| [ X ] | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2007 |
|-------|------------------------------------------------------------------------------------------------------------------------------------|

| [     ] | Transition report under Section 13 or 15(d) of the Exchange Act for the transition period from __________ to __________. |
|-----------------------------|--------------------------------------------------------------------------------------------------------------------------|

| NEVADA                                                        |   | 95-4756822                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

----

| ITEM 1.                     | FINANCIAL STATEMENTS                                                                                                                   | 3      |
|-----------------------------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
|                        |                                                                                                                                   |   |
|                        | Consolidated Unaudited Balance Sheets as of December 31, 2007 and June 30, 2007                                                        | 3      |
|                        |                                                                                                                                   |   |
|                        | Consolidated Unaudited Statements of Operations for the six months and three months ended December 31, 2007 and December 31, 2006 | 4      |
|                        |                                                                                                                                   |   |
|                        | Consolidated Unaudited Statements of Cash Flows for the six months and three months ended December 31, 2007 and December 31, 2006 | 5      |
|                        |                                                                                                                                   |   |
|                        | Notes to Consolidated Financial Statements                                                                                             | 6      |
|                        |                                                                                                                                   |   |
| ITEM 2.                     | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                  | 10     |
|                        |                                                                                                                                   |   |
| ITEM 3.                     | CONTROLS AND PROCEDURES                                                                                                                | 12     |
|                        |                                                                                                                                   |   |
| PART II - OTHER INFORMATION |
| ITEM 1                      | LEGAL PROCEEDINGS                                                                                                                      | 12     |
|                        |                                                                                                                                   |   |
| ITEM 2.                     | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                            | 12     |
|                        |                                                                                                                                   |   |
| ITEM 5.                     | OTHER EVENTS                                                                                                                           | 13     |
|                        |                                                                                                                                   |   |
| ITEM 6.                     | EXHIBITS                                                                                                                               | 13     |
|                        |                                                                                                                                   |
| SIGNATURES                  | 14                                                                                                                                     |

----

|                                                                                                                                                               |   |              |                  |   |          |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------------------|--------|---------------|--------|
|                                                                                                                                                               |   | December 31, 2007 |                  |   | June 30, 2007 |   |
| Assets                                                                                                                                                             |   |              |                  |   |          |   |
| Current assets:                                                                                                                                                    |   |              |                  |   |          |   |
| Cash                                                                                                                                                               |   | $                 | 40,059                |   |          | $      | 91,299 |   |
| Prepaid expenses                                                                                                                                                   |   |              | 26,750                |   |          |   | 131,380 |   |
| Other current assets                                                                                                                                               |   |              | -                     |   |          |   | 5,793 |   |
| Net current assets of discontinued operations                                                                                                                      |   |              | 455,335               |   |          |   | 308,479 |   |
| Total current assets                                                                                                                                               |   |              | 522,144               |   |          |   | 536,951 |   |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
| Equipment, net                                                                                                                                                     |   |              | 558,887               |   |          |   | 600,232 |   |
| Equipment of discontinued operations, net                                                                                                                          |   |              | 8,213,846             |   |          |   | 8,433,989 |   |
| Deposits & other assets                                                                                                                                        |   |              | 3,000                 |   |          |   | 36,649 |   |
| Net other assets of discontinued operations                                                                                                                        |   |              | 415,709               |   |          |   | 349,246 |   |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
|                                                                                                                                                               |   | $                 | 9,713,586             |   |          | $      | 9,957,067 |   |
| Liabilities and Net Capital Deficiency                                                                                                                             |   |              |                  |   |          |   |   |   |
| Current liabilities:                                                                                                                                               |   |              |                  |   |          |   |   |   |
| Accounts payable                                                                                                                                                   |   | $                 | 585,830               |   |          | $      | 724,044 |   |
| Accrued liabilities                                                                                                                                                |   |              | 1,238,176             |   |          |   | 1,131,322 |   |
| Other current liabilities                                                                                                                                          |   |              | 240,595               |   |          |   | 269,100 |   |
| Net current liabilities of discontinued operations                                                                                                                 |   |              | 5,992,018             |   |          |   | 5,313,243 |   |
| Total current liabilities                                                                                                                                          |   |              | 8,056,619             |   |          |   | 7,437,709 |   |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
| Long-term obligations                                                                                                                                              |   |              | 3,963,712             |   |          |   | 3,547,138 |   |
| Accrued interest                                                                                                                                                   |   |              | 483,233               |   |          |   | 176,404 |   |
| Long-term obligations of discontinued operations                                                                                                                   |   |              | 108,451               |   |          |   | 64,870 |   |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
| Minority interest                                                                                                                                                  |   |              | 1,214,746             |   |          |   | 1,276,003 |   |
| Net capital deficiency:                                                                                                                                            |   |              |                  |   |          |   |   |   |
| Preferred stock; no par value; authorized 200,000 shares:                                                                                                          |   |              |                  |   |          |   |   |   |
| Series A – 100,000 shares designated, issued & outstanding                                                                                               |   |              | 100                   |   |          |   | 100 |   |
| Series B – 100,000 shares designated, issued & outstanding                                                                                               |   |              | 100                   |   |          |   | 100 |   |
| Common stock; $.001 par value; authorized 500,000,000 shares; issued and outstanding 291,321,791 shares at December 31, 2007 (270,534,750 shares at June 30, 2007) |   |              |     291,322 |   |          |   |   270,535 |   |
| Convertible promissory note & accrued interest                                                                                                                 |   |              | 122,296               |   |          |   | 118,279 |   |
| Additional paid in capital                                                                                                                                         |   |              | 38,702,912            |   |          |   | 38,705,209 |   |
| Retained deficit                                                                                                                                                   |   |              | (27,848,795           | )      |          |   | (27,848,795 | ) |
| Deficit accumulated during the development stage                                                                                                                   |   |              | (15,381,110           | )      |          |   | (13,790,485 | ) |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
| Net capital deficiency                                                                                                                                             |   |              | (4,113,175            | )      |          |   | (2,545,057 | ) |
|                                                                                                                                                               |   |              |                  |   |          |   |   |   |
|                                                                                                                                                               |   | $                 | 9,713,586             |   |          | $      | 9,957,067 |   |

----

|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   | Cumulative activity during development stage |       |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------|--------|------------|---------------|--------|--------|----------|--------|--------|----------------------------------------------|------------|
|                                                                                                                    |   | Six months ended |       |   | Three months ended |   |       | April 1, 2006 |   |
|                                                                                                                    |   | December 31      |       |   | December 31        |   |       | through       |   |
|                                                                                                                    |   | 2007             |       |   | 2006               |   |       | 2007          |   |   | 2006     |   |   | 2007                                         |       |
| Operating expenses:                                                                                                     |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |
| General & administrative                                                                                            |   | $                | 976,869    |   |               | $      | 1,498,693  |          |   | $      | 222,066  |   |   | $                                            | 751,376    |   |   | $ | 6,334,967 |   |
| Research & development                                                                                              |   |             | 188,269    |   |               |   | 154,849    |          |   |   | 89,480   |   |   |                                         | 59,589     |   |   |   | 1,748,304 |   |
| Write-down of rotary engine patterns, demonstration engines not held for sale, & intellectual assets                |   |             | -          |   |               |   | -          |          |   |   | -        |   |   |                                         | -          |   |   |   | 7,717,000 |   |
| Total operating expenses                                                                                                |   |             | 1,165,138  |   |               |   | 1,653,542  |          |   |   | 311,546  |   |   |                                         | 810,965    |   |   |   | 15,800,271 |   |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss from operations                                                                                                |   |             | (1,165,138 | )      |               |   | (1,653,542 | )             |   |   | (311,546 | )      |   |                                         | (810,965   | ) |   |   | (15,800,271 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Other income (expenses):                                                                                                |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Change in fair value of derivative liabilities                                                                          |   |             | (2,289     | )      |               |   | 3,952      |          |   |   | -        |   |   |                                         | (1,438     | ) |   |   | (6,229 | ) |
| Other income                                                                                                            |   |             | -          |   |               |   | 80,000     |          |   |   | -        |   |   |                                         | 80,000     |   |   |   | - |   |
| Interest expense, net                                                                                                   |   |             | (173,359   | )      |               |   | (247,133   | )             |   |   | (90,661  | )      |   |                                         | (95,497    | ) |   |   | (846,501 | ) |
| Other income (expense)                                                                                                  |   |             | (175,648   | )      |               |   | (163,181   | )             |   |   | (90,661  | )      |   |                                         | (16,935    | ) |   |   | (852,730 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss from continuing operations before minority interest in net loss of subsidiary & provision for income taxes |   |             | (1,340,786 | )      |               |   | (1,816,723 | )             |   |   | (402,207 | )      |   |                                         | (827,900   | ) |   |   | (16,653,001 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Minority interest in net loss of subsidiary                                                                             |   |             | 67,740     |   |               |   | -          |          |   |   | 30,358   |   |   |                                         | (303,591   | ) |   |   | 4,248,699 |   |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Provision for income taxes – State of California                                                                  |   |             | (800       | )      |               |   | (3,141     | )             |   |   | (800     | )      |   |                                         | (3,141     | ) |   |   | (800 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss from continuing operations                                                                                     |   |             | (1,273,846 | )      |               |   | (1,819,864 | )             |   |   | (372,649 | )      |   |                                         | (1,134,632 | ) |   |   | (12,405,102 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Discontinued operations –                                                                                         |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| net loss from discontinued operations                                                                                   |   |             | (928,691   | )      |               |   | (1,027,304 | )             |   |   | (239,263 | )      |   |                                         | (473,033   | ) |   |   | (3,587,920 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss                                                                                                                |   | $                | (2,202,537 | )      |               | $      | (2,847,168 | )             |   | $      | (611,912 | )      |   | $                                            | (1,607,665 | ) |   | $ | (15,993,022 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss per common share:                                                                                              |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Continuing operations                                                                                                   |   | $                | (0.005     | )      |               | $      | (0.059     | )             |   | $      | (0.002   | )      |   | $                                            | (0.028     | ) |   | $ | (0.143 | ) |
| Discontinued operations                                                                                                 |   |             | (0.003     | )      |               |   | (0.033     | )             |   |   | 0.000    |   |   |                                         | (0.012     | ) |   |   | (0.041 | ) |
|                                                                                                                    |   |             |       |   |               |   |       |          |   |   |     |   |   |                                         |       |   |   |   |   |   |
| Net loss per common share                                                                                               |   | $                | (0.008     | )      |               | $      | (0.092     | )             |   | $      | (0.002   | )      |   | $                                            | (0.040     | ) |   | $ | (0.184 | ) |

----

|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   | Cumulative activity during development stage April 1, 2006 |       |
|-------------------------------------------------------------------------------------------|--------|------------------|------------|--------|--------------------|--------|------------|--------------|--------|--------|----------|--------|--------|------------------------------------------------------------|------------|
|                                                                                      |   | Six months ended |       |   | Three months ended |   |       | through      |   |
|                                                                                      |   | December 31      |       |   | December 31        |   |       | December 31, |   |
|                                                                                      |   | 2007             |       |   | 2006               |   |       | 2007         |   |   | 2006     |   |   | 2007                                                       |       |
| Cash flows from operating activities:                                                     |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |
| Net loss                                                                                  |   | $                | (2,202,537 | )      |               | $      | (2,847,168 | )            |   | $      | (611,912 | )      |   | $                                                          | (1,607,665 | ) |   | $ | (15,993,022 | ) |
| Net loss from discontinued operations                                                     |   |             | 928,691    |   |               |   | 1,027,304  |         |   |   | 239,263  |   |   |                                                       | 473,033    |   |   |   | 3,587,920 |   |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Adjustment to reconcile net loss to net cash provided by continuing operating activities: |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |
| Minority interest in net loss of subsidiary                                               |   |             |       |   |               |   |       |         |   |   | 37,382   |   |   |                                                       | 319        |   |   |   | 1,238,621 |   |
| Impairment of long-lived assets                                                           |   |             |       |   |               |   |       |         |   |   | -        |   |   |                                                       | -          |   |   |   | 7,717,000 |   |
| Other adjustments                                                                         |   |             |       |   |               |   |       |         |   |   | 37,498   |   |   |                                                       | (14,092    | ) |   |   | 23,406 |   |
| Changes in assets and liabilities, net of acquisition                                     |   |             |       |   |               |   |       |         |   |   | 826,317  |   |   |                                                       | 699,005    |   |   |   | (3,826,946 | ) |
|                                                                                      |   |             |       |   |               |   |       |         |   |   | -        |   |   |                                                       | -          |   |   |   | - |   |
| Net cash used in discontinued operating activities                                        |   |             |       |   |               |   |       |         |   |   | (64,534  | )      |   |                                                       | (815,408   | ) |   |   | (3,365,774 | ) |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Net cash flows from discontinued investing activities                                     |   |             |       |   |               |   |       |         |   |   | (42,519  | )      |   |                                                       | 6,356      |   |   |   | 1,483,736 |   |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Cash flows from financing activities –                                              |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Borrowings from long-term borrowings                                                      |   |             |       |   |               |   |       |         |   |   | 400,000  |   |   |                                                       | 780,000    |   |   |   | 2,207,303 |   |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Net change in cash                                                                        |   |             |       |   |               |   |       |         |   |   | 292,947  |   |   |                                                       | (29,052    | ) |   |   | 325,265 |   |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Cash at beginning of period                                                               |   |             |       |   |               |   |       |         |   |   | 91,299   |   |   |                                                       | 42,062     |   |   |   | 58,981 |   |
|                                                                                      |   |             |       |   |               |   |       |         |   |   |     |   |   |                                                       |       |   |   |   |   |   |
| Cash at end of period                                                                     |   |             |       |   |               |   |       |         |   | $      | 384,246  |   |   | $                                                          | 13,010     |   |   | $ | 384,246 |   |

----

| 1. | Summary of significant accounting policies |
|----|--------------------------------------------|

----

| 2. | Operations |
|----|------------|

----

| 3.  | Contingencies and litigation |
|----------|------------------------------|

----

| 4. | Preferred stock |
|----|-----------------|

| 5. | Common stock |
|----|--------------|

| 6. | Subsequent event |
|----|------------------|

----

| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

----

|                                |   | Three months ended December 31: |    |
|-------------------------------------|--------|---------------------------------|---------|
|                                |   | 2007                            |    |   | 2006 |   |   | Decrease |   |   | % |   |
| General and administrative expenses |   |                            | 222,066 |   |   |   | 751,376 |   |   |   | 529,310 |   |   |   | (70.5%) |   |

|                                |   | Six months ended December 31: |    |
|-------------------------------------|--------|-------------------------------|---------|
|                                |   | 2007                          |    |   | 2006 |   |   | Decrease |   |   | % |   |
| General and administrative expenses |   |                          | 979,869 |   |   |   | 1,498,693 |   |   |   | 518,824 |   |   |   | (34.6%) |   |

|   |   | December 31,2007 |   |   | June 30,2007 |   |   | Decrease |   |   | %      |   |
|--------|--------|------------------|--------|--------|--------------|--------|--------|----------|--------|--------|--------|--------|
| Cash   |   |             | 40,059 |   |         |   | 91,299 |     |   |   | 51,240 |   |   |   | (56.1%) |   |

|             |   | December 31,2007 |    |   | June 30,2007 |   |    | Decrease |   |   | %       |   |
|------------------|--------|------------------|---------|--------|--------------|--------|---------|----------|--------|--------|---------|--------|
| Accounts payable |   |             | 585,830 |   |         |   | 724,044 |     |   |   | 138,214 |   |   |   | (19.1%) |   |

|                  |   | December 31,2007 |      |   | June 30,2007 |   |      | Decrease |   |   | %       |   |
|-----------------------|--------|------------------|-----------|--------|--------------|--------|-----------|----------|--------|--------|---------|--------|
| Long-term obligations |   |             | 3,963,712 |   |         |   | 3,547,138 |     |   |   | 416,574 |   |   |   | (11.7%) |   |

----

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

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

| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------|-------------------------------------------------------------|

----

| ITEM 5.  | OTHER EVENTS |
|---------------|--------------|

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

| ExhibitNumber |   | Description of Document                |
|---------------|--------|----------------------------------------|
|          |   |                                   |
| 3.1           |   | Articles of Incorporation as Amended * |
| 3.2           |   | By laws *                              |
| 31            |   | Rule 13a-14(a)/15d-14(a) Certification |
| 32            |   | Section 1350 Certification             |
|          |   |                                   |
| *             |   |

----

|             | ENCOMPASS HOLDINGS, INC. |                    |
|------------------|--------------------------|-------------------------|
|             |                     |                    |   |
| January 20, 2010 | By:                      | /s/ J. SCOTT WEBBER     |   |
|             |                     | J. Scott Webber         |   |
|             |                     | Chief Executive Officer |   |