UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

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

For the transition period from ________________ to ________________

Commission file number 0-27549

SKYE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada	88-0362112
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

7701 E. Gray Rd, Suite 104 Scottsdale, AZ 85260

(Address of principal executive offices) (Zip Code)

(480) 993-2300

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~web site~~Website, 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). o x Yes o ~~No (Not~~ ~~required)~~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.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1516,~~317~~037,323 shares of Common Stock, $0.001 par value, as of ~~November~~ 13May 7, ~~2009~~2010.

	Index	Page Number
PART I	FINANCIAL INFORMATION	3
ITEM 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009	3
	Consolidated Statements of Operations for the three months and nine months ended September 30, 2009 and 2008 (unaudited)	4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited)	4
	Consolidated Statements of Stockholders' Deficit cumulative from December 31, 2007 to September 30, 2009 (unaudited)	5
	Condensed Consolidated Statements of Stockholders' Deficit cumulative from December 31, 2008 to March 31, 2010 (unaudited)	5
	Consolidated Statements of Cash Flows for nine months ended September 30, 2009 and 2008 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for three months ended March 31, 2010 and 2009 (unaudited)	6
	Notes to Financial Statements (unaudited)	7
	Notes to Condensed Financial Statements (unaudited)	7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1014
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	1518
ITEM 4T.	Controls and Procedures	1518
PART II	OTHER INFORMATION	1620
ITEM 1.	Legal Proceedings	1620
ITEM 1A.	Risk Factors	1620
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1620
ITEM 3.	Defaults Upon Senior Securities	1720
ITEM 4.	Submission of Matters to Vote of Security Holders	1720
ITEM 5.	Other Information	1720
ITEM 6.	Exhibits	1821
SIGNATURES		1822

PART I - FINANCIAL INFORMATION

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,			December 31,
	2010			2009
	(unaudited)
ASSETS

CURRENT ASSETS
Cash	$	376,147		$	333,593
Accounts Receivable		11,888			16,152
Inventory		723,642			723,617
Prepaid Expenses		20,827			12,948

Total Current Assets		1,132,504			1,086,310

EQUIPMENT, NET		56,445			56,252

OTHER ASSETS
Patents		9,916			10,089
Deferred Financing Costs		17,945			19,802

Total Other Assets		27,861			29,891

Total Assets	$	1,216,810		$	1,172,453

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts Payable	$	61,020		$	157,226
Accrued Expenses		7,844			2,039
Current portion, Long term debt		5,851			10,068
Accrued Interest Payable		67,260			8,101
Warranty Accrual		36,530			39,951

Total Current Liabilities		178,505			217,385

LONG-TERM LIABILITIES
Notes payable		2,986			2,986
Notes Payable - Related Parties		1,000,000			500,000

Total Liabilities		1,181,491			720,371

LIABILITIES SUBJECT TO COMPROMISE		2,417,903			2,421,926

STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: 25,000,000 shares
authorized at $0.001 par value;
Issued and outstanding 16,037,323 and
15,767,323 shares, respectively		16,037			15,767
Additional Paid in Capital		15,655,758			15,588,528
Accumulated Deficit		(18,054,379	)		(17,574,139	)

Total Stockholders' Equity (Deficit)		(2,382,584	)		(1,969,844	)

TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT)	$	1,216,810		$	1,172,453

Skye International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
	September 30,			December 31,
	2009			2008
				(Restated)
ASSETS
CURRENT ASSETS
Cash	$	7,486		$	37,822
Accounts Receivable, net		10,693			4,852
Inventory		684,971			443,978
Prepaid Expenses		51,924			91,671
Total Current Assets		755,074			578,323
EQUIPMENT, NET		62,340			77,638
OTHER ASSETS
Patents , net		10,263
Deposits		0			2,460
Total Other Assets		10,263			2,460
Total Assets	$	827,677		$	658,421
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable	$	486,716		$	312,189
Accrued Expenses		5,496			82,042
Notes Payable - Related Parties		253,000			413,000
Current portion, Long term debt		3,975			4,407
Accrued Interest Payable		260,603			134,414
Warranty Accrual		40,849			43,486
Total Current Liabilities		1,050,639			989,538
LONG-TERM LIABILITIES
Notes Payable		13,230			8,814
Notes Payable - Related Parties		418,800
Convertible Notes Payable, net - Related Parties		1,213,800			559,799
Total Liabilities		2,696,469			1,558,151
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: 25,000,000 shares
authorized at $0.001par value;
Issued and outstanding 15,317,323 and
13,927,915 shares, respectively		15,317			13,928
Common Stock Subscribed		0			(24,000	)
Additional Paid in Capital		14,674,652			14,317,969
Accumulated Deficit		(16,558,761	)		(15,207,627	)
Total Stockholders' Equity (Deficit)		(1,868,792	)		(899,730	)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT)	$	827,677		$	658,421

The accompanying notes are an integral part of these statements.

Skye International, Inc. and Subsidiaries
SKYE INTERNATIONAL, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Unaudited
	Three Months Ended						Nine Months Ended ,
	Three Months Ended March 31,
	September 30						September 30
	2010			2009
	2009			2008			2009			2008
				(Restated)
REVENUES
Product Sales	$	2027,~~324~~801		$	644,~~142~~989		$	~~147,965~~		$	~~53,423~~
Other Income		~~826~~297			0-			~~2,020~~			58
Total Revenues		2128,~~150~~098			644,~~142~~989			~~149,985~~			~~53,481~~
Cost of Goods Sold		1622,~~536~~660			442,~~623~~451			~~128,278~~			~~39,623~~
Gross Profit		45,~~614~~438			12,~~519~~538			~~21,707~~			~~13,858~~
EXPENSES
Legal and Professional		~~109~~52,~~870~~837			~~156~~130,~~056~~515			~~382,812~~			~~239,170~~
General and Administrative		~~240~~227,~~144~~565			~~123~~763,~~794~~593			~~809,813~~			~~904,743~~
Research and Development		713,~~871~~833			186,~~811~~728			~~26,991~~			~~40,145~~
Advertising and Marketing		3017,~~647~~904			2147,~~209~~540			~~90,732~~			~~24,951~~
Depreciation		65,~~088~~441			36,~~231~~052			~~18,228~~			~~9,175~~
Total Expenses		~~394~~317,~~620~~580			~~323~~954,~~101~~428			~~1,328,576~~			~~1,218,184~~
Net (Loss) from Operations		(~~390~~312,~~006~~142	)		(~~321~~951,~~582~~890	)		~~(1,306,869~~	)		~~(1,204,326~~	)
OTHER INCOME AND (EXPENSE)
Gain on Extinguishment of Debt					10,000			75,000			1,833,954
Interest Income		87			-
Interest Expense		(38,467	)		(55,626	)		(119,265	)		(158,363	)
Reorganization Items		(53,225	)		-
Total Other Income (Expense)		(38,467	)		(45,626	)		(44,265	)		1,675,591
Interest Expense		(114,960	)		(47,486	)
Net Income (Loss) before Income Taxes		(428,473	)		(367,208	)		(1,351,134	)		471,265
Total Other Income (Expense)		(168,098	)		(47,486	)
Income Tax Expense		-			-						-
Net Income (Loss) before Income Taxes		(480,240	)		(999,376	)
NET INCOME (LOSS)	$	(428,473	)	$	(367,208	)	$	(1,351,134	)	$	471,265
Income Tax Expense		-			-
Basic and diluted earnings (loss) per common share	$	(0.03	)	$	(.03	)		(.09	)	$	0.05
NET INCOME (LOSS)	$	(480,240	)	$	(999,376	)
Weighted Average Number of Common
Basic and diluted income (loss) per common share	$	(0.03	)	$	(0.07	)
Shares Outstanding		14,466,320			11,728,872			14,932,074			10,272,523
Weighted Average Number of Common
Diluted Shares		14,466,320			11,728,872			14,932,074			10,272,523
Shares Outstanding		15,982,583			13,927,915

The accompanying notes are an integral part of these statements.

Skye International, Inc., and Subsidiaries
SKYE INTERNATIONAL, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(unaudited)
	Common Stock					Common Stock			Paid in		Accumulated			Total
	Shares			Amount		Subscribed			Capital		Deficit			Deficit
Balance December 31, 2007		7,481,813		$	7,482	$	108,675		$	11,152,910	$	(14,536,470	)	$	(3,267,403	)
Balance December 31, 2008 (Restated)		13,927,915		$	13,928		(24,000	)	$	14,317,969	$	(15,207,627	)		(899,730	)
Common stock issued for related party services		62217,~~500~~100			62217		-			4954,~~938~~058		-			5054,~~000~~275
Common stock issued for consulting services		1,~~204~~040,~~905~~000			1,~~205~~040		-			~~692~~258,~~590~~960		-			~~693~~260,~~795~~000
Common stock issued for cash		1360,~~672,656~~000			~~1,673~~360		(24,000	)		~~533~~91,~~577~~640		-			~~511~~116,~~250~~000
Common stock issued for related party debt		3,506,104			3,506		(108,675	)		1,167,465					1,062,296
Common stock issued for legal fees		23,188			23		-			18,527		-			18,550
Beneficial conversion feature - (Restated)										360,000					360,000
Common stock issued for financing costs		159,120			159		-			22,118		-			22,277
Fair Value Options Granted- (Restated)										361,489					361,489
Common stock issued for services		40,000			40		-			9,960		-			10,000
Fractional shares cancelled in reverse stock split		(63	)
Beneficial conversion feature		-			-		-			240,000		-			240,000
Net Loss- (Restated)												(671,157	)		(671,157	)
Fair Value Options Granted		-			-		-			575,296		-			575,296
Balance December 31, 2008- (Restated)		13,927,915			13,928		(24,000	)		14,317,969		(15,207,627	)		(899,730	)
Net Loss		-			-		-			-		(2,366,512	)		(2,366,512	)
Common stock issued for cash		360,000			360		24,000			91,640					116,000
Balance December 31, 2009		15,767,323		$	15,767		-		$	15,588,528	$	(17,574,139	)	$	(1,969,844	)
Common stock issued for consulting services		720,000			720					179,280					180,000
Common Stock issued for compensation		270,000			270		-			67,230		-			67,500
Common stock issued for financing		159,120			159					22,118					22,277
Net Loss		-			-		-			-		(480,240	)		(480,240	)
Common stock issued for related party services		127,100			127					31,648					31,775
Balance March 31, 2010 (Unaudited)		16,037,323		$	16,037	$	-		$	15,655,758	$	(18,054,379	)	$	(2,382,584	)
Common stock issued for legal services		23,188			23					18,527					18,550
Stock Options Granted										13,470					13,470
Net Loss												(1,351,134)			(1,351,134)
Balance September 30, 2009		15,317,323		$	15,317	$	0		$	14,674,652	$	(16,558,761	)	$	(1,868,792	)

The accompanying notes are an integral part of these statements.

Skye international, Inc. and Subsidiaries
SKYE INTERNATIONAL, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Unaudited
	Nine Months Ended September 30,
	Three Months Ended March 31,
	2009			2008
	2010			2009
				(Restated)
Operating Activities
Net Income (Loss)	$	(1480,~~351,134~~240	)	$	~~471~~(999,~~265~~376	)
Adjustments to reconcile Net Loss to Cash Used in Operating Activities
Adjustments to reconcile from net income (loss) to net cash (used) by operating activities:
Gain on Extinguishment of Debt		(75,000	)		(1,833,954	)
Depreciation Expense		5,441			6,052
Depreciation Expense		18,228			9,175
Amortization of discount on convertible debt		30,499			4,722
Shares and options issued for services rendered		243,797			570,368
Amortization of Patents		173			-
Amortization of Discount on Notes Payable		54,000			3,333
Amortization of Financing Costs		1,856			-
Financing Costs		22,277
Shares and Options issued for Services		67,500			571,167
Changes in assets and liabilities:
Inventory		(~~240,993~~25	)		(~~193~~97,~~112)~~896	)
Accounts Receivable		(54,~~842~~314	)		(221,~~001~~208	)
Prepaid Expense		39(7,~~747~~878	)		(~~154~~2,~~029~~176	)
Patents/Deposits		(2,341	)		-
Accrued Interest Payable		59,160			37,727
					-
Accounts Payable and Accrued Expenses		(128,395	)		(10,151	)
Accrued Interest Payable		126,188			87,336
Net Cash (Used) by Operating Activities		(447,595	)		(511,139	)
Accounts Payable and Accrued Expenses		101,140			606,731
Net Cash (Used) in Operating Activities		(1,069,933	)		(434,888	)
Investing Activities
Payment of Patents		(5,462	)		(11,662	)
Purchase of Assets		(5,634	)		(2,930	)
Purchase of Assets		(2,930	)		(41,779	)
Net Cash (Used) by Investing Activities		(5,634	)		(2,930	)
Net Cash (Used) in Investing Activities		(8,392	)		(53,441	)
Financing Activities
Proceeds from Common Stock		116,000			511,250
Stock Subscriptions		-			116,000
Repayment of Notes Payable		(174,~~862~~217	)		(~~394~~13,~~474~~780	)
Proceeds from Notes Payable		949,851			429,228
DIP Financing – Related Party		500,000			-
Net Cash Provided by Financing Activities		1,047,989			546,004
Proceeds from Notes Payable		-			375,000
Net Increase/(Decrease) in Cash		(30,336	)		57,675
Net Cash Provided by Financing Activities		495,783			477,220
Cash, Beginning of Period		37,822			35,331
Net Increase/(Decrease) in Cash		42,554			(36,849	)
Cash, End of Period	$	7,486		$	93,006
Cash, Beginning of Period		333,593			37,822
Cash, End of Period	$	376,147		$	973
Supplemental Information:
Cash Paid for:
Income Taxes	$	-		$	-
Interest Expense	$	08,748		$	649,~~270~~579
Non Cash Financing Activities:
Common Stock Issued for Debt	$	-		$	~~1,170,971~~-

The accompanying notes are an integral part of these statements.

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES ~~Notes to the Condensed Financial Statements September 30, 2009 (unaudited)~~

~~NOTE 1~~ (Debtor- ~~CONDENSED FINANCIAL STATEMENTS The accompanying financial statements have been prepared by the Company without audit.~~ In ~~the opinion of management, all adjustments (which include only normal recurring adjustments~~-Possession) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2009, and for all periods presented herein, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2008 financial statements. The results of operations for the periods ended September 30, 2009 and 2008 are not necessarily indicative of the operating results for the full years.

~~NOTE~~NOTES 2TO -CONDENSED ~~GOING~~CONSOLIDATED ~~CONCERN~~FINANCIAL The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. Historically, the Company has incurred significant annual losses, which have resulted in an accumulated deficit of $16,558,761 at September 30, 2009 and raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company increasing sales to the point it becomes profitable. The Company may need to raise additional capital for marketing to increase its sales. If the Company is unable to increase sales sufficiently or obtain adequate capital, it could be forced to cease operation. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. Management plans to increase sales by increasing its marketing program and to obtain additional capital from the private placement of shares of its common stock. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.STATEMENTS

~~NOTE~~March ~~3 - New Wholly Owned Subsidiary The Company organized and filed Articles of Incorporation in Arizona to create Tankless.com~~31, ~~Inc.~~2010 as a wholly owned subsidiary to be responsible for the Company’s planned internet and direct marketing initiatives. The financial results of Tankless.com, Inc. are reported in these results on a consolidated basis. All intercompany transactions have been eliminiated.(unaudited)

~~NOTE~~Note 41. CONDENSED -FINANCIAL GAIN ON EXTINGUISHMENT OF DEBT During the nine months ended September 30, 2009, the Company settled litigation in connection with the Shareholder Derivative Lawsuit that resulted in a gain on extinguishment of debt in the amount of $75,000.STATEMENTS

~~NOTE~~The 5accompanying -financial ~~SIGNIFICANT~~statements ~~EVENTS~~have ~~During~~been ~~the~~prepared ~~nine~~by ~~months ended September 30, 2009,~~ the Company ~~issued~~without ~~720,000 shares of common stock to related parties for consulting services at $~~audit.25 In ~~per~~the ~~share,~~opinion ~~127,100 shares~~ of ~~common stock at $.25 per share to officers as part of their employment agreements~~management, ~~159,120~~all ~~shares~~adjustments of(which ~~common~~include ~~stock~~only tonormal ~~related~~recurring ~~parties~~adjustments) asnecessary ~~an inducement~~ to ~~loan~~present afairly ~~total~~the offinancial ~~$397~~position,~~800~~ onresults aof ~~short term basis~~operations, ~~260,000~~and ~~shares~~cash offlows ~~common stock~~ at ~~$.25~~March ~~per share and 100~~31,~~000~~ ~~shares of common stock at $.27 per share for cash~~2010, and ~~23,188~~for ~~shares~~all ofperiods ~~common~~presented ~~stock~~herein, athave ~~$.80~~been ~~per share for legal services~~made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2009 audited financial statements. The results of operations for the periods ended March 31, 2010 and 2009 are not necessarily indicative of the operating results for each respective full year.

Note 2. VOLUNTARY PETITION UNDER CHAPTER 11

On December 16, 2009, the Company (“Debtor”) filed a Voluntary Petition under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the District of Nevada (“the Bankruptcy Court”). Under Chapter 11, certain claims against the Debtor in existence before the filing of the Voluntary Petition under the federal bankruptcy laws are stayed while the Debtor continues business operations as Debtor-in-Possession. These claims are classified as liabilities subject to compromise. Additional claims (liabilities subject to compromise) may arise after the filing date resulting from rejection of executor contracts, including leases, and from the determination by the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtor's assets (secured claims) also are stayed, although the holders of such claims have the right to move the court for relief from the stay. Secured claims are secured primarily by liens on the Debtor's property, plant, and equipment.

On April 19, 2010 the Company filed its Disclosure Statement and Plan of Reorganization (the “Reorganization Plan”) with the Bankruptcy Court and a copy of such Reorganization Plan was mailed to all creditors and shareholders. On or about May 7, 2010 the Company filed a motion with the Bankruptcy Court seeking approval to file an amended Reorganization Plan (the “Amended Reorganization Plan”). As of the date of this Report the Amended Reorganization Plan has not yet been filed and mailed to creditors and shareholders, but such actions are expected in the near term. The Company incurred $52,575 of legal costs and $650 of trustee costs relative to the bankruptcy during the period ended March 31, 2010.

Note 3. GOING CONCERN

The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company has incurred net losses since inception with an accumulated deficit of $18,054,379 as of March 31, 2010. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s Plans

The Company commenced commercial manufacturing, sale and distribution of its patented FORTIS™ electric tankless water heater in late 2009. The Company continues to develop its wholesale sales and distribution channel across the United States in order to create a commercially viable outlet for the Company’s products.. Despite commencing production, the Company expects that it may take up to one year for the production design and processes to stabilize. The Company has continued to focus development efforts on the commercialization of its patented and pending Paradigm™ technology, and has recently been successful in developing a commercial 6.3 kW and 7.2 kW versions intended for use as a boost heater in residential, commercial and light industrial applications.

The Company has funded all of its capital needs over the 2009 fiscal year by way of private placements and loans from related parties. The Company’s business strategy requires it to raise in excess of $3 million over the next 12 month period in order to fully execute its business plan. Management believes that, in order to properly exploit the introduction of its products, it will be necessary to be positioned not only as a quality supplier of products but also able to supply a sufficient volume of product to meet wholesale demand.

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES

~~Notes to the Condensed Financial Statements~~(Debtor-In-Possession)

~~September~~NOTES ~~30,~~TO ~~2009~~CONDENSED ~~(unaudited)~~CONSOLIDATED FINANCIAL STATEMENTS

~~NOTE~~March ~~6 - INVENTORY The Company contracts with several third parties to manufacture Fortis units~~31, ~~sub~~2010 ~~and final assemblies. Parts and material inventory is stated at the lower of cost~~ (~~first-in, first-out~~unaudited) or net realizable value of $684,971 at September 30, 2009. Parts and materials purchased for development and testing are directly expensed to Research and Development. The inventory is comprised of $205,796 as WIP and $479,175 as Finished Goods.

~~NOTE~~Note 7 - USE OF ESTIMATES The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States4. The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are defined as those that entail significant judgments and estimates, and could potentially result in materially different results under different assumptions and conditions. INVENTORY

~~NOTE~~ The 8Company -contracts ~~RECENT~~with ~~ACCOUNTING~~a ~~PRONOUNCEMENTS~~third Inparty ~~October~~to ~~2009,~~manufacture the ~~Financial~~units Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), 2009-13, Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements — A Consensus of the FASB Emerging Issues Task Force. This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is ~~not available, or estimated selling price if~~ neither ~~vendor-specific~~billed orfor ~~third-party~~nor ~~evidence~~obligated ~~is available. We will be required to apply this guidance prospectively~~ for ~~revenue~~any arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. We have not determined the impact that this update may have on our consolidated financial statements. In June 2009, the FASB Accounting Standards Codification (“ASC”) issued ASC 105work-~~10 Generally Accepted Accounting Principles~~ in- ~~Overall (“ASC 105”)~~process. ASC 105 establishes the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The ~~FASB~~Company ~~will~~only ~~not~~supplies ~~issue~~certain ~~new~~parts ~~standards~~and inmaterials the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue ASUs. This standard reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and ~~displays them using a consistent structure. Also included~~ is ~~relevant~~then ~~SEC~~billed ~~guidance organized using the same topical structure in separate sections. ASC 105 is effective~~ for ~~interim~~completed ~~and annual periods ending after September 15, 2009~~products. ~~We adopted ASC 105 in the third quarter of fiscal 2009.~~ The ~~adoption~~majority ~~does not have an effect on our financial position or results~~ of ~~operations.~~inventory ~~However,~~is ~~because~~in ~~ASC~~finished ~~105 completely replaces existing standards, it will affect the way U~~goods.S. ~~GAAP~~Parts ~~is referenced within the consolidated financial statements~~ and ~~accounting~~material ~~policies.~~inventory Inis ~~June~~stated ~~2009,~~at the ~~FASB~~lower ~~issued~~of ~~guidance~~cost ~~now codified as FASB ASC 810~~(first-10in, ~~Consolidation ("ASC 810"~~first-out). ASC 810 amends tests for variable interest entities to determine whether a variable interest entity must be consolidated. ASC 810 requires an entity to perform an analysis to determine whether an entity's variable interest or ~~interests~~net ~~give~~realizable itvalue a controlling financial interest in a variable interest entity. This guidance requires ongoing reassessments of whether an entity is the primary beneficiary of a variable interest entity and enhanced disclosures that ~~provide~~was ~~more transparent information about an entity's involvement with a variable interest entity. We will be required to apply this guidance on January 1~~$723,642 ~~2010.~~at ~~We have not determined~~ the ~~impact~~end that this guidance may have on our consolidated financial statements. In May 2009, the FASB issued guidance now codified as FASB ASC 855-10, Subsequent Events, which provides guidance on the assessment of ~~subsequent events. This guidance defines the~~ period after the balance sheet date during which we should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, and the required disclosures for such events. The guidance is effective for interim or annual reporting periods ending ~~after~~March ~~June 15~~31, ~~2009~~2010. Parts Weand ~~adopted~~materials ~~this~~purchased ~~guidance in the second quarter of 2009. We have performed an evaluation of subsequent events through November 13, 2009 , which is the date our consolidated financial statements~~ for ~~the~~development ~~nine~~and ~~months~~testing ~~ended~~are ~~September~~expensed ~~30,~~directly 2009 were issued. In April 2009, the FASB staff issued guidance now codified as FASB ASC 825-10, Interim Disclosures about Fair Value of Financial Instruments (“ASC 825”). ASC 825 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to ~~require~~Research ~~disclosures~~and ~~about fair value of financial instruments in interim financial statements as well as in annual financial statements~~Development. ASC 825 also amends APB Opinion No. 28, Interim Financial Reporting, to require these disclosures in all interim financial statements. The adoption of this guidance did not have a material impact on our consolidated financial statements for the nine months ended September 30, 2009.

~~NOTE~~ Note ~~9 - RESTATEMENT Certain balances in 2008 have been restated relating to our beneficial conversion feature and stock option expense~~5. USE ~~The~~OF ~~restatement impacted the balance sheet as follows:~~ESTIMATES

	December 31, 2008
	As Originally Filed			Restated
Convertible Notes Payable, net - Related Parties	$	8,055		$	559,799
Total Liabilities		1,006,406			1,558,151
Additional Paid in Capital		14,728,057			14,317,969
Accumulated Deficit		(15,065,970	)		(15,207,627	)
Total Stockholders' Equity (Deficit)		(347,985	)		(899,730	)

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are defined as those that entail significant judgments and estimates, and could potentially result in materially different results under different assumptions and conditions.

Note 6. SIGNIFICANT EVENTS

During the three months ended March 31, 2010, the Company issued 270,000 shares of common stock to related parties for compensation in lieu of cash at $.25 per share.

During the three months ended March 31, 2010, the Company issued $500,000 in related party notes payable. The related party notes payable bear interest at 10% and are due the earlier of two years from the date of funding of the first tranche under the Debtor-in-possession financing or the closing of the Chapter 11 bankruptcy.

Note 7. RECENT ACCOUNTING PRONOUNCEMENTS

The following is a listing of the most recent accounting standards and their effect on the Company.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) ("ASU 2009-13") and ASU 2009-14, Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985, Software) ("ASU 2009-14"). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating, but does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company's consolidated results of operations or financial condition.

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update No. 2010-06, an update to Statement of Financial Accounting Standards Board Auditing Standard Codification Topic 820 “Fair Value Measurements and Disclosures” (FASB ASC 820). The update provides amendments to FASB ASC 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Leve1 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. 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. The adoption of the updates to FASB ASC 820 did not have a material impact on the financial statements.

Note 8. RESTATEMENT OF FINANCIAL STATEMENTS

In August 2009, the Company was informed that the Public Company Accounting Oversight Board (“PCAOB”) revoked the registration of Moore & Associates Chartered (“Moore”) who was serving as the Company’s independent auditor. The revocation was a result of Moore’s violation of PCAOB rules and auditing standards. This revocation of Moore’s registration required the Company to have the financial statements issued for the year ended December 31, 2008 re-audited.

The re-audit produced material differences from the previously filed versions. Originally, the Company miscalculated the 2008 beneficial conversion feature which resulted in an understatement of liabilities amounting to $540,000 and a nominal change in the related interest expense. Further, the Company miscalculated the fair value expense of stock options that were granted during 2008, resulting in an understatement of the fair value expense amounting to $129,912. The re-audit differences impacted the March 2009 original filing. In addition, for the year ended December 31, 2009, the Company miscalculated the fair value expense of stock options that were granted during the period ended March 31, 2009 resulting in an understatement of the fair value expense amounting to $571,167. Included in this filing are the restated March 2009 financial statements. For comparative purposes, the table below presents the re-audited balance sheet and income statement compared to the original filing for period ended March 31, 2009.

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES

(Debtor-In-Possession)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(unaudited)

Note 8. RESTATEMENT OF FINANCIAL STATEMENTS - continued

	Restated			As filed
	March 31,			March 31,
	2009			2009

ASSETS

CURRENT ASSETS
Cash	$	973		$	973
Accounts Receivable		26,060			26,060
Inventory		541,874			541,874
Prepaid Expenses		93,847			93,847

Total Current Assets		662,754			662,754

EQUIPMENT, NET		74,516			74,516

OTHER ASSETS
Patents		0			0
Deposits		2,460			2,460

Total Other Assets		2,460			2,460

Total Assets	$	739,730		$	739,730

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts Payable	$	345,963		$	345,963
Accrued Expenses		40,018			40,018
Current Portion, LT Debt		3,305			3,305
Notes Payable - Related Parties		400,500			400,500
Accrued Interest Payable		172,141			172,141
Warranty Accrual		41,584			41,584
Customer Deposits		-			-

Total Current Liabilities		1,003,511			1,003,511

LONG-TERM LIABILITIES
Notes Payable		8,636			8,636
Convertible Notes Payable, net		939,522			387,777

Total Liabilities		1,951,669			1,399,924

STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock: 25,000,000 shares
authorized at $0.001par value;
Issued and outstanding 13,327,915 and
13,327,915 shares, respectively		13,928			13,928
Common Stock Subscribed		92,000			92,000
Additional Paid in Capital		14,889,136			14,728,057
Accumulated Deficit		(16,207,004	)		(15,494,179	)

Total Stockholders' Equity (Deficit)		(1,211,939	)		(660,194	)

TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT)	$	739,730		$	739,730

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES

(Debtor-In-Possession)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010 (unaudited)

Note 8. RESTATEMENT OF FINANCIAL STATEMENTS - continued

	Three Months Ended March 31
	2009 Restated			2009 As Filed
REVENUES
Product Sales	$	44,989		$	44,989
Other Income		-			-

Total Revenues		44,989			44,989

Cost of Goods Sold		42,451			42,451

Gross Profit		2,538			2,538

EXPENSES
Legal and Professional		130,515			130,515
General and Administrative		763,593			192,426
Research and Development		6,728			6,728
Advertising and Marketing		47,540			47,540
Depreciation		6,052			6,052

Total Expenses		954,428			383,261

Net (Loss) from Operations		(951,890	)		(380,723	)

OTHER INCOME AND (EXPENSE)
Gain on Extinguishment of Debt		-			-
Interest Expense		(47,486	)		(47,486	)

Total Other Income (Expense)		(47,486	)		(47,486	)

Net Income (Loss) before Income Taxes		(999,376	)		(428,209	)

Income Tax Expense		-			-

NET INCOME (LOSS)	$	(999,376	)	$	(428,209	)

Basic and diluted income (loss) per share	$	(0.07	)	$	(0.03	)

Weighted Average Number of Common
Shares Outstanding		13,927,915			13,927,915

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES

(Debtor-In-Possession)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010 (unaudited)

Note 8. BANKRUPTCY PROCEEDINGS

As a consequence of the Company’s Chapter 11 bankruptcy proceeding, substantially all claims against the Company in existence prior to the filing of the Voluntary Petition or relating to acts or omissions prior to the filing of the Voluntary Petition for relief are stayed. These claims are reflected in the accompanying Consolidated Balance Sheet as “Liabilities subject to compromise” as of March 31, 2010. These amounts represent the Company’s best estimate of known or potential pre-petition liabilities that are probable of resulting in an allowed claim against the Company in connection with the Chapter 11 cases and are recorded at the estimated amount of the allowed claim which may be different from the amount for which the liability will be settled. Such claims remain subject to future adjustments. Adjustments may result from actions of the Bankruptcy Court, negotiations, rejection or acceptance of executory contracts and real property leases, determination as to the value of any collateral securing claims, proofs of claim or other events.

Liabilities subject to compromise consist of the following:

	As of
	March 31 2010
Convertible Notes made in favor of a related party, Unsecured, Mature five-years from issue date, bear 10% Interest payable quarterly, principal and interest convertible into one common share for each outstanding $0.25. Principal amount of $1,500,000 net of the discount for the fair value of the beneficial conversion feature of $432,975 as of March 31, 2010.	$	1,067,025
Unsecured Demand Note made in favor of related party, 10% interest		25,000
Secured Loan made in favor of related party, 10% interest, due at September 4, 2012		369,800
Unsecured Demand Note made in favor of former affiliate, 10% interest		150,000
Secured Loan made in favor of related party, 10% interest, due at September 4, 2012		164,000
Unsecured Demand Note made in favor of former affiliate , 10% interest		78,000

Total Debt subject to Compromise		1,853,825

Accounts Payable		275,790
Accrued interest payable		288,288
Total Liabilities subject to Compromise	$	2,417,903

Reorganization expenses are presented separately in the consolidated Statements of Operations on a net basis and represent items realized or incurred as a direct result of the Company’s Chapter 11 proceedings. For the period ended March 31, 2010, the Company incurred $52,575 in legal fees and $650 in trustee fees relating to the bankruptcy.

Note 9. STOCK OPTIONS

Changes in stock options for the periods ended March 31, 2010 and December 31, 2009 consisted of the following:

			Weighted		Remaining
	Number		Average		Contractual
	Of		Exercise		Term		Intrinsic
	Shares		Price		(In Years)		Value

2009:
Beginning Balance		1,700,000	$	0.65		4.65	$	-
Granted		1,660,000		0.60		3.56		-
Exercised		-		-		-		-
Forfeited/Expired		-		-		-		-
Balance, December 31, 2009		3,360,000		0.68		3.60
Vested and expected to vest		3,360,000		0.68		3.60		-
Exercisable		-		-		-		-

2010:
Beginning Balance		3,360,000		0.68		3.60		-
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited/Expired		-		-		-		-

Balance, March 31, 2010		3,360,000		0.68		3.60	$	-
Vested and expected to vest		3,360,000		0.68		3.60		-
Exercisable		-		-		-		-

The weighted average fair value of options granted during the year ended December 31, 2009 was $0.35 per option.

SKYE INTERNATIONAL, INC. AND SUBSIDIARIES

(Debtor-In-Possession)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010 (unaudited)

Note 9. STOCK OPTIONS - continued

The following table summarizes information about stock options outstanding at March 31, 2010:

	Options Outstanding						Options Exercisable
			Weighted
			Average
			Remaining		Weighted				Weighted
Range of			Contractual		Average				Average
Exercise	Number		Life		Exercise		Number		Exercise
Prices	Outstanding		(in years)		Price		Exercisable		Price

$0.50		3,000,000		3.71	$	0.50		-		-
$2.00		200,000		3.68	$	2.00		-		-
$2.50		160,000		0.02	$	2.50		-		-

$0.50 - $2.50		3,360,000		3.52	$	0.68		-		-

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Additionally, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 most likely do not apply to our forward-looking statements as a result of being a penny stock issuer. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

o	our ability to diversify our operations;
o	our ability to successfully compete in the energy efficient industry, including our ability to achieve EnergyStar® recognition of our products;
o	our inability to raise additional financing for working capital;
o	the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operation which may require management to make estimates about matters that are inherently uncertain;

o	our ability to attract key personnel;
o	our ability to operate profitably;
o	deterioration in general or regional economic conditions;
o	changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;

o	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
o	our inability to achieve future sales levels or other profitable operating results;
o	the inability of management to effectively implement our strategies and business plans;
o	the unavailability of funds for capital expenditures.

AVAILABLE INFORMATION

We file annual, quarterly and special reports and other information with the SEC that can be inspected and copied at the public reference facility maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company’s filings are also available through the SEC’s Electronic Data Gathering Analysis and Retrieval System which is publicly available through the SEC’s website (www.sec.gov). Copies of such materials may also be obtained by mail from the public reference section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405 at prescribed rates.

913

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial statements and accompanying notes included in this Form 10-Q.

~~Plan~~Business of ~~Operation~~the Company

The Company is in the business of designing, developing, ~~manufacturing~~ and marketing consumer ~~lifestyle~~water ~~products~~heating ~~including,~~appliances. All ~~initially,~~of ~~several~~the ~~models~~Company’s ofproducts ~~electric~~are ~~tankless~~designed ~~whole~~by in-house engineering and ~~point-of-use~~contract ~~water~~engineers ~~heaters.~~from ~~The~~third ~~FORTIS™,~~party ~~Paradigm™~~engineering ~~and~~firms. In ~~HeatWave™~~an ~~product lines,~~effort asto ~~well~~transition asto ~~future~~a ~~product~~“fabrication ~~lines~~free” business model, ~~are~~all ~~sold~~appliances ~~primarily~~produced ~~through~~for ~~manufacturer~~the ~~representatives~~Company inare ~~the~~manufactured ~~wholesale~~by ~~market.~~third ~~However,~~party ~~the~~contract manufacturers. The Company ~~recently~~first ~~commenced~~entered ~~internet~~its ~~direct~~current ~~sales~~line as of ~~June~~business ~~30,~~through ~~2009~~the ~~through~~acquisition of Envirotech and its ~~wholly~~product ~~owned~~line ~~subsidiary,~~- ~~Tankless.com,~~the ~~Inc.~~ESI-2000 onelectric atankless ~~test~~water ~~basis~~heater. ~~The~~Though ~~Company~~viewed ~~expects~~by many to be a significant advancement in whole house electric tankless water heaters, the ~~majority~~ESI-2000 product line never achieved critical sales levels, and thus production of the ESI-2000 product ~~sales~~line concluded in late 2005. In response to belackluster ~~made~~ESI-2000 ~~through~~product sales, the ~~wholesale~~Company ~~distribution~~engaged ~~channel~~in ~~and~~a itsubstantial ~~will~~research ~~continue~~and development program to ~~build~~design ~~this~~a ~~distribution model~~line ~~aggressively~~of replacement heating appliances. ~~Internet~~The ~~direct~~first ~~sales~~product ~~have~~that ~~been~~the ~~added,~~Company ~~through~~released to the ~~creation~~market ofin ~~Tankless.com,~~October ~~Inc~~2008 in limited volumes was the FORTIS™ electric tankless whole house water heater. The FORTIS™ is small, easy to ~~supply~~install aand ~~segment~~supplies ofvirtually ~~the~~endless ~~market~~amounts ~~not~~of ~~typically~~hot ~~serviced~~water bywith ~~the~~energy ~~wholesale~~savings. ~~channel~~The –FORTIS™ uses ~~early~~advanced technology ~~adopters~~and high quality stainless steel components that are ~~technologically~~expected ~~savvy~~to ~~and~~provide ~~likely~~increased toreliability ~~conduct~~and ~~technology~~longevity. ~~related~~SKYE’s ~~research~~tankless ~~and~~water ~~purchases~~heaters ~~via~~generate ~~the~~heated ~~internet~~water ~~direct,~~only as ~~opposed~~long toas ahot ~~traditional~~water ~~model~~is ofrequired ~~plumber/vendor~~and ~~recommendation. Despite~~only ~~commencing~~at the ~~Tankless~~temperature desired.~~com~~ ~~internet~~Since ~~direct~~electricity ~~initiative~~is ~~the~~only ~~Company~~used ~~intends~~when ~~to utilize~~heated water is required, the ~~internet~~cost of heating water can be reduced by as ~~primarily~~much as 40% or more compared to a ~~product~~storage ~~information~~type ~~portal~~water ~~with~~heater. ~~redirects~~Because toall ~~the~~of ~~Company~~SKYE’s ~~wholesale~~products ~~partners~~are ~~and~~compact, ~~plumber/contractors~~durable, ~~that~~self-contained ~~install~~ and ~~service~~safe, ~~our~~they ~~products. The~~can ~~Company~~be ~~intends~~easily toinstalled ~~dramatically~~close ~~expand~~to ~~its~~where ~~internet~~hot ~~presence~~water ~~with~~is ~~multimedia~~being ~~video~~used, and ~~additional~~they ~~information~~are ~~regarding~~ideal ~~energy~~for ~~efficiency~~condos, ~~and~~apartments, ~~the~~multifamily ~~Company’s~~residences ~~“green”~~and ~~product~~homes ~~line~~where inspace anis ~~effort~~at toa ~~increase~~premium ~~its~~or ~~organic~~where ~~internet~~instant ~~search~~hot ~~positioning~~water is desired.

ALiquidity ~~critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through equity~~ and~~/or~~ ~~debt~~Capital financing. Since inception, we have financed our cash flow requirements through issuances of debt and common stock and cash generated from our limited operations. As we continue our business activities, we will continue to experience net negative cash flows from operations pending receipt of significant revenues that generate positive sales margins and cash-flows. Commencing in the first quarter of 2007 and continuing throughout the third quarter of 2009, all of the Company’s cash needs were met through loans advanced to the Company by certain of its directors as well as private placements of common stock to third parties. As of the date of this Report, the Company has begun to recognize sales revenues from the sale of product. While reasonable sales margins are being achieved, cash-flow from operations is not yet sufficient to fund continuing business operations or the business plan of the Company and thus the Company continues to fund current operations from issuances of debt and common stock in private placements to accredited investors.Resources

~~The~~On ~~Company~~December ~~expects~~16, ~~that~~2009 ~~additional~~we ~~operating~~filed ~~losses~~a ~~will~~voluntary ~~occur~~petition ~~until~~of ~~net~~Bankruptcy ~~revenues~~in ~~from~~the ~~sales~~United ~~are~~States ~~sufficient~~Bankruptcy toCourt ~~offset~~for the ~~costs~~District ~~incurred~~of Nevada in ~~day~~Reno, toNevada ~~day~~(the ~~operations.~~“Bankruptcy ~~Until~~Court”) seeking ~~the~~Debtor-in-Possession ~~Company~~status ~~has~~while ~~achieved~~we apursue ~~sales~~reorganization ~~level~~under ~~sufficient~~Chapter to11. At ~~break~~the ~~even,~~time itof ~~will~~the ~~not~~voluntary bepetition ~~self-sustaining~~filing, ~~nor~~we beclaimed ~~competitive~~total inliabilities ~~the~~of ~~areas~~$3,167,387 inand ~~which~~total itassets ~~intends~~of ~~to operate~~$1,050,529. ~~The~~ Additionally, ~~Company~~the ~~will~~schedules ~~require~~to ~~additional~~the ~~funds~~voluntary topetition ~~continue~~disclosed ~~commercial~~three ~~production~~creditors ~~and~~holding ~~sale~~secured claims of ~~the FORTIS™~~$577,332 toand ~~tool~~53 upcreditors ~~for~~holding ~~production~~unsecured claims of ~~the Paradigm™~~$2,590,055. On toDecember ~~continue~~21, 2009, the ~~distribution~~Bankruptcy ~~and~~Court ~~sale~~issued ofan ~~the~~Order ~~HeatWave™~~approving ~~product~~a ~~lines,~~Debtor-in-Possession ~~and~~interim tofinancing ~~fully~~plan ~~implement~~between ~~its~~the ~~marketing~~Company and ~~brand~~Summit ~~development~~Growth ~~plans. Additionally,~~Management ~~the~~LLC ~~Company~~(“Summit”) ~~will~~in ~~also require~~the ~~further~~gross ~~development~~amount ~~funds~~of in$500,000 ~~order~~less tofees, ~~engineer~~expenses, ~~additional~~legal ~~product~~fees ~~lines~~and ~~utilizing~~a ~~the~~prior ~~patented~~loan ~~Paradigm™~~of ~~technology~~$80,000. At asa ~~well~~hearing ason ~~substantial~~February ~~funds~~19, to2009, ~~commence~~the ~~and~~Court ~~continue~~issued ana ~~advertising~~Final ~~and~~Order ~~branding~~to ~~initiative.~~approve Onthe ~~June~~terms ~~30,~~of ~~2009~~the weDebtor-in-Possession ~~commenced,~~financing onagreement anbetween ~~interim~~the ~~test~~Company ~~basis,~~and anSummit ~~internet~~in ~~direct~~the ~~sales~~total ~~strategy~~gross amount of $2,000,000. The ~~Company~~“DIP ~~expects~~Financing ~~that~~Agreement” ~~this~~is ~~internet~~more ~~channel~~fully ~~will~~described ~~require~~in ~~capital~~the exhibits to ~~further~~the ~~develop~~registrant’s ~~the~~report ~~functionality~~on ofForm ~~www.tankless.com~~8-K, as ~~well~~filed asDecember ~~further~~17, ~~capital~~2009. The toCompany ~~improve~~prepared ~~internet~~and ~~rankings~~filed ~~for~~a ~~the~~Joint ~~website.~~Plan Weof ~~anticipate~~Reorganization ~~obtaining~~and ~~additional~~Disclosure ~~financing~~Statement to(the ~~fund~~“Reorganization ~~operations~~Plan”) ~~through~~that ~~common~~was ~~stock~~subsequently ~~offerings,~~mailed ~~debt~~to ~~offerings~~our creditors and ~~bank~~shareholders ~~borrowings,~~for toconsideration ~~the~~and ~~extent~~approval. On ~~available~~or about May 7, or2010 towe ~~obtain~~filed ~~additional~~a ~~financing,~~motion towith the ~~extent~~Bankruptcy ~~necessary,~~Court seeking approval to ~~augment~~file ~~our~~an ~~working~~amended ~~capital. In~~plan of reorganization (the ~~event~~“Amended weReorganization ~~cannot~~Plan”), ~~obtain~~however as of the ~~necessary~~date ~~capital~~of tothis ~~pursue~~Report ~~our~~the ~~strategic~~Amended ~~business~~Reorganization ~~plan,~~Plan wehas ~~may~~not ~~have~~yet tobeen ~~significantly~~approved ~~curtail~~or ~~our~~mailed ~~operations. This~~to ~~would~~creditors ~~materially~~and ~~impact our~~shareholders ~~ability~~for toreview ~~continue~~and ~~operations~~consideration. As ~~There~~of isthe nodate ~~assurance~~of ~~that~~this Report, the Company ~~will~~has bereceived ~~able~~$1,000,000 toof ~~obtain~~the ~~additional~~previously ~~funding~~announced ~~when~~Debtor-in-Possession ~~needed,~~financing orwith ~~that~~an ~~such~~additional ~~funding~~$1, ~~if available~~000,000 ~~can~~to be ~~obtained~~drawn ~~on terms acceptable to the Company~~thereunder.

AsA critical component of ~~December~~our ~~31,~~operating ~~2008~~plan ~~and~~impacting ~~continuing~~our continued existence is the ability to obtain additional capital through ~~September~~equity ~~30,~~and/or ~~2009~~debt financing. Since inception, ~~the~~we ~~existing~~have ~~capital~~financed our cash flow requirements primarily through issuances of common stock and ~~anticipated~~debt. ~~funds~~As ~~from~~we ~~operations~~continue ~~were~~our ~~not~~activities, ~~sufficient~~we are likely to ~~sustain~~continue ~~Company~~to ~~operations~~experience ornet ~~the~~negative ~~business~~cash ~~plan~~flows ~~over~~from ~~the~~operations, ~~next~~pending ~~twelve~~receipt ~~months.~~of Wesignificant ~~anticipate~~revenues ~~substantial~~from ~~increases~~sales inof our products. Most of the Company’s cash ~~requirements~~needs ~~which~~have ~~will~~been ~~require~~met ~~additional~~through ~~capital~~loans ~~generated from~~advanced to the ~~sale~~Company by certain of ~~common~~its ~~stock,~~related party directors and some private placement purchases. The Company expects that additional operating losses will occur until revenue is sufficient to offset the ~~sale~~costs ofincurred ~~preferred~~for ~~stock~~marketing, orsales ~~debt~~and ~~financing~~product development. ~~Recent~~ ~~global~~Until ~~events,~~the asCompany ~~well~~has asachieved ~~domestic~~a ~~economic~~sales ~~factors~~level sufficient to break even, ~~have~~it ~~recently~~will ~~limited~~not be self-sustaining or competitive in the ~~access~~areas ofin ~~many~~which ~~companies~~it intends to ~~both~~operate. The ~~debt~~Company will require additional working capital for general operations and ~~equity~~otherwise ~~financings~~to implement its sales and marketing plans. ~~This~~We ~~continuing~~anticipate ~~contraction~~obtaining ofadditional ~~available~~financing ~~capital~~to isfund ~~particularly~~operations ~~apparent~~through indraws on the ~~micro-cap~~DIP ~~public~~Financing, ~~companies~~common ~~market~~stock asofferings, ~~private~~debt ~~equity~~offerings and ~~hedge~~bank ~~fund~~borrowings, ~~managers~~to ~~have,~~the asextent ofavailable ~~late~~and if approved by the Bankruptcy Court during the Chapter 11 proceedings, ~~tended~~or to ~~avoid~~obtain ~~investments~~additional infinancing ~~small~~to ~~unlisted~~the ~~public~~extent ~~companies~~necessary ~~such~~to asaugment ~~Skye~~our ~~International~~working ~~Inc~~capital. As In ~~such~~the event we cannot obtain the necessary capital to pursue our strategic plan, nowe ~~assurance~~may ~~can~~have beto ~~made~~significantly curtail our operations. This would materially impact our ability to continue operations. There is no assurance that ~~financing~~the Company will be ~~available~~able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company, ~~and,~~or if ~~available~~acceptable, itthat ~~may~~such ~~take~~funds ~~either~~will ~~the~~be ~~form~~approved ofby ~~debt~~the orBankruptcy ~~equity~~Court. It Inis ~~either~~likely ~~case,~~that any debt or equity financing will ~~likely~~ have a negative impact on our financial condition and ~~likely~~will result in anadditional ~~immediate~~dilution of our stockholders common share interests and ~~substantial~~this dilution tocould ~~our~~be ~~existing stockholders~~significant.

~~Satisfaction of our cash obligations for the next 12 months.~~14

As of September 30, 2009, we had available cash of $7,486, which will not be enough to pursue our business plan. With the intention to continue to expand FORTIS™ production, acquire additional Heatwave™ inventory for distribution and to acquire the tooling and supplies necessary to commence commercial production of the Paradigm™ product line, we plan to seek financing for operations through equity and/or debt or other means that may become available to us. If we are not able to receive any additional funds, we cannot continue our proposed business operations.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued

~~Summary~~Liquidity ~~of any product research~~ and ~~development~~Capital ~~that~~Resources we will perform for the term of the plan. We anticipate contracting with outside engineering firms to provide the necessary research and development for new product lines incorporating the Company’s Paradigm™ technology. Over the balance of fiscal 2009 the Company expects to expend approximately $50,000 in additional research and development initiatives to complete engineering on new product offerings currently under development, including three-~~phase~~ and commercial water heaters, as well as heaters designed to incorporate solar additions. A significant amount of effort and cash expenditure has been recently focused during the third quarter and continuing through the date of this Report on completing the safety certification of our pending Paradigm™ product line. We expect that such expenditures will increase over the fourth quarter and into the 2010 fiscal year as we bring additional Paradigm™ enabled products to the commercial production stage. continued

At March 31, 2010, we had cash and working capital of $376,147 and $953,999, respectively, as compared to cash of $333,953 and working capital of $868,925 at December 31, 2009. The primary reason for the improvement in working capital is the infusion of the DIP financing funds. As a measure to reduce cash expenditures, we issued a total of 270,000 restricted common shares to our President, Chief Financial Officer, and Chief Operating Office valued at $67,500 for compensation during the three months ended March 31, 2010.

Satisfaction of our cash obligations for the next 12 months.

As of March 31, 2010 we did not have sufficient available cash to pursue our business plan. With the intention to continue to expand FORTIS™ production, acquire additional Heatwave™ inventory for distribution and to acquire the tooling and supplies necessary to commence commercial production of the Paradigm™ product line, we intend to make further debt draws available to us under the Court approved DIP Financing and also plan to seek financing for operations through equity and/or debt or other means that may become available to us. If we are not able to receive any additional funds, we cannot continue our proposed business operations.

Summary of any product research and development that we will perform for the term of the plan.

We anticipate contracting with outside engineering firms to provide the necessary research and development for new product lines incorporating the Company’s Paradigm™ technology. Over the balance of fiscal 2010 the Company expects to expend approximately $50,000 to $100,000 in additional research and development initiatives to complete engineering on new product offerings currently under development, including three-phase and commercial water heaters, as well as heaters designed to incorporate solar additions. A significant amount of effort and cash expenditures have been recently focused on completing the safety certification of our pending Paradigm™ product line. However, certification fees will continue as we seek safety certifications of new products generated from current engineering efforts.

Expected purchase or rent of plant and significant equipment.

As we continue to grow our sales force, we expect that it will be necessary to relocate ~~into~~to larger facilities capable of accommodating limited ~~trans-shipping~~transshipping of parts and components used in the manufacturing process of our products. Additionally, as we add new sales territories, we expect that it will be necessary to add new computer hardware and software capable of assisting in the sales, distribution, accounting and customer service process. We will also work to integrate our accounting and inventory systems so as to provide real time access to critical product inventory information to aide in the timely distribution of our products to our customers.

Plan of Operation and Executive Summary

The Company is in the business of designing, contracting for the production of, and marketing consumer lifestyle appliances, including, initially a full suite of electric tankless water heaters. The Company’s premier consumer product is the FORTIS™, a series of whole-house electric tankless water ~~heater~~heaters. The Company markets the FORTIS ™ tankless water heater through wholesale distribution ~~which is~~ reached primarily through an established and growing list of manufacturer representatives (outside contracted sales force) located in many states across the United States. Effective June 30, 2009, the Company added, on a test basis, the internet direct marketing channel to product sales through its newly formed subsidiary Tankless.com, Inc. The Company believes there is an established trend towards the sale of goods by a manufacturer direct to the public, and thus it commenced product sales through its website www.tankless.com. The Company expects that the wholesale channel will continue to be the largest distribution channel for the Company and, to this end, it expects to continue to fully support its wholesale channel efforts through significant additions to its internet presence to provide a feature and content rich website for consumer information on the Company’s “green” products and general tankless product information and specifications.

Having recently received Intertek safety certification to the UL499 and CSA C22.2 ~~No. 64~~ standards, the Company ~~has~~ commenced sales of its private labeled HeatWave™ product line as of June 1, 2009. The HeatWave™ product ~~utilizes the Company’s proprietary thin-film heating technology to provide~~ is an innovative, powerful and inexpensive commercial point-of-use solution for local hot water code compliance in commercial buildings. Initial product supply volumes were limited in 2009 and thus we did not generate significant revenues from this product line. Commencing February 2010, we have greater product availability and thus we anticipate expanding the sales of the HeatWave™ product line. Specifically, we intend to position the HeatWave™ as a low cost code compliance alternative to traditional immersion resistance products. Leveraging the rapid heat delivery and significant duty cycle of the HeatWave™, management believes that it will soon become a plumbing specified unit of choice for many builders and mechanical specifiers.

During the latter part of the third quarter the Company submitted its proprietary Paradigm 7200 series point-of-use water heater for safety certification to the UL499 and CSA C22.2 No. 64 standards. We anticipate completing the product safety certification during the fourth quarter after which the Company will begin to take the steps necessary to commence production of the Paradigm™ product series. If there is sufficient capital to commence production we expect to have initial inventories of paradigm™ product during the first half of calendar 2010.15

The Company has established relationship with contract manufacturers – Electrosem, LLC to produce its FORTIS ™ product line and Zhijiang Riches Electric Appliance Co. Ltd. to produce its HeatWave™ product line. With respect to the Paradigm™ product line, the Company expects to receive its safety certifications during calendar 2009, and thereafter it will work to commence production of the Paradigm™ water heater with contract manufacturers that have been selected by the Company. The company expects that it may take up to one year for the production, design, and processes to stabilize for each product line. Once such processes and designs have stabilized, the Company will seek and implement product cost reductions accordingly.

In order to build a successful sales and marketing organization, it is necessary for the Company to be positioned not only as a quality supplier of product but also as a trusted and timely supplier as well. As such, management believes that the Company must be in a position to carry product inventory levels necessary to ensure timely delivery in its markets. Additionally, as further support in the markets, the Company must also be seen as having broad customer service and technical support for its products. All of these needs have associated cash requirements as the Company grows its business. These goals all require capital and we must be successful in our efforts to obtain this funding if we are to be successful in the wholesale sales and distribution channel. Recently we were successful in negotiating and concluding a logistics agreement with AGS Systems to expedite the timely North American distribution of our product. As of the date of this Report we currently hold product inventory in distribution centers located in Los Angeles, Phoenix, Dallas and Houston. As sales expand into other geographic areas we expect we will add product warehousing in those markets as well.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued

~~Over~~Plan ~~the balance~~ of ~~2009,~~Operation ~~we will continue to focus our efforts on expanding sales of our FORTIS™~~ and ~~Heatwave™~~Executive ~~product~~Summary lines through focused marketing efforts to plumbers and homebuilders in select markets. We will also focus our efforts on completing the safety certification of our Paradigm™ series of residential point-~~of-use~~ water heaters with an expectation that such certification will be received during the fourth quarter of 2009. Once the safety certification is complete we will work to commence production of the Paradigm™ product series. Additionally we expect to continue our research and development program to develop three-phase commercial tankless water heaters for regulatory certification in 2010.continued

WeThe ~~will~~Company ~~continue~~has tobeen ~~work~~diligently ~~and~~pursuing ~~build~~the ~~our~~steps ~~sales~~necessary ~~and~~to ~~customer~~bring ~~service~~its ~~infrastructure~~Paradigm™ totechnology ~~support~~into ~~product~~commercial ~~sales~~production. ~~and~~During ~~revenue~~the ~~for~~latter part of the ~~Company.~~third Wequarter ~~are~~of ~~currently~~2009, ~~engaged~~the inCompany asubmitted ~~concerted~~its ~~effort~~proprietary toParadigm™ ~~appoint~~series ~~Manufacturer~~point-of-use ~~Representatives~~water ~~over~~heater ~~the~~in ~~balance~~208VAC, of240VAC ~~states~~and in277VAC ~~which~~for ~~we intend~~safety certification to ~~focus~~the ~~our~~UL499 ~~sales~~and ~~efforts~~CSA C22.2 standards. OnAs aof ~~parallel~~the ~~track~~date of this Report, we have ~~worked~~received tocertification ~~increase~~under ~~our~~the ~~web~~UL ~~presence~~499 atand ~~www~~CSA 22.~~tankless.com,~~2 standards only for the 208VAC and ~~effective~~240VAC ~~June~~models. ~~30,~~We ~~2009,~~are weawaiting ~~commenced~~the ~~internet~~results ~~direct~~of ~~product~~ongoing ~~sales~~safety ~~through~~investigations ~~our~~for ~~wholly~~further ~~owned~~certification ~~subsidiary~~under ~~Tankless.com,~~UL ~~Inc~~499 and CSA C22.2 ~~Over~~for the ~~balance~~277VAC ~~of 2009~~model. weWe expect tothat ~~add~~all ~~new~~of ~~features~~the ~~and~~needed ~~functionality~~certifications tofor ~~our~~this ~~website~~first ~~including~~product ~~streaming~~will ~~video~~be ~~guides~~completed ~~for~~by ~~installation~~July ~~and troubleshooting~~2010. ~~All~~In order to expedite the availability of ~~our~~this ~~efforts~~product, ~~are~~we ~~being~~have ~~done~~commenced ~~with~~the apurchase ~~view~~of all the manufacturing tooling required to ~~building~~produce athe ~~high~~Paradigm™ ~~quality~~booster ~~brand that~~series. Initially, ~~will~~product ~~continue~~production tovolumes ~~garner~~will ~~recognition~~be limited in ~~the~~order ~~industry~~to test overall demand so as ato ~~premier~~manage ~~supplier~~the amount of ~~high-end~~capital ~~appliances~~necessary for this specific product line. WeAs ~~will~~demand ~~continue~~warrants, towe ~~support~~expect ~~our~~to ~~wholesale~~increase ~~distribution~~production. Therefore, ~~channel~~we ~~and~~have ~~work~~contracts ~~with~~in ~~our~~place ~~customers~~that ~~and~~provide ~~wholesale~~significant ~~partners~~flexibility to ~~grow~~quickly ~~our~~expand ~~business~~production ~~into~~to ameet ~~respected~~expected ~~and~~product ~~trusted~~demand. First ~~manufacturer~~deliveries of ~~high-quality~~the ~~appliances~~Paradigm™ product line is expected during the second quarter of 2010.

~~Through~~The ~~all~~Company ofhas ~~this~~established ~~access~~relationships towith ~~capital~~several ~~remains~~contract ~~one~~manufacturers ofto ~~the~~provide ~~most~~product ~~pressing~~manufacturing ~~considerations for us~~services. The Company has ~~continued~~both tolow ~~fund~~volume ~~operations~~and ~~with~~high ~~loans~~volume ~~from~~manufacturers ~~and~~available ~~equity~~for ~~private~~all ~~placements~~products ~~made~~except to the ~~Company’s~~HeatWave™ ~~directors,~~which ascurrently ~~well~~has asa ~~certain~~single ~~accredited~~source ~~investors~~supplier. InDepending ~~order~~on tothe ~~execute~~product ~~our~~demand, ~~business~~we ~~strategy,~~are ~~the~~able ~~Company~~to ~~must raise~~select ina ~~excess~~manufacturer offor $2each ~~million~~specific ~~over~~product ~~the~~manufacturing ~~next~~run. As ~~12-month~~is ~~period~~the incase ~~order~~with toall ~~fully~~new ~~execute~~product ~~our~~introductions, ~~current~~we ~~business~~expect ~~plan.~~that ~~Given~~it ~~the~~may ~~current~~take ~~business~~up ~~climate,~~to ~~and,~~one inyear ~~particular,~~for the ~~poor~~production ~~state~~and ofdesign ~~the~~processes ~~credit~~to ~~and~~stabilize ~~equity~~for ~~markets~~each inproduct ~~the U~~line.S. Once ~~and~~such ~~worldwide,~~processes ~~there~~and ~~can~~designs behave nostabilized, ~~assurance~~the ~~that~~Company we will beseek ~~able~~and toimplement ~~raise~~product ~~such~~cost ~~additional~~reductions ~~funding~~accordingly. As byof ~~way~~the date of ~~either~~this ~~new~~Report, ~~debt~~we orhave ~~equity;~~run ~~and,~~extensive incost ~~the~~reduction ~~event~~analysis weon ~~are~~the ~~unable~~FORTIS™ toproduct ~~raise~~line ~~the~~that ~~funds~~has ~~necessary~~resulted toin ~~fund~~certain ~~our~~design ~~business~~and ~~plan,~~component itsupplier ~~will~~changes. The befinancial ~~necessary~~impact toof ~~curtail~~these ~~such~~cost ~~plans~~reduction ~~and~~steps ~~this~~will ~~could~~not ~~have~~be ~~a detrimental~~realized ~~impact~~until onlate ~~our~~2010 ~~business~~or early 2011.

~~This~~Over isthe nobalance ~~small~~of ~~task~~2010, ~~and~~we it will ~~require~~continue ato ~~significant~~focus ~~investment~~our efforts on expanding sales of ~~capital,~~our asFORTIS™ ~~well~~and asHeatWave™ anproduct ~~expanded~~lines ~~staff~~through focused marketing efforts to plumbers and homebuilders in ~~order~~select markets. Additionally we expect to ~~execute~~continue our ~~business~~research ~~plan. The~~and ~~economic~~development ~~outlook~~program ~~globally~~to isdevelop ~~challenging~~three-phase ~~for~~commercial ~~every~~tankless ~~business~~water ~~and~~heaters wefor ~~are~~regulatory nocertification ~~exception~~in 2010. ~~Since~~We ~~late~~will ~~2007,~~continue ~~the~~our ~~new~~lobbying ~~home~~efforts ~~building~~to ~~market~~gain ~~has~~recognition ~~seen~~under ~~unprecedented~~the ~~declines in~~Environmental ~~new~~Protection ~~home~~Agency’s ~~starts,~~“EnergyStar®” program and ~~the~~we ~~recent~~will ~~credit~~continue ~~squeeze~~to ~~and~~work ~~lack~~closely ofwith ~~available~~our ~~credit~~industry ~~has~~associations ~~all~~and ~~but~~Federal ~~choked~~government ~~off~~to aensure ~~great~~that ~~portion~~electric oftankless ~~new~~becomes ~~commercial~~eligible ~~construction~~for energy efficiency programs as ~~well. Recent~~they Udevelop.S. ~~government~~We ~~efforts~~will continue to ~~add~~work ~~liquidity~~ and ~~overall~~build ~~economic~~our ~~stimulus~~sales ~~into~~and ~~the~~customer ~~broader~~service ~~economy~~infrastructure ~~have~~to ~~not~~support ~~yet~~product ~~created~~sales ~~expanded~~and ~~opportunities~~revenue for the Company,. ~~and~~We ~~thus~~are currently engaged in a concerted effort to appoint manufacturer representatives over the balance of states in which we intend ~~expect~~to focus our sales ~~opportunities~~efforts. As toa ~~continue~~means to besupport ~~challenging~~our ~~for~~overall ~~all~~sales initiatives over the balance of 2010, ~~2009~~we expect to add new features and ~~likely~~functionality ~~into~~to ~~2010~~our website including streaming video guides for installation and troubleshooting so that our potential customers can easily access consumer product information as ~~well~~a part of their buying process. InAll ~~addition,~~of ~~until~~our ~~the~~efforts ~~Company’s~~are ~~products~~being ~~are~~done ~~recognized by~~with a view to building a high quality brand that will continue to garner recognition in the ~~Department~~industry ofas ~~Energy’s~~a ~~“EnergyStar®~~premier ~~program~~supplier weof high-end appliances. We will continue to ~~operate~~support onour anwholesale ~~unlevel~~distribution ~~playing~~channel ~~field~~and aswork ~~compared~~with our customers and wholesale partners to grow our ~~gas-fired~~business ~~tankless~~into ~~competitors~~a inrespected ~~the~~and ~~market~~trusted manufacturer of high-quality appliances.

Results of Operations

Revenues

For three months ended September 30:	2009	2008	Increase/(decrease)
For the three months ended March 31:	2010	2009	Increase/(decrease)
			$	%
Revenue	$2028,~~324~~098	$644,~~142~~989	$14(16,~~182~~891)	~~231~~(38)

Revenues for the ~~third~~first quarter ended ~~September~~March 3031, ~~2009~~2010 were $2028,~~324~~098 compared to revenues of $644,~~142~~989 for the three months ended ~~September~~March 3031, ~~2008. Revenues for the nine months ended September 30,~~ 2009 ~~were $147,965 compared to revenues of $53,432 in the same period ended in 2008~~. ~~Revenues recorded are for product sold and shipped.~~ The ~~revenue~~decrease ~~increase~~in isrevenues ~~directly~~was attributable to ~~the~~a ~~increased~~decline ~~marketing~~in ~~efforts through~~ the ~~wholesale~~sales ~~channel. The revenues~~ for ~~the~~our ~~nine-month period ended September 30, 2009 reflect sales of~~ FORTIS ™ ~~whole-house~~ ~~electric tankless units and limited sales of HeatWave™~~ product line ~~units~~. Our revenues continue to be low as a result of the lack of available capital with which to engage in expanded sales and marketing initiatives. We recently commenced direct contact with plumbers and homebuilders in an effort to increase the wholesale “pull” demand for our product.

General and Administrative expenses

For three months ended September 30:	2009	2008	Increase/(decrease)
For the three months ended March 31:	2010	2009	Increase/(decrease)
			$	%
General & Administrative expenses	$~~240~~227,~~144~~565	$~~123~~763,~~794~~593	$~~116~~(536,~~350~~028)	94(71)

12General and administrative expenses decreased by $536,028 during the three-month period ended March 31, 2010 as compared to the same period in 2009. The decrease resulted from the fact that the Company did not issue any options during the quarter as it did in the same quarter in 2009. Despite the decrease in expenses, exclusive of charges in connection with option issuances, there was an increase in administrative expenses associated with the hiring of additional operational and administrative personnel .

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued

~~General~~Results ~~and administrative expenses increased by $116,350 during the three-month period ended September 30, 2009 as compared to the same period in 2008 as a result~~ of ~~personnel~~Operations increases. During the nine month period ended September 30, 2009 general and administrative expenses overall decreased $94,930 over the comparable period during 2008 as a result of a reduction of professional fees. We anticipate General & Administrative expenses to increase during the fourth quarter as the Company was required to change Auditors in response the de-~~certification~~ of our prior auditors Moore & Associates, CHTD whose license to practice was revoked by the Public Company Accounting Oversight Board for, among other things, the failure to engage in reasonable and prudent practices to ensure audits are in compliance with GAAP. Accordingly, the Company has retained new independent auditors who will conduct a re-audit of our 2008 operating results. The costs associated with these efforts will be expensed during the fourth quarter of 2009. Furthermore, though the SEC has delayed the applicability of some provisions of the Sarbanes-Oxley Act of 2002 to smaller reporting issuers like us, we will likely become subject to these provisions in 2010 and thus the associated costs will increase our general and administrative costs accordingly.continued

Total Operating Expenses

For three months ended September 30:	2009	2008	Increase/(decrease)
For the three months ended March 31:	2010	2009	Increase/(decrease)
			$	%
Total operating expenses	$~~394~~317,~~620~~580	$~~323~~954,~~101~~428	$71(636,~~519~~848)	23(67)

Overall operating expenses during the quarter ended ~~September~~March 3031, ~~2009~~2010 ~~increased~~decreased by $71636,~~519~~848 or approximately 2367%, ~~because~~as a result of ~~costs~~ ~~associated~~a ~~with~~decrease ~~increased~~in ~~sales~~legal and ~~marketing~~professional ~~personnel. During~~fees, ~~the~~as ~~nine~~well ~~month~~as ~~period~~the ~~ended~~fact ~~September 30~~that, ~~2009,~~because ~~overall~~no ~~operating~~options ~~expenses~~were ~~increased~~issued byduring ~~9%. Over~~ the ~~balance~~period, ofno ~~2009~~charge ~~and~~was inrecorded ~~2010~~for wethe ~~expect~~issuance ~~total~~of ~~operating~~options ~~expenses~~as tohappened ~~continue~~in tothe ~~increase~~same asquarter weduring ~~expand~~the ~~our~~2009 ~~business~~period. Legal ~~operations~~fees ~~and~~also ~~add~~reduced ~~staffing~~during the period as compared to ~~handle~~the ~~such~~same ~~increased~~period ~~business~~in 2009.

Other Income (Expense)

For three months ended September 30:	2009	2008	Increase/(decrease)
For three months ended March 31:	2010	2009	Increase/(decrease)
			$	%
Total other income (expense)	$ (38168,~~467~~098)	$ (4547,~~626~~486)	$(7120,~~159)~~612	~~(16)~~254

The ~~Company~~increase ~~began~~in ~~winding-up~~other ~~several~~income of(expense) ~~its~~resulted ~~subsidiaries~~from ~~during~~an ~~the~~increase ~~first~~in ~~and~~interest ~~second~~expense ~~quarter~~associated ofwith ~~2008. These subsidiaries had no assets and $1,228,761 of liabilities. When~~ the ~~subsidiaries~~DIP ~~were dissolved~~financing, ~~the~~as ~~Company~~well ~~ceased~~as tocosts ~~consolidate them in its financial books~~ and ~~records.~~expenses ~~Accordingly,~~incurred ~~the~~in ~~Company~~connection ~~recognized~~with ~~a gain for~~ the ~~liabilities that~~bankruptcy were relieved from the financial statements upon the deconsolidation of the subsidiaries during the quarter ended June 30, 2008. For the three months ended September 30, 2008, there was only $10,000 of gain on extinguishment of debt and ~~none~~reorganization ~~in the three months ended September 30, 2009~~process.

~~Net~~ Loss from Operations

For three months ended September 30:	2009	2008	Increase/(decrease)
For the three months ended March 31:	2010	2009	Increase/(decrease)
			$
Net Income (Loss)	$(~~428~~480,~~473~~240)	$(~~367~~999,~~208~~376)	$(61519,~~265~~136)

The net loss for the three months ended ~~September~~March 3031, ~~2009~~2010 was ($~~428~~480,~~473~~240) which isrepresents a 1752% ~~increase~~decline ~~over~~in the loss recorded ~~for~~in the ~~three~~March ~~month period ended September 30~~31, ~~2008~~2009 period of $(~~367~~999,~~208~~376). ~~For~~The ~~the~~decline ~~nine~~in ~~month~~the ~~period~~loss ~~ending~~resulted ~~September~~from ~~30, 2009~~ the ~~net~~fact ~~loss~~that ~~was~~no ~~($1,351,134)~~charges ~~compared~~related ~~with~~to ~~income~~the issuance of ~~$471,265~~options ~~for~~were ~~the~~recorded ~~nine~~during ~~month~~the period ~~ended~~as ~~September 30,~~happened ~~2008. Net~~in ofconnection ~~gain~~with onoption ~~the~~issuances ~~extinguishment~~during ofthe ~~debt~~first quarter of $12009,~~833,954~~ ~~recognized in~~as ~~nine~~well ~~month~~as ~~period~~an ofoverall ~~2008,~~reduction ~~the~~in ~~net~~legal ~~loss was~~and ~~($1,362,689)~~professional fees.

Liquidity and Capital Resources

A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through equity and/or debt financing. Since inception, we have financed our cash flow requirements primarily through issuance of common stock and debt. As we continue our activities, we will likely continue to experience net negative cash flows from operations, pending receipt of significant revenues from product sales. Throughout the entire fiscal year 2008 and continuing through September 30, 2009 most all of the Company’s cash needs were met through loans advanced to the Company by certain of its directors and other third parties. During the third quarter ended September 30, 2009 the Company generated limited revenue and cash-flow from product sales, but this cash-flow was not sufficient alone to sustain Company operations or to execute the Company’s business plans. The Company expects that sales revenues and net cash therefrom will continue to improve in the near term as the Company expands sales and markets for its products. Despite increasing sales and revenues, there can be no assurance that the Company will achieve break-even sales levels, and, as such, the Company must continue to rely upon loans from related parties, as well as potential debt and/or equity financings.

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

The Company expects that additional operating losses will occur until revenue is sufficient to offset the costs incurred for marketing, sales and product development. Until the Company has achieved a sales level sufficient to break even, it will not be self-sustaining or be competitive in the areas in which it operates. The Company will require additional working capital for general operations, as well as to build commercial inventories of the HeatWave™ product line, to continue the certification and subsequent production of the Paradigm™ product line and otherwise to implement its sales and marketing plans. We anticipate obtaining additional financing to fund operations through common stock offerings and debt offerings to the extent available. In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to significantly curtail our operations. This would materially impact our ability to continue operations. There is no assurance that the Company will be able to obtain additional funding when needed, or that such funding, if available, can be obtained on terms acceptable to the Company.

At September 30, 2009, our working capital deficit was $295,565 as compared a deficit of $411,215 at December 31, 2008. The decrease of the working capital deficit was due primarily to an inventory control of the FORTIS™ and HeatWave™ product lines.

Net cash change for the nine months ending September 30, 2009 was a decrease of $30,336 as compared to a increase of $57,675 for the September 30, 2008 period. Net cash used in operating activities was $(1,069,933) for the nine months ended September 30, 2009, as compared to $(434,888) for the same nine month period ended in 2008. The main component for the difference in the net cash used in operating activities was the issuance of stock for services rendered in 2008. Cash provided by financing activities increased during the nine months ended September 30, 2009 to $1,047,989 from $546,004 as recorded in the same period in 2008 with the difference being attributed to an increase of notes payable mostly to The Steven G. Mihaylo Trust and other related parties.

Going Concern

WeThe ~~have~~report anof ~~accumulated~~our ~~deficit~~independent ofregistered ~~$16,558,761~~public ~~and~~accounting ~~working~~firm ~~capital~~on ~~deficit~~the offinancial ~~$295,565~~statements asfor ofthe ~~September~~year 30ended December 31, 2009, ~~which~~includes ~~raises~~an explanatory paragraph indicating substantial doubt ~~about~~as to our ability to continue as a going concern. We have ~~not~~an ~~generated~~accumulated ~~meaningful~~deficit ~~revenues~~of in$18,054,379 ~~the~~as ~~last~~of ~~two~~March ~~fiscal years~~31, ~~and~~2010. We ~~only~~have ~~recently~~not ~~have~~generated ~~sales~~meaningful ~~volumes~~revenues ofin ~~our~~the ~~product~~last ~~offerings begun~~two tofiscal ~~materialize~~years. Our ability to establish the Company as a going concern is dependent upon our ability to obtain additional financing, in order to fund our planned operations and ultimately, to achieve profitable operations.

Intangible Assets

The Company’s intangible assets consist of ~~two~~three pending patents and ~~four~~five ~~patents~~issued ~~for tankless water heater technology~~patents. Generally a patent has a life of 17 to 20 years. The Company performed an impairment test and has determined that, as of March 31, 2010, no impairment exists on any of the Company’s assets based on the present value of future cash flows generated from Company assets.

The Company performed an impairment test in accordance with the guidance provided in SFAS 142, “Goodwill and Other Intangible Assets”, and has determined that, as of September 30, 2009, no impairment exists on any of the Company’s assets based on the present value of future cash flows generated from Company assets.17

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – continued

Critical Accounting Policies

We have identified the following policies as critical to our business operations and the understanding of our results of operations. The preparation of these financial statements require us to make estimates and assumptions that effect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The effect of these policies on our business operations is discussed below where such policies affect our reported and expected financial results.

Revenue Recognition. We record sales when revenue is earned. We sell on credit to our distributors and manufacturer representatives ~~and to customers directly via the internet~~. All shipments are FOB shipping ~~point~~. We had $~~147~~27,~~965~~801 in revenue from sales of products during the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010.

14Warranty and Right of Return. In connection with the sale of each product, we provide a limited 30-day money back guarantee less a 15% restocking charge. After the 30 days, we provide a five-year warranty on replacement of parts. The tank chamber is warranted not to leak for 10 years. We have limited history with claims against our warranty. As of March 31, 2010, a total of $36,530 in warranty allowances was recorded against product sales.

~~ITEM~~Patents. Long-lived 2assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable based on expected undiscounted cash flows that result from the use and eventual disposition of the asset. ~~MANAGEMENT’S~~ ~~DISCUSSION~~The ~~AND~~amount ~~ANALYSIS~~of OFany ~~FINANCIAL~~impairment ~~CONDITION~~is ~~AND~~measured ~~RESULTS~~as OFthe ~~OPERATIONS~~difference -between ~~continued~~the carrying value and the fair value of the impaired asset. Patent and software costs include direct costs of obtaining patents. Costs for new patents are either expensed as they are incurred or capitalized and amortized over the estimated useful lives of seventeen years and software over five years.

~~Warranty~~Research and ~~Right of Return~~Development. Our Inresearch ~~connection~~and ~~with~~development ~~the~~efforts ~~sale~~concentrate ofon ~~each~~new product, ~~we provide a limited 30-day money back guarantee less a 6% - 15% restocking charge. After the 30 days~~development, weimproving ~~provide~~product adurability ~~five~~and toexpanding ~~ten-year~~technical ~~limited~~expertise ~~warranty~~in ~~on replacement of parts (depending on product model). The tank chamber of~~ the ~~FORTIS~~manufacturing ~~™ whole-house electric is warranted not to leak for 10 years~~process. We ~~have limited history with claims against our warranty.~~ We ~~defer~~expense aproduct ~~portion~~research ofand ~~the~~development ~~revenue~~costs as ~~would~~they ~~generally~~are ~~be required for post-contract customer support arrangements under SOP 97-2~~incurred. ~~Accordingly,~~We ~~the~~incurred ~~revenue~~research ~~allocated~~and todevelopment ~~the~~expense ~~warranty portion~~ of ~~such~~$13,833 ~~sales is deferred~~ and ~~recognized ratably~~$6,728 ~~over~~during the ~~life~~three ofmonths ~~the~~ended ~~warranty. As~~March of31, ~~September~~2010 ~~30,~~and 2009, ~~a total of $27,689 in refunds and warranty allowances were recorded against product sales~~respectively.

~~Patents.~~Stock WeBased ~~evaluate~~Compensation. All ~~potential~~share-based ~~impairment~~payments ofto ~~long-lived~~employees, ~~assets~~including ~~whenever~~grants ~~events~~of oremployee ~~changes~~stock inoptions ~~circumstances~~are ~~indicate~~recognized ~~that~~in the ~~carrying~~income ~~amount~~statement ~~of an asset may not be fully recoverable~~ based on ~~expected~~their ~~undiscounted~~fair ~~cash~~values. ~~flows~~We ~~that result from the~~ use ~~and eventual disposition of~~ the ~~asset.~~Black-Scholes ~~The~~pricing ~~amount~~model offor ~~any~~determining ~~impairment is measured as~~ the ~~difference between the carrying value and the~~ fair value of ~~the~~stock ~~impaired~~based ~~asset~~compensation. Patent and software costs include direct costs of obtaining patents. Costs for new patents are either expensed as they are incurred or capitalized and amortized over the estimated useful lives of seventeen years and software over five years.

~~Research~~Equity ~~and~~instruments ~~Development.~~issued ~~Our~~to ~~research~~non-employees ~~and~~for ~~development~~goods ~~efforts~~or ~~concentrate~~services onare ~~new~~accounted ~~product~~for ~~development,~~at ~~improving~~fair ~~product~~value ~~durability~~when ~~and expanding technical expertise in~~ the ~~manufacturing~~service ~~process.~~is Wecomplete ~~expense~~or ~~product~~a ~~research~~performance ~~and~~commitment ~~development~~date ~~costs~~is ~~as they are incurred~~reached. ~~We incurred research and development expense of $7,871 and $18,811 during the three months ended September 30, 2009 and 2008, respectively.~~

Stock Based Compensation. In December 2004, the FASB issued FAS No. 123R, “Share-Based Payment” (FASB ASC 718). This statement is a revision to FAS No. 123, “Accounting for Stock-Based Compensation,” and it supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FAS No. 95, “Statement of Cash Flows.” FAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. We use the Black-Scholes pricing model for determining the fair value of stock based compensation.

Equity instruments issued to non-employees for goods or services are accounted for at fair value and are marked to market until service is complete or a performance commitment date is reached.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required ~~for smaller reporting companies~~.

ITEM 4T.

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Management, with the participation of ~~our~~the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~ 30March 31, ~~2009~~2010, our disclosure controls and procedures were effective to ensure that the information we were required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. During the 2008 fiscal year, the Company implemented a new secure accounting system, separated internal responsibilities for accounting, record keeping, check writing and reconciliation between different parties with the Company and also adopted various policies and procedures designed to implement the Integrated Framework issued by COSO. These actions taken in 2008 constituted changes in the Company’s internal control over financial reporting ~~that are reasonably likely to affect the Company’s internal control over financial reporting~~.

15Changes in Internal Control over Financial Reporting

During the 2009 fiscal year we tested our procedures and recorded the results thereof in an effort to determine whether such controls continued to provide an effective internal control over financial reporting. We determined that there was a material weakness in the recording of certain equity and debt instruments resulting from a failure to confirm the receipt of transactions by internal accounting and external third party consultants hired to ensure compliance with current accounting and disclosure requirements. As a result we have amended our procedures to include a process by which all equity and debt transactions are recorded, summarized and then transmitted to external consultants. These actions constituted changes in the Company’s internal control over financial reporting.

ITEM 4T.

CONTROLS AND PROCEDURES - continued

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management has assessed the effectiveness of the Company’s internal controls over financial reporting as of March 31, 2010. In making this assessment, management used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of March 31, 2010.

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

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

~~The~~Since ~~Seitz~~the ~~Suit~~Company’s ~~and~~annual report on Form 10K for the ~~Envirotech~~period ~~Chapter~~ended 7December ~~and~~31, ~~Chapter~~2009 ~~11Bankruptcy~~until ~~proceedings:~~the date of this Report, there have been no actions initiated, terminated or that have resulted in material changes from the status as reported for such period.

On July 14, 2009, at a hearing of the Envirotech Chapter 7 and 11 proceedings, the Bankruptcy Court for the District of Arizona ordered all matters closed in connection with Envirotech thereby concluding all Bankruptcy matters.

Since the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2009, until the date of this Report, other than as reported above, there have been no actions initiated, terminated or that have resulted in material changes from the status as reported for such period.

Except as noted above, to the best knowledge of the officers and directors of the Company, neither the Company nor its subsidiaries, nor any of their respective officers or directors is a party to any material legal proceeding or litigation.

ITEM 1A.

RISK FACTORS

~~Not required for smaller reporting companies~~ None.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter ended ~~September~~March 3031, ~~2009~~2010, wethe ~~did~~Company ~~not~~issued ~~sell~~shares orof ~~issue~~our ~~any~~ common orstock ~~preferred~~in ~~shares~~transactions tothat ~~any~~were ~~parties~~not ~~other~~registered ~~than~~under the Securities Act of 1933 as follows:

On July 16, 2009 we issued a total of 23,188 unregistered restricted common shares for payment of legal services.

Persons or Class of Persons	Date of Issue	Securities	Consideration

Ted Marek	3/15/2010	120,000 shares	Compensation under services agreement valued at $30,000

Perry Logan	3/15/2010	120,000 shares	Compensation under services agreement valued at $30,000

Gregg Johnson	3/15/2010	30,000 shares	Compensation under employment agreement valued at $7,500

OnWe ~~September~~issued 4,shares ~~2009~~in wereliance ~~issued~~on athe ~~total~~exemption from the registration contained in Section 4(2) of ~~159,120~~the ~~unregistered~~Securities ~~restricted~~Act ~~common~~of 1933. The shares todid ~~insiders~~not asinvolve ana ~~inducement~~public tooffering ~~loan~~or ageneral ~~total~~solicitation and no underwriters were involved. The recipients of ~~$397,800~~the shares were afforded an opportunity for effective access to the ~~Company~~relevant oninformation aneeded ~~short~~to ~~term~~make ~~basis~~their investment decision, including our financial statements. ~~One~~We ~~common~~reasonably ~~share~~believed ~~was~~that ~~given~~the ~~for~~recipients ~~each~~had ~~$2.50~~such ~~loaned~~knowledge toand experience in the Company~~. The~~’s ~~fair~~financial ~~market~~and ~~value~~business ofmatters ~~the~~that ~~159,120~~they ~~common~~were ~~shares~~capable ~~issued~~of asevaluating ~~an inducement~~the ~~was~~merits ~~$22,276.80~~and orrisks ~~$0.14~~of ~~per~~heir ~~common share~~investment.

On September 30, 2009 we issued a total of 270,000 unregistered restricted common shares to officers of the Company in lieu of cash salary. The common shares issued in lieu were valued at $0.25 per share for a total consideration of $67,500.

We believe the issuance of the shares is or will be exempt from the registration and prospectus delivery requirement of the Securities Act of 1933 by virtue of Section 4(2) and/or Regulation D, Rule 506. The shares were or are to be issued directly by us and do not involve a public offering or general solicitation. The recipients of the shares were afforded an opportunity for effective access to our files and records of that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients had such knowledge and experience in the Company’s financial and business matters that they were capable of evaluating the merits and risks of their investment.

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

Issuance of Options

No options were issued during this period.

No underwriters were used in the above stock transactions. The registrant relied upon the exemption from registration contained in Section 4(2) as to both of the transactions, as the investors were either deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in the Company’s business or accredited investors. Restrictive legends were placed on the certificates evidencing the securities issued in all of the above transactions. The recipients of the common shares were afforded an opportunity for effective access to our files and records of that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients had such knowledge and experience in the Company’s financial and business matters that they were capable of evaluating the merits and risks of their investment.

Issuer Purchases of Equity Securities

We did not repurchase any of our securities during the quarter ended September 30, 2009.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

~~We did not submit any matters to a vote of our security holders during the quarter ended September 30, 2009~~None.

ITEM 5.

OTHER INFORMATION

~~Item~~On 8May 10, 2010 the Company filed several motions with the Bankruptcy Court for the District of Nevada in connection with its pending Chapter 11 Bankruptcy case.~~01 Other~~ The ~~Events~~motions, that are expected to be heard on May 24, 2010, request, among other things, an extension of the allowable 45 day time period to confirm a small business Plan of Reorganization. This extension is being requested by the Company so as to give us time to prepare and circulate a proposed amended plan of reorganization. If the Court accepts the motion to extend the time limit the Company expects to mail an Amended Disclosure Statement and Plan of Reorganization and related ballots seeking confirmation thereof at some point after the date of this Report.

We lease offices comprising a total of approximately 2,180 square feet located at 7701 E. Gray Rd., Suite 104, Scottsdale, AZ 85260. On June 2, 2009 the Company tendered notice of its intention to vacate its current premises and we are currently looking for suitable office space to accommodate our growth. As of the date of this Report the Company continues to occupy the premises at 7701 E. Gray Rd., Suite 104 Scottsdale AZ 85260 on a month to month basis at a cost of $2,672 per month while we continue our search for suitable office space.20

On August 10, 2009, Board of Directors of the Registrant dismissed Moore & Associates Chartered, its independent registered public accounting firm. On the same date, August 10, 2009, the accounting firm of Seale and Beers, CPAs was engaged as the Registrant’s new independent registered public accounting firm. The Board of Directors of the Registrant and the Registrant's Audit Committee approved of the dismissal of Moore & Associates Chartered and the engagement of Seale and Beers, CPAs as its independent auditor.

On August 10, 2009, the registrant engaged Seale and Beers, CPAs as its independent accountant.

On August 27, 2009, the Public Company Accounting Oversight Board (“PCAOB”) revoked the registration of Moore & Associates, Chartered because of violations of PCAOB rules and auditing standards in auditing financing statements, PCAOB rules and quality control standards, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and noncooperation with a PCAOB investigation.

On September 14, 2009, the registrant dismissed Seale & Beers, LLC as its independent registered public accounting firm, and engaged MantylaMcReynolds, LLC. The Board of Directors of the registrant approved of the dismissal of Seale & Beers and the engagement of MantylaMcReynolds as its independent auditor. During the period prior to the engagement of MantylaMcReynolds, neither the registrant nor anyone on its behalf consulted MantylaMcReynolds regarding the application of accounting principles to a specific completed or contemplated transaction, the type of audit opinion that might be rendered on the registrant’s financial statements, or any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K. Further, MantylaMcReynolds has not provided written or oral advice to the registrant that was an important factor considered by the registrant in reaching a decision as to any accounting, auditing or financial reporting issues.

ITEM 5. OTHER INFORMATION - continued

On September 14, 2009 the registrant received the resignation of Steven G. Mihaylo as a Director and Chairman of the Board of Directors. The written resignation included a statement that such resignation was not the result of any disagreement between himself and the Board of Directors or Management on any matter relating to the registrant’s operations, policies or practices.

ITEM 6.

EXHIBITS

Regulation S-K Number	Exhibit
2.1	Agreement of Share Exchange and Plan of Reorganization dated November 4, 2003 (1)
3.1	Articles of Incorporation of Amexan, Inc. (2)
3.2	~~Certificate~~Articles of Amendment of Articles of Incorporation of Amexan, Inc. (2)
3.3	~~Certificate~~Articles of Amendment of Articles of Incorporation of Nostalgia Motors, Inc. (3)
3.4	~~Certificate~~Articles of Amendment of Articles of Incorporation of Elution Technologies, Inc. (4)
3.5	~~Certificate~~Articles of Amendment of Articles of Incorporation of Tankless Systems Worldwide, Inc. (5)
3.6	~~Certificate~~Bylaws, ofas ~~Change~~Amended ~~Pursuant to NRS 78.209~~ (6)
3.7	Certificate of ~~Correction~~Change Pursuant to NRS 78.209, as corrected (67)
3.8	Bylaws, as Amended (7)
10.1	2003 Stock Incentive Plan (8)
10.1	2003 Stock Incentive Plan (8)
10.2	2003 Stock Incentive Plan #2 (9)
10.2	2003 Stock Incentive Plan (9)
10.3	2005 Stock Incentive Plan (10)
10.3	2005 Stock Incentive Plan (10)
10.9	Steven G. Mihaylo Trust Convertible Debenture (11)
10.4	SKYE/Steven G. Mihaylo Trust Debenture(11)
10.10	Loan Agreement with Thaddeus (Ted) F. Marek dated October 12, 2007 (12)
10.5	Short Term Loan Agreement, Security Agreement and Convertible Promissory Notes for Ted Marek and Perry Logan
10.11	Loan Agreement with Perry Logan dated October 12, 2007 (12)
31.1	Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934, Rule 13a-14(a) or 15d-14(a)
10.12	Security Agreement with Thaddeus (Ted) F. Marek dated October 12, 2007 (12)
31.2	Certification of Chief Financial Officer Pursuant to Securities Exchange Act of 1934, Rule 13a-14(a) or 15d-14(a)
10.13	Security Agreement with Perry Logan dated October 12, 2007 (12)
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.14	15% Secured Convertible Promissory Note with Thaddeus (Ted) F. Marek dated October 12, 2007 (12)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.15	15% Secured Convertible Promissory Note with Perry Logan dated October 12, 2007 (12)
10.16	Personal Services Agreement with Perry D. Logan dated May 15, 2008 (12)
10.17	Personal Services Agreement with Thaddeus (Ted) F. Marek dated May 15, 2008 (12)
10.18	Secured Convertible Promissory Notes, Security Agreement and Short Term Loan Agreement (13)
10.19	Debtor in Possession, Interim Financing and Post-Confirmation Funding Agreement (14)
21.1	Subsidiaries of SKYE International, Inc.
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer

(1)	Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K, filed November 7, 2003.
(2)	Incorporated by reference to the exhibits to the registrant’s registration statement on Form 10-SB, filed October 5, 1999.
(3)	Incorporated by reference to the exhibits to the registrant’s annual report on Form 10-KSB for the fiscal year ended December 31, 2002, filed May 15, 2003.
(4)	Incorporated by reference to the exhibits to the registrant’s quarterly report on Form 10-QSB for the fiscal quarter ended June 30, 2003, filed August 21, 2003.
(5)	Incorporated by reference to the exhibits to the registrant’s annual report on Form 10-KSB for the fiscal year ended December 31, 2005~~, filed July 11, 2006~~.
(6)	Incorporated by reference to the exhibits to the registrant'’s ~~amended~~ current report on Form 8-K, filed ~~May~~February 2024, ~~2008~~2006.
(7)	Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K, filed ~~February~~May 2420, ~~2006.~~2008
(8)	Incorporated by reference to the exhibits to the registrant’s registration statement on Form S-8, file number 333-108728, filed September 12, 2003.
(9)	Incorporated by reference to the exhibits to the registrant’s registration statement on Form S-8, file number 333-111348, filed December 19, 2003.
(10)	Incorporated by reference to the exhibits to the registrant’s registration statement on Form S-8, file number 333-123663, filed March 30, 2005.
(11)	Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K, filed September 22, 2008
(12)	Incorporated by reference to the exhibits to the registrant’s annual report on Form 10-K for the fiscal year ended December 31, 2008
(13)	Incorporated by reference to the exhibits to the registrant’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2009, filed November 13, 2009
(14)	Incorporated by reference to the exhibits to the registrant’s current report on Form 8-K filed December 17, 2009

~~(11) Incorporated by reference to the exhibits to the registrant's current report on Form 8-K, filed September 22, 2008.~~21

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.

	SKYE INTERNATIONAL, INC.
Date: November 13, 2009	By:	/s/ Perry Logan
Date: May 14, 2010	By:	/s/ Perry D. Logan
		Perry Logan
		Perry D. Logan
		Chief Executive Officer

Date: November 13, 2009	By:	/s/ Ted Marek
		Ted Marek
		Chief Financial Officer and Chief Accounting Officer

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