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

**FORM        10-QSB**

*(Mark        One)*

þ     Quarterly        report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly        period ended **June 30, 2007**.

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

Commission file        number: **001-14791**

**SOLAR ENERGY        LIMITED**        (Exact name of small business issuer as specified in its charter)

| **DELAWARE**                        (State or other jurisdiction of incorporation or organization) | **76-0418364**                        (IRS Employer Identification Number) |
|----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|

**1151-C Triton        Drive, Foster City, California 94404**        (Address of Principal Executive        Office)          (Zip Code)

**(650)        638-1975**(Issuer’s telephone number)

Check whether 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.

Yesþ                     No ̈                    

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

Yes ̈                     Noþ                    

The number of outstanding shares of        the registrant’s common stock, $0.0001 par value (the only class of voting stock), as        of August 20, 2007 was 21,823,309.

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**TABLE OF CONTENTS**

|                                 |                                                                                  |                                                                                                                            |   |     |   |   |
|--------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|
|                                 |                                                                                  |                                                                                                                            |   | **Page** |
|                                 |                                                                                  |                                                                                                                            |   |          |
| **PART I.**                          |                                                                                  |                                                                                                                            |   |     |
|                                 | **ITEM 1. FINANCIAL                STATEMENTS**                                  |                                                                                                                            |   | 3        |   |
|                                 |                                                                                  | Consolidated Balance Sheets as of June 30,                        2007 (unaudited) and December 31, 2006                        |   |     | 4      |   |
|                                 |                                                                                  | Unaudited Consolidated Statement of Operations                        for the three and six months ended June 30, 2007 and 2006 |   |     | 5      |   |
|                                 |                                                                                  | Unaudited Consolidated Statement of Cash Flows                        for six months ended June 30, 2007 and 2006               |   |     | 6      |   |
|                                 |                                                                                  | Notes to Unaudited Consolidated Financial                        Statements                                                     |   |     | 8      |   |
|                                 |                                                                                  |                                                                                                                                 |   |     |        |   |
|                                 |                                                                                  |                                                                                                                                 |   |     |        |   |
|                                 |                                                                                  |                                                                                                                                 |   |     |        |   |
|                                 | **ITEM 2. MANAGEMENT'S PLAN OF                        OPERATION**                |                                                                                                                            |   | 21       |   |
|                                 | **ITEM 3. CONTROLS                AND PROCEDURES**                               |                                                                                                                            |   | 31       |   |
| **PART II.**                         |                                                                                  |                                                                                                                            |   |     |
|                                 | **ITEM 1. LEGAL                PROCEEDINGS**                                     |                                                                                                                            |   | 32       |   |
|                                 | **ITEM 2.                UNREGISTERED SALES OF EQUITY SECURITIES**               |                                                                                                                            |   | 32       |   |
|                                 | **ITEM 3. DEFAULTS                UPON SENIOR SECURITIES**                       |                                                                                                                            |   | 35       |   |
|                                 | **ITEM 4.                SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS** |                                                                                                                            |   | 35       |   |
|                                 | **ITEM 5. OTHER                INFORMATION**                                     |                                                                                                                            |   | 35       |   |
|                                 | **ITEM 6.                EXHIBITS**                                              |                                                                                                                            |   | 35       |   |
|                                 | **SIGNATURES**                                                                        |                                                                                                                            |   | 36       |   |
| **INDEX TO                EXHIBITS** |                                                                                  |                                                                                                                            | 37     |     |

**            2        **

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**PART        I**

 

| **ITEM 1.** | **FINANCIAL STATEMENTS** |
|-------------|--------------------------|

 

As used        herein the terms “Company,” “we,” “our,” and        “us” refer to Solar Energy Limited, a Delaware corporation and our        subsidiaries, unless otherwise indicated. In the opinion of management, the accompanying        unaudited consolidated financial statements included in this Form 10-QSB reflect all        adjustments (consisting only of normal recurring accruals) necessary for a fair        presentation of the results of operations for the periods presented. The results of        operations for the periods presented are not necessarily indicative of the results to be        expected for the full year.

 

 

3

 

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| **SOLAR ENERGY LIMITED**                               |                                  |                                                                                                                                                                              |      |         |
|--------------------------------------------------------|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------------|
|                                                   |                                  |                                                                                                                                                                              |      |         |
| **(A Development Stage Company)**                      |                                  |                                                                                                                                                                              |      |         |
| **CONSOLIDATED BALANCE                        SHEETS** |                                  |                                                                                                                                                                              |      |         |
|                                                   |                                  |                                                                                                                                                                              |      |         |   | June 30, |   | December 31, |
|                                                   |                                  |                                                                                                                                                                              |      |         |   | 2007 |   | 2006 |
|                                                   |                                  |                                                                                                                                                                              |      |         |   | (unaudited) |   |   |
| **ASSETS**                                             |                                  |                                                                                                                                                                              |      |         |   |   |
|                                                   |                                  |                                                                                                                                                                              |      |         |
| CURRENT ASSETS                                         |                                  |                                                                                                                                                                              |      |         |
|                                                   | Cash                                  |                                                                                                                                                                              |      | $            | 32,902 | $ | 203,912 |
|                                                   | Prepaid expenses                      |                                                                                                                                                                              | 20,176    |         | 26,357 |
|                                                   |                                  | TOTAL CURRENT ASSETS                                                                                                                                                              |      | 53,078       |   | 230,269 |
| OTHER ASSETS                                           |                                  |                                                                                                                                                                              |      |         |
|                                                   | Deposits                              |                                                                                                                                                                              |      | 4,720        |   | 4,720 |
| **TOTAL ASSETS**                                       | $                                     | 57,798                                                                                                                                                                            | $         | 234,989      |
|                                                   |                                  |                                                                                                                                                                              |      |         |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT**              |                                  |                                                                                                                                                                              |      |         |
|                                                   |                                  |                                                                                                                                                                              |      |         |
| CURRENT LIABILITIES                                    |                                  |                                                                                                                                                                              |      |         |
|                                                   | Bank overdraft                        | $                                                                                                                                                                                 | 13,551    | $            | - |
|                                                   | Accounts payable and accrued expenses |                                                                                                                                                                              | 125,473   |         | 91,904 |
|                                                   | Accrued interest - related party      |                                                                                                                                                                              | 3,514     |         | 9,750 |
|                                                   | Other current liabilities             |                                                                                                                                                                              | 23,214    |         | 6,700 |
|                                                   | Advances payable                      |                                                                                                                                                                              | 224,970   |         | - |
|                                                   | Notes payable to related party        |                                                                                                                                                                              | 1,073,220 |         | 174,084 |
|                                                   | Deferred revenues                     |                                                                                                                                                                              | 250,000   |         | 250,000 |
|                                                   |                                  | TOTAL CURRENT LIABILITIES                                                                                                                                                         |      | 1,713,942    |   | 532,438 |
|                                                   |                                  |                                                                                                                                                                              |      |         |   |   |
| LONG-TERM LABILITIES                                   |                                  |                                                                                                                                                                              |      |         |
|                                                   |                                  | Debenture payable, net of discount                                                                                                                                                |      | 76,818       |   | 72,850 |
|                                                   |                                  | Accrued interest                                                                                                                                                                  |      | 8,523        |   | 3,252 |
|                                                   |                                  | Derivative from debenture payable                                                                                                                                                 |      | 18,021       |   | 18,221 |
|                                                   |                                  | Provision for loss on contract                                                                                                                                                    |      | 967,500      |   | 967,500 |
|                                                   |                                  | TOTAL LONG-TERM LIABILITIES                                                                                                                                                       |      | 1,070,862    |   | 1,061,823 |
|                                                   |                                  |                                                                                                                                                                              |      |         |   |   |
| COMMITMENTS AND CONTINGENCIES                          |                                  | -                                                                                                                                                                                 |      | -            |
|                                                   |                                  |                                                                                                                                                                              |      |         |   |   |
|                                                   | STOCKHOLDERS' DEFICIT                 |                                                                                                                                                                              |      |         |   |
|                                                   |                                  | Common stock, 50,000,000 shares authorized;$0.0001 par                        value, 21,823,309 and 19,873,309 shares issued and outstanding,                        respectively |      | 2,182        |   | 1,987 |
|                                                   |                                  | Additional paid-in capital                                                                                                                                                        |      | 11,430,747   |   | 10,753,442 |
|                                                   |                                  | Accumulated deficit during development stage                                                                                                                                      |      | (14,159,935) |   | (12,114,701) |
|                                                   |                                  | TOTAL STOCKHOLDERS' DEFICIT                                                                                                                                                       |      | (2,727,006)  |   | (1,359,272) |
|                                                   |                                  |                                                                                                                                                                              |      |         |   |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS'**

**DEFICIT**   |                                  |                                                                                                                                                                              |      |         |
|                                                   |                                  |                                                                                                                                                                              | $         | 57,798       | $ | 234,989 |

 

 

 

 

 

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

 

4

 

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| **SOLAR ENERGY LIMITED**                                         |                                      |              |        |        |      |      |               |        |             |      |           |         |
|------------------------------------------------------------------|-------------------------------------------|-------------------|-------------|-------------|-----------|-----------|--------------------|-------------|------------------|-----------|----------------|--------------|
| **(A Development Stage Company)**                                |                                      |              |        |        |      |      |               |        |             |      |           |         |
| **CONSOLIDATED STATEMENTS OF                        OPERATIONS** |                                      |              |        |        |      |      |               |        |             |      |           |
|                                                             |                                      |              |        |        |      |      |               |        |             |      | From Inception |         |
|                                                             |                                      |              |        |        |      |      |               |        |             |      |           |         |   | (January 5, 1994) |   |
|                                                             |                                      |              |        |        |      |      | Three Months Ended |        | Six Months Ended |      | through        |         |
|                                                             |                                      |              |        |        |      |      | June 30,           |        | June 30,         |      | June 30,       |         | June 30, |   | June 30, |   |
|                                                             |                                      |              |        |        |      |      | 2007               |        | 2006             |      | 2007           |         | 2006 |   | 2007 |   |
|                                                             |                                      |              |        |        |      |      | (unaudited)        |        | (unaudited)      |      | (unaudited)    |         | (unaudited) |   | (unaudited) |   |
|                                                             |                                      |              |        |        |      |      |               |        |             |      |           |         |   |   |   |   |
| REVENUES                                                         |                                      |              | $           | -           | $         | -         | $                  | -           | $                | -         | $              | -            |   |
| EXPENSES                                                         |                                      |              |        |        |      |      |               |        |             |      |           |         |   |
|                                                             | General and administrative                |              |        | 711,444     |      | 484,626   |               | 1,213,840   |             | 918,393   |           | 5,955,291    |   |
|                                                             | Vessel operating costs                    |              |        | 263,918     |      | -         |               | 517,767     |             | -         |           | 517,767      |   |
|                                                             | Research and development                  |              |        | 169,009     |      | 29,046    |               | 279,908     |             | 96,427    |           | 2,765,035    |   |
|                                                             | Impairment of patents                     |              |        | -           |      | -         |               | -           |             | -         |           | 39,648       |   |
|                                                             | Impairment of goodwill                    |              |        | -           |      | -         |               | -           |             | -         |           | 3,514,118    |   |
|                                                             |                                      | TOTAL EXPENSES    |        |        | 1,144,371 |      | 513,672            |        | 2,011,515        |      | 1,014,820      |         | 12,791,859 |   |
|                                                             |                                      |              |        |        |      |      |               |        |             |      |           |         |   |   |   |   |
| LOSS FROM OPERATIONS                                             |                                      |              | (1,144,371) |        | (513,672) |      | (2,011,515)        |        | (1,014,820)      |      | (12,791,859)   |         |
| OTHER INCOME (EXPENSES)                                          |                                      |              |        |        |      |      |               |        |             |      |           |         |
|                                                             | Other income                              |              |        | 9,652       |      | 52,000    |               | 9,652       |             | 62,000    |           | 359,538      |   |
|                                                             | Financing costs                           |              |        | -           |      | -         |               | -           |             | -         |           | (963,500)    |
|                                                             | Charitable contribution                   |              |        | (2,500)     |      | -         |               | (27,500)    |             | -         |           | (27,500)     |   |
|                                                             | Gain (loss) on investments                |              |        | -           |      | -         |               | -           |             | -         |           | 17,200       |   |
|                                                             | Gain (loss) on sale or disposal of assets |              | -           |        | -         |      | -                  |        | -                |      | (10,867)       |         |
|                                                             | Gain (loss) on derivative instrument      |              | 6,590       |        | -         |      | 200                |        | -                |      | 11,530         |         |
|                                                             | Gain on forgiveness of debt               |              |        | -           |      | -         |               | -           |             | -         |           | 172,227      |   |
|                                                             | Interest income (expense), net            |              |        | (6,178)     |      | 982       |               | (12,103)    |             | 82        |           | (73,546)     |   |
| Amortization of discount on debenture payable                    | (2,041)                                   |              | -           |        | (3,968)   |      | -                  |        | (6,369)          |      |
|                                                             | Provision for loss on contract            |              | -           |        | -         |      | -                  |        | -                |      | (967,500)      |         |
|                                                             | Gain (loss) on sale of subsidiary         |              | -           |        | -         |      | -                  |        | -                |      | 120,711        |         |
|                                                             | TOTAL OTHER INCOME (EXPENSE)              |              | 5,523       |        | 52,982    |      | (33,719)           |        | 62,082           |      | (1,368,076)    |         |
|                                                             |                                      |              |        |        |      |      |               |        |             |      |           |         |   |   |   |   |
| LOSS BEFORE TAXES                                                |                                      |              | (1,138,848) |        | (460,690) |      | (2,045,234)        |        | (952,738)        |      | (14,159,935)   |         |
| INCOME TAXES                                                     |                                      |              | -           |        | -         |      | -                  |        | -                |      | -              |         |
| NET LOSS                                                         |                                      |              | $           | (1,138,848) | $         | (460,690) | $                  | (2,045,234) | $                | (952,738) | $              | (14,159,935) |   |
| NET LOSS PER COMMON SHARE,                                       |                                      |              |        |        |      |      |               |        |             |      |           |
|                                                             |                                      | BASIC AND DILUTED |        | $           | (0.05)    | $         | (0.03)             |        | (0.10)           | $         | (0.06)         |         |   |   |
| WEIGHTED AVERAGE NUMBER OF COMMON                                |                                      |              |        |        |      |      |               |        |             |      |           |         |
|                                                                  |                                           |                   |             |             |           |           |                    |             |                  |           |                |              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| SHARES OUTSTANDING, BASIC AND DILUTED | 20,867,816 |   | 17,479,948 |   | 20,373,307 |   | 16,376,105 |   |   |
|---------------------------------------|------------|--------|------------|--------|------------|--------|------------|--------|--------|

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

 

5

 

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| **SOLAR ENERGY LIMITED**                                                                           |                      |                                           |                |        |             |   |      |
|----------------------------------------------------------------------------------------------------|---------------------------|------------------------------------------------|---------------------|-------------|------------------|--------|-----------|
| **(A Development Stage Company)**                                                                  |                      |                                           |                |        |             |   |      |
| **CONSOLIDATED STATEMENTS OF CASH                        FLOWS**                                   |                      |                                           |                |        |             |   |      |
|                                                                                               |                      |                                           |                |        |             |   |      |   |   | From Inception |
|                                                                                               |                      |                                           |                |        |             |   |      |   | (January 5, 1994) |
|                                                                                               |                      |                                           |                |        | Six Months Ended |   | through   |
|                                                                                               |                      |                                           |                |        | June 30,         |   |      | June 30, |   | June 30, |
|                                                                                               |                      |                                           |                |        | 2007             |   |      | 2006 |   | 2007 |
|                                                                                               |                      |                                           |                |        | (unaudited)      |   |      | (unaudited) |   | (unaudited) |
|                                                                                               |                      |                                           |                |        |             |   |      |   |   |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                          |                      |                                           |                |        |             |   |      |
|                                                                                               | Net loss                  |                                           | $                   | (2,045,234) |             | $      | (952,738) | $ | (14,159,935) |
| Adjustments to reconcile net loss to net cash used in                        operating activities: |                      |                                           |                |        |             |
|                                                                                               | (Net of Acquisition/Sale) |                                           |                |        |             |   |      |   |
|                                                                                               |                      | Amortization and depreciation                  |                | -           |             |   | 1,939     |   | 203,644 |
|                                                                                               |                      | Amortization on discount of debentures         |                | 3,968       |             |   | -         |   | 6,369 |
|                                                                                               |                      | Bad debt                                       |                | -           |             |   | -         |   | 250,000 |
|                                                                                               |                      | Stock issued for services                      |                | 150,000     |             |   | -         |   | 856,851 |
|                                                                                               |                      | Services for pre-paid expense                  |                | -           |             |   | -         |   | 169,165 |
|                                                                                               |                      | (Gain) Loss on derivative                      |                | (200)       |             |   | -         |   | (11,530) |
|                                                                                               |                      | Stock issued for R&D expenses              |                | -           |             |   | -         |   | 439,900 |
|                                                                                               |                      | Loss on sale of assets                         |                | -           |             |   | -         |   | 10,867 |
|                                                                                               |                      | Gain on investments                            |                | -           |             |   | -         |   | (17,199) |
|                                                                                               |                      | Gain on sale of subsidiary                     |                | -           |             |   | -         |   | (120,711) |
|                                                                                               |                      | Gain on forgiveness of debt                    |                | -           |             |   | -         |   | (172,227) |
|                                                                                               |                      | Impairment of patents                          |                | -           |             |   | -         |   | 39,648 |
|                                                                                               |                      | Financing costs                                |                | -           |             |   | -         |   | 963,500 |
|                                                                                               |                      | Impairment of goodwill                         |                | -           |             |   | -         |   | 3,514,118 |
|                                                                                               |                      | Provision for loss on contract                 |                | -           |             |   | -         |   | 967,500 |
|                                                                                               |                      | Minority interest                              |                | -           |             |   | -         |   | (123,856) |
|                                                                                               |                      | (Increase) decrease in:                        |                |        |             |   |      |   |   |
|                                                                                               |                      |                                           | Accounts receivable |        | -                |   |      | (7,723) |   | 39 |
|                                                                                               |                      |                                           | Deposits            |        | -                |   |      | - |   | (24,883) |
|                                                                                               |                      |                                           | Prepaid expenses    |        | 6,181            |   |      | 150,111 |   | 2,324 |
|                                                                                               |                      | Increase (decrease) in:                        |                |        |             |   |      |   |   |
|                                                                                               |                      |                                           | Bank overdraft      |        | 13,551           |   |      | - |   | 13,551 |
|                                                                                               |                      |                                           | Accounts payable    |        | 33,569           |   |      | 44,052 |   | 169,145 |
|                                                                                               |                      | Accrued expenses and other current liabilities |                | 15,549      |             |   | 1,178     |   | 268,877 |
|                                                                                               |                      |                                           | Deferred revenues   |        | -                |   |      | - |   | 250,000 |
|                                                                                               |                      | Net cash used by operating activities          |                | (1,822,616) |             |   | (763,181) |   | (6,504,843) |

 

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

 

6

 

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| **SOLAR ENERGY LIMITED**                                                     |                                              |    |      |     |             |      |    |
|------------------------------------------------------------------------------|---------------------------------------------------|---------|-----------|----------|------------------|-----------|---------|
| **(A Development Stage Company)**                                            |                                              |    |      |     |             |      |    |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS                        (Continued)** |                                              |    |      |     |             |      |    |
|                                                                         |                                              |    |      |     |             |      |    |   |   | From Inception |
|                                                                         |                                              |    |      |     |             |      |    |   | (January 5, 1994) |
|                                                                         |                                              |    |      |     | Six Months Ended |      | through |
|                                                                         |                                              |    |      |     | June 30,         |      |    | June 30, |   | June 30, |
|                                                                         |                                              |    |      |     | 2007             |      |    | 2006 |   | 2007 |
|                                                                         |                                              |    |      |     | (unaudited)      |      |    | (unaudited) |   | (unaudited) |
| **CASH FLOWS PROVIDED BY INVESTING                        ACTIVITIES:**      |                                              |    |      |     |             |      |    |
|                                                                         | Cash acquired from sale of subsidiary             |    | -         |     |             | -         |    | 180,000 |
|                                                                         | Cash acquired (sold) from subsidiary              |    | -         |     |             | -         |    | 247,512 |
|                                                                         | Cash paid to subsidiary                           |    | -         |     |             | -         |    | (107,568) |
|                                                                         | Cash paid to RECO and Sunspring                   |    | -         |     |             | -         |    | (2,076) |
|                                                                         | Cash paid for patent costs                        |    | -         |     |             | -         |    | (106,318) |
|                                                                         | Cash received (paid) for property & equipment |    | -         |     |             | (11,898)  |    | (71,846) |
|                                                                         | Cash paid for deposits                            |    | -         |     |             | -         |    | (4,837) |
|                                                                         | Cash received on sale of assets                   |    | -         |     |             | -         |    | 23,000 |
|                                                                         | Cash paid for notes receivable                    |    | -         |     |             | -         |    | (295,000) |
|                                                                         | Net cash provided (used) by investing activities  |    | -         |     |             | (11,898)  |    | (137,133) |
| **CASH FLOWS PROVIDED BY FINANCING                        ACTIVITIES:**      |                                              |    |      |     |             |      |    |
|                                                                         | Issued stock for cash                             |    | 527,500   |     |             | 1,371,457 |    | 4,174,969 |
| Cash from related party notes payable and                        advances    | 1,124,106                                         |    |      | (30,536) |             | 1,743,988 |
|                                                                         | Stock subscription                                |    | -         |     |             | (6,680)   |    | - |
|                                                                         | Proceeds from debenture payable                   |    | -         |     |             | -         |    | 100,000 |
|                                                                         | Cash received from advances by shareholders       |    | -         |     |             | -         |    | 2,044,099 |
|                                                                         | Cash paid on debt financing                       |    | -         |     |             | -         |    | (1,388,178) |
|                                                                         | Net cash provided by financing activities         |    | 1,651,606 |     |             | 1,334,241 |    | 6,674,878 |
|                                                                         |                                              |    |      |     |             |      |    |   |   |   |
|                                                                         | **NET INCREASE (DECREASE) IN CASH**               |    | (171,010) |     |             | 559,162   |    | 32,902 |
|                                                                         |                                              |    |      |     |             |      |    |   |   |   |
| **CASH, BEGINNING OF PERIOD**                                                |                                              | 203,912 |      |     | 188,129          |      | -       |
| **CASH, END OF PERIOD**                                                      | $                                                 | 32,902  |      | $        | 747,291          | $         | 32,902  |
|                                                                         |                                              |    |      |     |             |      |    |   |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION:**                                      |                                              |    |      |     |             |      |    |
|                                                                         | Interest paid                                     | $       | -         |     | $                | -         | $       | 17,195 |
|                                                                         | Income taxes paid                                 | $       | -         |     | $                | -         | $       | - |

 

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

7

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**NOTE        1 - DESCRIPTION AND HISTORY OF BUSINESS AND BASIS OF PRESENTATION**

 

Solar        Energy Limited (“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.

 

The        Company was originally incorporated as Taurus Enterprises, Inc. under the laws the State of        Delaware on January 5, 1994. In August of 1996, the Company merged with Salvage World,        Inc., a private company, changed its name to “Salvage World, Inc.” and        reincorporated in the state of Nevada. On December 17, 1997, the Company merged with Solar        Energy Limited (“Solar”) a Delaware corporation organized on July 24, 1997 and        changed the name to “Solar Energy Limited.” The surviving corporation is a        Delaware corporation and the authorized shares were changed to 50,000,000 par value        $0.0001.

 

On        January 1, 1998, the Company acquired 100% of Hydro-Air Technologies, Inc.        (“Hydro”) a New Mexico corporation organized June 18, 1997. Hydro owns various        rights to patented intellectual property called Hydro-Air Renewable Power System ("HARPS"),        and has developed a prototype system to generate electricity from the evaporation of        water.

 

In        January 1999 the Company issued 35,000 shares of stock for the acquisition of 100% of        Renewable Energy Corporation (“RECO”) a New Mexico corporation organized        November 30, 1998. RECO owns various rights to patented intellectual property associated        with the solar recycling of CO2 to fuel. On June 30, 2000, the Company sold 100% of its        interest in RECO to Jade Electronic, Inc., who changed its name to Renewable Energy Limited        (“REEL”) for 63% of the outstanding stock of REEL and cash of $180,000. At the        point of sale REEL had no assets and no liabilities, thus RECO became its only assets,        liabilities and operations at June 30, 2000. Because the Company essentially sold 37% of        its interest in RECO for cash of $180,000, the Company recorded minority of interest of        $162,800 and a gain of $17,200.

 

In April        2000, the Company acquired all of the outstanding common stock of Sunspring, Inc.        (“Sunspring”) for $14,500. Sunspring was incorporated in April 2000 as        Holisticom.com Limited and subsequently changed its name to “Sunspring, Inc.”        in August 2000. Sunspring is a development stage company and has directed its efforts        towards development of new technology.

 

On April        27, 2004, the Company entered into a stock purchase agreement for RECO with Los Alamos        Renewable Energy, LLC, (“LARE”) a limited liability company for which two of        the Company’s former officers and directors act as managing members. Pursuant to the        agreement, an additional 99,900 shares of common stock of RECO were issued to the Company        and an additional 200,000 shares of RECO were issued to LARE. In effect, the transaction        resulted in the Company owning a 21% interest in RECO and using the equity method of        accounting instead of the consolidation method. The Company has also forgiven debt due from        RECO. At December 31, 2004, a gain of $56,138 has been recognized due to the recapture of        prior year losses.

 

 

 

 

8

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

On        August 10, 2005, the Company entered into a stock purchase agreement with Mr. Russ George        to acquire 100% of the issued and outstanding stock of Planktos, Inc.        (“Planktos”) for the purchase price of $1,500,000 by issuing a 5 year term        convertible debenture bearing an interest rate of 5%. The proprietary greenhouse emission        technology acquired as a result of this acquisition is focused on taking advantage of the        Kyoto Protocol which enables companies and governments to offset regulated greenhouse        emission restrictions by investing in CO2 reduction programs in exchange for certified        emission reduction (“CER”) credits. These CER credits are traded much like        commodities and have their own market of which they are listed for sale. In determining the        purchase price, consideration was given to previous amounts invested in developing this        technology up to the point of acquisition. On November 21, 2005, Mr. George converted the        debenture for 1,500,000 of the Company’s restricted common shares.

 

On        August 17, 2005, the Company and its wholly owned subsidiary, Planktos, executed an        Iron-Fertilization Prove-Out and Purchase Agreement with Diatom Corporation        (“Diatom”) whereby Diatom committed to assist the Company in providing        developmental funding for a marine “iron-fertilization” prove out program in        exchange for exclusive marketing and intellectual property rights to Planktos’s CO2        sequestration process. Planktos expects the cost of the prove out program to be $1,290,000        of which Diatom has agreed to provide up to 25%. The Company will be responsible for        funding the remainder of the developmental funding. The agreement also provides for a        royalty agreement which will entitle Planktos and the Company to 75% of net sales revenue        generated by Diatom from the sale of CER credits created from the sequestration process        until the Company and Planktos have recouped their costs. Thereafter, the Company and        Planktos will be entitled to 25% of net sales revenue generated by Diatom from the sale of        CERs. Diatom has paid $250,000 in cash for the exclusive marketing and intellectual        property rights. Since the Company has committed to fund 75% of the estimated cost to        develop the program, a provision for the estimated loss on the contract of $967,500 has        been recognized.

 

On        August 18, 2005, the Company entered into a stock purchase agreement with Russ George to        acquire 100% of the issued and outstanding stock of D2Fusion, Inc. (“D2Fusion”)        for the purchase price of $2,000,000 by issuing a 5 year term convertible debenture bearing        an interest rate of 5%. The proprietary solid-state fusion technology acquired as a result        of this acquisition is aimed at entry level heat and energy applications for homes and        industry with the ultimate goal of producing heat and electricity at a fraction of        today’s cost and with no emissions. In determining the purchase price, consideration        was given to previous amounts invested in developing this technology up to the point of        acquisition. On November 21, 2005, Mr. George converted the debenture for 2,000,000 of the        Company’s restricted common shares.

 

The        accompanying unaudited interim financial statements have been prepared in accordance with        United States generally accepted accounting principles for interim financial information        and with the instructions to Form 10-QSB of Regulation S-B. They may not include all        information and footnotes required by United States generally accepted accounting        principles for complete financial statements. However, except as disclosed herein, there        has been no material changes in the information disclosed in the notes to the financial        statements for the year ended December 31, 2006 included in the Company’s Annual        Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim        unaudited financial statements should be read in conjunction with those financial        statements included in the Form 10-KSB. In the opinion of management, all adjustments        considered necessary for a fair presentation, consisting solely of normal and recurring        adjustments have been made. Operating results for the six months ended June 30, 2007 are        not necessarily indicative of the results that may be expected for the year ending December        31, 2007.

 

 

9

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**NOTE        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

This        summary of significant accounting policies of Solar Energy Limited is presented to assist        in understanding the Company’s financial statements. The financial statements and        notes are representations of the Company’s management, which is responsible for their        integrity and objectivity. These accounting policies conform to accounting principles        generally accepted in the United States of America, and have been consistently applied in        the preparation of the financial statements.

 

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 and short-term debt instruments with original maturities of three months or        less to be cash equivalents.

 

Concentrations

Financial instruments that potentially subject the Company to concentrations        of credit risk consist of cash and cash equivalents. The Company places its cash and cash        equivalents at well-known, quality financial institutions.

 

Deferred Revenue

The        Company received deferred revenue from licensing its marketing and intellectual        property rights to its CO2 sequestration process. Currently this sequestration process is        not yet commercially viable, once the process becomes commercially viable, the Company will        recognize license revenues on a straight-line basis over the license term.

 

Derivative Instruments

The        Financial Accounting Standards Board issued Statement of Financial Accounting Standards        (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging        Activities,” as amended by SFAS No. 137, “Accounting for Derivative Instruments        and Hedging Activities – Deferral of the Effective Date of FASB No. 133”, 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”, which is effective for the Company as of its        inception. 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 balance sheet and measure those instruments at fair value.

 

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 derivatives contracts to hedge existing risks or for speculative        purposes.

 

 

10

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

The        Company issued convertible debt and accounts for that debt according to SFAS 133 and        subsequent pronouncements. Consequently, management recognizes its convertible debt        contract as containing a derivative instrument and accounts for the derivative according to        generally accepted accounting principles in the U.S.

 

During        the year ended December 31, 2006, the Company issued a debenture for a total of $100,000.        The debenture included provisions for the conversion of the debt and interest into shares        of the Company’s common stock or into CO2 Tonnes. See Note 6.

 

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 periods        reported, diluted net loss per share is the same as basic net loss per share as there were        no common stock equivalents outstanding.

 

As of        June 30, 2007, the Company had outstanding common stock options of 500,000, common stock        warrants of 2,381,500, and convertible debt subject to beneficial conversion of 225,972        common shares. The above common stock equivalents were deemed to be antidilutive for the        Company’s six month ended June 30, 2007.

 

As of        June 30, 2006, the Company had outstanding common stock options of 500,000, common stock        warrants of 1,400,000, and no convertible debt subject to beneficial conversion. The above        options and warrants were deemed to be antidilutive for the Company’s six months        ended June 30, 2006.

 

Fair        Value of Financial Instruments

The        Company's financial instruments as defined by Statement of Financial Accounting Standards        No. 107, "Disclosures about Fair Value of Financial Instruments," include cash, trade        accounts receivable, and accounts payable and accrued expenses. All instruments are        accounted for on a historical cost basis, which, due to the short maturity of these        financial instruments, approximates fair value at June 30, 2007 and December 31,        2006.

 

Foreign Currency Translation Gains/Losses

The        Company has adopted Financial Accounting Standard No. 52. Monetary assets and liabilities        denominated in foreign currencies are translated into United States dollars at rates of        exchange in effect at the balance sheet date. Gains or losses are included in income for        the year, except gains or losses relating to long-term debt which are deferred and        amortized over the remaining term of the debt. Non-monetary assets, liabilities and items        recorded in income arising from transactions denominated in foreign currencies are        translated at rates of exchange in effect at the date of the transaction. The        Company’s functional currency is the U.S. dollar.

 

11

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

Goodwill

Under        SFAS No. 142, goodwill must be tested annually for impairment using a two step process, the        first process is to test the carrying value of the reporting unit vs. fair value. The        second process tests if the carrying value exceeds fair value. If so, the carrying value is        then compared vs. the fair value of goodwill to measure the amount of goodwill impairment        loss, if any. The Company uses such methods as present value of discounted cash flows,        prices of similar assets, independent appraisals, and other valuation techniques to        determine fair value.

 

Impaired Asset Policy

The        Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for        Impairment of Disposal of Long-Lived Assets.” In complying with this standard, the        Company reviews its long-lived assets quarterly to determine if any events or changes in        circumstances have transpired which indicate that the carrying value of its assets may not        be recoverable. The Company determines impairment by comparing the undiscounted future cash        flows estimated to be generated by its assets to their respective carrying amount whenever        events or changes in circumstances indicate that an asset may not be        recoverable.

 

Principles of Consolidation

The June        30, 2007 financial statements include the accounts of Solar Energy Limited and its wholly        owned subsidiaries: Hydro; Sunspring; REEL; Planktos, Inc.; and D2 Fusion, Inc. All        intercompany accounts and transactions have been eliminated in the        consolidation.

 

Property and Equipment 

Property        and equipment are stated at cost. Depreciation of property and equipment is calculated        using the straight-line method over the estimated useful lives of the assets, which range        from three to ten years.

 

Provision for Loss on Contract

The        Company recognizes funding commitments for undeveloped programs as long term liabilities.        As funding is advanced by the Company for the programs, the liability is reduced by the        amount of the advances.

 

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.

 

 

 

 

 

 

12

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

Recent Accounting Pronouncements

In        February 2007, the Financial Accounting Standards Board issued Statement of Financial        Accounting Standards No. 159, “The Fair Value Option for Financial Assets and        Financial Liabilities – Including an amendment of FASB Statement No. 115”        (hereinafter “SFAS No. 159”). This statement permits entities to choose to        measure many financial instruments and certain other items at fair value. The objective is        to improve financial reporting by providing entities with the opportunity to mitigate        volatility in reported earnings cause by measuring related assets and liabilities        differently without having to apply complex hedge accounting provisions. This Statement is        expected to expand the use of fair value measurement, which is consistent with the        Board’s long-term measurement objectives for accounting for financial instruments.        This statement is effective as of the beginning of an entity’s first fiscal year that        begins after November 15, 2007, although earlier adoption is permitted. Management has not        determined the effect that adopting this statement would have on the Company’s        financial condition for results of operations.

 

Reclassifications

Certain        prior year amounts in the accompanying financial statements have been reclassified to        conform to the fiscal 2006 presentation. The reclassifications have no effect on net        assets, net revenues, or net earnings.

 

Revenue Recognition 

The        Company recognizes revenue for product sales when there is a mutually executed sales        contract, when the products are shipped and title passes to customers, when the contract        price and terms are fixed, and when collectibility is reasonably assured.

 

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 – GOING CONCERN**

 

The        accompanying financial statements have been prepared assuming that the Company will        continue as a going concern. As shown in the financial statements, the Company has limited        cash, no revenues, and an accumulated deficit since the inception of the Company. 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 plans includes the following: (1) obtaining funding from        private placement sources; (2) obtaining additional funding from the sale of the        Company’s securities; (3) establishing revenues from commercializing of its project;        and (4) obtaining loans and grants from various financial institutions, where possible. The        financial statements do not include any adjustments related 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 existence.

 

 

 

13

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**NOTE        4 - STOCKHOLDERS' EQUITY TRANSACTIONS**

 

During        2006, the Company issued 785,000 shares of common stock from the exercise of warrants for        cash proceeds of $196,250 and 4,162,034 common shares for private placements for net cash        proceeds of $1,205,306.

 

During        the six months ended June 30, 2007, the Company issued 1,150,000 shares of common stock for        a private placement for $120,000 in cash and related party note payable debt settlement of        $282,500 for net proceeds of $402,500, 500,000 shares of common stock from the exercise of        warrants for cash proceeds of $125,000 and 300,000 shares of common stock for services        valued at $150,000.

 

**NOTE        5 - NOTES PAYABLE - RELATED PARTY**

 

The loan        from Bay Cove Investments, Ltd., a shareholder, is uncollateralized, bears interest at 6%        per annum and is due upon demand. The loan balance, not including accrued interest, at        April 30, 2007 and December 31, 2006 was $198,260 and $168,260, respectively. The accrued        interest owing at April 30, 2007 and December 31, 2006 on this loan was $13,218 and $9,750,        respectively. On May 1, 2007, Bay Cove Investments, Ltd. assigned the outstanding loan and        accrued interest owing totaling $211,478 to Regal RV Resorts, Inc.

 

The loan        from Regal RV Resorts, Inc., is uncollateralized, bears interest at 4% per annum and is due        upon demand. The loan balance, not including accrued interest, at June 30, 2007 and        December 31, 2006 was $175,000 and $NIL, respectively. The accrued interest owing on this        loan at June 30, 2007 and December 31, 2006 was $2,912 and $NIL, respectively. The Company        has an additional loan with Regal RV Resorts, Inc. for and additional $123,561. This loan        is uncollateralized, bears interest at 6% per annum and is due upon demand. The accrued        interest owing on this loan at June 30, 2007 and December 31, 2006 was $602 and $NIL,        respectively.

 

The        Company has entered into a securities exchange agreement to sell 100% of Planktos, Inc. (a        subsidiary of Solar) to Planktos Corp. The transaction obtained Planktos Corp. shareholder        approval on May 31, 2007. See Note 7. In anticipation of this acquisition, Planktos Corp        has loaned operating capital to Planktos, Inc. to fund operations until the time of the        acquisition. As of June 30, 2007 and December 31, 2006, the Company owed Planktos Corp        $774,659 and $5,824, respectively. These operating loans are uncollateralized, with no        stated interest rate, and due upon demand. Also, in anticipation of the acquisition with        Planktos Corp, the Company’s subsidiary Planktos, Inc. has spent a total of $253,849        toward the Weatherbird II ship rework and refit. This included equipment upgrades,        maintenance, and the purchase of additional equipment. Planktos Corp has purchased the        research vessel RV Weatherbird II while Planktos Inc. has supplied the funds to upgrade the        ship. Planktos Inc. and Planktos Corp (formerly Diatom Corp) in anticipation of completing        a merger are each contributing toward the total costs of acquiring and upgrading the        vessel.

 

 

 

 

 

14

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**NOTE        6 - DEBENTURE PAYABLE / DERIVATIVE**

 

This        loan bears interest at 10% per year for a three year term. Principal and interest may be        converted into common shares of the Company at an average trading price of the previous 10        days once the holder has given the Company notice of conversion. Upon such notice, the        maximum conversion price is $0.75 per common share. The holder of the debenture also has        the right, at its option, to convert the principal and interest amount due into CO2 tons at        any time prior to the end of the three year term, at a rate determined by one United States        Dollar ($1.00) per CO2 ton, subject to Company’s ability to deliver such CO2 tons at        the time of conversion. As of June 30, 2007, none of the principal of $100,000 or accrued        interest of $8,523 has been converted.

 

The        original $100,000 debenture was discounted by $29,551 in order to reflect the derivative        portion of the note. This discount on the debenture is amortized over the life of the note        on a quarterly basis. As of June 30, 2007, the discount has been amortized by $6,369 to        $23,182 which when netted against the original note gives a value of the debenture payable        of $76,818. The derivative portion is adjusted on a quarterly basis at fair market value.        Any resulting gain or loss is recognized in the consolidated statement of        operations.

 

**NOTE        7 – COMMITMENTS**

 

The        founder of the HARPS technology has granted the Company’s subsidiary, Hydro an        exclusive license to develop, manufacture and market the same. For the license, Hydro is        committed to a 1% royalty on gross sales and 1/2% royalty on the sale of the electrical        power generated by any power plants owned by Hydro. At June 30, 2007, there were no sales        relating to the licensed technology.

 

On        August 17, 2005, the Company and Planktos executed an Iron-Fertilization Prove-Out and        Purchase Agreement with Diatom whereby Diatom committed to assist the Company in providing        developmental funding for a marine “iron-fertilization” prove out program in        exchange for exclusive marketing and intellectual property rights to Planktos’ CO2        sequestration process. Planktos expects the cost of the prove out program to be $1,290,000        of which Diatom has agreed to provide up to 25%. The Company will be responsible for        funding the remainder of the developmental funding.

 

On        January 12, 2007, the Company entered into a securities exchange agreement and plan of        exchange with Planktos Corp. to sell 100% ownership of Planktos, Inc. (a subsidiary of        Solar) in exchange for an aggregate of 45,000,000 shares of common stock of Planktos Corp.,        and the fulfillment of certain conditions on or before closing. The conditions include: (a)        making available working capital of no less than $1,000,000 to Planktos Inc. on or before        the acquisition is completed, (b) cancellation of 45,000,000 shares of issued and        outstanding common share capital of Planktos Corp. on or before the acquisition is        completed and (c) obtaining shareholder approval of the transaction. The transaction        obtained Planktos Corp. shareholder on May 31, 2007 but had not closed as of June 30,        2007.

 

 

 

 

 

15

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

On May        31, 2007, the Company entered into a securities exchange agreement and plan of exchange        with Enwin Resources, Inc. whereby The Company intends to sell 100% ownership of D2 Fusion,        Inc. to Enwin Resources, Inc., in exchange for an aggregate of 30,000,000 shares of Enwin        Resources, Inc.’s common stock, and the fulfillment of certain conditions on or        before closing. The conditions include that Enwin Resources, Inc. (a) make available        working capital of no less than $2,000,000 to D2 Fusion, Inc. on or before the acquisition        is completed, (b) cancel 30,000,000 shares of its issued and outstanding common share        capital on or before the acquisition is completed, and (c) obtain shareholder approval of        the transaction. As of June 30, 2007, Enwin Resources, Inc. had advanced $224,970 towards        working capital, these advances have no specific due dates for repayment, are currently        uncollateralized, and are non-interest bearing. Conditions of this agreement have not been        met and the closing of this transaction is still pending.

 

In the        six months ended June 30, 2007, Planktos, Inc. agreed to donate $75,000 to a non-profit        organization. In connection with this donation, the Company received the use of        approximately $50,000 in equipment for Planktos Corp.’s Weatherbird II vessel. The        Company recorded the value of the equipment in vessel operating costs and recorded the        remainder as a charitable contribution. As of June 30, 2007, the Company had paid only        $52,500 of the donation and recorded the unpaid portion of $22,500 as a current        liability.

 

**NOTE        8 – STOCK OPTIONS**

 

On        January 1, 2006, the Company adopted 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 Securities        and Exchange Commission issued 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. The Company uses 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.”        The Company has 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        Company has adopted the requirements of SFAS No. 123R for the fiscal year beginning on        January 1, 2006 under the prospective method.

 

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.

 

 

 

16

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

Prior to        the adoption of SFAS No. 123R, the Company measured compensation expense for its        employee stock-based compensation plans using the intrinsic value method prescribed by APB        Opinion No. 25. The Company 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 of        the Company’s employee stock options was equal to the market price of the underlying        stock on the date of the grant, no compensation expense was recognized.

 

Information with respect to the Company’s stock options at June 30,        2007 is as follows:

 

|   | Weighted |
|--------|----------|

|   | Stock | Exercise | Average |
|--------|-------|----------|---------|

|   | Options | Price | Exercise |
|--------|---------|-------|----------|

|   | Outstanding at January 1, 2006 | 500,000 | $ | .33 | $ | .33 |
|--------|--------------------------------|---------|---|-----|---|-----|

|   | Granted | - | - | - |
|--------|---------|---|---|---|

|   | Exercised | - | - | - |
|--------|-----------|---|---|---|

|   | Forfeited | - | - | - |
|--------|-----------|---|---|---|

|   | Outstanding at December 31, 2006 | 500,000 | .33 | .33 |
|--------|----------------------------------|---------|-----|-----|

|   | Granted | - | - | - |
|--------|---------|---|---|---|

|   | Exercised | - | .33 | .33 |
|--------|-----------|---|-----|-----|

|   | Forfeited | - | - | - |
|--------|-----------|---|---|---|

|   | Outstanding at June 30, 2007 | 500,000 | $ | .33 | $ | .33 |
|--------|------------------------------|---------|---|-----|---|-----|

 

 

**NOTE        9 – WARRANTS**

 

A        summary of the Company’s warrants at June 30, 2007 and December 31, 2006 and the        changes for 2007 are as follows:

 

|                                         |   |        |   | Weighted |   | Weighted   |
|----------------------------------------------|--------|-------------|--------|----------|--------|------------|
|                                         |   |        |   | Average  |   | Average    |
|                                         |   | Warrants    |   | Exercise |   | Remaining  |
|                                         |   | Outstanding |   | Price    |   | Life       |
|                                         |   |        |   |     |   |       |
| Balance, December 31, 2005                   |   | 2,185,000   |   | $ 0.28   |   | 1.71 years |
| Issued                                       |   | 531,500     |   | 0.40     |   | 1.32       |
| Exercised / Cancelled / Expired              |   | (785,000)   |   | (0.25)   |   | -          |
|                                         |   |        |   |     |   |       |
| Balance, December 31, 2006                   |   | 1,931,500   |   | 0.33     |   | 0.81       |
| Issued                                       |   | 1,150,000   |   | 0.40     |   | 1.84       |
| Exercised / Cancelled / Expired              |   | (700,000)   |   | (0.25)   |   | -          |
|                                         |   |        |   |     |   |       |
| Balance                        June 30, 2007 |   | 2,381,500   |   | $ 0.39   |   | 1.17 years |

 

 

 

 

17

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**NOTE        10 – SUBSEQUENT EVENTS**

 

The        Company has entered into a securities exchange agreement to sell 100% of D2 Fusion, Inc. (a        subsidiary of Solar) to Enwin Resources, Inc. Conditions of this agreement have not been        met and the closing of this transaction is still pending. See Note 7.

 

On        August 9, 2007 the Company sold its wholly owned subsidiary, Planktos, Inc. pursuant to the        closing of a securities exchange agreement and plan of exchange. The agreement entered into        on January 12, 2007 with the Company and Planktos Corp., provided for the sale of 100%        ownership of Planktos, Inc. in exchange for an aggregate of 45,000,000 shares (post forward        split, dated March 8, 2007) of Planktos Corp. common stock and the fulfillment of certain        conditions on or before closing, including the retirement of $1,180,000 of Planktos, Inc.        advances payable to the Company.

 

In        satisfaction for the purchase price, the Company now owns approximately 54% of Planktos        Corp. The fair market value of the assets acquired and liabilities assumed were as        follows:

 

|   | Cash | $ | 14,000 |
|--------|------|---|--------|

|   | Fixed Assets | 794,000 |
|--------|--------------|---------|

|   | ____________ |
|--------|--------------|

|   | Total assets acquired | 808,000 |
|--------|-----------------------|---------|

 

|   | Accounts Payable | $ | 14,000 |
|--------|------------------|---|--------|

|   | Loan payable | 98,000 |
|--------|--------------|--------|

|   | Other liabilities | 13,000 |
|--------|-------------------|--------|

|   | Total liabilities acquired | 125,000 |
|--------|----------------------------|---------|

 

|   | Net assets acquired in excess of liabilities | _____________ |
|--------|----------------------------------------------|---------------|

|   | $ | 683,000 |
|--------|---|---------|

 

 

 

 

 

 

 

 

 

 

 

 

18

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

 

| **SOLAR ENERGY LIMITED**                                                   |                                                                        |                         |                           |
|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------------------------|--------------------------------|
| **JUNE 30, 2007**                                                          |                                                                        |                         |                           |   |   |   |
| **CONSOLIDATED STATEMENT OF OPERATIONS -                        PROFORMA** |                                                                        |                         |                           |
|                                                                       |                                                                        |                         |                           |   |   |   |   | **PROFORMA** |
|                                                                       |                                                                        |                         | **Solar Energy, Ltd.**         |   | **Planktos Corp.** | **Eliminations** |   | **CONSOLIDATED** |
|                                                                       |                                                                        |                         | **For the Three Months Ended** |
|                                                                       |                                                                        |                         | June 30,                       |   | June 30, | June 30, |   | June 30, |
|                                                                       |                                                                        |                         | 2007                           |   | 2007 | 2007 |   | 2007 |
|                                                                       |                                                                        |                         | (Unaudited)                    |   | (Unaudited) | (Unaudited) |   | (Unaudited) |
| REVENUES                                                                   | $ -                                                                         |                         | $ -                            |   |   | $ - |
| OPERATING EXPENSES                                                         |                                                                        |                         |                           |   |   |   |
|                                                                       | General and administrative                                                  | 711,444                      |                           | 39,181 |   |   | 750,625 |
|                                                                       | Research and development                                                    | 169,009                      |                           |   |   |   | 169,009 |
|                                                                       | Vessel operating costs                                                      | 263,918                      |                           | - |   |   | 263,918 |
|                                                                       |                                                                        | Total Operating Expenses     | 1,144,371                      |   | 39,181 | - |   | 1,183,552 |
| LOSS FROM OPERATIONS                                                       | (1,144,371)                                                                 |                         | (39,181)                       | - |   | (1,183,552) |
| OTHER INCOME (EXPENSE)                                                     |                                                                        |                         |                           |   |   |   |
|                                                                       | Other income                                                                | 9,652                        |                           | - |   |   | 9,652 |
|                                                                       | Interest income                                                             | -                            |                           | - |   |   | - |
|                                                                       | Charitable contribution                                                     | (2,500)                      |                           | - |   |   | (2,500) |
|                                                                       | Gain (loss) on derivative instrument                                        | 6,590                        |                           |   |   |   | 6,590 |
|                                                                       | Interest expense                                                            | (6,178)                      |                           | - |   |   | (6,178) |
|                                                                       | Amortization of discount on debenture payable                               | (2,041)                      |                           |   |   |   | (2,041) |
|                                                                       | Less minority interest of Planktos Corp                        shareholders | -                            |                           |   | 17,945 |   | 17,945 |
|                                                                       |                                                                        | Total Other Income (Expense) | 5,523                          |   | - | 17,945 |   | 23,468 |
| NET LOSS BEFORE INCOME TAX                                                 | (1,138,848)                                                                 |                         | (39,181)                       | 17,945 |   | (1,160,084) |
| INCOME TAX EXPENSE                                                         | -                                                                           |                         | -                              | - |   | - |

 

| NET LOSS | $ (1,138,848) |   | $ (39,181) | $ 17,945 |   | $ (1,160,084) |
|----------|---------------|--------|------------|----------|--------|---------------|

 

 

19

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

| **SOLAR ENERGY LIMITED**                                                   |                                                                        |                         |                         |    |
|----------------------------------------------------------------------------|-----------------------------------------------------------------------------|------------------------------|------------------------------|---------|
| **JUNE 30, 2007**                                                          |                                                                        |                         |                         |    |   |   |   |
| **CONSOLIDATED STATEMENT OF OPERATIONS -                        PROFORMA** |                                                                        |                         |                         |    |
|                                                                       |                                                                        |                         | **Solar Energy, Ltd.**       |    | **Planktos Corp.** |   | **Eliminations** |   | **CONSOLIDATED** |
|                                                                       |                                                                        |                         | **For the Six Months Ended** |
|                                                                       |                                                                        |                         | June 30,                     |    | June 30, |   | June 30, |   | June 30, |
|                                                                       |                                                                        |                         | 2007                         |    | 2007 |   | 2007 |   | 2007 |
|                                                                       |                                                                        |                         | (Unaudited)                  |    | (Unaudited) |   | (Unaudited) |   | (Unaudited) |
| REVENUES                                                                   | $ -                                                                         |                         | $ -                          |    | $ - |   | $ - |
| OPERATING EXPENSES                                                         |                                                                        |                         |                         |    |   |   |   |
|                                                                       | General and administrative                                                  | 1,213,840                    |                         | 208,312 |   |   |   | 1,422,152 |
|                                                                       | Research and development                                                    | 279,908                      |                         | -       |   |   |   | 279,908 |
|                                                                       | Vessel operating costs                                                      | 517,767                      |                         | -       |   |   |   | 517,767 |
|                                                                       |                                                                        | Total Operating Expenses     | 2,011,515                    |    | 208,312 |   | - |   | 2,219,827 |
| LOSS FROM OPERATIONS                                                       | (2,011,515)                                                                 |                         | (208,312)                    |    | - |   | (2,219,827) |
| OTHER INCOME (EXPENSE)                                                     |                                                                        |                         |                         |    |   |   |   |
|                                                                       | Other income                                                                | 9,652                        |                         | -       |   |   |   | 9,652 |
|                                                                       | Interest income                                                             | -                            |                         | -       |   |   |   | - |
|                                                                       | Charitable contribution                                                     | (27,500)                     |                         | -       |   |   |   | (27,500) |
|                                                                       | Gain (loss) on derivative instrument                                        | 200                          |                         |    |   |   |   | 200 |
|                                                                       | Interest expense                                                            | (12,103)                     |                         | -       |   |   |   | (12,103) |
|                                                                       | Amortization of discount on debenture payable                               | (3,968)                      |                         |    |   |   |   | (3,968) |
|                                                                       | Less minority interest of Planktos Corp                        shareholders | -                            |                         |    |   | 95,407 |   | 95,407 |
|                                                                       |                                                                        | Total Other Income (Expense) | (33,719)                     |    | - |   | 95,407 |   | 61,688 |

 

| NET LOSS BEFORE INCOME TAX | (2,045,234)   |   | (208,312)   |   | 95,407   |   | (2,158,139)   |
|----------------------------|---------------|--------|-------------|--------|----------|--------|---------------|
| INCOME TAX EXPENSE         | -             |   | -           |   | -        |   | -             |
| NET LOSS                   | $ (2,045,234) |   | $ (208,312) |   | $ 95,407 |   | $ (2,158,139) |

 

 

20

 

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**SOLAR        ENERGY LIMITED**

**(A        Development Stage Company)**

**Condensed Notes to the Interim Consolidated Financial        Statements**

**June 30, 2007**

 

**ITEM        2.**

 

**MANAGEMENT’S PLAN OF OPERATION**

 

The        following discussion should be read in conjunction with our financial statements and notes        thereto included in this report. All information presented herein is based on our period        ended June 30, 2007. Our fiscal year end is December 31.

 

**Description of Business**

 

The Company        is a research and development incubator of (a) cost-effective renewable energy sources that        do not threaten the environment, and (b) practical solutions to mitigate the effects of        traditional energy sources’ unintended consequences concerning global climate change.        Since 1997 the Company has focused on innovative solutions for global issues related to        water, energy and pollution. Our primary focus was on the development of renewable energy        sources that could compete with traditional energy sources. Operations were concentrated on        research and development activities involving the utilization of solar and water energy, in        addition to increasing engine efficiencies. However, despite the Company’s efforts,        we were unable to bring to market any commercial application of this work.

 

Over the        last two years, the Company has concentrated on furthering the science connected to the        operation of two wholly owned subsidiaries, D2Fusion, Inc. and Planktos, Inc. both of which        are involved in developing pioneering technologies. D2Fusion is developing a mechanism to        provide limitless renewable energy through proprietary solid-state fusion, more commonly        known as “cold-fusion” aimed at entry level heat and energy applications for        homes and industry. Planktos is well underway to sequester CO2 from the earth’s        marine environment using a proprietary “iron fertilization” process and from        the growth of new forests. These efforts at sequestration will generate commercial        quantities of verifiable carbon credits to meet global requirements made part of        international agreements such as the Kyoto Protocol.

 

Subsequent        to the end of the current period, the Company transferred ownership of Planktos to Planktos        Corp. in exchange for 45,000,000 shares of Planktos Corp. common stock pursuant to the        terms of a securities and exchange agreement and plan of exchange executed on January 12,        2007. The transaction enabled the Company to acquire a controlling interest (53.78%) in the        outstanding common shares of Planktos Corp. The Company intends to consolidate its        financial statements with those of Planktos Corp. in future reporting periods.

 

On May 31,        2007, the Company entered into a securities exchange agreement and plan of exchange with        Enwin Resources, Inc. pursuant to which agreement the Company intends to transfer ownership        of D2Fusion to Enwin Resources in exchange for an aggregate of 30,000,000 shares of its        common stock, and the fulfillment of certain conditions on or before closing. Those        conditions include that Enwin Resources (a) make available working capital of no less than        $2,000,000 to D2Fusion on or before the acquisition is completed, (b) cancel 30,000,000        shares of its issued and outstanding common share capital on or before the acquisition is        completed, and (c) obtain shareholder approval of the transaction. The transaction is        pending subject to the fulfillment of these certain conditions.

 

 

 

 

21

 

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***PLANKTOS, INC.***

 

Planktos is        a Foster City, California based business focused on reviving marine as well as land based        ecosystem health and biodiversity, with the intention to slow global climate change. We        have launched a two year pilot project series to restore hundreds of millions of tons of        missing plankton plant life in the open seas that will sequester tens of millions of tons        of carbon dioxide (“CO2”) in the deep ocean for centuries or more. On land,        Planktos’ Hungarian subsidiary KlimaFa (translated as “Climate Forest”)        intends to plant thousands of hectares of new, permanently protected, native forests or        “climate parks” in the national parks system of the European Union and        elsewhere.

 

Both ocean        plankton and forest ecorestoration projects remove huge quantities of global warming CO2        from the atmosphere. Long term CO2 reductions can now be banked and traded like a commodity        in international carbon markets. Consequently, Planktos’ business model will not only        restore the planet’s most vital biological systems but will generate the largest        volume of low cost greenhouse gas offsets or “carbon credits” available to        commercial, governmental and green consumer clients.

 

Rarely in        history has a globally recognized environmental crisis and a remedial technology emerged        with such auspicious synchronicity. Planktos is pioneering natural science intensive marine        and terrestrial ecorestoration regimes that affordably offer unprecedented gains for the        climate, the biosphere and the company’s our commercial objectives. Simply restoring        of ocean plankton plant life to 1980’s levels of health will remove 3-4 billion tons        of global warming CO2 and generate tens of billions of dollars in tradable carbon credit        value.

 

Years        before global warming began claiming headlines around the world, Planktos researchers were        building on a decade of ocean international science investigations with micronutrient        revival of lifeless regions of the sea. Although this restoration science was once proposed        as a potent technique to revive the collapsing marine food chain, it was neither funded nor        developed as an effective technology. The advent of the Kyoto Protocol, the enormous carbon        sequestration potential of this work and the developing global trade in carbon credits, has        become the focus of the Planktos business model.

 

The Kyoto        Protocol enables companies and governments to offset regulated greenhouse emission        restrictions by investing in CO2 reduction programs in exchange for Carbon Emission        Reduction (“CER”) credits.European        nations began tradingCER credits as of January 2005. CER        credits are traded much like commodities with an average value of between $6 and $16 per        CER (which represents one ton of CO2 or equivalent) dependent on whether the carbon credit        is certified or not and depending on the date and origin of the carbon credit. The Kyoto        Protocol became law effective February 16, 2005, the result of which should be a rapidly        expanding multi-billion-dollar market for CER credits.

 

Planktos has cultivated working partnerships with        government labs and ocean science institutions to assist with measurement and verification        procedures and to optimize project designs. Bankable, tradable investment grade CER credits        for corporate buyers and fund managers will be verified and certified with satellite &        aerial mapping, underwater analysis methods, and bloom measuring sensors on Planktos’        proprietary autonomous ocean rovers.

 

Russ        George, the president of Planktos, has been involved with ocean restoration and CO2        sequestration since 1997 and was responsible for establishing the Planktos Foundation.        Planktos’ management team is supported by an Advisory Group headed by Dr. Noel Brown        (formerly the United Nations Environmental Program director), Dr. Scott Chubb (US Naval        Research Laboratory) and Dr. Gustov Boehm (Senior Scientist Daimler /Chrysler, Stuttgart,        Germany).

 

 

22

 

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***Forests of the Ocean***

 

Plankton in        our oceans is well documented in its utilization of photosynthesis to absorb CO2. Planktos'        near-term commercial objective is to produce CER credits at a cost of less than $1 per ton        utilizing proprietary technology designed to stimulate plankton growth in the world's        oceans as a means by which to sequester(isolate from the atmosphere)CO2.

 

Specifically, Planktos expects to implement its program of sequestration by        "iron fertilization" of the ocean, restoring this        micronutrient that is vital for ocean plant        growth and photosynthesis which is now scarce in marine waters. The iron is similar to that        nature has delivered to sustain the oceans throughout history, but that has been on the        decline for thirty years owing to changes in land use. The fertilization process is        intended to trigger vast plankton blooms which will absorb the carbon in CO2, 30-40% of        which sinks deep enough to be verified as sequestered.

 

Our initial        calculations have determined that the introduction of one ton of iron results on the        biological fixation of up to 100,000 tons of CO2. Moreover, this process has three        additional benefits that help to restore ecosystems of the open ocean:

 

|   | **•** | Support and restore diminished fish populations (additional                        plankton means more food) |
|--------|------------|--------------------------------------------------------------------------------------------------------------|

|   | **•** | Adds to global O2 levels (more plankton results in more                        oxygen as some 60% of the earth’s O2 is produced by                        plankton) |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Preserves coral reefs by reducing the acidity of the                        oceans. |
|--------|------------|-------------------------------------------------------------------------------------|

 

The process        of stimulating plankton growth and the overall mission of Planktos can be viewed on its        website:www.planktosinc.com.

 

***Forests of the Land***

 

A tree is        composed of about 50% carbon which is produced by removing CO2 from the air through        photosynthesis. KlimaFa is dedicated to afforestation and reforestation projects in Europe        and the Americas. Studies are now underway to develop an ecologically sound indigenous        species mix and planting model of flora to maximize wildlife habitat and biodiversity in        the respective regions. KlimiFa is currently involved in several government-assisted carbon        forest projects in Hungary that intend to restore native mixed growth forests in national        parks and then afforest large tracts of retired agricultural lands.

 

The Kyoto        Protocol recognizes a variety of mechanisms to reduce atmospheric CO2 and other greenhouse        gases, and has approved carbon sequestration from new forests. The development of forests        ultimately produces valuable carbon credits. KlimaFa estimates that carbon credits produced        in this manner will cost approximately $4.00 per ton. KlimaFa’s target is to plant up        to 100,000 hectares over the next 24 months.

 

The        science and news surrounding eco-restoration can be viewed on KilmaFa’s        website:www.klimafa.com.

 

 

 

 

 

23

 

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***D2FUSION INC.***

 

| D2Fusion, based in Foster                        City, California, and Los Alamos, New Mexico, is a research and development                        company staffed by scientists and engineers working toward the delivery of                        proprietary solid-state fusion aimed at entry level heat and energy                        applications for homes and industry. Solid-state fusion is a solid state,                        low temperature, non-radioactive nuclear reaction that fuses two heavy                        hydrogen nuclei into a helium atom and releases enormous amounts of heat.                        The technology is more widely recognized under the name                        “cold-fusion.”

 

Unlike the reactions in                        “cold-fusion,” D2Fusion technology uses more simple and                        reliable solid state processes more akin to high temperature                        super-conductor physics to produce and control radiation-free fusion                        reactions known as “LENR” or Low Energy Nuclear Reaction in the                        Solid State. In this most simple form of fusion, the process of LENR fuses                        two Deuterium atoms (heavy Hydrogen) that are contained and constrained                        under solid-state conditions fuse to form a single Helium-4 isotope (4He)                        but since the mass of one 4H atom is slightly less than two Deuterium                        atoms, each new helium atom created is accompanied by a release of energy.                        To put this into a more common perspective, under ideal conditions one gram                        of hydrogen fuel holds the equivalent to billions of watts (joules) of                        energy.

 

First discovered in the 1930s                        then re-discovered and announced in 1989, this safe, low-cost technology                        seemed to answer all society's prayers for a clean and abundant new energy                        source. To some, however, it appeared to violate conventional physics and                        threaten entrenched energy industries, and it was for a time denounced as                        impossible. Now, after more than 17 years of painstaking research and                        experimentation, this enigmatic new phenomenon has finally given up enough                        secrets to allow development of laboratory applications. Upon completion of                        a consumer model, multi-kilowatt D2Fusion devices will be able to permeate                        society, enhancing the economy, environment, and self-sufficiency of                        countless nations around the globe.

 

Major energy research                        organizations and government agencies around the world are now accelerating                        efforts to develop and deliver new forms of nuclear energy. Only                        solid-state fusion offers such an energy solution without any radioactivity                        or nuclear waste. As the departments of energy and defense in the USA,                        Europe, and Asia begin to make R&D commitments in this field, D2Fusion                        is positioned to pioneer many commercial applications that can finally                        bring this clean energy revolution to fruition.

 

Russ George and Dr. Tom Passell (formerly of the Nuclear                        Power Division of the Electric Power Research Institute of Palo Alto), have                        been involved with solid-state fusion research since 1989. Mr.                        George’s successful experimental prototypes have been tested at the                        Los Alamos National Laboratory and Stanford Research Institute.                        D2Fusion’s management team is supported by a Scientific Advisory                        Board that includes Dr. Brian Josephson (Cambridge Nobel Laureate), Dr.                        Martin Fleischman (one of the two original proponents of cold fusion in                        1989) as well as Dr. Tom Clayton, Dr. Dale Tuggle and Dr. Malcolm Fowler,                        from the Los Alamos National Laboratory.

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

The        immediate goal of D2Fusion is to produce and operate three, small scale thermal prototypes,        one in Foster City, California, one in Los Alamos, New Mexico and one in Cambridge, England        in order to provide the ability of our scientists to prove their ability to replicate LENR        at disparate locations. D2Fusion is already well on its way to accomplishing this goal as        our facilities in Foster City and Los Alamos already have working prototypes that can        demonstrate LENR. We expect that these prototypes will be further tested and refined by        collaborating research groups in the Silicon Valley, Los Alamos, and Europe.

 

 

24

 

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D2Fusion’s ultimate goal is to produce heat and electricity at a        fraction of today’s cost, with no emissions. The first commercial product envisioned        is a small space heater suitable for all residential homes that will not need refueling        over several human life spans.

 

The Company        is well aware of the controversy surrounding “cold fusion” technology. However,        we believe that there is sufficient global evidence that the risk/reward ratio merits our        investment. As D2Fusion’s prototype technology is scaled to commercial size it could        help solve much of the world’s energy, water, and pollution problems. The science and        news surrounding solid-state fusion and D2Fusion can be viewed on its website:        www.D2Fusion.com.

 

***Historical Research and Development***

 

The Company        is the owner of intellectual property rights related to the acquisition of Hydro-Air        Technologies, Inc., (“HAT”), from Dr. Melvin Prueitt. HAT has certain        intellectual property rights that the Company had intended to develop for the purpose of        generating commercially viable electrical power using the energy generated by the heat of        evaporation of water. Unfortunately, these projects proved difficult to develop into        working prototypes that caused the Company to abandon research and development specific to        these technologies. However, preliminary work, experiments completed and test results        generated from the projects did prove useful to derivative projects that the Company        expects may become commercially viable at some future date.

 

The Company        is the owner of a 30% interest in Renewable Energy Limited (“RECO”). The        primary asset of RECO is a project called SOLAREC (Solar Reduction of Carbon Dioxide.) This        project, lead by Dr. Reed Jensen involves the task of recycling carbon dioxide into fuel        using focused ultraviolet and visible light from the sun. One of the goals of the SOLAREC        project is to use solar energy and CO2 to produce a clean usable fuel (gasoline, diesel,        etc.) with electricity and oxygen as the only by-products. RECO has also developed three        solar driven methods for the environmentally friendly production of hydrogen, utilizing        atmospheric or industrially produced CO2 or coal. The Company believes that the SOLAREC        project has the potential to significantly address today’s global energy and        pollution problems but as a minority interest holder is no longer involved in on a        day-to-day basis.

 

The Company        is a research and development company with no revenues and no immediate source of revenue        generation. The Company has been funded since inception from public or private debt or        equity placements or by major shareholders in the form of loans. All of the Company’s        projects have been experimental in nature and virtually all of the capital raised to date        has been allocated for research and the development activities with related administrative        costs. In 2005 we began research and development operations with Planktos, Inc.        (“Planktos”) and D2Fusion Inc. (“D2Fusion”).

 

**Plan        of Operation**

 

During the        six month period ended June 30, 2007, the Company was involved in developing innovative        technologies tied to its wholly owned subsidiaries, Planktos and D2Fusion, building a        management team for both entities, and completing a private placement to fund research and        development. The Company remains focused on overseeing the operation of Planktos as the        controlling shareholder of Planktos Corp. and managing the day to day operation of D2Fusion        in anticipation of closing its agreement to transfer ownership to Enwin        Resources.

 

 

 

25

 

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***Planktos, Inc.***

 

Planktos is        currently working with U.S. and European marine research teams to plan and launch        significant ocean iron fertilization projects during 2007. Initial efforts will be modest        in scope and research-intensive, but are still designed to verifiably sequester carbon        between hundreds of thousands and millions of tonnage per voyage.

Planktos is        approaching this work with an array of qualifications:

 

|   | **•** | Years of experience in the basic science of the                        field; |
|--------|------------|-------------------------------------------------------------------------------|

|   | **•** | Collaborative arrangements and working relationships with                        internationally recognized marine science project partners required for                        certification; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Sustainable resource maximization plan designs; |
|--------|------------|-------------------------------------------------|

|   | **•** | Expertise in resource value computation and certification                        procedures; |
|--------|------------|----------------------------------------------------------------------------------------------|

|   | **•** | Market access for resource monetization and trade;                        and |
|--------|------------|-------------------------------------------------------------------------------|

|   | **•** | Experience in structuring all preceding factors into viable                        binding business plans. |
|--------|------------|------------------------------------------------------------------------------------------------------------|

         

Planktos        expects to launch in 2007 the first of a series of up to 6 commercial scale ocean plankton        blooms over 24 months designed to verifiably sequester a total of between 24 and 30 million        tons of CO2. Post 2008 follow on projects include new ships, and larger blooms with a        target of 250 million tons of verified CO2 sequestration by 2010.

 

Our plan of        operation for Planktos will require $1,500,000 in funding over the next 12 months. We are        confident that Planktos Corp. will be able to finance the remainder of the “iron        fertilization” prove out phase of the Planktos business model.

 

***D2Fusion***

 

D2Fusion is        currently working with eminent U.S. and international research teams to continue product        development projects. Using the know-how as well as collaborative expertise from the U.S.        government's top nuclear science labs, D2Fusion is prepared to build, demonstrate, and test        small (kilowatt-scale) thermal module prototypes. D2Fusion intends to achieve the        following:

 

|   | **•** | Pilot project to compellingly demonstrate the commercial                        promise of D2Fusion technology, producing prototype kilowatt-scale thermal                        modules for use in many applications; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Coordinate design, assembly, and testing of these prototype                        modules with leading national laboratory scientific and engineering teams                        to demonstrate these devices deliver safe clean solid-state fusion energy                        in a commercially useful form. This will both legitimate and publicize the                        field as well as generating important intellectual properties; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Design of a licensing and development plan obtain the                        highest possible return on our products and technologies; |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Grow the business to develop and deliver new products and                        processes. |
|--------|------------|---------------------------------------------------------------------------------------------|

 

Our plan of        operation for D2Fusion will require $2,000,000 in financing over the next 12 months which        financing is tied to our agreement with Enwin Resources. The Company is confident that        Enwin Resources will be able to finance D2Fusion in the near term. Meanwhile, we will        continue to fund limited research and development of D2Fusion’s LENR        technology.

 

 

 

26

 

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**Results of Operations**

 

The Company        has been funded since inception from public or private debt or equity placements or by        major shareholders in the form of loans. Virtually all of the capital raised to date has        been allocated for research and the development activities and for administrative costs.        All projects under development by the Company are experimental in nature and are recorded        as research and development expenses with related general and administrative        expenses.

 

The Company        did not generate any revenues from operations during this period.

 

The Company        does not expect to receive revenues through 2007 as both D2Fusion and Planktos remain in        the development stages.

 

***Net        Losses***

 

For the        period from January 5, 1994 to June 30, 2007 the Company recorded a net loss of        $14,159,935. Net losses for the three month period ended June 30, 2007 were $1,138,848 as        compared to $460,690 for the three month period ended June 30, 2006. Net losses for the six        month period ended June 30, 2007 were $2,045,234 as compared to $952,738 for the six month        period ended June 30, 2006. The change in net losses in the current six month period can be        attributed to increases in general and administrative expenses, research and development        costs and vessel maintenance. General and administrative expenses include accounting        expenses, professional fees consulting fees and costs associated with the preparation of        public disclosure documentation. The research and development expenses include costs        associated with both the pursuit of numerous non-fossil fuel energy technologies including        solar power, cold fusion nuclear power and the sequestration of CO2 in the marine and        terrestrial environments. Vessel maintenance is related to expenses incurred by Planktos in        retrofitting the Weatherbird II research ship.

 

The Company        expects to continue to operate at a loss through fiscal 2007 due to the nature of the        Company’s operations.

 

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

         

The Company        has a prospective income tax benefit resulting from a net operating loss carryforward and        start up costs that may offset any future operating profit.

 

***Impact of Inflation***

         

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

 

***Capital Expenditures***

 

The Company        expended no significant amounts on capital expenditures for the period from inception to        June 30, 2007.

***Liquidity and Capital Resources***

 

As of June        30, 2007, the Company had current assets totaling $53,078 and a working capital deficit of        $1,660,864. These assets consist of cash on hand of $32,902 and prepaid expenses of        $20,176. Net stockholders' deficit in the Company was $2,727,006 at June 30, 2007. The        Company is in the development stage and, since inception, has experienced significant        changes in liquidity, capital resources and shareholders’ equity.

 

27

 

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Cash flow        used in operating activities was $6,504,843 for the period from inception to June 30, 2007.        Cash flow used in operating activities for the six month period ended June 30, 2007 was        $1,822,616 as compared to $763,181 for the six months ended June 30, 2006. The increase in        cash flow used in operating activities in the current six month period was due primarily to        an increase in net losses.

 

Cash flow        provided by financing activities was $6,674,878 for the period from inception to June 30,        2007. Cash flow provided by financing activities for the six month period ended June 30,        2007 was $1,651,606 as compared to $1,334,241 for the six months ended June 30, 2006. Cash        flow provided by financing activities in the current six month period can be attributed to        proceeds received from related party loans, advances and sales of our equity.

 

Cash flows        used for investing activities was $137,133 for the period from inception to June 30, 2007.        Cash flow used for investing activities for the six month periods ended June 30, 2007 was        $0 as compared to $11,898 for the six months ended June 30, 2006.

 

The        Company’s current assets are insufficient to conduct our plan of operation over the        next twelve (12) months 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 be given that funding, if needed,        would be available or available to the Company on acceptable terms. The Company’s        shareholders would be the most likely 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 would have a        material adverse affect on our plan of operation.

 

The Company        has no current plans for the purchase or sale of any plant or equipment.

 

The Company        has no current plans to make any changes in the number of employees.

 

**Off        Balance Sheet Arrangements** 

 

As of June        30, 2007, the Company has 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.

**Critical Accounting Policies**

 

In the        notes to the audited consolidated financial statements for the year ended December 31, 2006        included in the Company’s Form 10-KSB, the Company discussed those accounting        policies that are considered to be significant in determining the results of operations and        our financial position. We believe that the accounting principles utilized by us conform to        accounting principles generally accepted in the United States of America.

 

 

 

 

 

28

 

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The        preparation of financial statements requires management to make significant estimates and        judgments that affect the reported amounts of assets, liabilities, revenues and expenses.        By their nature, these judgments are subject to an inherent degree of uncertainty. On an        on-going basis, we evaluate our estimates, including those related to bad debts,        inventories, intangible assets, warranty obligations, product liability, revenue, and        income taxes. We base our estimates on historical experience and other facts and        circumstances that are believed to be reasonable, and the results form the basis for making        judgments about the carrying value of assets and liabilities. The actual results may differ        from these estimates under different assumptions or conditions.

 

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

 

The        statements contained in the section titled*Management's Plan of        Operation*with the exception of historical facts, are forward        looking statements within the meaning of Section 27A of the Securities Act. A safe-harbor        provision may not be applicable to the forward looking statements made in this Form 10-QSB        because of certain exclusions under Section 27A (b). 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:

 

|   | **•** | our anticipated financial performance; |
|--------|------------|----------------------------------------|

|   | **•** | the sufficiency of existing capital resources; |
|--------|------------|------------------------------------------------|

|   | **•** | our ability to fund cash requirements for future                        operations; |
|--------|------------|-------------------------------------------------------------------------------------|

|   | **•** | uncertainties related to the development of our                        technologies; |
|--------|------------|--------------------------------------------------------------------------------------|

|   | **•** | the volatility of the stock market; and |
|--------|------------|-----------------------------------------|

|   | **•** | general economic conditions. |
|--------|------------|------------------------------|

 

We wish to        caution readers that the Company’s operating results are subject to various risks and        uncertainties that could cause our actual results to differ materially from those discussed        or anticipated 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 that is required by law.

 

**Risks        Related to Our Business**

 

Our future        operating results are highly uncertain. Before deciding to invest in us or to maintain or        increase your investment, you should carefully consider the risks described below, in        addition to the other information contained in this annual report. If any of these risks        actually occur, our business, financial condition or results of operations could be        seriously harmed. In that event, the market price for our common stock could decline and        you may lose all or part of your investment.

 

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

 

Since our        inception in 1994, our operations have resulted in a continuation of losses and an        accumulated deficit which reached $14,159,935 at June 30, 2007. The Company has never        realized revenue from operations. We will continue to incur operating losses as we fund our        subsidiaries’ operations. Our only expectation of future profitability is dependent        upon the success of our subsidiaries’ programs and research and development.        Therefore, we may never be able to achieve profitability.

 

 

29

 

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***Our        subsidiaries will not likely be profitable in the next twelve months and may never be        profitable.***

 

Planktos is        in the process of its iron-fertilization prove-out program and D2Fusion remains in the        research and development stage with no significant revenues and will not likely be        profitable within the next twelve months. While both operations have very high potential        profit, it cannot be assured that iron-fertilization will live up to our expectations or        whether our research into solid state fusion will ever be successful. Therefore, the        possibility of future profits by our subsidiaries is purely speculative.

 

***We        will need additional financing to fund our subsidiaries***

 

We will        need additional capital to fund Planktos for its iron-fertilization prove-out program and        D2Fusion’s research and development. In our efforts to raise capital or obtain        additional financing, we may be obligated to issue additional shares of common stock or        warrants or other rights to acquire common stock on terms that will result in dilution to        existing shareholders or place restrictions on operations. If adequate funds are not        available or are not available on acceptable terms, our ability to fund our subsidiaries        would be significantly limited.

 

***We        are dependent upon key people, who would be difficult to        replace*****.**

 

Our        continued operations will be largely dependent upon the efforts of our executive officer        and our directors as well as Russ George and our other engineers. Our future success also        will depend in large part upon the Company’s ability to identify, attract and retain        other highly qualified managerial and engineering personnel. Competition for these        individuals is intense. The loss of the services of our managers and engineers, the        inability to identify, attract or retain qualified personnel in the future, or delays in        hiring qualified personnel could make it more difficult for us to maintain our operations        and meet our key objectives.

 

***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.

 

***We        may incur significant expenses as a result of being quoted on the Over the Counter Bulletin        Board, which may negatively impact our financial performance.***

 

We may        incur significant legal, accounting and other expenses as a result of being listed on the        Over the Counter Bulletin Board. The Sarbanes-Oxley Act of 2002, as well as related rules        implemented by the Commission, have required changes in corporate governance practices of        public companies. We expect that 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, may substantially increase our expenses, including our legal and        accounting costs, and make some activities more time-consuming and costly. As a result,        there may be a substantial increase in legal, accounting and certain other expenses in the        future, which would negatively impact our financial performance and could have a material        adverse effect on our results of operations and financial condition.

 

 

 

30

 

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***Our        internal controls over financial reporting may not be 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, beginning with our annual report for the        year ending December 31, 2008, we may be required to furnish a report by our management on        our internal controls over financial reporting. Such report will 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. If we are unable to assert that our internal controls are        effective as of December 31, 2008, investors could lose confidence in the accuracy and        completeness of our financial reports, which in turn could cause our stock price to        decline.

 

**Going        Concern**

 

The        Company’s audit expressed substantial doubt as to the Company’s ability to        continue as a going concern as a result of recurring losses, lack of revenue-generating        activities and an accumulated deficit of $12,114,701 as of December 31, 2006. The        Company’s ability to continue as a going concern is subject to the ability of the        Company to realize a profit and /or obtain funding from outside sources. Management’s        plan to address the Company’s ability to continue as a going concern, include: (1)        obtaining funding from private placement sources; (2) obtaining additional funding from the        sale of the Company’s securities; (3) establishing revenues from commercializing of        its projects; and (4) 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.

 

| **ITEM 3.** | **CONTROLS AND PROCEDURES** |
|-------------|-----------------------------|

 

The        Company’s president acts both as the chief executive officer and the chief financial        officer and is responsible for establishing and maintaining disclosure controls and        procedures.

 

| ***a)***   | ***Evaluation of disclosure controls and                        procedures.*** |
|----------------------|--------------------------------------------------------------------------------|

 

Under the        supervision and with the participation of management, including the chief executive officer        and chief financial officer, the Company evaluated the effectiveness of the design and        operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and        15d-15(e) under the Securities Exchange Act of 1934, as of June 30, 2007. Based on this        evaluation, the chief executive officer and chief financial officer concluded that, as of        the end of the period covered by this report, the Company’s disclosure controls and        procedures were effective and adequately designed to ensure that the information required        to be disclosed in the reports which the Company files or submits under the Securities        Exchange Act of 1934 is recorded, processed, summarized and reported within the time        periods specified in applicable rules and forms and that such information was accumulated        and communicated to our chief executive officer and chief financial officer, in a manner        that allowed for timely decisions regarding required disclosure.

 

| ***(b)***   | ***Changes in internal controls over financial                        reporting.*** |
|-----------------------|-------------------------------------------------------------------------------------|

 

During the        quarter ended June 30, 2007 there has been no change in the Company’s internal        control over financial reporting that has materially affected, or is reasonably likely to        materially affect, internal control over financial reporting.

 

31

 

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**PART        II**

 

| **ITEM 1.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

None.

 

| **ITEM 2.** | **UNREGISTERED SALES OF EQUITY SECURITIES** |
|-------------|---------------------------------------------|

 

On May 1, 2007, the Company authorized the issuance of 1,150,000 units, each        unit comprised of one common share and one purchase warrant with an exercise price of $0.40        for a period of 24 months to Regal RV Resorts, Inc., pursuant to exemptions from        registration provided by Section 4(2) and Regulation S of the Securities Act of 1933 in        exchange for cash consideration of $402,500 or $0.35 per unit. No commissions were paid in        connection with this transaction.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration; (3) the offeree stated 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 lead to the issuance of the stock took place directly between the offeree        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 distribution compliance period for shares sold in reliance on Regulation S is one        year.

 

The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the entity to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 14,        2007 the Company authorized the issuance of 50,000 shares of common stock valued at $0.50 a        share to Andrew Wallace, pursuant to exemptions from registration provided by Section 4(2)        and Regulation S of the Securities Act of 1933 in consideration of services rendered as an        officer and director of the Company.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration for services rendered as an officer and        director; (3) the offeree stated 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 lead to the issuance of the        stock took place directly between the offeree and the Company.

 

 

32

 

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The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the person to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 14,        2007 the Company authorized the issuance of 30,000 shares of common stock valued at $0.50 a        share to William Sherban, pursuant to exemptions from registration provided by Section 4(2)        and Regulation S of the Securities Act of 1933 in consideration of services rendered as a        director of the Company.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration for services rendered as a director; (3) the        offeree stated 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 lead to the issuance of the stock took        place directly between the offeree and the Company.

 

The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the person to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 14,        2007 the Company authorized the issuance of 10,000 shares of common stock valued at $0.50 a        share to Toby Thatcher, pursuant to exemptions from registration provided by Section 4(2)        and Regulation S of the Securities Act of 1933 in consideration of services rendered as a        director of the Company.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration for services rendered as a director; (3) the        offeree stated 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 lead to the issuance of the stock took        place directly between the offeree and the Company.

 

The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the person to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 14,        2007 the Company authorized the issuance of 10,000 shares of common stock valued at $0.50 a        share to Nora Coccaro, pursuant to exemptions from registration provided by Section 4(2)        and Regulation S of the Securities Act of 1933 in consideration of services rendered as a        former director of the Company.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration for services rendered as a former director; (3)        the offeree stated 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 lead to the issuance of the stock took        place directly between the offeree and the Company.

 

33

 

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The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the person to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 17,        2007 the Company authorized the issuance of 200,000 shares of common stock valued at $0.51        a share to RV Regal Resorts, Inc. as required by Section 3(B) of a Consulting Agreement        dated December 1, 2005, pursuant to exemptions from registration provided by Section 4(2)        and Regulation S of the Securities Act of 1933 for services rendered.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for services rendered as a consultant; (3) the offeree stated 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 lead to the issuance of the stock took place directly between the        offeree and the Company.

 

The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the entity to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 31,        2007 the Company authorized the issuance of 250,000 shares of common stock for cash        consideration of $62,500 to Supreme Gold Holding Limited on the exercise of common stock        purchase warrants for $0.25 a share pursuant to exemptions from registration provided by        Section 4(2) and Regulation S of the Securities Act of 1933, as amended.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration; (3) the offeree stated 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 lead to the issuance of the stock took place directly between the offeree        and the Company.

 

The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the entity to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

On May 31,        2007 the Company authorized the issuance of 250,000 shares of common stock for cash        consideration of $62,500 to Netone Enterprise Limited on the exercise of common stock        purchase warrants for $0.25 a share pursuant to exemptions from registration provided by        Section 4(2) and Regulation S of the Securities Act of 1933.

 

The Company        complied with Section 4(2) based on the following factors: (1) the issuance was an isolated        private transaction that did not involve a public offering; (2) there was one offeree who        was issued the stock for cash consideration; (3) the offeree stated 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 lead to the issuance of the stock took place directly between the offeree        and the Company.

 

34

 

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The Company        complied with the requirements of Regulation S by having no directed selling efforts made        in the United States, by selling only to an offeree who was outside the United States at        the time of the offering, and ensuring that the entity to whom the stock was issued was a        non-U.S. person with an address in a foreign country.

 

| **ITEM 3.** | **DEFAULTS UPON SENIOR                        SECURITIES** |
|-------------|------------------------------------------------------------|

 

None.

 

| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITIES                        HOLDERS** |
|-------------|----------------------------------------------------------------------------------|

 

None.

 

| **ITEM 5.** | **OTHER INFORMATION** |
|-------------|-----------------------|

 

None.

 

| **ITEM 6.** | **EXHIBITS** |
|-------------|--------------|

 

Exhibits        required to be attached by Item 601 of Regulation SB are listed in the Index to Exhibits on        page 37 of this Form 10-QSB, and are incorporated herein by this reference.

 

35

 

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**SIGNATURES**

 

In        accordance with the requirements of the Securities Exchange Act, the registrant caused this        report to be signed on its behalf by the undersigned, hereunto duly authorized, this        20th day of August, 2007.

 

 

| ***Solar Energy Limited*** |
|----------------------------|

         

         

/s/ Andrew Wallace

| Andrew Wallace |
|----------------|

Chief        Executive Officer, Chief Financial Officer and Principal Accounting Officer

 

 

 

 

 

 

 

 

 

 

36

 

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### INDEX TO EXHIBITS

| Exhibit No. | Page No. | Description                                                                                                                                                                                                                                                                                                                                            |
|-------------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(i)        | *        | Articles of Incorporation (incorporated by reference to the Company's Form                    10-SB filed with the Securities and Exchange Commission on January 28,                    1999)                                                                                                                                                          |
| 3(ii)       | *        | By-laws (incorporated herein by reference to the Company's Form 10-SB filed                    with the Commission on January 28, 1999)                                                                                                                                                                                                                |
| 10(i)       | *        | Stock Purchase Agreement dated April 27, 2004 between Renewable Energy                    Limited, Los Alamos Renewable Energy , LLC, Renewable Energy Corporation and                    the Company (incorporated by reference to the Company's Form 10-QSB filed with                    the Securities and Exchange Commission on August 24, 2004) |
| 10(ii)      | *        | Acquisition Agreement with Planktos, Inc., dated August 10, 2005                    (incorporated by reference to the Company's Form 8-K filed with the Commission                    on August 19, 2005)                                                                                                                                              |
| 10(iii)     | *        | Acquisition Agreement with D2Fusion Inc., dated August 18, 2005                    (incorporated by reference to the Company's Form 8-K filed with the Commission                    on August 19, 2005)                                                                                                                                               |
| 10(iv)      | *        | Iron-Fertilization Prove-Out and Purchase Agreement with Planktos Corp.                    (formerly Diatom Corporation, dated August 18, 2005 (incorporated by reference                    to the Company's Form 8-K filed with the Commission on August 19, 2005)                                                                                   |
| 10(v)       | Attached | Consulting Agreement with Bay Cove Capital                    Corporation dated December 1, 2005                                                                                                                                                                                                                                                       |
| 10(vi)      | *        | Securities Exchange Agreement and Plan of Exchange with Planktos Corp.                    (formerly Diatom Corporation dated January 12, 2007 (incorporated by reference                    to the Company's Form 8-K filed with the Commission on January 19, 2007)                                                                                   |
| 10(vii)     | Attached | Amendment to Consulting Agreement with Bay Cove                    Capital Corporation dated May 1, 2007                                                                                                                                                                                                                                               |
| 14          | *        | Code of Ethics Adopted March 30, 2004 (incorporated by reference to the                    Company's Form 10-KSB filed with the Securities and Exchange Commission on                    April 1, 2004                                                                                                                                                 |
| 31          | Attached | Certification of the Chief Executive Officer  and Chief Financial                    Officer pursuant to Rule 13a-15(e) and 15d-15(e)  of the Securities and                    Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the                    Sarbanes-Oxley Act of 2002                                     |
| 32          | Attached | 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 200                                                                                                                                  |

* Incorporated by reference to prior filings with the Securities and        Exchange Commission.

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