SES SOLAR INC. - FORM 10-Q - November 22, 2010

Attached files

file	filename
EX-32.2 - SES SOLAR INC.	v203695_ex32-2.htm
EX-10.1 - SES SOLAR INC.	v203695_ex10-1.htm
EX-31.2 - SES SOLAR INC.	v203695_ex31-2.htm
EX-31.1 - SES SOLAR INC.	v203695_ex31-1.htm
EX-32.1 - SES SOLAR INC.	v203695_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

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

FOR THE TRANSITION PERIOD FROM _______ to _______

COMMISSION FILE NUMBER 000-21571

SES SOLAR INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware		33-0860242
(STATE OR OTHER JURISDICTION OF		(IRS EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NUMBER)

36, chemin du Champ-des-Filles, 1228 Plan-les-Ouates, Geneva, Switzerland

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

+41-22-884-1484

(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company þ

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

The number of shares outstanding of each of the issuer's classes of stock as of November 22, 2010 is 72,984,168 shares of common stock, par value $.001 per share.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	21
ITEM 4T.	CONTROLS AND PROCEDURES	21
PART II	OTHER INFORMATION	21
ITEM 2.	UNREGUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	21
ITEM 6.	EXHIBITS	22

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SES SOLAR INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in $, except per share amounts)

	September 30, 2010 (unaudited)			December 31st 2009
ASSETS (in $)
Current Assets:
Cash and cash equivalents		150,707			311,372
Receivables, net of allowance for doubtful accounts of $ 0 at September 30, 2010 and December 31, 2009.		133,844			12,205
Due from related party		97,955			92,112
Inventory		494,171			457,570
Work in progress		0			3,131,865
Other current assets		18,248,239			303,986
Total current assets		19,124,916			4,309,110

Long-Term Assets:
Advance payments for machinery		366,378			385,795
Advance payments for certification		113,432			113,432
Total other long-term assets		479,810			499,227
Property, Plant and Equipment, at cost,		687,171			646,177
Building construction		0			18,429,669
Less accumulated depreciation and amortization		(550,973	)		(484,026	)
Total fixed assets		136,198			18,591,820
Total long-term assets		616,008			19,091,047

Total Assets		19,740,924			23,400,157

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term loan		154,822			3,234,172
Construction loan		9,063,010			13,111,439
Accounts payable		3,192,831			3,452,094
Billings in excess of cost and estimated earnings		0			571,466
Total current liabilities		12,410,663			20,369,171
Long-Term Liabilities:
Loan payable		132,107			218,559
Deferred gain on sales of building		4,155,418
Construction loan		0			862,407
Total long-term liabilities		4,287,525			1,080,966
Stockholders’ Equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 73,081,168 shares issued and 72,984,168 outstanding (73,081,168 shares issued and 72,984,168 outstanding as of December 31, 2009)		73,081			73,081
Additional paid in Capital		8,050,093			8,050,093
Accumulated other comprehensive loss
Translation Adjustment		(503,334	)		(689,618	)
Year end Accumulated Deficit		(4,553,547	)		(5,459,979	)
Less: Cost of common stock in treasury, 97,000 shares		(23,557	)		(23,557	)
Total stockholders’ equity		3,042,736			1,950,020

Total Liabilities and Stockholders’ Equity		19,740,924			23,400,157

See accompanying summary of accounting policies and the notes to the financial statements.

SES SOLAR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in $, except per share amounts)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2010 (unaudited)			2009 (unaudited)			2010 (unaudited)			2009 (unaudited)
Revenue:
Revenue		4,100,515			38,046			5,477,267			1,299,316
Cost of goods sold (exclusive of depreciation shown separately below)		(3,167,882	)		(17,560	)		(3,880,728	)		(882,735	)
Costs and Expenses:
Personnel		122,619			158,285			402,916			467,152
Rent and Leases Expenses		51,545			26,629			127,853			99,989
Research & Development		60,102			63,866			179,721			188,343
Other General & Administrative Expenses		100,196			157,860			249,197			463,970

Gain on sale of assets, net		0			(25,330	)		0			(25,330	)
Depreciation and amortization		10,812			9,998			33,235			55,366
Total costs and expenses		345,274			391,308			992,922			1,249,490
Other Income and Expense:
Interest expense		(20,885	)		(9,979	)		(46,023	)		(27,577	)
Other gain		652			0			25,324			0

Foreign exchange gain		578,987			260,002			323,514			96,923
Total other income and expenses		558,754			250,023			302,815			69,346

Income (loss) before taxes		1,146,113			(120,799	)		906,432			(763,563	)
Income taxes		0			0			0			0
Net income (loss)		1,146,113			(120,799	)		906,432			(763,563	)
Other Comprehensive income (loss):
Translation adjustment		64,040			(146,600	)		186,284			(85,747	)
Comprehensive income (loss)		1,210,153			(267,399	)		1,092,716			(849,310	)
Basic and diluted weighted average shares		72,984,168			72,984,929			72,984,168			73,024,095
Basic and diluted net income (loss) per share		0.017			(0.002	)		0.015			(0.010	)

See accompanying summary of accounting policies and the notes to the financial statements.

SES SOLAR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in $, except per share amounts)

	Nine Months Ended September 30,
	2010			2009
	(unaudited)			(unaudited)
Cash Flows from Operating Activities:
Net income (loss)		906,432			(763,563	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		33,235			55,366
Gain on sale of assets					(25,330	)
Gain on sale of building					0
Changes in operating assets and liabilities:

(Increase) decrease in:
Receivables, including Due from Related Party		(110,844	)		(36,652	)
Inventory		(71,593	)		1,161,046
Other current assets		137,973			231,157
Increase (decrease) in:
Accounts payable and accrued expenses		569,041			24,893
Work in progress/billings in excess of cost and estimated earnings		1,335,100			(1,116,186	)
Net cash used in (provided by) operating activities		2,799,344			(469,269	)

Cash Flows from Investing Activities:
Property, plants and equipment		6,104,418			(2,561,557	)
Advance payments for machinery/certification		0			(121,283	)
Net cash provided by (used in) investing activities		6,104,418			(2,682,840	)
Cash Flows from Financing Activities:
Treasury shares		0			(23,444	)
Proceed from loans		0			2,977,212
Repayment of loans		(8,710,150	)		(7,194	)
Net cash provided by (used in) financing activities		(8,710,150	)		2,946,574

Increase (decrease) in cash and cash equivalents		193,612			(205,535	)
Effect of exchange rate changes on cash		(354,277	)		(164,132	)
Cash and cash equivalents, beginning of the period		311,372			765,694
Cash and cash equivalents, end of the period		150,707			396,027
Supplemental cash flow information
Cash paid for interest		46,023			27,577
Supplemental disclosure of non-cash operating and investing activities
Non cash transaction, Property, plants and equipment in account payable		2,048,000			694,478
Non cash transactions with the sale of the building
Repayment of loans		6,912,667
Removal of carrying value of building		19,334,081
Remaining purchase price due from trustee		16,576,833

See accompanying summary of accounting policies and the notes to the financial statements.

SES SOLAR INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Nature of Operations

Organization - SES SOLAR INC. (the “Company,” “SES USA,” “our,” “we” and “us”) is the result of a reverse acquisition accomplished on September 27, 2006 between SES USA, a Delaware company, which had no operations and net assets of $39,069, and Société d’Energie Solaire SA (“SES Switzerland”), a Swiss company. SES USA acquired all of the outstanding shares of SES Switzerland. For accounting purposes, the acquisition has been treated as a recapitalization of SES Switzerland with SES Switzerland as the acquirer (reverse acquisition). SES Switzerland acquired 10,668,000 shares of SES USA in the transaction. The historical financial statements prior to September 27, 2006 are those of SES Switzerland. The reverse acquisition resulted in a change of control of SES USA, with the former stockholders of SES Switzerland owning approximately 70% of SES USA and SES Switzerland becoming a wholly owned subsidiary of SES USA.

SES Switzerland was formed in 2001 for the purpose of researching, developing, manufacturing and selling innovative products to the solar photovoltaic market. From its inception, SES Switzerland has focused primarily on manufacturing and installing silicon photovoltaic solar cell panels. The principal source of revenue for the Company has been the sale of photovoltaic panels in turn-key installations, manufactured in-house or purchased from subcontractors, to electric utilities, local government agencies and private households.

In 2008, the Company formed a second Swiss wholly owned subsidiary, SES Prod SA (“SES Prod”), which is also located in Geneva. It is expected that in the future, all of the Company’s manufacturing activities now being conducted by SES Switzerland will be conducted by SES Prod.

2. Plan of Operations

The Company has experienced losses from operations and anticipates incurring losses in the near future. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Cash flow from operations was positive for $2,799,344, working capital was $6,714,253 as of September 30, 2010 due to the favorable short term movement as a result of the sale of the Manufacturing Facility. Despite the positive quarter results, there is substantial doubt about the Company’s ability to continue as a going concern without exceptional items. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On September 30, 2010, the Company, indirectly through SES Switzerland, a wholly-owned subsidiary, entered into an agreement with Loc-Invest SA, an unrelated party (the “Purchaser”), to sell the Company’s manufacturing facility in Plan-les-Ouates (the “Manufacturing Facility”), which the Company began constructing in the second half of 2007 and four related mortgage notes, for an aggregate purchase price of CHF 25,000,000 ($23,489,500) (the “Purchase Price”). Certain debts relating to the property will be deducted from the Purchase Price, including CHF 140,544 ($ 149,582.40) for equipment taxes, CHF 18,016.35 ($ 19,175) for regional annuities, and CHF 7,357,187.48 ($ 7,830,328.20) for payments due on a loan from the Geneva (Switzerland) State Department of Energy. The Company received CHF 7,357,187 ($6,912,667) of the Purchase Price on September 30, 2010, and the balance of the Purchase Price was deposited into a notary account at Banque Cantonale de Genève to be released starting from October 1, 2010. Pursuant to the terms of the purchase and sale agreement, the notary will also keep CHF 500,000 ($512,258) on reserve for a period of six months after September 30, 2010 for the payment of any other debts in connection with the property that may arise (the”Reserves”). The Company used the portion of the Purchase Price it received on September 30 to repay certain of its existing indebtedness, and will use the balance of the Purchase Price when received to further reduce its existing indebtedness and for working capital purposes. As of the date of this report, the remaining balance of the Purchase Price, other than the deductions and the Reserves discussed above, has been released to the Company. The transaction has been approved by the Company’s board of directors. The closing of the transaction is subject to the satisfaction of various closing conditions as set forth in the purchase and sale agreement, including the expiration of the six month holding period for the Reserves.

The Company's ability to continue its operations. market and sell its products and services will depend on its ability to use free cash generated by the sale of the Manufacturing Facility to start effectively production and sale of photovoltaic modules. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, will increase expenses and may involve restrictive covenants. The Company will be required to raise additional capital on terms that are uncertain, especially in light of current capital market conditions. Under these circumstances, if the Company is unable to obtain additional capital or is required to raise it on undesirable terms, its financial condition could be adversely impacted

The Company’s cash and cash equivalents are $150,707 for the quarter ended September 30, 2010. Based on the Company’s business plan it needs additional funding from external sources of approximately $4 million to fund anticipated operating expenses.

These activities require that the Company design and manufacture prototype panels, have them approved in accordance with European and other standards, manufacture them in series and sell them in the primary markets for solar photovoltaic cells. Costs incurred in manufacturing prototype panels have been expensed as research and development costs.

The Company does not believe that it can achieve profitability until development, implementation, and commercialization of new products manufactured through the new assembling process are operational.

The Company has a significant amount of debt, and several loans that it has entered into have either matured or will soon be maturing. The loan with State Department of Energy Geneva (Switzerland) (“ScanE”), dated November 3, 2003, in the original amount of $911,810 matured on March 31, 2010 and was reimbursed on September 30, 2010. The loan with ScanE, dated July 1, 2009, in the amount of CHF5 million matured on July 7, 2010 and was reimbursed on September 30, 2010. Another loan with ScanE, dated January 21, 2004 in the original amount of CHF 1.0 million was reimbursed on September 30, 2010. A CHF8.5 million construction credit loan that the Company entered into with Banque Cantonale de Genève (“BCGE”), dated December 20, 2006, matured upon the completion or the sale of the Manufacturing Facility, this loan was reimbursed on October 1, 2010.

3. Basis of Presentation

The consolidated interim financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

These consolidated interim financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. These consolidated interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The Company adheres to the same accounting policies in the preparation of its interim financial statements. As permitted under generally accepted accounting principles (“GAAP”), interim accounting for certain expenses, including income taxes, are based on full year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.

4. Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, SES Switzerland and SES Prod. All significant inter-company accounts and transactions have been eliminated in the consolidation.

All amounts are presented in U.S. dollars ($) unless otherwise stated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may differ from such estimates.

Foreign Currency Translation - The reporting currency of SES USA is the U.S. dollar ($) whereas its wholly owned subsidiaries’ functional currency is the Swiss Franc (CHF). The financial statements of the wholly owned subsidiaries are translated to U.S. dollar equivalents under the current method in accordance with FASB ASC 830, “Foreign Currency Matters” (prior authoritative literature: SFAS No.52,“Foreign Currency Translation”). Assets and liabilities are translated into U.S. dollar equivalents at rates of exchange in effect at the balance sheet date. Average rates for the year are used to translate revenues and expenses. The cumulative translation adjustment is reported as a component of accumulated other comprehensive income (loss). Foreign currency differences from inter-company receivables and payables are recorded as Foreign Exchange Gains/Losses in the Statement of Operations.

The exchange rates used for translating the financial statements are listed below:

Average Rates	2010		2009
	CHF		CHF
$		1.06431		1,10498

	2010		2009
Balance Sheet period-end rates	CHF		CHF
$		0.97607		1.03799

Cash Equivalents —The Company considers all highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents.

Receivables and Credit Policies — The Company’s accounts receivables primarily consists of trade receivables. Management reviews accounts receivables on a monthly basis to determine if any receivables will potentially be uncollectible. The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable and unbilled receivables to their expected net realizable value. The Company estimates the amount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from estimates, due primarily to credit policies, collection experience and the Company’s stability as it relates to its current customer base. Receivables consist of revenues billed to customers upon achievement of contractual obligations. Based on the information available, the Company believes its allowance for doubtful accounts as of September 30, 2010 is adequate.

Product Inventory —Product inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method and includes certain charges directly and indirectly incurred in bringing product inventories to the point of sale. Inventory is accounted for at the lower of cost or market, and as a result, write-offs/write-downs occur due to damage, deterioration, obsolescence, changes in prices and other causes.

Property and Equipment —Property and equipment is stated at cost. Depreciation is computed using straight-line method over estimated useful lives of 3 to 20 years. Expenditures for maintenance and repairs, which do not materially extend the useful lives of property and equipment, are charged to operations as incurred. When property or equipment is retired or otherwise disposed of, the property accounts are relieved of costs and accumulated depreciation and any resulting gain or loss is recognized.

Long-Lived Assets —The Company accounts for long-lived assets in accordance with the provisions of FASB ASC 360, "Property, Plant and Equipment" (prior authoritative literature: SFAS No.144,“Accounting for the Impairment or Disposal of Long-lived Assets”). The statement requires the Company to evaluate its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, impairment may exist. To determine the amount of impairment, the Company compares the fair value of the asset to its carrying value. If the carrying value of the asset exceeds its fair value, an impairment loss equal to the difference is recognized.

Warranties —Since the Company’s commencement it has had no warranty claims. The Company’s production was low and components were purchased for photovoltaic installations, all of which have their own warranties. Since the Company has not yet started producing its own photovoltaic cells and warranty claims can be thus exercised against its suppliers, the Company does not believe that discussion of warranties is a critical accounting policy currently, but this may become so in the future.

Earnings (Loss) per Share - Earnings (Loss) per share is presented in accordance with the provisions of FASB ASC 260 (prior authoritative literature: SFAS No. 128, “Earnings Per Share”). Basic and diluted loss per share for the nine months ended September 30, 2010 does not include the effects of warrants and is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, commitments to issue common stock and common stock issuable upon exercise of warrants for periods in which the exercise price of the warrants is lower than the Company’s average share price for the period.

	Nine Months Ended September 30,
	2010		2009
Basic Weighted average shares outstanding		72,984,168		73,024,095
Diluted weighted average shares outstanding		72,984,168		73,024,095

Note : The Company issued warrants to purchase 1,500,000 shares potentially issuable upon exercise until November 22, 2010 at an exercise price of $0.90 per share. See Note 12 herein. As of the September 30, 2010 balance sheet date, the warrants were not yet exercised. Despite the Company’s net income for the three months ended September 30, 2010, the calculation of earnings per share excludes the effect of common stock equivalents due to the issuance of the warrants because the Company’s average share price for the period was lower than the exercise price of the warrants.

Revenue Recognition - The Company recognizes revenue in accordance with FASB ASC 605, "Revenue Recognition" (prior authoritative literature: SAB 104,“Revenue Recognition”), which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the seller's price to the buyer is fixed and determinable; and (4) collection is reasonably assured.

Revenues and profits from general management of construction-type contracts are recognized on the completed-contract method and therefore when the project is completed. A contract is considered complete when all costs except insignificant items have been incurred and the installation is operating according to specifications or has been accepted by the customer. Contract costs include all direct materials and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Costs in excess of amounts billed are classified as current assets under Work in Progress. Billings in excess of cost are classified under current liabilities as Billings in Excess of Cost and Estimated Earnings. Any anticipated losses on contracts are charged to operations as soon as they are determinable. No unbilled revenue has been recognized so far.

For the nine months ended September 30, 2010 and 2009, the Company had no billed or unbilled amount representing claims or other similar items subject to uncertainty concerning their determination or ultimate realization. Amounts outstanding as at quarter end are expected to be collected subsequent to September 30, 2010.

Research and Development Costs —Research and development costs are expensed as incurred. Research and development costs are not disclosed separately in the Notes to the Financial Statements, but are disclosed separately in the Income Statement.

Income Taxes —The Company follows FASB ASC 740, “Income Taxes” (prior authoritative literature: SFAS No. 109,“Accounting for Income Taxes”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense (benefit) is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. The Company’s tax basis for assets and liabilities is identical for the financial statements and tax reporting. Accordingly, the only deferred tax position is the benefit with respect to the net operating loss. The Company records a valuation allowance to reduce the deferred tax asset to the amount that is estimated to be more likely than not to be realized.

Comprehensive Income - The Company accounts for comprehensive income according to FASB ASC 220 “Comprehensive Income” (prior authoritative literature: SFAS No. 130,“Reporing Comprehensive Income”). Effective for fiscal years beginning after December 15, 1997, ASC 200 states that comprehensive income is net income, plus certain other items that are recorded directly to shareholders’ equity such as foreign currency translation adjustments and unrealized gains (losses) on marketable securities.

Capitalization of Interest - The Company capitalizes interest on projects that qualify for interest capitalization under FASB ASC 835-20 (prior authoritative literature: SFAS No. 34, "Capitalization of Interest Costs") as amended. Capitalized interest is included within construction in progress. For the period ended September 30, 2010 and 2009, the Company capitalized $0 and $467,563 of interest, respectively.

Fair Value of Financial Instruments —The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value because of the short-term maturities of these instruments. The fair value of the long-term debt is estimated based on anticipated interest rates which management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and the other market factors. The fair value approximates carrying value of the long-term debt.

Impact of Recently Issued Accounting Pronouncements

In June 2009, the FASB issued ASC 470 (prior authoritative literature: EITF Issue No. 09-1, “Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance” (“EITF 09-1”)), which clarifies that share lending arrangements that are executed in connection with convertible debt offerings or other financings should be considered debt issuance costs. This new standard is effective for us beginning on January 1, 2010. There was no impact from the adoption of this guidance on our consolidated financial position or results of operations.

In December 2009, the FASB issued ASC 810-10 regarding improvements to financial reporting by enterprises involved with variable interest entities. The new guidance provides an amendment to its consolidation guidance for variable interest entities and the definition of a variable interest entity and requires enhanced disclosures to provide more information about an enterprise’s involvement in a variable interest entity. This amendment also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity and is effective for us January 1, 2010. There was no impact from the adoption of this guidance on our consolidated financial position or results of operations.

In January 2010, the FASB issued amendment ASC 820 regarding improving disclosures about fair value measurements. This new guidance requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. There was no impact from the adoption of this guidance on our consolidated financial position or results of operations.

Recent Accounting Pronouncements Not Yet Effective

In October 2009, the FASB issued amendment ASC 605 to its accounting guidance on revenue arrangements with multiple deliverables. This new accounting guidance addresses the unit of accounting for arrangements involving multiple deliverables and how consideration should be allocated to separate units of accounting, when applicable. This guidance will be effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted. This guidance will not have a material impact on our consolidated financial position or results of operations.

In October 2009, the FASB issued amendment ASC 985 to its accounting guidance on certain revenue arrangements that include software elements. The new accounting guidance excludes from software revenue recognition all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality. This guidance will be effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted. This guidance must be adopted in the same period that the company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. This guidance will not have a material impact on our consolidated financial position or results of operations.

5. Inventory

Inventory is summarized as follows:

	September 30, 2010		December 31, 2009
	$		$
Raw Materials and Others		269,493		253,416
Finished Goods		224,678		204,154
Total Inventory		494,171		457,570

6. Property, Plant and Equipment

Property, plant and equipment is summarized as follows:

	September 30, 2010			December 31, 2009
	$			$
Machinery and equipment		576,986			542,565
Office furniture and equipment		94,422			88,789
Vehicles		15,763			14,823
Equipment		687,171			646,177
Building construction		0			18,429,669
Property and equipment		687,171			19,075,846
Less accumulated depreciation and amortization		(550,973	)		(484,026	)
Property, Plant and Equipment, net		136,198			18,591,820

The company has defined the following useful lives for fixed assets: Machinery and equipment: 8 years, Office furniture and equipment: 3 (IT equipment) to 5 years (office furniture), Vehicles: 4 years.

SES SOLAR INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Borrowings under Revolving Credit Facility, Short and Long-Term Loans

Short-Term Loans	September 30, 2010		December 31, 2009
	$		$
State Department of Energy Geneva (Switzerland)		0		68,640
Banque Cantonale de Genève (1)		9,063,010		8,225,799
Banque Cantonale de Genève		154,822		131,581
Banque Cantonale de Genève		0		2,168,604
State Department of Energy Geneva (Switzerland)		0		4,817,000
State Department of Energy Geneva (Switzerland)		0		933,987
		9,217,832		16,345,611

Long-Term Loans	September 30, 2010		December 31, 2009
	$		$
Banque Cantonale de Genève		132,107		218,559
State Department of Energy Geneva (Switzerland)		0		862,407
		132,107		1,080,966
Total loans		9,349,939		17,426,577

Year	Repayments
	$
2010		9,117,514
2011		134,401
2012		98,024
Total		9,349,939

(1) The loan totaling $9,063,010, relating to amounts used to finance construction of the Company’s Manufacturing Facility was reimbursed on October 1, 2010.

On July 22, 2009, the Company entered into a loan agreement with BCGE for CHF29,430 to finance production equipment. The loan has a duration of 36 months and is reimbursed in 36-equal monthly installments of CHF871, which amount includes principal and interest of 4.54%. The first installment was paid in August 2009, and as of September 30, 2010, the principal balance had been reduced to approximately $20,594, thereof $11,702 is reflected as short term loan.

On August 13, 2009, the Company entered into a loan agreement with BCGE for CHF245,557 to finance the certification of its SwissTile® product. The loan has a duration of 36 months and is reimbursed in 36-equal monthly installments of CHF7,188, which amount includes principal and interest of 3.8%. The first installment was paid in September 2009, and as of September 30, 2010, the principal balance had been reduced to approximately $178,046 thereof $97,295 is reflected as short term loan.

On September 15, 2009, the Company entered into a separate loan agreement with BCGE for CHF86,200 to finance certain production equipment. The loan has a duration of 36 months and is reimbursed in 36-equal monthly installments of CHF2,520, which amount includes principal and interest of 3.72%. The first installment was paid in October 2009, and as of September 30, 2010, the principal balance had been reduced to approximately $64,867, thereof $34,047 is reflected as short term loan.

On October 7, 2009, the Company entered into a loan agreement with BCGE for CHF29,947 to finance production equipment. The loan has a duration of 36 months and is reimbursed in 36-equal monthly installments of CHF885, which amount includes principal and interest of 4.48%. The first installment was paid in November 2009, and as of September 30, 2010, the principal balance had been reduced to approximately $23,421, thereof $11,778 is reflected as short term loan.

8. Work in Progress/Billings in Excess of Cost and Estimated Earnings

Work in Progress/Billings in Excess of Cost and Estimated Earnings	September 30, 2010		December 31, 2009
	$		$
Work in progress		0		3,131,865
Prepayments from customers		0		(571,466	)
		0		2,560,399

9. Commitments and Contingencies

Operating Leases - lease expenses for the nine months ended September 30, 2010 and 2009 were $67,376 and $99,989, respectively.

The following table presents future minimum lease commitments (concerning the lease of vehicles) under operating leases at September 30, 2010 :

	Operating Leases
2010		10,807
2011		43,482
2012		25,566
Total		79,855

In addition to the amounts disclosed above, SES Switzerland has an operating lease for its office located at 129 Route de Saint-Julien, Plan-les-Ouates, Switzerland (a suburb of Geneva). The rent is CHF54,084 per year. The lease will terminate on August 31, 2010.

SES Switzerland also leased a 1,654 square meter industrial facility in Härkingen, Switzerland. The lease was terminated on February 28, 2009. The global charge for the period January 1, 2009 to February 28, 2009 was CHF10,631 ($9,819).

SES Switzerland has no non-cancellable operating leases.

Employment Agreements —As at quarter end, SES Switzerland and SES Prod employed 3 employees and 1 executive officers. The terms of employment are supplemented by Swiss Commercial Law, which requires in case of termination of the contract, a minimum of one month’s notice the first year, 2 months’ paid notice the second year and 3 months’ paid notice of termination thereafter.

Flannel Management sarl has a consulting agreement with SES Switzerland effective October 1, 2006. Flannel Management sarl receives a monthly consulting fee of CHF20,000 ($18,792) (using exchange rate set forth in Note 4 to the Consolidated Financial Statements hereto). The contract is for a 10-year term and if earlier terminated, the Company nevertheless pays the consulting fees for the remainder of the term. One of Flannel Management sarl’s consultants is Philippe Crisafulli, the husband of Sandrine Crisafulli, Chief Financial Officer of SES USA and SES Switzerland.

Litigation —The Company is from time to time subject to routine litigation incidental to its business. There are no such litigation currently pending.

Capital Commitments - At September 30, 2010, the Company has an outstanding purchase order of EUR448,600 ($610,631) for the future construction of a new machine to be used in the new plant for solar module production. The Company has made an advance payment of EUR269,160 ($366,378) for the purchase of this machine. The balance due will be paid upon delivery of the machine.

10. Business Segments

As of September 30, 2010, all of the Company’s operations were conducted through its wholly owned subsidiaries, SES Switzerland and SES Prod, and were limited to the assembly and installation of PV panels in Switzerland.

11. Discontinued Operations

In 2010, there was no income or expense from discontinued operations (same thing in 2009).

12. Stockholders' Equity

Common Stock — The Company has 100,000,000 shares of common stock authorized, par value $0.001 per share, and 73,081,168 shares issued and 72,984,168 shares outstanding.

Treasury Stock - The Company purchased shares of its common stock, par value $0.001, in the open market. As of September 30, 2010, the Company held 97,000 shares in the amount of $23,557.

On November 22, 2006, the Company issued warrants to purchase 1,500,000 shares of common stock at an exercise price of $0.90 per share (the “Warrant Shares”). The warrants expire four (4) years after the date of issuance.

During the quarter ended September 30, 2010, no warrants were exercised.

In connection with the closing of the share exchange agreement with SES Switzerland and the stockholders thereof whereby the Company agreed to acquire SES Switzerland, the Company entered into, among other agreements, the Long Term Escrow Agreement, dated September 1, 2006, with Christiane Erné, Jean-Christophe Hadorn (our former CEO and director), and Claudia Rey. Pursuant to the terms of the Long Term Escrow Agreement, the Company agreed to escrow 10,000,000 shares of common stock issued to Ms. Erné (9,000,000 shares), Mr. Hadorn (500,000 shares) and Ms. Rey (500,000 shares) in order to secure partial repayment of its loan dated November 3, 2003 with ScanE, which shares remain in escrow under the Long Term Escrow Agreement, and which are included in earnings per share. The Company has entirely paid its loans from the Geneva (Switzerland) State Department of Energy (“ScanE”) as of September 30, 2010, as a result this guarantee will be cancelled before year end.

13. Subsequent Events

The Company evaluates events and transactions that occur after the balance sheet date as potential subsequent events. This evaluation was performed through the date on which the Company’s financial statements were issued.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated audited financial statements and related notes accompanying this Annual Report on Form 10-K. As used herein, the terms “company,” “SES USA,” “our,” “we,” and “us” refer to SES Solar Inc. and its subsidiaries on a consolidated basis, and the terms “SES Switzerland” and “SES Prod” refer to our wholly owned subsidiaries, unless the context requires otherwise.

We are a Delaware corporation based in Geneva, Switzerland engaged in the business of designing, engineering, producing and installing solar modules and solar tiles for generating electricity. We have developed a new assembly technology for solar tiles that allows for higher quality electrical contacts, better performance and reduced costs resulting from our proprietary automation processes. To date, while we have been engaged in developing and testing our new solar panel assembly technology, we have been developing the sales and distribution portions of our business by selling solar tiles manufactured and produced by us and third parties and by responding to quotations for our solar tiles to electric companies, local governmental agencies and private home owners.

Our business was commenced in 2001 by SES Société d’Energie Solaire SA (“SES Switzerland”), a Swiss-based developer of solar panels and solar roof tiles. On September 27, 2006, our parent company, SES USA, completed a share exchange agreement with SES Switzerland in which SES Switzerland became our wholly owned subsidiary. We then abandoned our previous Internet based auction website business and the SES Switzerland business of designing, engineering, producing, and installing solar panels or modules and solar tiles became the sole business of the combined company. In July 2008, we formed a second wholly owned subsidiary, SES Prod, to conduct our manufacturing operations. Because SES USA and its subsidiaries on a consolidated basis are the successor business to SES Switzerland, and because the operations and assets of SES Switzerland and SES Prod represent our entire business and operations from the closing date of the share exchange agreement, the following discussion and analysis is based on SES Switzerland’s and SES Prod’s financial results for the relevant periods.

Overview

This overview addresses our plan of operation and the trends, events, and uncertainties that have been identified by our management as those that we believe are reasonably likely to materially affect the comparison of historical operating results reported herein to either past period results or to future operating results.

We have developed and patented a new assembly technology for solar modules and solar tiles. Our business plan includes the completion of a new assembly line based on our proprietary technology to produce solar modules and solar tiles at a lower cost. We believe this new facility will enable us to produce solar photovoltaic (“PV”) modules that are larger than three square meters.

To implement our business plan, we will need to complete the design of the solar modules and solar tiles, manufacture and test the prototype panels, have them approved in accordance with European and other standards, manufacture them in series and sell them in major markets in Europe and eventually other countries around the world. Our initial plan to commence full scale production and sale of our new products between the second and the third quarters of 2010 is delayed of a few months due to additional testing of the production process. Once our manufacturing capabilities are fully operational, we will have available a product line consisting of our SunTechTile® and SwissTile® solar tiles and, in the future, PV solar modules

Historically, we have relied upon third-party vendors to supply us with component parts, such as PV cells, in order to manufacture and produce our products. While we work to bring our fully automated production lines into operation, we have reconfigured our production capabilities to manufacture our solar products on a manual and semi-manual production basis and in partnership with subcontractors.

To date, we have generated only limited revenue from the sale of solar modules and solar tiles manufactured by us and third parties and the related engineering services required to design and install the same.

Once our manufacturing capabilities are fully operational, we will have available a product line consisting of our SunTechTile® and SwissTile® solar tiles and, in the future, PV solar modules. Historically, we have relied upon third-party vendors to supply us with component parts, such as PV cells, in order to manufacture and produce our products.

We have experienced operating losses from our early stage operations, which have involved developing and testing our new solar panel technology and commencement of the sales and distribution portions of our business by selling custom solar modules and solar tiles using an early stage technology. We anticipate incurring additional operating losses over the next few years as we complete the development, testing, prototypes and licensing of our new products and commence production. Our research and development costs and the costs incurred in manufacturing prototypes have been expensed to date. We do not believe that we can achieve profitability until development, implementation and commercialization of our solar products manufactured through our new assembling processes are operational.

We believe the demand for solar modules and solar tiles will ultimately be substantial. According to the Energy Information Administration, global demand for electricity is expected to increase from 18 trillion kilowatt hours in 2006 to 32 trillion kilowatt hours in 2030. Over time, supply constraints, rising electricity prices, dependence on foreign countries for fuel feedstock and environmental concerns could limit the ability of many conventional sources of electricity and other alternative sources to supply this rapidly expanding global demand. According to the U.S. Department of Energy, solar energy is the only source of renewable power with a large enough resource base to supply a significant percentage of the world’s electricity needs over the next several decades.

However, in the near term there are significant competitive concerns with solar energy. As the cost of producing electricity from grid connected PV installations is higher than the current cost of electricity from fossil or nuclear plants, the PV market relies heavily on government subsidies and regulation concerning independent power producers. These regulations favor PV electricity in some, but not all, countries. Existing regulations are subject to change due to local political factors affecting the energy market, especially in Europe, where the process has been ongoing for 10 years. The major PV market in Europe is Germany, where the EEG law governs. We expect France will play an increasing role in the future due to current law. Other countries, including Italy, Spain and Greece, have similar but less favorable laws. The PV market is heavily dependent on public policies and, as a result, such policies present the greatest uncertainties for our products. Reductions of the feed-in tariff in Germany by 8% per year could affect our sales. Spain decreased its subsidies by 75% during 2008. Without continued and/or enhanced governmental support in the form of favorable laws and subsidies, the projected growth of the PV market will not exist, which could hurt our results of operations.

Our primary market for our SwissTile® product is Switzerland, which enacted a feed-in tariff that became effective May 2008. This tariff has 10 different values depending on PV integration and size. Due to the properties of our SwissTile® product, we believe that it will receive the highest value, which will be favorable for us.

Due to overwhelming demand, final subsidy decisions by the relevant Swiss grid authority regarding remuneration for electricity generated by solar power installations have been delayed. As a result of this delay, many of our prospective and potential solar power production customers have postponed new solar power installations as they await determination by the Swiss grid authority whether their respective installations will qualify for remuneration. The tariff will decrease for new entrants by 8% every year starting in 2010.

Despite the significant growth of the PV market over the past several years, solar electricity still represents only a small fraction of the supply of electricity. So long as governments and the market are focused on the ability of manufacturers to develop new technologies that reduce the cost of solar electricity, we believe that the demand for solar energy products will continue to grow significantly. This growth projection is based on continued governmental support, on the success of such manufacturing efforts to reduce the gap between the cost of solar electricity and more conventional and established methods of generating electricity, and on other developments affecting the world energy markets. In addition to the uncertainties associated with government subsidies and these other factors, it is also possible that breakthrough technologies might emerge in other areas that will reduce demand for new solar energy products. Furthermore, even within the solar energy sector, it is possible that developments in thin films or nanoscience could reduce the cost of PV cells or that future shortages in the supply of polysilicon, an essential raw material in the production of our PV cells, could impact our proposed new products and adversely affect our plan of operation.

We are in ongoing discussions with strategic partners, including cell manufacturers, PV line manufacturers and special machine manufacturers to assist us with our new technology for module assembly.

During the three month period ended September 30, 2010, we incurred capital expenditures of $676,003 to construct the Manufacturing Facility that was sold on September 30, 2010 as discussed above. We also continued sales of our custom solar panels and solar tiles to customers during the three month period ended September, 2010, generating revenue of $4,100,515 and a net income of $1,146,113

Based on current and planned custom installation projects that will be completed during fiscal year 2010, we believe that our cash flows used in operating activities for the remainder of fiscal year 2010 will be greater than our cash flows used in operating activities during 2009. In light of these operating activities, we believe that our operating expenses in fiscal year 2010 will be approximately $2 million, which we anticipate financing through revenue generated from operating income, available cash from proceeds of the sale of the Manufacturing Facility and credit facilities. Management anticipates $2 million for the assembly lines and related machinery, of which we have already financed $366,378. Depending on our production requirements, we may also require up to an additional $11 million during the next 12 months to finance the purchase of raw materials to be used in the production of 2MW of solar tiles. We anticipate financing the remaining capital expenditures on the assembly lines using available cash, loans and lines of credit.

We expect to continue to experience losses from operations until we can generate significant revenue from manufacturing our new products. As a result of our continuing need to expand our operations and develop and market our new products, we expect to continue to need additional capital over the long-term in order to continue as a going concern. See “Liquidity and Capital Resources.”

Selected Financial Data

Balance Sheets	September 30, 2010		December 31, 2009
	(unaudited)		(audited)
	in $
Total current assets		19,124,916		4,309,110
Total long-term assets		616,008		19,091,047
Total current liabilities		12,410,663		20,369,171
Total long-term liabilities		4,287,525		1,080,966
Total liabilities and stockholders' equity		19,740,924		23,400,157

Statement of Operations (unaudited)

	For the three months ended September 30,
	2010			2009
	in $
Revenues		4,100,515			38,046
Total cost of goods sold (exclusive of depreciation, shown separately below)		(3,167,882	)		(17,560	)
Personnel		(122,619	)		(158,285	)
Rent and lease expenses		(51,545	)		(26,629	)
Research and development		(60,102	)		(63,866	)
Depreciation and amortization		(10,812	)		(9,998	)
Gain on sale of assets		0			25,330
General and administrative expenses		(100,196	)		(157,860	)
Interest expense		(20,885	)		(9,979	)
Other gain		652			0
Foreign exchange gain (loss)		578,987			260,002
Income (Loss) before taxes		1,146,113			(120,799	)
Income Taxes		(0	)		(0	)
Net income (loss)		1,146,113			(120,799	)
Other comprehensive income (loss): translation adjustment		64,040			(146,600	)
Comprehensive income (loss)		1,210,253			(267,399	)

RESULTS OF OPERATIONS - COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

Net Income

Our net income for the three months ended September 30, 2010 was $1,146113 compared to a net loss of $120,799 for the three months ended September 30, 2009. The change to net income for the three months ended September 30, 2010 from a net loss for the three months ended September 30, 2009 is mainly attributable to a reduction of the operating expenses.

The gain on the sale of the building of $4,155,419 has not been recognized but instead been deferred as the basic conditions for recognition per ASC 840-40-25 were not met.

Revenue and Cost of Goods Sold

We recognize revenue on the completed-contract method, and therefore when projects are completed. During the three months ended September 30, 2010, we completed several projects and generated total revenue of $4,100,515 compared to $38,046 for the three months ended September 30, 2009. Cost of goods sold for the three months ended September 30, 2010 was $3,167,882 compared to cost of goods sold of $17,560 for the three months ended September 30, 2009.

Operating Expenses

Operating expenses for the three months ended September 30, 2010 were $345,274 compared to $391,308 for three months ended September 30, 2009, which represents a 12% decrease. Personnel, rent, research and development, general and administrative, and depreciation and amortization expenses constitute the components of our operating expenses. We expect that as we continue to implement our business plan these expenses will increase accordingly.

The majority of the decrease resulted from reduced general and administrative expenses (decrease of $57,664), personnel expenses (decrease of $35,666) partly compensated by an increase of rent and lease expenses of $ 24,916 and an exceptional gain on sale of assets for $25,330 in the preceding period.

Other Income (Expense)

Interest expense increased to $20,885 for the three months ended September 30, 2010 compared to $9,979 for the three months ended September 30, 2009. For the three months ended September 30, 2010, we have incurred interest expense of $2,515 in connection with financing of the production equipment and $15,451 in connection with reimbursement of Geneva (Switzerland) State Department of Energy (“ScanE”)’s loan from November 3, 2003.

Foreign exchange profit for the three months ended September 30, 2010 was $578,987 compared to a foreign exchange profit of $260,002 for the three months ended September 30, 2009. We conduct our business and incur substantially all of our costs in Swiss francs (CHF). The favorable result of foreign exchange is due primarily to the decrease of the Swiss Franc against US dollar which is the company’s reporting currency. See Note 4 to the accompanying financial statements.

Statement of Operations (unaudited)	For the Nine Months Ended September 30,
	2010			2009
	in $
Total revenues		5,477,267			1,299,316
Total cost of goods sold (exclusive of depreciation shown separately below)		(3,880,728	)		(882,735	)
Personnel		(402,916	)		(467,152	)
Rent and lease expenses		(127,853	)		(99,989	)
Research and development		(179,721	)		(188,343	)
Depreciation and amortization		(33,235	)		(55,366	)
Gain on sale of assets		0			25,330
General and administrative expenses		(249,197	)		(463,970	)
Interest expense		(46,023	)		(27,577	)
Other gain		25,324			0
Foreign exchange gain (loss)		323,514			96,923
Income (loss) before taxes		906,432			(763,563)
Taxes		0			0
Net income (loss)		906,432			(763,563)
Other comprehensive income (loss): translation adjustment		186,284			(85,747	)
Comprehensive income (loss)		1,092,716			(849,310	)

RESULTS OF OPERATIONS - COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

Net Income

Our net income for the nine months ended September 30, 2010 was $906,432 compared to a net loss of $763,563 for the nine months ended September 30, 2009. Our net income for the nine months ended September, 2010 compared to 2009 is mainly attributable to a reduction of the operating expenses.

Revenues and Cost of Goods Sold

We recognize revenue on the completed-contract method, and therefore when projects are completed. During the nine months ended September 30, 2010, we completed several projects and generated total revenue of $5,477,267 compared to $1,299,316 for the nine months ended September 30, 2009.

Cost of goods sold for the nine months ended September 30, 2010 was $3,880,728 compared to cost of goods sold of $882,735 for the nine months ended September 30, 2009. The decrease in cost of good sold for the nine months ended September 30, 2010 is entirely attributable to the projects completed during the period.

Operating Expenses

Operating expenses for the nine months ended September 30, 2010 were $992,922 compared to $1,249,490 for the nine months ended September 30, 2009, which represents a 21% decrease. Personnel, rent, research and development, general and administrative expenses, and depreciation and amortization expenses constitute the components of our operating expenses.

The majority of the decrease resulted from reduced general and administrative expenses (decrease of $214,773), personnel costs to develop the activities of our new subsidiary (decrease of $64,236) and a decrease of $22,131 in depreciation and amortization expense.

We expect that as we continue to implement our business plan these expenses will increase accordingly.

Other Income (Expense)

Interest expense increased to $46,023 for the nine months ended September 30, 2010 compared to $27,577 for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, we have incurred interest expense of $8,390 in connection with financing of the production equipment and $34,556 in connection with reimbursement of Geneva (Switzerland) State Department of Energy (“ScanE”)’s loan from November 3, 2003 .

Foreign exchange profit for the nine months ended September 30, 2010 was $323,514 compared to a foreign exchange profit of $96,923 for the nine months ended September 30, 2009. Our wholly owned subsidiaries conduct substantially all of their business and incur substantially all of their costs in Swiss francs. The favorable result of foreign exchange is due primarily to the decrease of the Swiss Franc against US dollar which is the company’s reporting currency. See Note 4 to the accompanying financial statements.

Liquidity and Capital Resources

Our principal cash requirements are for operating expenses, including research and development, personnel, consulting, accounting, and legal costs.

As of September 30, 2010, we had positive working capital of $6,714,253 compared with negative working capital of $16,060,061 as of December 31, 2009, and our cash and cash equivalents decreased to $150,707 as of September 30, 2010 compared to $311,372 as of December 31, 2009. Positive working capital was mainly achieved through the sale of the Manufacturing Facility on September 30, 2010.

As of September 30, 2010, we had accounts payable of $3,192,831 compared to $3,452,094 as of December 31, 2009. This balance is primarily composed of creditors for construction costs related to our sold Manufacturing Facility ($2,162,650) and suppliers liabilities for $104,660 and sundry accruals for the remaining balance.

As September 30, 2010, we had short-term debt in the amount of $9,217,832 compared to $16,345,611 as of December 31, 2009. The decrease relates mainly to the reimbursement in March 9, 2010 of a loan amounting to $2,275,896 received from BCGE on September 18, 2009, and on September 30, 2010 of several loans amounting to $6,516,822 received from the Geneva (Switzerland) State Department of Energy (“ScanE”) on November 3, 2003, January 21, 2004 and October 27, 2008.

We currently have several loans outstanding with Banque Cantonale de Genève (“BCGE”).

BCGE Loans

Our wholly owned subsidiary, SES Switzerland, entered into a Construction Credit Agreement with BCGE, dated December 20, 2006, in the amount of CHF4.8 million to finance construction of the Manufacturing Facility. The loan was amended on November 13, 2007 and increased from CHF4.8 million to CHF8.5 million. As of September 30, 2010, the Company had used CHF8,846,104 ($9,063,010) of the loan. This loan was reimbursed on October 1, 2010.

On October 7, 2009, the Company entered into a loan agreement with BCGE for CHF29,947 to finance production equipment. The loan has a duration of 36 months and is reimbursed in 36-equal monthly installments of CHF885, which amount includes principal and interest of 4.48%. The first installment was paid in November 2009, and as of June 30, 2010, the principal balance had been reduced to approximately $23,421, thereof $11,778 is reflected as short term loan.

Our ability to meet our financial commitments in the near term will be primarily dependent upon revenue from the future sale of our manufactured solar modules and from the continued sale of our solar tiles and the related engineering services required to design and install the same.

Due to our current financial situation and history of losses, there is substantial doubt about our ability to continue as a going concern, as discussed in Note 2 to our financial statements for the quarter ended Septembre 30, 2010. If our future revenues do not increase significantly to a level sufficient to cover our net losses, we will continue to need to raise additional funds to expand our operations. In addition, we may need to raise funds sooner than anticipated to respond to competitive pressures, to develop new or enhanced products or services, to fund our expansion or to make acquisitions. We may not be able to find financing on acceptable terms or at all.

Operating Activities

Net cash provided by operating activities was $2,799,344 for the nine months ended September 30, 2010 compared to $(469,269) of net cash used in operating activities for the nine months ended September 30, 2009. Net amount between advances received from customers for related projects was $0 compared to $(367,992) for the same preceding period. .

Investing Activities

Net cash provided by investing activities was $6,104,418 during the nine months ended September 30, 2010 compared to $(2,682,840) during the nine months ended September 30, 2009.

Management anticipates total capital expenditures of approximately $2 million for the assembly lines and related machinery, of which we have already financed $366,378. In addition, and depending on our production requirements, we may require during the next 12 months up to an additional $11 million to finance the purchase of raw materials to be used in the production of 2 MWs of solar tiles.

Financing Activities

Net cash used in financing activities was $(8,710,150) for the nine months ended September 30, 2010 compared to $2,946,574 net cash provided by financing activities for the nine months ended September 30, 2009. During nine months ended September 30, 2010, the Company used $289,206 of such financing for interests on loans. In addition, we also used $78,343 to pay down certain loans relating to equipment production and certification. We also reimbursed a loan amounting to $2,275,896 received from BCGE on September 18, 2009 and loans amounting to $6,912,667 received from ScanE.

Non cash transactions

The Company, through a trustee, on September 30, 2010 has paid back several loans amounting to $6.912,667 received from the Geneva (Switzerland) State Department of Energy (“ScanE”) on November 3, 2003, January 21, 2004 and October 27, 2008. The remainder of the purchase price in the amount of $16,576,833 is a receivable due from the trustee.

Off-Balance Sheet Arrangements

We have no outstanding derivative financial instruments, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

At September 30, 2010, we had an outstanding purchase order of EUR448,600 ($610,631) for the future construction of a new machine to be used in the new plant for solar module production. We made an advance payment of EUR269,160 ($305,315) for the purchase of this machine. The balance due will be paid upon delivery of the machine.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to “smaller reporting companies” under Item 305(e) of Regulation S-K.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act, is accumulated and communicated to management, including the company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and which also are effective in ensuring that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

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

Treasury Stock - The Company holds 97,000 shares of its common stock. For the nine months ended September 30, 2010, there were no purchases or sales of treasury shares.

ITEM 6. EXHIBITS

Exhibits

10.1		Manufacturing Facility Purchase and Sale Agreement, dated September 30, 2010, by and between SES Société d’Energie Solaire SA and Loc-Invest SA.

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 22, 2010		SES SOLAR INC. (Registrant)

Dated: November 22, 2010	By:	/s/ SANDRINE CRISAFULLI
		Sandrine Crisafulli
		Chief Financial Officer and Chief Operating Officer
		(principal financial officer and principal accounting officer)

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