation for services rendered by such person
      in his capacity as a Director of the Company. Each option entitles the holder
      thereof to purchase one share of common stock of the Company for a price of
      $0.35 per share. The options are exercisable for three years after the date
      that
      the stock options vest. Such person is entitled to an an additional 162,500
      stock options pursuant to the minutes of said board meeting, of which 16,500
      shall vest quarterly over the balance of the three year period, which commenced
      on November 9, 2006.




23





(13)
      Includes 1,766,667 shares of common stock granted to Mr. Levinas, which were
      issued in consideration for services rendered by Mr. Levinas pursuant to his
      employment agreement with the Company, dated March 23, 2005, as amended on
      April
      18, 2005 and May 18, 2005. Mr. Levinas is entitled to an additional 883,333
      shares pursuant to said employment agreement, of which 220,833 shall vest
      quarterly over the balance of the three year period, which commenced on March
      23, 2005.





(14)
      Includes 66,666 stock options (each entitling the holder thereof to purchase
      one
      share of common stock for $0.45) granted to Mr. Levinas on October 3,
      2006.





**Item
      12. Certain Relationships and Related Transactions, and Director Independence.**





**Related
      Transactions**





On
      February 26, 2007, the Company entered into a separate letter agreement with
      each of the following, newly-appointed directors of the Company: Guy Moshe,
      Michael Ben-Ari, and Pete Mateja (who is also the Company’s Chief Executive
      Officer). The terms of each letter agreement are identical. Pursuant to the
      letter agreement, each such Director agreed to serve as a Director of the
      Company until the next annual meeting of the Company’s shareholders. Each of
      such persons may be removed from his position at any time by the affirmative
      vote of the majority of the Company’s directors or the affirmative vote of the
      majority of the Company’s shareholders. He may resign at any time. As
      compensation for his services, each such Director shall be paid $4,000 for
      each
      year that he serves as director. In addition, he shall be paid $1,000 for each
      board or committee meeting at which he is physically present. He shall also
      receive 540,000 common stock purchase options, which shall vest on a quarterly
      basis over the three year period following the date of the letter agreement,
      so
      that 45,000 common stock purchase options shall vest every three months during
      such period. Each such common stock purchase option shall entitle the holder
      thereof to purchase one share of the common stock of the Company for a price
      of
      $0.35 per share, and it shall be exercisable for three years after the date
      that
      such option vests. If the Company undergoes a change in control, all stock
      options shall vest automatically upon the date of such change in control.
      Pursuant to the letter agreement, the Company agreed to indemnify the Director
      to the fullest extent permitted by law and the by-laws of the Company for all
      expenses, costs, liabilities and legal fees which the Director may incur in
      the
      discharge of his duties thereunder. Notwithstanding the foregoing, the Director
      shall not be entitled to any indemnification with respect to any claim arising
      directly or indirectly if (i) his acts were committed in bad faith or were
      the
      result of active and deliberate dishonesty, (ii) he gained any financial profit
      or other advantage to which he was not legally entitled, ( i ii)
      he
      made profits from the purchase or sale of securities of the Company within
      the
      meaning of Section 16 of the Securities Exchange Act of 1934 or similar
      provisions of any state, or (iv) payment by the Company under the letter
      agreement is not permitted by applicable law. The Company also agreed to
      reimburse the Director for any
      reasonable legal fees which he may have incurred in connection with the
      negotiation and consummation of the letter agreement.





On
      February 5, 2007, the Company agreed to issue 66,667 shares of its common stock
      to Pink Carnation Ltd. pursuant to a Regulation S Subscription Agreement dated
      as of such date. Michael Ben-Ari, who has been our director since February
      26,
      2007, has an ownership interest in Pink Carnation Ltd. In consideration for
      such
      shares, Pink Carnation Ltd. paid to the Company $0.30 per share, amounting
      in
      the aggregate to $20,000.





On
      December 24, 2006, the Company entered into a Corporate Advisory Services
      Agreement with Pink Carnation, Ltd. Michael Ben-Ari, who has been our director
      since February 26, 2007, has an ownership interest in Pink Carnation Ltd.
      Pursuant to such agreement, the Company agreed to engage Pink Carnation Ltd.
      as
      a consultant for a one year period expiring on December 24, 2007. The term
      of
      the agreement will be renewed for successive one year periods unless either
      party thereto provides written notice of its intent not to renew at least 30
      days prior to the expiration of the term. The consulting services to be rendered
      by Pink Carnation Ltd. pursuant thereto include the following: identifying
      business opportunities; identifying potential suitable acquisitions for the
      Company; advising the Company with respect to its corporate development; and
      introducing the Company to certain of its contacts. As compensation for such
      services, the Company agreed to issue 267,857 shares of its common stock to
      Pink
      Carnation Ltd.




24





On
      January 31, 2007, the Company issued 194,445 shares of common stock to Pink
      Carnation Ltd. in consideration for a payment of $.30 per share. Michael
      Ben-Ari, who has been our director since February 26, 2007, has an ownership
      interest in Pink Carnation Ltd





On
      November 22, 2006, EGFE Israel, Ltd. purchased 293,250 shares of the Company’s
      common stock in consideration for the payment of $0.34 per share, amounting
      in
      the aggregate to approximately $100,000. EGFE Israel, Ltd. is a wholly owned
      subsidiary of EGFE, Ltd., whose sole owner and manager is Michael Ben-Ari,
      who
      has been our director since February 26, 2007.





During
      the three months ended September 30, 2006, the Company issued 142,857 shares
      of
      common stock to EGFE, Ltd. EGFE, Ltd. is the beneficial owner of more than
      5% of
      the Company’s outstanding common stock, and its sole owner and manager is
      Michael Ben-Ari, who has been our director since March 19, 2007. Such shares
      were issued in connection with the promissory note, dated May 22, 2006 and
      amended on March 6, 2007, in the principal amount of $500,000, issued by the
      Company to EGFE, Ltd. Such shares were issued pursuant to an exemption from
      registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
      or Regulation D promulgated thereunder. EGFE, Ltd. represented its intention
      to
      acquire the securities for investment only and not with view to or for sale
      in
      connection with any distribution thereof, and appropriate legends were affixed
      to the share certificates issued in such transaction. EGFE, Ltd. had adequate
      access, through its relationships with us, to information about us and was
      knowledgeable, sophisticated and experienced in making investments of this
      kind.





On
      September 28, 2006, Michael Ben-Ari, who has been our director since March
      19,
      2007, purchased 285,174 shares of the Company’s common stock in consideration
      for the payment of $0.35 per share, amounting in the aggregate to
      $100,000.





On
      September 14, 2006, the Company issued to EGFE, Ltd. a demand promissory note,
      in the principal amount of $500,000. In consideration therefor, EGFE, Ltd.
      loaned $500,000 to the Company. Interest on such promissory note will accrue
      at
      the rate of 12% per year. On March 6, 2007, such note was amended and restated
      for the purpose of providing that the entire principal sum and all accrued
      interest due under the promissory note shall be paid on September 30, 2007.
      Such
      promissory note was issued pursuant to an exemption from registration pursuant
      to Section 4(2) of the Securities Act of 1933, as amended, or Regulation D
      promulgated thereunder. EGFE, Ltd. represented its intention to acquire the
      securities for investment only and not with view to or for sale in connection
      with any distribution thereof, and appropriate legends were affixed to the
      share
      certificates issued in such transaction. EGFE, Ltd. had adequate access, through
      its relationships with us, to information about us and was knowledgeable,
      sophisticated and experienced in making investments of this kind.





On
      May
      22, 2006, the Company issued to EGFE, Ltd. two convertible promissory notes,
      each in the principal amount of $500,000. In consideration therefor, EGFE agreed
      to pay to the Company an aggregate of $1,000,000. Interest on each note will
      accrue at the rate of 15% per annum. The entire principal sum and all accrued
      interest due under each note shall be paid on the maturity date of the
      respective note. The maturity date of one of the notes was originally June
      4,
      2007, but such note was amended on March 6, 2007 for the purpose of extending
      the maturity date to June 4, 2008. The maturity date of the other Note was
      originally May 24, 2007, but such note was amended on March 6, 2007 for the
      purpose of extending the maturity date to May 24, 2008. Pursuant to each
      promissory note, EGFE has the right, at its option, to convert the outstanding
      principal and interest due under the promissory notes to shares of the Company's
      common stock. The number of shares of common stock that shall be issued upon
      conversion will be calculated by dividing the amount of outstanding principal
      and interest that EGFE elects to convert by the conversion price specified
      therein. The conversion price will be calculated as follows: (1) if the Company
      is not in default under the terms of the note, the conversion price shall be
      equal to 95% of the average of the last bid and ask price of the common stock
      as
      quoted on the Over-The-Counter-Bulletin -Board or such other exchange where
      the
      common stock is quoted or listed for the five trading days preceding EGFE's
      election to convert; or (2) if the Company is in default under the terms of
      the
      Note, the conversion price shall be equal to 50% of the of the average of the
      last bid and ask price of the common stock as quoted on the
      Over-The-Counter-Bulletin -Board or such other exchange where the common stock
      is quoted or listed for the five trading days preceding EGFE, Ltd.'s election
      to
      convert.




25





As
      of
      March 6, 2006, the Company has received a lock-up agreement from each of 29
      shareholders with respect to an aggregate of 37,029,528 shares (representing
      51%) of the Company's common stock. Each lock-up agreement prohibits the
      shareholder from selling the shares which are specified in such shareholder's
      lock-up agreement until April 2008, except as follows: (1) After April 2006,
      the
      shareholder may sell 20% of the shares specified in such shareholder's lock-up
      agreement. (2) After April 2007, the shareholder may sell 30% of the shares
      specified in such shareholder's lock-up agreement. (3) After April 2008, the
      balance remaining may be sold by the shareholder. Notwithstanding the foregoing,
      the shares held by the shareholder may be sold at anytime as long as such sale
      does not involve the shares being sold on the Over-The-Counter Bulletin Board
      (or any other exchange or medium where the securities of the Company are listed
      or quoted), provided that any transferee agrees to be bound by the terms of
      the
      lock-up agreement.





On
      February 1, 2006 the company entered into a consulting agreement with Shiri
      Levinas. Ms. Levinas is the daughter of Aharon Y. Levinas, our Chief Technology
      Officer and Director, and the sister of Tamir Levinas, our director. Pursuant
      to
      such agreement, Ms. Levinas agreed to provide consulting services related to
      our
      human resource needs. Shiri Levinas has received $30,000 for her services and
      received 60,000 stock options, each of which entitles the holder thereof to
      purchase one share of common stock at $0.15 per share.





On
      January 24, 2006, the Company issued 60,000 shares to each of the following
      persons: Amir Uziel, a director; Tamir Levinas, a director; and Shiri Levinas,
      the daughter of Ahraon Y. Levinas, who is a director. Such shares were issued
      in
      consideration for consulting services rendered to the Company. The shares were
      offered and issued pursuant to an exemption from registration pursuant to
      Section 4(2) of the Securities Act of 1933, as amended.





On
      October 3, 2005, the Company entered into a Consulting Agreement with Peter
      Mateja, pursuant to which Mr. Mateja was engaged as the Chief Executive Officer
      of the Company. Such agreement was renewed and amended upon its expiration
      as of
      October 3, 2006. Prior to the renewal of such consulting agreement, Mr. Mateja
      was entitled to the following as compensation for his services: an annual base
      salary of $150,000; an annual bonus of up to $50,000 based on the Company's
      performance and meeting established objectives which shall be submitted by
      Mr.
      Mateja and approved by the Company's board of directors; and 3,000,000 stock
      options, each of which gives Mr. Mateja the right to purchase one share of
      the
      Company's common stock for $0.15. Such stock options shall vest pro ratably
      every three months over the three year period commencing three months from
      October 3, 2005. The vested stock options shall be exercisable until the earlier
      of five years after vesting or 365 days after Mr. Mateja's termination. All
      remaining stock options shall automatically vest upon the Company's change
      in
      control. Following the renewal and amendment of the consulting agreement on
      October 3, 2006, Mr. Mateja’s annual base salary has been increased to $170,000.
      In addition, commencing as of October 3, 2006, he is entitled to $700 per month
      as reimbursement for accommodation expenses incurred by him. The Company also
      agreed that, if the Company terminates Mr. Mateja’s engagement without cause it
      will continue to pay him under normal payroll practices for the next six months
      immediately following such termination.





On
      August
      31, 2005, the Company issued 10,421,750 shares to Aharon Y. Levinas. Such shares
      were issued pursuant to the Asset Purchase Agreement, dated March 23, 2005,
      between the Company, Purisys, Inc., and Mr. Levinas, as partial consideration
      for the sale of the Battery Brain to the Company by Purisys, Inc., a company
      wholly owned by Mr. Levinas. The shares were offered and issued pursuant to
      an
      exemption from registration pursuant to Section 4(2) of the Securities Act
      of
      1933, as amended.





On
      July
      29, 2005, the Company entered into a separate Letter Agreement with each of
      its
      five directors (the "Letter Agreements"): Joseph Bahat, Jacob Enoch, Amir Uziel,
      Tamir Levinas, and Aharon Y. Levinas. The terms of each Letter Agreement are
      identical. Pursuant to the Letter Agreements, each director agreed to serve
      as a
      director of the Company until the Annual Meeting of Shareholders that is to
      be
      held in 2006. The director may be removed from his position at any time by
      the
      affirmative vote of the majority of the directors or the affirmative vote of
      the
      majority of the Company's shareholders. The director may resign at any time.
      As
      compensation for his services, each director shall be paid $4,000 for each
      year
      that he serves as director, payable quarterly in arrears. In addition, each
      director shall be paid $1,000 for each board or committee meeting at which
      he is
      physically present. Each director shall also receive options to purchase 345,000
      shares of the common stock of the Company for a price of $0.15 per share,
      exercisable for three years after the date that the stock options vest. Such
      stock options shall vest every quarterly over the next three years, commencing
      three months from the date of the Letter Agreement, so that 28,750 stock options
      shall vest every three months. If the Company undergoes a change in control,
      all
      stock options shall vest automatically upon the date of such change in control.




26





On
      July
      1, 2005, the Company entered into a Consulting Agreement with Tamir Levinas,
      which was thereafter amended in February, 2006. Mr.T. Levinas manages our the
      research and development facility in Israel and is also a principal of Aniam
      Engineering . Aniam Engineering is responsible for our research and development
      laboratory and also manages our relationships with some of our component
      manufacturing suppliers in Israel. As compensation for his services, he is
      entitled to a consulting fee of $5,000 per month plus reimbursement of
      reasonable costs incurred on behalf of the Company.





On
      May
      24, 2005, the Company and Edward Braniff entered into an employment agreement
      pursuant to which Braniff is to be employed by the Company as its Chief
      Financial Officer. Such agreement was amended and restated as of October 25,
      2006. Prior to the amendment and restatement of such employment agreement,
      Mr.
      Braniff was entitled to the following as compensation for services: $140,000,
      as
      base salary; an annual bonus of $50,000 based on performance; and options to
      purchase 1,000,000 shares of the Company’s common stock at an exercise price of
      $0.05 per share. Such options shall vest shall vest pro ratably every three
      months over three year period commencing on May 24, 2005. The vested options
      shall be exercisable until the earlier of 5 years after vesting or 365 days
      after the termination of Mr. Braniff’s employment with the Company. Following
      the amendment and restatement of Mr. Braniff’s employment agreement on October
      25, 2006, his salary has been increased to $145,000. Mr. Braniff continues
      to be
      entitled to a bonus of up to $50,000 based on performance. In addition, Mr.
      Braniff is entitled to an additional bonus as follows: for each $1,000,000
      in
      revenues above $1,200,000 earned by the Company during the fiscal year ended
      December 31, 2006, the Company shall pay to Mr. Braniff the following: (a)
      50,000 stock options, each of which shall give him the right to purchase one
      share of common stock for $0.45; (b) a cash payment equal to $10,000; and (c)
      a
      cash payment equal to 2.5% of the Company’s EBIT for the fiscal year ending
      December 31, 2006.





We
      have
      an agreement with Aharon Y. Levinas, who became the Chief Technology Officer
      and
      a director as of March 23, 2005. The agreement is for a 4-year term, with a
      base
      salary of $160,000, $200,000, $240,000 and $240,000 for each year of the term.
      All benefits to be granted to the individual who will be appointed as our Chief
      Executive Officer shall be granted to Levinas as well, including bonuses and
      stock options. Levinas shall receive a cell phone and a car allowance. The
      consulting agreement with Levinas provides that if Levinas is terminated during
      the 4-year term, or is no longer employed by us for any reason during said
      period, including termination for cause or death, we remain obligated to pay
      the
      full amount of payment due Levinas thereunder.





On
      April
      22, 2005, the Company entered into a Consulting Agreement with Amir Uziel,
      a
      director and also our Chief Executive Officer from November 24, 2004 until
      April
      17, 2005. As compensation for services rendered thereunder, Mr. Uziel was
      entitled to receive a monthly cash payment of $2,700 and 5,000 shares of common
      stock of the Company during each month of the agreement’s term, commencing as of
      January 1, 2005. The Consulting Agreement was terminated on December 31,
      2005.





On
      April
      22, 2005, the Company entered into a Consulting Agreement with Shiri Levinas,
      which was thereafter cancelled by the Company. No compensation was paid to
      Ms.
      Levinas pursuant to such agreement.




27




As
      of
      February 20, 2005, the Company issued 250,000 shares to Joseph Ollivier, a
      former Chief Executive Officer of the Company, in consideration for consulting
      services rendered to the Company. The shares were offered and issued pursuant
      to
      an exemption from registration pursuant to Section 4(2) of the Securities Act
      of
      1933, as amended.





On
      December 27, 2004, the following persons, who were directors of the Company
      at
      that time, purchased shares of the Company’s common stock in connection with an
      offering of shares by the Company involving a total of 31 persons: Amir Uziel,
      the President and Chief Executive Officer and a director of the Company,
      purchased 1,500,000 shares of common stock, and Robert Lubin, who was at the
      time a director of the Company, purchased 50,000 shares of Common Stock. The
      per
      share purchase price was $0.005 per share.





**Director
      Independence**





We
      are
      not subject to the listing requirements of any national securities exchange
      or
      national securities association and, as a result, we are not at this time
      required to have our board comprised of a majority of “independent directors.”
We do believe that the following directors currently meet the definition of
      “independent” as promulgated by the rules and regulations of the American Stock
      Exchange: Jacob Enoch; Joseph Bahat; and Guy Moshe.





**Item
      13. Exhibits**




Exhibit
                No.
            
            Description
            
            Where
                Found3.1
            
            Articles
                of Incorporation
            
            Previously
                filed with the Company’s Definitive Proxy Statement on Schedule 14A, filed
                with the SEC on July 19, 20053.2
            
            Bylaws
            
            Previously
                filed with the Company’s Definitive Proxy Statement on Schedule 14A, filed
                with the SEC on July 19, 200510.1
            
            Letter
                of Intent
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                December 17, 200410.2
            
            Letter,
                dated February 28, 2005, between Purisys, Inc. and the
                Company
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 1, 200510.3
            
            Asset
                Purchase Agreement dated as of March 23, 2005 among the Company,
                Purisys,
                Inc. and Aharon Y. Levinas
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 28, 200510.4
            
            Consulting
                Agreement dated as of March 23, 2005 between the Company and Aharon
                Y.
                Levinas
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 28, 200510.5
            
            Amended
                and Restated Employment Agreement, dated May 18, 2005 between the
                Company
                and Aharon Y. Levinas
            
            Previously
                filed with the Company’s Quarterly Report on Form 10-QSB for the quarter
                ended March 31, 2005, filed with the SEC on May 23,
                200510.6
            
            Employment
                Agreement between the Company and Edward Braniff
            
            Previously
                filed with the Company’s Quarterly Report on Form 10-QSB for the quarter
                ended March 31, 2005, filed with the SEC on May 23,
                200510.7
            
            Consulting
                Agreement between the Company and Peter Mateja
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                October 12, 200510.8
            
            Distribution
                Agreement, dated January 15, 2006, between the Company and Elcart
                Distribution S.P.A.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                January 23, 2006




28




10.9
            
            15%
                Convertible Promissory Note Due May 24, 2007, made by the Company
                in favor
                of EGFE, Ltd.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                May 25, 200610.10
            
            15%
                Convertible Promissory Note Due June 4, 2007, made by the Company
                in favor
                of EGFE, Ltd.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                May 25, 200610.11
            
            Distributorship
                Agreement, dated June 22, 2006, by and between the Company and Carter
                Group, Inc.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                June 28, 200610.12
            
            Profit
                Sharing and Internet Distribution Agreement, dated June 22, 2006,
                by and
                between Company and Carter Group, Inc.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                June 28, 200610.13
            
            Finder’s
                Agreement, dated June 22, 2006, by and between Company and Carter
                Group,
                Inc.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                June 28, 200610.14
            
            Demand
                Promissory Note, dated September 14, 2006, made by the Company in
                favor of
                EGFE, Ltd.
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                September 19, 200610.15
            
            Amended
                and Restated Employment Agreement, dated October, 2006, between Edward
                Braniff and the Company
            
            Filed
                herewith10.16
            
            First
                Amendment to Consulting Agreement, dated November, 2006, between
                Pete
                Mateja and the Company
            
            Filed
                herewith10.17
            
            Letter
                Agreement, dated March 19, 2007, between the Company and Moshe
                Guy
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 23, 200710.18
            
            Letter
                Agreement, dated March 19, 2007, between the Company and Pete
                Mateja
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 23, 200710.19
            
            Letter
                Agreement, dated March 19, 2007, between the Company and Michael
                Ben-Ari
            
            Previously
                filed with the Company’s Current Report on Form 8-K, filed with the SEC on
                March 23, 200731.1
            
            Rule
                13a-14(a)/15d14(a) Certifications of Principal Executive
                Officer
            
            Filed
                herewith31.2
            
            Rule
                13a-14(a)/15d14(a) Certifications of Principal Financial
                Officer
            
            Filed
                herewith32.1
            
            Section
                1350 Certifications
            
            Filed
                herewith




29




**Item
      14.**  **Principal
      Accountant and Fees**





Chisholm,
      Bierwolf and Nilson, LLC has been serving as the Company’s auditors since May
      17, 2005. Squire & Company, PC served as the Company’s auditors from June
      10, 2002 until May 17, 2005. Their pre-approved fees billed to the Company
      are
      set forth below:


Fiscal
                  year ending
                December 31,
                  2006
              
              Fiscal
                  year ending
                December 31,
                  2005Audit
                  Fees
              
              $
              22,686
              
              $
              15,825Audit
                  Related Fees
              
              $
              8,158
              
              $
              0Tax
                  Fees
              
              $
              0
              
              $
              1,924All
                  Other Fees
              
              $
              0
              
              $
              0




As
      of
      December 31, 2006, the Company did not have a formal documented pre-approval
      policy for the fees of the principal accountant.





30




**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Company has duly caused this report to be signed on its behalf by
      the
      undersigned, thereunto duly authorized.




SMART
                ENERGY SOLUTIONS, INC., INC.Dated:
                April 12, 2007
            By:
            /s/
              Peter MatejaName:
                Peter MatejaTitle:
                Chief Executive Officer and
                Director




Dated:
                April 12, 2007
            By:
            /s/
              Edward BraniffName:
                  Edward BraniffTitle:
                  Chief Financial Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.





**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                Pete Mateja
              Pete
                Mateja
            
            Chief
                Executive Officer and Director
            
            April
                12, 2007/s/
                Edward Braniff
              
              Edward
                Braniff
            
            Chief
                Financial Officer
            
            April
                12, 2007/s/
                Aharon Y. Levinas
              
              Aharon
                Y. Levinas
            
            Chief
                Technology Officerand
                Director
            
            April
                12, 2007/s/
                Tamir Levinas
              
              Tamir
                Levinas
            
            Director
            
            April
                12, 2007/s/
                Joseph Bahat
              
              Joseph
                Bahat
            
            Chairman
                and Director
            
            April
                12, 2007/s/
                Michael Ben-Ari
              
              Michael
                Ben-Ari
            
            Director
            
            April
                12, 2007/s/
                Jacob Enoch
              
              Jacob
                Enoch
            
            Director
            
            April
                12, 2007





31




**SMART
      ENERGY SOLUTIONS, INC.**





**FINANCIAL
      STATEMENTS**





**December
      31, 2006 and 2005**









**CONTENTS**


Report
                  of Independent Registered Public Accounting Firms
              
              
              F-3Balance
                  Sheet
              
              
              F-5Statements
                  of Operations
              
              
              F-6Statements
                  of Stockholders' Equity
              
              
              F-7Statements
                  of Cash Flows
              
              
              F-8Notes
                  to the Financial Statements
              
              
              F-10









REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      The
      Board of Directors


Smart
      Energy Solutions, Inc.


Clifton,
      New Jersey





We
      have
      audited the accompanying balance sheet of Smart Energy Solutions, Inc. (formerly
      Datigen.com, Inc.) as of December 31, 2006, and the related statements of
      operations, stockholders' equity, and cash flows for the years ended December
      31, 2006 and 2005. These financial statements are the responsibility of the
      Company's management. Our responsibility is to express an opinion on these
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the PCAOB (United
      States). Those standards require that we plan and perform the audit to obtain
      reasonable assurance about whether the financial statements are free of material
      misstatement. The Company is not required to have, nor were we engaged to
      perform, an audit of its internal controls over financial reporting. Our audits
      included consideration of internal control over financial reporting as a basis
      for designing our procedures that are appropriate in the circumstances, but
      not
      for the purpose of expressing an opinion on the effectiveness of the Company’s
      internal control over financial reporting. As such we express no such opinion.
      An audit includes examining, on a test basis, evidence supporting the amounts
      and disclosures in the financial statements. An audit also includes assessing
      the accounting principles used and significant estimates made by management,
      as
      well as evaluating the overall financial statement presentation. We believe
      that
      our audit provides a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Smart Energy Solutions, Inc. as
      of
      December 31, 2006 and the results of their operations and their cash flows
      for
      the years ended December 31, 2006 and 2005 in conformity with accounting
      principles generally accepted in the United States.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company has incurred substantial losses from operations and
      has
      limited sales of its product which raises substantial doubt about its ability
      to
      continue as a going concern. Management's plans in regard to these matters
      are
      also described in Note 2. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




/s/
      Chisholm, Bierwolf & Nilson, LLC


Chisholm,
      Bierwolf & Nilson, LLC


Bountiful,
      Utah


March
      29,
      2007




F-3


**SMART
        ENERGY SOLUTIONS, INC.**
 Balance
        Sheet


December
                  31,2006ASSETSCURRENT
                  ASSETSCash
              
              $
              963,627Accounts
                  receivable, net
              
              
              1,230,588Deferred
                  loan fees
              
              
              81,378Inventory
              
              
              213,441Prepaid
                  expenses
              
              
              154,709Total
                  Current Assets
              
              
              2,643,743PROPERTY
                  AND EQUIPMENT, net
              
              
              54,796OTHER
                  ASSETSTrademark,
                  net
              
              
              1,001Security
                  deposits
              
              
              34,872Battery
                  technology, net
              
              
              31,512Total
                  Other Assets
              
              
              67,385TOTAL
                  ASSETS
              
              $
              2,765,924LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              301,093Bank
                  overdraft
              
              
              80,255Note
                  payable
              
              
              500,000Convertible
                  debt, net
              
              
              436,101Total
                  Current Liabilities
              
              
              1,317,449Total
                  Liabilities
              
              
              1,317,449COMMITMENTSSTOCKHOLDERS’
                  EQUITYPreferred
                  stock: no par value; 1,000,000 sharesauthorized;
                  none outstanding
              
              
              -Common
                  stock: no par value; authorized 500,000,000shares;
                  71,510,628 shares issued and outstanding
              
              
              10,212,723Accumulated
                  deficit
              
              
              (8,764,248
              )Total
                  Stockholders’ Equity
              
              
              1,448,475TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              2,765,924




The
      accompanying notes are an integral part of these
      financial statements.




F-4


**SMART
        ENERGY SOLUTIONS, INC.**
 Statements
        of Operations


For
                  the Years Ended
                December
                  31,2006
              
              2005(restated)REVENUES
              
              $
              1,818,973
              
              $
              151,257COST
                  OF SALES
              
              
              1,184,889
              
              
              78,167GROSS
                  MARGIN
              
              
              634,084
              
              
              73,090OPERATING
                  EXPENSESGeneral
                  and administrative
              
              
              1,520,223
              
              
              746,703Marketing
                  and advertising
              
              
              437,125
              
              
              546,107Consulting
                  fees
              
              
              3,668,337
              
              
              1,301,672TOTAL
                  OPERATING EXPENSES
              
              
              5,625,685
              
              
              2,594,482LOSS
                  FROM OPERATIONS
              
              
              (4,991,601
              )
              
              (2,521,392
              )OTHER
                  INCOME (EXPENSES)Interest
                  income
              
              
              19,315
              
              
              1,815Interest
                  expense
              
              
              (356,210
              )
              
              -TOTAL
                  OTHER INCOME (EXPENSES)
              
              
              (336,895
              )
              
              1,815LOSS
                  BEFORE INCOME TAXES
              
              
              (5,328,496
              )
              
              (2,519,577
              )INCOME
                  TAX EXPENSE
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (5,328,496
              )
              $
              (2,519,577
              )BASIC
                  AND DILUTED LOSSPER
                  COMMON SHARE
              
              $
              (0.08
              )
              $
              (0.05
              )BASIC
                  AND DILUTED WEIGHTED AVERAGENUMBER
                  OF SHARES OUTSTANDING
              
              
              67,453,046
              
              
              53,968,475




The
      accompanying notes are an integral part of these financial
      statements.




F-5
 
 **SMART
          ENERGY SOLUTIONS, INC.**
 Statements
          of Stockholders’ Equity
  Common
                    Stock
                
                AccumulatedShares
                
                Amount
                
                Deficit
                
                TotalBalance,
                    December 31, 2004
                
                
                36,517,856
                
                $
                1,092,782
                
                $
                (916,175
                )
                $
                176,607Common
                    stock issued for cash
                
                
                25,591,749
                
                
                2,749,600
                
                
                -
                
                
                2,749,600Common
                    stock issued for services
                
                
                1,170,000
                
                
                234,000
                
                
                -
                
                
                234,000Value
                    of options issued forfinancing
                
                
                -
                
                
                435,665
                
                
                -
                
                
                435,665Stock
                    offering costs
                
                
                -
                
                
                (139,000
                )
                
                -
                
                
                (139,000
                )Net
                    loss for the year endedDecember
                    31, 2005
                
                
                -
                
                
                -
                
                
                (2,519,577
                )
                
                (2,519,577
                )Balance,
                    December 31, 2005
                
                
                63,279,605
                
                
                4,373,047
                
                
                (3,435,752
                )
                
                937,295Common
                    stock issued for cash
                
                
                5,880,560
                
                
                1,881,666
                
                
                -
                
                
                1,881,666Common
                    stock issued for services
                
                
                2,350,463
                
                
                1,256,684
                
                
                -
                
                
                1,256,684Value
                    of warrants and optionsissued
                    for financing
                
                
                -
                
                
                1,963,521
                
                
                -
                
                
                1,963,521Fair
                    value of beneficial conversionfeature
                    of convertible debt
                
                
                -
                
                
                737,805
                
                
                -
                
                
                737,805Net
                    loss for the year endedDecember
                    31, 2006
                
                
                -
                
                
                -
                
                
                (5,328,496
                )
                
                (5,328,496
                )Balance,
                    December 31, 2006
                
                
                71,510,628
                
                $
                10,212,723
                
                $
                (8,764,248
                )
                $
                1,448,475




The
      accompanying notes are an integral part of these
      financial statements.




F-6




**SMART
      ENERGY SOLUTIONS, INC.**


Statements
      of Cash Flows




For
                  the Years Ended
                December
                  31,2006
              
              2005(restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (5,328,496
              )
              $
              (2,519,577
              )Adjustments
                  to reconcile net loss to net cash usedby
                  operating activities:Allowance
                  for bad debts
              
              
              68,018
              
              
              8,637Depreciation
                  and write off of fixed assets
              
              
              12,134
              
              
              60,225Warrants
                  and options issued for services
              
              
              1,963,521
              
              
              435,665Amortization
              
              
              203,315
              
              
              7,888Common
                  stock issued for services
              
              
              1,256,684
              
              
              234,000Changes
                  in operating assets and liabilities:(Increase)
                  Decrease in accounts receivable
              
              
              (1,282,923
              )
              
              (24,320
              )(Increase)
                  Decrease in inventory
              
              
              (18,787
              )
              
              (126,763
              )(Increase)
                  Decrease in prepaid expenses and deposits
              
              
              (208,008
              )
              
              (23,293
              )Increase
                  (Decrease) in accounts payable, bank overdraftand
                  accrued expenses
              
              
              49,088
              
              
              330,735Net
                  Cash Provided in Operating Activities
              
              
              (3,285,454
              )
              
              (1,616,803
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of intangible assets
              
              
              -
              
              
              (7,359
              )Purchases
                  of property and equipment
              
              
              (22,130
              )
              
              (105,025
              )Net
                  Cash Used in Investing Activities
              
              
              (22,130
              )
              
              (112,384
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESLoan
                  fees paid
              
              
              (50,000
              )
              
              -Proceeds
                  from notes payable
              
              
              1,500,000
              
              
              -Common
                  stock issued for cash
              
              
              1,881,666
              
              
              2,610,600Net
                  Cash Provided by Financing Activities
              
              
              3,331,666
              
              
              2,610,600NET
                  INCREASE (DECREASE) IN CASH
              
              
              24,082
              
              
              881,413CASH
                  AT BEGINNING OF YEAR
              
              
              939,545
              
              
              58,132CASH
                  AT END OF YEAR
              
              $
              963,627
              
              $
              939,545




The
      accompanying notes are an integral part of these
      financial statements.




F-7




**SMART
        ENERGY SOLUTIONS, INC.**
 Statements
        of Cash Flows
  For
                    the Years Ended
                  December
                    31,2006
                
                2005(restated)SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION:Cash
                    paid during the year for:Interest
                
                $
                -
                
                $
                -Income
                    taxes
                
                $
                -
                
                $
                -NON-CASH
                    FINANCING AND INVESTING ACTIVITIES:Common
                    stock issued for services
                
                $
                1,256,684
                
                $
                234,000Warrants
                    and options issued for services
                
                $
                1,963,521
                
                $
                435,665
  The
        accompanying notes are an integral part of these financial
        statements.
  F-8
  **SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005
 NOTE
              1 - ORGANIZATION
              AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a.
          Business and Organization
 
 This
          summary of significant accounting policies of Smart Energy Solutions, Inc.
          (the
          Company) is presented to assist in understanding the Company’s financial
          statements. The financial statements and notes are representations of the
          Company’s management, which is responsible for their integrity and objectivity.
          These accounting policies conform to accounting principles generally accepted
          in
          the United States of America and have been consistently applied in the
          preparation of the financial statements.
 
 Nature
          of Operations –
          Smart Energy
          Solutions, Inc., was incorporated in the State of Utah on February 10,
          1999, for
          the purpose of developing and marketing various Internet and Internet-related
          products and services. On March 23, 2005, the Company purchased inventory,
          manufacturing molds and technology from Purisys, Inc. whereby it became
          a
          producer of an electronic control for vehicle batteries, known as the “Battery
          Brain”, which is intended to keep the batteries from discharging to the point
          that the vehicle can not be started. It is also intended to prevent the
          vehicle
          from being started without using the ignition system by what it commonly
          known
          as hot wiring. The Company has been selling the Battery Brain from that
          date on
          a wholesale basis through distributors and a retail basis over the internet.
          A
          special meeting of the shareholders of the Company was held on August 22,
          2005.
          At the Meeting, the shareholders approved the change of the Company’s state of
          incorporation from Utah to Nevada by the merger of the Company with and
          into its
          wholly owned subsidiary, Smart Energy Solutions, Inc., a Nevada corporation.
          The
          shareholders also authorized the differences between the Articles of
          Incorporation of Smart Energy Solutions, Inc. and the Certificate of
          Incorporation of the Company, including changing the Company's name from
          Datigen.com, Inc. to Smart Energy Solutions, Inc., increasing the number
          of
          shares of the authorized common stock of the Company from 50,000,000 to
          500,000,000 shares of common stock and authorization of a class of 1,000,000
          million shares of preferred stock.
 
 Stock
          Based Compensation –
          In December 2005,
          the Company adopted the provisions of Statement of Financial Accounting
          Standards No. 123R, although this statement had no effect on the Company’s 2005
          financial statements.
 
 Fair
          Value of Financial Instruments –
          The Company’s
          financial instruments consist of cash and accounts payable. The carrying
          amounts
          approximate fair value because of the short-term nature of the
          items.
 
 Concentration
          of Credit Risk –
          As of December
          31, 2006, $863,627 of the Company’s cash is held in a single banking institution
          in excess of the federally insured limits. The Company had one customer
          in 2006
          that accounted for approximately 39% of its revenues.
 
 Cash
          and Cash Equivalents– For
          purposes of financial statement presentation, the Company considers all
          highly
          liquid investments with a maturity of three months or less, from the date
          of
          purchase, to be cash equivalents.
 
 F-9
  **SMART
            ENERGY SOLUTIONS, INC.**
 Notes
            to
            the Financial Statements
 December
            31, 2006 and 2005
  NOTE
            1
            -  ORGANIZATION
            AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Basic
            and Diluted Loss Per Share - The
            computation of basic and diluted loss per common share is based on the
            weighted
            average number of shares outstanding during each period.
 December
                    31,2006
                
                
                2005BASIC
                    AND DILUTED LOSS PER COMMON SHARELoss
                    from continuing operations
                
                $
                (0.08
                )
                $
                (0.05
                )BASIC
                    AND DILUTED WEIGHTEDAVERAGE
                    NUMBER OF SHARES OUTSTANDING
                
                
                67,453,046
                
                
                53,968,475
  The
          computation of diluted earnings per common share is based on the weighted
          average number of shares outstanding during the year plus the common stock
          equivalents which would arise from the exercise of stock options and warrants
          outstanding using the treasury stock method and the average market price
          per
          share during the year. Common stock equivalents were not included in the
          computation of loss per share at December 31, 2006 and 2005 because they
          are
          anti-dilutive.
 
 Use
          of
          Estimates -The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America requires management
          to make
          estimates and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of
          the financial statements and the reported amounts of revenues and expenses
          during the reporting period. Actual results could differ from those
          estimates.
 
 Revenue
          Recognition -The
          Company’s revenues originate from sales of the Company’s Battery Brain product.
          The Company recognizes the revenue from such sales when the sale has been
          completed, the product delivered to and accepted by the purchaser, and
          collectibility is reasonably assured.
  Research
          and Development -The
          Company follows the policy of expensing its research and development costs
          in
          the period in which they are incurred. The Company incurred research and
          development expenses of approximately $128,296 and $-0- during the years
          ended
          December 31, 2006 and 2005, respectively.
 
 Inventory -The
          Company’s inventory is composed of Battery Brain units and memory chips for the
          Battery Brain. The inventory is recorded at the lower of cost or
          market.
 
 Accounts
          Receivable -  Accounts
          receivable are carried at original invoice amount less an estimate made
          for
          doubtful receivables based on a review of all outstanding amounts on a
          monthly
          basis. Specific reserves are estimated by management based on certain
          assumptions and variables, including the customer’s financial condition, age of
          the customer’s receivables, and changes in payment histories. As of December 31,
          2006 and 2005, an allowance for doubtful receivables $68,018 and $1,743,
          respectively, was considered necessary. Trade receivables are written off
          when
          deemed uncollectible. Recoveries of trade receivables previously written
          off are
          recorded when received.
  F-10
 **SMART
              ENERGY SOLUTIONS, INC.**
 Notes
              to
              the Financial Statements
 December
              31, 2006 and 2005


NOTE
      1
      -  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Income
      Taxes -Deferred
      taxes are provided on a liability method whereby deferred tax assets are
      recognized for deductible temporary differences and operating loss and tax
      credit carry forwards and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between the
      reported amounts of assets and liabilities and their tax bases. Deferred tax
      assets are reduced by a valuation allowance when, in the opinion of management,
      it is more likely than not that some portion or all of the deferred tax assets
      will to be realized. Deferred tax assets and liabilities are adjusted for the
      effects of changes in tax laws and rates on the date of enactment.





Net
      deferred tax assets consist of the following components as of December 31,
      2006
      and 2005:


2006
              
              2005Deferred
                  tax assets:NOL
                  Carryover
              
              $
              1,597,403
              
              $
              721,466Deferred
                  tax liabilities:
              
              
              -
              
              
              -Valuation
                  allowance
              
              
              (1,597,403
              )
              
              (721,466
              )Net
                  deferred tax asset
              
              $
              -
              
              $
              -




The
      income tax provision differs from the amount of income tax determined by
      applying the U.S. federal and state income tax rates of 39% to pretax income
      from continuing operations for the years ended December 31, 2006 and 2005 due
      to
      the following:


2006
              
              2005Book
                  Loss from Operations
              
              $
              (2,109,904
              )
              $
              (982,635
              )Options
                  and warrants issued for services
              
              
              733,850
              
              
              169,909Common
                  stock issued for services
              
              
              490,107
              
              
              91,260Allowance
                  for bad debts
              
              
              24,624
              
              
              680Valuation
                  allowance
              
              
              861,323
              
              
              720,786$
              -
              
              $
              -




At
      December 31, 2006, the Company had net operating loss carryforwards of
      approximately $5,102,000 that may be offset against future taxable income from
      the year 2024 through 2026. No tax benefit has been reported in the December
      31,
      2006 financial statements since the potential tax benefit is offset by a
      valuation allowance of the same amount.





Due
      to
      the change in ownership provisions of the Tax Reform Act of 1986, net operating
      loss carry forwards for Federal income tax reporting purposes are subject to
      annual limitations. Should a change in ownership occur, net operating loss
      carryforwards may be limited as to use in future years.




F-11


**SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005


NOTE
      1
      -  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Battery
      Technology -On
      March
      23, 2005, the Company purchased the technology to its Battery Brain product
      for
      $52,109. The technology is being amortized over a period of 5 years. Costs
      associated with the trademark on the Battery Brain product of $1,431 are also
      capitalized and are pending or are being developed are not being amortized.
      Amortization expense for the years ended December 31, 2006 and 2005 was $10,787
      and $7,959, respectively.





Future
      Amortization of these Costs is as follows:


2007
              
              $
              10,7872008
              
              $
              10,7872009
              
              $
              10,7872010
              
              $
              2,510




The
      Company evaluates the recoverability of intangibles and reviews the amortization
      period on a continual basis utilizing the guidance of SFAS No. 142, “Goodwill
      and Other Intangible Assets.” Several factors are used to evaluate intangibles,
      including, but not limited to, management’s plans for future operations, recent
      operating results and projected, undiscounted cash flows.





Property
      and Equipment -The
      Company’s property and equipment are comprised of the following December 31,
      2006:


Office
                  equipment
              
              $
              35,853Trade
                  show booth
              
              
              4,650Molds
              
              
              22,500Leasehold
                  improvements
              
              
              9,665Accumulated
                  depreciation
              
              
              (17,872
              )Net
                  Property and Equipment
              
              $
              54,796




The
      equipment is depreciated over its estimated useful life of 5 years under the
      straight-line method. Depreciation expense for the years ended December 31,
      2006
      and 2005 was $12,134 and $11,279, respectively. During the year ended December
      31, 2005, the Company determined that molds with a depreciated book value of
      $48,946 were no longer usable accordingly it recorded an impairment of the
      full
      amount.





Recent
      Accounting Pronouncements -





In
      September 2006, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 157, “Fair Value Measurements” which defines
      fair value, establishes a framework for measuring fair value in generally
      accepted accounting principles (GAAP), and expands disclosures about fair value
      measurements. Where applicable, SFAS No. 157 simplifies and codifies
      related guidance within GAAP and does not require any new fair value
      measurements. SFAS No. 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those fiscal years. Earlier adoption is encouraged. The Company does
      not expect the adoption of SFAS No. 157 to have a significant effect on its
      financial position or results of operation.




F-12


**SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005


NOTE
      1
      -  ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





In
      June
      2006, the Financial Accounting Standards Board issued FASB Interpretation No.
      48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      Statement No. 109”, which prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on de-recognition, classification, interest and penalties, accounting
      in interim periods, disclosure and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. The Company does not expect the
      adoption of FIN 48 to have a material impact on its financial reporting, and
      the
      Company is currently evaluating the impact, if any, the adoption of FIN 48
      will
      have on its disclosure requirements.





In
      March
      2006, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
      amendment of FASB Statement No. 140.” This statement requires an entity to
      recognize a servicing asset or servicing liability each time it undertakes
      an
      obligation to service a financial asset by entering into a servicing contract
      in
      any of the following situations: a transfer of the servicer’s financial assets
      that meets the requirements for sale accounting; a transfer of the servicer’s
      financial assets to a qualifying special-purpose entity in a guaranteed mortgage
      securitization in which the transferor retains all of the resulting securities
      and classifies them as either available-for-sale securities or trading
      securities; or an acquisition or assumption of an obligation to service a
      financial asset that does not relate to financial assets of the servicer or
      its
      consolidated affiliates. The statement also requires all separately recognized
      servicing assets and servicing liabilities to be initially measured at fair
      value, if practicable, and permits an entity to choose either the amortization
      or fair value method for subsequent measurement of each class of servicing
      assets and liabilities. The statement further permits, at its initial adoption,
      a one-time reclassification of available for sale securities to trading
      securities by entities with recognized servicing rights, without calling into
      question the treatment of other available for sale securities under Statement
      115, provided that the available for sale securities are identified in some
      manner as offsetting the entity’s exposure to changes in fair value of servicing
      assets or servicing liabilities that a servicer elects to subsequently measure
      at fair value and requires separate presentation of servicing assets and
      servicing liabilities subsequently measured at fair value in the statement
      of
      financial position and additional disclosures for all separately recognized
      servicing assets and servicing liabilities. This statement is effective for
      fiscal years beginning after September 15, 2006, with early adoption permitted
      as of the beginning of an entity’s fiscal year. Management believes the adoption
      of this statement will have no immediate impact on the Company’s financial
      condition or results of operations.





Advertising
      and Marketing -The
      Company expenses advertising costs in the period in which they are incurred.
      Advertising and marketing expense was $437,125 and $546,107 for the years ended
      December 31, 2006 and 2005, respectively.




F-13


**SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005


NOTE
      2
      -  GOING
      CONCERN





The
      Company’s financial statements are prepared using generally accepted accounting
      principles applicable to a going concern, which contemplates the realization
      of
      assets and liquidation of liabilities in the normal course of business. The
      Company has not yet established an ongoing source of revenues sufficient to
      cover its operating costs and allow it to continue as a going concern.
      Historically, the Company has incurred significant annual losses, which have
      resulted in an accumulated deficit of $8,764,248 at December 31, 2006 which
      raises substantial doubt about the Company’s ability to continue as a going
      concern. The ability of the Company to continue as a going concern is dependent
      on the Company increasing sales to the point it becomes profitable. The Company
      may need to raise additional capital for marketing to increase its sales. If
      the
      Company is unable to increase sales sufficiently or obtain adequate capital,
      it
      could be forced to cease operation. The accompanying financial statements do
      not
      include any adjustments relating to the recoverability and classification of
      asset carrying amounts or the amount and classification of liabilities that
      might result from the outcome of this uncertainty.





Management
      plans to increase sales by increasing its marketing program and to obtain
      additional capital from the private placement of shares of its common stock.
      However, management cannot provide any assurances that the Company will be
      successful in accomplishing any of its plans.





NOTE
      3-  COMMON
      STOCK





During
      the year ended December 31, 2006, the Company issued 200,000 shares of its
      common stock to unrelated investors for an aggregate cash inflow of $90,000
      upon
      the exercise of its warrants at $0.45 per share. The Company also issued
      2,000,006 shares for cash at $0.35 per share, 125,000 shares for cash at $0.20
      per share and 3,555,554 shares for cash at $0.30 per share for an aggregate
      cash
      inflow of $1,881,666.





During
      January 2006, the Company issued 420,000 shares of common stock at $0.81 per
      share for services rendered for a total value of $294,840. During May 2006,
      the
      Company issued 105,000 shares of common stock for services rendered at $0.65
      per
      share for a value of $68,250 and 36,000 shares of common stock at $0.57 for
      a
      value of $20,520.During June 2006, the Company issued 5,000 shares of common
      stock for services at $0.46 per share rendered for a value of $2,300, 508,750
      shares at $0.48 for a value of $244,000. During July 2006, the Company issued
      328,571 shares valued at $0.40 per share for a value of $157,714. In November
      2006, the Company issued 279,285 shares of common stock at $0.35 per share
      for
      services rendered for a value of $97,750. In December 2006, the Company issued
      200,000 shares of common stock for services at $0.35 per share for a value
      of
      $70,000 and 267,857 shares at $0.31 per share for a value of $93,750.





All
      valuations of common stock issued for services were based upon value of the
      services rendered, which did not differ materially from the fair value of the
      Company’s common stock during the period the services were
      rendered.




F-14


**SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005


NOTE
      4-  NOTES
      PAYABLE




During
        2006, the Company raised $1,000,000 through the issuance of 15% convertible
        debt. The debt with the accrued interest was due on September 4, 2006. The
        Company was unable to repay the debt on the due date, accordingly the holders
        thereof have the right to convert the debt to equity. The Company recorded
        a
discount
        of $737,805 for the value of the beneficial conversion feature attached to
        the
        $1,000,000 of convertible debt issued during the period as computed using
        the
        Black-Scholes model. The discount is being amortized over the term of the
        convertible debt. The convertible debt is unsecured and due upon
        demand.




During
      2006, the Company raised an additional $500,000 through the issuance of a non
      convertible note payable bearing interest at 12%. The note payable is unsecured
      and due upon demand.





The
      Company has accrued $119,384 in interest payable on these notes payable as
      of
      December 31, 2006.




NOTE
      5-  COMMON
      STOCK PURCHASE OPTIONS AND WARRANTS





The
      Company has granted common stock purchase options to certain of its employees
      and consultants. The options vest according to the terms of the contracts with
      the employees and consultants (usually 1 to 3 years). The option price is also
      determined in accordance with the terms of the contracts (usually $0.00 to
      $0.45
      per share).





On
      January 1, 2005, the Company authorized the sale of its units. Each unit
      consisted of one share of common stock and a Class A warrant to purchase one
      share of common stock at $0.45 (exercisable for 1 year) and a Class B warrant
      to
      purchase one share at $0.75 (exercisable for 3 years).





The
      following table summarizes the changes in options and warrants outstanding
      and
      the related prices for the shares of the Company’s common stock issued to
      non-employees of the Company. These options and warrants were granted in lieu
      of
      cash compensation for services performed or financing expenses.





Number
                of Shares
            
            Weighted
                Average Exercise PriceOutstanding
                as of January 1, 2005
            
            
            -
            
            
            -Granted
            
            
            35,510,000
            
            $
            0.60Exercised
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Outstanding
                at December 31, 2005
            
            
            35,510,000
            
            
            0.60Granted
            
            
            5,304,183
            
            
            0.56Exercised
            
            
            200,000
            
            
            0.45Cancelled
            
            
            13,540,000
            
            
            0.45Outstanding
                at December 31, 2006
            
            
            27,074,183
            
            $
            0.49




F-15


**SMART
          ENERGY SOLUTIONS, INC.**
 Notes
          to
          the Financial Statements
 December
          31, 2006 and 2005


NOTE
      5-  COMMON
      STOCK PURCHASE OPTIONS AND WARRANTS (Continued)





During
      the year ended December 31, 2006, the estimated value of the compensatory common
      stock purchase warrants and options granted to non-employees in exchange for
      services and financing expenses was determined using the Black-Scholes pricing
      model and the following assumptions: expected term of 1 to 3 years, a risk
      free
      interest rate of 4.51% to 4.91%, a dividend yield of 0% and volatility of 92%
      to
      98%. The amount of the expense charged to operations for compensatory options
      and warrants granted in exchange for services was $1,963,521.





During
      the year ended December 31, 2005, the estimated value of the compensatory common
      stock purchase warrants and options granted to non-employees in exchange for
      services and financing expenses was determined using the Black-Scholes pricing
      model and the following assumptions: expected term of 1 to 3 years, a risk
      free
      interest rate of 3.50% to 4.55%, a dividend yield of 0% and volatility of 22%
      to
      98%. The amount of the expense charged to operations for compensatory options
      and warrants granted in exchange for services was $435,665.





NOTE
          6- COMMITMENTS
          AND CONTINGENCIES





The
      Company has entered into a one year lease for its office which expires in
      January of 2007. Future lease commitments are $3,000 for 2007. The Company
      incurred rent expense of $36,000 and $27,000 in 2006 and 2005,
      respectively.





NOTE
          7- RESTATED
          FINANCIAL STATEMENTS





Subsequent
      to the issuance the Company’s 2005 financial statements adjustments were made to
      record the value of options granted. A summary of those changes is reflected
      in
      the following schedule:


As
                  Restated
              
              OriginalRevenues
              
              $
              151,257
              
              $
              151,257Cost
                  of sales
              
              
              78,167
              
              
              78,167Operating
                  expenses
              
              
              2,594,482
              
              
              2,155,187Other
                  income (expense)
              
              
              ,1,815
              
              
              (124,696
              )Income
                  tax expense
              
              
              -
              
              
              -Net
                  loss
              
              $
              (2,519,577
              )
              $
              (2,206,793
              )




F-16