Idleaire Technologies 10QSB 2007 Q2 Quarterly report (small business)

Idleaire Technologies Inactive 10QSB2007 Q2 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 2007


o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission file number 000-51966

IdleAire Technologies Corporation

(Exact name of small business issuer as specified in its charter)


Delaware		62-1829384

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

410 N. Cedar Bluff Road, Suite 200, Knoxville, Tennessee 37923

(Address of principal executive offices)

(865) 437-3600

(Issuer’s telephone number)

Not Applicable

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12,13 or15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yeso Noo

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:As of July 31, 2007, the issuer had 48,827,414 shares of common stock, par value $0.001 per share, issued and outstanding.

Transitional Small Business Disclosure Yes No
Format (Check one): o þ

IdleAire Technologies Corporation

Form 10-QSB

Table of Contents


Part I. FINANCIAL INFORMATION

Item 1 – Financial Statements (unaudited)

Condensed Balance Sheets as of June 30, 2007 and December 31, 2006			1
Condensed Statements of Operations for the Three Months and Six Months Ended June 30, 2007 and 2006			2
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006			3
Notes to Condensed Unaudited Financial Statements			4

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			13

Item 3 – Controls and Procedures			24

Part II. OTHER INFORMATION

Item 1A – Risk Factors			26

Item 1B – Legal Proceedings			34

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			34

Item 3 – Defaults Upon Senior Securities			34

Item 4 – Submission of Matters to a Vote of Security Holders			35

Item 5 – Other Information			36

Item 6 – Exhibits			36

Signatures			37

EX-31.1
EX-31.2
EX-32.1
EX-32.2

Part I. Financial Information

Item 1. Financial Statements

IdleAire Technologies Corporation

Condensed Balance Sheets
(Unaudited)


	June 30,			December 31,
	2007			2006

Assets
Current assets:
Cash and cash equivalents	$	19,423,293		$	16,632,466
Short-term trading securities		14,900,000			15,000,000
Accounts receivable		1,494,660			5,587,935
Inventories		772,020			950,742
Prepaid expenses and other current assets		2,141,013			1,915,075

Total current assets		38,730,986			40,086,218

Restricted cash and investments		1,065,526			39,221,783
Deposits with vendors		13,091,102			15,974,745
Property and equipment, net		156,092,600			137,507,599
Deferred financing costs, net		28,735,860			29,452,860
Other assets		433,185			110,130

Total assets	$	238,149,259		$	262,353,335


Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	1,989,351		$	6,222,687
Accrued expenses		7,396,592			5,672,425
Deferred trade revenue		1,765,626			1,221,147
Deferred grant revenue		2,301,447			1,161,344

Total current liabilities		13,453,016			14,277,603

Deferred grant revenue		12,436,374			10,812,118
Other liabilities		3,691,265			2,965,167
Secured convertible notes		100,000			100,000
Senior secured discount notes		252,805,994			234,510,984

Total liabilities		282,486,649			262,665,872

Stockholders’ deficit:
Series A convertible preferred stock, $0.001 par value; 22,000,000 shares authorized, 17,171,448 shares issued and outstanding		30,349,676			30,349,676
Series B convertible preferred stock, $0.001 par value; 13,000,000 shares authorized, 12,566,774 shares issued and outstanding		48,673,927			49,055,727
Series C convertible preferred stock, $0.001 par value; 11,000,000 shares authorized, 4,473,032 shares issued and outstanding		22,155,254			22,155,254
Common stock, $0.001 par value; 200,000,000 shares authorized, 48,827,414 and 48,646,610 shares issued at June 30, 2007 and December 31, 2006, respectively		48,827			48,647
Stockholder subscription receivable		(925,000	)		(925,000	)
Treasury stock, 111,111 common shares, at cost		(200,000	)		(200,000	)
Additional paid-in capital		53,011,759			52,207,709
Accumulated deficit		(197,451,833	)		(153,004,550	)

Total stockholders’ deficit		(44,337,390	)		(312,537	)

Total liabilities and stockholders’ deficit	$	238,149,259		$	262,353,335

See accompanying notes.

The condensed balance sheet as of December 31, 2006 is taken from the audited financial statements at that date.

IdleAire Technologies Corporation

Condensed Statements of Operations
(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Net revenues:
Basic and premium services, net	$	7,189,035		$	1,764,603		$	12,534,291		$	2,793,681
Ancillary product sales		508,702			224,638			956,880			328,934
Grant revenues		637,092			479,388			1,208,769			917,385
Other revenues		77,513			92,446			174,543			173,650

Total net revenues		8,412,342			2,561,075			14,874,483			4,213,650

Operating expenses:
Direct site operating costs (1)		12,335,096			4,018,632			23,505,419			6,490,130
Cost of ancillary product sales		317,718			163,536			564,425			244,588
Depreciation and amortization		5,250,491			1,573,988			10,094,836			2,933,422
Selling, general and administrative expenses		5,428,728			3,683,122			10,421,208			7,608,621
Impairment of long-lived assets		—			1,303,885			—			1,303,885
Loss on settlement of asset retirement obligation		—			316,807			—			316,807
Loss on disposal of fixed assets		54,412			970,242			177,234			988,623

Total operating expenses		23,386,445			12,030,212			44,763,122			19,886,076


Loss from operations		(14,974,103	)		(9,469,137	)		(29,888,639	)		(15,672,426	)

Interest income		564,961			2,218,700			1,427,221			4,330,105
Interest expense		(8,102,475	)		(6,634,079	)		(15,985,865	)		(14,484,711	)


Net loss	$	(22,511,617	)	$	(13,884,516	)	$	(44,447,283	)	$	(25,827,032	)


(1)		Excludes depreciation expense in the amount of $4,826,150 and $1,360,493 for the three months ended June 30, 2007 and 2006, respectively, and $9,307,420 and $2,534,970 for the six months ended June 30, 2007 and 2006, respectively, reported in a separate caption.

See accompanying notes.

IdleAire Technologies Corporation

Condensed Statements of Cash Flows
(Unaudited)


	For the Six Months Ended
	June 30,
	2007			2006

Operating activities
Net loss	$	(44,447,283	)	$	(25,827,032	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense, net of amounts capitalized		15,259,291			14,295,578
Amortization of deferred financing costs		717,000			174,000
Depreciation and amortization		10,094,836			2,933,422
Impairment of long-lived assets		—			1,303,885
Accretion of asset retirement obligations		200,405			275,144
Loss on settlement of asset retirement obligation		—			316,807
Loss on disposal of property and equipment		177,234			988,623
Share-based compensation expense		226,920			133,144
Issuance of warrants for goods or services		—			41,000
Changes in operating assets and liabilities:
Accounts receivable		4,093,275			592,533
Inventories		178,722			(152,036	)
Prepaid expenses and other assets		(493,368	)		(301,001	)
Interest income earned on restricted cash		(387,785	)		(3,948,481	)
Acquisition of short-term trading securities, net		100,000			—
Accounts payable		(4,233,336	)		5,875,821
Accrued expenses		1,686,150			2,808,765
Deferred trade revenue		544,479			39,462
Deferred grant revenue		2,764,359			(911,772	)
Cash settlement of asset retirement obligation		—			(331,022	)

Net cash used in operating activities		(13,519,101	)		(1,693,160	)

Investing activities
Purchases of property and equipment		(24,890,785	)		(31,175,192	)
Proceeds from disposal of property and equipment		3,079			—
Deposits with vendors toward equipment purchases, net		2,883,643			(31,008,425	)
Cost of patents		(24,771	)		(34,942	)
Restricted cash released to operations		38,544,042			75,774,671

Net cash provided by investing activities		16,515,208			13,556,112

Financing activities
Proceeds from exercise of stock options and warrants		34,504			108,505
Deferred offering costs incurred		(72,193	)		—
Deferred financing costs incurred		—			(135,553	)
Payments on capital lease obligations		(167,591	)		(4,354	)

Net cash used in financing activities		(205,280	)		(31,402	)

Net increase in cash and cash equivalents		2,790,827			11,831,550
Cash and cash equivalents at beginning of period		16,632,466			5,925,600

Cash and cash equivalents at end of period	$	19,423,293		$	17,757,150


Supplemental non-cash activities
Anti-dilution warrants as additional debt discount	$	161,006		$	114,571
Receipt of free equipment as a vendor concession	$	345,600		$	975,000
Warrants as finder’s fee in connection with sale of Series B convertible preferred stock	$	381,800		$	—

See accompanying notes.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation

IdleAire Technologies Corporation (the Company) offers comprehensive in-cab idle reduction, driver work environment, communication, safety and other training services to the long-haul trucking industry. The Company provides its ATE Advanced Truck Stop Electrification^® services at travel centers and truck fleet terminals throughout the continental United States. As of June 30, 2007, the Company operated 118 sites in 33 states.

In December 2005, the Company completed a discount note and warrant offering, the proceeds of which are being used to fund the installation of ATE systems at numerous additional sites around the United States, and to fund interim operating losses. At June 30, 2007, the Company had open commitments on purchase orders of approximately $55.4 million, primarily for various site equipment components pursuant to the Company’s capital expansion plans. The majority of these commitments do not have a specific contractual end date associated with them. The Company actively manages its supplier relationships in order to ensure timely receipt of necessary components, while minimizing the stockpiling of components in advance of construction.

At June 30, 2007, the Company had approximately $19.4 million of cash and cash equivalents, $14.9 million of short-term investments, $1.1 million in restricted cash and investments, and $13.1 million of deposits held by suppliers to be applied to vendor invoices related to the open commitments on purchase orders noted above. The Company has experienced and continues to experience negative operating margins and negative cash flows from operations, has not attained profitable results of operations to date, and has a deficit of $44.3 million in stockholders’ equity at June 30, 2007. Management believes that the Company has sufficient resources to fund its open commitments on purchase orders and its operations during 2007; however, depending on the cash from operations over the remainder of 2007, the Company may be required to limit its site development in 2007 to assist in this regard. Additionally, the Company may be required to limit its site development and seek additional financing in 2008 and beyond to maintain liquidity and fund its operations. Any sale of additional equity or issuance of debt securities may result in dilution to stockholders, and there can be no assurance as to the availability or terms upon which additional funding sources may be available in the future, if at all. The Company announced on July 25, 2007 that it has plans to file with the Securities and Exchange Commission a registered initial public offering of its common stock. However, there is no assurance that the filing will be made or that the offering will indeed take place. The offering, if any, will be made only by means of a prospectus.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

The unaudited financial statements of IdleAire Technologies Corporation included herein have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The financial statements are prepared on a consistent basis with those of the annual financial statements for the year ended December 31, 2006 and should be read in conjunction with the audited financial statements and notes thereto. The interim results are not necessarily indicative of the results that may be expected for a full year.

Certain prior period amounts have been reclassified in order to conform to the current period presentation.

Revenue Recognition

Revenue for services is recognized as service is completed; revenue from ancillary product sales is recognized at the point of sale. Reported revenues exclude sales taxes. Revenue is recorded net of promotional, contractual and customer service discounts as the Company continues to utilize discounts to introduce its services to truck drivers through its facilities at travel centers, truck fleet terminals and other locations. Deferred trade revenue represents unutilized balances from the sale of prepaid cards and member cards.

Grant revenue is recognized as follows: (i) grants with continuing service requirements are recognized on a straight-line basis over the life of the contract; (ii) grants otherwise designated for funding of revenue-generating equipment are recognized on a straight-line basis over the life of the respective equipment; and (iii) grants funded based on hours of emission reduction are recognized based on actual usage over the term of the grant. Deferred grant revenue represents that portion of grant monies billed or received but not yet earned.

On January 1, 2007, the Company adopted Emerging Issues Task Force Issue No. 06-3 (“EITF 06-3”),How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation).Pursuant to the adoption of this standard, the Company has elected to exclude from revenue all sales taxes and any other taxes that are imposed on a revenue transaction between the Company and its customers. The adoption of EITF 06-3 had no effect on the Company’s financial statements, since this policy is consistent with prior treatment.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

Property and Equipment

Property and equipment, including improvements that add to productive capacity or extend the useful life, are carried at cost. Amortization of assets recorded under capital leases is included with depreciation expense in the accompanying statements of operations. Depreciation is computed by the straight-line method over the estimated useful lives of the assets as follows:


Revenue generating equipment	3-15	years
Furniture and fixtures	5	years
Data processing equipment and software	3	years
Automobiles and motorized equipment	3	years

Leasehold improvements are depreciated over the shorter of useful life or lease term.

Capitalized Leases

During 2006, the Company entered into an agreement with a service provider which included terms that required the service provider to furnish certain equipment, at no additional cost to the Company, as sites are constructed. The Company capitalizes the fair value of this equipment as a capital lease in accordance with EITF 01-8,Determining Whether an Arrangement Contains a Leaseand Statement of Financial Accounting Standards No. 13,Accounting for Leasesand reduces the lease obligation over the term of the service agreement as service fees are paid.As of June 30, 2007, capitalized lease obligations were $1,618,463, of which $1,433,218 and $185,245 are included with other liabilities and accrued expenses, respectively, in the accompanying balance sheets. As of December 31, 2006, capitalized lease obligations were $1,345,164, of which $1,197,936 and $147,228 are included with other liabilities and accrued expenses, respectively, in the accompanying balance sheets.

Impairment of Long-Lived Assets

When indicators of impairment are present, the Company evaluates the carrying value of constructed revenue-generating assets in relation to the operating performance and future undiscounted cash flows of the underlying assets in accordance with Statement of Financial Accounting Standards No. 144,Accounting for the Disposal or Impairment of Long-Lived Assets(“SFAS No. 144”). Based on these evaluations, asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount of the respective asset.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

Asset Retirement Obligations

The Company’s lease agreements with certain of its travel centers and host sites generally contain obligations to return the leased property to its original condition upon termination of the lease. The Company accounts for these obligations in accordance with Statement of Financial Accounting Standards No. 143,Accounting for Asset Retirement Obligationsand FASB Interpretation 47,Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143. The Company’s asset retirement obligation was $2,258,047 and $1,767,231 at June 30, 2007 and December 31, 2006, respectively, and is included with other liabilities in the accompanying balance sheets.

Key assumptions used to calculate the Company’s asset retirement obligations were (i) 2.5% rate of inflation; (ii) weighted average credit-adjusted risk-free interest rate of 21%; and (iii) weighted average term of obligation of 13 years. Expected settlement dates generally represent the lesser of the useful life of the constructed assets or the life of the lease, and are evaluated using site-specific facts and circumstances.

Share-Based Compensation

The Company accounts for share-based payments to employees in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 123 – revised 2004 (“SFAS 123(R)”),Share-Based Payment.Under the fair value recognition provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date based on the fair value of the award.

Since the Company used the minimum-value method to measure pro forma compensation cost for employee stock options under SFAS 123, it was required to use the prospective method upon adoption of SFAS 123(R). Under the prospective method, the Company continues to account for its nonvested awards outstanding at January 1, 2006 using the provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees. All awards granted, modified or settled after January 1, 2006 are accounted for using the measurement recognition and attribution provisions of SFAS 123(R). Additionally, deferred taxes, excess tax benefits and tax deduction deficiencies also continue to be accounted for under those methods. Accordingly, the pool of excess tax benefits for awards accounted for under SFAS 123(R) started at $0 on January 1, 2006.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

Income Taxes

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. At the adoption date and as of June 30, 2007, the Company had no uncertain tax positions and no adjustments to liabilities or retained earnings were required.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense, which was $0 for the three months and six months ended June 30, 2007.

Tax years 2003 through 2006 and 2002 through 2006 are subject to examination by the federal and state taxing authorities, respectively. However, due to the Company’s historical net operating loss position, all tax attributes are subject to adjustment upon examination. There are no income tax examinations currently in process.

New Accounting Standards

On September 15, 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157,Fair Value Measurements. This new Statement defines fair value, establishes the framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Although early adoption of this Statement is permitted, it will be effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating what impact, if any, this new standard may have on its financial statements.

On February 15, 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. The Statement permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. It will be effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted, provided the Company also elects to apply the provisions of SFAS No. 157. The Company is in the process of evaluating what impact, if any, this new standard may have on its financial statements.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

2. Property and Equipment

Property and equipment consist of the following:


	June 30,			December 31,
	2007			2006

Revenue-generating equipment	$	150,773,084		$	125,410,713
Leasehold improvements		905,736			826,722
Furniture and fixtures		711,733			679,746
Data processing equipment and software		5,716,577			4,998,987
Automobiles and motorized equipment		2,834,195			1,521,893
Service units in process		25,692,426			25,093,253

		186,633,751			158,531,314

Less accumulated depreciation and amortization		(30,541,151	)		(21,023,715	)

	$	156,092,600		$	137,507,599

At June 30, 2007 and December 31, 2006, revenue-generating equipment and service units in process above include $1,728,000 and $1,382,393, respectively, of free equipment subject to a capital lease (see Note 1). Accumulated depreciation associated with this equipment was $166,980 and $58,908 at June 30, 2007 and December 31, 2006, respectively.

During the three months and six months ended June 30, 2007, the Company opened 10 new sites and 19 new sites, respectively. During the three months and six months ended June 30, 2006, the Company opened 15 new sites and 16 new sites, respectively. At June 30, 2007, the Company had 8 additional sites under physical construction. The Company capitalized internal costs relating to the construction and deployment of new sites, as follows: during the three months and six months ended June 30, 2007, the Company capitalized interest of $1,753,214 and $3,292,014, respectively; and capitalized salaries and travel costs of $570,844 and $1,055,154, respectively. During the three months and six months ended June 30, 2006, the Company capitalized interest and salaries of $1,562,422 and $660,196, respectively.

At June 30, 2007 and December 31, 2006, deposits with vendors toward future purchases of revenue-generating equipment were $13,091,102 and $15,974,745, respectively.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

A summary of depreciation expense follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

Depreciation expense on revenue-generating equipment	$	4,826,150	$	1,360,493	$	9,307,420	$	2,534,970
Depreciation expense on non-revenue-generating equipment		412,806		206,380		766,922		384,455


Total depreciation expense	$	5,238,956	$	1,566,873	$	10,074,342	$	2,919,425

3. Debt and Equity

During 2006 and 2007, the Company issued warrants to certain members of management and directors. These issuances triggered the anti-dilution provisions contained in the warrant agreement by and between the Company and Wells Fargo Bank, N.A., as the Warrant Agent, dated December 30, 2005 (the “Warrant Agreement”). At June 30, 2007, the Company was obligated to issue 283,805 additional warrants to the holders of warrants issued on December 30, 2005 pursuant to the Warrant Agreement.

In December 2005, we raised approximately $234.8 million through the sale of Senior Discount Notes (the “Notes”) and Common Stock Warrants (the “Senior Discount Notes Offering”). In connection with the Senior Discount Notes Offering, the Company entered into a Registration Rights Agreement with the holders named therein, dated December 30, 2005 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to make an offer to exchange the Notes for registered, publicly tradable notes with substantially identical terms within 2 years from the issue date. If the Company had failed to fulfill its obligations with respect to the exchange offer or the registration of the Notes, the holders of the Notes would have been entitled to receive additional warrants that would have entitled the holders to purchase at $0.01 per share an aggregate number of Company common stock equal to 5.0% of the then outstanding common stock of the Company on a fully diluted basis (the “Registration Default Warrants”). The Company fulfilled its registration obligation under the Registration Rights Agreement by commencing an exchange offer on July 16, 2007. The exchange offer is currently scheduled to expire at 5:00 pm., New York City time, on August 14, 2007. As a result, the Company will not be required to issue any Registration Default Warrants under the Registration Rights Agreement.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

4. Share-Based Compensation

The Company granted 195,500 and 223,000 stock options to employees at a weighted average fair value per share of $.96 and $1.04 during the three months and six months ended June 30, 2007, respectively. The Company granted 824,000 and 855,575 stock options to employees at a weighted average fair value per share of $.44 during the three months and six months ended June 30, 2006, respectively. The fair value per share was calculated using the Black Scholes Merton model with the following weighted average assumptions:


	For the Six Months Ended
	June 30,
	2007			2006

Expected term in years		5.9			5.6
Risk-free interest rate		4.6	%		4.9	%
Expected dividend rate		—			—
Expected volatility		36.7	%		51.7	%

For the three months and six months ended June 30, 2007, the Company recorded share-based compensation expense to employees and directors of $178,397 and $226,920, respectively. For the three months and six months ended June 30, 2006, the Company recorded share-based compensation expense of $123,044 and $133,144, respectively.

During the six months ended June 30, 2007, management became aware that a warrant for 95,450 common shares that was issued to a director in satisfaction of a finder’s fee obligation related to the 2004 Series B preferred stock offering had not been recorded in the financial statements. The Company recorded the transaction during the six months ended June 30, 2007, which resulted in a $381,800 decrease to Series B preferred stock and a corresponding increase to additional paid-in capital. As a result of the anti-dilution provisions contained in the Warrant Agreement, the Company became obligated to issue 51,400 additional warrants to the holders of warrants issued on December 30, 2005 and recorded an additional debt discount and corresponding increase to additional paid-in capital of $42,000 during the six months ended June 30, 2007. These adjustments were not material to debt, equity or the results of operations of any prior periods and, accordingly, did not require restatement of any prior periods.

The Company’s Board Compensation policy provides for annual equity awards to non-employee directors as compensation for serving on the Board of Directors. Specifically, non-employee directors are granted the right to receive either (i) a warrant to purchase 10,000 shares of common stock or (ii) 10,000 restricted common shares. During the three months ended June 30, 2007, the Company granted non-employee directors equity awards for 2006 and 2007, totaling 100,000 shares. The fair value of this grant was $221,000, of which $121,917 was recorded as compensation expense during the three months ended June 30, 2007. As a result of the anti-dilution provisions contained in the Warrant Agreement, the Company became obligated to issue 53,849 additional warrants to the holders of warrants issued on December 30, 2005 and recorded an additional debt discount and corresponding increase to additional paid-in capital of $119,006 during the six months ended June 30, 2007.

IdleAire Technologies Corporation

Notes to Condensed Unaudited Financial Statements

5. Commitments and Contingencies

On November 27, 2006, the Company was served with a complaint by a former supplier in the U.S. District Court for the Eastern District of Tennessee, alleging that by its termination of a manufacturing and sales agreement, the Company had breached the contract and interfered with certain advantageous business relationships. The complaint, which was subsequently amended, does not specify an amount of damages. The Company is in the process of answering the amended complaint. The Company believes it has meritorious defenses to all of the claims asserted in this action and will continue to vigorously defend its position.

During 2006 and 2005, the Company maintained professional services contracts with a shareholder vendor for consulting and construction program management services. On April 13, 2007, this vendor served a complaint against the Company alleging that the Company, by making payments in stock instead of in cash, had failed to satisfy its payment obligations under a Program Management Services Agreement dated August 17, 2004. The vendor also alleged that by having internal staff perform the construction program management services, the Company had deprived it of the material benefits of its agreement with the Company. The shareholder vendor is seeking damages for $23 million, including $20 million for loss of profits. On May 29, 2007, we filed a Demand for Arbitration with the American Arbitration Association in Atlanta, Georgia. On May 31, 2007, we filed a motion in the Supreme Court of the State of New York, New York County, to compel arbitration of the claim and to stay the action pending such arbitration. The motion was heard on July 11, 2007 and we are awaiting a ruling. The Company plans to vigorously defend its position.

The Company is subject to various legal proceedings which arise in the ordinary course of its business. Management believes that the amount of any ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements or Information

This Form 10-QSB and statements included or incorporated by reference in this Form 10-QSB include certain historical and forward-looking information. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” or similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, and working capital needs and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to these forward-looking statements include, among others, assumptions regarding demand and utilization of our ATE systems, the number of parking spaces and locations we expect to install, competition, the seasonal nature of our business, economic conditions, regulatory matters and litigation and other risks as well as our negotiation of agreements with third parties. In addition, construction projects such as the rollout of our ATE system entail significant risks, including local building permit approval, shortages of materials or skilled labor, dependence on third party electrical power and telecommunications providers, unforeseen regulatory problems, work stoppages, weather interference, and unanticipated cost increases. The anticipated costs and construction periods are based on budgets and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. These assumptions may prove to be inaccurate.

You should not place undue reliance on any of these forward-looking statements, which are based on our current expectations and assumptions. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Unless indicated otherwise, “the Company,” “IdleAire^®,” “we,” “us” and “our” refer to IdleAire Technologies Corporation. As used herein, references to any “fiscal” year of the Company refer to our fiscal year ended or ending on December 31 of such year.

The following discussion should be read in conjunction with the Financial Statements and Notes contained herein.

Overview

IdleAire Technologies Corporation is the leading provider of in-cab idle reduction, driver work environment, communication, safety and other training services to the long-haul trucking industry through its patented advanced travel center electrification, or ATE system. We believe that our ATE system is the only commercial idling reduction alternative that provides significant value to all key stakeholders in the trucking industry without imposing significant incremental costs. Our existing ATE network includes travel centers and fleet terminals nationwide. As of June 30, 2007, our ATE network was installed in 7,754 parking spaces at 118 locations across 33 states, and we had provided more than 16.3 million hours of service.

How We Generate Revenue

We generate revenues principally from the sale of basic and premium services, ancillary products, and from government grant monies earned, as follows:

	•		Basic and premium services. Basic services include HVAC and shore power electricity, basic satellite television (20 channels), unlimited local telephone and Internet access. Our basic services are charged hourly, with a one hour minimum. The retail rate per hour for basic services was $2.18 as of June 30, 2007, with a discount for fleets and gold members. To obtain the discount rate for basic services, a fleet company must sign a fleet contract. Premium services include premium satellite television (46 channels), movies-on-demand, Ethernet or wireless based Internet access, unlimited long distance telephone service, and driver training modules. These services are generally sold in packages or blocks of time. Additionally, basic and premium services include revenues from the amortization of annual gold card membership sales. The Gold Card membership allows members to purchase our products and selected services at a discount. Any driver may purchase a gold membership for $10 which is effective for 6 months. For the six months ended June 30, 2007 and 2006, revenues from the sale of basic and premium services accounted for 92.9% and 89.5% of our net product revenues, respectively.

	•		Ancillary products. Ancillary products include window adaptors, telephones, keyboards, remotes and coaxial and power cables. For the six months ended June 30, 2007 and 2006, revenues from the sale of ancillary products accounted for 7.1% and 10.5% of our net product revenues, respectively.

•

Amortization of grants. Through June 30, 2007, we have been awarded approximately $47.0 million in cumulative-to-date grant assistance from governmental agencies, which is net of grants withdrawn, expired or terminated. Through June 30, 2007, we have received approximately $20.5 million in cumulative-to-date funds. Grant funds invoiced but not yet received were $1.2 million at June 30, 2007. Grant revenues consist of amortization of grant funds received and recognized as follows: (i) grants with continuing service requirements are recognized on a straight-line basis over the life of the contract; (ii) grants otherwise designated for funding of revenue-generating equipment are recognized on a straight-line basis over the life of the respective equipment; and (iii) grants funded based on hours of emission reduction are recognized based on actual usage over the term of the grant.

Trends in Our Business

In December 2005, the Company raised $234.8 million through a discount note and warrant offering, the net proceeds of which are being used to fund the installation of ATE units at numerous additional sites around the United States and to fund interim operating losses. Our current network expansion plan, initiated during the first quarter of 2006, includes the installation of our ATE systems in approximately 13,000 new parking spaces; as of June 30, 2007, we have completed 6,630 new spaces under the new expansion, for a total of 7,754 space overall.

The following table summarizes our site deployment activity for the six months ended June 30, 2007:


	Total Sites
	Travel		Fleet
	Centers		Terminals		Other		Total

Site Analysis
December 31, 2006		96		2		1		99
January 1 – March 31		9		—		—		9
April 1 – June 30		10		—		—		10

June 30, 2007		115		2		1		118

Key performance indicators for our business include the following:

•

Occupancy– calculated as the total amount of hours of ATE system time used by our customers divided by the total amount of hours available for ATE system use, assuming 24-hour availability for every parking space. We analyze occupancy to evaluate utilization overall as well as individual site performance. Occupancy was 19.2% and 20.1% for the six months ended June 30, 2007 and 2006, respectively. On an aggregate basis, current quarter occupancy also includes start-up time associated with new sites. For our “core comp” sites (opened for at least one year), occupancy was 28.4% and 26.3% for the three months ended June 30, 2007 and 2006, respectively, and 25.8% and 23.5% for the six months ended June 30, 2007 and 2006, respectively.

•

Fleet Usage– calculated as the percentage of hours used by fleet customers as compared to total hours used. Fleet usage was 40.1% and 30.5% for the three months ended June 30, 2007 and 2006, respectively, and 41.8% and 32.9% for the six months ended June 30, 2007 and 2006. As we continue to deploy our ATE systems at easy-to-find, convenient locations along high volume freight delivery routes, we believe we can create a positive “network effect” which can drive the occupancy rate and our top-line growth. We believe fleet usage is an important metric as it validates the “network effect” on growing usage.

We provide our services at a cost that is significantly less than the cost of diesel fuel burned during idling. Our ATEsystem reduces the need for idling during federally-mandated resting periods for drivers, saving approximately one gallon of diesel fuel per hour of idling and reducing engine wear and maintenance expense. Because of this, users of our services often compare our prices with the average cost of diesel prices. The price of diesel averaged $2.81 and $2.68 during the three months and six months ended June 30, 2007; the price of diesel averaged $2.84 and $2.67 during the three months and six months ended June 30, 2006.

Historically, our business has been subject to seasonal volatility, with a larger portion of sales typically realized during the summer and winter months of the year due to the weather. We believe that our network expansion will increase fleet acceptance of our ATEsystem which we expect to translate into a lower overall percentage use by more seasonal owner-operator users. We expect this may reduce seasonality in future periods.

We expect to incur net losses for the foreseeable future as we continue to deploy a critical mass network of locations, expand fleet sales efforts and grow operations. The goal is to increase our utilization and revenues to generate economies of scale which we believe, when combined with what we anticipate to be relatively flat operating expenses, will allow us to reach profitability.

Results of Operations

The following table summarizes our operations for the six months ended June 30, 2007 and 2006:


	Six Months			% of			Six Months			% of
	Ended			Net			Ended			Net
	June 30,			Product			June 30,			Product
	2007			Revenues			2006			Revenues
Statements of Operating Data:

Net revenues:
Basic and premium services, net	$	12,534,291			92.9	%	$	2,793,681			89.5	%
Ancillary product sales		956,880			7.1			328,934			10.5

Net product revenues		13,491,171			100.0			3,122,615			100.0
Grant revenues		1,208,769						917,385
Other revenues		174,543						173,650

Total net revenues		14,874,483						4,213,650

Operating expenses:
Direct site operating costs (1)		23,505,419			174.2			6,490,130			207.8
Cost of ancillary product sales		564,425			4.2			244,588			7.8
Depreciation and amortization		10,094,836			74.8			2,933,422			93.9
Selling, general & administrative expenses		10,421,208			77.2			7,608,621			243.7
Impairment of long-lived assets		—						1,303,885			41.8
Loss on settlement of asset retirement obligation		—						316,807			10.1
Loss on disposal of fixed assets		177,234			1.3			988,623			31.7

Total operating expenses		44,763,122			331.8	%		19,886,076			636.8	%


Loss from operations		(29,888,639	)					(15,672,426	)
Interest expense, net		(14,558,644	)					(10,154,606	)

Net loss	$	(44,447,283	)				$	(25,827,032	)


(1)		Exclusive of depreciation and amortization expense, presented in a separate caption.

Total net revenues. The growth in total net revenues was principally due to the increase in the number of ATE-equipped sites from 37 as of June 30, 2006 to 118 as of June 30, 2007. For the six months ended June 30, 2007 compared with the six months ended June 30, 2006, the average number of ATE-equipped spaces available for rent increased from 1,474 spaces to 7,146 spaces and total hours of usage increased from 1,283,000 hours to 5,963,000 hours. Additionally, the Company collected $8,017,236 in grants during the six months ended June 30, 2007, of which $606,254 represented incremental amortization to grant revenues, less $314,870 of 2006 amortization associated with grants for which all service requirements were completed in 2006.

Direct site operating costs.Our site level costs and expenses primarily consist of (i) salaries and benefits for a team of site representatives, (ii) lease consideration for parking spaces, (iii) cost of electricity, satellite television and movies, (iv) telephone and communications, and (v) equipment maintenance costs. As a percentage of net product revenues, direct site operating costs decreased from 208% to 174%, principally due to a reduction in site-level salaries and benefits as a percentage of net product revenues from 113% of net product revenues, or $3,518,325, for the six months ended June 30, 2006 to 107% of net product revenues, or $14,490,490, for the six months ended June 30, 2007. This is due to better leverage of existing staff and economies of scale achieved as a result of our network expansion.

Selling, general and administrative expenses.Selling, general and administrative expenses declined as a percentage of net product revenues from 244% for the six months ended June 30, 2006 to 77% for the six months ended June 30, 2007 as the increased revenue base was able to absorb more of the fixed corporate costs.

Interest expense, net.Net interest expense increased $4,404,038 for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 due to: (i) a $2,902,883 decrease in interest income associated with a lower investing base; (ii) an increase of $3,230,748 in interest expense associated with the Company’s debt; and (iii) an increase of $1,729,592 in capitalized interest during the six months ended June 30, 2007.

Liquidity and Capital Resources

In December 2005, we raised approximately $234.8 million through the sale of Senior Discount Notes (the “Notes”) and Common Stock Warrants (the “Senior Discount Notes Offering”). The net proceeds from the Senior Discount Notes Offering are being used for our current nationwide ATE network expansion. The Notes rank senior in right of payment to all existing and future subordinated indebtedness and equal in right of payment with all other existing and future senior indebtedness. The Notes are unconditionally guaranteed on a senior secured basis by any future domestic restricted subsidiaries. The Notes and guarantees are secured by substantially all of the Company’s tangible and intangible assets. Under the terms of the Notes, if we enter into a $25.0 million senior revolving credit facility, the liens on the collateral that secure the Notes and the guarantees will be contractually subordinated to the liens securing the indebtedness under such future credit facility. While the Company has had preliminary discussions with potential lenders regarding such a credit facility, there is no assurance that the Company will secure such credit facility.

As of June 30, 2007, we had cash and cash equivalents of $19,423,293, short-term investments of $14,900,000, and restricted cash and investments of $1,065,526.

Cash Flows

Our operating cash inflows consist principally of cash received from customers and grant monies received from governmental agencies, not all of which result in immediate revenue recognition, for the following reasons:

	•		Customers frequently purchase member cards and assorted prepaid plans for future use. As of June 30, 2007, we have deferred recognition of related trade revenues of approximately $1.8 million to future periods.

	•		Through June 30, 2007, we have been awarded approximately $47.0 million in cumulative-to-date grant assistance from governmental agencies, which is net of grants withdrawn, expired or terminated. We have invoiced approximately $21.7 million against these grants and, of this total, we have deferred recognition of $14.7 million of related revenue to future periods. Of the remaining $25.3 million in grant monies not yet invoiced, we expect such amounts to become collectible as additional sites are built. However, there can be no assurance that all amounts will be collected. In addition, we plan to continue our efforts to pursue other grant opportunities.

Our operating cash outflows consist principally of site operating costs and selling, general and administrative expenses. Such costs currently exceed operating cash inflows. Our site operating costs generally vary directly with site operating revenues, with the exception of salaries and benefits and depreciation of our revenue-generating equipment.

We historically have satisfied our working capital requirements primarily through sales of equity and debt securities. Cash flows from operating, financing and investing activities are summarized in the following table:


	Six Months Ended
	June 30,
	2007			2006

Activity:
Operating activities	$	(13,519,101	)	$	(1,693,160	)
Investing activities		16,515,208			13,556,112
Financing activities		(205,280	)		(31,402	)

Net increase in cash	$	2,790,827		$	11,831,550

Operating Activities

The net cash used in operating activities of $13,519,101 and $1,693,160 for the six months ended June 30, 2007 and 2006, respectively, is due principally to our site operating expenses and selling, general and administrative expenses exceeding revenues. The change between periods is primarily due to the increase in operating losses.

Investing Activities

The $16,515,208 provided by investing activities during the six months ended June 30, 2007 was primarily due to the release of approximately $38.5 million of restricted cash to operations which, combined with $2.9 million of existing prepayments, was used to purchase $24.9 million of equipment used in our capital expansion plan and to fund operational losses. The $13,556,112 used in investing activities during the six months ended June 30, 2006 was primarily due to purchases and prepayments of property and equipment, less restricted cash released to operations. As of June 30, 2007, we have 118 sites operating and 8 sites under construction.

Financing Activities

The net cash used in financing activities of $205,280 for the six months ended June 30, 2007 included payments on capital lease obligations of $167,591, offset by $34,504 received from the exercise of stock options and warrants and deferred offering costs of $72,193. This compares to net cash used in financing activities of $31,402 for the six months ended June 30, 2006, which included debt issuance costs of $135,553 offset by $108,505 received from the exercise of stock options and warrants and $4,354 in payments on capital lease obligations.

At June 30, 2007, the Company had open commitments on purchase orders of approximately $55.4 million, primarily for various site equipment components pursuant to the Company’s capital expansion plans. The majority of these commitments do not have a specific contractual end date associated with them. The Company actively manages its supplier relationships in order to ensure timely receipt of necessary components, while minimizing the stockpiling of components in advance of construction.

At June 30, 2007, the Company had approximately $19.4 million of cash and cash equivalents, $14.9 million of short-term investments, $1.1 million in restricted cash and investments, and $13.1 million of deposits held by suppliers to be applied to vendor invoices related to the open commitments on purchase orders noted above. The Company has experienced and continues to experience negative operating margins and negative cash flows from operations, has not attained profitable results of operations to date, and has a deficit in stockholders’ equity at June 30, 2007. Management believes that the Company has sufficient resources to fund its open commitments on purchase orders and its operations during 2007; however, depending on the cash from operations over the remainder of 2007, the Company may be required to limit its site development in 2007 to assist in this regard. Additionally, the Company may be required to limit its site development and seek additional financing in 2008 and beyond to maintain liquidity and fund its operations. Any sale of additional equity or issuance of debt securities may result in dilution to stockholders, and there can be no assurance as to the availability or terms upon which additional funding sources may be available in the future, if at all. The Company announced on July 25, 2007 that it has plans to file with the Securities and Exchange Commission a registered initial public offering of its common stock. However, there is no assurance that the filing will be made or that the offering will indeed take place. The offering, if any, will be made only by means of a prospectus.

The Company announced on June 27, 2007, that it had entered into a non-binding letter of intent with a private investment firm with respect to a proposed $25 million senior revolving credit facility. The terms of the Notes provide that the liens on the collateral that secure the Notes will be contractually subordinated to the liens used to secure the indebtedness under this credit facility, as proposed. As of the date of this filing, we have not obtained this financing. We anticipate entering into such a credit facility during the third quarter, although there can be no assurances as to when, or if, we will be able to obtain such a credit facility.

We are party to certain legal proceedings which arose in the ordinary course of our business. We cannot predict at this time the outcome of any of these proceedings and there is no assurance that ultimate liabilities with respect to these proceedings will not have a material adverse effect on our financial position or results of our operations.

Recently Issued Accounting Pronouncements

On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. At the adoption date and as of June 30, 2007, we had no uncertain tax positions and no adjustments to liabilities or operations were required.

On September 15, 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157,Fair Value Measurements. This new Statement defines fair value, establishes the framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Although early adoption of this Statement is permitted, it will be effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is in the process of evaluating what impact, if any, this new standard may have on its financial statements.

Critical Accounting Policies, Judgments and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. In addition to the estimates presented below, there are other items within the Company’s financial statements that require estimation, but are not deemed critical as defined below. The Company believes these estimates are reasonable and appropriate. However, if actual experience differs from the assumptions and other considerations used, the resulting changes could have a material effect on the financial statements taken as a whole.

Management believes the following policies and estimates are critical because they involve significant judgments, assumptions, and estimates. Management has discussed the development and selection of its critical accounting estimates with the Audit Committee of the Company’s Board of Directors, and the Audit Committee has reviewed the disclosures presented below relating to those policies and estimates.

Impairment of Long-Lived Assets.When indicators of impairment are present, the Company evaluates the carrying value of constructed revenue-generating assets in relation to the operating performance and future undiscounted cash flows of the underlying assets in accordance with Statement of Financial Accounting Standards No. 144,Accounting for the Disposal or Impairment of Long-Lived Assets. Based on these evaluations, asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount of the respective asset. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement of the value of long-lived assets.

Asset Retirement Obligations.The Company’s lease agreements with its travel centers and host sites generally contain obligations to return the leased property to its original condition upon termination of the lease. These obligations represent asset retirement obligations subject to Statement of Financial Accounting Standards No. 143,Accounting for Asset Retirement Obligations and FASB Interpretation 47,Accounting for Conditional Asset Retirement Obligations – an interpretation of FASB Statement No. 143.We estimate our obligations based on the amount a third party would charge us to perform such activities; historical closure activities provide a basis for those estimates. Inherent in the calculation of asset retirement obligations are assumptions regarding our credit-adjusted risk free interest rate, the rate of inflation and the expected settlement date of the obligation. Settlement dates generally represent the lesser of the estimated useful life of the constructed assets or the life of the lease, and are evaluated using site-specific facts and circumstances.

It is possible that actual results, including the amount of costs incurred and the timing of those events, could be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced as we settle these obligations.

Share-Based Compensation.The Company accounts for share-based payments to employees in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 123 – revised 2004 (“SFAS 123(R)”),Share-Based Payment.Under the fair value recognition provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date based on the fair value of the award. For awards with graded vesting, the Company has elected to recognize the expense on a straight-line basis over the requisite service period, which is the vesting period.

Since the Company used the minimum-value method to measure pro forma compensation cost for employee stock options under SFAS 123, it was required to use the prospective method upon adoption of SFAS 123(R). Under the prospective method, the Company continues to account for its nonvested awards outstanding at the date of adoption (January 1, 2006) using the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB25”); all awards granted, modified or settled after the date of adoption are accounted for using the measurement recognition and attribution provisions of SFAS 123(R).

We use the Black-Scholes Merton standard option pricing model (“Black-Scholes model”) to determine the fair value of stock options. Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the estimated fair value of the Company’s outstanding shares, the expected term of the stock-based awards, stock price volatility, and pre-vesting option forfeitures. The assumptions used in calculating the fair value of stock-based awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, stock-based compensation expense could be materially different in the future.

The Company’s computation of expected term was calculated as the simple average of the weighted average vesting period and the contractual life of the option, as permitted by the “shortcut approach” in Staff Accounting Bulletin No. 107,Share-Based Payment. The risk-free interest rate for periods within the contractual life of the option is based on the United States treasury yield for a term consistent with the expected life of the stock option in effect at the time of grant. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Prior to January 1, 2006, the Company used the minimum value method to measure stock compensation cost, which excludes the effects of expected volatility. Since the Company’s stock is not publicly traded and the Company has no historical data on volatility of its stock, the expected volatility used for purposes of computing fair value is based on the historical volatility of similar public companies (referred to as “guideline companies”). In evaluating similarity, the Company considered factors such as industry, stage of life cycle, size, and financial leverage. The amount of stock-based compensation expense we recognize during a period is based on the portion of the awards that are ultimately expected to vest. We estimate option forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.

The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in our option grants. Existing valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise or forfeiture of those stock-based awards in the future. Some employee stock options may expire worthless, or only realize minimal intrinsic value, as compared to the fair values originally estimated on the grant date and recognized in our financial statements. Alternatively, some employee stock options may realize significantly more value than the fair values originally estimated on the grant date and recognized in our financial statements. Currently, there is no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values.

The guidance in SFAS 123(R) is relatively new. The application of these principles may be subject to further interpretation and refinement over time. There are significant differences among valuation models, and there is a possibility that we may adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimate of stock-based awards. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

Item 3. Controls and Procedures

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934). The Company’s Chief Executive Officer and Chief Financial Officer have concluded based upon their evaluation that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or the intentional circumvention of the established process.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, and streamlining or migrating processes. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-QSB that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A. Risk Factors.

We have a limited operating history, and neither our historical results of operations, nor our business and financial expectations, may be an accurate indicator of our future operating results or business prospects.

We have a limited operating history, which makes an evaluation of our business and prospects very difficult. Our business and financial plans are based on assumptions, such as a nationwide expansion of our ATEsystem network, adoption rate, occupancy rate, price increase of our services, the mix of our retail and discounted prices and other estimates that management believes are reasonable, but are necessarily speculative in nature. Actual results will likely vary from our plans and such variations may be material. As a result, neither our historical results of operations nor any forward-looking information regarding future expectations may give you an accurate indication of our future results of operations or our business prospects.

We have a history of net losses and an accumulated deficit of $197 million at June 30, 2007. We cannot guarantee if, when and the extent that we will become profitable, or that we can maintain profitability once it is achieved.

We are not currently profitable. We recorded a net loss of $44.4 million for the six months ended June 30, 2007. We expect to continue to incur and report net losses at least through 2007. Our future operating results over both the short and long term will be subject to factors, many of which are beyond our control. These factors include, among other things, the following:

	•		Costs associated with our national expansion plan and the build-out of our ATE system network;

	•		Continued success in securing additional parking spaces for installation of our ATE systems;

	•		Market acceptance of our ATE technology;

	•		Diesel prices;

	•		Changes in the regulatory environment;

	•		Adoption of our ATE technology by fleet owners and usage by truck drivers; and

	•		Changes in general economic conditions.

We cannot assure that we will achieve profitability or positive cash flow from operating activities in the future, or will generate sufficient cash flow to service our current or future working capital or debt requirements, including our Discount Notes.

Since inception, we have incurred losses every fiscal quarter through June 30, 2007. We expect to incur increasing operating expenses as we continue to construct new installation sites. We are currently experiencing negative operating margins and negative cash flows from operations as the cost of operating our ATEsystem network exceeds the revenue generated from the usage of the ATEsystem network. We cannot provide any assurance that we will achieve profitability, when we will become profitable, the sustainability of profitability should it occur, or the extent to which we will be profitable. Our ability to become profitable is dependent in part upon successful expansion of our ATE systems nationwide, and achieving greater utilization of our ATE systems.

We cannot accurately predict the size of the idling-reduction market, and it may be smaller or slower to develop than we expect.

Although our primary market of the approximately 1.3 million long-haul diesel trucks with sleeper cabs in the U.S. is seemingly large, we cannot accurately predict the size of the market that is receptive to idling alternatives. Currently, there are several idling-reduction technologies available in the market. However, adoption has been limited. Although many states have anti-idling laws and regulations designed to reduce air pollution from emission, many of these regulations have not been enforced historically.

Our long-term growth will depend on the number of truck fleets and drivers who adopt idling alternatives, and how quickly they adopt them. We began operating our ATEbusiness in 2003. To further develop the market for idling alternatives, we will need to continue to devote significant resources to marketing and other business development activities. Developing a market for idling alternatives takes time and it may take us longer than we expect. In the event that we are successful in developing a growing market for idling alternatives, we may find the market smaller than we expect.

The trucking industry is highly fragmented and regulated.

Our target customers in the trucking industry are a disparate group, including operators of travel centers, owners of truck fleets and drivers. Some travel center operators and truck fleet owners are small companies that are not well-versed in industry trends or new methods of doing business. As a result, we may not be able to establish a consistently effective method for marketing our systems and programs to such industry participants.

The trucking industry is highly regulated and there can be no assurance that the government agencies will not adopt new policies or regulations that could adversely affect our business, results of operations and financial condition.

The jurisdiction of the DOT and the EPA, as well as similar state agencies, extends to the trucking industry, our customers and the products and services that we currently sell to our customers. DOT and EPA regulations are subject to varying interpretations which may evolve over time. If compliance with the current regulations is not actively enforced by these agencies, our business could be materially adversely affected. We cannot assure you that future regulations will not have a material adverse effect on our business and operating results.

Our success is dependent on the market acceptance of our ATEsystems.

Our ATEtechnology has growing, but still relatively limited, adoption. At ATE-equipped sites, we have educated, and are educating, truck drivers about the benefits of using our ATEsystems as a superior alternative to idling. Lack of acceptance by the truck drivers would make it difficult for us to grow our business. Despite the obvious benefits of our ATEsystems, we may have difficulty gaining widespread or rapid acceptance of our ATEsystems for a number of reasons including:

	•		our failure to educate the truck drivers of the benefits for using our ATEsystems;

	•		truck drivers’ unwillingness to change their idling habits; and

	•		the introduction of competing products or services in the market.

We will require significant capital to complete our nation-wide ATEsystem expansion plan, and financing may not be available to us on reasonable terms, if at all.

We are in a capital intensive industry. At an average size travel center consisting of 70 installed spaces, the capital expenditures involved is approximately $1.1 million, or about $15,000 a space. Completion of the nationwide expansion of our ATEsystem network will require significant amounts of capital. We began operating our ATEsystem in 2003 and we have not yet achieved widespread market acceptance. We may not be able to generate sufficient cash flow to meet the capital needs required for the completion of our nationwide expansion plan. If our existing capital resources are insufficient to satisfy our liquidity requirements, we may need to sell additional equity or issue convertible debt securities. Any sale of additional equity or issuance of convertible debt securities may result in dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, or at all. If we are unable to obtain this additional financing when needed, we may be required to delay our nationwide expansion plan, reduce the scope of, or eliminate one or more aspects of our business development activities, all of which could adversely affect the growth of our business. As of June 30, 2007, we have deposits of approximately $13.1 million with our vendors and suppliers to secure our short-term purchase obligations. In the event we need to delay our expansion plan due to insufficient financing, there may be a delay involved in the refund of these deposits, and our financial situation may be further strained as a result.

As we continue the nationwide expansion of our ATEsystem network, we may have difficulty managing our growth and expanding our operations successfully.

As we continue the nationwide expansion of our ATEsystem network, we may need to expand our construction, sales, marketing and internal accounting activities. We will need to manage relationships with the rapidly growing numbers of employees, partners and customers. Failure to effectively manage any of these relationships may lead to legal disputes and unnecessary litigation. Our growth will continue to place a significant strain on our managerial, operational and financial resources. To manage the growth, we must continue to implement and improve our operational and financial systems and to expand, train and manage our employees, including our customer service representatives. There can be no assurance that our systems, procedures or controls will be adequate to support our operations.

Our business is subject to seasonal volatility and our operating results may fluctuate on a quarterly and annual basis.

Our business is subject to seasonal volatility, with a larger portion of sales typically realized during the summer and winter months of each year due to the weather. Accordingly, this may create variability in our sales revenues between periods, depending on the severity of weather patterns. While we believe that our network expansion and increasing fleet acceptance of our ATEsystem may reduce seasonality for future periods, there is no assurance that will indeed be the case.

We depend upon our key personnel to run our business and manage our business growth. The loss of any one of them could have a materially adverse effect on our business, operating results and financial condition.

Our success depends largely upon the continued contributions of our experienced senior management team and our ability to attract and retain qualified personnel. The relationships and reputation that our key employees have established and continue to maintain with government agencies, travel center operators and our manufacturing and service strategic partners are key to our success. Competition for qualified personnel is highly intense and no assurance can be made that we will be able to retain our key employees or that we will be able to attract and retain additional qualified personnel in the future. The loss of any of our officers or key personnel could impair our ability to identify and secure new installation agreements and strategic partnerships, and in turn materially adversely affect our ability to manage the growth of our business.

Although we are in active negotiation with travel centers, travel center operators and truck fleet owners to expand our network coverage, our expansion plan may not succeed as quickly as anticipated, if at all.

Our success in expanding our network coverage depends on our ability to market our ATE system to travel center operators and truck fleet owners and obtain building permit approvals from local municipal planning agencies. If these parties do not find our value proposition compelling because of travel center maintenance shop or truck wash expansion, ground lease extensions or other reasons, or require extensive and costly improvements prior to issuing a building permit, our plan to install a nationwide network of our ATEsystems could be delayed. Although we also plan to install our ATE systems at fleet terminals, distribution centers, seaports and border crossings, there is no assurance that we will be successful in penetrating those markets on terms that are acceptable to us, or at all.

We rely on third-party suppliers for the manufacture and assembly of our ATEsystems, and may not be able to meet the schedule of our expansion plan if our suppliers cannot meet the specific quantity and quality requirements.

We rely on third-party suppliers for the manufacture and assembly of our ATEsystem. In the event that certain of these suppliers are unable or unwilling to provide us with certain specific components on commercially reasonable terms, or at all, delays in securing alternative sources of supply would result and could have a material adverse effect on our operations. We cannot assure you that our current suppliers will at all times dedicate sufficient production capacity to satisfy our requirements within scheduled delivery times, or at all. Failure or delay by our suppliers in fulfilling our anticipated needs would have an adverse effect on our ability to install our ATEsystems. General economic downturns or factors such as labor strikes, supply shortages, product defects, or safety recalls of particular equipment, affecting those manufacturers with whom we have a strategic partnership would also likely have a material adverse effect on our business.

We rely on electrical power utilities and communications companies, including Internet and bandwidth providers, data centers, satellite communications and mobile network providers, to provide their services to customers through our ATEsystems. If these companies cannot provide reliable access or if there are failures or delays in providing such services, our ability to service our customers would be negatively impacted, which could materially adversely affect our business, operating results and financial condition.

Electrical power utilities, communications companies and internet content providers must be able to deliver their services to us reliably so that we can provide our customers with entertainment and communication services. If not, we will be limited as to what services we can offer to our customers, and the quality of our overall product offering will suffer. Signal interference, service interruptions or system failure could lead to customer dissatisfaction and complaints, damage our reputation, and cause delay in the expansion of our system network nationwide.

We rely on vendors, including data center and bandwidth providers. Any disruption in the network access or collocation services provided by these providers or any failure of these providers to handle current or higher volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business. We exercise little control over these vendors, which increases our vulnerability to problems with the services they provide. Any errors, failures, interruptions or delays in connection with these technologies and information services could harm our relationship with customers, adversely affect our brand and expose us to liabilities.

Our systems are also heavily reliant on the availability of electricity. If we were to experience a major power outage, we would have to rely on back-up generators. These back-up generators may not operate properly and their fuel supply could be inadequate during a major power outage. This could result in a disruption of our business.

We may have difficulty scaling and adapting our existing architecture to accommodate increased traffic and technology advances or changing business requirements, which could lead to the loss of customers and cause us to incur expenses to make architectural changes.

To be successful, our network infrastructure has to perform well and be reliable. The greater the user traffic and the greater the complexity of our products and services, the more computing power we will need. We have spent and expect to continue to spend substantial amounts on the purchase and lease of data centers and equipment and the upgrade of our technology and network infrastructure to handle increased traffic on our web sites and to roll out new products and services. This expansion is expensive and complex and could result in inefficiencies or operational failures. If we do not expand successfully, or if we experience inefficiencies and operational failures, the quality of our products and services and our users’ experience could decline. This could damage our reputation and lead us to lose customers. Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition.

We could experience system failures and capacity constraints, which could materially adversely affect our business and operating results.

To be successful, our systems must be able to operate 24 hours a day, 7 days a week without interruption. We must protect our equipment and data against damage from human error and from “acts of God” that could cause loss or corruption of data or interruptions in our services. We have business interruption insurance, but such insurance may be insufficient to compensate us for losses relating to system failures or may not provide coverage under certain particular circumstances. If we were unable to maintain uninterrupted service to our customers, such interruptions could:

	•		Cause customers to seek damages from us for losses incurred;

	•		Require us to incur expenses, either earlier or in amounts greater than originally planned, to replace existing equipment, expand facilities or add redundant facilities;

	•		Damage our reputation of reliability;

	•		Cause customers and others to cancel contracts with us; and

	•		Make it more difficult for us to attract new customers.

As a result, our business, financial condition and results of operations could be materially adversely affected.

Unauthorized disclosure of data, whether through breach of our computer systems or otherwise, could expose us to protracted and costly litigation or cause us to lose customers.

Maintaining the security of our networks is an issue of critical importance for our customers because our services involve the storage and transmission of proprietary, confidential data and customer information, including truck fleet financial data and personal information, such as debit or credit card numbers. Individuals and groups may develop and deploy viruses, worms and other malicious software programs that attack or attempt to infiltrate our ATEsystem. If our security measures, or those of our contractors handling our customers’ information, are breached as a result of third-party action, employee error, malfeasance or otherwise, we could be subject to liability or our business could be interrupted. Successful penetration of our network security could have a negative impact on our reputation and could lead our existing and potential customers to choose not to use our ATEsystem or services. Even if we do not encounter a security breach ourselves, a well-publicized breach of the consumer data security of any major consumer website could lead to a general public loss of confidence in the use of the Internet, which could diminish the attractiveness of our systems and service offerings.

We may not be able to protect our intellectual property, brands or technology effectively, or we may be subject to claims of infringement.

We rely upon a combination of patents, service marks and other rights to protect our intellectual property. We cannot assure you that our patent applications will be allowed or that our patents or service marks will not be challenged by third parties. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology. There can be no assurance that the actions we have taken to protect our intellectual property rights will be successful, particularly in foreign jurisdictions where the laws may not protect our intellectual property rights as fully or in the same manner as the laws of the United States. From time to time it may be necessary for us to enforce our intellectual property rights against third parties. We also may be subjected to claims by others that we have violated their intellectual property rights. Even if we prevail, we may be exposed to expensive litigation and time-consuming diversion of our resources. If we are unsuccessful protecting our intellectual property rights, we risk jeopardizing our competitive position and engineering advantage. The occurrence of any of these factors could diminish the value of our patents, service marks or other intellectual property, increase competition in our industry and negatively impact our sales volume and revenues.

We are unable to predict the future availability of governmental grants.

Through June 30, 2007, we have been awarded approximately $47.0 million in cumulative-to-date grants of which we have invoiced approximately $21.7 million. Of the remaining $25.3 million in grant monies not yet invoiced, such amounts will become collectible as additional sites are constructed. However, there can be no assurances that all such amounts will be collected. We have also applied for other funding under the DOT’s Congestion Mitigation and Air Quality (CMAQ) Program which is designed to assist communities in attaining the EPA’s air quality standards. Although we believe that we will receive additional grants, as well as other sources of governmental funding in the future, there can be no assurance that we will in fact receive such additional funding or that the amounts of funding we do receive will not be less than what we currently anticipate.

We have incurred increased legal and financial compliance costs common to publicly held companies as a result of becoming a reporting company under SEC rules in July 2006.

Since becoming a reporting company under the SEC rules, we have incurred significant legal, accounting and other expenses associated with our public company’s reporting status that we did not incur as a private company. We have incurred and will continue to incur costs associated with recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002. These rules and regulations have significantly increased our legal and financial compliance costs and could make some of our future capital-raising activities more time-consuming and costly, and have made it more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers since becoming a reporting company under the SEC rules.

Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) will require the Company to document and test its internal controls over financial reporting beginning with the fiscal year ending December 31, 2007. Additionally, beginning with the fiscal year ending December 31, 2008, Section 404 will require an independent registered public accounting firm to independently opine on the effectiveness of these internal controls over financial reporting. Any delays or difficulty in satisfying these requirements could cause our shareholders to lose confidence in us and adversely affect our ability to raise additional financing through the sale of equity or debt securities.

Section 404 of the Sarbanes-Oxley Act requires us to maintain effective internal controls for financial reporting and disclosure controls and procedures. Commencing in fiscal 2007, we must perform system and process evaluation and testing of our internal controls over financial reporting, and report management’s conclusion as to the effectiveness of these internal controls over financing reporting. Commencing in fiscal 2008, an independent registered public accounting firm must independently opine upon the effectiveness of these internal controls over financial reporting. Compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, our shareholders could lose confidence in the reliability of our financial statements and our ability to list any classes of our securities on any national stock exchange or to raise additional financing through the sale of equity or debt securities will be adversely affected. During the audit and preparation of our financial statements as of and for the year ended December 31, 2006, our independent auditors communicated to us that they identified significant deficiencies in our internal controls. However, such deficiencies are not deemed to be material weaknesses. Also, despite the communication of these findings, our independent auditors issued an unqualified opinion on our December 31, 2006 financial statements. We will continue to devote significant time and resources to designing and implementing improved internal controls and procedures.

Item 1B. Legal Proceedings

On November 27, 2006, we were served with a complaint by Chiaphua Industries Limited (“Chiaphua”) in the U.S. District Court for the Eastern District of Tennessee, alleging that by our termination of a Manufacturing and Sales Agreement with Chiaphua dated April 2004, we have breached the contract and have interfered with certain advantageous business relationships with Chiaphua. The complaint does not specify an amount of damages. We believe we have meritorious defenses to all of the claims asserted in this action and will continue to vigorously defend our position. A Motion to Dismiss the Complaint was filed on March 5, 2007 and the plaintiff subsequently filed an amended complaint. On May 7, 2007, we filed our reply brief in support of the Motion to Dismiss the First Amended Complaint. The plaintiff then filed an Amended Complaint, and we have filed an Amended Motion to Dismiss. On August 2, 2007, our motion was denied. At the time of this filing, we are preparing our response to the Amended Complaint.

During 2006 and 2005, we maintained professional services contracts with PB Constructors, Inc. (“PB”), a shareholder vendor, for consulting and construction program management services. On April 13, 2007, PB served a complaint against us alleging that, by making payments in stock instead of in cash, we had failed to satisfy our payment obligations under a Program Management Services Agreement dated August 17, 2004. PB also alleged that by having our internal staff perform construction program management services, we had deprived PB of the material benefits of its agreement with us. PB is seeking damages for $23 million, including $20 million for loss of profits. On May 29, 2007, we filed a Demand for Arbitration with the American Arbitration Association in Atlanta, Georgia. On May 31, 2007, we filed a motion in the Supreme Court of the State of New York, New York County, to compel arbitration of the claim and to stay the action pending such arbitration. The motion was heard on July 11, 2007 and we are awaiting a ruling. We plan to vigorously defend our position.

We are subject to various legal proceedings which arise in the ordinary course of business. While management believes that the amount of any ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company, we cannot assure you that that will indeed be the case.

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

The Company held its Annual Meeting of Stockholders on May 10, 2007, for the following purposes:

	•		To elect nine directors, each to serve for terms expiring at the next annual meeting of Stockholders to be held on May 8, 2008;

	•		To ratify the selection of the independent registered public accounting firm for the year ending December 31, 2007; and

	•		To set the date for the next annual meeting of the stockholders for Thursday, May 8, 2008.

The following tables show the voting tabulations for the matters voted upon at the Annual Meeting of Stockholders:


	For		Against		Withheld

Election of Directors:
Michael C. Crabtree, President, CEO and Chairman of the Board		45,604,491		159,237		37,248,121
David Everhart, Former COO and Co-Founder		45,604,491		159,237		37,248,121
Tom Badgett, CIO, Co-Founder and Secretary		45,604,491		159,237		37,248,121
James H. Price, Senior Vice President and General Counsel		45,604,491		159,237		37,248,121
Lana Batts		45,604,491		159,237		37,248,121
Dan Felton III		45,604,491		159,237		37,248,121
Steve Kirkham		45,604,491		159,237		37,248,121
Lewis Frazer III		45,604,491		159,237		37,248,121
Thomas (Mack) McLarty		45,604,491		159,237		37,248,121

Ratify the Selection of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2007		45,621,206		159,237		37,231,406

Set the date for the next annual meeting of the stockholders for Thursday, May 8, 2008		45,585,591		166,637		37,259,621

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes Oxley Act of 2002.

SIGNATURES

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

Date: August 14, 2007

/s/ Michael C. Crabtree

Michael C. Crabtree
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Paul W. Boyd

Paul W. Boyd
Chief Financial Officer and Treasurer
(Principal Financial Officer)