World Energy Solutions (XWES) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2009; or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ______________ to ______________

Commission file number:  333-136528

World Energy Solutions, Inc.

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

446 Main Street

Worcester, Massachusetts  01608

(Address of principal executive offices)

508-459-8100

(Registrant's telephone number)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.    Yes  x       No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  o       No  o

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

Large Accelerated Filer o	Accelerated Filer x
Non-Accelerated Filer o	Smaller Reporting Company o
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of August 1, 2009, the registrant had 8,513,344 shares of common stock outstanding.

TABLE OF CONTENTS

PART I.	Financial Information	Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended
	June 30, 2009 and 2008	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	23
Item 4.	Controls and Procedures	23
PART II.	Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	25
Item 6.	Exhibits	25

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2009			December 31, 2008
Assets	(Unaudited)
Current assets
Cash and cash equivalents	$	756,295		$	1,731,411
Trade accounts receivable, net		2,977,238			2,343,593
Prepaid expenses and other current assets		295,969			431,246
Total current assets		4,029,502			4,506,250
Property and equipment, net		444,131			487,211
Capitalized software, net		511,518			627,275
Intangibles, net		5,312,553			5,949,609
Goodwill		3,178,701			3,178,701
Other assets		27,194			27,594
Total assets	$	13,503,599		$	14,776,640
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	542,434		$	593,553
Accrued commissions		893,140			777,784
Accrued compensation		1,047,829			1,118,168
Accrued expenses		313,256			355,511
Deferred revenue and customer advances		701,078			876,271
Capital lease obligations		31,324			42,485
Total current liabilities		3,529,061			3,763,772
Capital lease obligations, net of current portion		24,222			3,737
Total liabilities		3,553,283			3,767,509
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.0001 par value; 15,000,000 shares authorized; 8,490,432 shares issued and 8,454,758 shares outstanding at June 30, 2009, and 8,410,727 shares issued and  8,397,684 shares outstanding at December 31, 2008		845			840
Additional paid-in capital		31,239,433			30,755,596
Accumulated deficit		(21,108,610	)		(19,648,432	)
Treasury stock, at cost; 35,674 shares at June 30, 2009 and 13,043 shares at December 31, 2008		(181,352	)		(98,873	)
Total stockholders’ equity		9,950,316			11,009,131
Total liabilities and stockholders’ equity	$	13,503,599		$	14,776,640

See accompanying notes to condensed consolidated financial statements.

2

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Revenue:
Brokerage commissions and transaction fees	$	3,406,547		$	2,426,085		$	7,100,221		$	5,200,140
Management fees		275,929			334,610			560,034			675,072
Total revenue		3,682,476			2,760,695			7,660,255			5,875,212
Cost of revenue		984,896			1,276,859			2,074,848			2,512,912
Gross profit		2,697,580			1,483,836			5,585,407			3,362,300
Operating expenses:
Sales and marketing		2,662,921			2,770,924			5,233,469			5,414,660
General and administrative		827,719			1,100,642			1,808,955			2,521,625
Total costs and expenses		3,490,640			3,871,566			7,042,424			7,936,285
Operating loss		(793,060	)		(2,387,730	)		(1,457,017	)		(4,573,985	)
Interest income (expense), net		(2,044	)		7,413			(3,161	)		33,726
Loss before income taxes		(795,104	)		(2,380,317	)		(1,460,178	)		(4,540,259	)
Income tax benefit		—			—			—			—
Net loss	$	(795,104	)	$	(2,380,317	)	$	(1,460,178	)	$	(4,540,259	)
Loss per share:
Net loss per common share – basic and diluted	$	(0.09	)	$	(0.29	)	$	(0.17	)	$	(0.55	)
Weighted average shares outstanding – basic and diluted		8,446,999			8,288,673			8,433,436			8,270,310

See accompanying notes to condensed consolidated financial statements.

3

WORLD ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(1,460,178	)	$	(4,540,259	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		867,061			870,409
Share-based compensation		395,280			502,641
Loss on disposal of property and equipment		1,604			—
Changes in assets and liabilities:
Trade accounts receivable		(633,645	)		(395,873	)
Prepaid expenses and other assets		135,677			(40,563	)
Accounts payable		(51,119	)		(386,941	)
Accrued commissions		115,356			(89,069	)
Accrued compensation		7,374			(404,466	)
Accrued expenses		(42,255	)		98,303
Deferred revenue and customer advances		(175,193	)		(8,205	)
Net cash used in operating activities		(840,038	)		(4,394,023	)
Cash flows from investing activities:
Cost incurred in software development		(41,024	)		(205,057	)
Purchases of property and equipment		(1,432	)		(40,704	)
Cash received in sale of property and equipment		500			—
Net cash used in investing activities		(41,956	)		(245,761	)
Cash flows from financing activities:
Proceeds from exercise of stock options		10,849			10,339
Proceeds from exercise of stock warrants		—			6,986
Purchase of treasury stock		(82,479	)		(66,490	)
Principal payments on capital lease obligations		(21,492	)		(21,638	)
Net cash used in financing activities		(93,122	)		(70,803	)
Net decrease in cash and cash equivalents		(975,116	)		(4,710,587	)
Cash and cash equivalents, beginning of period		1,731,411			7,001,884
Cash and cash equivalents, end of period	$	756,295		$	2,291,297
Non-cash investing and financing activities:
Restricted common stock granted to employees in consideration for services performed	$	77,713		$	—
Net capital lease obligations entered into during period	$	30,816		$	—
Supplemental disclosure of cash flow information:
Net cash received (paid) for interest	$	(2,671	)	$	37,803

See accompanying notes to condensed consolidated financial statements.

4

WORLD ENERGY SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2009

1.             Nature of Business and Basis of Presentation

World Energy Solutions, Inc. (“World Energy” or the “Company”) is an energy and environmental commodities brokerage company that has developed two online auction platforms, the World Energy Exchange and the World Green Exchange. On the World Energy Exchange, retail energy consumers (commercial, industrial and government) and wholesale energy participants (utilities, electricity retailers and intermediaries) in the United States are able to negotiate for the purchase or sale of electricity and other energy resources from competing energy suppliers which have agreed to participate on the Company’s auction platform. Although the Company’s primary source of revenue is from brokering electricity and natural gas, the Company adapted its World Energy Exchange auction platform to accommodate the brokering of green power in 2003 (i.e., electricity generated by renewable resources), wholesale electricity in 2004 and certain other energy-related products in 2005. In 2007, the Company created the World Green Exchange based on the World Energy Exchange technology and business process. On the World Green Exchange, buyers and sellers negotiate for the purchase or sale of environmental commodities such as Renewable Energy Certificates, Verified Emissions Reductions, Certified Emissions Reductions and Regional Greenhouse Gas Initiative (“RGGI”) allowances.

On March 27, 2009 the Company filed a previously approved Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to (i) effect a reverse stock split of its outstanding common stock at a ratio of one-for-ten; and (ii) decrease the number of authorized shares of its common stock from 150,000,000 to 15,000,000.  As a result of the reverse stock split, the issued and outstanding shares of common stock were reduced on a basis of one share for every ten shares outstanding. All of the Company’s issued and outstanding common stock, stock options and warrants to purchase common stock and restricted stock for all periods presented have been restated to reflect the reverse stock split.

2.             Interim Financial Statements

The December 31, 2008 condensed balance sheet has been derived from audited financial statements and the accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim reporting.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements and should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments consisting of normal recurring adjustments and accruals necessary for the fair presentation of the Company’s financial position as of June 30, 2009, the results of its operations for the three and six months ended June 30, 2009 and 2008 and its cash flows for the six months ended June 30, 2009 and 2008, respectively. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2009.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

The Company’s most judgmental estimates relate to revenue recognition and the estimate of actual energy purchased from the energy supplier by the end user of such energy; software development costs; the fair value of the Company’s equity securities where there was no ready market for the purchase and sale of those shares prior to our November 16, 2006 initial public offering of common stock; the valuation of intangible assets and goodwill; impairment of long-lived assets; and estimates of future taxable income as it relates to the realization of the Company’s net deferred tax assets. The effect of those estimates could have a material impact on the Company’s estimation of commission revenue, accounts receivable, intangible assets, accrued commission expense, income taxes, share-based compensation and earnings per share.

5

In December 2007, the Financial Accounting Standards Board (“FASB”), issued Statement of Financial Accounting Standards, (“SFAS”) No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”).  SFAS No. 141(R) requires an acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.  SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008.  The Company has determined that its adoption of SFAS No. 141(R) on January 1, 2009 did not have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS No. 161”).  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.  This standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company has determined that its adoption of SFAS No. 161 on January 1, 2009 did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position (“FSP”) SFAS No. 107-1 and Accounting Principles Board (“APB”) Opinion 28-1, “Interim Disclosures About Fair Value of Financial Instruments” (“FSP SFAS No. 107-1”).  FSP SFAS No. 107-1 amends SFAS No. 107, “Disclosures about Fair Values of Financial Instruments” and APB Opinion No. 28, “Interim Financial Reporting”, to require disclosures about fair value of financial instruments in interim financial statements.  FSP SFAS No. 107-1 is effective for interim periods ending after June 15, 2009.  The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses.  At June 30, 2009 and December 31, 2008 the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”).  The Company adopted SFAS No. 165 which requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet.  For nonrecognized subsequent events that must be disclosed to keep the financial statements from being misleading, an entity will be required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that an estimate cannot be made.  In addition, SFAS No. 165 requires an entity to disclose the date through which subsequent events have been evaluated.  The Company has evaluated subsequent events through the issuance of its condensed consolidated financial statements on August 6, 2009.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement  No. 162” (“SFAS No. 168”), which established the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with GAAP.  SFAS No. 168 explicitly recognizes rules and interpretative releases of the Security and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants.  SFAS No. 168 will become effective in the third quarter of 2009 and will not have a material impact on the Company’s results of operations, financial position or liquidity.

3.             Loss Per Share

As of June 30, 2009 and 2008, the Company only had one issued and outstanding class of stock – common stock.  As a result, the basic loss per share for the three and six months ended June 30, 2009 and 2008, respectively, is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period.

The computed loss per share does not assume conversion, exercise, or contingent exercise of securities that would have an anti-dilutive effect on loss per share.  As the Company was in a net loss position for the reported periods, all common stock equivalents were anti-dilutive.  Therefore, the weighted average number of basic and diluted voting shares of common stock outstanding for the three months ended June 30, 2009 and 2008 were 8,446,999 shares and 8,288,673 shares, respectively, and the weighted average number of basic and diluted voting shares of common stock outstanding for the six months ended June 30, 2009 and 2008 were 8,433,436 shares and 8,270,310 shares, respectively.

6

For the three months ended June 30, 2009, 278,359, 14,345 and 2,422 weighted average shares issuable relative to common stock options, common stock warrants and restricted stock, respectively, were excluded from net loss per share since the inclusion of such shares would be anti-dilutive due to the Company’s net loss position.  For the three months ended June 30, 2008, 296,814, 99,682 and 135,139 weighted average shares issuable relative to common stock options, common stock warrants and restricted stock, respectively, were excluded from net loss per share since the inclusion of such shares would be anti-dilutive due to the Company’s net loss position.

For the six months ended June 30, 2009, 251,385, 15,420 and 1,357 weighted average shares issuable relative to common stock options, common stock warrants and restricted stock, respectively, were excluded from net loss per share since the inclusion of such shares would be anti-dilutive due to the Company’s net loss position.   For the six months ended June 30, 2008, 292,545, 85,892 and 121,982 weighted average shares issuable relative to common stock options, common stock warrants and restricted stock, respectively, were excluded from net loss per share since the inclusion of such shares would be anti-dilutive due to the Company’s net loss position.

At June 30, 2009, 235,001 and 61,148 shares issuable relative to common stock options and restricted stock, respectively, had exercise prices that exceeded the average market price of the Company’s common stock during the three months ended June 30, 2009 and were excluded from the calculation of diluted shares since the inclusion of such shares would be anti-dilutive.  At June 30, 2008, 141,000 shares issuable relative to common stock options had exercise prices that exceeded the average market price of the Company’s common stock during the three months ended June 30, 2008 and were excluded from the calculation of diluted shares since the inclusion of such shares would be anti-dilutive.

At June 30, 2009, 237,001 and 64,048 shares issuable relative to common stock options and restricted stock, respectively, had exercise prices that exceeded the average market price of the Company’s common stock during the six months ended June 30, 2009 and were excluded from the calculation of diluted shares since the inclusion of such shares would be anti-dilutive.  At June 30, 2008, 153,000 shares issuable relative to common stock options had exercise prices that exceeded the average market price of the Company’s common stock during the six months ended June 30, 2008 and were excluded from the calculation of diluted shares since the inclusion of such shares would be anti-dilutive.

4.             Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company had no significant off-balance sheet risk such as foreign exchange contracts, open contracts, or other foreign hedging arrangements. The Company places its cash with primarily one institution, which management believes is of high credit quality. As of June 30, 2009, approximately $350,000 of the Company’s cash and cash equivalents was invested in a highly liquid, U.S. Treasury money market fund.

The Company receives commission payments from energy suppliers based on the energy usage transacted between energy consumers and energy suppliers.  The Company provides credit in the form of both invoiced and unbilled accounts receivable to energy suppliers and energy consumers in the normal course of business.  Collateral is not required for trade accounts receivable, but periodic credit evaluations of energy suppliers and energy consumers are performed.  Management provides for an allowance for doubtful accounts on a specifically identified basis, as well as through historical experience applied to an aging of accounts, if necessary.  Trade accounts receivable are written off when deemed uncollectible.  To date, write-offs have not been material.

The following represents revenue and trade accounts receivable from energy suppliers exceeding 10% of the total in each category:

	Revenue For the three months ended		Revenue For the six months ended		Trade Accounts Receivable
Energy Supplier	June 30, 2009	June 30, 2008	June 30, 2009	June 30, 2008	As of June 30, 2009	As of June 30, 2008
A	18%	23%	18%	21%	26%	19%
B	7%	7%	7%	8%	11%	20%

7

In addition to its direct relationship with energy suppliers, the Company also has direct contractual relationships with energy consumers for the online procurement of certain of their energy needs.  These energy consumers are primarily large businesses and government organizations.  For the three months ended June 30, 2009 and 2008, one and two of these energy consumers accounted for transactions resulting in at least 10% individually, and approximately 10% and 23% in the aggregate of the Company’s revenue, respectively.  For the six months ended June 30, 2009, no energy consumer represented at least 10% individually of the Company’s revenue.  For the six months ended June 30, 2008, two of these energy consumers accounted for transactions resulting in at least 10% individually and approximately 24% in the aggregate, respectively.

SFAS No. 130, “Reporting Comprehensive Income”, establishes standards for reporting and displaying comprehensive income (loss) and its components in financial statements. Comprehensive income (loss) is defined as the change in stockholders’ equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The comprehensive loss for all periods presented does not differ from the reported net loss.

5.             Trade Accounts Receivable, Net

The Company generally does not directly invoice energy suppliers and, therefore, reports a significant portion of its receivables as “unbilled.” Unbilled accounts receivable represents management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates.

Trade accounts receivable, net consists of the following:

	June 30, 2009			December 31, 2008
Unbilled accounts receivable	$	2,221,218		$	1,901,892
Billed accounts receivable		799,564			487,089
		3,020,782			2,388,981
Allowance for doubtful accounts		(43,544	)		(45,388	)
Trade accounts receivable, net	$	2,977,238		$	2,343,593

6.             Property and Equipment, Net

Property and equipment, net consists of the following:

	June 30, 2009			December 31, 2008
Leasehold improvements	$	65,451		$	65,451
Equipment		443,141			452,312
Furniture and fixtures		435,579			434,147
		944,171			951,910
Less: accumulated depreciation		(500,040	)		(464,699	)
Property and equipment, net	$	444,131		$	487,211

Depreciation expense for the three months ended June 30, 2009 and 2008 was $37,329 and $36,967, respectively. Depreciation expense for the six months ended June 30, 2009 and 2008 was $73,224 and $75,412, respectively. Property and equipment purchased under capital lease obligations at June 30, 2009 and December 31, 2008 was $183,131 and $189,524, respectively. Accumulated depreciation for property and equipment purchased under capital lease was $111,050 and $133,466 at June 30, 2009 and December 31, 2008, respectively.

7.             Share-Based Compensation

In accordance with SFAS No. 123(R), “Share-Based Payment”, the Company recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period of the award.  For the six months ended June 30, 2009, share-based awards consisted of grants of restricted stock and stock options and, for the six months ended June 30, 2008, share-based awards consisted of grants of restricted stock.  The restrictions on the restricted stock lapse over the vesting period.  The vesting period of share-based awards is determined by the Board of Directors, and is generally four years for employees.  The per-share weighted-average fair value of stock options granted during the six months ended June 30, 2009 was $3.70 on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:

8

Six-months ended June 30,	Expected Dividend Yield	Risk-Free Interest Rate	Expected Option Life	Expected Volatility
2009	—	2.20%	4.75 years	100%

For the three and six months ended June 30, 2009, the Company recorded share-based compensation expense of approximately $109,000 and $368,000 in connection with share-based payment awards, respectively.  For the three and six months ended June 30, 2008, the Company recorded share-based compensation expense of approximately $267,000 and $503,000 in connection with share-based payment awards, respectively.  The approximate total share-based compensation expense included in the condensed consolidated statements of operations for the periods presented is included in the following expense categories:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Cost of revenue	$	15,000	$	51,000	$	65,000	$	105,000
Sales and marketing		58,000		173,000		237,000		304,000
General and administrative		36,000		43,000		66,000		94,000
Total share-based compensation	$	109,000	$	267,000	$	368,000	$	503,000

The Company has two stock incentive plans: the 2003 Stock Incentive Plan, or the 2003 Plan, and the 2006 Stock Incentive Plan, or the 2006 Plan.  As of June 30, 2009, 349,231 shares of common stock were reserved under the 2003 Plan. No further grants are allowed under the 2003 Plan.  As of June 30, 2009, 717,497 shares of common stock were reserved under the 2006 Plan representing 300,600 outstanding stock options, 66,048 shares of restricted stock outstanding and 350,849 shares available for grant.  A summary of stock option activity under both plans for the six months ended June 30, 2009 is as follows:

	Number of Stock Options			Weighted Average Exercise Price
Outstanding at December 31, 2008		626,456		$5.08
Granted		41,000		$4.98
Cancelled		(8,625	)	$4.35
Exercised		(9,000	)	$1.21
Outstanding at June 30, 2009		649,831		$5.03

A summary of restricted stock activity under the 2006 Plan for the six months ended June 30, 2009 is as follows:

	Shares			Weighted Average Grant Price
Outstanding at December 31, 2008		118,603		$            9.76
Granted		30,058		$            3.55
Cancelled		(11,900	)	$            9.51
Vested		(70,713	)	$            6.86
Outstanding at June 30, 2009		66,048		$          10.08

In December 2008, certain members of the senior management team agreed to receive shares of Company common stock in lieu of cash related to the 2008 annual incentive bonus plan. In addition, certain members of the Board of Directors agreed to receive shares of Company common stock in lieu of approximately $27,000 in cash related to amounts due under the 2009 Directors’ compensation plan. Included in shares granted and in shares vested above is 29,558 shares of common stock issued to employees and non-employee Directors related to these arrangements. The amounts related to director fees are included in share-based compensation within the cash flow statement for the six months ended June 30, 2009.

9

A summary of common stock options outstanding and common stock options exercisable as of June 30, 2009 is as follows:

	Options Outstanding					Options Exercisable
			Weighted					Weighted
			Average					Average
Range of			Remaining	Aggregate		Number		Remaining	Aggregate
Exercise			Contractual	Intrinsic		Of Shares		Contractual	Intrinsic
Prices	Options		Life	Value		Exercisable		Life	Value
$0.20 - $1.99		203,030	1.34 Years	$	1,004,999		203,030	1.34 Years	$	1,004,999
$2.00 - $3.80		209,800	5.31 Years		574,320		65,625	3.07 Years		145,075
$3.81 - $11.29		98,001	4.77 Years		340		51,015	4.08 Years		—
$11.30 - $13.40		139,000	4.86 Years		—		73,253	4.86 Years		—
		649,831	3.89 Years	$	1,579,659		392,923	2.64 Years	$	1,150,074

The aggregate intrinsic value of options exercised during the six months ended June 30, 2009 was approximately $46,000.  At June 30, 2009, the weighted average exercise price of common stock options outstanding and exercisable was $5.03 and $4.33, respectively.

8.            Credit Arrangement

On September 8, 2008, the Company and its wholly-owned subsidiary, World Energy Securities Corp., entered into a Loan and Security Agreement (the “Agreement”) with Silicon Valley Bank (“SVB”). Under the Agreement, SVB has committed to make advances to the Company in an aggregate amount of up to $3,000,000, subject to availability against certain eligible account receivables, eligible retail backlog and maintenance of financial covenants. The credit facility bears interest at a floating rate per annum based on SVB’s prime rate plus three-quarters of one percentage point (0.75%) on advances made against eligible accounts receivable and prime plus one-and-one-half of one percentage point (1.5%) on advances made against eligible retail backlog. These interest rates are subject to change based on the Company's maintenance of an adjusted quick ratio of one-to-one. All unpaid principal and accrued interest is due on September 7, 2009 (the “Maturity Date”). Until the Maturity Date, the Company is only required to pay interest, with each such payment due in arrears on the last calendar day of each month.

There were no outstanding borrowings from the credit facility at June 30, 2009 and the Company was in compliance with its covenants as of June 30, 2009.

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

This quarterly report on Form 10-Q including this Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which  involve risks and uncertainties. Readers can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words.  The Company’s actual results and the timing of certain events may differ significantly from the results and timing discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed or referred to in this report and in the “Risk Factors” section of our Annual Report on Form 10-K and any later publicly available filing with the Securities and Exchange Commission. The following discussion and analysis of the Company’s financial condition and results of operations should be read in light of those factors and in conjunction with the Company’s accompanying consolidated financial statements and notes thereto.

Overview

World Energy is an energy and environmental commodities brokerage company that has developed two online auction platforms, the World Energy Exchange and the World Green Exchange. On the World Energy Exchange, retail energy consumers (commercial, industrial and governmental) and wholesale energy participants (utilities, electricity retailers, and intermediaries) in the United States are able to negotiate for the purchase or sale of electricity and other energy resources from competing energy suppliers which have agreed to participate on our auction platform. The World Energy Exchange is supplemented with information about market rules, pricing trends, energy consumer usage and load profiles. Our procurement staff uses this auction platform to conduct auctions, analyze results, guide energy consumers through contracting, and track their contracts, sites, accounts and usage history. Although our primary source of revenue is from brokering electricity and natural gas, we adapted our World Energy Exchange auction platform to accommodate the brokering of green power in 2003 (i.e. electricity generated by renewable resources), wholesale electricity in 2004 and certain other energy-related products in 2005.  In 2007, we created the World Green Exchange based on the World Energy Exchange technology and business process.  On the World Green Exchange, buyers and sellers negotiate for the purchase or sale of environmental commodities such as Renewable Energy Certificates, Verified Emissions Reductions, Certified Emissions Reductions and Regional Greenhouse Gas Initiative (RGGI) allowances.

On March 27, 2009 we filed a previously approved Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to (i) effect a reverse stock split of our outstanding common stock at a ratio of one-for-ten; and (ii) decrease the number of authorized shares of our common stock from 150,000,000 to 15,000,000.  As a result of the reverse stock split, the issued and outstanding shares of common stock were reduced on a basis of one share for every ten shares outstanding. All of our issued and outstanding common stock, stock options and warrants to purchase common stock and restricted stock for all periods presented have been restated to reflect the reverse stock split.

On June 1, 2007, we acquired substantially all of the assets of EG Partners, LLC, formerly known as EnergyGateway LLC (EnergyGateway) for $4,951,758 in cash and 537,500 shares of our common stock (adjusted for the one-for-ten reverse split) plus the assumption of certain liabilities.  The EnergyGateway operations are included in our financial statements from June 1, 2007. EnergyGateway provided online energy procurement and value-added energy services to customers in many major industries in the U.S. and Canada, from large multi-site Fortune 500 industrials to middle-market manufacturing and small commercial operations.

Since our initial public offering (“IPO”) in November 2006, we significantly grew the Company from 20 employees to a high of 66 during the second quarter of 2008, with a current employee count of 61. This planned investment has allowed us to pursue our strategic initiatives as outlined in our IPO growing our revenue by over 200% since the fourth quarter of 2006. The majority of our infrastructure investment was made during the first nine months of 2007 and our fixed operating costs have declined since mid-2008 as we benefited from the operating efficiencies created by our integration efforts. We believe that our fixed operating cost structure will remain at or below current levels in the short-term. However, a portion of our operating costs, including channel partner and internal commission structures, are variable in nature and will increase as revenue levels increase.

Calendar year 2008 saw dramatic swings in commodity prices as well as a sharp contraction in the general economy in the fourth quarter. Beginning in the latter half of the first quarter of 2008 and continuing into the early part of the third quarter of 2008, there was a sharp rise in electricity and natural gas prices, and the third and fourth quarters saw a reversal of this trend as commodity prices fell as sharply as they rose.  For our business, we saw some customers in our wholesale and retail product lines delay their energy procurement decisions when prices rose, and then saw them return to the market when prices fell.  We believe this pricing environment contributed to an increase in procurement activity in our retail and wholesale product lines during the first six months of 2009 as compared to the same period in the prior year.

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U.S. and global economic conditions worsened significantly in the fourth quarter of 2008. The stress on international credit markets due to the sharp contraction of the general economy led to a dramatic tightening in liquidity. The U.S. government responded with several initiatives to alleviate the strain on the financial markets. While these programs have had some positive effects on financial systems, credit remains tight and economic conditions in the U.S. and globally remain uncertain. As a result of the decline in economic output, energy demand in many regions is lower, which could lead to reduced sales and lower margins. While we have experienced a decline in reported energy usage during the fourth quarter of 2008 and the first six months of 2009, energy demand was still within our long-term historical trends. In the near term, we expect that energy demand will continue to be affected as companies cut back production, close plants and delay or reduce purchasing decisions.

Operations

Revenue

Retail Electricity Transactions

We receive a monthly commission on energy sales contracted through our online auction platform from each energy supplier based on the energy usage transacted between the energy supplier and energy consumer. Our commissions are not based on the retail price for electricity; rather on the amount of energy consumed.  Commissions are based on the energy usage transacted between the energy supplier and energy consumer multiplied by our contractual commission rate. Our contractual commission rate is negotiated with the energy consumer on a procurement-by-procurement basis based on energy consumer specific circumstances, including the size of auction, internal effort required to organize and run the respective auction and competitive factors, among others. Once the contractual commission is agreed to with the energy consumer, all energy suppliers participating in the auction agree to that rate. That commission rate remains fixed for the duration of the contractual term regardless of energy usage. Energy consumers provide us with a letter of authority to request their usage history from the local utility. We then use this data to compile a usage profile for that energy consumer that will become the basis for the auction. This data may also be used to estimate revenue on a going forward basis, as noted below.

Historically, our revenue and operating results have varied from quarter-to-quarter and are expected to continue to fluctuate in the future. These fluctuations are primarily due to energy usage, particularly electricity, having higher demand in our second and third quarters and lower demand during our fourth and first quarters. In addition, the activity levels on the World Energy Exchange can fluctuate due to a number of factors, including market prices, weather conditions, energy consumers’ credit ratings, the ability of suppliers to obtain financing in credit markets, and economic and geopolitical events. To the extent these factors affect the purchasing decisions of energy consumers our future results of operations may be affected.

Contracts between energy suppliers and energy consumers are signed for a variety of term lengths, with a one year contract term being typical for commercial and industrial energy consumers, and government contracts typically having two to three year terms. As a result of recent commodity price fluctuations, where prices increased sharply in the first half of 2008 and then fell dramatically in the second half of 2008 and into 2009, we have seen our customers take advantage of what they perceive as low prices and contract for multiple year terms.  In this period we saw customers in some cases contract for four, five and even six year terms.  Our revenue has grown over the last three years through new participants utilizing our World Energy Exchange as well as energy consumers increasing the size or frequency of their transactions on our exchange platform.

We generally do not directly invoice our electricity energy suppliers and, therefore, we report a substantial portion of our receivables as “unbilled.” Unbilled accounts receivable represents management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates and is made up of two components. The first component represents energy usage for which we have received actual data from the supplier and/or the utility, but for which payment has not been received at the balance sheet date. The majority of our contractual relationships with energy suppliers require them to supply actual usage data to us on a monthly basis and remit payment to us based on that usage. The second component represents energy usage for which we have not received actual data, but for which we have estimated usage.

Retail Natural Gas Transactions

There are two primary fee components to our retail natural gas services - transaction fees and management fees.  

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Transaction fees are billed to and paid by the energy supplier awarded business on the platform.  Transaction fees for natural gas and electricity awards are established prior to award and are the same for each supplier.  For the majority of our natural gas transactions, we bill the supplier upon the conclusion of the transaction based on the estimated energy volume transacted for the entire award term multiplied by the transaction fee. As with electricity transactions described above, the favorable pricing environment saw certain gas customers also purchase for multiple year terms. Management fees are paid by our energy consumers and are generally billed on a monthly basis for services rendered based on terms and conditions included in contractual arrangements. While substantially all of our retail natural gas transactions are accounted for in accordance with this policy, a certain percentage is accounted for as the natural gas is consumed by the customer and recognized as revenue in accordance with the retail electricity transaction revenue recognition methodology described above.

Wholesale and Environmental Commodity Transactions

For wholesale energy and environmental commodity transactions, substantially all transaction fees are invoiced upon the conclusion of the auction based on a fixed fee.  These revenues are not tied to future energy usage and are recognized upon the completion of the online auction.  For reverse auctions where our customers bid for a consumer’s business, the fees are paid by the bidder. For forward auctions where a lister is selling energy or credits, the fees are typically paid by the lister. In addition, revenue may not be recognized on certain green transactions until the credits being auctioned have been verified and/or delivered. While substantially all wholesale and green transactions are accounted for in this fashion, a small percentage of our wholesale revenue is accounted for as electricity or gas is delivered similar to the retail electricity transaction methodology described above.

Cost of revenue

Cost of revenue consists primarily of:

• salaries, employee benefits and stock-based compensation associated with our auction management services, which are directly related to the development and production of the online auction and maintenance of market-related data on our auction platform and monthly management fees (our supply desk function);

• amortization of capitalized costs associated with our auction platform and acquired developed technology; and

• rent, depreciation and other related overhead and facility-related costs.

Sales and marketing

Sales and marketing expenses consist primarily of:

• salaries, employee benefits and stock-based compensation related to sales and marketing personnel;

• third party commission expenses to our channel partners;

• travel and related expenses;

• amortization related to customer relationships and contracts;

• rent, depreciation and other related overhead and facility-related costs; and

• general marketing costs such as trade shows, marketing materials and outsourced services.

General and administrative

General and administrative expenses consist primarily of:

• salaries, employee benefits and stock-based compensation related to general and administrative personnel;

• accounting, legal, recruiting and other professional fees; and

• rent, depreciation and other related overhead and facility-related costs.

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Interest income (expense), net

Interest income (expense), net consists primarily of:

• interest income related to the invested portion of the proceeds from our initial public offering; and

• interest expense related to capital leases.

Income tax provision

We did not record an income tax benefit for the six months ended June 30, 2009 and 2008 as we provided a full valuation allowance against our deferred tax assets due to uncertainty regarding the realization of those deferred tax assets, primarily net operating loss carryforwards, in the future.

Results of Operations

The following table sets forth certain items as a percent of revenue for the periods presented:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2009	2008	2009	2008
Revenue	100%	100%	100%	100%
Cost of revenue	27	46	27	43
Gross profit	73	54	73	57
Operating expenses:
Sales and marketing	72	100	68	92
General and administrative	23	40	24	43
Operating loss	(22)	(86)	(19)	(78)
Interest income (expense), net	—	—	—	1
Income tax benefit	—	—	—	—
Net loss	(22)%	(86) %	(19)%	(77)%

Comparison of the Three Months Ended June 30, 2009 and 2008

Revenue

	For the Three Months Ended June 30,
	2009		2008		Increase
Revenue	$	3,682,476	$	2,760,695	$	921,781	33%

Revenue increased 33% primarily due to increased auction activity in all of our product lines and new customer wins.  The revenue increase reflects a significant increase in wholesale activity in the second quarter of 2009 versus the same period in 2008 as our wholesale customer base grew to 46 in 2009 from 30 in 2008. In addition, activity in our retail business was strong in both our auction and post and respond product offerings. Our channel partner network increased to 72 as of June 30, 2009 from 53 as of June 30, 2008 with 33 contributing to our revenue by brokering transactions over the exchange in 2009 as compared to 26 during 2008. The second quarter of 2009 also reflected our success in the environmental commodities product line including the completion of the fourth quarterly auction for RGGI.  Partially offsetting these increases was an 18% decrease in management fee revenue resulting from the transitioning of the former EnergyGateway customer base to a performance-based, transaction fee model.

Cost of revenue

	For the Three Months Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue		Decrease
Cost of revenue	$	984,896		27%	$	1,276,859		46%	$	(291,963	)	(23)%

The 23% decrease in cost of revenue related to the three month period June 30, 2009 as compared to the same period in 2008 was substantially due to decreases in employee costs and, to a lesser extent, travel costs. Cost of revenue as a percent of revenue decreased 19% due to the 33% increase in revenue and the cost decreases noted above.

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Operating expenses

	For the Three Months Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue		Decrease
Sales and marketing	$	2,662,921		72%	$	2,770,924		100%	$	(108,003	)	(4)%
General and administrative		827,719		23		1,100,642		40		(272,923	)	(25)
Total operating expenses	$	3,490,640		95%	$	3,871,566		140%	$	(380,926	)	(10)%

The 4% decrease in sales and marketing expense for the three month period ended June 30, 2009 as compared to the same period in 2008 primarily reflects general decreases in marketing and promotional costs and, to a lesser extent, salary costs, partially offset by increases in third party commission costs. Marketing and promotional costs decreased as a result of transferring those functions in-house. Third party commission costs increased 44% substantially due to the 33% increase in revenue and, to a lesser extent, slightly higher commission rates in the second quarter of 2009 compared to the same period in the prior year. Sales and marketing expense as a percentage of revenue decreased 28% primarily due to the 33% increase in revenue and, to a lesser extent, the net cost decreases noted above.

The 25% decrease in general and administrative expenses related to the three month period ended June 30, 2009 as compared to the same period in 2008 was primarily due to a gain related to a settlement from the early termination of a customer contract in 2007, and net decreases in compliance and legal costs. These decreases were partially offset by the write-off of prepaid consulting fees. General and administrative expenses as a percent of revenue decreased 17% due to the 33% increase in revenue, the gain related to a settlement from the early termination of a customer contract and the cost decreases noted above.

Interest income (expense), net

Interest expense, net was approximately $2,000 for the three month period ended June 30, 2009, and interest income, net was approximately $7,000 for the same period in 2008.  The decrease in interest income was primarily due to a lower average cash balance in 2009 as compared to 2008, as we utilized the proceeds from our initial public offering to pursue our strategic initiatives.

Income tax provision

We did not record an income tax benefit in either 2009 or 2008 as we provided a full valuation allowance against our deferred tax assets due to uncertainty regarding the realization of those deferred tax assets, primarily net operating loss carryforwards, in the future.

Net loss

We reported a net loss for the three months ended June 30, 2009 of approximately $0.8 million as compared to a net loss of approximately $2.4 million for the three months ended June 30, 2008. The 67% decrease in net loss is primarily due to the 33% increase in revenue and, to a lesser extent, an overall decrease in cost of revenue and operating expenses.

Comparison of the Six Months Ended June 30, 2009 and 2008

Revenue

	For the Six Months Ended June 30,
	2009		2008		Increase
Revenue	$	7,660,255	$	5,875,212	$	1,785,043	30%

Revenue increased 30% primarily due to increased auction activity in all of our product lines and new customer wins.  The revenue increase reflects increased activity in our retail business including strong bookings generated by our auction and post and respond product offerings, and an increase to 72 channel partners as of June 30, 2009 from 53 as of June 30, 2008. Of those channel partners, 33 had contributed to our revenue by brokering transactions over the exchange in 2009 as compared to 26 during 2008.  In addition, our wholesale customer base grew to 46 in 2009 from 30 in 2008. The first six months of 2009 also reflected our success in the environmental commodities product line including the completion of two quarterly auctions for RGGI in 2009.  Partially offsetting these increases was a 17% decrease in management fee revenue resulting from the transitioning of the former EnergyGateway business to a performance-based, transaction fee model.

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Cost of revenue

	For the Six Months Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue		Decrease
Cost of revenue	$	2,074,848		27%	$	2,512,912		43%	$	(438,064	)	(17)%

The 17% decrease in cost of revenue related to the six month period June 30, 2009 as compared to the same period in 2008 was substantially due to decreases in employee costs and, to a lesser extent, travel costs. Cost of revenue as a percent of revenue decreased 16% due to the 30% increase in revenue and the cost decreases noted above.

Operating expenses

	For the Six Months Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue		Decrease
Sales and marketing	$	5,233,469		68%	$	5,414,660		92%	$	(181,191	)	(3)%
General and administrative		1,808,955		24		2,521,625		43		(712,670	)	(28)
Total operating expenses	$	7,042,424		92%	$	7,936,285		135%	$	(893,861	)	(11)%

The 3% decrease in sales and marketing expense for the six month period ended June 30, 2009 as compared to the same period in 2008 primarily reflects general decreases in marketing, travel and salary costs, substantially offset by increases in third party commission costs. Third party commission costs increased 28% primarily due to the 30% increase in revenue. Sales and marketing expense as a percentage of revenue decreased 24% due to the 30% increase in revenue and, to a lesser extent, the net cost decreases noted above.

The 28% decrease in general and administrative expenses related to the six month period ended June 30, 2009 as compared to the same period in 2008 was primarily due to a gain related to a settlement from the early termination of a customer contract in 2007, net decreases in compliance and legal costs, and employee related costs. These decreases were offset by a write-off of prepaid consulting fees. General and administrative expenses as a percent of revenue decreased 19% substantially due to the 30% increase in revenue, the gain related to a settlement from the early termination of a customer contract and cost decreases noted above.

Interest income (expense), net

Interest expense, net was approximately $3,000 for the six month period ended June 30, 2009, and interest income, net was approximately $34,000 for the same period in 2008.  The decrease in interest income was primarily due to a lower average cash balance in 2009 as compared to 2008, as we utilized the proceeds from our initial public offering to pursue our strategic initiatives.

Income tax provision

We did not record an income tax benefit in either 2009 or 2008 as we provided a full valuation allowance against our deferred tax assets due to uncertainty regarding the realization of those deferred tax assets, primarily net operating loss carryforwards, in the future.

Net loss

We reported a net loss for the six months ended June 30, 2009 of approximately $1.5 million as compared to a net loss of approximately $4.5 million for the six months ended June 30, 2008. The 68% decrease in net loss is primarily due to the 30% increase in revenue and decreases in cost of revenue and operating expenses.

Liquidity and Capital Resources

At June 30, 2009, we had no commitments for material capital expenditures. We have identified and executed against a number of strategic initiatives that we believe are key components of our future growth, including: expanding our community of channel partners, energy consumers and energy suppliers on our exchanges; strengthening and extending our long-term relationships with government agencies; entering into other energy-related markets including wholesale transactions with

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utilities and the emerging environmental credit markets; making strategic acquisitions and growing our sales force.  As of June 30, 2009, our workforce numbered 61 reflecting a decrease of one from the 62 we employed at June 30, 2008. At June 30, 2009, we had 26 professionals in our sales and marketing and account management groups, 25 in our supply desk group and 10 in our general and administrative group.  While we will continue to adjust our workforce as the need and/or opportunity arises, we believe that our operating costs will remain at or below current levels in the short term.

Comparison of June 30, 2009 to December 31, 2008

	June 30, 2009		December 31, 2008		Increase/(Decrease)
Cash and cash equivalents	$	756,295	$	1,731,411	$	(975,116	)	(56	)%
Trade accounts receivable		2,977,238		2,343,593		633,645		27
Days sales outstanding		74		62		12		19
Working capital		500,441		742,478		(242,037	)	(33	)
Stockholders’ equity		9,950,316		11,009,131		(1,058,815	)	(10	)

Cash and cash equivalents decreased 56%, primarily due to an increase in trade accounts receivable, decreases in current liabilities and the net loss for the six months ended June 30, 2009. Trade accounts receivable increased 27% as revenue for the second quarter of 2009 was 12% greater than revenue for the fourth quarter of 2008 and as a result of days sales outstanding increasing 19%. Days sales outstanding (representing accounts receivable outstanding at June 30, 2009 divided by the average sales per day during the current quarter) increased 19% due to the timing of revenue recognized within the second quarter of 2009 as compared to the fourth quarter of 2008. Revenue from our energy suppliers representing greater than 10% of our revenue decreased to 18% from one energy supplier during the first six months of 2009, from 21% from the same energy supplier during the first six months of 2008.

Working capital (consisting of current assets less current liabilities) decreased 33%, primarily due to a $1.0 million decrease in cash and cash equivalents discussed above, substantially offset by a $0.6 increase in trade accounts receivable and a $0.2 million decrease in current liabilities. Stockholders’ equity decreased 10% primarily due to the net loss for the first six months of 2009, partially offset by share-based compensation.

Cash used in operating activities for the six months ended June 30, 2009 was approximately $0.8 million due primarily to increases in trade accounts receivable and decrease in current liabilities. Cash used in operating activities for the six months ended June 30, 2008 was approximately $4.4 million due primarily to the net losses for that period.  Cash used in investing and financing activities for the six months ended June 30, 2009 was approximately $135,000 primarily due to purchases of our common stock in connection with the vesting of restricted stock granted to employees and costs incurred in software development. Cash used in investing and financing activities for the six months ended June 30, 2008 was approximately $317,000, primarily due to costs incurred in software development, the purchase of common stock in connection with the vesting of restricted stock granted to employees and purchases of property and equipment.

To date we have not experienced any significant liquidity effects from the current economic crisis. Energy suppliers are active participants in the financial markets and have been able to obtain financing when required. Our energy supplier base has been contracting as an industry wide consolidation has been under way over the last several years. We have had several energy consumers file for bankruptcy and liquidate operations as a result of the current economic environment but the effect on our operations has not been significant to date.  We do expect to see some impact to our commercial and industrial business in the near term as companies cut back production, close plants and delay or reduce purchasing decisions. However, we have not experienced a material impact on our base business in 2009 to date.

We have incurred $21.1 million of cumulative operating losses to date. For the six months ended June 30, 2009, we incurred net losses of $1.5 million and generated negative cash flow of $1.0 million.  The cash decrease was primarily due to a $0.6 million increase in our trade accounts receivable and a net decrease of $0.2 million in deferred revenue.  Non-cash expense items including depreciation, amortization and share-based compensation were $1.3 million, substantially offsetting the net loss of $1.5 million for the first six months of 2009. Excluding the effects of the accounts receivable increase and deferred revenue decrease, negative cash flow for the six months would have been $0.2 million, which was primarily due to costs incurred in software development, the purchase of common stock in connection with the vesting of restricted stock and the net loss for the period.

We have historically funded our operations with cash flow from operations and the issuance of various debt and equity instruments. We have approximately $0.8 million of cash and cash equivalents and no bank debt as of June 30, 2009.  We expect to continue to fund our operations from existing cash resources, operating cash flow and, when required, the issuance

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of various debt and equity instruments. That notwithstanding, we believe that our current financial resources are adequate to fund our ongoing operations and pursue our strategic initiatives. Management anticipates that we will reach cash flow positive and improve our liquidity through continued growth. We have consistently decreased our quarterly operating loss and cash usage during 2009 and 2008. While we experienced cash usage due primarily to certain working capital increases in the first six months, we have reduced our negative operating cash flow substantially. To the extent our revenue growth does not meet our anticipated targets, we will adjust our cost structure as deemed appropriate. However no assurance can be given that management’s actions will result in profitable operations or positive cash flow.

On September 8, 2008, we entered into a Loan and Security Agreement (the “Agreement”) with Silicon Valley Bank (SVB). Under the Agreement, SVB has committed to make advances to us in an aggregate amount of up to $3,000,000, subject to availability against certain eligible account receivables, eligible retail backlog and maintenance of financial covenants. The credit facility bears interest at a floating rate per annum based on SVB’s prime rate plus three-quarters of one percentage point (0.75%) on advances made against eligible accounts receivable and prime plus one-and-one-half of one percentage point (1.5%) on advances made against eligible retail backlog. These interest rates are subject to change based on our maintenance of an adjusted quick ratio of one-to-one. All unpaid principal and accrued interest is due on September 7, 2009 (“Maturity Date”). Until the Maturity Date, we are only required to pay interest, with each such payment due in arrears on the last calendar day of each month.

There were no outstanding borrowings from the credit facility and we were in compliance with our bank covenants as of June 30, 2009.

Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The most judgmental estimates affecting our consolidated financial statements are those relating to revenue recognition and the estimate of actual energy purchased from the energy supplier and end user, or energy consumer, of such energy; software development costs; the fair value of our equity securities prior to our initial public offering when there was no ready market for the purchase and sale of these shares; the valuation of intangible assets and goodwill; impairment of long-lived assets; and estimates of future taxable income as it relates to the realization of our net deferred tax assets. We regularly evaluate our estimates and assumptions based upon historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, our future results of operations may be affected. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Refer to Note 2 of our consolidated financial statements within our Annual Report on Form 10-K as filed on March 3, 2009 for a description of our accounting policies.

Revenue Recognition

Retail Electricity Transactions

We receive a monthly commission on energy sales contracted through our online auction platform from each energy supplier based on the energy usage transacted between the energy supplier and energy consumer. Our commissions are not based on the retail price for electricity; rather on the amount of energy consumed. Commissions are based on the energy usage transacted between the energy supplier and energy consumer multiplied by our contractual commission rate. Revenue from commissions is recognized as earned on a monthly basis over the life of each contract as energy is consumed, provided there is persuasive evidence of an arrangement, the sales price is fixed or determinable, collection of the related receivable is reasonably assured, and customer acceptance criteria, if any, has been successfully demonstrated.

We record brokerage commissions based on actual usage data obtained from the energy supplier for that accounting period, or to the extent actual usage data is not available, based on the estimated amount of electricity and gas delivered to the energy consumers for that accounting period. We develop our estimates on a quarterly basis based on the following criteria:

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• Payments received prior to the issuance of the financial statements;

• Usage updates from energy suppliers; 

• Usage data from utilities;

• Comparable historical usage data; and

• Historical variances to previous estimates.

To the extent usage data cannot be obtained, we estimate revenue as follows:

• Historical usage data obtained from the energy consumer in conjunction with the execution of the auction;

• Geographic/utility usage patterns based on actual data received;

• Analysis of prior year usage patterns; and

• Specific review of individual energy supplier/location accounts.

In addition, we analyze this estimated data based on overall industry trends including prevailing weather and usage data. Once the actual data is received, we adjust the estimated accounts receivable and revenue to the actual total amount in the period during which the payment is received. Based on management’s current capacity to obtain actual energy usage, we currently estimate four to six weeks of revenue at the end of our accounting period. Differences between estimated and actual revenue have been within management’s expectations and have not been material to date.

We generally do not directly invoice our electricity energy suppliers and, therefore, we report a substantial portion of our receivables as “unbilled.” Unbilled accounts receivable represents management’s best estimate of energy provided by the energy suppliers to the energy consumers for a specific completed time period at contracted commission rates and is made up of two components. The first component represents energy usage for which we have received actual data from the supplier and/or the utility but for which payment has not been received at the balance sheet date. The majority of our contractual relationships with energy suppliers require them to supply actual usage data to us on a monthly basis and remit payment to us based on that usage. The second component represents energy usage for which we have not received actual data, but for which we have estimated usage.  Commissions paid in advance by certain energy suppliers are recorded as deferred revenue and amortized to commission revenue on a monthly basis on the energy exchanged that month.

Retail Natural Gas Transactions

There are two primary fee components to our retail natural gas services, transaction fees and management fees.  Transaction fees are billed to and paid by the energy supplier awarded business on the platform.  Transaction fees for natural gas awards are established prior to award and are the same for each supplier. For the majority of our natural gas transactions, we bill the supplier upon the conclusion of the transaction based on the estimated energy volume transacted for the entire award term multiplied by the transaction fee.  Management fees are paid by our energy consumers and are generally billed on a monthly basis for services rendered based on terms and conditions included in contractual arrangements. While substantially all of our retail natural gas transactions are accounted in accordance with this policy, a certain percentage are accounted for as the natural gas is consumed by the customer and recognized as revenue in accordance with the retail electricity transaction revenue recognition methodology described above.

Wholesale and Green Transactions

Substantially all transaction fees are invoiced upon the conclusion of the auction based on a fixed fee.  These revenues are not tied to future energy usage and are recognized upon the completion of the online auction.  For reverse auctions where our customers bid for a consumer’s business, the fees are paid by the bidder. For forward auctions where a lister is selling energy or credits, the fees are typically paid by the lister. In addition, revenue may not be recognized on certain green transactions until the credits being auctioned have been verified and/or delivered. While substantially all wholesale and green transactions are accounted for in this fashion, a small percentage of our wholesale revenue is accounted for as the wholesale electricity or gas is delivered similar to the retail electricity transaction revenue recognition methodology described above.

Channel Partner Commissions

We pay commissions to our channel partners at contractual rates based on monthly energy transactions between energy suppliers and energy consumers. The commission is accrued monthly and charged to sales and marketing expense as revenue is recognized. We pay commissions to our salespeople at contractual commission rates based upon cash collections from our customers.

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Revenue Estimation

Our estimates in relation to revenue recognition affect revenue and sales and marketing expense as reflected on our statements of operations, and trade accounts receivable and accrued commissions accounts as reflected on our balance sheets. For any quarterly reporting period, we may not have actual usage data for certain energy suppliers and will need to estimate revenue. We record revenue based on the energy consumers’ historical usage profile. At the end of each reporting period, we adjust historical revenue to reflect actual usage for the period and estimate usage where actual usage is not available. For the six months ended June 30, 2009, we estimated usage for approximately 11% of our revenue resulting in a negative 0.5%, orapproximately $41,000, adjustment to reduce revenue. This decrease in revenue resulted in an approximate $11,000 decrease in sales and marketing expense related to third party commission expense associated with those revenues. Corresponding adjustments were made to trade accounts receivable and accrued commissions, respectively. A 1% difference between this estimate and actual usage would have an approximate $8,000 effect on our revenue for the three months ended June 30, 2009.

Software Development

Certain acquired software and significant enhancements to our software are recorded in accordance with Statement of Position 98-1, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use”. Accordingly, internally developed software costs of approximately $41,000 and $205,000 related to implementation, coding and configuration have been capitalized during the six months ended June 30, 2009 and 2008, respectively. We amortize internally developed and purchased software over the estimated useful life of the software (generally three years).  During the six months ended June 30, 2009 and 2008, approximately $157,000 and $105,000 were amortized to cost of revenues, respectively.  Accumulated amortization was approximately $669,000 and $512,000 at June 30, 2009 and December 31, 2008, respectively.

Our estimates for capitalization of software development costs affect cost of revenue and capitalized software as reflected on our consolidated statements of operations and on our consolidated balance sheets. During the six months ended June 30, 2009, capitalized software costs were 0.3% of our total assets and amortization expense was approximately 7.6% of cost of revenue. To the extent the carrying amount of the capitalized software costs may not be fully recoverable or that the useful lives of those assets are no longer appropriate, we may need to record an impairment (non-cash) charge and write-off a portion or all of the capitalized software balance on the balance sheet.

Goodwill

We use assumptions in establishing the carrying value and fair value of our goodwill.  Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of acquired businesses.  We account for goodwill that results from acquired businesses in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”).  Under SFAS No. 142, goodwill and intangible assets having indefinite lives are not amortized but instead are assigned to reporting units and tested for impairment annually or more frequently if changes in circumstances or the occurrence of events indicate possible impairment.

Pursuant to SFAS No. 142, we perform an annual impairment review during the fourth fiscal quarter of each year, or earlier, if indicators of potential impairment exist. The impairment test for goodwill is a two-step process.  Step one consists of a comparison of the fair value of a reporting unit with its carrying amount, including the goodwill allocated to each reporting unit.  If the carrying amount is in excess of the fair value, step two requires the comparison of the implied fair value of the reporting unit with the carrying amount of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill will be recorded as an impairment loss.  We performed our annual impairment analysis in December 2008 and determined that no impairment of our goodwill or intangible assets existed.

Intangible Assets

We use assumptions in establishing the carrying value, fair value and estimated lives of our intangible assets.  The criteria used for these assumptions include management’s estimate of the assets continuing ability to generate positive income from operations and positive cash flow in future periods compared to the carrying value of the asset, as well as the strategic significance of any identifiable intangible asset in our business objectives.  If assets are considered impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.  Useful lives and related amortization expense are based on our estimate of the period that the assets will generate revenues or otherwise be used by us.  Factors that would influence the likelihood of a material change in our reported results include significant changes in the asset’s ability to generate positive cash flow, a significant decline in the economic and competitive environment on which the asset depends and significant changes in our strategic business objectives.

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Intangible assets consist of customer relationships and contracts, purchased technology and other intangibles, and are stated at cost less accumulated amortization. Intangible assets with a definite life are amortized using the straight-line method over their estimated useful lives, which range from one to ten years.

Impairment of Long-Lived and Intangible Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we periodically review long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable or that the useful lives of those assets are no longer appropriate. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount.  During 2009, no impairment of our long-lived assets was recorded as no change in circumstances indicated that the carrying value of the assets was not recoverable.

Income Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. Deferred tax assets and liabilities are determined at the end of each period based on the future tax consequences that can be attributed to net operating loss carryforwards, as well as differences between the financial statement carrying amounts of the existing assets and liabilities and their respective tax basis. Deferred income tax expense or credits are based on changes in the asset or liability from period to period. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income. In determining the valuation allowance, we consider past performance, expected future taxable income, and qualitative factors which we consider to be appropriate in estimating future taxable income.  Our forecast of expected future taxable income is for future periods that can be reasonably estimated. Results that differ materially from current expectations may cause management to change its judgment on future taxable income and adjust our existing tax valuation allowance.

Our estimates in relation to income taxes affect income tax benefit and deferred tax assets as reflected on our statements of operations and balance sheets, respectively. The deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized in the near term.  As of June 30, 2009, we had deferred tax assets of approximately $7.9 million against which a full valuation allowance has been established. To the extent we determine that it is more likely than not that we will recover all of our deferred tax assets, it could result in an approximate $7.9 million non-cash tax benefit.

Share-Based Compensation

In accordance with SFAS No. 123(R) “Share-Based Payment”, we recognize the compensation cost of share-based awards on a straight-line basis over the requisite service period of the award. For the six months ended June 30, 2009, share-based awards consisted of grants of restricted stock and stock options and, for the six months ended June 30, 2008, share-based awards consisted of grants of restricted stock. The restrictions on the restricted stock lapse over the vesting period. The vesting period of restricted stock is determined by our Board of Directors, and is generally four years for employees. The per-share weighted-average fair value of stock options granted during the six months ended June 30, 2009 was $3.70 on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Six-months ended June 30,	Expected Dividend Yield	Risk Interest Rate	Expected Option Life	Expected Volatility
2009	—	2.20%	4.75 years	100%

We have two stock incentive plans: the 2003 Stock Incentive Plan, or the 2003 Plan, and the 2006 Stock Incentive Plan, or the 2006 Plan.  As of June 30, 2009, 349,231 shares of common stock were reserved under the 2003 Plan. No further grants are allowed under the 2003 Plan.  As of June 30, 2009, 717,497 shares of common stock were reserved under the 2006 Plan representing 300,600 outstanding stock options, 66,048 shares of restricted stock outstanding and 350,849 shares available for grant.

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Stock Options

A summary of stock option activity under both plans for the six months ended June 30, 2009 is as follows:

	Number of Stock Options			Weighted Average Exercise Price
Outstanding at December 31, 2008		626,456		$5.08
Granted		41,000		$4.98
Cancelled		(8,625	)	$4.35
Exercised		(9,000	)	$1.21
Outstanding at June 30, 2009		649,831		$5.03

A summary of common stock options outstanding and common stock options exercisable as of June 30, 2009 is as follows:

	Options Outstanding					Options Exercisable
			Weighted					Weighted
			Average					Average
Range of			Remaining	Aggregate		Number		Remaining	Aggregate
Exercise			Contractual	Intrinsic		Of Shares		Contractual	Intrinsic
Prices	Options		Life	Value		Exercisable		Life	Value
$0.20 - $1.99		203,030	1.34 Years	$	1,004,999		203,030	1.34 Years	$	1,004,999
$2.00 - $3.80		209,800	5.31 Years		574,320		65,625	3.07 Years		145,075
$3.81 - $11.29		98,001	4.77 Years		340		51,015	4.08 Years		—
$11.30 - $13.40		139,000	4.86 Years		—		73,253	4.86 Years		—
		649,831	3.89 Years	$	1,579,659		392,923	2.64 Years	$	1,150,074

The aggregate intrinsic value of options exercised during the six months ended June 30, 2009 was approximately $46,000.  At June 30, 2009, the weighted average exercise price of common stock options outstanding and exercisable was $5.03 and $4.33, respectively.

Restricted Stock

A summary of restricted stock activity under the 2006 Plan for the six months ended June 30, 2009 is as follows:

	Shares			Weighted Average Grant Price
Outstanding at December 31, 2008		118,603		$              9.76
Granted		30,058		$              3.55
Cancelled		(11,900	)	$              9.51
Vested		(70,713	)	$              6.86
Outstanding at June 30, 2009		66,048		$            10.08

In December 2008, certain members of the senior management team agreed to receive shares of Company common stock in lieu of cash related to the 2008 annual incentive bonus plan. In addition, certain members of the Board of Directors agreed to receive shares of Company common stock in lieu of approximately $27,000 in cash related to amounts due under the 2009 Directors’ compensation plan. Included in shares granted and in shares vested above is 29,558 shares of common stock issued to employees and non-employee Directors related to these arrangements. The amounts related to director fees are included in share-based compensation within the cash flow statement for the six months ended June 30, 2009.

There were 1,066,728 shares reserved for issuance under these plans at June 30, 2009.

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Item 3.                      Quantitative and Qualitative Disclosure about Market Risk

Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency rates, interest rates, and other relevant market rates or price changes.  In the ordinary course of business, we are exposed to market risk resulting from changes in foreign currency exchange rates, and we regularly evaluate our exposure to such changes.  The Company’s overall risk management strategy seeks to balance the magnitude of the exposure and the costs and availability of appropriate financial instruments.

Impact of Inflation and Changing Prices

Historically, our business has not been materially impacted by inflation. We provide our service at the inception of the service contract between the energy supplier and energy consumer. Our fee is set as a fixed dollar amount per unit of measure and fluctuates with changes in energy demand over the contract period.

Foreign Currency Fluctuation

Our commission revenue is primarily denominated in U.S. dollars. Therefore, we are not directly affected by foreign exchange fluctuations on our current orders. However, fluctuations in foreign exchange rates do have an effect on energy consumers’ access to U.S. dollars and on pricing competition. We have entered into non-U.S. dollar contracts but they have not had a material impact on our operations. We do not believe that foreign exchange fluctuations will materially affect our results of operations.

Item 4.                      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2009. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, the Company��s management was required to apply its reasonable judgment. Based upon the required evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that as of June 30, 2009, the Company’s disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the second fiscal quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.                      Legal Proceedings

None.

Item 1A.                   Risk Factors

No material changes.

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

We registered shares of our common stock in connection with our initial public offering concurrently in Canada under the terms of a Supplemented Prep Prospectus dated November 9, 2006 and in the United States under the Securities Act of 1933, as amended. Our Registration Statement on Form S-1 (No. 333-136528) in connection with our initial public offering was declared effective by the SEC on November 9, 2006.

As of June 30, 2009, we have used all of the $17.5 million of the net proceeds of our initial public offering to redeem our long-term debt, to acquire the assets of Energy Gateway, for working capital and to fund operations.  There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b).

In connection with the vesting of restricted stock granted to employees, we withheld shares with value equivalent to employees’ minimum statutory obligations for the applicable income and other employment taxes.  A summary of the shares withheld to satisfy employee tax withholding obligations is as follows:

			Total Number of	Maximum
	Total		Shares Purchased	Number of Shares
	Number of	Average	As Part of Publicly	That May Yet Be
	Shares	Price Paid	Announced Plans	Purchased Under
Period	Purchased	Per Share	Or Programs	The Plan
4/01/09 – 4/30/09	187	$        3.16	—	—
5/01/09 – 5/31/09	1,429	$        6.50	—	—
6/01/09 – 6/30/09	2,153	$        5.62	—	—
Total	3,769	$        5.83	—	—

Item 3.                      Defaults Upon Senior Securities

None.

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

The Annual Meeting of Stockholders of the Company held May 21, 2009 was called to (a) elect one Class III directors to our Board of Directors to hold office until our 2012 Annual Meeting of Stockholders and until such director's successor is duly elected and qualified, and (b) to ratify the selection of UHY LLP as our independent registered public accounting firm for the 2009 fiscal year.

The following table lists the Class III director elected at the annual meeting and the number of votes cast for and the number of votes withheld.  No other persons were nominated and no other persons received any votes.

	Number of Votes
Directors Elected At Annual Meeting	For		Withheld
Mr. Richard Domaleski		6,467,327		180,939

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The term of office of each of the following directors continued through and after the meeting:  Thad Wolfe, Patrick Bischoff, Edward Libbey and John Wellard.

The following table sets forth the number of votes cast for and against, and the number of abstentions, with respect to the ratification of UHY LLP as the Company’s independent registered public accounting firm for the 2009 fiscal year.

	Number of Votes
	For		Against		Abstain		Non-Vote
Ratification of Public Accounting Firm		6,641,892		—		6,375		—

Item 5.                      Other Information

   None.

Item 6.                      Exhibits

31.1	Certification of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

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

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SIGNATURES

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

	World Energy Solutions, Inc.
Dated:  August 6, 2009	By:	/s/ Richard Domaleski
		Richard Domaleski
		Chief Executive Officer

Dated:  August 6, 2009	By:	/s/ James Parslow
		James Parslow
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit                                                                                 Description

31.1 Certification of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002

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

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