**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION        Washington, D.C. 20549**

**FORM 10-K**

*(Mark One)*

þ     Annual report pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended        **December 31, 200****8**.

o     Transition report pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from             to     .

Commission file number: **00****0-28429**

**PLANKTOS CORP****.**

(Exact name of registrant as specified in its charter)

| **NEVADA**

(State or other jurisdiction of

incorporation or organization) | **68-0423301**

(I.R.S. Employer

Identification No.) |
|-----------------------------------------------------------------------------|-------------------------------------------------------|

**73200 El Paseo, S****uite 2H, Palm Desert, California,****92260**

(Address of principal executive offices) (Zip Code)

**(760) 773-1111**

(Issuer’stelephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:none.

Securities registered under Section 12(g) of the Exchange Act:common stock(title of class), $0.0001 par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Actof 1933: Yes o No        þ.Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act:Yes o No        þ.

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

Indicate by check mark ifdisclosure of delinquent filers in response to Item 405 of Regulation S-K isnot containedherein,and will not be contained, to        the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-Kor any amendment to this Form 10-Ko.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting companyas defined byRule 12b-2 of the Exchange Act: smaller reporting companyþ.

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

The aggregate market value of theregistrant's common stock, $0.001 par value, held by non-affiliates(39,751,838shares)was approximately $874,540based on the average closing bid and asked prices ($0.022) for the common stock on April14, 2009.

At April 14, 2009the number of shares outstanding of theregistrant's common stock, $0.001 par value (the only class of voting stock), was 84,751,838.

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**TABLE OF CONTENTS**

**           **Page**    
**PART I.**
     Item       1.        Business  3  Item       1A.      Risk Factors  7  Item       1B.      Unresolved Staff Comments  9  Item       2.        Properties  9  Item       3.        Legal Proceedings  10  Item       4.        Submission of Matters to a Vote of Security Holders  10 
**PART II.**
     Item       5.        Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities  10  Item       6.        Selected Financial Data  12  
Item       7.        Management's Discussion and Analysis of Financial Condition and Results of Operations
  13  Item       7A.     Quantitative and Qualitative Disclosures about Market Risk  18  Item       8.        Financial Statements and Supplementary Data  18  Item       9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  19  Item       9A.     Controls and Procedures (Item 9A (T))  19  Item       9B.     Other Information  21 
**PART III.**
     Item     10.      Directors, Executive Officers and Corporate Governance  21  Item     11.      Executive Compensation  23  Item     12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  24  Item     13.      Certain Relationships and Related Transactions, and Director Independence  25  Item     14.      Principal Accountant Fees and Services  25 
**PART IV.**
     Item     15.      Exhibits and Financial Statement Schedules  26                         Signatures  27    **
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**PART I**

**ITEM 1.     ****BUSINESS**

***As used herein the terms “Company,”******“it,” “its,”******“we,” “our,” and “us”        refer to******Planktos Corp******., and its******subsidiaries and******predecessor******s******,******unless context indicates otherwise.***

**Corporate History**

The Company was incorporated as “eWorld Travel Corp” on December 10, 1998 to provide internet-based travel services. We changed our name to “GYK Ventures, Inc.” on September 23, 2002, and to “Diatom Corporation” on July 8, 2005. On March 7, 2007, we changed our name to        “Planktos Corp.”to focus on carbon sequestration after entering into an agreement to acquire Planktos, Inc. from Solar Energy Limited (“Solar”) pursuant to a share exchange that caused the Company to become a majority controlled subsidiary of Solar.           

The methods for sequestering carbon were intended to be by “iron-fertilization” of the oceans designed to generate plankton blooms in combination with reforestation projects as a means to resist global warming and quantify carbon credits.

The Company’s efforts to finance and conduct an “iron-fertilization” prove out program while at the same time attempting to fund a reforestation project in Hungary were not successful. A combination of poor market conditions, condemnation from certain environmental groups and local opposition to ocean research caused Planktos to suspend        operations in December of 2007. By the end of the first quarter of 2008the Company had sold it’s research vessel, terminated all employees and ceased operations. 

The Company is currently without operations.

***Planktos***

The methods for sequestering carbon were intended to be by“iron-fertilization” of the oceans designed to generate plankton blooms in combination with reforestation projects as a means to resist global warming and quantify carbon credits.

On January 21, 2008, the Company entered into a letter of intent with the St Petersburg Environmental Research Center (“SPERC”) to sell its research vessel the Weatherbird II according to certain terms and conditions in exchange for a purchase price of $1,000,000 of which        $100,000 was paid on acceptance of the letter of intent. Further to mutual agreement, the terms of the letter of intent were subsequently assigned to Sperc Explorer, Inc. The balance of the purchase price was paid to the Company on February 29, 2008 at which time title to the Weatherbird II passed to Sperc Explorer, Inc.

On February 21, 2008 the Company executed an agreement to sell its sixty percent (60%) interest in KlimafaS.A. to Dr. David Gazdag in exchange for two hundred and fifty thousand dollars ($250,000) in the form of a        convertible debenture with a repayment term being the earlier of ten years or Klimafa’s generation of cash flow, bearing four percent (4%) per annum, convertible into sequestered tones of carbon dioxide (“CO2”)credits.

On February 22, 2008 the Company and Solar entered into an agreement with Russ George, the proponent of the carbon sequestration processes, to separate itself and its subsidiaries from his management, pursuant to which Mr. George agreed to cancel 3.5 million shares of Solar in exchange        for the non-exclusive use of the know how associated “iron-fertilization” and the exclusive use of the name “Planktos”.

 

 

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On November 12, 2008Solarsold its entire interest in the Companyto Maidon Services Limited.

Our principal place of business is located at 73200 El Paseo, Suite 2H, Palm Desert, California, 92260, and our telephone number is (760) 773-1111. Our        registered statutory office is located at The Company Corporation, 2711 Centerville Road, Wilmington, Delaware, 19808. 

The Company’s shares are quoted on thePink Sheetsunder the symbol “PLTK”. 

**The Company**

The Company’s plan of operation for the coming year is to actively pursue development stage assets and emerging businesses with which to merge or acquire. We intend to function as a business incubator for assets and businesses that focus on (i) cost-effective renewable        energy sources that do not threaten the environment, and (ii) practical solutions to mitigate the effects of traditional energy sources’ unintended consequences concerning global climate change. We intend tofund the process of driving emerging technologies towards commercial applications through debt or equity offerings tied to our common        stock. 

***Selection of a Business***

Management has adopted a policy of seeking opportunities that it considers to be of exceptional quality. As a result of thispolicy, the Company may have to wait some time before consummating a suitable transaction. Management recognizes thatdue to its limited resources thatit may be at acompetitive disadvantage when vying with other acquiring interests or entities.                   The Company does not intend to restrict its consideration to any particular business or industry segment, and the Company may consider, among others, finance, brokerage, insurance, transportation, communications, research and development, biotechnology, service, natural resources, manufacturing or high-technology. However, due to the Company’s limited financial resources, the scope and number of suitablebusiness        venture candidatesis limited, and most likely the Company will not be able to participate in more than a single business venture. Accordingly, it is anticipated that the Company will not be able to diversify, but may be limited to one merger or acquisition. This lack of diversification will not permit the Company to offset potential losses from one business opportunity against profits from another.                   The decision to participate in a specific business opportunity will be made upon management’s analysis of the quality of the other firm’s management and personnel, the anticipated acceptability of new products or marketing concepts, the merit of technological changes and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria. In many instances, it is anticipated that the historical operations of a specific        venture may not necessarily be indicative of the potential for the future because of the necessity to substantially shift a marketing approach, expand operations, change product emphasis, change or substantially augment management, or make other changes. The Company will be dependent upon the management of a business opportunity to identify such problems and to implement, or be primarily responsible for the implementation of, required changes.         Since the Company may participate in a business opportunity with a newly organized business or with a business which is entering a new phase of growth, it should be emphasized that the Company may incur risk due to the failure of the target’s management to have proven its abilities or effectiveness, or the failure to establish a market for the target’s products or services, or the failure to realize profits.

 

 

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The Company will not acquire or merge with any company for which audited financial statements cannot be obtained. It may be anticipated that any opportunity in which the Company participates will present certain risks. Many of these risks cannot be adequately identified prior to selection of the specific opportunity, and the        Company’s shareholders must, therefore, depend on the ability of management to identify and evaluate such risk. In the case of some of the opportunities available to the Company, it may be anticipated that the founders thereof have been unable to develop a going concern or that such business is in its development stage in that it has not generated significant revenues from its principal business activities prior to the Company’s participation.          

***Acquisition of Business***

While no suitable business candidate has been identified, the Company may become a party to a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. It may also purchase stock or assets of an existing business. On the consummation of a transaction, it is possible        that the present management and shareholders of the Company will not be in control of the Company. In addition, the Company’s sole officer and director may, as part of the terms of the acquisition transaction, resign and be replaced by new officers and directors without a vote of the Company’s shareholders.                  The Company anticipates that any securities issued in any such reorganization would be issued in reliance on exemptions from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of this transaction, the Company may agree to register such securities either at the time the transaction is consummated, under certain conditions, or at a specified time thereafter. The issuance of substantial additional securities and their        potential sale into any trading market will likelyhave adepressive effect on the Company’s stock price.                  While the actual terms of a transaction to which the Company may be a party cannot be predicted, it may be expected that the parties to the business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition in a so called “tax-free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). In order to obtain tax-free treatment under the Code, it may be necessary        for the owners of the acquired business to own 80% or more of the voting stock of the surviving entity. In such event, the shareholders of the Company would retain less than 20% of the issued and outstanding shares of the surviving entity, which could result in significant dilution in the equity of such shareholders.          

In the event a merger were to occur,the Company’s shareholders wouldin all likelihood hold a lesser percentage ownership interest in the Company following any merger or acquisition. The        percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant substantial dilutive effect on the percentage of shares held by the Company’s then shareholders.          

***Operation of Business After Acquisition***

The Company’s operation following any futuremerger or acquisition of a business cannot be predicted at the present time.

 

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**Competition**

We will be involved in intense competition with other business entitiesto obtaina suitable business opportunity many of which competitors will have a considerableedge over us        by virtue of their stronger financial resources and prior experience in business.

**Patents, Trademarks, Licenses,****Franchises, Concessions, Royalty Agreements and Labor Contracts**

The Company currently operates under and holdsnopatents, trademarks, licenses,        franchises, concessions, orroyalty agreements.The Company is not subject to any labor contracts. 

**Governmental****and****Environmental****Regulation          **

The Company cannot anticipate the government regulations, if any, to which the Company may be subject until it has acquired an interest in a business. The use of assets to conduct a business that the Company may acquire could subject it to environmental, public health and safety, land use, trade, or other governmental regulations        and state or local taxation. In selecting a business in which to acquire an interest, management will endeavor to ascertain, to the extent of the limited resources of the Company, the effects of such government regulation on the prospective business of the Company. In certain circumstances, however, such as the acquisition of an interest in a new or start-up business activity, it may not be possible to predict with any degree of accuracy the impact of government regulation.

**Research and Development**

During the years ended December 31, 2008and 2007the Company did not spend anything on research and development activities. We cannot anticipate the amount of spending onresearch and development, if any,in the future;such level will depend upon the nature of the businesswe acquire, if any.

**Employees**

Our sole executive officer devotes as much time tothe affairs of the Company as he deems appropriate. Management of the Company uses consultants, attorneys, and contract accountants as necessary, and does not anticipate a need to engage any full-time employees as        long as business needs are being identified and evaluated. The need for employees and their availability will be addressed in connection with a decision concerning whether or not to acquire or participate in a specific business venture.

**Reports to Security Holders**

The Company’s annual report contains audited financial statements. We are not required to deliver an annual report to security holders and will not automatically deliver a copy of the annual report to our security holders unless a request is made for such delivery. We file all of our required reports and        other information with the Securities and Exchange Commission (the “Commission”). The public may read and copy any materials that are filed by the Company with the Commission at the Commission’s Public Reference Room at 100 FStreet, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The statements        and forms filed by us with the Commission have also been filed electronically and are available for viewing or copy on the Commission maintained Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. The Internet address for this site can be found at        *http://www.sec.gov*.

 

 

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**ITEM 1A.     RISK FACTORS**

The Company’s operations and securities are subject to a number of risks. Below we have identified and discussed the material risks that we are likely to face. Should any of the following risks occur, they will adversely affect our operations, business, financial condition and/or operating results as well as        the future trading price and/or the value of our securities. 

***The******C******ompany’s ability to continue as a going concern is in question***

Our independent public accounting firm has issued a reporton our consolidated financial statements for the years ended December 31, 2008and 2007 that states that the consolidated financial        statements were prepared assuming we will continue as a going concern and further states that our significant operatinglosses and negative working capitalraise substantial doubt about our ability to continue as a going concern.

***We have a history of significant operating losses and such losses may continue in the future.***

Since the beginning or our development stage, our operations have resulted in a continuation of losses and an accumulated deficit which reached $3,928,861at December 31, 2008.The Company has        never realized revenue from operations. We will continue to incur operating losses as we maintain our search for a suitable business opportunity and satisfy our ongoing disclosure requirements with the Commission. Such continuing losses could result in a decrease in share value.

***The Company******’******s limited financial resources cast severe doubt on our ability to acquire a profitable business opportunity.***

The Company’s future operation is dependent upon the acquisition of a profitable business opportunity. However, the prospect of such an acquisition is doubtful due to the Company’s limited financial resources. Since we have no current business opportunity, the Company is not in a position to improve this financial        condition through debt or equity offerings. Therefore, this limitation may act as a deterrent in future negotiations with prospective acquisition candidates. Should we be unable to acquire a profitable business opportunity the Company will, in all likelihood, be forced to cease operations.

***The Company will require additional capital funding.***

        The Company will require additional funds, either through equity offerings or debt placements to develop our operations. Such additional capital may result in dilution to our current shareholders. Our ability to meet short-term and long-term financial commitments depends on future cash. There can be no assurance that future income will generate sufficient funds to enable us to meet our financial commitments.

***C******orporate control lies in the hands of one shareholder.***

  

Maidon ServicesLimitedowns and controls voting power of approximately 53% of the Company’s issued and outstanding stock. The concentration of such a large percentage        ofthe Company’s stock in the hands of one shareholder may have a disproportionate effect on the voting power of minority shareholders’ upon any and all matters presented to the Company’s shareholders.

 

 

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***The market for our stock is limited and our stock price may be volatile.***

        The market for our common stock has been limited due to low trading volume and the small number of brokerage firms acting as market makers. Because of the limitations of our market and volatility of the market price of our stock, investors may face difficulties in selling shares at attractive prices when they want to. The average daily trading volume for our stock has varied significantly from week to week and from month to month, and the trading volume often varies widely from day to        day.

***The Company does not pay cash dividends.***

The Company does not pay cash dividends. We have not paid any cash dividends since inception and have no intention of paying any cash dividends in the foreseeable future. Any future dividends would be at the discretion of our board of directors and would depend on, among other things, future earnings, our operating        and financial condition, our capital requirements, and general business conditions. Therefore, shareholders should not expect any type of cash flow from their investment.

***We incur significant expenses as a result of******the Sarbanes-Oxley Act of 2002******, which******expenses may continue to******negatively impact our financial performance.***         We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002,as discussed in the following risk factor, hassubstantially increased our expenses, including legal and accounting costs, and madesome activities more time-consuming and costly. Further, expenses related to our compliance may increase in the future, as legislation affecting smaller        reporting companies comes into effect that may negatively impact our financial performance to the point of having a material adverse effect on our results of operations and financial condition.

***Our internal controls over financial reporting******are******not******considered effective, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price.***         Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material        weaknesses in our internal controls over financial reporting identified by management. Since we have beenunable to assert that our internal controls are effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

***The Company’s shareholders may face significant restrictions on their stock.***

The Company’s stock differs from many stocks in that it is a “penny stock.” The Commission has adopted a number of rules to regulate “penny stocks” including, but not limited to, those rules from the Securities Act as follows:

3a51-1     which defines penny stock as, generally speaking,those securities which are not listed on either NASDAQ or a national securities exchange and are priced under $5, excluding securities of issuers that have net tangible assets        greater than $2 million if they have been in operation at least three years, greater than $5 million if in operation less than three years, or average revenue of at least $6 million for the last three years;

 

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15g-1     which outlines transactions by broker/dealers which are exempt from 15g-2 through 15g-6 as those whose commissions from traders are lower than 5% total commissions;

15g-2      which details that brokers must disclose risks of penny stock on Schedule 15G;

15g-3      which details that broker/dealers must disclose quotes and other information relating to the penny stock market;

15g-4      which explains that compensation of broker/dealers must be disclosed;

15g-5      which explains that compensation of persons associated in connection with penny stock sales must be disclosed;

15g-6      which outlines that broker/dealers must send out monthly account statements; and

15g-9     which defines sales practice requirements. 

 

Since the Company’s securities constitute a “penny stock” within the meaning of the rules, the rules would apply to us and our securities. Because these rules provide regulatory burdens upon broker-dealers, they may affect the ability of shareholders to sell their securities in any market that may develop; the        rules themselves may limit the market for penny stocks. Additionally, the market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor.        In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. 

Shareholders should be aware that, according to Commission Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered from patterns of fraud and abuse. These patterns include:           

|  | ·      | control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
|--|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------|

|  | ·      | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
|--|----------------------------------------|---------------------------------------------------------------------------------------------------------------------|

|  | ·      | “boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
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|  | ·      | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
|--|----------------------------------------|--------------------------------------------------------------------------------------------|

|  | ·      | the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
|--|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM 1B.     UNRESOLVED STAFF COMMENTS**

Not applicable.

**ITEM 2.     ****PROPERT****IES**

The Company’s maintains an office located at 73200 El Paseo, Suite 2H, Palm Desert, California, 92260, for which the Company pays no rent.The Company does not believe that it will need to maintain any        additionalofficespaceat any time in the foreseeable future in order to carry out the plan of operation described herein.

 

 

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**ITEM 3.     LEGAL PROCEEDINGS**

Legal proceedings were initiated by Mary Ruth Ladd against the Company,Solar,and certain individuals affiliated to the Company on October 3, 2007 in the Superior Court of the State of        California, County of San Francisco in connection with allegations of discrimination and retaliation against a whistle blower, wrongful termination, fraud, breach of contract, wrongful business acts and intentionally causing injury in the workplace. The claim seeks $58,280 in lost wages in addition to certain employee benefits and punitive damages. The Company has retained counsel to respond to these allegations and denies any liability for these alleged causes of action.

**ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

No matter was submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the fourth quarter ended December 31, 2008.

**PART II**

**ITEM 5.     MARKET FOR COMMON EQUITY****,****RELATED STOCKHOLDER MATTERS****, AND        ISSUER PURCHASES OF EQUITY SECURITIES**

The Company’s common stock is quoted on thePink Sheets LLC over-the-countersecurities marketunder the symbol “PLKT.” Trading in the common stock        over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions. These prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions. The high and low bid prices for the common stock for each quarter of the years ended December 31, 2008 and 2007are as follows:

| ***Year*** | ***Quarter Ending*** | ***High*** | ***Low*** |
|------------|----------------------|------------|-----------|
| 2008       | December 31          | $0.020     | $0.001    |
|       | September 30         | $0.024     | $0.008    |
|       | June 30              | $0.021     | $0.010    |
|       | March 31             | $0.075     | $0.010    |
| 2007       | December 31          | $0.70      | $0.06     |
|       | September 30         | $1.40      | $0.46     |
|       | June 30              | $1.95      | $0.71     |
|       | March 31*            | $2.56      | $0.51     |

*The Company effected a 1.5 for 1 forward split on March 8, 2007.

During the year ended 2007 the Company became ineligible for trading on the Over-the-Counter Bulletin Board (the “OTCBB”)because the Company was not timely in reporting with the Commission.The Company intends to comply in a timely manner with all Commission reporting        rulesand expects to reapply for quotation of the Company’s common stock on the OTCBB.

 

 

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**Capital Stock**

The following is a summary of the material terms of the Company’s capital stock. This summary is subject to and qualified by our articles of incorporation and bylaws.

***Common Stock***

As of April 14, 2009there were 52stockholders of record holding a total of there were 84,751,838shares of        the Company’s common stock of the 250,000,000 common shares authorized. The board of directors believes that the number of beneficial owners is substantially greater than the number of record holders because a portion of our outstanding common stock is held in broker “street names” for the benefit of individual investors. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of        the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

***Preferred Stock***

There are no authorized preferred shares of the Company.

***Warrants***

Asof April14, 2009the Company had 5,525,000outstanding warrantsto purchase shares of our common stock.

***Stock Options***

Asof April14, 2009the Companyhad no outstanding stock        options to purchase shares of our common stock.

***Dividends***

The Company has not declared any cash dividends since inception and does not anticipate paying any dividends in the near future. The payment of cash dividends is within the discretion of the board of directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no        restrictions that currently limit the Company's ability to pay cash dividends on its common stock other than those generally imposed by applicable state law.

**Transfer Agent and Registrar**

Our transfer agent is Michael Anzemanat Madison Stock Transfer,Inc., located at1688        East 16th Street, Suite 7, Brooklyn, New York, 11229. His phone number is(718) 627-4453.

 

**Purchases of Equity Securities made by the Issuer and Affiliated Purchasers**

None.          

 

 

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**Recent Sales of Unregistered Securities**

On November 14, 2007, the Company authorized the issuance of 1,078,000 shares of common stock for cash consideration of $1.00 per share for the cash proceeds of $1,078,000 received within the three months ended September 30, 2007 pursuant to the exemptions from registration provided by Section 4(2) and Regulation S of the        Securities Act of 1933, as amended, to the following subscribers:

| Date of Subscription Agreement | Subscriber        | Number Of Shares | Consideration |
|--------------------------------|-------------------|------------------|---------------|
| July 19, 2007                  | Lorenz Consulting | 150,000          | $150,000      |
| July 25, 2007                  | TCE Source        | 75,000           | $75,000       |
| August 15, 2007                | Urs Angst         | 853,000          | $853,000      |

The Companycomplied with Section 4(2) based on the following factors: (1) the issuances were isolated private transactions that did not involve a public offering; (2) there were three offerees who were issued the stock for cash consideration; (3) the        offereesstated an intention not to resell the stock; (4) there were no subsequent or contemporaneous public offerings of the stock; (5) the stock was not broken down into smaller denominations; and (6) the negotiations that that led to the subscription of the stock took place directly between the offerees and the Company.

Regulation S provides generally that any offer or sale that occurs outside of the United States is exempt from the registration requirements of the Securities Act, provided that certain conditions are met. Regulation S has two safe harbors. One safe harbor applies to offers and sales by issuers, securities professionals involved in        the distribution process pursuant to contract, their respective affiliates, and persons acting on behalf of any of the foregoing (the “issuer safe harbor”), and the other applies to resales by persons other than the issuer, securities professionals involved in the distribution process pursuant to contract, their respective affiliates (except certain officers and directors), and persons acting on behalf of any of the forgoing (the “resale safe harbor”). An offer,        sale or resale of securities that satisfied all conditions of the applicable safe harbor is deemed to be outside the United States as required by Regulation S. 

The Company complied with the requirements of Regulation S by: (1) having made no directed offering efforts in the United States; (2)offering only to        offereeswho wereoutside the United Statesat the time the stock wasoffered and authorized; and (3) ensuring that the offereesto whom the stock will beissued are non-U.S. offerees with addresses in foreign countries.  

**ITEM 6.     SELECTED FINANCIAL DATA**

Not required.

 

 

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**ITEM 7****.     MANAGEMENT’S DISCUSSION AND ANALYSIS****OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

This *Management’s Discussion and Analysi**s of Financial Condition and**Results of        Operations*and other parts of this current reportcontain forward-looking statements that involve risks and uncertainties. Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking        statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to those discussed in the subsection entitled *Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition*below. The following discussion should be read in conjunction with our financial statements and notes thereto included in this current report. Our fiscal year end is December 31. 

**Discussion and Analysis**

The Company’s plan of operation for the coming year is to identify andacquire a favorable business opportunity through merger or acquisition. We have not yet entered into any agreement, nor do we have any commitment or understanding to enter into or become engaged in any transaction, as of the date of        this filing.

The Company’s plan of operation over the next twelve months will require a minimum of$100,000 to identify a suitable business opportunity for development through merger or acquisition. Shouldthe Company decide to develop        a business opportunity through merger or acquisition, our funding requirements will change.Financingto meet this cash requirementis not currently available.

The Company has been funded since inception from public or private debt or equity placements or by major shareholders in the form of loans. Substantially all of the capital raised to date has been allocated in some manner to a prove-out of our suspended“iron        fertilization” program.

**Results of Operations**

During the yearended December 31, 2008, the Company was focused on (i) winding down its intended carbon sequestration business in connection with Planktos, Inc., including the dispositionofitsresearch vessel and essentially all of its other assets, (iii) pursued financing commitments for its plan of operation, (iii) beginning thesearch for a business opportunity to develop through merger or        acquisition,and (iv) satisfying continuous public disclosure requirements.

The Company hasnot generated any revenues since inception. Since wehave suspended operations and havenocurrent ability to generate revenue, we expectto continue to incur losses for the foreseeable future.

***Net Losses***              For the period from inception until December 31, 2008, the Company incurred a net loss of $3,928,861.Net losses for the twelvemonth period ended December 31, 2008 were $249,991as compared to $2,937,599for the twelvemonth period ended December 31, 2007. The Company’s net losses in the current period are primarily attributable to general and administrative expenses and losses from discontinued operations. General and administrative expenses include        accounting expenses, professional fees, consulting fees, and costs associated with the preparation of disclosuredocumentation while losses from discontinued operations are primarily consulting fees and office related costs.

 

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We expect to continue to incur losses over the next twelve months as the Company seeks out another business opportunity fordevelopment through merger or acquisition.

***Income Tax Expense (Benefit)***

The Company may havea prospective income tax benefit resulting from a net operating loss carryforward and start up costs that could offset future operating profits.

***Impact of Inflation***

The Company believes that inflation has had a negligible effect on operations over the past three years. 

***Capital Expenditures***         During the year ended December 31, 2007, the Company expended approximately $800,000 on a research vessel and research equipment which was sold during the nine month period ended September 30, 2008 for $1,000,000. Otherwise, we have expended no significant amounts on capital expenditures for the period from inception to December 31, 2008.

***Liquidity and Capital Resources*** 

The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and stockholders’ equity.We have been funded since inception from public or private debt or equity placements or by major        shareholders in the form of loans.         The Company had a working capital deficit of $121,242 as of December 31, 2008, as compared to a working capital surplus of $174,501as of December 31, 2007. As of December 31, 2008 our total assets consisted of $22,454 in cash and $13in net assets of discontinued operations. Our current        liabilitieswere $143,696, consisting of advancespayable to related partiesand accounts payable.Our net liabilities from discontinued operations were$51,256. Net stockholders' deficit in the Company was$172,485as ofDecember 31, 2008as compared to a net stockholders’ equity of $77,506 at        December 31, 2007. 

Cash flow used in operating activities was $3,892,436for the period from inceptionto December 31, 2008. Cash flow used in operating activities for the twelve month period ended December 31,        2008 was $493,498 as compared to $2,694,458for the twelvemonth period ended December 31, 2007. The decrease in cash flow used in operating activities in the priorperiod was due primarily to a decrease in amounts attributed to a decrease in discontinued operating        activities.

Cash flow provided by investing activities was $249,394for the period from inception to December 31, 2008. Cash flow provided by investing activities for the twelvemonth period ended        December31, 2008was $1,000,000 attributed to the sale of our research vessel and related equipmentas compared to $750,606used ininvesting        activities for the twelvemonth period ended December 31, 2007. Cash flowused ininvesting activities in the priorperiod is attributed to the purchaseof our research vessel and related equipment.

Cash flow provided byfinancing activities was $3,665,496for the period from inception to December 31, 2008. Cash flow used infinancing activities for the twelvemonth period ended December 31, 2008was $524,589as compared to $3,331,367provided by financing activities for the        twelvemonth period ended December 31, 2007. Cash flow provided byfinancing activities in the current period can be primarily attributed to discontinued operations. 

 

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The Company’s current assets are insufficient to conduct our plan of operation over the next twelvemonths and we will have to seek debt or equity financing to fund operations. The Company has no current commitments or arrangements with respect to, or        immediate sources of funding. Further, no assurances can begiven that funding isavailable or available to the Company on acceptable terms. The Company’s shareholdersmay provide a source of new funding in the form of loans or equity placements though none have made any        commitment for future investment and we have no agreement formal or otherwise. The Company’s inability to obtain funding has had a material adverse affect on our plan of operation and will continue todiminish our efforts.         

The Company does not expect to pay cash dividends in the foreseeable future.         The Companyhad no lines of credit or other bank financing arrangements as of December 31, 2008.          The Companyhas no defined benefit plan or contractual commitment with any of its officers or directorsas of December 31, 2008. 

The Companyhas no plans for the purchase or sale of any plant or equipment. 

The Company currently has no employees and has no plans to hire any employees in the near future.

***Off Balance Sheet Arrangements***

As of December 31, 2008, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to        stockholders.

***Going Concern***

The Company’s auditors have expressed an opinion as to our ability to continue as a going concern as a result of an accumulated deficit of $3,928,861 as of December 31, 2008.Our ability to continue as        a going concern is subject to the ability of the Company to obtain the necessary funding from outside sources. Management’s plan to address the Company’s ability to continue as a going concern, includes (i) obtaining funding from private placement sources; (ii) obtaining additional funding from the sale of the Company’s securities; (iii) establishing revenuesfrom a suitable business opportunity; (iv)        obtaining loans and grants from various financial institutions where possible. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.

***Forward Looking Statements and Factors That May Affect Future Results and Financial Condition***

The statements contained in the section titled *Management’s Discussion and Analysis of Financial Condition and**Results of        Operations*, with the exception of historical facts, are forward looking statements. A safe-harbor provision may not be applicable to the forward looking statements made in this current report Forward looking statements reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon        assumptions and beliefs that may or may not materialize. These statements include, but are not limited to, statements concerning: 

 

 

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|  | ·      | the sufficiency of existing capital resources; |
|--|----------------------------------------|------------------------------------------------|

|  | ·      | our ability to raise additional capital to fund cash requirements for future operations; |
|--|----------------------------------------|------------------------------------------------------------------------------------------|

|  | ·      | uncertainties related to the Company’s future business prospects; |
|--|----------------------------------------|-------------------------------------------------------------------------|

|  | ·      | the ability of the Company to generate revenues to fund future operations; |
|--|----------------------------------------|----------------------------------------------------------------------------|

|  | ·      | the volatility of the stock market; and |
|--|----------------------------------------|-----------------------------------------|

|  | ·      | general economic conditions. |
|--|----------------------------------------|------------------------------|

We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated, including the factors set forth in the section entitled *Risk        Factors*included elsewhere in this report. We also wish to advise readers not to place any undue reliance on the forward looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update or revise these forward looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other        thanis required by law.

***Stock-Based Compensation***

** **

Wehaveadopted SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment, which addresses the accounting for stock-based payment        transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. In January 2005, the Commissionissued Staff Accounting Bulletin (SAB) No. 107, which provides supplemental implementation guidance        for SFAS No. 123R. SFAS No. 123R eliminates the ability to account for stock-based compensation transactions using the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and instead generally requires that such transactions be accounted for using a fair-value-based method. We use the Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair-value of stock-based awards under SFAS No. 123R,        consistent with that used for pro forma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation. We have elected the modified prospective transition method as permitted by SFAS No. 123R and accordingly prior periods have not been restated to reflect the impact of SFAS No. 123R. The modified prospective transition method requires that stock-based compensation expense be recorded for all new and unvested stock options, restricted stock, restricted stock units, and employee        stock purchase plan shares that are ultimately expected to vest as the requisite service is rendered beginning on January 1, 2006, the first day of our fiscal year 2006. Stock-based compensation expense for awards granted prior to January 1, 2006 is based on the grant date fair-value as determined under the pro forma provisions of SFAS No. 123.Prior to the adoption of SFAS No 123R, we measured compensation expense        for our employee stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25. We applied the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, as if the fair-value-based method had been applied in measuring compensation expense. Under APB Opinion No. 25, when the exercise price ofouremployee stock options was equal to the market price of the underlying stock on the date of the grant, no compensation expense was recognized.

We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18. Costs are measured at the estimated fair market value of the        consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

 

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***Recent Accounting Pronouncements***

In May, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 163, “Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60” (SFAS 163). This Statement requires that an insurance enterprise recognize a claim        liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance        enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprise’s        risk-management activities. This Statement requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuance of this Statement. Except for those disclosures, earlier application is not permitted.  The adoption of this statement will have no material effect on the Company’s financial condition or results of operations.                   In May, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 162, “The Heirarchy of Generally Accepted Accounting Principles” (SFAS No. 162). This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the        United States (the GAAP hierarchy). The sources of accounting principles that are generally accepted are categorized in descending order of authority as follows:          

a.      FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are        not superseded by actions of the FASB

b.      FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position 

c.     AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of *EITF Abstracts* (EITF D-Topics)

d.      Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the        industry. 

The adoption of this statement will have no material effect on the Company’s financial condition or results of operations. 

 

 

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In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (SFAS No. 161). This statement changes the disclosure requirements for        derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is intended to enhance the current        disclosure framework in Statement 133. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure better conveys the purpose of derivative use in terms of the risks that the entity is intending to manage. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format should provide a more complete picture of the location in an entity’s financial        statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features should provide information on the potential effect on an entity’s liquidity from using derivatives. Finally, this Statement requires cross-referencing within the footnotes, which should help users of financial statements locate important information about derivative instruments.         The adoption of this statement will have no material effect on the Company’s financial condition or results of operations. 

**ITEM 7****A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not required.

**ITEM 8.     F****INANCIAL STATEMENTS****AND SUPPLEMENTARY DATA**

Ouraudited financial statements for the yearsended December 31, 2008and 2007are attached hereto as F-1 through F-17. 

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**PLANKTOS CORP.****(A Development Stage Company)        INDEX TO****CONSOLI****DA****TED****FINANCIAL STATEMENTS        December 31, 200****8****and 200****7**

                                                                                                      ***Page***

     Report of Independent Registered Public Accounting Firm     F-2     

     Consolidated Balance        Sheets                                                F-3

     Consolidated Statements of Operations                                 F-4              Consolidated Statements of Stockholders’ Equity                   F-5              Consolidated Statements of Cash Flows                                F-6         

     Notes toConsolidatedFinancial        Statements                           F-9

     **                    **

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**Board of Directors**

Planktos Corp         Palm Desert, California           

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We have audited the accompanying consolidated balance sheets of Planktos Corp (a development stage company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, consolidated statement of stockholders’ equity (deficit) and consolidated statement of cash flows for the        years then ended and for the period from February 11, 2005 (Inception) to December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.                  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit        included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.                  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Planktos Corp (a development stage company) as of December 31, 2008 and 2007, and the results of its operations, consolidated statement of stockholders equity (deficit) and its consolidated statement of cash flows for the years then ended and for the period from February 11, 2005 (Inception) to December 31, 2008 in conformity with accounting principles generally        accepted in the United States of America.          

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses and negative working capital raise substantial doubt about its ability to continue as a going concern.        Management’s plans regarding the resolution of this issue are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 

/s/ Williams & Webster, P.S.          

Williams & Webster, P.S.

Certified Public Accountants

Spokane, Washington        April 14, 2009

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| **PLANKTOS CORP**                                  |                                                        |                                                     |                                 |   |        |
|----------------------------------------------------|-------------------------------------------------------------|----------------------------------------------------------|--------------------------------------|--------|-------------|
| **(formerly Diatom Corporation)**                  |                                                        |                                                     |                                 |   |        |
| **(A Development Stage Company)**                  |                                                        |                                                     |                                 |   |        |
| **CONSOLIDATED BALANCE SHEETS**                    |                                                        |                                                     |                                 |   |        |
|                                               |                                                        |                                                     |                                 |   |        | December 31, |   | December 31, |
|                                               |                                                        |                                                     |                                 |   |        | 2008 |   | 2007 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
| **ASSETS**                                         |                                                        |                                                     |                                 |   |        |   |
|                                               | CURRENT ASSETS                                              |                                                     |                                 |   |        |   |
|                                               |                                                        | Cash                                                     |                                 | $      | 22,454      | $ | 40,541 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               |                                                        |                                                     | Total Current Assets                 |   |        | 22,454 |   | 40,541 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               | OTHER ASSETS                                                |                                                     |                                 |   |        |   |
|                                               |                                                        | Net assets of discontinued operations                    |                                 |   | 13          |   | 808,300 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               |                                                        |                                                     | Total Other Assets                   |   |        | 13 |   | 808,300 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               | **TOTAL ASSETS**                                            |                                                     | $                                    | 22,467 | $           | 848,841 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)** |                                                        |                                                     |                                 |
|                                               | CURRENT LIABILITIES                                         |                                                     |                                 |   |        |   |
|                                               |                                                        | Accounts payable                                         |                                 | $      | 73,351      | $ | 92,531 |
|                                               |                                                        | Advances payable – related parties                 |                                 |   | 70,345      |   | 122,511 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               |                                                        |                                                     | Total Current Liabilities            |   |        | 143,696 |   | 215,042 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               |                                                        | Net liabilities of discontinued operations               |                                 |   | 51,256      |   | 556,293 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               | STOCKHOLDERS' EQUITY (DEFICIT)                              |                                                     |                                 |   |        |   |
|                                               |                                                        | Common stock, authorized 250,000,000 sharesof $0.001     |                                 |   |        |   |   |
|                                               |                                                        | par value, issued and outstanding 84,751,838 at December |                                 |   |        |   |
|                                               |                                                        | 31, 2008 and 84,751,838 shares at December 31, 2007      |                                 | 84,752 |        | 84,752 |
|                                               |                                                        | Additional paid-in capital                               |                                 |   | 3,671,624   |   | 3,671,624 |
|                                               |                                                        | Deficit accumulated during development stage             |                                 |   | (3,928,861) |   | (3,678,870) |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               |                                                        |                                                     | Total Stockholders' Equity (Deficit) |   |        | (172,485) |   | 77,506 |
|                                               |                                                        |                                                     |                                 |   |        |   |   |   |
|                                               | **TOTAL LIABILITIES AND STOCKHOLDERS'****EQUITY (DEFICIT)** | $                                                        | 22,467                               | $      | 848,841     |

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

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| **PLANKTOS CORP**                                  |                              |                         |               |        |     |                  |
|----------------------------------------------------|-----------------------------------|------------------------------|--------------------|-------------|----------|-----------------------|
| **(formerly Diatom Corporation)**                  |                              |                         |               |        |     |                  |
| **(A Development Stage Company)**                  |                              |                         |               |        |     |                  |
| **CONSOLIDATED STATEMENTS OF OPERATIONS**          |                              |                         |               |        |
|                                               |                              |                         |               |        |     | From Inception        |
|                                               |                              |                         |               |        |     | (February 11, 2005 to |
|                                               | For the Year Ended 

December 31, |                         | December 31, 2008) |
|                                               |                              |                         |               | 2008        |     | 2007                  |   |   |
|                                               |                              |                         |               |        |     |                  |   |   |
| REVENUES                                           | $                                 | -                            | $                  | -           | $        | -                     |
|                                               |                              |                         |               |        |     |                  |   |   |
| OPERATING EXPENSES                                 |                              |                         |               |        |     |                  |
|                                               | Bad debt expense                  |                         | -                  |        | 32,876   |                  | 32,876 |
|                                               | General and administrative        |                         | 111,793            |        | 296,618  |                  | 1,141,562 |
|                                               | Research and development          |                         |               |        | -        |                  |   |
|                                               | Vessel operating expenses         |                         | -                  |        | -        |                  | - |
|                                               |                              | Total Operating Expenses     |               | 111,793     |     | 329,494               |   | 1,174,438 |
|                                               |                              |                         |               |        |     |                  |   |   |
| LOSS FROM OPERATIONS                               |                              | (111,793)                    |               | (329,494)   |     | (1,174,438)           |
|                                               |                              |                         |               |        |     |                  |   |   |
| OTHER INCOME (EXPENSE)                             |                              |                         |               |        |     |                  |
|                                               | Other income                      |                         | -                  |        | -        |                  | 11,119 |
|                                               | Other income- related party       |                         | -                  |        | -        |                  | 61,000 |
|                                               | Interest income                   |                         | -                  |        | -        |                  | 3,522 |
|                                               | Interest expense                  |                         | -                  |        | (32,614) |                  | (73,715) |
|                                               |                              | Total Other Income (Expense) |               | -           |     | (32,614)              |   | 1,926 |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS BEFORE INCOME TAX                         |                              | (111,793)                    |               | (362,108)   |     | (1,172,512)           |
| INCOME TAX EXPENSE                                 |                              | -                            |               |        |     | -                     |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS FROM CONTINUING OPERATIONS                |                              | (111,793)                    |               | (362,108)   |     | (1,172,512)           |
| LOSS ON DISCONTINUED OPERATIONS                    |                              | (138,198)                    |               | (2,575,491) |     | (2,756,349)           |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS                                           | $                                 | (249,991)                    | $                  | (2,937,599) | $        | (3,928,861)           |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS PER SHARE, CONTINUING                     |                              |                         |               |        |     |                  |
| OPERATIONS                                         | $                                 | (0.00)                       | $                  | (0.00)      | $        | (0.03)                |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS PER SHARE, DISCONTINUED                   |                              |                         |               |        |     |                  |
| OPERATIONS                                         | $                                 | (0.00)                       | $                  | (0.03)      | $        | (0.06)                |
|                                               |                              |                         |               |        |     |                  |   |   |
| NET LOSS PER SHARE, BASIC AND DILUTED              | $                                 | (0.00)                       | $                  | (0.03)      | $        | (0.08)                |
| WEIGHTED AVERAGE NUMBER OFCOMMONSHARES OUTSTANDING |                              |                              |               |        |     |                       |
|                                               | 84,751,838                        | 84,751,838                   | 46,257,169         |

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

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| **PLANKTOS CORP**                                                       |         |   |                |   |                       |   |                    |                      |               |      |
|-------------------------------------------------------------------------|--------------|--------|---------------------|--------|----------------------------|--------|-------------------------|---------------------------|--------------------|-----------|
| **(formerly Diatom Corporation)**                                       |         |   |                |   |                       |   |                    |                      |               |      |
| **(A Development Stage Company)**                                       |         |   |                |   |                       |   |                    |                      |               |      |
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**                      |         |   |                |   |                       |   |                    |                      |
|                                                                    |         |   |                |   |                       |   |                    |                      | DeficitAccumulated |      |
|                                                                    | Common Stock |   | Additional

Paid-in |   | Accumulated

Comprehensive |   | During the

Development | Total Stockholder’s |
|                                                                    | Shares       |   | Amount              |   | Capital                    |   | Income/(Loss)           |                      | Stage              | Equity    |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Common stock issued at inception for cash at $67 per share              | 300          | $      | -                   | $      | 20,000                     | $      | -                       | $                         | -                  | 20,000    |
| Net loss for the year ended December 31, 1998                           | -            |   | -                   |   | -                          |   | -                       |                      | -                  | -         |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Balance, December 31, 1998                                              | 300          |   | -                   |   | 20,000                     |   | -                       |                      | -                  | 20,000    |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Common stock issued for cash at $167 per share                          | 101          |   | -                   |   | 16,800                     |   | -                       |                      | -                  | 16,800    |
| Common stock issued for cash at $2,000 per share                        | 1            |   | -                   |   | 2,000                      |   | -                       |                      | -                  | 2,000     |
| Net loss for the year ended December 31, 1999                           | -            |   | -                   |   | -                          |   | -                       |                      | (36,360)           | (36,360)  |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Balance, December 31, 1999                                              | 402          |   | -                   |   | 38,800                     |   | -                       |                      | (36,360)           | 2,440     |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Net change in unrealized gains/(losses)                                 |         |   |                |   |                       |   |                    |                      |               |      |
| on available for sale securities                                        | -            |   | -                   |   | -                          |   | (12,185)                |                      | -                  | (12,185)  |
| Net loss for the year ended December 31, 2000                           | -            |   | -                   |   | -                          |   | -                       |                      | (37,792)           | (37,792)  |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Balance, December 31, 2000                                              | 402          |   | -                   |   | 38,800                     |   | (12,185)                |                      | (74,152)           | (47,537)  |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Common stock issues for services from $7 to $17 per share               | 105,000      |   | 105                 |   | 499,895                    |   | -                       |                      | -                  | 500,000   |
| Share issued in round-up                                                | 5            |   | -                   |   | -                          |   | -                       |                      | -                  | -         |
| Common stock issued for services to a related party at                  |         |   |                |   |                       |   |                    |                      |               |      |
| $0.01 per share                                                         | 3,000,000    |   | 3,000               |   | 17,000                     |   |                    |                      |               | 20,000    |
| Rounding of shares                                                      | 149          |   | -                   |   | -                          |   | -                       |                      | -                  | -         |
| Forgiveness of debt                                                     | -            |   | -                   |   | 43,085                     |   | -                       |                      | -                  | 43,085    |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Net change in unrealized gains/(losses)on available for sale securities | -            |   | -                   |   | -                          |   | 12,185                  |                      |               | 12,185    |
| Net loss for the year ended December 31, 2001                           | -            |   | -                   |   | -                          |   | -                       |                      | (588,198)          | (588,198) |
|                                                                    |         |   |                |   |                       |   |                    |                      |               |      |
| Balance, December 31, 2001                                              | 3,105,555    | $      | 3,105               | $      | 598,780                    | $      | -                       | $                         | (662,350)          | (60,465   |

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

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| **PLANKTOS CORP**                                                   |         |   |                |   |                       |   |                    |                      |               |        |
|---------------------------------------------------------------------|--------------|--------|---------------------|--------|----------------------------|--------|-------------------------|---------------------------|--------------------|-------------|
| **(formerly Diatom Corporation)**                                   |         |   |                |   |                       |   |                    |                      |               |        |
| **(A Development Stage Company)**                                   |         |   |                |   |                       |   |                    |                      |               |        |
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**                  |         |   |                |   |                       |   |                    |                      |
|                                                                |         |   |                |   |                       |   |                    |                      | DeficitAccumulated |        |
|                                                                | Common Stock |   | Additional

Paid-in |   | Accumulated

Comprehensive |   | During the

Development | Total Stockholder’s |
|                                                                | Shares       |   | Amount              |   | Capital                    |   | Income/(Loss)           |                      | Stage              | Equity      |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Balanceforward, December 31, 2001                                   | 3,105,555    | $      | 3,105               | $      | 598,780                    | $      | -                       | $                         | (662,350)          | (60,465)    |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Shares returned to treasury                                         | (7,500)      |   | (8)                 |   | 8                          |   | -                       |                      | -                  | -           |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Issuance of common stock for services from $0.07 to $0.17 per share | 33,450,000   |   | 33,450              |   | 527,550                    |   | -                       |                      | -                  | 561,000     |
| Issuance of common stock for debt at $0.13 per share                | 600,000      |   | 600                 |   | 79,400                     |   | -                       |                      | -                  | 80,000      |
| Issuance of stock in round-up                                       | 22,749       |   | 23                  |   | (23)                       |   | -                       |                      | -                  | -           |
| Net loss for the period ended December 31, 2002                     | -            |   | -                   |   | -                          |   | -                       |                      | (749,558)          | (749,558)   |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Balance, December 31, 2002                                          | 37,170,804   |   | 37,170              |   | 1,205,715                  |   | -                       |                      | (1,411,908)        | (169,023)   |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Issuance of common stock for services at $0.01 per share            | 30,000,000   |   | 30,000              |   | 370,000                    |   | -                       |                      | -                  | 400,000     |
| Rounding due to stock split                                         | 224          |   | -                   |   | -                          |   | -                       |                      | -                  | -           |
| Cancellation of common shares                                       | (43,500)     |   | (44)                |   | 44                         |   | -                       |                      | -                  | -           |
| Net loss for the period ended December 31, 2003                     | -            |   | -                   |   | -                          |   | -                       |                      | (463,037)          | (463,037)   |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Balance, December 31, 2003                                          | 67,127,527   |   | 67,127              |   | 1,575,759                  |   | -                       |                      | (1,874,945)        | (232,060)   |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Rounding due to Madison adjustment                                  | -            |   | 1                   |   | 243                        |   | -                       |                      | -                  | 244         |
| Net loss for the period ended December 31, 2004                     | -            |   | -                   |   | -                          |   | -                       |                      | (54,079)           | (54,079)    |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Balance, December 31, 2004                                          | 67,127,527   |   | 67,128              |   | 1,576,002                  |   | -                       |                      | (1,929,024)        | (285,895)   |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Issuance of common stock for debt at $.01 per share                 | 78,711,311   |   | 78,711              |   | 918,299                    |   | -                       |                      | -                  | 997,010     |
| Common stock issued for cash from $0.13 to $0.17 per share          | 2,100,000    |   | 2,100               |   | 327,900                    |   | -                       |                      | -                  | 330,000     |
| Cancellation of common shares                                       | (70,500,000) |   | (70,500)            |   | 70,500                     |   | -                       |                      | -                  | -           |
| Issuance of warrants                                                | -            |   | -                   |   | 500,347                    |   | -                       |                      | -                  | 500,347     |
| Capital contribution by shareholders                                | -            |   | -                   |   | 100                        |   | -                       |                      | -                  | 100         |
| Net loss for the period ended December 31, 2005                     | -            |   | -                   |   | -                          |   | -                       |                      | (1,356,581)        | (1,356,581) |
|                                                                |         |   |                |   |                       |   |                    |                      |               |        |
| Balance, December 31, 2005                                          | 77,438,838   |   | 77,439              |   | 3,393,148                  |   | -                       |                      | (3,285,605)        | 184,981     |

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

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| **PLANKTOS CORP**                                           |         |   |                |   |                       |   |                    |                      |               |       |
|-------------------------------------------------------------|--------------|--------|---------------------|--------|----------------------------|--------|-------------------------|---------------------------|--------------------|------------|
| **(formerly Diatom Corporation)**                           |         |   |                |   |                       |   |                    |                      |               |       |
| **(A Development Stage Company)**                           |         |   |                |   |                       |   |                    |                      |               |       |
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**          |         |   |                |   |                       |   |                    |                      |
|                                                        |         |   |                |   |                       |   |                    |                      | DeficitAccumulated |       |
|                                                        | Common Stock |   | Additional

Paid-in |   | Accumulated

Comprehensive |   | During the

Development | Total Stockholder’s |
|                                                        | Shares       |   | Amount              |   | Capital                    |   | Income/(Loss)           |                      | Stage              | Equity     |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Balanceforward, December 31, 2005                           | 77,438,838   |   | 77,439              |   | 3,393,148                  |   | -                       |                      | (3,285,605)        | 184,981    |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Net loss for the period ended December 31, 2006             | -            |   | -                   |   | -                          |   | -                       |                      | (286,793)          | (286,793)  |
| Recapitalization of Planktos Corp                           |         |   |                |   | (3,572,398)                |   |                    |                      | 3,572,398          | -          |
| Accumulated deficit & recapitalization of Planktos Inc. |         |   |                |   | 143,013                    |   |                    |                      | (741,271)          | (598,258)  |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Balance, December 31, 2006                                  | 77,438,838   |   | 77,439              |   | (36,238)                   |   | -                       |                      | (741,271)          | (700,070)  |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Net equity acquired in reverse acquisition                  |         |   |                |   | (101,811)                  |   |                    |                      |               | (101,811)  |
| Common stock issued for cash from $0.27 to $0.40 per share  | 5,585,000    |   | 5,585               |   | 1,650,415                  |   |                    |                      |               | 1,650,000  |
| Common stock issued for services at $0.86 per share         | 50,000       |   | 50                  |   | 42,950                     |   |                    |                      |               | 43,000     |
| Common stock issued for cash at $0.16 per share             | 600,000      |   | 600                 |   | 99,385                     |   |                    |                      |               | 99,985     |
| Common stock issued for cash at $1.00 per share             | 1,078,000    |   | 1,078               |   | 1,076,922                  |   |                    |                      |               | 1,078,000  |
| Common stock cancelled                                      | (45,000,000) |   | (45,000)            |   | -                          |   |                    |                      |               | (45,000)   |
| Common stock issued in exchange for Planktos, Inc. stock    | 45,000,000   |   | 45,000              |   | 940,000                    |   |                    |                      |               | 985,000    |
| Net loss for the period ended December 31, 2007             |         |   |                |   |                       |   |                    |                      | (2,937,599)        | (2,937,599 |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Balance, December 31, 2007                                  | 84,751,838   |   | 84,752              |   | 3,671,624                  |   | -                       |                      | (3,678,870)        | 77,505     |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Net loss for the period ended December 31, 2008             |         |   |                |   |                       |   |                    |                      | (249,991)          | (249,991)  |
|                                                        |         |   |                |   |                       |   |                    |                      |               |       |
| Balance, December 31, 2008                                  | 84,751,838   | $      | 84,752              | $      | 3,671,624                  | $      | -                       | $                         | (3,928,861)        | (172,486)  |

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

F-7

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| **PLANKTOS CORP**                             |                                                        |                                      |      |      |        |                  |
|-----------------------------------------------|-------------------------------------------------------------|-------------------------------------------|-----------|-----------|-------------|-----------------------|
| **(formerly Diatom Corporation)**             |                                                        |                                      |      |      |        |                  |
| **(A Development Stage Company)**             |                                                        |                                      |      |      |        |                  |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS**     |                                                        |                                      |      |      | From        |
|                                          |                                                        |                                      |      |      |        | Inception             |
|                                          |                                                        |                                      |      |      |        | (February 11, 2005 to |
| For the Year Ended 

December 31,             | December 31, 2008)                                          |
|                                          |                                                        |                                      |      | 2008      |        | 2007                  |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:         |                                                        |                                      |      |      |        |
| Net loss from continuing operations           | $                                                           | (111,793)                                 | $         | (362,108) | $           | (1,172,512)           |
| Adjustments to reconcile net loss to net cash |                                                        |                                      |      |      |        |                  |
| (Used) in operating activities:               |                                                        |                                      |      |      |        |                  |
|                                          | Depreciation                                                |                                      | -         |      | 35,745      |                  | 35,745 |
|                                          | Expenses paid through contribution of paid in capital       |                                      | -         |      | -           |                  | 41,101 |
|                                          | (Increase) decrease in prepaid expense& misc receivable |                                      | -         |      | 7,162       |                  | - |
|                                          | Increase (decrease) in accounts payable                     |                                      | (19,180)  |      | 186,898     |                  | 168,789 |
|                                          | Increase (decrease) in other liabilities                    |                                      | -         |      | (3,259)     |                  | 3,242 |
|                                          | Increase (decrease) in accrued interest payable             |                                      | -         |      | 32,614      |                  | 32,614 |
|                                          | Net Cash (Used in) Continuing Operating Activities          |                                      | (130,973) |      | (102,948)   |                  | (891,021) |
|                                          | Net Cash (Used in) Discontinued Operating Activities        |                                      | (362,525) |      | (2,591,510) |                  | (3,001,415) |
|                                          |                                                        | Net Cash (Used in) Operating Activities   |      | (493,498) |        | (2,694,458)           |   | (3,892,436) |
| CASH FLOWS FROM INVESTING ACTIVITIES:         |                                                        |                                      |      |      |        |
|                                          | Acquisition of business                                     |                                      | -         |      | 72,700      |                  | 72,700 |
|                                          | Discontinued operations                                     |                                      | 1,000,000 |      | (823,306)   |                  | 176,694) |
|                                          |                                                        | Net Cash (Used in) Investing Activities   |      | 1,000,000 |        | (750,606)             |   | 249,394) |
| CASH FLOWS FROM FINANCING ACTIVITIES:         |                                                        |                                      |      |      |        |
|                                          | Issued common stock for cash                                |                                      | -         |      | 2,876,985   |                  | 2,877,085 |
|                                          | Affiliate receivable                                        |                                      | -         |      | 86,956      |                  | 5,824 |
|                                          | Affiliate payable                                           |                                      | -         |      | (5,824)     |                  | (5,824) |
|                                          | Proceeds from payable - related party                       | -                                         |      | 650,000   |        | 1,589,750             |
|                                          | Loan principal repayments                                   |                                      | (52,166)  |      | (276,750)   |                  | (328,916) |
|                                          | Discontinued operations                                     |                                      | (472,423) |      | -           |                  | (472,423) |
|                                          |                                                        | Net Cash Provided by Financing Activities | (524,589) |      | 3,331,367   |                  | 3,665,496 |
| NET INCREASE (DECREASE) IN CASH AND           |                                                        |                                      |      |      |        |
| CASH EQUIVALENTS                              |                                                        | (18,087)                                  |      | (113,697) |        | 22,454                |
| CASH AT BEGINNING OF PERIOD                   |                                                        | 40,541                                    |      | 154,238   |        | -                     |
| CASH AT END OF PERIOD                         | $                                                           | 22,454                                    | $         | 40,541    | $           | 22,454                |
| SUPPLIMENTAL CASH FLOW INFORMATION            |                                                        |                                      |      |      |        |
|                                          | CASH PAID FOR:                                              |                                      |      |      |        |                  |   |
|                                          |                                                        | Interest                                  | $         | -         | $           | -                     | $ | - |
|                                          |                                                        | Income taxes                              | $         | -         | $           | -                     | $ | - |

NON-CASH FINANCING AND INVESTING TRANSACTIONS:                              

During 2005the Company issued 78,711,311 shares of common stock to satisfy debt of $997,010.          

During 2006the Company converted $99,541 of accounts payable - related party to loan payable.During 2007the Company issued 50,000 shares of common stock for services provided by one of our directors valued at $46,000.

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

F-8

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

**NOTE 1 –****ORGANIZATION AND BASIS OF PRESENTATION**

Planktos Corp. (the “Company”) was incorporated as “eWorld Travel Corp”on December 10, 1998 under the laws of the state of Nevada. The Company was originally organized to provide internet-based travel services.On September 23, 2002, the Company changed its name to “GYK Ventures, Inc.”and on July 8, 2005, the Company changed its name to “Diatom Corporation”. On March 7, 2007 the Company acquired Planktos, Inc as a wholly owned subsidiary. These consolidated financial statements include the accounts of the Company and Planktos,        Inc.

The Company was engaged in the carbon offset business through efforts to prove out an “iron-fertilization” technology.

The Company is a development stage company as defined in Financial Accounting Standards Board Statement No. 7. It is concentrating substantially all of its efforts in raising capital and defining its business operation in order to generate revenues.

During the fourth quarter of 2007, Planktos’ “iron-fertilization” prove out program was suspended and its operations were discontinued. In the first quarter of 2008 Planktos terminated all employees, liquidated substantially all of its assetsand closedits Foster City, California office.As of December 31, 2008 a cumulative loss of $2,756,349 has been recognized as a loss in discontinued operations.

**NOTE 2 –****SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES**

This summary of significant accounting policies ofthe Companyis 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.

Accounting Method

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.         

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2008, all of the Company’s cash was within Federally insured limits.

Concentrations

The Company maintains its cash accounts in commercial banks. During the year, the Company may maintain balances in excess of the federally insured amounts in the accounts that are maintained in the United States. 

F-9

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

**NOTE****2****– SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES****- continued**

Derivative Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (hereinafter “SFAS No. 133”) as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities – Deferral        of the Effective Date of FASB No. 133,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize        all derivatives as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. In February 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments, an Amendment of FASB Standards No. 133 and 140.”                  If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the        period of change.                  Historically, the Company has not entered into derivative contracts to hedge existing risks.

Development Stage Activities

The Company has been in the development stage since inception. The Company has no revenues from its planned operations. The Company is in the development stage according to Financial Accounting Standards Board Statement No. 7 and is currently focusing its attention on raising capital in order to pursue its goals.

Earnings (Loss) Per Share 

The Company adopted Statement of Financial Accounting Standards No. 128, which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted        average common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. For the fiscal year 2007 and 2008, diluted net loss per share wasthe same as basic net loss per share as the common stock        equivalents outstandingwere considered anti-dilutive. 

As of December 31, 2008 and December 31, 2007, the Company had outstanding common stock warrants of5,525,000. 

F-10

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

 

 

**NOTE****2****– SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES****-        continued**         

Fair Value Measurements

 

Effective January 1, 2008, the Company adopted Financial Accounting Standards Board (FASB) SFAS No.157, *Fair Value Measurements*(SFAS 157). The provisions of SFAS 157        are applicable to all of the Company’s assets and liabilities that are measured and recorded at fair value. SFAS 157 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. SFAS 157 establishes a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable        inputs. The three levels of the fair value hierarchy defined by SFAS 157 are described below.

Level 1:     Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2:     Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. 

Level 3:     Pricing inputs that are generally unobservable inputs and not corroborated by market data.

The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2008. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the year ended December 31, 2008.

Going Concern 

 

As shown in the accompanying financial statements, the Company had no revenues, a negative working capital of $121,242 and an accumulated deficit of $3,928,861 incurred through December 31, 2008. These factors indicate that the Company may be unable to continue in existence. The Company is currently putting business plans in        place which will, if successful, mitigate these factors which raise substantial doubt about the Company’s ability to continue as a going concern.Management’s plansincludes the following: (1) obtaining funding from private placement sources; (2) obtaining additional funding from the sale of the Company’s securities; and (3) seeking out a new business opportunity that might, if successful, mitigate        those factors which raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Companyand its subsidiaries.  All significant intercompany balances and transactions have been eliminated.

 

F-11

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

 

**NOTE****2****– SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES****-        continued**         

Provision for Taxes 

 

Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the        tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by SFAS No. 109 to allow recognition of such an asset.

At December 31, 2008and 2007, the Company had gross deferred tax assets calculated at an expected rate of 34% of approximately $1,289,000and $1,251,000,respectively, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of $1,289,000and $1,251,000has been established at December 31, 2008and 2007, respectively.

The significant components of the Company’s deferred tax assets at December 31, 2008and 2007are as follows:

|                                         | December 31, 2008 |   | December 31, 2007 |
|----------------------------------------------|-------------------|--------|-------------------|
|                                         |              |   |              |
| Net Operating Losses Carryforward Cumulative | $ 3,791,000       |   | $ 3,679,000       |
|                                         |              |   |              |
|                                         |              |   |              |
| Gross deferred tax assets (liabilities):     |              |   |              |
| Deferred tax asset before allowance          | $ 1,289,000       |   | $ 1,251,000       |
| Valuation allowance                          | (1,289,000)       |   | (1,251,000)       |
| Net deferred tax asset                       | $ -               |   | $ -               |
|                                         |              |   |              |

At December 31, 2008and 2007, the Company has net operating loss carryforwards of approximately $3,791,000and $3,679,000respectively, which will expire in the years 2021through 2028. The net change in the allowance account was an increase of $38,000.

 

 

F-12

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

**NOTE****2****– SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES****- continued**         

Recent Accounting Pronouncements

 

In May, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 163, “Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60” (SFAS 163). This Statement requires that an insurance enterprise recognize a        claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by        insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprise’s        risk-management activities. This Statement requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period (including interim periods) beginning after issuance of this Statement. Except for those disclosures, earlier application is not permitted.  The adoption of this statement will have no material effect on the Company’s financial condition or results of operations.                   In May, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 162, “The Heirarchy of Generally Accepted Accounting Principles” (SFAS No. 162). This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the        United States (the GAAP hierarchy). The sources of accounting principles that are generally accepted are categorized in descending order of authority as follows:                  a. FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB                  b. FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position                   c. AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of *EITF Abstracts*(EITF D-Topics)

d. Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.                   The adoption of this statement will have no material effect on the Company’s financial condition or results of operations.

 

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

 

 

**NOTE****2****– SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES****-        continued**

Recent Accounting Pronouncements(Continued)

In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (SFAS No. 161). This statement changes the disclosure requirements for        derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is intended to enhance the current        disclosure framework in Statement 133. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure better conveys the purpose of derivative use in terms of the risks that the entity is intending to manage. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format should provide a more complete picture of the location in an entity’s financial        statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features should provide information on the potential effect on an entity’s liquidity from using derivatives. Finally, this Statement requires cross-referencing within the footnotes, which should help users of financial statements locate important information about derivative instruments.         The adoption of this statement will have no material effect on the Company’s financial condition or results of operations. 

Reclassification

 

Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company’s accumulated deficit or net losses presented.

Use of Estimates

 

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions        and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

 

 

 

**NOTE 3 – NET ASSETS OF DISCONTINUED OPERATIONS         **

The net assets of the disposed subsidiary include cash, deposit and the vessel including marine equipment.

**                                                            **December 31,     December 31,                                                                               2008                 2007

Research Vessel “Weatherbird II”              $       -              $ 800,000        Marine Equipment                                                      -                  23,306                                                                                 -                823,306        Accumulated Depreciation                                   -                         35,745Net Vessel & Equipment                             $              -             $ 787,561

 

 

 

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

 

**NOTE****3****– NET ASSETS OF DISCONTINUED OPERATIONS****-        continued**         

Depreciation is calculated, based on cost, less estimated residual value, using the straight-line method, over the remaining economic life of each asset. The costs of significant replacements, renewals and betterments. Depreciation expense for the years ended December 31, 2008 and        2007 was $0 and $35,745 respectively.

**NOTE****4****– CAPITAL STOCK**

Common Stock 

In January 2007 the Company completed a private placement for 4,327,500 units at $0.27 per unit for cash proceeds of $1,154,000. Each unit consists of one common share and one share purchase warrant exercisable into one common share at $0.27 for a period of two years.                  In February 2007 the Company completed a private placement for 1,257,500 units at $0.40 per unit for cash proceeds of $502,000. Each unit consists of one common share and one share purchase warrant exercisable into one common share at $0.50 for a period of two years.                  On March 8, 2007, the Company effected a 1:1.5 forward split of its common stock. All references in the financial statements to shares, share prices, per share amounts and stock plans have been adjusted retroactively for the 1:1.5 forward stock split.                  On March 13, 2007, the Company issued 50,000 common shares for services valued at $43,000.                  On May 31, 2007 the Company increased the number of shares authorized for issuance to 250,000,000 shares of common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Holders of more than 50% of our common stock could elect all of the directors of the Company.                  On June 26, 2007, the Company issued 600,000 common shares on the exercise of 600,000 purchase warrants at $0.1667 share for cash proceeds of $100,000.

In August 2007, the Company cancelled 45,000,000 shares of common stock and issued 45,000,000 shares of common stock in exchange for all of the outstanding stock of Planktos, Inc.

During the six months period ended December 31, 2007, the Company issued a total of 1,078,000 common shares at $1.00 per share for the cash proceeds of $1,078,000.

There were no equity, stock option or stock warrant transactions for the year ended December 31, 2008.

During the six months period ended December 31, 2007, the Company issued a total of 1,078,000 common shares at $1.00 per share for the cash proceeds of $1,078,000.

There were no equity, stock option or stock warrant transactions for the year ended December 31, 2008.

 

 

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

**NOTE****4****– CAPITAL STOCK****- continued**

Warrants

A summary of the Company’s warrants at December 31, 2008 and December 31, 2007 and the changes for 2008are as follows:

 

|                            |   |        |   | Weighted |   | Weighted   |
|---------------------------------|--------|-------------|--------|----------|--------|------------|
|                            |   |        |   | Average  |   | Average    |
|                            |   | Warrants    |   | Exercise |   | Remaining  |
|                            |   | Outstanding |   | Price    |   | Life       |
|                            |   |        |   |     |   |       |
| Balance, December 31, 2006      |   | 600,000     |   | $ 0.16   |   | -          |
| Issued                          |   | 5,525,000   |   | 0.32     |   | 1.05 years |
| Exercised/Cancelled / Expired   |   | (600,000)   |   | 0.16     |   | -          |
|                            |   |        |   |     |   |       |
| Balance, December 31, 2007      |   | 5,525,000   |   | $ 0.32   |   | 1.05 years |
| Issued                          |   | -           |   | -        |   | -          |
| Exercised / Cancelled / Expired |   | -           |   | -        |   | -          |
|                            |   |        |   |     |   |       |
| Balance December 31, 2008       |   | 5,525,000   |   | $ 0.32   |   | 0.04 years |

**NOTE****5****–****RELATED PARTY TRANSACTIONS         **

During the year ended December 31, 2007, the Company recognized a bad debt expense of $32,876 in connection with amounts loaned to D2Fusion, Inc., a wholly owned subsidiary of Solar Energy Limited, our majority shareholder.                  During the year ended December 31, 2007, the Company issued 50,000 common shares to a director for services rendered valued at $43,000.                  During the year ended December 31, 2007, the Company received $100,000 in loans from a related party. Additionally, the Company paid back $162,000 in previous loans during the year ended December 31, 2007. As of December 31, 2007 the Company owes the related party $97,511.                  During the year ended December 31, 2007, the Company received $450,000 in loans from related parties and has recorded accrued interest payable of $32,614 related to these loans.                  During the year ended December 31, 2006, the Company received loan advances of $74,970 from a related party. These loans bear no interest and are unsecured. During December 2006, this related party purchased the debt of $99,541 from a former related party, as described above. The Company plans on repaying these loans from future equity financings.

During 2008 payments of $134,000 were paid to a former director for consulting services and $23,000 for repayment of short term loans.                   During 2008 $300,000 was paid to Solar Energy as repayment of loans payable – related party. 

 

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**PLANKTOS CORP.            (formerly Diatom Corporation)            (A Development Stage Company)**

**NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**December 31, 2008**

 

 

 

**NOTE 6 – DISCONTINUED OPERATIONS         **

In December 2007, the Company’s majority owned subsidiary, Planktos Inc., suspended its Iron-Fertilization Prove-Out operations and initiated negotiations for the sale of the related assets (See Note 1).  Accordingly, this business component has been presented as discontinued operations within the        consolidated financial statements in accordance with SFAS No. 144, “ Accounting for the Impairment or Disposal of Long-Lived Assets” and EITF 03-13. As discussed in Note 1, Planktos Corp was engaged in research related to creation and sales of “Kyoto Protocol” certified emission reduction credits. 

The loss on discontinued operations for the year ended December 31, 2007 includes Planktos, Inc.’s loss from operations of $2,575,491. 

The losson discontinued operations for the year ended December 31, 2008includes Planktos, Inc.’ loss fromoperations of $350,637 plus the recognition of a $212,439 gain from the sale of the Weatherbird II.  

 

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**ITEM 9****.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS****ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None.

**ITEM 9****A.     CONTROLS AND PROCEDURES****(ITEM 9A****(T))**

**Evaluation of Disclosure Controls and Procedures**

In connection with the preparation of this annual report, an evaluation was carried out by the Company’s management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)        under the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2008. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and        the chief financial officer, to allow timely decisions regarding required disclosures.                  Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and such information was accumulated and communicated to management, including the chief executive officer and the chief        financial officer, to allow timely decisions regarding required disclosures.          

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

Management of the Companyis responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the chief executive officer and the        chief financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting 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 Company’s assets; |
|--|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the        policies or procedures may deteriorate.          

 

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The Company’smanagement conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008 based on criteria established in        *Internal Control – Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknessesin internal control over financial reporting.                   A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.          

The material weaknessesasidentifiedby managementare disclosed below.         

*Lack of Appropriate Independent Oversight.*  The board of directors has not provided an appropriate level of oversight of the Company’s consolidated financial reporting and procedures for internal control over financial reporting since there are, at present, no independent directorswho could provide an appropriate level of oversight, including challengingmanagement’s accounting for and reporting oftransactions. Our lack of appropriate independent oversight has been a material weakness since the resignation of two of our directors in the current annual period. While this control deficiency did not result in any audit adjustments toour 2008or 2007interim or annual financial statements, it could have resulted inmaterial misstatement that might have been prevented or detected by independent oversight. Accordingly we have determined that this control deficiency constitutes a material weakness.         

*Failure to Segregate Duties.*Management has not maintained any segregation of duties within the Company due to itsrelianceon a single individual to fillthe role of chief executive officer, chief financial        officer and principal accounting officer.Our failure to segregate dutieshas been a material weakness since inceptionthrough the annual period of this report.While this control deficiency did not result in any auditadjustments to our 2008or 2007interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties. Accordingly we have determined that this control deficiency constitutes a material weakness.

*Sufficiency of Accounting**Resources**.*The Company haslimitedaccounting personnel to prepare itsfinancial statements,        including the consolidation of the Company and its subsidiaries. The insufficiency of our accounting resources has been a material weakness since inceptionthrough the annual period of this report. While this control deficiency did not result in any audit adjustments to our 2008 or 2007 interim or annual financial statements, it did result in certain errors in the consolidation of the Company and its subsidiaries that were not detected by the        Company’s internal control over financial reporting.

As a result of the material weaknesses in internal control over financial reporting described above, the Company’s management has concluded that, as of December 31, 2008, that the Company’s internal control over financial reporting was not effective basedon the criteria in*Internal Control – Integrated Framework*issued by the COSO.         The Company intends, as capital resources allow,to remedyits material weaknesses by:         

|  | ·      | Forming an audit committee made up of independent directors that will oversee management (we have begun this process by seeking out individuals who might act as independent directors). |
|--|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·      | Engaging an individual to serve as chief financial officer and principal accounting officer to segregate the duties of chief executive officer and chief financial officer (our chief executiveofficer is in the process of seeking out an individual willing to serve as chief financial officer and principal accounting officer).

 

 

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                      |
|--|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Despite the Company’s intention to remedy its material weaknesses in the manner described,the actionsrequired to accomplish these objectives will require the Company toengage additional personnelwhich        actions may not be possiblein the near term due to our limited financial resourcesand operations.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting        pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.          

***Changes in Internal Controls over Financial Reporting***

During the period ended December 31, 2008, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

**9B.           OTHER INFORMATION**

None.

**PART III**

**ITEM****10****.     DIRECTORS, EXECUTIVE OFFICERS, AND****CORPORATE        GOVERNANCE**

**Officers and Directors**

The following table sets forth the name, age and position of each director and executive officer of the Company:          

| ***Name***           | ***Age*** | ***Year                    Elected/Appointed*** | ***Positions Held***       |
|----------------------|-----------|-------------------------------------------------|----------------------------|
| Michael James Gobuty | 70        | 2008                                            | CEO, CFO, PAO and Director |

***Michael James Gobuty***was appointed as a director on September 12, 2008 and as chief executive officer, chief financial officer and principal accounting officer on December 15, 2008. 

Mr. Gobuty earned a Bachelor of Arts degreefrom the University ofWinnipeg. He was involved for many years as a consultant to theinternational garment industry based on years of experience inleather outerwear and        sportswear. Mr. Gobuty has been active in hockey serving as team president and owner. He has also beeninvolved in financing and developing real estate properties.

Mr.Gobuty is not a director of any reporting corporations other than the Company. 

***Term of Office***         Our directors are appointed for a one (1) year term to hold office until the next annual meeting of our shareholders or until removed from office in accordance with our bylaws. Our executive officers are appointed by our board of directors and hold office until removed by the board.

 

 

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***Family Relationships*** 

There are no family relationships between or among the directors or executive officers.

 

***Involvement in Certain Legal Proceedings***         To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic        violations and other minor offences); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have        violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.         

**Compliance with Section 16(A) of the Exchange Act**

Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, weareaware of the following persons who, during the period ended December 31, 2008failed to file, on a timely basis, reports required by Section 16(a) of the Securities Exchange Act of 1934.

|  | ·      | Robert Fisherfailed to timely file a Form 3or Form 5despite being an officer anddirector. |
|--|----------------------------------------|-------------------------------------------------------------------------------------------|

|  | ·      | Joel Dumaresq failed to timely file a Form 3 or 5 despite being a director. |
|--|----------------------------------------|-----------------------------------------------------------------------------|

|  | ·      | Michael James Gobuty,ourdirector and executive officer, failed to file on Form 3 or 5 |
|--|----------------------------------------|---------------------------------------------------------------------------------------|

**Code of Ethics**

 

The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal executive officer, principal financial officer, controller, and persons performing similar functions. The Company has incorporated a copy of its Code        of Ethics as Exhibit 14 to this form 10-K. Further, our Code of Ethics is available in print, at no charge, to any security holder who requests such information by contacting us.

**Board of Directors Committees**

 

The board of directors has not established an audit committee. An audit committee typically reviews, acts on and reports to the board of directors with respect to various auditing and accounting matters, including the recommendations and performance of independent auditors, the scope of the annual audits, fees to be paid to the        independent auditors, and internal accounting and financial control policies and procedures. Certain stock exchanges currently require companies to adopt a formal written charter that establishes an audit committee that specifies the scope of an audit committee’s responsibilities and the means by which it carries out those responsibilities. In order to be listed on any of these exchanges, the Company will be required to establish an audit committee.

The Company’s board of directors has not established a compensation committee. 

 

 

 

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**Director Compensation**

Directors currently are not reimbursed for out-of-pocket costs incurred in attending meetings nor are they compensated for their service as directors. The Company may compensate directors in the future.

**ITEM****11****.     EXECUTIVE COMPENSATION**

**Compensation Discussion and Analysis**

 

Since the Companyhas limited operations,no compensation was paid as of the annual period ended December 31, 2008, to retain the services of our current executive officer. However, in the event that the Company expands it operations, the        amountwe deem appropriate to compensate our executive officer may change inaccordance with market forces thoughwe have no specific formula to determine future compensation at this time. Executive compensation may include salaries, options and other compensatory elements for our executive officer and any future executive        employees. Decisions as to executive compensation would be based on the type of operations, the scale of those operations and available capital resources. 

The Company did pay executive compensation for the annual period ended December 31, 2007 to two of its former chief executive officers, Mr. Robert Fisher and Mr. Russ George.Mr. Fisher was paid $10,000 and 50,000 shares of the Company’s common stock for        services rendered. Mr. Russ George was paid $15,000 a month pursuant to a consulting agreement.

The Company did not pay executive compensation for the annual period ended December 31, 2006. 

The increase in executive compensation paid in the year ended December 31, 2007 can be attributed to the contribution brought to the Company by Mr. George in his role as the chief proponent of the carbon sequestration process and business model. He was relieved of his duties in March of 2008.

Even thoughthe Company has limited resources at this time for executive compensation itanticipates that executive compensation will be paid in future periods.         

**Tables**

The following table provides summary information for the years 2008, 2007, and 2006 concerning cash and non-cash compensation paid or accrued by the Companyto or on behalf of (i) the chief executive officer        and (ii) any other employee to receive compensation in excess of $100,000.

 

 

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| ***Summary Compensation Table***                    |
|-----------------------------------------------------|
| Name and Principal Position                         | Year | Salary                    ($) | Bonus                    ($) | Stock Awards                    ($) | Option                    Awards                    ($) | Non-Equity Incentive Plan Compensation                    ($) | Change in Pension Value and Nonqualified Deferred Compensation                    ($) | All Other Compensation                    ($) | Total                    ($) |
| Michael James Gobuty1

CEO, CFO, and PAO            | 2008                    2007                    2006 | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - |
| Enrique J. Lõpez de Mesa2

CEO, CFO, and PAO | 2008                    2007                    2006 | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - |
| Joel Dumaresq3CEO, CFO, and PAO                     | 2008                    2007                    2006 | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - |
| Robert Fisher4

CEO, CFO, and PAO                   | 2008                    2007                    2006 | -

10,000- | -                    -                    - | -

46,000- | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -

56,000- |
| Russ George5CEO, CFO, and PAO                       | 2008                    2007                    2006 | -                    180,000                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    -                    - | -                    180,000                    - |

**     **

1     Chief executive officer, chief financial officer and principal accounting officer from        December 15, 2008until present.

2     Chief executive officer, chief financial officer and principal accounting officer from        September 10, 2008until December 15, 2008.

3     Chief executive officer, chief financial officer and principal accounting officer from July 22,        2008untilSeptember 10, 2008.

4     Chief executive officer, chief financial officer and principal accounting officer from December 15, 2006 until March 13, 2007and March 3, 2008 to July 22, 2008.Mr. Fisher was issued 50,000 shares of the Company’s common stock on March 13, 2007 for services rendered.

5     Chief executive officer, chief financial officer and principal accounting officer from March 13, 2007 to March 3, 2008.

We have no “Grants of Plan-Based Awards,”“Outstanding Equity Awards at Fiscal Year-End,”“Option Exercises and Stock        Vested,” “Pension Benefits,” “Nonqualified Deferred Compensation,” or“Post Employment Payments” to report.

**ITEM 12****.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT****AND RELATED STOCKHOLDER MATTERS**

The following table sets forth certain information concerning the ownership of the Company’s 84,751,838shares of common stock issued and outstanding as of April14, 2009with respect to: (i) all directors; (ii) each person known by us to be the beneficial owner of more than five percent of our common stock; and (iii) our directors and executive officers as a group.

 

 

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| ***Names and Addresses of Managers and Beneficial Owners***                                                      | ***Title of Class*** | ***Number of Shares*** | ***Percent of                     Class*** |
|------------------------------------------------------------------------------------------------------------------|----------------------|------------------------|--------------------------------------------|
| Michael Gobuty

73200 El Paseo, Ste #2HPalm Desert, CA 92260                                                     | Common               | 0                      | 0                                          |
| Maidon Services Limited

GIPS-BLOK SP.Z.O.O                    Smiata 4 – 18 lok 98

01-523 Warsaw, Poland | Common               | 45,000,000             | 53.1                                       |
| Officer and Directors as a Group(1)                                                                              | Common               | 0                      | 0                                          |

**ITEM 13****.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS****AND DIRECTOR INDPENDENCE**

None of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse,        parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction in the period covered by this reportor in any presently proposed transaction which, in either case, has or will materially affect us, except as follows:

On November 12, 2008Maidon Services Limited purchased45,00,000 shares or53.1% ofthe Company’scommon stockfrom        Solarpursuant to the terms and conditions of an agreementdated August 28, 2008 for cash consideration of $200,000 of which $125,000 was delivered on the closing date. The remainder of the purchase price is due within fourteen months and can be converted at Solar’s option into shares of the Company at $0.25 per share.

***Director Independence*** 

The Company is quotedon the Pink Sheets LLC over-the-counter securities market, which does not have director independence requirements.However, for purposes of determining director        independence, we have applied the definitions set out in NASDAQ Rule 4200(a)(15). NASDAQ Rule 4200(a)(15) states that a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Accordingly, none of our directors can be considered independent.

**ITEM 14.****     ****PRINCIP****AL ACCOUNTANT FEES AND SERVICES         **

***Audit Fees***

Williams & Webster, P.S., provided audit services in connection with its annual report for the fiscal years ended December 31, 2008 and 2007. The aggregate fees billed by Williams & Webster for auditsof ourfinancial statements were$50,482and $25,182in 2008 and 2007, respectively. 

***Audit Related Fees***

Williams & Webster, P.S., billed to the Company no fees in 2008 or 2007for professional services that are reasonably related to the audit of the Company’s financial statements that are not disclosed in “Audit Fees” above. 

 

 

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***Tax Fees***

Williams & Webster, P.S., billed to the Company no fees in 2008 or 2007for professional services rendered in connection with the preparation of the Company's tax return for the period. 

 

***All Other Fees***

Williams & Webster, P.S., billed to the Company no fees in 2008 or 2007for professional services rendered or any other services not disclosed above. 

         

***Audit Committee Pre-Approval***

The Company did not have a standing audit committee at the time its respective auditors were engaged. Therefore, all services provided to the Company by Williams & Webster, P.S., as detailed above, were pre-approved by the Company’s board of directors. Williams & Webster, P.S., performed all work only with their permanent full time employees.        

**PART IV**

**ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

***(a) Con******solidated Financial Statements***

The following documents are filedunder “*Item 8. Financial Statements and Supplementary Data**,*”pages F-1 through F-17,and are included as part of this Form 10-K: 

     

Financial Statements ofThe Companyfor the years ended December 31, 2008and 2007:

Reportof Independent Registered Public Accounting Firm**     **

ConsolidatedBalance Sheets

ConsolidatedStatements of Income        Consolidated Statementsof Stockholders’ Equity        ConsolidatedStatements of Cash Flows

Notes to Consolidated Financial Statements     **                    **

***(b) Exhibits***

The exhibits required to be attached by Item 601 of Regulation S-Kare listed in the Index to Exhibits on page 28of this Form 10-K, and are incorporated        herein by this reference.

***(c)******Financial Statement Schedules***

We are not filing any financial statement schedules as part of this Form 10-K because such schedules are either not applicable or the required information is included in the financial statements or notes thereto. 

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**SIGNATURES**

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

| ***Planktos Corp.****          *                                                                    | ***Date***     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| /s/ Michael James Gobuty

By: Michael James Gobuty

Its: Chief Executive Officer, Chief Financial Officer, Principal 

Accounting Officerand Director | April 14, 2009 |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.          

|                                                                                                                                        | ***Date***     |
|---------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| /s/ Michal James Gobuty

Michael James Gobuty

Chief Executive Officer, Chief Financial Officer, Principal 

Accounting Officerand Director | April 14, 2009 |

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**INDEX TO EXHIBITS**

***Exhibit     Description***

3(i)(a)*     Articles of Incorporation (incorporated by reference to the Company’sForm 10-SB filed with the Commission on January 31, 2000) 

3(i)(b)*          Amendment of the Company’s Articles of Incorporation (incorporated by reference to the Company’s Form 8-K filed with the Commission on September 24, 2002)

3(i)(c)*     Amendment of the Company’s Articles of Incorporation (incorporated by reference to the Company’s Form 8-K filed with the Commission on August 10, 2007)

3(i)(d)*     Amendment of the Company’s Articles of Incorporation (incorporated by reference to the Company’s Form 8-K filed with the Commission on August 10, 2007)

3(i)(e)*     Amendment of the Company’s Articles of Incorporation (incorporated by reference to the Company’s Form 8-K filed with the Commission on August 10, 2007)

3(ii)*     By-laws (incorporated herein by reference to the Company’s Form 10-SB filed with the Commission on January 31, 2000) 

10(i)*      Securities Exchange Agreement and Plan of Exchange with Solar, dated January 12, 2007 (incorporated by reference to the Company’s Form 8-K filed with the Commission on January 19, 2007) 

10(ii)*     Settlement and Release Agreement betweenthe Company, Planktos, Russ George, Solar, and Nelson Skalbania dated February 22, 2008 (incorporated by reference to the Company’s Form 8-K filed with the        Commission on March 31, 2008)

14*     Code of Ethics adopted April 1, 2008(incorporated herein by reference to Form 10-Kdated April 29, 2008).

31     Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(attached).

               

32     Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(attached).

      *      Incorporated by reference to previous filings of the Company.

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