**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**





(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, 2007





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.**


(Exact
      Name of Registrant as Specified 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


(Registrant’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





Indicate
      by check mark if the Registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes
o No
x





Indicate
      by check mark if the Registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No
x





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained
      herein, and will not be contained, to the best of Registrant’s knowledge, in
      definitive proxy or information statements incorporated by reference in Part
      III
      of this Form 10-K or any amendment to this Form 10-K. x





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a small reporting company. See
      definitions of “large accelerated filer,” “accelerated filer” and “small
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o     Accelerated
      filer o





Non-accelerated
      filer o     Small
      reporting company x





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes
o No
x





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 June 29, 2007 was $46,901,930.





The
      number of shares outstanding of the Registrant’s common stock as of March 27,
      2008 was 84,672,679.





Documents
      Incorporated By Reference:  None









**TABLE
      OF CONTENTS**




PagePART
              IItem
                1. Business
            
            1Item
                1A. Risk Factors
            
            5Item
                1B. Unresolved Staff CommentsItem
                2. Properties
            
            9Item
                3. Legal Proceedings
            
            10Item
                4. Submission of Matters to a Vote of Security Holders
            
            10PART
                IIItem
                5. Market for Common Equity, Related Stockholder Matters and Purchases
                of
                Equity Securities
            
            10Item
                6. Selected Financial Data
            
            17Item
                7. Management’s Discussion and Analysis or Financial Condition and Results
                of Operations
            
            17Item
                8. Financial Statements and Supplementary Data
            
            18Item
                9. Changes in and Disagreements With Accountants on Accounting and
                Financial Disclosure
            
            19Item
                9A. Controls and Procedures
            
            19Item
                9A(T). Controls and Procedures
            
            19Item
                9AB. Other Information
            
            20PART
                IIIItem
                10. Directors, Executive Officers and Corporate Governance
            
            20Item
                11. Executive Compensation
            
            22Item
                12. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            
            27Item
                13. Certain Relationships and Related Transactions and Director
                Independence.
            
            28Item
                14. Principal Accountant Fees and Services
            
            30PART
                IVItem
                15. Exhibits, Financial Statement Schedules
            
            30






-
          ii
          -




**PART
      I.**





As
      used
      in this Form 10-K, 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-K 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-K 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-K or in documents incorporated by reference in this
      Annual Report on Form 10-K. 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. 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


-
          1 -


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.





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 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
      shares issued to Levinas pursuant to the Agreement were issued in a private
      transaction exempt from registration under the Securities Act of 1933, as
      amended, in reliance of Section 4(2) of that act. The certificate evidencing
      the
      securities will contain a legend restricting their transferability absent
      registration under the Securities Act or the availability of an applicable
      exemption therefrom. 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.





We
      agreed
      to issue to Levinas an additional 20% of the issued and outstanding shares
      if
      prior to June 23, 2005 $400,000 is not invested in the development of the
      Battery Brain product. If less than $400,000 is invested, said 20% shall be
      pro
      rated based on the actual amount invested.





The
      consideration paid by the Company for the Battery Brain assets included (i)
      the
      issuance to Mr. Levinas, the sole shareholder of Purisys, of shares of our
      common stock representing twenty (20%) percent of the issued and outstanding
      shares of common stock, assuming new investments in the Company in the aggregate
      amount of $1,000,000, and (ii) a payment of $100,000. Pursuant to the Agreement,
      10,421,750 shares of our common stock were issued to Mr. Levinas in August
      2005.
      Pursuant to the Agreement, we agreed that if we 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. issue
      to
      Levinas an additional 20% of the issued and outstanding shares. If less than
      $400,000 is invested, said 20% shall be pro rated based on the actual amount
      invested. Since we
      successfully raised more than the $400,000 in a private placement of units
      of
      our securities we 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 from the Battery Brain product in an
      aggregate amount of at least $2,000,000. If we failed to achieve either (a)
      or
      (b) at any time on or prior to March 23, 2007, then Mr. Levinas would be
      entitled to receive additional shares of common stock equal to 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 Mr. Levinas to negotiate, in good faith, an agreement regarding the
      registration rights associated
      with the shares issued to Mr. Levinas pursuant to the Agreement, providing
      that
      Mr. Levinas is entitled to equal registration rights with our controlling
      shareholders, pro rata in accordance with their holdings, subject to a lock-up
      agreement, but have not executed a registration rights agreement with Mr.
      Levinas with respect to these shares as of the date of this report.





Pursuant
      to the terms of our March 23, 2005 asset purchase agreement with Purisys, Inc.
      and Mr. Levinas, our Board of Directors shall consist of five (5) members,
      and
      Mr. Levinas is entitled to appoint 40% of the directors. If
      for
      any reason we cease to manufacture, sell or otherwise cease to be involved
      in
      the Battery Brain product, then Mr. 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.





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





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 its 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 ignition 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
      engaging 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, they maintain strict protection of our proprietary property, they
      enable the Company to meet the strictest regulation, and they provide the
      necessary flexibility to meet the growing demands in each market segment.





Markets;
      Distribution Methods




We
      will
      not be dependent upon a small number of customers, as we intend to 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; and 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
      June
      22, 2006, the Company and Carter Group, Inc. (“Carter”) executed a profit
      sharing and internet distribution agreement, pursuant to which 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 Battery Brain 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 p rofit
      sharing and internet distribution agreement is for
      a
      three year period expiring on June 22, 2009. The
      parties are in discussions regarding the possible termination of this
      agreement.





On
      August
      14, 2007 we executed a letter of intent with Carter, regarding a potential
      acquisition by the Company of an interest in Carter. Our discussions regarding
      this matter were suspended on January 28, 2008.





The
      Company has been approved as a supplier to the U.S. General Services
      Administration and was awarded a GSA contract on February 1, 2007. This contract
      authorizes the Company to sell products electronically via the Internet to
      all
      executive agencies of the US government, contractors working for the Federal
      government, fleet managers and the District of Columbia. On January 31, 2007
      the
      Company and the U.S. Department of Defense announced that the U.S. Army has
      begun testing the Battery Brain on their Striker Tactical Vehicle. The military
      designed Battery Brain has passed all phases of testing to date and the U.S.
      Army is scheduled to complete testing in the 2 nd quarter
      of 2008.





On
      October 25, 2007 the Company executed a d istributorship agreement
      with All Start Battery. Pursuant to this agreement, All Start was appointed
      as
      the exclusive distributor of the Battery Brain products to new car dealers
      located in California. The
      term
      of the agreement is for
      a
      three year period expiring on October 24, 2010 and may be terminated if minimum
      sales targets are not achieved. The term shall be automatically renewed
      for successive two year periods unless terminated by the parties. Either party
      may terminate the agreement without cause upon 30 days’ prior notice.





On
      March
      17, 2008 we executed a distributorship agreement with OnGuard Dealer Services,
      LLC. Pursuant to the agreement, OnGuard was appointed as the exclusive
      distributor of the Battery Brain products to new
      and
      used car dealers in all
      of
      the United States other than California .
      The
      agreement has a term of ten years and renews automatically for successive one
      year periods. Either party may terminate the agreement in the event of a breach
      or a change in the majority ownership of the Company. The agreement establishes
      sales targets and allows us to terminate the exclusivity of the distributorship
      if these targets are not met and take other remedial actions. The agreement
      also
      provides that we will grant OnGuard 1,000,000 warrants at an exercise price
      of
      $.50 with a term of five years, if OnGuard achieves the minimum sales threshold
      of one hundred fifty thousand units in the first year of the term. An additional
      1,000,000 warrants will be granted if OnGuard achieves minimum sales threshold
      of three hundred thousand units over two years from the date of the agreement.
      OnGuard will be granted a total of 3,000,000 warrants should it achieve a sales
      threshold of seven hundred fifty thousand units over two years.




The
      Company also sells units of the Battery Brain to other commercial enterprises,
      including the following; automotive retail distributors like Canadian Tire,
      Keystone, Crutchfield and O’Reilly Auto Parts; marine
      distributors, including Canadian Tire, Overton and Keller Marine; recreational
      vehicle and motor home distributors, including Coast and Stag Parkway; truck
      distributors, including Camping World, International Truck and Truck Equipment
      Hawaii; and international distributors in Italy, Belgium, the Netherlands,
      Sweden, Mexico, Israel, the Philippines and the United Kingdom.




-
          4 -




Competition





The
      Company believes that it has a competitive advantage over the producers of
      products which the market might consider 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 shorts circuits in the electrical system, and
      also provide 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 remote control.





Intellectual
      Property





Our
      intellectual property rights in the Battery Brain products are protected by
      a US
      patent, which was issued on June 1, 2004 and expires on July 23, 2022. On
      December 7, 2007 we applied for a provisional patent with respect to our new
      Battery Switch products, which incorporate electronic circuit technology and
      will enhance our current product line.





Employees





As
      of
      March 27, 2008 the Company had 5 employees, of which all are employed full
      time.





**Item
      1A. Risk Factors**





The
      risks
      described below in addition to the other cautionary statements and risks
      described elsewhere in this Annual Report on Form 10-K, and the other
      information contained in herein and in our other filings with the Securities
      and
      Exchange Commission, including our subsequent quarterly reports on
      Forms 10-Q and current reports on Form 8-K, should be carefully
      considered in evaluating our Company and our business. The risks and
      uncertainties described below are not the only ones we face. Additional risks
      and uncertainties not presently known to us or that we currently deem immaterial
      may also affect our business. Should one or more of these risks or uncertainties
      materialize, or should underlying assumptions prove incorrect, actual results
      may vary materially from those anticipated, estimated or projected.




***Risks
      Related to Our Business***





**We
      are an early stage company. Our limited operating history makes it difficult
      to
      evaluate our future prospects.**





We
      have
      only recently begun offering our product, as we have entered into the majority
      of our contracts and significant relationships only within the last two years.
      Our limited operating history makes it difficult to evaluate our future
      prospects. Our prospects are subject to risks and uncertainties frequently
      encountered by start-up companies. Many of these risks are unknown, but include
      the lack of widespread acceptance of our product,
      problems with production and distribution and managing our growth. Our failure
      to identify the challenges and risks in the after-market automotive market
      and
      successfully address these risks would harm our business.




-
          5 -





**We
      have a going concern opinion from our auditors, indicating the possibility
      that
      we may not be able to continue to operate.**





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 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.





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. Furthermore, we anticipate
      generating losses for the next 12 months. Therefore, we may be unable to
      continue operations in the future as a going concern. If we cannot continue
      as a
      viable entity, our shareholders may lose some or all of their investment in
      the
      Company.





**We
      have a history of losses and anticipate continued losses, and we may be unable
      to achieve profitability.**





We
      have
      never been profitable as a public company and expect to continue to incur
      operating losses on both a quarterly and annual basis at least until 2009.
      We
      may be unable to achieve profitability in the future. We expect to continue
      to
      make significant expenditures for sales and marketing, development, and general
      and administrative functions. As a result, we will need to generate significant
      revenues to achieve profitability. We cannot assure you that revenues will
      grow
      in the future or that we will achieve sufficient revenues for profitability.
      If
      revenues grow more slowly than we anticipate, or if operating expenses exceed
      our expectations, our business would be severely harmed.





**The
      revenue and profit potential of our business model is unproven. Our success
      is
      dependent on our ability to expand our distribution
      network.**





Our
      business model is to generate revenues from sales of Battery Brain to major
      distribution channels. We believe that our product is unique and our business
      model is new; our ability to generate revenue or profits is unproven. There
      is
      little or no evidence to date that our potential customers will drive the level
      of demand required for us to become profitable. Our success is also dependent
      on
      our ability to develop and then expand our base through international
      distributors. We cannot assure you that we will be successful in doing
      this.





We
      depend
      on sales and strategic marketing relationships for growth. These relationships
      may not contribute to increased use of our product, help us add new retail
      outlets, or achieve any revenue. We may not be able to enter into new or
      maintain our existing relationships. We plan to continue to establish sales
      and
      strategic marketing relationships with large organizations as part of our growth
      strategy. These arrangements may not generate any new retail outlets or revenue.
      We may not be able to enter into new relationships or renew existing
      relationships on favorable terms, if at all. We may not be able to recover
      our
      costs and expenses associated with these efforts which could severely harm
      our
      business.





**Our
      quarterly results are subject to significant fluctuations** *.*




We
      expect
      that our quarterly operating results will fluctuate significantly due to many
      factors, several of which are outside our control, including:




·
            demand
                for and market acceptance of our products and services;
            
            ·
            Intei
                intense and increased competition;·
            inconsistent
                growth, if any, from our distributor base;
            
            ·
            introductions
                of new services or enhancements, or changes in pricing policies,
                by us and
                our competitors;·
            loss
                of key customers or strategic partners;
            
            ·
            our
                our inability to control costs; and·
            variations
                in the dollar volume of transactions effected through our
                distribution  network;
            
            ·
            interinterruption
                of our manufacturing facilities




-
          6 -


We
      believe that quarterly revenues, expenses and operating results are likely
      to
      vary significantly in the future, that period-to-period comparisons of results
      of operations are not necessarily meaningful and that, as a result, such
      comparisons should not be relied upon as indications of future performance.




**We
      depend on a small group of third-party manufacturers for the manufacture of
      our
      products, and the loss of any of these manufacturers could affect our ability
      to
      produce our products at competitive prices, which would decrease our sales
      or
      earnings.**





The
      Battery Brain is manufactured on behalf of the Company by third party
      manufacturers. Changes in our relationships with these manufacturers, shortages,
      production delays, or work stoppages by the employees of such manufacturers
      could have a material adverse effect on our ability to timely manufacture our
      products and secure sales. If we cannot obtain an adequate supply of products,
      this could result in a decrease in our sales and earnings.





**We
      may not be able to deliver our product on a timely basis which could adversely
      impact our revenues.**




It
      is
      possible that notwithstanding the relationship between our manufacturers and
      our
      Company, our manufacturers may not be able to fulfill their contractual
      obligation to us. Delays or technical problems with the product may cause our
      customers to cease ordering our product.





**The
      Company has third-party manufacturing and distribution facilities in foreign
      countries.**





The
      Company has 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. The Company has also
      contracted with various distributors for distribution of the Battery Brain
      products in the United States, Canada, Italy, and Israel.





International
      operations are subject to certain risks including the following: exposure to
      local economic conditions; exposure to local political conditions (including
      the
      risk of seizure of assets by foreign governments); currency exchange rate
      fluctuations and currency controls; and export and import restrictions.





The
      likelihood of such occurrences and their potential effect on the Company are
      unpredictable and vary from country to country.





**We
      depend upon our key personnel and they would be difficult to
      replace.**





We
      believe that our success will depend on the continued employment of our senior
      management team and key sales and technical personnel. If one or more members
      of
      our senior management team were unable or unwilling to continue in their present
      positions, our business would suffer. We plan to expand our employee base to
      manage our anticipated growth. Most importantly, we plan to hire additional
      members of senior management.
      Competition for personnel, particularly for senior management personnel and
      employees with technical and sales expertise, is intense. The success of our
      business is dependent upon hiring and retaining suitable personnel.




**If
      our intellectual property protection is inadequate, competitors may gain access
      to our technology and undermine our competitive position.**




We
      regard
      our current and future intellectual property as important to our success, and
      rely on trademark and copyright law, trade secret protection and confidentiality
      and/or license agreements with our employees, customers and business partners
      to
      protect our proprietary rights. Despite our precautions, unauthorized third
      parties may copy certain portions of our services or reverse engineer or obtain
      and use information that we regard as proprietary. We have been granted one
      patent in the United States and we may seek additional patents in the future.
      We
      do not know if any future patent application will be issued with the scope
      of
      the claims we seek, if at all, or whether any patents we receive will be
      challenged or invalidated. In addition, the laws of some foreign countries
      do
      not protect proprietary rights to the same extent as do the laws of the United
      States. Our means of protecting our proprietary rights in the United States
      or
      abroad may not be adequate and competitors may independently develop similar
      technology.




-
          7 -




**If
      we incur product liability, warranty and other claims against us, including
      wrongful death claims, our business, results of operations and financial
      condition may be harmed.**





We
      may
      become subject, in the ordinary course of business, to litigation involving
      products liability and other claims, including wrongful death claims, related
      to
      personal injury and warranties. We purchase product liability insurance in
      the
      commercial insurance market. We cannot be certain that our insurance coverage
      will be sufficient to cover all future claims against us. Any increase in the
      frequency and size of these claims may cause the premiums that we are required
      to pay for such insurance to rise significantly. It may also increase the
      amounts we pay in punitive damages, which may not be covered by our insurance.





***Risks
      Related to Ownership of our Common Stock***





**Our
      certificate of incorporation authorizes the issuance of shares of blank check
      preferred stock.**





Our
      certificate of incorporation provides that our board of directors will be
      authorized to issue from time to time, without further stockholder approval,
      up
      to 1,000,000 shares of preferred stock in one or more series and to fix or
      alter
      the designations, preferences, rights and any qualifications, limitations or
      restrictions of the shares of each series, including the dividend rights,
      dividend rates, conversion rights, voting rights, terms of redemption, including
      sinking fund provisions, redemption price or prices, liquidation preferences
      and
      the number of shares constituting any series or designations of any series.
      Such
      shares of preferred stock could have preferences over our Common Stock with
      respect to dividends and liquidation rights. We may issue additional preferred
      stock in ways which may delay, defer or prevent a change in control of us
      without further action by our stockholders. Such shares of preferred stock
      may
      be issued with voting rights that may adversely affect the voting power of
      the
      holders of our Common Stock by increasing the number of outstanding shares
      having voting rights, and by the creation of class or series voting
      rights.





**Our
      stock is a penny stock. Trading of our stock may be restricted by the SEC’s
      penny stock regulations and NASD’s sales practice requirements, which may limit
      a stockholders’ ability to buy and sell our stock** .





The
      limited trading market for our shares of Common Stock is further subject to
      the
      regulations applicable to Penny Stocks. The regulations of the SEC promulgated
      under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
      require additional disclosure relating to the market for penny stocks in
      connection with trades in any stock defined as a penny stock. The SEC
      regulations define penny stocks to be any non-NASDAQ equity security that has
      a
      market price of less than $5.00 per share, subject to certain exceptions. Unless
      an exception is available, those regulations require the broker-dealer to
      deliver, prior to any
      transaction involving a penny stock, a standardized risk disclosure schedule
      prepared by the SEC, to provide the customer with current bid and offer
      quotations for the penny stock, the compensation of the broker-dealer and its
      salesperson in the transaction, monthly account statements showing the market
      value of each penny stock held in the customer’s account, to make a special
      written determination that the penny stock is a suitable investment for the
      purchaser and receive the purchaser's written agreement to the transaction.
      These disclosure requirements may have the effect of reducing the level of
      trading activity, if any, in the secondary market for a stock that becomes
      subject to the penny stock rules. Consequently, these penny stock rules may
      affect the ability of broker-dealers to trade our securities. We believe that
      the penny stock rules discourage market investor interest in and limit the
      marketability of our common stock.




-
          8 -





In
      addition to the "penny stock" rules promulgated by the Securities and Exchange
      Commission, the NASD has adopted rules that require that in recommending an
      investment to a customer, a broker-dealer must have reasonable grounds for
      believing that the investment is suitable for that customer. Prior to
      recommending speculative low priced securities to their non-institutional
      customers, broker-dealers must make reasonable efforts to obtain information
      about the customer's financial status, tax status, investment objectives and
      other information. Under interpretations of these rules, the NASD believes
      that
      there is a high probability that speculative low priced securities will not
      be
      suitable for at least some customers. The NASD requirements make it more
      difficult for broker-dealers to recommend that their customers buy our common
      stock, which may limit your ability to buy and sell our stock.





**The
      market price for our Common Stock is volatile.**





The
      market price for our Common Stock is highly volatile. We believe that a variety
      of factors, including announcements by us or our competitors, lack of market
      acceptance, quarterly variations in financial results, trading volume, general
      market trends and other factors, could cause the market price of our Common
      Stock to fluctuate substantially. Additionally, due to our limited operating
      history and limited trading performance, the market price is
      volatile.





**We
      may issue a substantial amount of our Common Stock in connection with future
      acquisitions, and the sale of those shares could adversely affect our stock
      price.**





If
      we
      were to locate a suitable acquisition candidate, we anticipate issuing
      additional shares of Common Stock as consideration for such acquisitions. To
      the
      extent that we are able to grow through acquisitions and issue shares of our
      Common Stock as consideration, the number of outstanding shares of Common Stock
      that will be eligible for sale in the future is likely to increase
      substantially. Persons receiving shares of our Common Stock in connection with
      these acquisitions may be more likely to sell large quantities of their Common
      Stock that may influence the price of our Common Stock. In addition, the
      potential issuance of additional shares in connection with anticipated
      acquisitions could lessen demand for our Common Stock and result in a lower
      price than would otherwise be obtained.





**Our
      stock price may be adversely affected when additional shares are sold or
      issued.**





If
      our
      stockholders sell substantial amounts of our Common Stock in the public market,
      the market price of our Common Stock could fall. These sales might make it
      more
      difficult for us to sell equity or equity-related securities in the future
      at a
      time and price that we deem appropriate and may require us to issue greater
      amounts of our Common Stock to finance future acquisitions. Additional shares
      sold to finance acquisitions may dilute our earnings per share if the new
      operations' earnings are disappointing. In addition, we are presently authorized
      to issue up to 500,000,000 shares of common stock without further stockholder
      approval. As of March 27, 2008, there were 84,672,629 shares issued and
      outstanding. Accordingly, we can issue, at anytime(s), up to an additional
      415,327,371 shares of common stock, possibly for nominal consideration, without
      shareholder approval. This would result in the proportionate dilution of the
      equity and voting positions of the then existing shareholders.





**Item
      2. Properties**




The
      Company leases its executive offices and warehouse facilities, which together
      consist of approximately 7,000 square feet, at 210 West Parkway, #7, Pompton
      Plains, NJ 07444, pursuant to a lease with a term of one year commencing on
      July
      31, 2007. The rent due under the lease is $7,000 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. The Company
      believes that its current office and warehouse space will be adequate for the
      foreseeable future.




-
          9 -




**Item
      3. Legal Proceedings**





The
      Company is not a party to, and the Company’s property is not the subject of, any
      pending legal proceedings involving claims for damages which, exclusive of
      interest and costs, exceed 10% of the current assets of the Company. There
      are
      no pending legal proceedings in 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 any associate of any such director,
      officer, affiliate of the Company, or security holder is a party adverse to
      the
      Company or has a material interest adverse to the Company.





The
      Company suit against Superior Automotive Company was settled on December 5,
      2007.





**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.





**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 Financial Industry Regulatory Authority, Inc., Inc. under
      the
      symbol SMGY.OB. The following table sets forth the range of quarterly high
      and
      low closing bids for the common stock as reported on http://finance.yahoo.com
      during the years ending December 31, 2007 and December 31, 2006:





Financial
                Quarter
            Bid
                Information*Year
            Quarter
            High
                Bid
            Low
                Bid2007
            Fourth
                Quarter
            $0.50
            $0.25Third
                Quarter
            $0.60
            $0.49Second
                Quarter
            $0.62
            $0.54First
                Quarter
            $0.65
            $0.412006
            Fourth
                Quarter
            $0.39
            $0.31Third
                Quarter
            $0.42
            $0.30Second
                Quarter
            $0.80
            $0.43First
                Quarter
            $0.93
            $0.55





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





**Holders**





On
      March
      27, 2008, there were approximately 187 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.




-
          10 -




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





The
      following table presents certain information as of the end of December 31,
      2007
      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 inColumn
                (a))
              
              (c)Equity
                Compensation Plans Approved by Security Holders
            0
            0
            0Equity
                Compensation Plans Not Approved by Security Holders
            10,784,665
            0.15
            1,000,000Total
            10,784,665
            0.15
            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.





The
      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, or to increase such
      interest, by purchasing shares of the Company’s common stock. The 2005 Stock
      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 2005 Stock 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 2005
      Stock Plan shall be deferred either automatically or at the election of the
      holder thereof or of the Board; (viii) interpret and administer the 2005 Stock
      Plan and any instrument or agreement relating to, or award made under, the
      2005
      Stock 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 2005 Stock Plan; and (x) make any other determination
      and
      take any other action that the Board deems necessary or desirable for the
      administration of the 2005 Stock Plan. Unless otherwise expressly provided
      in
      the 2005 Stock Plan, all designations, determinations, interpretations and
      other
      decisions under or with respect to the 2005 Stock 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.




-
          11 -




The
      2005
      Stock Plan provides that 1,000,000 shares of the Company’s common stock are
      reserved for stock awards 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.





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 Mr. 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 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 Mr. Braniff’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.




-
          12 -





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 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 Mr. Levinas as well, including bonuses and stock options. The
      agreement with Mr. Levinas provides that if Mr. 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 Mr. Levinas thereunder.





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





Between
      December 21, 2006 and January 3, 2007, the Company executed subscription
      agreements with eight non-US investors providing for the issuance of 4,453,410
      shares of common stock, at a purchase price of $0.30 per share for aggregate
      consideration of $1,336,023. In addition the Company issued 500,000 shares
      of
      common stock to a non-US person as payment of commissions earned in connection
      with the sale of these shares. The shares were offered and sold pursuant to
      an
      exemption from the registration requirements of the Securities Act of 1933,
      as
      amended (the “Securities Act”) under Regulation S promulgated under the
      Securities Act. 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 and sold 184,458 shares of common
      stock to non-US investors at a purchase of $0.35 per share for aggregate
      consideration of $225,000. No commissions were paid in connection with the
      sale
      of these shares. The shares were offered and sold pursuant to an exemption
      from
      the registration requirements of the Securities Act under Regulation S
      promulgated under the Securities Act. 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. These 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. The shares were issued pursuant to an exemption
      from the registration requirements of the Securities Act under Regulation D
      promulgated under the Securities Act. EGFE represented that it was an accredited
      investor, as defined in Regulation D, and made customary representations
      regarding its intention to acquire the shares for investment only and not with
      view to or for sale in connection with any distribution thereof.





On
      September 14, 2006, the Company issued a promissory note to EGFE in the
      principal amount of $500,000. The note is payable on demand and accrues interest
      at the rate of 12% per annum. On March 6, 2007 this note was amended to provide
      that the entire outstanding principal and all accrued interest would be repaid
      on September 30, 2007. The note was offered and sold pursuant to an exemption
      from the registration requirement of the Securities Act under Regulation D
      promulgated under the Securities Act. EGFE represented that it was an accredited
      investor, as defined in Regulation D, and made customary representations
      regarding its intention to acquire the shares for investment only and not with
      view to or for sale in connection with any distribution thereof.




In
      May
      2006, the Company issued and sold 1,357,142 shares of common stock to non-U.S.
      investors, at a purchase price of $0.35 per share for aggregate consideration
      of
      $475,000. No commissions were paid in connection with the sale of these shares.
      The shares were offered and sold pursuant to an exemption from the registration
      requirements of the Securities Act under Regulation S promulgated under the
      Securities Act. 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.




-
          13 -





In
      May
      2006, the Company issued and sold 100,000 units, each consisting of one share
      of
      common stock, one class A warrant and one class B warrant, at a purchase price
      of $0.25 per unit for aggregate consideration of $25,000. Each class A warrant
      entitles the holder to purchase one share of common stock at a purchase price
      of
      $0.45 at any time on or before the first anniversary of the date on which the
      warrant was issued. Each class B warrant entitles the holder to purchase one
      share of common stock at a purchase price of $0.75 at any time on or before
      the
      third anniversary of the date on which the warrant was issued. No commissions
      were paid in connection with the sale of the units. The units were offered
      and
      sold pursuant to an exemption from the registration requirement of the
      Securities Act under Regulation S promulgated under the Securities Act. 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
      May
      22, 2006, the Company issued two convertible promissory notes to EGFE, each
      in
      the principal amount of $500,000. One of these notes s payable June 4, 2008
      and
      the other is payable on May 24, 2008. Both notes accrue interest at the rate
      of
      15% per annum. Both notes and all accrued and unpaid interest are convertible
      into shares of the Company’s common stock, at the holder’s option, at a
      conversion price equal to 95% of the average of the closing bid and ask prices
      for the common stock as quoted on the Over-The-Counter-Bulletin-Board for the
      five trading days preceding conversion. If the Company is in default under
      the
      terms of the notes the conversion price shall be 50% of the average of the
      closing bid and ask price for of the common stock for the five trading days
      preceding conversion. The notes were issued pursuant to an exemption from the
      registration requirements of the Securities Act under Regulation D promulgated
      the Securities Act. EGFE represented that it was an accredited investor, as
      defined in Regulation D, and made customary representations regarding its
      intention to acquire the shares for investment only and not with view to or
      for
      sale in connection with any distribution thereof.





In
      March
      2006, the Company issued 200,000 shares of common stock upon the exercise of
      warrants, at an exercise price of $0.45 per share for aggregate proceeds of
      $90,000. No commissions were paid in connection with the exercise of the
      warrants. The shares were issued pursuant to an exemption from the registration
      requirements of the Securities Act under Regulation S promulgated under the
      Securities Act. 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 Amir Uziel, Tamir
      Levinas, Shiri Levinas, Yoram Drucker, Lavi Krasney and David Lubin. These
      shares were issued as consideration for consulting services provided to the
      Company. The shares were issued pursuant to an exemption from the registration
      requirements of the Securities Act under Regulation D promulgated under the
      Securities Act. The recipients of these shares were our officers, directors
      and
      consultants and each represented that he or she was an accredited investor,
      as
      defined in Regulation D, and made customary representations regarding his or
      her
      intention to acquire the shares for investment only and not with view to or
      for
      sale in connection with any distribution thereof.




On
      January 9, 2006, the Company issued 26,250 shares of common stock to Yair Alon,
      50,000 shares to Guy Bahat, 40,000 shares to Daniel Levi and 143,750 shares
      to
      Dov Resnik. These shares were issued as consideration for services provided
      to
      the Company. The shares were issued pursuant to an exemption from the
      registration requirements of the Securities Act under Regulation D promulgated
      under the Securities Act. The recipients of these shares were our officers,
      directors and consultants and each represented that he was an accredited
      investor, as defined in Regulation D, and made customary representations
      regarding his intention to acquire
      the shares for investment only and not with view to or for sale in connection
      with any distribution thereof.





On
      January 24, 2007, the Company issued 250,000 shares of common stock to Joseph
      Oliver in exchange for consulting services provided to the Company. These shares
      were issued pursuant to an exemption from the registration requirements of
      the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.




-
          14 -





On
      March
      9, 2007, the Company issued 25,000 shares of common stock to Richard Wexler
      in
      exchange for corporate advisory services provided by Mr. Wexler to the Company.
      These shares were issued pursuant to an exemption from the registration
      requirements of the Securities Act under Section 4(2) thereof. The recipients
      of
      these shares made customary representations regarding his or her intention
      to
      acquire the shares for investment only and not with view to or for sale in
      connection with any distribution thereof.





On
      March
      14, 2007, the Company issued 166,000 shares of common stock to BR Eood in
      exchange for consulting services provided to the Company. These shares were
      issued pursuant to an exemption from the registration requirements of the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      March
      20, 2007, the Company issued 350,000 shares of common stock to Lion Partners
      Ltd. in exchange for Investor Relations services provided to the Company. These
      shares were issued pursuant to an exemption from the registration requirements
      of the Securities Act under Section 4(2) thereof. The recipients of these shares
      made customary representations regarding his or her intention to acquire the
      shares for investment only and not with view to or for sale in connection with
      any distribution thereof.





On
      May
      11, 2007, the Company issued 40,000 shares of common stock to Stern/Ferbman
      in
      exchange for consulting services provided to the Company. These shares were
      issued pursuant to an exemption from the registration requirements of the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      May
      17, 2007, the Company issued 1,333,333 shares of common stock to Michael
      Ben-Ari, a director of the Company, in exchange for consulting services provided
      to the Company. These shares were issued pursuant to an exemption from the
      registration requirements of the Securities Act under Section 4(2) thereof.
      The
      recipients of these shares made customary representations regarding his or
      her
      intention to acquire the shares for investment only and not with view to or
      for
      sale in connection with any distribution thereof.





On
      May
      23, 2007, the Company issued 350,000 shares of common stock to Joji Mangubat
      in
      exchange for Investor Relation services provided to the Company. These shares
      were issued pursuant to an exemption from the registration requirements of
      the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      June
      19, 2007, the Company issued 350,000 shares of common stock to American Cap
      in
      exchange for Investor Relations services provided to the Company. These shares
      were issued pursuant to an exemption from the registration requirements of
      the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      July
      2, 2007, the Company issued 45,000 shares of common stock to Michael Ben-Ari,
      a
      director of the Company. These shares were issued upon exercise of options
      granted to Mr. Ben-Ari, as consideration for his service on the Company’s board
      of directors, for an aggregate exercise price of $15,750. These shares were issued
      pursuant to an exemption from the registration requirements of the Securities
      Act under Section 4(2) thereof. The recipient of these shares made customary
      representations regarding his intention to acquire the shares for investment
      only and not with view to or for sale in connection with any distribution
      thereof.





On
      August
      17, 2007, the Company issued 100,000 shares of common stock to Edward Braniff,
      a
      bonus granted on October 25, 2006. These shares were issued pursuant to an
      exemption from the registration requirements of the Securities Act under Section
      4(2) thereof. The recipients of these shares made customary representations
      regarding his or her intention to acquire the shares for investment only and
      not
      with view to or for sale in connection with any distribution thereof.




-
          15 -





On
      August
      17, 2007, the Company issued 35,000 shares to Amir Uziel and 35,000 share to
      Lavi Krasney for consulting services. These shares were issued pursuant to
      an
      exemption from the registration requirements of the Securities Act under Section
      4(2) thereof. The recipients of these shares made customary representations
      regarding his or her intention to acquire the shares for investment only and
      not
      with view to or for sale in connection with any distribution
      thereof.





On
      September 23, 2007, the Company issued 31,000 shares of common stock to
      Friedland Corporate Investor Services LLC, in connection with the settlement
      of
      a dispute relating to a consulting agreement between the Company and Friedland
      Corporate Investor Services. These shares were issued pursuant to an exemption
      from the registration requirements of the Securities Act under Section 4(2)
      thereof. The recipients of these shares made customary representations regarding
      his or her intention to acquire the shares for investment only and not with
      view
      to or for sale in connection with any distribution thereof.





On
      September 23, 2007, the Company issued 750,000 shares of common stock to Eyal
      Gohar in exchange for consulting services provided to the Company. These shares
      were issued pursuant to an exemption from the registration requirements of
      the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      September 27, 2007, the Company issued 300,000 shares of common stock to TENA
      Holdings and 300,000 shares of common stock to Black Velvet Ltd. in exchange
      for
      consulting services provided to the Company. These shares were issued pursuant
      to an exemption from the registration requirements of the Securities Act under
      Section 4(2) thereof. The recipients of these shares made customary
      representations regarding his or her intention to acquire the shares for
      investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      October 1, 2007, the Company issued 110,000 shares of common stock to Lieber
      McDonald in exchange for public relations services provided to the Company.
      These shares were issued pursuant to an exemption from the registration
      requirements of the Securities Act under Section 4(2) thereof. The recipients
      of
      these shares made customary representations regarding his or her intention
      to
      acquire the shares for investment only and not with view to or for sale in
      connection with any distribution thereof.





On
      October 15, 2007, the Company issued 250,000 units, each consisting of one
      share
      of common stock and one warrant, to Lighthouse Capital Insurance Company for
      total consideration of $100,000. Each warrant entitles the holder to purchase
      one share of common stock at an exercise price of $0.75 until August 1, 2009.
      These units, the shares of common stock and the warrants included in the units
      were issued pursuant to an exemption from the registration requirements of
      the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding his or her intention to acquire the shares
      for investment only and not with view to or for sale in connection with any
      distribution thereof.





On
      October 15, 2007, the Company issued 168,750 units, each consisting of one
      share
      of common stock and one warrant, to Ofliam LLC for total consideration of in
      exchange for consulting services provided to the Company. These shares were
      issued pursuant to an exemption from the registration requirements of the
      Securities Act under Section 4(2) thereof. The recipients of these shares made
      customary representations regarding
      his or her intention to acquire the shares for investment only and not with
      view
      to or for sale in connection with any distribution thereof.





On
      December 10, 2007, the Company issued 151,937 shares of common stock to
      Strauss/Shinder in exchange for consulting services provided to the Company.
      These shares were issued pursuant to an exemption from the registration
      requirements of the Securities Act under Section 4(2) thereof. The recipients
      of
      these shares made customary representations regarding his or her intention
      to
      acquire the shares for investment only and not with view to or for sale in
      connection with any distribution thereof.




-
          16 -




Purchases
      of equity securities by the issuer and affiliated purchasers .





None.




**Item
      6. Selected Financial Data**





Not
      applicable.





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





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, 2007 Compared to Fiscal Year Ended December 31,
      2006





The
      Company recorded revenues of $1,244,108 in 2007, compared to $1,818,973 in
      2006.
      Cost of sales was $933,836 in 2007, compared to $1,184,889 in 2006. In 2006
      one
      transaction accounted for 42% of total sales, while the Company’s sales in 2007
      were to a broader base of customers. The Company expects to continue to expand
      its customer base in 2008 as a result of its extensive marketing programs,
      including its participation in trade shows and private label
      programs.





The
      Company's 2007 general and administrative expenses of $2,687,557 consisted
      primarily of bad debt expenses for Superior Automotive Company and Carter Group
      Inc. of $253,163, travel costs of $439,837, and administrative payroll of
      $800,987. The Company paid or accrued professional fees, including legal and
      accounting fees, of $350,190 in connection with audits and SEC reporting. The
      Company incurred consulting fees of $4,644,482 in connection with the
      development of its business strategy, recruiting of key executives and interim
      managers and completing the roll out of the Battery Brain products. The Company
      also paid $350,190 in marketing and advertising expenses during the year. The
      marketing and advertising costs were related to the development of a marketing
      plan and marketing materials for the Company.





The
      Company's 2006 general and administrative expenses of $1,520,223 consisted
      primarily of research and development expenses of $128,296, travel costs of
      $401,734, and administrative payroll of $500,714, incurred in connection with
      the Company’s efforts to increase public awareness of its products and prepare
      for increased sales. The Company incurred consulting fees of $3,517,992 in
      2006
      in connection with the development of its business strategy, recruiting key
      executives and interim managers and completing the roll out of the Battery
      Brain
      products. 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 $437,125 in marketing and
      advertising expense in 2006. The marketing and advertising costs were related
      to
      development of a marketing plan and marketing materials for the Company.





The
      Company recorded a net loss of $7,896,679 or $0.10 per share for the year of
      2007, compared to a net loss of $5,162,631 or $0.08 per share in 2006. Excluding
      non cash expenses incurred through common stock and option grants, the Company
      would have incurred a net loss of $3,660,888, or $0.05 per share, and
      $2,040,176, or
      $0.04
      per share, in 2007 and 2006, respectively. The Company expects to continue
      granting common stock and options as consideration for services in
      2008.





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 products, 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 in 2006 primarily as a result of
      its extensive marketing programs, including its trade shows and private label
      programs.




-
          17 -





General
      and administrative expenses were $1,520,223 in 2006, compared to $615,441 in
      2005. The Company's 2005 general and administrative expenses consisted primarily
      of professional fees of $131,262, travel costs of $150,538, and administrative
      payroll of $251,427. The Company incurred consulting fees of $3,517,992 in
      2006,
      compared to $1,178,791 in 2005, in connection with the development of its
      business strategy, recruiting of key executives and interim managers and
      completing the roll out of the Battery Brain products. The Company also paid
      $437,125 in marketing and advertising expense in 2006, compared to $546,107
      in
      2005. The marketing and advertising costs were related to development of a
      marketing plan and marketing materials for the Company.





The
      Company recorded a net loss of $5,162,631 or $0.08 per share in 2006, compared
      to $2,519,577 or $0.05 per share for the year of 2005. Excluding non cash
      expenses incurred through common stock and option grants, the Company would
      have
      incurred a net loss of $2,197,890, or $0.04 per share, and $1,849,912, or $0.03
      per share, in 2006 and 2005, respectively.





**Liquidity
      and Capital Resources**





The
      Company believes that it will need approximately $2,000,000 to fund its
      operations through December 31, 2008. As
      of
      December 31, 2007, the Company had $70,902 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, 2008 to March 27, 2008 t he
      Company raised $1,433,214 through the issuance of its securities. On January
      15,
      2008 the Company executed a letter of intent with EKN Financial Services, Inc.,
      regarding a proposed offering of common stock and warrants in a private
      placement that would raise gross proceeds of at least $2 million and not more
      than $4 million. Pursuant to the letter of intent the Company would offer common
      stock, at a price equal to 60% of the average closing price for the common
      stock
      as quoted on the OTC Bulletin Board on the 15 consecutive trading days prior
      to
      the first closing of the offering, and warrants to purchase additional shares
      of
      common stock equal to 25% of the number of shares sold in the offering. The
      warrants would have a per share exercise price equal to the offering price
      of
      the common stock in the offering, they would be exercisable immediately and
      they
      would have a five year term.





The
      Company has renegotiated the terms of three notes held by EGFE, Ltd., extending
      their maturity for an additional 12 months.





The
      Company has an aggregate of 16,560,037 vested warrants outstanding, with an
      aggregate exercise price of $11,611,517. However, there can be no assurance
      that
      the outstanding warrant will be exercised or that the required funds will be
      raised. In order to raise the funds required in order to pursue our business
      plan we may raise
      additional capital through the issuance of our securities or enter into a
      strategic alliance with a third party. There can be no assurance that we will
      be
      successful in raising additional capital or creating a strategic alliance.
      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 securities, if available, and may involve significant payment obligations
      and covenants that restrict how we operate our business.




**Off
      Balance Sheet Arrangements**





None





**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk**





Not
      applicable.





**Item
      8. Financial Statements and Supplementary Data**





The
      financial statements are set forth immediately following the signature page
      and
      are incorporated herein by reference.




-
          18 -




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





None.





**Item
      9A. Controls and Procedures**





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we evaluated the effectiveness
      of
      our disclosure controls and procedures (as defined in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
      December 31, 2007. Based upon that evaluation, our Chief Executive Officer
      and Chief Financial Officer concluded that our disclosure controls and
      procedures were effective as of December 31, 2007.




There
      has
      not been any change in our internal control over financial reporting (as defined
      in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
      the quarter ended December 31, 2007 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




**Item
      9A(T). Controls and Procedures**





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





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as
      a process designed by, or under the supervision of, a company’s principal
      executive and principal financial officers and effected by the company’s board
      of directors, management and other personnel to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles and includes those policies and procedures
      that:




·
            pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of the assets of
                the
                Company;




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




·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the Company’s assets that
                could have a material effect on the financial
                statements.




Management
      acknowledges its responsibility for establishing and maintaining adequate
      internal controls over financial reporting. We are not in compliance with
      Section 404 of the Sarbanes-Oxley Act of 2002, but intend to
      commence shortly the system and process of documentation and evaluation needed
      to comply with Section 404.





This
      annual report does not include an attestation report of the company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the company's registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the company to provide only management's report
      in this annual report





During
      the year ended December 31, 2007, there was no change in our internal
      control over financial reporting that has materially affected, or is reasonably
      likely to materially affect our internal control over financial reporting.




-
          19 -




**Item
      9B. Other Information**





None.








**PART
      III**





**Item
      10.**  **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 31,
      2008.




**Name**
              **Age**
              **Positions
                  and Offices**Peter
                  Mateja
              57
              CEO
                  and DirectorEdward
                  Braniff
              58
              CFOAharon
                  Y. Levinas
              61
              CTO
                  and DirectorJoseph
                  Bahat
              76
              ChairmanJacob
                  Enoch
              58
              DirectorTamir
                  Levinas
              36
              DirectorMichael
                  Ben-Ari
              48
              DirectorGuy
                  Moshe
              56
              Director


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 the education and business experience of each
      of
      our directors and executive officers, including any other directorships held
      by
      our directors in other companies that file reports with the SEC pursuant to
      the
      Exchange Act:





*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.




-
          20 -





*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 activity 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 a Car (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.




*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.




-
          21 -




**Audit
      Committee Financial Expert**





The
      Board
      of Directors has not established an audit committee and does not have an audit
      committee financial expert. The entire Board of Directors acts as the Company’s
      audit committee.





**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, 2007, 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
      11. 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;
      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
      January 3, 2006. 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 six months immediately following such
      termination. Mr. Mateja’s consulting agreement expired on October 2,
      2007.





During
      the fiscal year ending December 31, 2007 Mr. Mateja received $170,000. 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 ending
      December 31, 2007. 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.




-
          22 -




Edward
      Braniff





During
      the fiscal year ending December 31, 2007 Mr. Braniff received $145,000. 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. Mr. Braniff’s consulting agreement expired on May 23,
      2008.





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. During the fiscal year ending December 31, 2007 Mr. Levinas received
      $230,000 in salary. In addition, during the fiscal year ended December 31,
      2007,
      833,333 shares of common stock which were 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.”




-
          23 -





The
      following table sets forth information concerning the compensation paid or
      earned during the fiscal years ended December 31, 2007 and 2006 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, 2007, regardless of
      compensation level; (ii)
      our
      two most highly compensated executive officers other than our principal
      executive officer, who were serving as executive officers at the end of 2007;
      and (iii) up to two additional individuals who have served as the Company’s
      highest paid executives but were not serving as such at the end of
      2007.




**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,
                CEO(1)
              2007
              170,000
              0
              0
              517,042
                  (4)
              0
              0
              0
              687,0422006
              155,000
              64,025(2)
              
              517,515(4)
              0
              0
              8,400
                  (3)
              744,940Edward
                  Braniff,
                CFO(5)
              2007
              145,000
              0
              
              134,379
                  (7)
              0
              0
              0
              279,3792006
              143,333
              56,140
                   (6)
              0
              134,390(7)
              0
              0
              0
              333,863Aharon
                  Y. Levinas,
                CTO(8)
              2007
              230,000
              0
              
              379,042
                  (10)
              0
              0
              0
              609,0422006
              190,000
              
              0
              398,067
                  (9)(10)
              0
              0
              0
              588,067





(1)
      Mr.
      Mateja has been serving as our Chief Executive Officer since October 3, 2005.


(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 and stock options was based on
      the
      following assumptions: $.30 per share on the share grant and 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 the following
      assumptions: a Black-Scholes Model value of $517,515.


(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; 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. The value of such shares and stock options
      was based on the following assumptions: $.30 per share on the share grant and
      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 pro ratably every three months over a 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 the following assumptions: a Black-Scholes Model value of $
      134,390.


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


(9)
      Represents 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 Mr.
      Levinas on October 3, 2006. The value of such stock options was based on the
      following assumptions: a Black-Scholes Model value of $ 19,025.


(10)
      Represents the value of 2,650,000 shares of common stock granted to Mr. Levinas,
      which 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 the following assumptions: a Black-Scholes Model value of $
      379,042.




-
          24 -





**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, 2007.





**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
              ($)
              (e)
            Option
                Expira-
              tion
                Date
              (f)
            Number
                of Shares or Units of Stock That Have Not Vested
              (#)
              (g)
            Market
                Value of Shares or Units of Stock That Have Not Vested
              ($)
              (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)
            1,000,000
            517,515
            0
            066,666(2)
            0
            0
            0.45
            * (1)
            0
            0
            0
            0Edward
                Braniff
            1,000,000(3)
            0
            0
            0.05
            *
                (3)
            166,667
            0
            0
            050,000(4)
            0
            0
            0.30
            *
                  (3)
            0
            0
            0
            033,333(5)
            0
            0
            0.45
            *
                  (3)
            0
            0
            0
            0Aharon
                Y. Levinas
            66,666(6)
            0
            0
            0.45
            0
            0
            0
            0
            02,650,000
            0
            0
            0
            0
            441,666(7)





(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, 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
      vest pro ratably every three months over the three year period commencing
      January 3, 2006 and are 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, 2007, 2,000,000 of such stock options had vested. ****


(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.


(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 pro ratably every three months over
      a
      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, 2007, 843,333 of the stock options had vested.


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


(5)
      On
      December 31, 2006, we issued 33,333 stock options to Mr. Braniff (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, 2007, 2,208,333 of such shares had
      vested.




-
          25 -




**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.





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 in quarterly increments of 45,000 over a three year 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 of vesting.
      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 date
      of
      vesting. Such stock options shall vest quarterly over three years, commencing
      on
      November 9, 2006.




The
      following table sets forth certain information regarding the compensation paid
      to our Directors during the fiscal year ended December 31, 2007. In determining
      the value of the stock options described below, we made the following
      assumptions: The value of the stock option shares was based on a Black-Scholes
      Model value of $ 168,203 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
            71,982
            0
            0
            0
            79,482Amir
                Uziel
            27,000
            0
            14,017
            0
            0
            0
            41,017Joseph
                Bahat
            7,500
            0
            71,982
            0
            0
            0
            79,482Jacob
                Enoch
            7,500
            0
            71,982
            0
            0
            0
            79,482Tamir
                Levinas
            66,000
            0
            71,982
            0
            0
            0
            137,982Peter
              Mateja
            4,000
            0
            86,176
            0
            0
            0
            90,176Mike
              Ben
                Ari
            6,000
            0
            75,436
            0
            0
            0
            81,436Guy
              Moscha
            6,000
            0
            75,436
            0
            0
            0
            81,436




-
          26 -




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





The
      following table lists, as of March 1, 2008, 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.





The
      percentages below are calculated based on 84,672,679 shares of Common Stock
      issued and outstanding as of March 27, 2008. 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
            
            5,201,998
                (1)
            
            6.1%**Directors
                and Executive Officers:**Peter
                Mateja
            
            Common
            
            3,756,666(2)(3)(4)
            
            4.4%Edward
                Braniff
            
            Common
            
            1,183,333
                (5)(6)
            
            1.4%Michael
                Ben-Ari
            
            Common
            
            6,413,824(7)(8)(9)
            
            7.6%Moshe
                Guy
            
            NA
            
            540,000
            
            Less
                than 1%Joseph
                Bahat
            
            Common
            
            655,000(8)
                (9)
            
            Less
                than 1%Jacob
                Enoch
            
            Common
            
            655,000(8)(9)
            
            Less
                than 1%Aharon
                Y. Levinas
            
            Common
            
            13,678,466
                (8)(9)(10)(11)
            
            16.2%Tamir
                Levinas
            
            Common
            
            2,600,000(8)(9)
            
            3.0%All
                directors andexecutive
                officers as a
              group
                (6 persons)
            
            Common
            
            29,518,072
              (2)(3)(4)(5)(6)(7)(8)(9)(10)(11)
            
            34.9%





(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 3,000,000 shares of common stock issuable upon exercise of 3,000,000
      stock options granted to Mr. Mateja 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. Such stock options shall vest pro ratably every three months over the
      three year period commencing three months from October 3, 2005.


(3)
      Includes 150,000 shares and 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.


(4)
      Includes shares of common stock issuable upon exercise of 540,000 stock options
      granted to Mr. Mateja 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. 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 stock options shall vest quarterly over the three year period
      commencing on the date of the letter agreement.


(5)
      Includes 1,000,000 shares of common stock issuable upon exercise of 1,000,000
      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. 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 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.


(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 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. See Note 1 above.


(8)
      Includes shares of common stock issuable upon exercise of 345,000 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 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.


(9)
      Includes shares of common stock issuable upon exercise of 195,000 stock options
      granted to such person pursuant to a 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
      stock options shall vest quarterly over the three year period commencing three
      months from the date of the board meeting, so that 16,250 stock options shall
      vest every three months.


(10)
      Includes 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.


(11)
      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.




-
          27 -





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





**Related
      Transactions**





On
      August
      17, 2007, the Company issued 100,000 shares of common stock to Edward Braniff,
      the Company’s Chief Financial Officer, as a bonus that was granted to Mr.
      Braniff on October 25, 2006.




On
      July
      2, 2007, the Company issued 45,000 shares of common stock to Michael Ben-Ari,
      a
      director of the Company.
      These shares were issued upon exercise of options granted to Mr. Ben-Ari, as
      consideration for his service on the Company’s board of directors, for an
      aggregate exercise price of $15,750.





On
      May
      17, 2007, the Company issued 1,333,333 shares of common stock to Michael Ben-Ari
      as consideration for consulting services provided to the Company.





During
      the three months ended September 30, 2006, the Company issued 142,857 shares
      of
      common stock to EGFE, Ltd. EGFE 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 February 26, 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.




On
      September 14, 2006, the Company issued to EGFE a demand promissory note, in
      the
      principal amount of $500,000. In consideration therefor, EGFE 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.





On
      May
      22, 2006, the Company issued to EGFE 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.





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 outstanding 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
      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.


-
          28 -




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. As compensation for his services, Mr. Mateja will receive an
      annual base salary of $150,000 and 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. In
      addition, 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. The term of
      the
      Consulting Agreement was for one year, commencing on the date thereof.  On
      October 3, 2006 Mr. Mateja’s consulting agreement was renewed and amended, to
      provide for an annual base salary of $170,000 and $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 six months
      immediately following such termination. Mr. Mateja’s consulting agreement
      expired on October 2, 2007.





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.





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 in quarterly increments of 45,000 over a three year 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 of vesting.
      If
      the Company undergoes a change in control, all stock options shall vest
      automatically upon the date of such change in control.





On
      July
      1, 2005, the Company entered into a Consulting Agreement with Tamir Levinas,
      which was thereafter amended in February, 2006. Mr. Levinas manages our 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 was employed by the Company as its Chief Financial
      Officer with an annual base salary of $140,000, an annual bonus of $50,000
      based
      on performance, and options for 1,000,000 shares at $0.05. On October 25, 2006
      Mr. Braniff’s employment agreement was amended and restated to provide for an
      annual base salary of $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. Mr. Braniff’s employment agreement was
      amended and restated on October 25, 2006 to provide for an annual base salary
      of
      $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 paid 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. Mr. Braniff’s employment agreement expired
      on May 22, 2008.




-
          29 -





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. Mr. Levinas shall receive a cell phone and a car allowance.
      The
      consulting agreement with Mr. Levinas provides that if Mr. 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 amounts due Mr. Levinas thereunder. Mr. Levinas’ agreement was
      amended on April 18 and May 18 of 2005 to provide, among other things, for
      a
      grant of 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. ****





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.





**Director
      Independence**





We
      believe that the following of our directors currently meet the definition of
      “independent” as promulgated by the rules and regulations of NASDAQ: Joseph
      Bahat, Jacob Enoch, Guy Moshe and Michael Ben-Ari.





Peter
      Mateja, Aharon Levinas and Tamir Levinas are employees or relatives of employees
      of the Company and do not qualify as “independent” under the rules and
      regulations of NASDAQ.





**Item
      14.**  **Principal
      Accounting Fees and Services**





Chisholm,
      Bierwolf & Nilson, LLC has been serving as the Company’s auditor 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,
                2007
            
            Fiscal
                year ending
              December 31,
                2006Audit
                Fees
            
            $
            22,686
            
            $
            22,686Audit
                Related Fees
            
            $
            8,158
            
            $
            8,158Tax
                Fees
            
            $
            0
            
            $
            0All
                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.





**Item
      15. Exhibits, Financial Statement Schedules**





**(a)
      Financial Statements:**





Our
      financial statements, as indicated by the Index to Consolidated Financial
      Statements set forth below, begin on page F-1 of this Form 10-K, and
      are hereby incorporated by reference. Financial statement schedules have been
      omitted because they are not applicable or the required information is included
      in the financial statements or notes thereto.




Report
                of Independent Registered Public Accounting Firms
            
            
            F-1Balance
                Sheet
            
            
            F-2Statements
                of Operations
            
            
            F-3Statements
                of Stockholders' Equity
            
            
            F-4Statements
                of Cash Flows
            
            
            F-5
                - F-6Notes
                to the Financial Statements
            
            
            F-7
                - F-18




-
          30
          -




**(b)
      Exhibits:**




3.1
                
                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 current report on Form 8-K as Exhibit 10.9, filed
                    with the SEC on April 22, 200710.6
                
                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 as exhibit 10.22 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 as exhibit 10.23 with the Company’s Current Report on Form 8-K,
                    filed with the SEC on January 23,
                    2006
 10.9
                
                15%
                    Convertible Promissory Note Due May 24, 2007, made by the Company
                    in favor
                    of EGFE, Ltd.
                
                Previously
                    filed as exhibit 10.26 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 as exhibit 10.27 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 as exhibit 10.28 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 as exhibit 10.29 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 as exhibit 10.30 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 as exhibit 10.31 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
                
                Previously
                    filed as exhibit 10.15 to the Company’s annual report on 10-KSB filed with
                    the SEC on April 13, 200710.16
                
                First
                    Amendment to Consulting Agreement, dated November, 2006, between
                    Pete
                    Mateja and the Company
                
                Previously
                    filed as exhibit 10.15 to the Company’s annual report on 10-KSB filed with
                    the SEC on April 13, 200710.17
                
                Director
                    Agreement, dated March 19, 2007, between the Company and Moshe
                    Guy
                
                Previously
                    filed as exhibit 10.1 with the Company’s Current Report on Form 8-K, filed
                    with the SEC on March 23, 200710.18
                
                Director
                    Agreement, dated March 19, 2007, between the Company and Pete
                    Mateja
                
                Previously
                    filed as exhibit 10.3 with the Company’s Current Report on Form 8-K, filed
                    with the SEC on March 23, 200710.19
                
                Director
                    Agreement, dated March 19, 2007, between the Company and Michael
                    Ben-Ari
                
                Previously
                    filed as exhibit 10.2 with the Company’s Current Report on Form 8-K, filed
                    with the SEC on March 23,
                    2007
  -
            31
            -
  10.20
                  
                  Distibutor
                      Agreement between the Company and OnGuard Dealer Services
                      LLC
                  
                  Previously
                      filed as exhibit 10.2 with the Company’s Form 8-KA, filed with the SEC on
                      March 24, 200810.21
                  
                  Letter
                      of Intent between the Company and Carter Group Canadian
                  
                  Previously
                      filed as exhibit 99.1 with the Company’s Form 8-K, filed with the SEC on
                      August 15, 200710.22
                  
                  Stock
                      Purchase Agreement ($0.30 offering)
                  
                  Previously
                      filed as exhibit 10.32 with the Company’s Form 8-K, filed with the SEC on
                      January 9, 200710.23
                  
                  Lock-up
                      letter (form of)
                  
                  Previoulsy
                      filed as exhibit 10.25 with the Company’s Form 8-K, filed with the SEC on
                      March 7, 200610.24
                  
                  Distributorship
                      Agreement between the Company and Superior Automotive
                      Company
                  
                  Previoulsy
                      filed as exhibit 10.24 with the Company’s Form 8-K, filed with the SEC on
                      January 23, 200610.25
                  
                  Director
                      Agreement between the Company and Joseph Bahat
                  
                  Previously
                      filed as exhibit 10.17 with the Company’s Form 8-K, filed with the SEC on
                      August 2, 200610.26
                  
                  Director
                      Agreement between the Company and Jacob Enoch
                  
                  Previously
                      filed as exhibit 10.18 with the Company’s Form 8-K, filed with the SEC on
                      August 2, 200510.27
                  
                  Director
                      Agreement between the Company and Aharon Y. Levinas
                  
                  Previously
                      filed as exhibit 10.19 with the Company’s Form 8-K, filed with the SEC on
                      August 2, 200510.28
                  
                  Director
                      Agreement between the Company and Tamir Levinas
                  
                  Previously
                      filed as exhibit 10.20 with the Company’s Form 8-K, filed with the SEC on
                      August 2, 200510.29
                  
                  Director
                      Agreement between the Company and Amir Uziel
                  
                  Previously
                      filed as exhibit 10.21 with the Company’s Form 8-K, filed with the SEC on
                      August 2, 200510.30
                  
                  Agreement
                      between the Company and Tamir Levinas
                  
                  Previously
                      filed as exhibit 10.16 with the Company’s Form 8-K, filed with the SEC on
                      July 20, 200510.31
                  
                  Agreement
                      between the Company and E. Schnapp & Co. Works Ltd.
                  
                  Previously
                      filed as exhibit 10.14 with the Company’s Form 8-K, filed with the SEC on
                      July 1, 200510.32
                  
                  Consulting
                      Agreement between the Company and Shiri Levinas
                  
                  Previously
                      filed as exhibit 10.15 with the Company’s Form 8-K, filed with the SEC on
                      July 1, 200510.33
                  
                  Second
                      Amendment and Restated to Employment Agreement between the
                      Company and
                      Aharon Levinas
                  
                  Previously
                      filed as exhibit 10.3 with the Company’s Form 10-QSB, filed with the SEC
                      on May 23, 200510.34
                  
                  Regulation
                      S Subscription Agreement ($0.50 per share)
                  
                  Previously
                      filed as exhibit 10.10 with the Company’s Form 8-K, filed with the SEC on
                      April 22, 200510.35
                  
                  Regulation
                      S Subscription (1 unit= 1 share of common stock, 1 Class A
                      Warrant, and 1
                      Class B Warrant at $0.20 per unit)
                  
                  Previously
                      filed as exhibit 10.11 with the Company’s Form 8-K, filed with the SEC on
                      April 22, 200510.36
                  
                  Class
                      A Warrant Agreement
                  
                  Previously
                      filed as exhibit 10.12 with the Company’s Form 8-K, filed with the SEC on
                      April 22, 200510.37
                  
                  Class
                      B Warrant Agreement
                  
                  Previously
                      filed as exhibit 10.13 with the Company’s Form 8-K, filed with the SEC on
                      April 22, 2005
  31.1
                
                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


-
          32 -




**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:
                March 31, 2008
            By:
            /s/
                Peter MatejaName:
                Peter MatejaTitle:
                Chief Executive Officer and DirectorDated:
                March 31, 2008
            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
            
            Chief
                Executive Officer
            
            March
                31, 2008Pete
              Mateja/s/
                Edward Braniff
            
            Chief
                Financial Officer
            
            March
                31, 2008Edward
              Braniff/s/
                Aharon Y. Levinas
            
            Chief
                Technology Officer
              and
                Director
            
            March
                31, 2008Aharon
              Y. Levinas/s/
                Tamir Levinas
            
            Director
            
            March
                31, 2008Tamir
              Levinas/s/
                Joseph Bahat
            
            Chairman
                and Director
            
            March
                31, 2008Joseph
              Bahat/s/
                Guy Moshe
            
            Director
            
            March
                31, 2008Guy
              Moshe/s/
                Michael Ben-Ari
            
            Director
            
            March
                31, 2008Michael
              Ben-Ari/s/
                Jacob Enoch
            
            Director
            
            March
                31, 2008Jacob
              Enoch




-
            33 -









**SMART
      ENERGY SOLUTIONS, INC.**





**FINANCIAL
      STATEMENTS**





**December
      31, 2007 and 2006**











**C
      O N T E N T S**




Report
                of Independent Registered Public Accounting Firm
            F-1Balance
                Sheets
            F-2Statements
                of Operations
            F-3Statements
                of Stockholders' Equity (Deficit)
            F-4Statements
                of Cash Flows
            F-5Notes
                to the Financial Statements
            F-6
                - F-18














F-1






**SMART
                  ENERGY SOLUTIONS, INC.**Balance
                  Sheets
  ASSETSDecember
                  31,
              
              December
                  31,2007
              
              2006CURRENT
                  ASSETSCash
              
              $
              70,902
              
              $
              963,627Accounts
                  receivable, net
              
              
              259,552
              
              
              1,230,588Inventory
              
              
              955,912
              
              
              213,441Prepaid
                  expenses
              
              
              485
              
              
              154,709Total
                  Current Assets
              
              
              1,286,851
              
              
              2,562,365PROPERTY
                  AND EQUIPMENT, net
              
              
              42,062
              
              
              54,796OTHER
                  ASSETSDeferred
                  loan fees, net
              
              
              -
              
              
              81,378Trademark,
                  net
              
              
              715
              
              
              1,001Deposits
              
              
              23,700
              
              
              32,513Battery
                  Brain technology, net
              
              
              23,449
              
              
              33,871Total
                  Other Assets
              
              
              47,864
              
              
              148,763TOTAL
                  ASSETS
              
              $
              1,376,777
              
              $
              2,765,924LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $
              481,060
              
              $
              309,924Bank
                  overdraft
              
              
              52,294
              
              
              71,424Deferred
                  revenue
              
              
              140,000
              
              
              -Convertible
                  debt, net
              
              
              1,475,613
              
              
              1,459,795Total
                  Current Liabilities
              
              
              2,148,967
              
              
              1,841,143TOTAL
                  LIABILITIES
              
              
              2,148,967
              
              
              1,841,143COMMITMENTS
              
              
              -
              
              
              -STOCKHOLDERS'
                  EQUITYPreferred
                  stock:no par value;1,000,000 sharesauthorized;
                  none outstandingCommon
                  stock, no par value; 500,000,000 shares authorized;
                  82,022,679and
                  71,510,628 shares issued and outstanding, respectively
              
              
              15,722,872
              
              
              9,523,164Accumulated
                  deficit
              
              
              (16,495,062
              )
              
              (8,598,383
              )Total
                  Stockholders' Equity (Deficit)
              
              
              (772,190
              )
              
              924,781TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              1,376,777
              
              $
              2,765,924The
                  accompanying notes are an integral part of these condensed financial
                  statements.




F-2




**SMART
                  ENERGY SOLUTIONS, INC.**Statements
                  of Operations
  For
                  the Years EndedDecember
                  31,2007
              
              2006REVENUES
              
              $
              1,244,108
              
              $
              1,818,973COST
                  OF GOODS SOLD
              
              
              933,836
              
              
              1,184,889GROSS
                  PROFIT
              
              
              310,272
              
              
              634,084OPERATING
                  EXPENSESGeneral
                  and administrative
              
              
              2,687,557
              
              
              1,520,223Marketing
                  and advertising
              
              
              350,190
              
              
              437,125Professional
                  fees
              
              
              334,506
              
              
              150,345Consultation
                  fees
              
              
              4,644,482
              
              
              3,517,992Total
                  Operating Expenses
              
              
              8,016,735
              
              
              5,625,685LOSS
                  FROM OPERATIONS
              
              
              (7,706,463
              )
              
              (4,991,601
              )OTHER
                  INCOME (EXPENSES)Interest
                  income
              
              
              35,602
              
              
              19,315Interest
                  expense
              
              
              (225,818
              )
              
              (190,345
              )Total
                  Other Income (Expenses)
              
              
              (190,216
              )
              
              (171,030
              )NET
                  LOSS BEFORE INCOME TAXES
              
              
              (7,896,679
              )
              
              (5,162,631
              )INCOME
                  TAX EXPENSE
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (7,896,679
              )
              $
              (5,162,631
              )BASIC
                  LOSS PER SHARE
              
              $
              (0.10
              )
              $
              (0.08
              )BASIC
                  WEIGHTED AVERAGE NUMBER OFCOMMON
                  SHARES OUTSTANDING
              
              
              78,979,737
              
              
              67,453,046The
                  accompanying notes are an integral part of these condensed financial
                  statements.




F-3




**SMART
                  ENERGY SOLUTIONS, INC.**Statements
                  of Stockholders' Equity (Deficit)For
                  the Period January 1, 2006 through December 31,
                  2007
  Shares
              
              Amount
              
              Deficit
              
              TotalBalance,
                  January 1, 2006
              
              
              63,279,605
              
              $
              4,373,047
              
              $
              (3,435,752
              )
              $
              937,295Common
                  stock issued for cash
              
              
              5,959,845
              
              
              1,889,416
              
              
              -
              
              
              1,889,416Common
                  stock issued for services
              
              
              1,742,607
              
              
              1,001,220
              
              
              -
              
              
              1,001,220Common
                  stock issued forexercise
                  of warrants
              
              
              200,000
              
              
              90,000
              
              
              -
              
              
              90,000Common
                  stock issued forloan
                  fees
              
              
              328,571
              
              
              157,714
              
              
              -
              
              
              157,714Valuation
                  of options and warrants
              
              
              -
              
              
              1,963,521
              
              
              -
              
              
              1,963,521Value
                  attributable to beneficialconversion
                  feature ofconvertible
                  debt
              
              
              -
              
              
              48,246
              
              
              -
              
              
              48,246Net
                  loss for the year endedDecember
                  31, 2006
              
              
              -
              
              
              -
              
              
              (5,162,631
              )
              
              (5,162,631
              )Balance,
                  December 31, 2006
              
              
              71,510,628
              
              
              9,523,164
              
              
              (8,598,383
              )
              
              924,781Common
                  stock issued for cash
              
              
              5,946,531
              
              
              1,900,832
              
              
              -
              
              
              1,900,832Common
                  stock issued for services
              
              
              4,287,270
              
              
              2,346,526
              
              
              -
              
              
              2,346,526Common
                  stock issued forexercise
                  of options
              
              
              278,250
              
              
              63,085
              
              
              -
              
              
              63,085Valuation
                  of options and warrants
              
              
              -
              
              
              1,889,265
              
              
              -
              
              
              1,889,265Net
                  loss for the year endedDecember
                  31, 2007
              
              
              -
              
              
              -
              
              
              (7,896,679
              )
              
              (7,896,679
              )Balance,
                  December 31, 2007
              
              
              82,022,679
              
              $
              15,722,872
              
              $
              (16,495,062
              )
              $
              (772,190
              )The
                  accompanying notes are an integral part of these condensed financial
                  statements.




F-4




**SMART
                  ENERGY SOLUTIONS, INC.**Statements
                  of Cash Flows
  For
                  the Years EndedDecember
                  31,2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (7,896,679
              )
              $
              (5,162,631
              )Adjustments
                  to reconcile net loss tonet
                  cash used by operating activities:Warrants
                  and options issued for services
              
              
              1,889,265
              
              
              1,963,521Common
                  stock issued for services
              
              
              2,346,526
              
              
              1,001,220Accretion
                  of discount on convertible notes payable
              
              
              15,818
              
              
              8,041Depreciation
                  and amortization
              
              
              106,820
              
              
              149,178Changes
                  in operating assets and liabilities:(Increase)
                  decrease in prepaid expenses and deposits
              
              
              163,037
              
              
              (157,929
              )(Increase)
                  decrease in accounts receivable
              
              
              971,036
              
              
              (1,214,905
              )(Increase)
                  in inventory
              
              
              (742,471
              )
              
              (18,787
              )Increase
                  (decrease) in accounts payable, bank overdraftand
                  accrued expenses
              
              
              152,006
              
              
              49,088Increase
                  in deferred revenue
              
              
              140,000
              
              
              -Net
                  Cash Used by Operating Activities
              
              
              (2,854,642
              )
              
              (3,383,204
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of equipment
              
              
              (2,000
              )
              
              (22,130
              )Net
                  Cash Used by Investing Activities
              
              
              (2,000
              )
              
              (22,130
              )CASH
                  FLOWS FROM FINIANCING ACTIVITIESLoan
                  fees paid
              
              
              -
              
              
              (50,000
              )Proceeds
                  from exercise of common stock warrants
              
              
              -
              
              
              90,000Proceeds
                  from convertible notes payable
              
              
              -
              
              
              1,500,000Proceeds
                  from exercise of stock options
              
              
              63,085
              
              
              -Proceeds
                  from issuance of common stock
              
              
              1,900,832
              
              
              1,889,416Net
                  Cash Provided by Financing Activities
              
              
              1,963,917
              
              
              3,429,416NET
                  INCREASE (DECREASE) IN CASH
              
              
              (892,725
              )
              
              24,082CASH
                  AT BEGINNING OF YEAR
              
              
              963,627
              
              
              939,545CASH
                  AT END OF YEAR
              
              $
              70,902
              
              $
              963,627The
                  accompanying notes are an integral part of these condensed financial
                  statements.




F-5




**SMART
                  ENERGY SOLUTIONS, INC.**Statements
                  of Cash Flows (Continued)
  For
                  the Years EndedDecember
                  31,2007
              
              2006SUPPLIMENTAL
                  DISCLOSURES OFCASH
                  FLOW INFORMATION:Cash
                  Paid for:Interest
              
              $
              210,411
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -NON-CASH
                  FINANCING AND INVESTING ACTIVITIES:Common
                  stock issued for services
              
              $
              2,346,526
              
              $
              1,001,220Warrants
                  and options issued for services
              
              $
              1,889,265
              
              $
              1,963,521Common
                  stock issued for loan fees
              
              $
              -
              
              $
              157,714


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






F-6




**SMART
      ENERGY SOLUTIONS, INC.**


Notes
        to
        Financial Statements


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 cannot 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.





Share-Based
      Payments -The
      Company has adopted the fair value based method of accounting for stock-based
      employee compensation in accordance with Statement of Financial Accounting
      Standards Number 123 (REVISED 2004), "Share-Based Payment" (SFAS 123[R]). In
      accordance with SFAS 123[R], option expense of $1,889,265 and $1,963,521 was
      recognized for the years ended December 31, 2007 and 2006, respectively. The
      expense was calculated using the Black-Scholes valuation model.





Fair
      Value of Financial Instruments - The
      carrying value of cash and cash equivalents, accounts receivable and accounts
      payable approximates fair value due to the short-term maturity of these
      instruments. The carrying value of notes payable approximates fair value because
      negotiated terms and conditions are consistent with current market rates as
      of
      December 31, 2007 and 2006.





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-7




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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





Concentration
      of Credit Risk -
      Financial instruments, which potentially subject us to concentrations of credit
      risk, consist principally of cash and trade receivables. Concentrations of
      credit risk with respect to trade receivables are limited due to the clients
      that comprise our customer base and their dispersion across different business
      and geographic areas. We estimate and maintain an allowance for potentially
      uncollectible accounts and such estimates have historically been within
      management's expectations. Our cash balances are maintained in accounts held
      by
      major banks and financial institutions located in the United States. The Company
      occasionally maintains amounts on deposit with a financial institution that
      are
      in excess of the federally insured limit of $100,000. Statement of Financial
      Accounting Standards No. 105 identifies this as a concentration of credit risk
      requiring disclosure, regardless of the degree of risk. The risk is managed
      by
      maintaining all deposits in high quality financial institutions. The Company
      had
      no amounts in excess of federally insured limits at December 31,
      2007.





During
      the year ended December 31, 2007, the Company had customers that accounted
      for
      approximately 27% and 13% of its revenues, respectively.





During
      the year ended December 31, 2006, the Company had one customer that accounted
      for approximately 39% of its revenues.





Basic
      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
                31,2007
            
            2006NET
                LOSS
            
            $
            (7,896,679
            )
            $
            (5,162,631
            )BASIC
                LOSS PER COMMON SHARE
            
            $
            (0.10
            )
            $
            (0.08
            )BASIC
                WEIGHTED AVERAGENUMBER
                OF SHARES OUTSTANDING
            
            
            78,979,737
            
            
            67,453,046





The
      computation of loss 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, consisting of 10,934,665 and 10,223,665 in options
      and
      16,560,037 and 16,850,518 in warrants were considered but were not included
      in
      the computation of loss per share at December 31, 2007 and 2006, respectively,
      because they would have been 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.








F-8




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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





Revenue
      Recognition -
      The
      Company applies the provisions of SEC Staff Accounting Bulletin No. 104,
      "Revenue Recognition in Financial Statements" ("SAB 104"), which provides
      guidance on the recognition, presentation and disclosure of revenue in financial
      statements filed with the SEC. SAB 104 outlines the basic criteria that must
      be
      met to recognize revenue and provides guidance for disclosure related to revenue
      recognition policies. In general, the Company recognizes revenue related to
      goods and services provided when (i) persuasive evidence of an arrangement
      exists, (ii) delivery has occurred or services have been rendered, (iii) the
      fee
      is fixed or determinable, and (iv) collectability is reasonably
      assured.





The
      Company's revenues are generated from sale of products. Revenues from the sale
      of products are generally recognized upon shipment of product, which corresponds
      with the transfer of title. The costs of shipping are typically billed to the
      customer upon shipment and are included in cost of sales. Deposits from
      customers for orders to be delivered in the future are recorded as deferred
      revenues. The Company has $140,000 in deferred revenues as of December 31,
      2007.





Research
      and Development -The
      Company follows the policy of expensing its research and development costs
      in
      the period in which they are incurred in accordance with SFAS No. 2, “Accounting
      for Research and Development Costs”. The Company incurred research and
      development expenses of $423,441 and $128,296 during the years ended December
      31, 2007 and 2006, 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 and
      comprised of the following as of December 31:


2007
            
            2006Finished
                goods
            
            $
            314,432
            
            $
            82,132Work
                in progress
            
            
            -
            
            
            -Raw
                materials
            
            
            641,480
            
            
            131,309$
            955,912
            
            $
            213,441


The
      Company has not recorded a reserve for obsolescence as of December 31, 2007
      and
      2006.





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,
      2007 and 2006, an allowance for doubtful receivables $21,367 and $64,882,
      respectively, was considered necessary. Trade receivables of $197,963, and
      $-0-
      were written off when deemed uncollectible during 2007 and 2006, respectively.
      Recoveries of trade receivables previously written off are recorded when
      received.





Income
      Taxes -
      The
      Company has adopted FASB 109 to account for income taxes. The Company currently
      has no issues which create timing differences that would


mandate
      deferred tax expense. Net operating losses would create possible tax assets
      in
      future years, but due to the uncertainty as to the utilization of
      net





F-9




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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




operating
      loss carry forwards, a valuation allowance has been made to the extent of any
      tax benefit that net operating losses may generate.





Net
      deferred tax assets consist of the following components as of December 31,
      2007
      and 2006:




2007
            
            2006Deferred
                tax assets:NOL
                Carryover
            
            $
            2,935,623
            
            $
            1,597,403Deferred
                tax liabilities:
            
            
            -
            
            
            -Valuation
                allowance
            
            
            (2,935,623
            )
            
            (1,597,403
            )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, 2007 and 2006 due
      to
      the following:




2007
            
            2006Book
                Loss from Operations
            
            $
            (3,074,611
            )
            $
            (2,013,426
            )Options
                and warrants issued for services
            
            
            736,813
            
            
            637,372Common
                stock issued for services
            
            
            980,470
            
            
            490,107Allowance
                for bad debts
            
            
            19,107
            
            
            24,624Valuation
                allowance
            
            
            1,338,221
            
            
            861,323$
            -
            
            $
            -




At
      December 31, 2007, the Company had net operating loss carry forwards of
      approximately $8,533,000 that may be offset against future taxable income from
      the year 2024 through 2027. No tax benefit has been reported in the December
      31,
      2007financial 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.





Intangible
      Assets -
      Intangible assets consist of technology and trademark costs. Technology costs
      are acquisition costs. Trademark costs are costs incurred to develop and file
      trademark applications. If the technology is purchased or the trademarks are
      approved, the costs are amortized using the straight-line method over the
      estimated lives of 5 years for technology and 5 years for trademarks.
      Unsuccessful trademark application costs are expensed at the time the
      application is denied. Management assesses the carrying values of long-lived
      assets for impairment when circumstances warrant such a review. In performing
      this assessment, management considers current market analysis and appraisal
      of
      the technology, along with estimates of future cash flows. The Company
      recognizes impairment losses when undiscounted cash flows estimated to be
      generated from long-lived assets are less than the amount of unamortized assets.





F-10




**SMART
      ENERGY SOLUTIONS, INC.**


Notes
          to
          Financial Statements


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




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.
      Trademarks that are pending or are being developed are not being amortized.


Future
      Amortization of these Costs is as follows:





2008
            
            $
            10,7072009
            
            $
            10,7072010
            
            $
            2,750


Amortization
      expense for the years ended December 31, 2007 and 2006 was $10,707 and $10,707,
      respectively. The Company has recorded no impairment of its intangible assets
      in
      2007 or 2006.





Property
      and Equipment -The
      Company’s property and equipment are comprised of the following December 31,
      2007:





Office
                equipment
            
            $
            35,853Trade
                show booth
            
            
            4,650Molds
            
            
            22,500Leasehold
                improvements
            
            
            11,66574,668Accumulated
                depreciation
            
            
            (32,606
            )Net
                Property and Equipment
            
            $
            42,062





The
      equipment is depreciated over its estimated useful life of 5 years under the
      straight-line method. Leasehold improvements are depreciated over the lesser
      of
      the lease term or the useful life of the asset. Depreciation expense for the
      years ended December 31, 2007 and 2006 was $14,734 and $12,134, respectively.





Beneficial
      Conversion Feature -The
      Company has adopted Emerging Issues Task Force ("EITF") Issue No. 98-5,
      "Accounting for Convertible Securities with Beneficial Conversion Features
      or
      Contingently Adjustable Conversion Ratios," and EITF Issue No. 00-27,
      "Application of EITF Issue No. 98-5 to Certain Convertible Instruments." The
      Company incurred debt with a conversion feature that provides for a rate of
      conversion that is below market value. This feature is recorded by the Company
      as a beneficial conversion feature pursuant to EITF Issues No. 98-5 and 00-27.
      Expense recorded on the Company's financial statements during the years ended
      December 31, 2007 and 2006 as a result of adoption of EITF issues No. 98-5
      and
      00-27 totaled $15,818 and $8,041, respectively.





Recent
      Accounting Pronouncements -
      In
      December 2007, the FASB issued SFAS 160, “Noncontrolling interests in
      Consolidated Financial Statements - an amendment of ARB No. 51”. This Statement
      amends ARB 51 to establish accounting and reporting standards for the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary is
      an
      ownership interest in the consolidated entity that should be reported as equity
      in the consolidated financial statements. This Statement is effective for fiscal
      years beginning on or after December 15, 2008. Early adoption is not permitted.
      Management is currently evaluating the effects of this statement, but it is
      not
      expected to have any impact on the Company’s financial statements.





F-11




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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





In
      February 2007 , the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities. SFAS 159 creates a fair value option allowing
      an entity to irrevocably elect fair value as the initial and subsequent
      measurement attribute for certain financial assets and financial liabilities,
      with changes in fair value recognized in earnings as they occur. SFAS 159 also
      requires an entity to report those financial assets and financial liabilities
      measured at fair value in a manner that separates those reported fair values
      from the carrying amounts of assets and liabilities measured using another
      measurement attribute on the face of the statement of financial position.
      Lastly, SFAS 159 requires an entity to provide information that would allow
      users to understand the effect on earnings of changes in the fair value on
      those
      instruments selected for the fair value election. SFAS 159 is effective for
      fiscal years beginning after November 15, 2007 with early adoption permitted.
      The Company is continuing to evaluate SFAS 159 and to assess the impact on
      its
      results of operations and financial condition if an election is made to adopt
      the standard.





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.


In
      June
      2007, the Financial Accounting Standards Board issued FAS No. 141R, *Business
      Combinations* - This
      Statement implements certain revisions to SFAS 141, including changes to the
      measurement of purchase consideration, measurement of goodwill, capitalization
      of in-process research and development, and definition of the acquisition date.
      This statement is effective for fiscal years, and interim periods within those
      fiscal years, beginning on or after December 15, 2008. The implementation of
      this pronouncement had no effect on the Company’s consolidated financial
      statements.





Advertising
      and Marketing -The
      Company expenses advertising costs in the period in which they are incurred.
      Advertising and marketing expense was $350,190 and $437,125 for the years ended
      December 31, 2007 and 2006, respectively.





Deferred
      Loan Fees -In
      connection with the $1,500,000 of convertible debt issued by the Company during
      2006, the Company paid loan fees of $50,000 in cash and issued $157,714 in
      shares of its common stock. The loan fees are being amortized over the one
      year
      term of the convertible debt. The Company recorded amortization expense of
      $81,378 and $126,336 during the years ended December 31, 2007 and 2006,
      respectively.




F-12




**SMART
      ENERGY SOLUTIONS, INC.**


Notes
          to
          Financial Statements


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 $16,495,062 at December 31, 2007 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-  CAPITAL
      STRUCTURE





The
      Company has 1,000,000 shares of preferred stock authorized with no par value.
      No
      preferred shares are issued and outstanding at December 31, 2007 and 2006.
      The
      rights and preferences of the preferred stock will be determined by the board
      of
      directors at the time of issuance.





The
      Company has 500,000,000 shares of common stock authorized with no par value.
      All
      common shares are entitled to one vote per share in all matters submitted to
      the
      shareholders.





During
      the year ended December 31, 2007, the Company issued 278,250 shares of its
      common stock to unrelated investor for an aggregate cash inflow of $63,085
      upon
      the exercise of their warrants at $0.45 per share. The Company also issued 4,777,781
      shares for cash at $0.30 per share and 1,168,750 shares for cash at $0.40 per
      share for an aggregate cash inflow of $1,900,832.





During
      January 2007, the Company issued 250,000 shares of common stock at $0.54 per
      share for services rendered for a total value of $135,000 and 360,000 shares
      of
      common stock for services at $0.46 per share for a value of $163,800. During
      March 2007, the Company issued 350,000 shares of common stock for services
      rendered at $0.58 per share for a value of $203,000, 25,000 shares of common
      stock at $0.60 for a value of $15,000 and 166,000 shares of common stock at
      $0.59 for a value of $97,940.During May 2007, the Company issued 40,000 shares
      of common stock for services at $0.59 per share rendered for a value of $23,600,
      1,333,333 shares at $0.58 for a value of $773,333 and 350,000 shares at $0.59
      for a value of $206,500. During June 2007, the Company issued 350,000 shares
      for
      services at $0.55 per share for a value of $189,000. During August 2007, the
      Company issued 170,000 shares for services at $0.57 per share for a value of
      $96,900. During September 2007, the Company issued 600,000 shares for services
      at $0.50 per share for a value of $306,000. In October 2007, the Company issued





F-13




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


NOTE
      3-  CAPITAL
      STRUCTURE (CONTINUED)




110,000
      shares of common stock at $0.50 per share for services rendered for a value
      of
      $55,000, In December 2007, the Company issued 151,937 shares of common stock
      at
      $0.43 per share for services rendered for a value of $65,333.




During
      the year ended December 31, 2006, the Company issued 200,000 shares of its
      common stock to an unrelated investor for an aggregate cash inflow of $90,000
      upon the exercise of their warrants at $0.45 per share. The Company also issued 2,279,291
      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
      $1,889,416.





During
      January 2006, the Company issued 620,000 shares of common stock at $0.81 per
      share for services rendered for a total value of $502,200. 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 $244,200. During July 2006, the Company issued 328,571
      shares as loan fees at $0.40 per share for a value of $157,714. In November
      2006, the Company issued 267,857 shares of common stock at $0.35 per share
      for services
      rendered for a value of $93,750. 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.





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.





NOTE
      4
      -  CONVERTIBLE DEBT





During
                2006, the Company raised $1,000,000 through the issuance of 15% unsecured
                convertible debt and $500,000 from the issuance of 12% unsecured
                convertible debt. The debt with the accrued interest is due, by extension,
                on September 8, 2008. The Company was unable to repay the debt on
                the
                original due date, accordingly the holders thereof have the right
                to
                convert the debt to equity.





Per
      the
      convertible debt agreement the conversion price is to be calculated by dividing
      the amount of outstanding principal and interest that the holder elects to
      convert by the average of the conversion price. The conversion price is 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 ending the day prior to the Company's
      receipt of the holders' written notice of election to convert. Since the
      convertible debt can be converted at anytime from the signing of the agreement
      forward, the closing prices of the five trading days prior to May 24, 2006
      were
      used for the calculation of beneficial conversion feature.





The
      value
      of the beneficial conversion feature was determined using the intrinsic value
      method. The amount recorded as a discount to the convertible debt was $48,246.
      The discount is being amortized over the 2 year term of the convertible debt,
      accordingly, the Company recorded $15,818 and $8,041 in expense for the
      accretion of the discount during the years ended December 31, 2007 and 2006.
      The





F-14




**SMART
      ENERGY SOLUTIONS, INC.**


Notes
          to
          Financial Statements


NOTE
      4-  CONVERTIBLE DEBT (Continued)





Company
      has accrued $119,384 and $119,384 in interest payable on the convertible debt
      as
      of December 31, 2007 and 2006. Interest expensed and paid during the year ended
      December 31, 2007 was $210,411.





A
      summary
      of the Secured Convertible Notes at December 31, 2007:


Convertible
                secured notes: 15% per annum due September 8, 2008
            
            $
            1,000,000Convertible
                secured notes: 12% per annum due September 8, 2008
            
            
            500,000Discount
                on debt, net of accumulated amortization of $32,164
            
            
            (24,387
            )Net
                convertible secured debentures
            
            $
            1,475,613




All
                notes are shown as current liabilities due to their maturity date
                during
                the year ended December 31, 2008.





NOTE
      5
      -  COMMON
      STOCK PURCHASE WARRANTS AND OPTIONS





Warrants





The
      Company has determined the estimated value of the compensatory warrants granted
      to non-employees in exchange for services and financing expenses using the
      Black-Scholes pricing model and the following assumptions: expected term of
      1year, a risk free interest rate of 4.93%, a dividend yield of 0% and volatility
      of 92% in 2007 and 92%-98% for the valuation of warrants in 2006. The amount
      of
      the expense charged to operations for compensatory warrants granted in exchange
      for services was $218,278 and $348,437 during the years ended December 31,
      2007
      and 2006, respectively.





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




Warrants
                Outstanding
            
            Warrants
                ExercisableYear
            
            Exercise
                Price
            
            Number
                shares outstanding
            
            Weighted
                Average Contractual Life (Years)
            
            Number
                Exercisable
            
            Weighted
                Average Exercise Price2005
            
            $
            0.75
            
            
            13,740,000
            
            
            .75
            
            
            13,740,000
            
            $
            0.752006
            
            $
            0.75
            
            
            125,000
            
            
            1.5
            
            
            125,000
            
            $
            0.752007
            
            $
            0.45
            
            
            2,695,037
            
            
            .93
            
            
            2,695,037
            
            $
            0.45Total
            
            
            
            
            
            16,560,037
            
            
            
            
            
            16,560,037








F-15




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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





Transactions
      involving the Company’s warrant issuance are summarized as follows:




Number
                of Shares
            
            Weighted
                Average
              Exercise
                PriceOutstanding
                as of January 1, 2006
            
            
            27,480,000
            
            $
            0.60Granted
            
            
            3,110,518
            
            $
            0.46Exercised
            
            
            (200,000
            )
            
            0.45Cancelled
            
            
            (13,540,000
            )
            
            0.45Outstanding
                at December 31, 2006
            
            
            16,850,518
            
            
            0.70Granted
            
            
            2,695,037
            
            
            0.45Exercised
            
            
            -
            
            
            0.00Cancelled
            
            
            (2,985,518
            )
            
            0.45Outstanding
                at December 31, 2007
            
            
            16,560,037
            
            $
            0.70




Options





The
      Company has granted common stock purchase options to certain of its employees,
      directors and consultants. The options vest according to the terms of the
      employment contracts with the employees and consulting agreements with directors
      and consultants (usually 1 to 3 years). The option price is also determined in
      accordance with the terms of the contracts (between $0.00 to $0.75 per share).





During
      the year ended December 31, 2007, the estimated value of the compensatory common
      stock purchase 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 4.69% to 5.85%, a dividend yield of 0% and volatility of 98%. The amount
      of
      the expense charged to operations for compensatory options and warrants granted
      in exchange for services was $1,562,616.





During
      the year ended December 31, 2006, the estimated value of the compensatory common
      stock purchase 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 $1,670,988.





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








F-16




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


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




Number
                of Shares
            
            Weighted
                Average
              Exercise
                PriceOutstanding
                as of January 1, 2006
            
            
            8,030,000
            
            $
            0.09Granted
            
            
            2,193,665
            
            
            0.39Exercised
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            10,223,665
            
            $
            0.15Granted
            
            
            1,341,000
            
            
            0.41Exercised
            
            
            (
                278,250
            )
            
            0.23Cancelled
            
            
            (351,750
            )
            
            0.45Outstanding
                at December 31, 2007
            
            
            10,934,665
            
            $
            0.17





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






Options
                Outstanding
            
            Options
                ExercisableYear
            
            Exercise
                Price
            
            Number
                shares outstanding
            
            Weighted
                Average Contractual Life (Years)
            
            Number
                Exercisable
            
            Weighted
                Average Exercise Price2005
            
            $
            0.15
            
            
            4,035,000
            
            
            2
            
            
            2,920,000
            
            $
            0.152005
            
            $
            0.00
            
            
            2,650,000
            
            
            2
            
            
            1,766,666
            
            $
            0.002005
            
            $
            0.05
            
            
            1,000,000
            
            
            4
            
            
            666,666
            
            $
            0.052006
            
            $
            0.15
            
            
            242,000
            
            
            1
            
            
            242,000
            
            $
            0.152006
            
            $
            0.45
            
            
            1,166,665
            
            
            4
            
            
            385,805
            
            $
            0.452006
            
            $
            0.35
            
            
            540,000
            
            
            2
            
            
            270,000
            
            $
            0.352006
            
            $
            0.30
            
            
            50,000
            
            
            4
            
            
            50,000
            
            $
            0.302007
            
            $
            0.35
            
            
            990,000
            
            
            1.83
            
            
            360,000
            
            $
            0.352007
            
            $
            0.35
            
            
            40,000
            
            
            4.33
            
            
            40,000
            
            $
            0.352007
            
            $
            0.15
            
            
            60,000
            
            
            4
            
            
            60,000
            
            $
            0.152007
            
            $
            0.15
            
            
            11,000
            
            
            4
            
            
            11,000
            
            $
            0.152007
            
            $
            1.00
            
            
            150,000
            
            
            1.33
            
            
            150,000
            
            $
            1.00Total
            
            
            
            
            
            10,934,665
            
            
            
            
            
            6,922,137





F-17




**SMART
        ENERGY SOLUTIONS, INC.**
 Notes
          to
          Financial Statements


NOTE
          6 - COMMITMENTS
          AND CONTINGENCIES


The
                Company has entered into a one year lease for its office which expires
                in
                July 2008. Future lease commitments are $49,000 for 2008. The Company
                incurred rent expense of $75,313 and $36,000 in 2007 and 2006,
                respectively.





The
      Company offers the warranty replacement of defective units for 2 years from
      the
      date of sale.




NOTE
      7 -
      SUBSEQUENT EVENT




On
      March 17, 2008 we executed a distributorship
      agreement with OnGuard Dealer Services, LLC. Pursuant to the agreement, OnGuard
      was appointed as the exclusive distributor of the Battery Brain products to
      new
      and used car dealersinall
      of
      the United States other than California.
      The
      agreement has a term of ten years and renews automatically for successive one
      year periods. Either party may terminate the agreement in the event of a breach
      or a change in the majority ownership of the Company. The agreement establishes
      sales targets and allows us to terminate the exclusivity of the distributorship
      if these targets are not met and take other remedial actions. The agreement
      also
      provides that we will grant OnGuard 1,000,000 warrants at an exercise price
      of
      $.50 with a term of five years, if OnGuard achieves the minimum sales threshold
      of one hundred fifty thousand units in the first year of the term. An additional
      1,000,000 warrants will be granted if OnGuard achieves minimum sales threshold
      of three hundred thousand units over two years from the date of the agreement.
      OnGuard will be granted a total of 3,000,000 warrants should it achieve a sales
      threshold of seven hundred fifty thousand units over two
      years.






F-18