SCGY Scientific Energy Inc New (PK)

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 June 30, 2008

[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

 Utah 87-0680657
--------------------------------------------------------------------------------
 State or other jurisdiction (I.R.S. Employer Identification No.)
 of incorporation or organization)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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 definition of "larger accelerated filer", and "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ]

Non Accelerated filer [ ] (Do not check if a smaller reporting company)

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.) Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 94,915,855 shares of common stock, par value $0.01, as of August 19, 2008.

SCIENTIFIC ENERGY, INC.
(A Development Stage Company)

Table of Contents

Part I. Financial Information

Item1. Financial Statements

Consolidated Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2007................................................... 4

Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2008 and 2007 with Cumulative Totals since Inception................................... 5

Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2008 and 2007 with Cumulative Totals since Inception. 6

 Notes to Consolidated Financial Statements.............................. 7

Item 2. Management's Discussion and Analysis or Plan of Operation......... 11

Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 15

Item 4T. Controls and Procedures........................................... 15


Part II. Other Information

Item 1. Legal Proceedings................................................ 15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...... 15

Item 3. Defaults Upon Senior Securities.................................. 15

Item 4. Submission of Matters to a Vote of Security Holders.............. 16

Item 5. Other Information................................................ 16

Item 6. Exhibits......................................................... 16

Signatures................................................................. 16

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

SCIENTIFIC ENERGY, INC.
(A Development Stage Company)

Consolidated Balance Sheets

 June 30, December 31,
 2008 2007
 ---------------- ----------------
 (unaudited)

 ASSETS
Current Assets:
Cash and cash equivalents............................. $ 6,417,160 $ 455,304
 ----------------- --------------
 Total Current Assets............................. 6,417,160 455,304

Property, Plant, & Equipment:
Furniture and fixtures................................ 313 313
Office equipment...................................... 2,394 1,222
 ----------------- --------------
 Total Property, Plant, & Equipment............... 2,707 1,535
 Less: accumulated depreciation................... (618) (435)
 ----------------- --------------
 Net property, plant & equipment.................. 2,089 1,100

Total Assets.......................................... $ 6,419,249 $ 456,404
 ================= ==============



 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable...................................... $ - $ 2,750
Salary payable........................................ - 20,000
 ---------------- -------------
 Total Current Liabilities........................ - 22,750

Minority interest in subsidiary....................... 645,190 -

Stockholders' Equity:
 Preferred stock: par value $0.01; 25,000,000 shares authorized;
 none issued and outstanding at June 30, 2008 and
 December 31, 2007................................... - -
Common stock: par value $0.01; 100,000,000 shares authorized;
 94,915,855 shares and 4,915,855 shares issued and outstanding
 at June 30, 2008 and December 31, 2007, respectively 949,158 49,159
Additional paid-in capital............................ 5,734,031 1,234,030
Deficit accumulated during the development stage...... (909,130) (849,535)
 ---------------- --------------
 Total stockholders' equity....................... 5,774,059 433,654

Total Liabilities and Stockholders' Equity............ $ 6,419,249 $ 456,404
 ================ ==============




 See accompanying notes to unaudited consolidated financial statements

SCIENTIFIC ENERGY, INC.
(A Development Stage Company)

Consolidated Statements of Operations (Unaudited)

 Period From
 Three Months Ended Six Months Ended May 30 2001
 June 30, June 30, (Inception) to
 2008 2007 2008 2007 June 30, 2008
 ------------ ---------- --------- --------- -------------

Service Revenue.............................. $ - $ - $ - $ - $ -
Cost of Goods Sold........................... - - - - -
 ------------ ----------- --------- ---------- ------------
 Gross Profit............................ - - - - -

Expenses:
Research and development..................... - - - - 68,090
Write-down of technology and royalties....... - - - - 250,040
General and administrative................... 33,452 15,986 59,453 21,544 689,264
 ------------ ----------- --------- --------- -----------
 Total expenses.......................... 33,452 15,986 59,453 21,544 1,007,394

Loss from operations......................... (33,452) (15,986) (59,453) (21,544) (1,007,394)
 ------------ ----------- ---------- --------- -----------
Other income (expense):
Interest expense............................. - - - - (20,207)
 ------------ ----------- ---------- --------- -----------
 Total other expense..................... - - - - (20,207)

Net loss before discontinued operations...... - - - - (1,027,601)
 ------------ ------------ ---------- ---------- -----------

Income (loss) from discontinued operations... - 273 - 273 375

Gain on disposal of subsidiary............... - - - - 118,238

Net loss before taxes and minority interest.. (33,452) (15,713) (59,453) (21,271) (908,988)

Income tax expense........................... - - - - -
 ------------ ----------- ---------- --------- -----------

Net income before minority interest.......... (33,452) (15,713) (59,453) (21,271) (908,988)

Minority interest in subsidiary income (loss) (142) - (142) - (142)

Net loss..................................... $ (33,594) $ (15,713) $(59,595) $(21,271) $(909,130)
 =========== =========== ========= ========== ===========

Basic and diluted loss per share............. $ (0.00) $ (0.00) $ (0.00) $ (0.00)
 =========== =========== ========= ==========
Weighted average common shares outstanding... 50,410,360 4,915,855 27,663,108 4,915,855
 =========== =========== ========= ==========



 See accompanying notes to unaudited financial statements

SCIENTIFIC ENERGY, INC.
(A Development Stage Company)

Consolidated Statements of Cash Flows (unaudited)

 Period From
 May 30, 2001
 Six Months Ended June 30, (Inception) to
 2008 2007 June 30, 2008
 --------------- ------------- ---------------
Cash Flows from Operating Activities:
Net loss............................................ $ (59,595) $ (21,271) $ (909,130)
Adjustments to reconcile net income to net cash
 used in operating activities:
 Depreciation expense............................. 183 7,429 18,856
 Gain on disposal of subsidiary................... - - (118,238)
 Write-down of technology and royalties........... - - 250,040
 Stock issued for expenses........................ - - 31,200
 Minority interest loss........................... 142 - 142
Changes in operating assets and liabilities:
 Increase (decrease) in accounts payable........... (2750) (57) -
 Decrease in income tax payable.................... - - -
 Increase (decrease) in salary payable............. (20,000) 8,000 -
 ---------------- ------------ --------------
 Net cash used in operating activities........ (82,020) (5,899) (727,130)

Cash Flows from Investing Activities:
Purchase of subsidiary.............................. - - (300,000)
Proceeds from sale of subsidiary.................... - - 400,000
Purchase of property, plant and equipment........... (1,172) (300,161) (2,707)
 ---------------- ------------ -------------
 Net cash used in investing activities........ (1,172) (300,161) 97,293

Cash Flows from Financing Activities:
Minority interest investment........................ 645,048 - 645,048
Principal payments on shareholder loans............. - - (39,915)
Proceeds from shareholder loans..................... - - 630,841
Issuance of common stock............................ 5,400,000 - 5,800,000
Contributed capital................................. - - 11,023
 ---------------- ------------ -------------
 Net cash provided by financing activities.... 6,045,048 - 7,046,997

Increase (decrease) in cash and cash equivalents.... 5,961,856 (306,060) 6,417,160

Cash and cash equivalents, beginning of period...... 455,304 369,365 -
 --------------- ------------- ------------

Cash and cash equivalents, end of period............ $ 6,417,160 $ 63,305 $ 6,417,160
 =============== ============= ============


Supplemental disclosure of cash flow information:

Interest paid in cash............................... $ - $ - $ 6,620
 =============== ============= ============
Income taxes paid in cash........................... $ - $ - $ -
 =============== ============= ============


Supplemental Disclosure of non-cash investing and financing activities:

Common stock exchanged for technology............... $ - $ - $ 250,040
 ============== ============== ===========
Note payable converted to common stock.............. $ - $ - $ 590,926
 ============== ============== ===========
Contributed capital by shareholders for expenses.... $ - $ - $ 31,200
 ============== ============== ===========



 See accompanying notes to unaudited financial statements

SCIENTIFIC ENERGY, INC.
(A Development Stage Company)

Notes to Unaudited Consolidated Financial Statements June 30, 2008

Note 1. Nature of Operations and Basis of Presentation

Scientific Energy, Inc. (the "Company") was incorporated under the laws of the State of Utah on May 30, 2001. The business plan of the Company is to acquire energy - related technologies, equipment and crude oil or natural gas fields. Currently the Company intends to enter into mining and natural resources industry in China. As of June 30, 2008, the Company was in the development stage.

The consolidated financial statements include the accounts of the Company, and its subsidiaries, PDI Global Limited and Kabond Investments Limited. All material intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements of the Company and its wholly owned subsidiary, PDI Global Limited, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Item 8-03 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company's results of operations and financial position for the periods presented. The results of operations for the three months ended June 30, 2008 are not necessarily indicative of the results of operations to be expected for the year ended December 31, 2008. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto of Scientific Energy, Inc. included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

Note 2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash on hand and demand deposits held by banks.

Concentration of Credit Risk

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.

Use of Estimates

The preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. Actual results could vary from those estimates, and those variances might be significant.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost less accumulated depreciation, which is computed using the straight-line method over the useful lives of the assets. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Property and equipment are depreciated over their estimated useful lives as follows:

Office equipment 5 years Furniture and fixtures 7 years

Depreciation expense for the six months ended June 30, 2008 and 2007 was $183 and $7,429, respectively.

Income (loss) per Share

Income (loss) per common share is computed pursuant to the provisions of SFAS No. 128, "Earnings Per Share" (SFAS 128). Under SFAS 128, basic income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding unvested restricted common stock. Diluted loss per common share reflects the additional dilution for all potentially dilutive securities such as unvested restricted common stock and convertible preferred stock.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, or SFAS 141(R). SFAS 141(R) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The provisions of SFAS 141(R) are effective for financial statements issued for fiscal years beginning after December 15, 2008. We are currently assessing the financial impact of SFAS 141(R) on our consolidated financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51, or SFAS 160. SFAS 160 amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," or ARB 51, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement also amends certain of ARB 51's consolidation procedures for consistency with the requirements of SFAS 141(R). In addition, SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The provisions of SFAS 160 are effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently assessing the financial impact of SFAS 160 on our financial statements.

In March of 2008 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133, "Accounting for Derivatives and Hedging Activities." SFAS No. 161 has the same scope as Statement No. 133 but requires enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. SFAS No. 161 has no effect on the Company's financial position, statements of operations, or cash flows at this time.

In May of 2008 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 163, "Accounting for Financial Guarantee Insurance - an interpretation of FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises". This statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This statement also clarifies how Statement 60 applies to financial guarantee insurance contracts. This statement is effective for fiscal years beginning after December 15, 2008. This statement has no effect on the Company's financial reporting at this time.

In May of 2008, the FASB issued Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles." This statement identifies literature established by the FASB as the source for accounting principles to be applied by entities which prepare financial statements presented in conformity with generally accepted accounting principles (GAAP) in the United States. This statement is effective 60 days following approval by the SEC of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." This statement will require no changes in the Company's financial reporting practices.

Note 3 - Principal Stockholder

As of June 30, 2008, Kelton Capital Group Ltd., controlled by Stanley Chan, our president and CEO, owned 31,190,500 shares, or 32.9%, of the Company's common stock. Other than Stanley Chan, no persons own 5% or more of the Company's issued and outstanding shares.

Note 4 - Capital Stock

The Company is authorized to issue 100,000,000 shares of common stock, $0.01 par value, and 25,000,000 shares of preferred stock, $0.01 par value. As of June 30, 2008, there were 94,915,855 shares of the Company's common stock issued and outstanding, and none of the preferred shares were issued and outstanding.

On May 23, 2006, the Company entered into a stock purchase agreement with Kelton Capital Group Ltd., the controlling shareholder of the Company, and each of ten individual investors in a private placement. Pursuant to the agreement, the Company sold and investors purchased an aggregate of 4,000,000 shares of the Company's common stock for an aggregate consideration of $400,000 in cash.

On January 25, 2007, the Company amended its Articles of Incorporation to affect a reverse stock split of the Company's common stock in which every ten (10) outstanding shares would be combined into one (1) share. All share transactions disclosed in these financial statements give retroactive effect to this 1:10 reverse split.

On May 15, 2008, the Company issued 90,000,000 shares to 18 investors in a private placement in exchange for an aggregate consideration of $5,400,000 in cash.

Note 5 - Additional Paid-In Capital

In connection with the change in control of the Company, on May 31, 2006, the selling shareholders paid off all liabilities (Accounts Payable, Note Payable- Shareholder) of the Company by using their personal funds in an aggregate amount of $11,023, which was recorded as additional paid-in capital.

Note 6 - Transactions with Related Parties

On April 14, 2006, there was a change in control of the Company effected pursuant to a share purchase agreement by and among Todd Crosland, Jana Meyer, Mark Clawson and Dale Gledhill (collectively the "Sellers"), and Kelton Capital Group Limited (the "Buyer"). Each of the Sellers was a director of the Company. Under the agreement, the Buyer acquired from the Sellers an aggregate of 790,500 shares of the Company's issued and outstanding common stock, representing approximately 86.3% of the Company's outstanding shares at that time, for the aggregate cash purchase price of $539,929.

On May 23, 2006, the Company entered into a stock purchase agreement with Kelton Capital Group Ltd., a company controlled by Stanley Chan, our president and CEO. Under the agreement, Kelton purchased 1,600,000 shares of the Company's common stock at a price of $0.10 per share.

On May 15, 2008, the Company issued 28,800,000 shares of its common stock as part of the 90,000,000 issued in the private placement to Kelton Capital Group Ltd., a company controlled by Stanley Chan, our president and CEO, in exchange for $1,728,000 in cash.

Note 7 - Acquisition and Sale of Assets

On April 21, 2007, the Company entered into an Asset Purchase Agreement with PT Prima Jasa Energy, an Indonesian crude oil drilling and service corporation ("PJE"), for the acquisition of certain of PJE's assets, including certain heavy drilling equipment, facilities and contract rights associated with its crude oil drilling and service business. The purchase price for the assets was $300,000. The transactions were closed April 30, 2007.

On April 21, 2007, the Company also entered into a long-term Drilling Services Agreement with PJE, pursuant to which PJE will provide crude oil drilling and services to the Company as an independent contractor. Under this contract PJE will utilize the equipment and other assets purchased by the Company under the Asset Purchase Agreement to provide drilling services under the operating contract rights the Company acquired from PJE under the Asset Purchase Agreement. Under the contract PJE will also search for and develop new clients on behalf of the Company, will maintain the equipment purchased, and will collect accounts receivable under the operating contract rights on behalf of the Company. The Services Agreement commenced on May 1, 2007.

On October 29, 2007, the Company entered into an Asset Purchase Agreement with Bermon Capital Holdings Limited, a Hong Kong corporation, for the sale of the Company's certain assets for $400,000. The assets sold include certain heavy drilling equipment, facilities and associated contract rights, which the Company purchased in April 2007 for $300,000 from PT Prima Jasa Energy, an Indonesian crude oil drilling and service company.

Note 8 - Establishment of a Subsidiary

On January 21, 2008, the Company, through its wholly owned subsidiary PDI Global Ltd., which was incorporated under the laws of Territory of the British Virgin Islands on January 21, 2008, entered into a joint venture agreement with China Resources Development Group Ltd., a Hong Kong company. Under the agreement a joint venture company, Kabond Investments Limited (the "JVC"), has been established in Hong Kong, and the Company invested $39,600,000 Hong Kong dollars (approximately USD$5.09 million) into the JVC for 72% of the JVC's capital shares, and China Resources Development Group Ltd., jointly with its partner, invested $15,400,000 Hong Kong dollars (approximately USD$1.98 million) into the JVC to receive 28% of the JVC's capital shares. As of June 30, 2008, China Resources Development has contributed $645,245 in cash and the remaining $1,334,190. has been recorded in the JVC as a stock subscription receivable. The purpose of this transaction is for the Company to set up a business entity in China to gain access to mineral products, mineral resources and sales channel in China.

On January 25, 2008, the Company entered into a subscription agreement with 18 non-US investors, pursuant to which the Company agreed to issue, in a private placement, an aggregate of 90,000,000 shares of its restricted common stock to those investors, at a purchase price of $0.06 per share, for an aggregate of purchase price of $5.4 million. The transaction was completed by May 15, 2008. Pursuant to the JVC agreement, the Company transferred $5,089,736, of the proceeds received from the private placement to the JVC, which is used to set up a business entity in China to gain access to mineral products, mineral resources and sales channel in China.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report contains certain forward-looking statements that involve risks and uncertainties. We use words such as "anticipate," "believe," "expect," "future," "intend," "plan," and similar expressions to identify forward-looking statements. These statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements.

Overview

The Company has not engaged in material operations or realized revenues since inception outside of discontinued operations as disclosed in the Company's 10-KSB for the year ended December 31, 2007. On April 14, 2006, Kelton Capital Group Ltd. acquired a majority of the Company's issued and outstanding common stock. Prior to April 2006, the business plan of the Company was to develop and manufacture various energy generation devices and energy efficient mechanisms for use in currently available products.

In April 2007, the Company acquired certain heavy drilling equipment, facilities and contract rights associated with crude oil drilling and service business from PT Prima Jasa Energy, an Indonesian crude oil drilling and service firm ("PJE"), for $300,000. At the same time, the Company entered into a long-term drilling services agreement with PJE, pursuant to which PJE will provide crude oil drilling and services to the Company. Under the agreement, PJE agrees to provide drilling, marketing, and equipment maintenance services to the Company by utilizing the equipment and other assets the Company purchased from PJE.

In October 2007, the Company sold all drilling equipment, facilities and associated contract rights the Company purchased from PJE to Bermon Capital Holdings Limited for $400,000, and intends to enter into mining and natural resources industry in China.

On January 21, 2008, the Company, through its wholly owned subsidiary PDI Global Ltd., which was incorporated under the laws of Territory of the British Virgin Islands on January 21, 2008, entered into an agreement with China Resources Development Group Ltd., a Hong Kong company. Under the agreement, a joint venture company, Kabond Investments Limited (the "JVC"), has been established in Hong Kong, and the Company invested $39,600,000 Hong Kong dollars (approximately USD$5.09 million) into the JVC to get 72% of the JVC's capital shares, and China Resources Development Group Ltd., jointly with partner, invested $15,400,000 Hong Kong dollars (approximately USD$1.98 million) into the JVC to receive 28% of the JVC's capital shares. The purpose of this transaction is for the Company to set up a business entity in China to gain access to mineral products, mineral resources and sales channel in China.

For that purpose, on January 25, 2008, the Company entered into a subscription agreement with 18 non-US investors, pursuant to which the Company agreed to issue, in a private placement, an aggregate of 90,000,000 shares of its restricted common stock to those investors, at a purchase price of $0.06 per share, for an aggregate of purchase price of $5.4 million. The transaction was completed and the shares were issued on May 15, 2008.

In order to set up an entity in China to gain access to mineral products and resources in Luobei, Heilongjiang Province, China, the "JVC" remitted HK$45 million, approximately $5.77 million, to Heilongjiang Branch, Bank of China, as a deposit on July 4, 2008, for foreign currency verification to obtain government approval. The examination and approval process for the establishment of that entity is expected to be completed in the third quarter of 2008.

Results of Operations

For the Three Months Ended March 31, 2008 and 2007

Revenues

In October 2007, the Company's drilling service operations were discontinued. For the three months ended June 30, 2008, the Company did not generate any revenue, as well as for the same period of the previous year.

Operating Expenses

For the three months ended June 30, 2008, the Company's operating expenses were $33,452, as compared to $15,986 for the same period of the prior year. The largest expense items in the second quarter of 2008 were salary expense ($12,000, or 35.9%), professional fees ($8,425, or 25.2%), China earthquake donation ($10,000, or 29.9%), and office rent ($1,460, or 4.4 %).

Net Loss

For the three months ended June 30, 2008, the Company had a net loss of $33,594, or $0.00 per share, as compared to a net loss of $15,713, or $0.00 per share, for the prior year.

For the Six Months Ended June 30, 2008 and 2007

Revenues

In October 2007, the drilling service operations of the Company were discontinued. For the six months ended June 30, 2008 and 2007, the Company did not generate any revenue.

Operating Expenses

For the six months ended June 30, 2008, the Company's operating expenses were $59,453, as compared to $21,544 for the same period of the prior year. The largest expense items for the period were salary expense ($24,000, or 40.4%), professional fees ($20,652, or 34.7%), China earthquake donation ($10,000, or 16.8%), and office rent ($2,900, or 4.9%).

Net Loss

For the six months ended June 30, 2008, the Company had a net loss of $59,595, or $0.00 per share, as compared to a net loss of $21,271, or $0.00 per share, for the prior year.

Liquidity and Capital Resources

Since inception, the Company has funded its operations primarily by equity capital and short-term loans from its directors and officers. On May 23, 2006, the Company issued an aggregate of 4,000,000 shares of its common stock to ten investors for an aggregate consideration of $400,000 in cash. On May 15, 2008, the Company issued an aggregate of 90,000,000 shares of its common stock to 18 investors, in a private placement, for an aggregate of purchase price of $5.4 million in cash.

As of June 30, 2008, the Company had cash and cash equivalents of $6,417,160. For the six months ended June 30, 2008, the Company's operating activities used net cash of $82,020 primarily due the Company's net loss during the period and the payment of outstanding salaries.

During the six months ended June 30, 2008, the Company's investing activities used $1,172 of net cash due to the purchase of equipment. For the same period, the financing activities provided net cash of $5,400,000 as a result of proceeds from issuance of the Company's common stock.

The Company's sources of working capital are limited. Its current proposed business plan calls for significant additional capital. To finance any business operations, it may be necessary for the Company to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us, and, in the case of equity financings, would result in dilution to our stockholders. There can be no assurance that such additional financing, when and if necessary, will be available to us on acceptable terms, or at all.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

Our financial statements and related public information are based on the application of generally accepted accounting principles in the United States ("GAAP"). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that may have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. We base our estimates on historical experience and on various assumptions that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 2 to our financial statements. While all of these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements. Our critical accounting policies are discussed below.

Impairment of Long-Lived Assets

Long-lived assets, including our property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets used in operations, impairment losses are only recorded if the asset's carrying amount is not recoverable through its undiscounted, probability-weighted cash flows, including estimated net proceeds if we were to sell a long-lived asset. When applicable, we measure the impairment loss based on the difference between the carrying amount and estimated fair value.

We periodically review our long-lived assets, in light of our history of operating losses, but under the methodology described above, we have not been required to record any impairment losses. Should applicable external factors such as competition, governmental regulations or other market conditions change in such a way as to be materially adverse to our business, impairment losses might be required in the future.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the Company's market risk during the quarter or six months ended June 30, 2008. For additional information, refer to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

Item 4T. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

(b) Changes in Internal Controls over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit No. Title of Document
---------- -------------------------------------------
 31 Rule 13a-14(a)/15d -14(a) Certification
 32 Section 1350 Certification

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SCIENTIFIC ENERGY, INC.

Date: August 19, 2008



By:/s/ Stanley Chan
--------------------------------------
Stanley Chan
President and Chief Executive Officer

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