Historically, electric utility companies were formed in North America as regulated monopolies to manage the capital intensive, mission critical service of delivering electricity to end-use customers. Each local utility was vertically integrated, with responsibility for owning, managing, and delivering all components of the electric power industry: generation, transmission, distribution and retail sales. Each utility was also responsible for maintaining reliability standards based on avoiding service disruptions, commonly known as blackouts. In about half of North America, the industry continues to operate in this vertically integrated fashion.

In the rest of North America, including New England, New York, the Mid-Atlantic, the Midwest, Texas, California, and Ontario, Canada, the electric power industry has been restructured to foster a competitive environment. In these restructured markets, utilities continue to operate and maintain the local distribution lines, delivering electricity to consumers as they had before, but power generators and electricity suppliers are now allowed to openly compete for business.

Independent system operators, referred to as ISOs, or regional transmission organizations, referred to as RTOs, have been formed in these restructured markets to take control of the operation of the regional power system, coordinate the supply of electricity, and establish fair and efficient markets. ISOs and RTOs are collectively referred to as grid operators. These grid operators are responsible for maintaining Federal reliability standards designed to avoid service disruptions.

Increasingly, grid operators and utilities in both restructured markets and in traditionally regulated markets are challenged to reliably provide electricity during periods of peak demand. Clean and intelligent power solutions can provide a lower cost, reliable and environmentally sound alternative to building additional supply infrastructure in both traditionally regulated and restructured markets.

Web services connect applications directly with other applications. They do this through a form of \\\"loose coupling\\\" which allows connections to be established across applications without customization. As a result, these connections can be established without regard to technology platform or programming language, making it easy to share technology resources across a broad range of users and companies.

The Company’s technology can be broken down into three primary components: the Network Operations Center, the Site Server, or ESS, and PowerTrak, the Company’s enterprise energy management software.

The Company’s technology platform enables NOC to automatically respond to signals sent by grid operators and utilities to deliver real-time demand reductions within targeted geographic regions. The Company can customize its technology to receive and interpret many types of dispatch signals sent directly from a grid operator or utility to its NOC.

PowerTrak is the Company’s Web-based enterprise energy management software platform used for power measurement, load control and energy analysis, and is the underlying software that runs its NOC. It utilizes a modular Web services architecture that is designed to allow application modules to be easily integrated into the platform.

Selling and marketing expenses were $3.8 million for the nine months ended September 30, 2006 compared to $1.1 million for the nine months ended September 30, 2005, an increase of $2.8 million, or 258%.

General and administrative expenses were $5.0 million for the nine months ended September 30, 2006 compared to $2.3 million for the nine months ended September 30, 2005, an increase of $2.7 million, or 113%.

Research and development expenses were $0.7 million for the nine months ended September 30, 2006 compared to $0.8 million for the nine months ended September 30, 2005, a decrease of $0.1 million, or 11%.

Net interest expense was $103,000 for the nine months ended September 30, 2006 compared to net interest income of $53,000 for the nine months ended September 30, 2005.