UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended ~~December~~March 31, ~~2008~~2009

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission File Number: 0-16196

ENERLUME ENERGY MANAGEMENT CORP.

(Exact name of registrant as specified in its charter)

Colorado		06-1168423
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

2 Broadway Hamden, Connecticut		06518-2697
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (203) 248-4100

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

On ~~March~~May 2015, 2009, there were 14,~~071~~285,~~728~~155 shares of the registrant’s common stock, $.001 par value, outstanding.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED ~~DECEMBER~~MARCH 31, ~~2008~~2009

TABLE OF CONTENTS

Part I – Financial Information			Page
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – December 31, 2008 (Unaudited) and June 30, 2008 (Audited)		3
	Condensed Consolidated Balance Sheets – March 31, 2009 (Unaudited) and June 30, 2008 (Audited)		3
	Condensed Consolidated Statements of Operations – for the three months ended December 31, 2008 and 2007 (Unaudited)		4
	Condensed Consolidated Statements of Operations – for the three months ended March 31, 2009 and 2008 (Unaudited)		4
	Condensed Consolidated Statements of Operations – for the six months ended December 31, 2008 and 2007 (Unaudited)		5
	Condensed Consolidated Statements of Operations – for the nine months ended March 31, 2009 and 2008 (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows – for the six months ended December 31, 2008 and 2007 (Unaudited)		6
	Condensed Consolidated Statements of Cash Flows – for the nine months ended March 31, 2009 and 2008 (Unaudited)		6
	Notes to Condensed Consolidated Financial Statements (Unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2830
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4144
Item 4(T).	Controls and Procedures		4145
Part II – Other Information
Item 1.		Legal Proceedings	4347
Item 1A.		Risk Factors	4448
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	4448
Item 3.		Defaults Upon Senior Securities	4650
Item 4.		Submission of Matters to a Vote of Security Holders	4650
Item 5.		Other Information	4650
Item 6.		Exhibits	4651
		Signatures	4752

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
	December 31, 2008 (Unaudited)			June 30, 2008 (Audited)
	March 31, 2009 (Unaudited)			June 30, 2008 (Audited)
CURRENT ASSETS
Cash and cash equivalents	$	2631,~~367~~108		$	409,672
Accounts receivable, net of allowance for doubtful accounts of $61,000, at December 31 and June 30, 2008		705,309			547,848
Accounts receivable, net of allowance for doubtful accounts of $61,000, at March 31, 2009 and June 30, 2008		505,227			547,848
Inventories		256,460			259,145
Prepaid expenses and other current assets		~~329~~316,~~850~~646			357,622
Total current assets		1,~~317~~109,~~986~~441			1,574,287
EQUIPMENT AND IMPROVEMENTS, net		~~195~~151,~~501~~272			291,990
OTHER ASSETS
Other		19,360			19,360
Deferred financing costs, net		~~20,185~~-			30,229
Intangible assets, net		6752,500			97,500
		107,045			147,089
		71,860			147,089
Total Assets	$	1,~~620~~332,~~532~~573		$	2,013,366
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES
Demand note payable	$	~~286~~348,~~971~~922		$	293,223
Current portion of secured debt		~~147~~142,~~168~~624			172,264
Current portion of unsecured debt		1,~~333~~422,~~581~~361			536,038
Accounts payable		3,~~039~~409,~~928~~478			2,102,874
Accrued expenses		23,~~067~~213,~~996~~973			1,680,883
Total current liabilities		68,~~875~~537,~~644~~358			4,785,282
LONG-TERM LIABILITIES
Secured debt, less current portion		~~548~~562,~~832~~167			799,209
Unsecured debt, less current portion		12,~~982~~111,~~073~~352			1,855,055
Other long term liability		1012,~~561~~632			-
		2,541,466			2,654,264
		2,686,151			2,654,264
Total liabilities		911,~~417~~223,~~110~~509			7,439,546
COMMITMENTS & CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIENCY)
STOCKHOLDERS’ DEFICIENCY
Preferred stock, $.001 par value, 2,000,000 shares authorized		-			-
Common stock, $.001 par value, 80,000,000 shares authorized; 13,994,142 and 13,492,138, issued and outstanding at December 31 and June 30, 2008		13,994			13,492
Common stock, $.001 par value, 80,000,000 shares authorized; 14,071,728 and 13,492,138, issued and outstanding at March 31, 2009 and June 30, 2008		14,072			13,492
Additional paid-in capital		51,~~445~~764,~~033~~848			49,775,345
Accumulated deficit		(5961,~~255~~669,~~605~~856	)		(55,215,017	)
Total stockholders’ deficiency		(79,~~796~~890,~~578~~936	)		(5,426,180	)
Total Liabilities and Stockholders’ Equity (Deficiency)	$	1,620,532		$	2,013,366
Total Liabilities and Stockholders’ Deficiency	$	1,332,573		$	2,013,366

See accompanying notes to the condensed consolidated financial statements.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2008~~2009 AND ~~2007~~2008

(UNAUDITED)

		2008			2007
		2009			2008
NET REVENUES	$	1462,~~136,558~~817		$	2993,~~222,727~~461
OPERATING COSTS AND EXPENSES
Cost of revenues		~~981~~533,~~477~~607			1860,~~209,722~~333
Selling, general and administrative expenses		1,~~196~~732,~~164~~132			21,~~368~~721,~~260~~506
Depreciation and amortization		4430,~~649~~648			4645,~~789~~727
Research and development costs		3511,~~038~~432			6121,~~946~~988
		2,257,328			3,631,717
		2,307,819			2,749,554
Loss from operations		(1,~~120~~845,~~770~~002	)		(1,~~408~~756,~~990~~093	)
OTHER INCOME (EXPENSE)
Other income		679			23,692
Other income (expense)		(623	)		10,860
Amortization of deferred financing costs		~~(13,594~~-	)		(7816,~~207~~353	)
Amortization and write off of debt discount		(222,681	)		(209,557	)
Amortization of debt discount		(305,606	)		(142,831	)
Interest expense		(~~340~~263,~~357~~020	)		(190,~~085,896~~565	)
		(575,953	)		(1,349,968	)
		(569,249	)		(238,889	)
Loss from continuing operations		(12,~~696~~414,~~723~~251	)		(21,~~758~~994,~~958~~982	)
Income from discontinued operations		-			9613,~~190~~590
Gain on sale of discontinued operations		-			~~716~~84,~~339~~649
Income from operations classified as discontinued		-			~~812~~98,~~529~~239
Net loss		(12,~~696~~414,~~723~~251	)		(1,~~946~~896,~~429~~743	)
Preferred stock dividends		-			(2,667	)
Net loss applicable to common stockholders	$	(1,696,723	)		(1,949,096	)
Net earnings (loss) per share – basic and diluted:
Loss per share from continuing operations	$	(0.1218	)	$	(0.2415	)
Earnings per share from discontinued operations		-			0.0701
Net loss per share	$	(0.1218	)	$	(0.1714	)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		1314,~~993~~071,~~599~~441			1113,~~795~~057,~~101~~863

See accompanying notes to the condensed consolidated financial statements.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2008~~2009 AND ~~2007~~2008

(UNAUDITED)

		2008			2007
		2009			2008
NET REVENUES	$	2,~~440~~903,~~628~~445		$	45,~~399~~393,~~788~~249
OPERATING COSTS AND EXPENSES
Cost of revenues		2,~~142~~676,~~877~~484			23,~~695~~556,~~677~~010
Selling, general and administrative expenses		24,~~734~~466,~~834~~966			35,~~820~~541,~~411~~917
Depreciation and amortization		89120,~~947~~595			89135,~~823~~550
Research and development costs		7182,~~243~~675			9131,~~310~~298
		5,038,901			6,615,221
		7,346,720			9,364,775
Loss from operations		(24,~~598~~443,~~273~~275	)		(23,~~215~~971,~~433~~526	)
OTHER INCOME (EXPENSE)
Other income		~~916~~293			2435,~~653~~513
Amortization of deferred financing costs		(30,229	)		(~~163~~180,~~763~~116	)
Amortization and write off of debt discount		(~~440~~746,~~678~~284	)		(~~438~~581,~~905~~736	)
Interest expense		(~~972~~1,~~324~~235,344	)		(1,~~324~~415,~~819~~384	)
		(1,442,315	)		(1,902,834	)
		(2,011,564	)		(2,141,723	)
Loss from continuing operations		(46,~~040~~454,~~588~~839	)		(46,~~118~~113,~~267~~249	)
Income from discontinued operations		-			~~315~~329,~~423~~013
Gain on sale of discontinued operations		-			~~716~~800,~~339~~988
Income from operations classified as discontinued		-			1,~~031~~130,~~762~~001
Net loss		(46,~~040~~454,~~588~~839	)		(34,~~086~~983,~~505~~248	)
Preferred stock dividends		-			(10,667	)
Net loss applicable to common stockholders	$	(46,~~040~~454,~~588~~839	)	$	(34,~~097~~993,~~172~~915	)
Net earnings (loss) per share – basic and diluted:
Loss per share from continuing operations	$	(0.2946	)	$	(0.3651	)
Earnings per share from discontinued operations		-			0.09
Net loss per share	$	(0.2946	)	$	(0.2742	)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		13,~~827~~907,~~914~~905			11,~~337~~954,~~758~~440

See accompanying notes to the condensed consolidated financial statements.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~DECEMBER~~ MARCH 31, ~~2008~~2009 AND ~~2007~~2008

(UNAUDITED)

		2008			2007
		2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(46,~~040~~454,~~588~~839	)	$	(34,~~086~~983,~~505~~248	)
Income from discontinued operations		-			~~315~~329,~~423~~013
Gain on sale of discontinued operations		-			~~716~~800,~~339~~988
Loss from continuing operations		(46,~~040~~454,~~588~~839	)		(46,~~118~~113,~~267~~249	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization		~~162~~226,~~253~~269			~~185~~276,~~852~~883
Bad debt expense		3,069			~~(913)~~4,087
Deferred rent		1012,~~561~~632			-
Non cash interest expense		~~736~~866,~~689~~704			1,~~079~~050,~~656~~289
Warrant reprice charge		135,841			-
Amortization and write off of debt discount		~~440~~746,~~678~~284			~~438~~581,~~905~~736
Non-cash compensation		~~130~~174,~~134~~835			12,~~187~~004,~~146~~427
Amortization of deferred financing costs		30,229			~~163~~180,~~763~~116
Loss on disposal of property and equipment		-			597
Gain on disposal of property and equipment		-			(5,803	)
Changes in operating assets and liabilities		13,~~235~~019,~~004~~817			(~~658~~1,~~243)~~636,142	)
Net cash used in operating activities of continuing operations		(1,~~156~~239,~~130~~159	)		(13,~~721~~657,~~504~~656	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment		-			~~300~~6,700
Purchases of equipment and improvements		(3540,~~764~~551	)		(5355,~~092~~038	)
Increase in restricted cash		-			(178,770)
Purchase of intangible asset		-			(12,069	)
Net Increase in restricted cash		-			(30,862)
Cash received from sale of food services		-			3,012,747
Net cash (used in) provided by investing activities of continuing operations		(3540,~~764~~551	)		2,~~781~~921,~~185~~478
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on demand note		(6,252	)		(100,000)
Principal proceeds (payments) on demand note		55,699			(175,000	)
Proceeds from issuance of common stock, net		-			~~978~~1,~~100~~166,860
Proceeds from unsecured debt		~~945~~970,000			-
Proceeds from long-term debt		-			175,000
Payments for deferred financing costs		(20,185	)		-
Payments of unsecured debt		-			(316,846	)
Principal payments on long-term debt		(~~109~~124,~~974~~553	)		(1612,~~320,782~~822	)
Net cash provided by (used in) financing activities of continuing operations		808,589			(267,682)
Net cash provided by financing activities of continuing Operations		901,146			237,192
Net cash used in continuing operations		(~~383~~378,~~305~~564	)		~~791~~(498,~~999~~986	)
Net cast provided by discontinued operations:
Net cash provided by operating activities		-			~~664~~762,~~231~~470
Net cash used in investing activities		-			(32,153	)
Net cash used in financing activities		-			(166,361	)
Total net cash provided by discontinued operations		-			~~465~~563,~~717~~956
NET INCREASE (DECREASE) IN CASH		(~~383~~378,~~305~~564)			164,~~257,716~~970
Cash, beginning of period		409,672			458,705
Cash, end of period	$	2631,~~367~~108		$	1523,~~716,421~~675

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2008~~2009 AND ~~2007~~2008

(UNAUDITED) (Continued)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	2008		2007
	2009		2008
Cash paid during the six months ended December 31 for:
Cash paid during the nine months ended March 31 for:
Interest – continuing operations	$	94105,~~993~~748	$	~~232~~295,~~858~~701
Interest – discontinued operations		-		13,083
Income taxes– continuing operations		-		-
Income taxes– discontinued operations		-		36,400

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
	2008		2007
	2009		2008
Secured debt converted into common stock and warrants	$	150,000	$	300,000
Unsecured debt converted into common stock and warrants		-		1,~~112~~133,500
Accrued dividends converted into note payable		-		135,471
Receivable recorded pertaining to issuance of common shares		-		71,000
Accrued litigation cost converted into a note payable		-		550,000
Interest accrual converted into common stock		20,950		1738,~~917~~144
Accrued interest converted into notes payable		56,000		-
Dividends on preferred stock		-		10,667
Beneficial conversion charge on convertible debt		~~737~~866,~~040~~704		232,037
Warrants issued to extend term of unsecured debt		~~613~~741,~~941~~736		-
Warrants issued with debt issuance		~~224~~280,~~908~~470		-25,360

See accompanying notes to the condensed consolidated financial statements.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
		NATURE OF OPERATIONS
		EnerLume Energy Management Corp., formerly Host America Corporation, (“EnerLume”, “Host”, or the “Company”) was originally incorporated in Delaware on February 6, 1986 and reincorporated in Colorado in 1999. The Company is an electrical energy management organization, which specializes in providing electrical energy conservation products and services. The Company also provides electrical installations and service operations through its wholly owned subsidiary, RS Services, Inc. (“RS Services”).
		GOING CONCERN
		The Company incurred net losses of $4,040,588 and $3,086,505 for the six months ended December 31, 2008 and 2007, respectively. The Company had $1,156,130 and $1,721,504 of cash that was used in operating activities in continuing operations for the six months ended December 31, 2008 and 2007, respectively. At December 31, 2008 the Company had a working capital deficiency and a stockholders’ deficiency of $5,557,658 and $7,796,578 respectively.
		The Company incurred net losses of $6,454,839 and $4,993,915 for the nine months ended March 31, 2009 and 2008, respectively. The Company had $1,239,159 and $3,657,656 of cash that was used in operating activities in continuing operations for the nine months ended March 31, 2009 and 2008, respectively. At March 31, 2009 the Company had a working capital deficiency and a stockholders’ deficiency of $7,427,917 and $9,890,936 respectively.
		The Company’s overall short term going concern outlook is directly dependent on the success of immediate fundraising efforts, which are imperative for the Company to continue as a going concern. The Company does not have sufficient cash at December 31, 2008 to support its current obligations. As discussed above, the Company has suffered recurring losses from continuing operations, has negative cash flows from operations, has a working capital and stockholders’ deficiency at December 31, 2008 and is currently involved in litigation that can have an adverse effect on the Company’s operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
		In addition, on May 15, 2009, RS Services received a principal reduction demand payment in the amount of $258,486 from the holder of the demand note which is the amount in excess of the collateralized eligible accounts receivable balance (See Note 3).
		In addition, as described in Note 7, the Company is currently involved in litigation that can have an adverse effect on the Company’s operations. If an adverse ruling with any or all of these legal matters occurs, the Company may be forced to make material payments, restructure operations, sell off a significant portion of its assets or take other necessary and appropriate matters to ensure its ability to continue operations.
		The Company’s overall short term going concern outlook is directly dependent on the success of immediate fundraising efforts, which are imperative for the Company to continue as a going concern. The Company does not have sufficient cash at March 31, 2009 to support its current obligations. As discussed above, the Company has suffered recurring losses from continuing operations, has negative cash flows from operations, has a working capital and stockholders’ deficiency at March 31, 2009 and is subject to litigation settlements that will have an adverse effect on the Company’s operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
		The Company plans to improve cash flow from operations through continued focus, deployment and promotion of its energy efficiency segment and the underlying technology associated with its newly designed light controller. The Company also plans to continue its efforts to identify ways of reducing operating costs and to increase liquidity through additional equity and debt financings and has a standing agreement with an institutional investment firm that could provide additional equity and debt financings. The completion of these financings and the operational initiatives are expected to improve the Company’s cash flow and to help foster the implementation of the Company’s current initiatives and business plan.
		The Company’s approach to improving cash flow from operations is through its continued focus, deployment and promotion of its energy efficiency segment and the underlying technology associated with the EnerLume \|EM® light controller. The Company also plans to continue its efforts to identify ways of reducing operating costs and to increase liquidity through additional equity and debt financings and has a standing agreement with an institutional investment firm that may provide additional equity and debt financings. The completion of these financings and the operational initiatives are anticipated to improve the Company’s cash shortage and to help foster the implementation of the Company’s current initiatives and business plan.

~~NERLUME~~ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		BASIS OF PRESENTATION
		The condensed consolidated financial statements of EnerLume Energy Management Corp. and subsidiaries for the three and six months ended December 31, 2008 and 2007 have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) and disclosures necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the audited financial statements, and accompanying notes, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2008.
		The condensed consolidated financial statements of EnerLume Energy Management Corp. and subsidiaries for the three and nine months ended March 31, 2009 and 2008 have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) and disclosures necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted in accordance with the rules and regulations of the SEC. These condensed consolidated financial statements should be read in conjunction with the audited financial statements, and accompanying notes, included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2008.
		PRINCIPLES OF CONSOLIDATION
		The consolidated financial statements include the accounts of EnerLume and its wholly-owned subsidiaries since the date of acquisition. The consolidated financial statements reflect the accounts and results of corporate dining and unitized meals as discontinued operations for the six months ended December 31, 2007 within the accompanying financial statements, as those assets have been sold on October 26 and October 31, 2007, respectively.
		The consolidated financial statements include the accounts of EnerLume and its wholly-owned subsidiaries since the date of acquisition. The consolidated financial statements reflect the accounts and results of corporate dining and unitized meals as discontinued operations for the nine months ended March 31, 2008 within the accompanying financial statements, as those assets have been sold on October 26 and October 31, 2007, respectively.
		USE OF ESTIMATES
		The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates.
		INVENTORIES
		Inventories consist of finished goods, primarily of electrical components and are stated at the lower of cost or market, with cost determined on a first-in, first-out basis.
		Inventories consist of finished goods, primarily electrical components and are stated at the lower of cost or market, with cost determined on a first-in, first-out basis.
		REVENUE RECOGNITION
		The Company derives its revenues from continuing operations from electrical customer contracts for service work performed and from the delivery to the distributor of energy efficiency products. The Company recognizes revenue when persuasive evidence of an arrangement exists, the Company has delivered the product or performed the service, the fee is fixed or determinable and collectability is reasonably assured.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		REVENUE RECOGNITION (Continued)
		Energy Services. Our energy services segment recognizes revenues from contract installations on a percentage of completion basis and the installation of computerized products when the products are delivered and the installation is complete. Contract installations with the RS Services, Inc. subsidiary also can include contracts that extended beyond the fiscal reporting periods. EnerLume accounted for these projects on a percentage of completion basis, which is governed by SOP 81-1, Accounting for Performance of Construction Type and Certain Production Type Contracts. As work in progress continues, the contracts specify for progress payments and the acceptance of the work from the buyer as delivered. The measurement of performance during the recognition process is calculated by the contract value of the total work to date. The contract billings require a set invoicing schedule either on a monthly and/or quarterly basis. Revenue is recognized based on the performance rendered at the measurement date. The company has incurred costs and estimated earnings in excess of billing of $144,041 and $254,344 at December 31, 2008 and 2007, respectively, which are included in accounts receivable.
		Energy Services. Our energy services segment recognizes revenues from contract installations on a percentage of completion basis and the installation of computerized products when the products are delivered and the installation is complete. Contract installations with the RS Services, Inc. subsidiary also can include contracts that extended beyond the fiscal reporting periods. EnerLume accounted for these projects on a percentage of completion basis, which is governed by SOP 81-1, Accounting for Performance of Construction Type and Certain Production Type Contracts. As work in progress continues, the contracts specify for progress payments and the acceptance of the work from the buyer as delivered. The measurement of performance during the recognition process is calculated by the contract value of the total work to date. The contract billings require a set invoicing schedule either on a monthly and/or quarterly basis. Revenue is recognized based on the performance rendered at the measurement date. The Company has incurred costs and estimated earnings in excess of billing of $10,145 and $72,134 at March 31, 2009 and 2008, respectively, which are included in accounts receivable.
		Energy Efficiency Products. EnerLume recognizes product revenue at the time of delivery with the channel partner which EnerLume has a direct contractual agreement. Title to the products delivered are transferred with a fixed fee upon fully accomplishing the terms of the agreement, and collectability is reasonably assured, as governed by SEC Staff Accounting Bulletin #104 (SAB 104). Under SAB 104, revenue is realized and earned when all of the following are met: i) persuasive evidence of an arraignment is met, ii) delivery has occurred or services rendered, iii) sellers price to buyer is fixed or determinable, and iv) collectability is reasonably assured.
		Energy Efficiency Products. EnerLume recognizes product revenue at the time of delivery with the channel partner which EnerLume has a direct contractual agreement. Title to the products delivered are transferred with a fixed fee upon fully accomplishing the terms of the agreement, and collectability is reasonably assured, as governed by SEC Staff Accounting Bulletin #104 (SAB 104). Under SAB 104, revenue is realized and earned when all of the following are met: i) persuasive evidence of an arrangement is met, ii) delivery has occurred or services rendered, iii) sellers price to buyer is fixed or determinable, and iv) collectability is reasonably assured.
		RESEARCH AND DEVELOPMENT
		Research and development costs related to our energy management division are charged to expense when incurred. The amount charged to expense for the six months ended December 31, 2008 and 2007 was $71,243 and $9,310 respectively.
		Research and development costs related to our energy management division are charged to expense when incurred. The amount charged to expense for the nine months ended March 31, 2009 and 2008 was $82,675 and $131,298 respectively.
		INCOME TAXES
		The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the temporary differences between the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the estimated amount realizable. The income tax provision or credit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets or liabilities.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		NET EARNINGS (LOSS) PER COMMON SHARE
		The Company presents “basic” earnings (loss) per share and, if applicable, “diluted” earnings (loss) per share pursuant to the provisions of SFAS 128, Earnings per Share. Basic earnings (loss) per share is calculated by dividing net income or loss (including dividend requirements on the Company’s outstanding preferred stock) by the weighted average number of common shares outstanding during each period.
		Net loss per common share was computed based upon 13,827,914 and 11,337,758 weighted average number of common shares outstanding during the six months ended December 31, 2008 and 2007, respectively. Net loss per common share was computed based upon 13,993,599 and 11,795,101 weighted average number of common shares outstanding during the three months ended December 31, 2008 and 2007, respectively.
		Net loss per common share was computed based upon 13,907,905 and 11,954,440 weighted average number of common shares outstanding during the nine months ended March 31, 2009 and 2008, respectively. Net loss per common share was computed based upon 14,071,441 and 13,057,863 weighted average number of common shares outstanding during the three months ended March 31, 2009 and 2008, respectively.
		The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants and the conversion of convertible securities, were issued during the period and appropriate adjustments were made for the application of the treasury stock method and the elimination of interest and other charges related to convertible securities. Diluted earnings (loss) per common share are not presented as the potentially dilutive convertible preferred stock, stock options and stock warrants are anti-dilutive.
		The December 31, 2007 preferred stock dividend declared of $10,667 has been added to the net loss of $3,086,505 for the six months ended December 31, 2007 to calculate the net loss applicable to common stockholders of $3,097,172 and the corresponding net loss per common share of $0.27. There was no preferred stock dividends for the six months ended December 31, 2008.
		The March 31, 2008 preferred stock dividend declared of $10,667 has been added to the net loss of $4,983,248 for the nine months ended March 31, 2008 to calculate the net loss applicable to common stockholders of $4,993,915 and the corresponding net loss per common share of $0.42. There was no preferred stock dividends for the nine months ended March 31, 2009.
		Shares under stock purchase options totaled 1,512,000 and 1,492,000 for the six months ended December 31, 2008 and 2007, respectively. Shares under warrants totaled 5,748,215 and 2,744,770 for the six months ended December 31, 2008 and 2007, respectively. Convertible notes subject to potential dilution totaled 4,936,170 and 400,943 shares for the six months ended December 31, 2008 and 2007 respectively.
		Shares under stock purchase options totaled 1,338,000 and 1,492,000 for the nine months ended March 31, 2009 and 2008, respectively. Shares under warrants totaled 5,975,715 and 2,880,808 for the nine months ended March 31, 2009 and 2008, respectively. Convertible notes subject to potential dilution totaled 5,427,142 and 400,943 shares for the nine months ended March 31, 2009 and 2008 respectively.
		SEGMENT INFORMATION
		The Company’s primary operating segments are the energy services segments of RS Services and energy efficiency product segment consisting of EnerLume Corp.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		STOCK COMPENSATION PLANS
		The Company records compensation expense associated with stock options in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment”, as interpreted by SEC Staff Accounting Bulletin No. 107. During the three and six months ended December 31, 2008, the Company recognized $28,548 each, in stock based compensation expense and for the three and six months ended December 31, 2007, the Company recognized $765,354 and $771,495, respectively. The grant date fair value is calculated using the Black-Scholes option valuation model. There were 40,000 options granted during the three and six months ended December 31, 2008 and 447,000 options granted during the three and six months ended December 31, 2007.
		The Company records compensation expense associated with stock options in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment”, as interpreted by SEC Staff Accounting Bulletin No. 107. During the nine months ended March 31, 2009, the Company recognized $28,548 in stock based compensation expense and for the three and nine months ended March 31, 2008, the Company recognized $13,782 and $785,277, respectively. The grant date fair value is calculated using the Black-Scholes option valuation model. There were 40,000 options granted during the nine months ended March 31, 2009 and 447,000 options granted during the nine months ended March 31, 2008. there were no stock based compensation expense or options granted during the three months ended March 31, 2009.
		The weighted-average fair value of options granted during the six months ended December 31, 2008 was $0.47. The following assumptions were used during fiscal 2009:
		The weighted-average fair value of options granted during the nine months ended March 31, 2009 was $0.47. The following assumptions were used during fiscal 2009:

Expected dividend rate	~~0.00~~	0.00
Expected volatility	~~81.61%~~	81.61	%
Risk free interest rate	~~3.99%~~	3.99	%
Expected option holding period (years)	10	10

		RECENTLY ISSUED ACCOUNTING STANDARDS

		During September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS No. 157 for financial assets and liabilities, as well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements, are effective for financial statements issued for fiscal years beginning after November 15, 2007 (fiscal year 2009 for the Company). In February 2008, the FASB issued FASB Staff Positions (‘‘FSP’’) 157-1, which amended SFAS 157 to remove leasing transactions accounted for under SFAS 13, ‘‘Accounting for Leases’’ and FSP 157-2, which deferred the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008 (fiscal year 2010 for the Company). The Company is currently evaluating the impact of SFAS No. 157 for nonfinancial assets and liabilities on its consolidated financial statements.

		In December 2007, the FASB issued SFAS 160 “Noncontrolling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51” (SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company does not have noncontrolling interests in subsidiaries and believes that SFAS 160 will not have a material impact on its financial statements.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		RECENTLY ISSUED ACCOUNTING STANDARDS (Continued)
		In December 2007, the FASB issued SFAS 141 (Revised 2007) “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also establishes disclosure requirements to enable users of financial statements to evaluate the nature and financial effects of the business combination. SFAS141R applies prospectively to business combinations which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company has not yet determined the impact, if any, that the implementation of SFAS No.141R will have on results of operations of financial condition as a result of any acquisitions the Company may consummate.
		In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company is currently evaluating the effect, if any, of SFAS 161 on its financial statements.
		In May 2008, the FASB issued SFAS 162, “the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of the financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The Company’s adoption of SFAS 162 will not have a material impact on its financial Statements.
		No other new accounting pronouncement issued or effective during this interim period has had or is expected to have a material impact on the consolidated financial statements.
		In April 2009, the FASB issued Staff Position No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 amends FASB Statement No.157, Fair Value Measurements to provide additional guidance on estimating fair value when the volume and level of activity for an asset or liability significantly decreased in relation to market activity for the asset or liability. The FSP also provides additional guidance on circumstances that may indicate that a transaction is not orderly. FSP No. 157-4 becomes effective for interim and annual periods ending after June 15, 2009 with early application permitted for period ending after March 15, 2009. The Company does not expect the application of FSP No. 157-4 to have a material impact on its consolidated financial statements upon adoption.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 1 -		BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
		FAIR VALUE MEASUREMENTS
		In April 2009, the FASB issued Staff Position No. FAS 107-1, “Interim Disclosures About Fair Value of Financial Instruments” (“FSP 107-1”). FSP 107-1 amends FASB Statement No.107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financials information at interim reporting periods. FSP No. 107-1 becomes effective for interim and annual periods ending after June 15, 2009 with early application permitted for period ending after March 15, 2009. The Company does not expect the application of FSP No. 107-1 to have a material impact on its consolidated financial statements upon adoption.
		In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 is effective for the Company’s fiscal year beginning July 1, 2008 and for interim periods within that year. The implementation of SFAS No. 157 for financial assets and financial liabilities, effective July 1, 2008, did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
		In April 2009, the FASB issued Staff Position No. FAS 115-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP 115-2”). FSP 115-2 provides new guidance on the recognition of an Other-Than-Temporary-Impairments (OTTI) and provides some new disclosure requirements. FSP No. 115-2 becomes effective for interim and annual periods ending after June 15, 2009 with early application permitted for periods ending after March 15, 2009. The Company does not expect the application of FSP 115-2 to have a material impact on its consolidated financial statements upon adoption.
		No other new accounting pronouncement issued or effective during this interim period has had or is expected to have a material impact on the consolidated financial statements.
NOTE 2 -		DISCONTINUED OPERATIONS OF FOOD SERVICE DIVISION
		The fiscal 2007 period reflects the food service division classified as assets held for sale and reported as discontinued operations. The food service division was sold in October 2007 which resulted in a gain on the sale in the aggregate of $716,339 during the six months ended December 31, 2007.
		The fiscal 2008 period reflects the food service division classified as assets held for sale and reported as discontinued operations. The food service division was sold in October 2007 which resulted in a gain on the sale in the aggregate of $800,988 during the nine months ended March 31, 2008.
		SALE OF CORPORATE DINING
		On October 19, 2007, the holders of a majority of shares of the Company’s outstanding common stock approved the sale of substantially all of the assets comprising our contract food management division pursuant to the Asset Purchase Agreement dated April 17, 2007 and amended on August 31, 2007 by and between the Company, Timothy Hayes and an entity formed by Mr. Hayes to facilitate the transaction. The transaction closed on October 26, 2007 and the principal assets of this division sold in the transaction consisted of the corporate name, customer accounts, inventory, equipment, intellectual property and promotional and marketing materials.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 2 -		DISCONTINUED OPERATIONS OF FOOD SERVICE DIVISION (Continued)
		SALE OF CORPORATE DINING (Continued)
		The Asset Purchase Agreement provided for a cash purchase price of $1.2 million dollars subject to certain adjustments prior to closing. Based upon the adjustments made at closing, the final cash purchase price paid to the Company was $1,137,077.
		Mr. Hayes formerly served as the director of operations for the corporate dining division and resigned from the Company effective at the closing date. The Company believes the sale was fair to the Company and its shareholders based upon a fairness opinion provided by an independent valuation firm. In addition, the Company’s audit committee reviewed the transaction and the Company’s board of directors approved the transaction based upon the conclusion the terms were no less favorable than generally available to an independent third party. David Murphy, the Company’s chief executive officer and a director, entered into a non-compete agreement with the purchaser for a period of five years and was paid $34,218 over a five year period as consideration for entering into a non-compete agreement.
		The Corporate Dining accounts are classified as discontinued operations in the consolidated financial statements for the three and six months ended December 31, 2007.
		The Corporate Dining accounts are classified as discontinued operations in the consolidated financial statements for the three and nine months ended March 31, 2008.
		Summarized operating data for the discontinued operations of Corporate Dining are as follows:

	Three Months Ended Dec 31, 2007		Six Months Ended Dec 31, 2007
	Three Months Ended Mar 31, 2008		Nine Months Ended Mar 31, 2008
Net revenue	$	~~859~~13,~~690~~590	$	3,~~797~~810,~~072~~662
Income before taxes		1413,~~072~~590		~~154~~168,~~710~~300
Income taxes		~~1,000~~-		4,000
Income from discontinued operations	$	13,~~072~~590	$	~~150~~164,~~710~~300

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 2 -		DISCONTINUED OPERATIONS OF FOOD SERVICE DIVISION (Continued)
		SALE OF UNITIZED MEALS
		On October 19, 2007, the holders of a majority of shares of the Company’s outstanding common stock approved the sale of substantially all the assets of Lindley Food Services Corporation, our supplier of fresh unitized meals to schools and senior feeding programs. Pursuant to the Asset Purchase Agreement dated April 17, 2007, the Company sold to Lindley Acquisition Corporation substantially all the assets and liabilities of this division which consisted of equipment, inventory, accounts receivable, intellectual property, contracts and agreements, cash and real estate and capital services leases. The transaction closed on October 31, 2007.
		The Asset Purchase Agreement provided for an initial cash purchase price of $2,500,000 subject to adjustments based on the net asset value of the division two days prior to closing. As a result of the aforementioned adjustments, the Company received final net proceeds after post closing adjustments of $1,875,670 from the sale of this division.
		Prior to the transaction, Gilbert Rossomando was the president of this division and Mark Cerreta was the executive vice president of this division. Messrs. Rossomando and Cerreta are the sole shareholders of Lindley Acquisition Corporation. Messrs. Rossomando and Cerreta resigned as officers of the Company effective at the closing date, and Mr. Rossomando resigned as a member of the board of Directors as of September 28, 2008. The Company believes the sale was fair to the Company and its shareholders based upon a fairness opinion provided by an independent valuation firm. In addition, the Company’s audit committee reviewed the transaction and the Company’s board of directors approved the transaction based upon the conclusion the terms were no less favorable than generally available to an independent third party.
		The unitized meals accounts are classified as discontinued operations in the consolidated financial statements for the three and six months ended December 31, 2007.
		The unitized meals accounts are classified as discontinued operations in the consolidated financial statements for the three and nine months ended March 31, 2008.
		Summarized operating data for the discontinued operations of unitized meals are as follows:

	Three Months Ended Dec 31, 2007		Six Months Ended Dec 31, 2007
	Three Months Ended Mar 31, 2008		Nine Months Ended Mar 31, 2008
Net revenue	$	~~1,559,717~~-	$	5,353,684
Income before taxes		~~87,118~~-		180,713
Income taxes		~~4,000~~-		16,000
Income from discontinued operations	$	~~83,118~~-	$	164,713

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 3 -		DEMAND NOTE PAYABLE
		RS Services has an open credit obligation with a bank with interest calculated based on a variable rate index equal to the Wall Street Journal prime rate daily plus 1% per annum (4.25% at December 31, 2008). The note is collateralized by certain assets of RS Services and has an outstanding balance of $286,971 and $293,223 at December 31, 2008 and June 30, 2008 respectively.
		RS Services has an open credit obligation with a bank with interest calculated based on a variable rate index equal to the Wall Street Journal prime rate daily plus 1% per annum (4.25% at March 31, 2009). The note is collateralized by certain assets of RS Services and has an outstanding balance of $348,922 and $293,223 at March 31, 2009 and June 30, 2008 respectively. On May 15, 2009 RS Services received a principal reduction demand payment in the amount of $258,486 from the holder of the demand note which is the amount in excess of the collateralized eligible accounts receivable balance (See Note 9).
NOTE 4 -		DEBT
		SECURED DEBT
		On July 23, 2007, the Company closed the sale of $850,000 of subordinated secured convertible promissory notes (“Notes”) in a private placement to a limited number of accredited investors. The Notes bear interest at the rate of 12.00% per annum, payable semi-annually on December 31 and June 30. The Notes had an initial maturity date of June 30, 2008, and the unpaid principal balance due and interest accruing on the Notes is convertible at the option of the holder into the Company’s common stock at $2.12 per share. The offer and sale of the Notes was conducted by the officers and directors of the Company who did not receive a commission or other remuneration. As security for the payment of the Notes and the performance by the Company of its obligations, the Company assigned to the Noteholders a security interest in all of its right, title and interest in the patent pending and brand name rights relating to the Company’s EnerLume \| EM® energy saving-device.
		Between June 2008 and September 2008 the Company entered into a promissory note extension agreement with the holders of the Notes to amend the maturity date of the Notes pursuant to a promissory note extension agreement, in which the maturity date for the Notes was extended to June 30, 2010. In July 2008 the Company paid $50,000 as principal to one investor and extended the maturity of the balance of the Notes. The Notes shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the Note. As an inducement to extend maturity holders received warrants to purchase an aggregate 433,850 shares of the Company’s common stock exercisable until June 30, 2013 at $0.75 per share. The Company recorded an unamortized debt discount associated with the fair value of warrants issued under the Black Scholes method of $226,779.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 4 -		DEBT (Continued)
		SECURED DEBT (Continued)
		Pursuant to EITF No. 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, an embedded beneficial conversion feature has been recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in-capital. That amount is calculated at the commitment date of July 23, 2007 as the difference between the conversion price and the fair value of the common stock. The recorded discount resulting from allocation of proceeds to the beneficial conversion feature is amortized and recognized as interest expense over the minimum period from the date of issuance to the date at which the debt holder can realize that return using the effective yield method. The market price of the Company’s shares when the Company committed to the July 23, 2007 private placement was $2.70 per share and the exercise price of the Note was set at $2.12 per share. A beneficial conversion feature was also recorded during the repricing of the convertible feature of the Notes on August 4, 2008 (see Note 5). For the six months ended December 31, 2008 and 2007 the beneficial conversion feature recorded as interest expense was $264,859 and $102,508 respectively. For the three months ended December 31, 2007, the beneficial conversion feature recorded as interest expense was $58,008.
		Pursuant to EITF No. 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, an embedded beneficial conversion feature has been recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in-capital. That amount is calculated at the commitment date of July 23, 2007 as the difference between the conversion price and the fair value of the common stock. The recorded discount resulting from allocation of proceeds to the beneficial conversion feature is amortized and recognized as interest expense over the minimum period from the date of issuance to the date at which the debt holder can realize that return using the effective yield method. The market price of the Company’s shares when the Company committed to the July 23, 2007 private placement was $2.70 per share and the exercise price of the Note was set at $2.12 per share. A beneficial conversion feature was also recorded during the repricing of the convertible feature of the Notes on August 4, 2008. For the nine months ended March 31, 2009 and 2008 the beneficial conversion feature recorded as interest expense was $264,859 and $160,516 respectively. For the three months ended March 31, 2008, the beneficial conversion feature recorded as interest expense was $58,008.
		UNSECURED DEBT
		On April 18, 2008 the Company completed the sale of 20 units consisting of 9% convertible unsecured promissory notes and common stock purchase warrants to 5 investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total proceeds to the Company were $1,000,000. Each unit was sold for $50,000 per unit and also entitled the unit holder to 15,000 common stock purchase warrants which are exercisable for five years at $1.80 per warrant. The notes bear interest at a rate of 9% per year, payable semiannually in arrears in cash. The notes will mature on April 18, 2010. Holders may convert their notes and any accrued interest 6 months after the date of purchase into shares of common stock at a conversion rate of $1.50 per share. One investor has requested his conversion right not to be effective until 12 months from the date of purchase to facilitate his investment objectives. The Company did not pay a sales commission or other remuneration in connection with the sale of the notes. The fair value of the warrants of $234,240 under the Black Scholes method has been recorded as debt discount, resulting in a reduction in the carrying value of the related debt. On August 4, 2008, the convertible feature on this note has been repriced to $0.47 per share. (see Note 5)
		On April 18, 2008 the Company completed the sale of 20 units consisting of 9% convertible unsecured promissory notes and common stock purchase warrants to 5 investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total proceeds to the Company were $1,000,000. Each unit was sold for $50,000 per unit and also entitled the unit holder to 15,000 common stock purchase warrants which are exercisable for five years at $1.80 per warrant. The notes bear interest at a rate of 9% per year, payable semiannually in arrears in cash. The notes will mature on April 18, 2010. Holders may convert their notes and any accrued interest 6 months after the date of purchase into shares of common stock at a conversion rate of $1.50 per share. One investor has requested his conversion right not to be effective until 12 months from the date of purchase to facilitate his investment objectives. The Company did not pay a sales commission or other remuneration in connection with the sale of the notes. The fair value of the warrants of $234,240 under the Black Scholes method has been recorded as debt discount, resulting in a reduction in the carrying value of the related debt. On August 4, 2008, the convertible feature on this note has been repriced to $0.47 per share.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 4 -		DEBT (Continued)
		UNSECURED DEBT (Continued)
		On January 8, 2004, the Company commenced a private placement offering of $2,000,000 or eighty units at $25,000 per unit. Each unit consisted of one 7.5% unsecured promissory note in the amount of $25,000 due January 31, 2009 and warrants to purchase 7,500 shares of common stock at an exercise price of $10.00 per share, exercisable from December 31, 2004 until January 31, 2009. Interest began to accrue from the date of issuance, payable semi-annually on June 30 and December 31. Unsecured notes payable to directors and other affiliated persons totaled $150,000 each at September 30 and June 30, 2008. The Company sold a total of 80 units and received gross proceeds of $2,000,000 from the offering and issued warrants to purchase 600,000 shares. The fair value of the warrants of $803,467 has been recorded as debt discount, resulting in a reduction in the carrying value of the related debt. The debt discount is being amortized on a straight-line basis over the period of the related debt at an annual amount of $161,289.
		Between June 2008 and September 2008 the Company entered into a promissory note extension agreement with the holders of the notes with a face value of $1,437,500 to amend the terms of the 7.5% unsecured promissory notes. Pursuant to the promissory note extension agreements, the maturity date for the Unsecured Notes were extended to January 31, 2010, interest shall continue to accrue on the Unsecured Notes and the Company shall continue to pay interest payments under the terms of the Unsecured Notes until the amended maturity date. As an inducement to the note holders to extend the maturity date, the Company issued aggregate warrants to purchase 731,250 shares of the Company’s common stock exercisable until June 30, 2014 at $0.75 per share. Such warrants were valued at $399,110 under the Black Scholes method. This debt discount will be amortized over the remaining term of the Notes.
		On July 30, 2008, the Company completed the sale of one unit consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation B of the Securites Act of 1933. The total net proceeds to the Company were $500,000. The unit was sold for $500,000 and entitled the unit holder to 250,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The unit will mature and be payable in full on January 30, 2009. The Holder may convert the unit and any accrued interest thereon, on January 30, 2009 into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the unit. The unit was purchased by the brother of Nicholas Troiano, a current director.
		During January 2009 the Company entered into a promissory note extension agreements with the holders of the notes with a face value of $437,500 to amend the terms of the 7.5% unsecured promissory notes. Pursuant to the promissory note extension agreements, the maturity date for the Unsecured Notes were extended to July 31, 2009, interest shall continue to accrue on the Unsecured Notes and the Company shall continue to accrue interest payments under the terms of the Unsecured Notes until the amended maturity date. As an inducement to the note holders to extend the maturity date, the Company issued aggregate warrants to purchase 218,750 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share. Such warrants were valued at $45,918 under the Black Scholes method. This debt discount will be amortized over the remaining term of the Notes.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 4 -		DEBT (Continued)
		UNSECURED DEBT (Continued)
		On September 30, 2008, the Company completed the sale of 2.5 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $125,000. The units were sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $111,921 under the Black Scholes method and will be amortized over the remaining term of the units. The Company also recorded a beneficial conversion feature of $151,814 as a discount and being amortized over six months to interest expense.
		On July 30, 2008, the Company completed the sale of one unit consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation B of the Securites Act of 1933. The total net proceeds to the Company were $500,000. The unit was sold for $500,000 and entitled the unit holder to 250,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The unit will mature and be payable in full on January 30, 2009. The holder may convert the unit and any accrued interest thereon, on January 30, 2009 into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the unit. The unit was purchased by the brother of Nicholas Troiano, a current director.
		On December 2, 2008, the Company completed the sale of 3.9 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to four investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $195,000. Each unit was sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $26,541 under the Black Scholes method and will be amortized over the remaining term of the units. The Company also recorded a beneficial conversion feature of $21,196 as a discount and being amortized over six months to interest expense.
		On February 12, 2009, the Company entered into a promissory note extension agreement with the holder of the 18% convertible unsecured promissory note to amend the terms of the note issued to him on July 30, 2008. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $545,000 which includes the prior accrued interest. The conversion feature on the note was adjusted to $0.37 per share and the maturity date for the unsecured note was extended to July 30, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder received an additional warrant to purchase 310,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share. The warrants issued were valued at $77,106 under the Black Scholes method and will be amortized over the remaining term of the note. The beneficial conversion feature of $91,835 associated with the adjusted convertible amount will be amortized over the six month term and charged to interest expense. The holder of the note is a brother to a member of the Company’s Board of Directors and such brother did not participate in the Board’s decision to extend the notes or the revised terms thereof.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 4 -		DEBT (Continued)
		UNSECURED DEBT (Continued)
		On December 31, 2008, the Company completed the sale of $125,000 12% two month unsecured promissory note and common stock purchase warrants to two investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.26 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. The Company paid a 10% sales commission in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $46,553 under the Black Scholes method and will be amortized over the remaining term of the units.
		On September 30, 2008, the Company completed the sale of 2.5 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $125,000. The units were sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $111,921 under the Black Scholes method and will be amortized over the remaining term of the units. The Company also recorded a beneficial conversion feature of $151,814 as a discount and being amortized over nine months to interest expense.
NOTE 5 -		STOCKHOLDERS’ EQUITY
		On December 2, 2008, the Company completed the sale of 3.9 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to four investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $195,000. Each unit was sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $26,541 under the Black Scholes method and will be amortized over the remaining term of the units. The Company also recorded a beneficial conversion feature of $21,196 as a discount and being amortized over nine months to interest expense.
		The Company granted 40,000 stock options during the three and six months ended December 31, 2008 and recorded no forfeitures as actual terminations according to the plan policy.
		COMMON STOCK AND WARRANTS
		On July 1, 2008, The Company issued 68,750 shares to the members of the Board pursuant to the scheduled quarterly and annual compensation plan in the fourth quarter of fiscal 2008. The value of the shares granted totaled $55,000 and were accrued as of June 30, 2008. On October 1, 2008, The Company issued 44,530 shares to the members of the Board pursuant to the scheduled quarterly compensation plan in the first quarter of fiscal 2009. The value of the shares granted totaled $29,836.
		On October 3, 2008, The Company issued 25,000 shares as compensation to an employee. The value of the shares granted totaled $16,750.
		In September 2008, EnerLume granted 363,723 shares of common stock upon conversion of $150,000 plus interest of $20,950 of the $850,000 of subordinated secured convertible promissory notes. The securities were issued at a conversion price of $0.47.
		REPRICE AGREEMENTS
		The Company recorded an aggregate charge to earnings of $135,841 from the following warrant reprice agreements:
		On August 4, 2008 the Company offered to investors of the holders of its 12% secured promissory notes dated July 23, 2007 the option to change the convertible feature of the note from $2.12 per share to $0.47 per share and to reprice the holders warrants from an exercise price of $0.75 per share to $0.54 per share.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 5 -		STOCKHOLDERS’ EQUITY (Continued)
NOTE 4 -		DEBT (Continued)
		REPRICE AGREEMENTS (Continued)
		UNSECURED DEBT (Continued)
		On August 4, 2008 the Company offered to investors of the holders of its 9% unsecured promissory notes dated April 18, 2008 the option to change the convertible feature of the note from $1.50 per share to $0.47 per share and to reprice the holders’ warrants from an exercise price of $1.80 per share to $0.54 per share.
		On December 31, 2008, the Company completed the sale of $125,000, 12% two month unsecured promissory note and common stock purchase warrants to two investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.26 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. The Company paid a 10% sales commission in connection with the sale of the note. The warrants issued from the 18% convertible unsecured promissory note were aggregated and valued at $46,553 under the Black Scholes method and will be amortized over the remaining term of the units. On April 29, 2009, the Company entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due March 1, 2009 (see note 9)
		On August 11, 2008, the Company offered to the holders of its 7.5% unsecured promissory notes dated January 8, 2004 a repricing agreement to reprice the warrants to the holders of the notes from $0.75 per share to $0.54 per share.
		On February 26, 2009, the Company entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due February 19, 2009 to amend the terms of the note issued to him on December 19, 2008. The unsecured note was originally issued for the principal amount of $100,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $102,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder received an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share. The warrant issued was valued at $45,913 under the Black Scholes method and will be amortized over the remaining term of the note.
		On August 11, 2008 the Company offered to holders of previously issued warrants with an exercise price of $2.25 issued between November 2007 through January 2008 the option to change the exercise price from $2.25 per share to $0.54 per share.
		On January 5, 2009, the Company completed the sale of a 12% unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $25,000. The note entitled the unit holder to 50,000 common stock purchase warrants which are exercisable for a five year period at $0.27 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. The warrants issued were valued at $9,649 under the Black Scholes method and will be amortized over the term of the note.The Company did not pay a sales commission or other remuneration in connection with the sale of the note.
NOTE 6 -		INCOME TAXES
		The provision for income taxes for discontinued operations consists of current state income taxes of $20,000 for the six months ended December 31, 2007.
		As of December 31, 2008, the Company has federal net operating loss carryforwards of approximately $30,717,000 expiring through fiscal 2028.
		The Company establishes a valuation allowance in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. The Company continually reviews the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized. At December 31, 2008, the Company has recorded a valuation allowance for all of its net deferred tax assets and for the six months ended December 31, 2008 the Company increased the valuation allowance by approximately $1,093,000.
		The Company adopted the provisions of FIN 48 “Accounting for Uncertainty in Income Taxes – An Interpretation of SFAS No. 109” (“FIN 48”) on July 1, 2007, and the adoption did not have an impact on the consolidated financial statements. The Company classifies any interest and penalty payments or accruals within operating expenses on the financial statements. There were no accruals on interest or penalties nor were there unrecognized tax benefits at the date of adoption of FIN 48.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 7 -		CONTINGENCIES
NOTE 4 -		DEBT (Continued)
		LEGAL MATTERS
		UNSECURED DEBT (Continued)
		The Company has established an accrual for all maximum estimated potential losses that it expects to incur from the below actions pursuant to SFAS 5, “Accounting for Contingencies”.
		During March 2009, the Company entered into a promissory note extension agreements with four holders of the 18% unsecured promissory note due March 2009 to amend the terms of the note issued to them in September 2008. The unsecured notes were originally issued for the aggregate principal amount of $100,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the aggregate principal on the notes has been increased to $109,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to September 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holders received additional warrants to purchase 50,000 shares of the Company’s common stock exercisable until March 31, 2014 at $0.54 per share. The warrants issued were valued at $4,772 under the Black Scholes method and will be amortized over the remaining term of the note.
		State Court Derivative Action
NOTE 5 -		STOCKHOLDERS’ EQUITY
		On September 28, 2005, the Company was named as a nominal defendant in a derivative action filed in the Connecticut Superior Court in Bart Hester v. Geoffrey W. Ramsey, et al., Docket No. UWY-CV-05-5001448-S (“Hester” action). The action named as defendants the Company’s then existing board, Geoffrey Ramsey and Roger Lockhart. The Hester complaint asserted claims based on a press release issued by the Company in July 2005 regarding its commercial relationship with a major retail chain. The Hester action essentially duplicated an earlier-filed derivative action in federal court. Following the settlement of the federal action, all parties in Hester filed a joint motion to dismiss the suit with prejudice, which the court granted on September 2, 2008.
		The Company granted 40,000 stock options during the nine months ended March 31, 2009 and recorded 174,000 forfeitures as actual terminations according to the plan policy.
		State and Federal Court Individual Suits
		On July 1, 2008, The Company issued 68,750 shares to the members of the Board pursuant to the scheduled quarterly and annual compensation plan in the fourth quarter of fiscal 2008. The value of the shares granted totaled $55,000 and were accrued as of June 30, 2008. On October 1, 2008, The Company issued 44,530 shares to the members of the Board pursuant to the scheduled quarterly compensation plan in the first quarter of fiscal 2009. The value of the shares granted totaled $29,836. On January 1, 2009, The Company issued 77,586 shares to the members of the Board pursuant to the scheduled quarterly compensation plan in the second quarter of fiscal 2009. The value of the shares granted totaled $22,500. On April 1, 2009, the Company issued 163,427 shares to the members of the Board pursuant to the scheduled quarterly compensation plan for the third quarter of fiscal 2009. The value of the shares granted totaled $29,417.
		On May 2, 2006, 47 plaintiffs who alleged that they had purchased the Company’s securities at artificially inflated prices in reliance on the July 2005 press release sued the Company in the Connecticut Superior Court in Enrique Jose Contreras, et al., v. Host America Corp., Docket No. No. UWY-CV-06-4013754-S (“Contreras” action). The Contreras amended complaint asserts claims under state law, including fraud and negligent misrepresentation. On June 25, 2007, the same plaintiffs’ group filed a separate complaint under the federal securities laws in the federal district court in Connecticut against David J. Murphy, Geoffrey Ramsey, Peter Sarmanian, and Roger D. Lockhart, in the matter Anil Sawant, et al. v. Geoffrey W. Ramsey, et. al., Civil Action No. 07-cv-980 (VLB). Plaintiffs in the two cases claim aggregate damages of approximately $2.93 million. The Company and its past and present officer and director defendants have tentatively agreed in principal with the plaintiffs to settle both actions. The tentative agreement is subject to various contingencies and will not become binding until the parties have executed a written settlement stipulation. There is no assurance that a settlement will be finalized. In the event a settlement is not concluded, the Company believes that it has substantial and meritorious defenses to the action.
		On October 3, 2008, the Company issued 25,000 shares as compensation to an employee. The value of the shares granted totaled $16,750.
		In September 2008, the Company granted 363,723 shares of common stock upon conversion of $150,000 plus interest of $20,950 of the $850,000 of subordinated secured convertible promissory notes. The securities were issued at a conversion price of $0.47.
		On January 31, 2009 the Company issued 105,000 warrants to purchase common shares as sales commission to a broker/dealer in exchange for the support relating to the extension agreements executed for the 7.5% notes. The warrants issued were valued at $22,201 under the Black Scholes method and were expensed professional services expense.
		REPRICE AGREEMENTS
		The Company recorded an aggregate charge to earnings of $135,841 from the following warrant reprice agreements:

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 7 -		CONTINGENCIES (Continued)
NOTE 5 -		STOCKHOLDERS’ EQUITY (Continued)
		LEGAL MATTERS (Continued)
		REPRICE AGREEMENTS (Continued)
		Anne and Debra Ramsey Arbitration
		On August 4, 2008 the Company offered to investors of the holders of its 12% secured promissory notes dated July 23, 2007 the option to change the convertible feature of the note from $2.12 per share to $0.47 per share and to reprice the holders warrants from an exercise price of $0.75 per share to $0.54 per share.
		On December 2, 2005, a Demand for Arbitration was filed by Anne Ramsey and Debra Ramsey alleging that their employment was terminated in breach of employment agreements that they purportedly entered into with the Company. Anne Ramsey, the sister of Geoffrey Ramsey, was the Company’s former Human Resource Director and had served on the Board of Directors until June 18, 2007. Debra Ramsey is the wife of Geoffrey Ramsey and was a former administrative assistant for the Company. The Company terminated both individuals on November 23, 2005. On or about March 20, 2006, the Company instituted an injunction proceeding in the New Haven Superior Court to permanently enjoin this arbitration on the basis that the Company never authorized the employment agreements relied upon by Anne and Debra and therefore such contracts were void. The matter was tried in November, 2006 and the Court rendered a decision on January 8, 2007 denying a permanent injunction. On January 26, 2007 the Company filed an appeal of the Superior Court decision in the Connecticut Appellate Court and thereafter filed a Motion for Stay with the Superior Court which was granted. On July 5, 2007 the Company filed its brief with the Appellate Court and oral argument occurred on March 10, 2008. On May 20, 2008, the Connecticut Appellate affirmed the Superior Court’s decision. Thereafter the Company filed a petition for certification on June 27, 2008 with the Supreme Court in the State of Connecticut which the Supreme Court denied. An arbitration hearing occurred on March 3rd and 5th 2009, and briefs from both parties were filed on March 24, 2009. The Company intends to continue to vigorously defend itself against the claims of Anne and Debra Ramsey.
		On August 4, 2008 the Company offered to investors of the holders of its 9% unsecured promissory notes dated April 18, 2008 the option to change the convertible feature of the note from $1.50 per share to $0.47 per share and to reprice the holders’ warrants from an exercise price of $1.80 per share to $0.54 per share.
		Wal-Mart Stores, Inc. v. Eaton Corp. & RS Services
		On August 11, 2008, the Company offered to the holders of its 7.5% unsecured promissory notes dated January 8, 2004 a repricing agreement to reprice the warrants to the holders of the notes from $0.75 per share to $0.54 per share.
		On July 9, 2008, RS Services, Inc. was named as a co-defendant with Eaton in a lawsuit initiated by Wal-Mart arising from an industrial accident in July 2006. The case is docket number 08CV1141and was filed in Adams County District Court in the State of Colorado. Wal-Mart claims breach of contract and negligence against the defendants. It seeks damages for worker’s compensation benefits paid to its employees, property damage, lost profits, and other items. In accordance with the liability insurance policy, RS Services, Inc. has submitted the defense of this case to its liability carrier. Management believes that the liability carrier for RS Services, Inc. will cover all expenses, including damages, relating to this suit as part of the liability policy and without additional expense by RS Services, Inc.
		On August 11, 2008 the Company offered to holders of previously issued warrants with an exercise price of $2.25 issued between November 2007 through January 2008 the option to change the exercise price from $2.25 per share to $0.54 per share.
		Other
NOTE 6 -		INCOME TAXES
		In addition, there exists routine litigation incidental to the Company’s business, none of which is anticipated to have a material adverse impact on our financial position, results of operations, liquidity or cash flows.
		The provision for income taxes for discontinued operations consists of current state income taxes of $20,000 for the nine months ended March 31, 2008.
		As of March 31, 2009, the Company has federal net operating loss carryforwards of approximately $32,048,000 expiring through fiscal 2028.
		The Company establishes a valuation allowance in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. The Company continually reviews the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized. At March 31, 2009, the Company has recorded a valuation allowance for all of its net deferred tax assets and for the nine months ended March 31, 2009 the Company increased the valuation allowance by approximately $1,866,000.
		The Company adopted the provisions of FIN 48 “Accounting for Uncertainty in Income Taxes – An Interpretation of SFAS No. 109” (“FIN 48”) on July 1, 2007, and the adoption did not have an impact on the consolidated financial statements. The Company classifies any interest and penalty payments or accruals within operating expenses on the financial statements. There were no accruals on interest or penalties nor were there unrecognized tax benefits at the date of adoption of FIN 48.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 8 -		INDUSTRY SEGMENT INFORMATION
NOTE 7 -		CONTINGENCIES
		The Company has two major reportable segments: energy services and energy efficiency products. RS Services is the energy services segment and EnerLume Corp. is the energy efficiency products segment. The segments were determined based on the components of the Company’s business that are evaluated separately by management.
		LEGAL MATTERS
		Business segment financial information as of and for the three months ended December 31, 2008 is as follows:
		The Company has established an accrual for all maximum estimated potential losses that it expects to incur from the below actions pursuant to SFAS 5, “Accounting for Contingencies”.
		State Court Derivative Action
		On September 28, 2005, the Company was named as a nominal defendant in a derivative action filed in the Connecticut Superior Court in Bart Hester v. Geoffrey W. Ramsey, et al., Docket No. UWY-CV-05-5001448-S (“Hester” action). The action named as defendants the Company’s then existing board, Geoffrey Ramsey and Roger Lockhart. The Hester complaint asserted claims based on a press release issued by the Company in July 2005 regarding its commercial relationship with a major retail chain. The Hester action essentially duplicated an earlier-filed derivative action in federal court. Following the settlement of the federal action, all parties in Hester filed a joint motion to dismiss the suit with prejudice, which the court granted on September 2, 2008.
		State and Federal Court Individual Suits
		On May 2, 2006, 47 plaintiffs who alleged that they had purchased the Company’s securities at artificially inflated prices in reliance on the July 2005 press release sued the Company in the Connecticut Superior Court in Enrique Jose Contreras, et al., v. Host America Corp., Docket No. No. UWY-CV-06-4013754-S (“Contreras” action). The Contreras amended complaint asserts claims under state law, including fraud and negligent misrepresentation. On June 25, 2007, the same plaintiffs’ group filed a separate complaint under the federal securities laws in the federal district court in Connecticut against David J. Murphy, Geoffrey Ramsey, Peter Sarmanian, and Roger D. Lockhart, in the matter Anil Sawant, et al. v. Geoffrey W. Ramsey, et. al., Civil Action No. 07-cv-980 (VLB). Plaintiffs in the two cases claim aggregate damages of approximately $2.93 million. The Company and its past and present officer and director defendants have tentatively agreed in principal with the plaintiffs to settle both actions. The tentative agreement is subject to various contingencies and will not become binding until the parties have executed a written settlement stipulation. There is no assurance that a settlement will be finalized. In the event a settlement is not concluded, the Company believes that it has substantial and meritorious defenses to the action. As of May 11, 2009, the Company’s counsel has informed the court it’s decision to withdrawal from the Contreras case.

	Energy Services			Energy Products			Corporate			Total
Sales to unaffiliated customers	$	1,093,150		$	43,408		$	-		$	1,136,558
Segment loss		(356,566	)		(201,492	)		(1,138,665	)		(1,696,723	)
Depreciation and amortization		68,511			3,284			7,291			79,086
Provision for income taxes		-			-			-			-

Business segment financial information for the three months ended December 31, 2007 is as follows:

	Energy Services		Energy Products			Corporate			Total
Sales to unaffiliated customers	$	2,103,010	$	119,717		$	-		$	2,222,727
Segment profit (loss)		418,839		(141,563	)		(3,036,234	)		(2,758,958	)
Depreciation and amortization		79,214		3,241			10,556			93,011
Provision for income taxes		-		-			-			-

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 8 - INDUSTRY SEGMENT INFORMATION (Continued) Business segment financial information as of and for the six months ended December 31, 2008 is as follows:

NOTE 7 -		CONTINGENCIES (Continued)

		LEGAL MATTERS (Continued)

		Anne and Debra Ramsey Arbitration

		On December 2, 2005, a Demand for Arbitration was filed by Anne Ramsey and Debra Ramsey alleging that their employment was terminated in breach of employment agreements that they purportedly entered into with the Company. Anne Ramsey, the sister of Geoffrey Ramsey, was the Company’s former Human Resource Director and had served on the Board of Directors until June 18, 2007. Debra Ramsey is the wife of Geoffrey Ramsey and was a former administrative assistant for the Company. The Company terminated both individuals on November 23, 2005. On or about March 20, 2006, the Company instituted an injunction proceeding in the New Haven Superior Court to permanently enjoin this arbitration on the basis that the Company never authorized the employment agreements relied upon by Anne and Debra and therefore such contracts were void. The matter was tried in November 2006 and the Court rendered a decision on January 8, 2007 denying a permanent injunction. On January 26, 2007 the Company filed an appeal of the Superior Court decision in the Connecticut Appellate Court and thereafter filed a Motion for Stay with the Superior Court which was granted. On July 5, 2007 the Company filed its brief with the Appellate Court and oral argument occurred on March 10, 2008. On May 20, 2008, the Connecticut Appellate affirmed the Superior Court’s decision. Thereafter the Company filed a petition for certification on June 27, 2008 with the Supreme Court in the State of Connecticut which the Supreme Court denied. An arbitration hearing occurred on March 3rd and 5th 2009, and briefs from both parties were filed on March 24, 2009.

		On April 3, 2009, the Arbitrator ruled that the Company’s reasons for terminating Debra Ramsey did not constitute “cause” as that term was defined in her employment agreement and, therefore, the Company had breached Debra Ramsey’s employment agreement and was ordered to pay Ms. Debra Ramsey $545,931.50 in salary and fringe benefits which she would have been entitled to pursuant to her employment agreement until it terminated by its terms on April 21, 2016. Ms. Debra Ramsey was also awarded attorneys’ fees to be determined at a future date. Also on April 3, 2009, the Arbitrator further ruled that the Company had sufficient grounds to discharge Ms. Anne Ramsey for “cause” as that term was defined in her employment agreement and, accordingly, she was not entitled to any salary or benefits for the balance of the remaining term of her agreement. As a result of the Arbitrator’s decision with respect to Ms. Anne Ramsey, the Company was awarded its attorneys’ fees to be determined at a future date. The Company has reserved the above award and is reflected in the results of operations for three months ended March 31, 2009.

	Energy Services			Energy Products			Corporate			Total
Sales to unaffiliated customers	$	2,369,014		$	71,614		$	-		$	2,440,628
Segment loss		(746,754	)		(463,679	)		(2,830,155	)		(4,040,588	)
Depreciation and amortization		139,244			7,696			15,313			162,253
Provision for income taxes		-			-			-			-
Segment assets		900,136			606,645			113,751			1,620,532

Business segment financial information for the six months ended December 31, 2007 is as follows:

	Energy Services		Energy Products			Corporate			Total
Sales to unaffiliated customers	$	4,264,929	$	134,859		$	-		$	4,399,788
Segment profit (loss)		596,022		(348,568	)		(4,365,721	)		(4,118,267	)
Depreciation and amortization		161,833		5,960			18,059			185,852
Provision for income taxes		-		-			-			-
Segment assets		2,114,286		306,934			2,029,590			4,450,810

NOTE 9 -		SUBSEQUENT EVENTS
		PRIVATE PLACEMENTS
		On January 5, 2009, the Company completed the sale of a 12% unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $25,000. The note entitled the unit holder to 50,000 common stock purchase warrants which are exercisable for a five year period at $0.27 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. The Company did not pay a sales commission or other remuneration in connection with the sale of the note.

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 9 -		SUBSEQUENT EVENTS (Continued)
NOTE 7 -		CONTINGENCIES (Continued)
		PRIVATE PLACEMENTS (Continued)
		LEGAL MATTERS (Continued)
		On February 12, 2009, the Company entered into a promissory note extension agreement with the holder of the 18% convertible unsecured promissory note to amend the terms of the note issued to him on July 30, 2008. The unsecured note was originally issued for the principal amount of $500,000, convertible into common stock at $0.47 per share, accrued interest at the rate of 18% per annum, and was originally due on January 30, 2009. Pursuant to the promissory note extension agreement, the principle on the note has been increased to $545,000 which includes the prior accrued interest. The conversion feature on the note was adjusted to $0.37 per share and the maturity date for the unsecured note was extended to July 30, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 310,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share. The holder of the note is a brother to a member of the Company’s Board of Directors and such brother did not participate in the Board’s decision to extend the notes or the revised terms thereof.
		Wal-Mart Stores, Inc. v. Eaton Corp. & RS Services
		On February 26, 2009, the Company entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due February 19, 2009 to amend the terms of the note issued to him on December 19, 2008. The unsecured note was originally issued for the principal amount of $100,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principle on the note has been increased to $102,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share.
		On July 9, 2008, RS Services, Inc. was named as a co-defendant with Eaton Corp. in a lawsuit initiated by Wal-Mart arising from an industrial accident in July 2006. The case is docket number 08CV1141and was filed in Adams County District Court in the State of Colorado. Wal-Mart claims breach of contract and negligence against the defendants. It seeks damages for worker’s compensation benefits paid to its employees, property damage, lost profits, and other items. In accordance with the liability insurance policy, RS Services, Inc. has submitted the defense of this case to its liability carrier. Management believes that the liability carrier for RS Services, Inc. will cover all expenses, including damages, relating to this suit as part of the liability policy and without additional expense by RS Services, Inc.
		Other
		In addition, there exists routine litigation incidental to the Company’s business, none of which is anticipated to have a material adverse impact on our financial position, results of operations, liquidity or cash flows.
NOTE 8 -		INDUSTRY SEGMENT INFORMATION
		The Company has two major reportable segments: energy services and energy efficiency products. RS Services is the energy services segment and EnerLume Corp. is the energy efficiency products segment. The segments were determined based on the components of the Company’s business that are evaluated separately by management.
		Business segment financial information as of and for the three months ended March 31, 2009 is as follows:

	Energy Services			Energy Products			Corporate			Total
Sales to unaffiliated customers	$	449,865		$	12,952		$	-		$	462,817
Segment loss		(484,561	)		(259,310	)		(1,670,380	)		(2,414,251	)
Depreciation and amortization		55,579			3,223			5,215			64,016
Provision for income taxes		-			-			-			-

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 8 -		INDUSTRY SEGMENT INFORMATION (Continued)

		Business segment financial information for the three months ended March 31, 2008 is as follows:

	Energy Services			Energy Products			Corporate			Total
Sales to unaffiliated customers	$	919,975		$	73,486		$	-		$	993,461
Segment loss		(239,575	)		(257,901	)		(1,497,506	)		(1,994,982	)
Depreciation and amortization		77,737			3,695			9,598			91,030
Provision for income taxes		-			-			-			-

Business segment financial information as of and for the nine months ended March 31, 2009 is as follows:

	Energy Services			Energy Products			Corporate			Total
Sales to unaffiliated customers	$	2,818,879		$	84,566		$	-		$	2,903,445
Segment loss		(1,231,315	)		(722,989	)		(4,500,535	)		(6,454,839	)
Depreciation and amortization		194,822			10,919			20,528			226,269
Provision for income taxes		-			-			-			-
Segment assets		543,804			715,219			73,549			1,332,573

Business segment financial information for the nine months ended March 31, 2008 is as follows:

	Energy Services		Energy Products			Corporate			Total
Sales to unaffiliated customers	$	5,184,904	$	208,345		$	-		$	5,393,249
Segment profit (loss)		356,447		(606,469	)		(5,863,227	)		(6,113,249	)
Depreciation and amortization		239,571		9,655			27,657			276,883
Provision for income taxes		-		-			-			-
Segment assets		1,529,626		589,358			427,723			2,546,707

ENERLUME ENERGY MANAGEMENT CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Continued)

NOTE 9 -		SUBSEQUENT EVENTS

		PRIVATE PLACEMENTS

		On April 16, 2009, the Company entered into a promissory note extension agreement with a holder of the 18% unsecured promissory note due April 16, 2009 to amend the terms of the note issued to him on October 16, 2008. The unsecured note was originally issued for the principal amount of $25,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $27,250 which includes the prior accrued interest. The maturity date for the unsecured note was extended to October 16, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 12,500 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share.

		On April 29, 2009, the Company entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due March 1, 2009 to amend the terms of the note issued to him on December 31, 2008. The unsecured note was originally issued for the principal amount of $25,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $25,500 which includes the prior accrued interest. The maturity date for the unsecured note was extended to July 1, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 25,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.10 per share.

		During May 2009, the Company entered into agreements with five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933 for the sale of an aggregate $150,000 12% four month unsecured promissory note and common stock purchase warrants. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.35 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full four months from the date of issuance. The Company paid a 10% sales commission in connection with the sale of the note.

		DEMAND NOTE PAYABLE

		On May 15, 2009 RS Services received a principal reduction demand payment in the amount of $258,486 from Liberty Bank, the holder of the demand note which is the amount in excess of the collateralized eligible accounts receivable balance (see Note 3), balance as required by the note.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” are those statements that describe management’s beliefs and expectations about the future. Although we believe these expectations are reasonable, our operations involve a number of risks and uncertainties, including those described in the “Risk Factors” section of our Annual Report for the fiscal year ended June 30, 2008 on Form 10-K.

The Company’s actual results could differ materially from those discussed in any forward-looking statements included in this Quarterly Report.

We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “predict,” “project” and similar terms and phrases, including references to assumptions, in this Quarterly Report on Form 10-Q to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

our ability to develop, retain and renew Master Channel Partner and service related contracts;

uncertainties in the competitive bidding process;

our dependence on key personnel;

the outcome of existing litigation and the potential for new litigation;

intense competition in the industry segments in which we operate on a local and national level;

the integration and success of the early stage energy management division and its ability to produce favorable revenue and profitability; and

other factors including those discussed under “Risk Factors” in Item 1A of our Annual Report for the fiscal year ended June 30, 2008 on Form 10-K.

You should keep in mind that any forward-looking statement made by us in this Quarterly Report on Form 10-Q or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Quarterly Report on Form 10-Q after the date of this filing, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Quarterly Report on Form 10-Q or elsewhere might not occur.

Overview

We are an outsource provider of an electrical energy efficiency product and electrical energy management services that enable customers to manage their lighting infrastructure more effectively and reduce energy costs. We believe as the economic cost of energy rises and the demand for energy conservation continues to increase, our mission is to provide products and design systems that provide new levels of efficient utilization of energy and utilities.

2830

Our principal product, EnerLume | EM®, is a computerized energy savings device which improves the efficiency of fluorescent lighting systems. EnerLume | EM® accomplishes this by reducing the amount of electricity needed to operate fluorescent lighting with limited light loss. EnerLume | EM® is most adaptable to large retail and manufacturing facilities that are heavily dependent on fluorescent lighting. With third party independent testing and proven field results demonstrating energy savings of up to 15%, EnerLume | EM® improves the efficiency of a lighting system by reducing the electrical energy consumed while maintaining energy loads to keep peak demands within user-defined limits. Once installed and connected to a facility’s utility meters, EnerLume | EM® allows the user to set and adjust electrical lighting demand set points to reduce energy consumption and load limits during peak or off peak usage hours. With the lighting system’s ballasts operating at the use prescribed levels, peak voltage for maximum light output can be regulated, reducing energy consumption and resulting in energy savings. Through a self-contained energy management system, EnerLume | EM® can also be programmed to automatically turn off or curtail the amount of fluorescent fixtures when not required, which can also provide additional energy savings.

We also provide full service electrical contracting and installation of electrical energy management services, through our RS Services segment located in Duncan, Oklahoma, to clients consisting of large retail chains primarily in the southeastern part of the United States. We specialize in the installation and design of electrical systems, energy management systems, telecommunications networks and retrofitting of existing electrical control panels. Our service electricians and technicians provide the necessary evaluation and installation service for our products and services. We also have a certified design engineer and certified alarm personnel on staff to assist with network cabling and compliance with local laws and regulations for high voltage electrical systems.

Our principal executive offices are located at Two Broadway, Hamden, Connecticut 06518 and our telephone number is (203) 248-4100. Our web site is www.enerlume.com. Any reference contained in this report to our web site, or to any other web site, shall not be deemed to incorporate information from those sites into this report.

Recent Developments

This section covers developments beginning in the ~~second~~third quarter of fiscal 2009 (beginning ~~October~~January 1, ~~2008~~2009)~~, the last period for which reports were provided to shareholders~~.

~~Private~~Ramsey ~~Brand Label Agreement~~Arbitration

WeOn ~~announced on~~ December 2, 102005, ~~2008~~a Demand for Arbitration was filed by Anne Ramsey and Debra Ramsey alleging that atheir ~~global~~employment ~~leader~~was terminated in ~~power~~breach ~~technology has~~of employment agreements that they purportedly entered into awith ~~private~~us. We terminated ~~brand~~both ~~label~~individuals ~~agreement~~on November 23, 2005. On or about March 20, 2006, we instituted an injunction proceeding in the New Haven Superior Court to ~~distribute~~permanently ~~our~~enjoin ~~proprietary~~this arbitration on the basis that the ~~EnerLume~~Company |never ~~EM®~~authorized ~~energy~~the ~~efficiency~~employment ~~product~~agreements relied upon by Anne and Debra and therefore such contracts were void. ~~This~~ ~~agreement~~The ~~provides~~matter ~~for~~was tried in November, 2006 and the Court rendered a ~~two~~decision on January 8, 2007 denying a permanent ~~year~~injunction. ~~private~~On ~~brand~~January 26, ~~label~~2007 ~~agreement~~we ~~with~~filed an ~~open~~appeal ~~quantity~~of ~~purchase~~the ~~with~~Superior noCourt ~~minimum~~decision ~~purchase~~and ~~requirement~~on ~~with~~May 20, ~~set~~2008, ~~pricing~~the ~~for~~Connecticut ~~the~~Appellate ~~duration~~Court ofaffirmed the ~~term~~lower Court’s decision. Accordingly, an arbitration hearing occurred on March 3rd and 5th 2009, and briefs from both parties were filed on March 24, 2009.

2931

On April 3, 2009, the Arbitrator ruled that our reasons for terminating Debra Ramsey did not constitute “cause” as that term was defined in her employment agreement and, therefore, the Company had breached Debra Ramsey’s employment agreement and was ordered to pay Ms. Debra Ramsey $545,931.50 in salary and fringe benefits which she would have been entitled to pursuant to her employment agreement until it terminated by its terms on April 21, 2016. Ms. Debra Ramsey was also awarded attorneys’ fees to be determined at a future date.

Also on April 3, 2009, the Arbitrator further ruled that we had sufficient grounds to discharge Ms. Anne Ramsey for “cause” as that term was defined in her employment agreement and, accordingly, she was not entitled to any salary or benefits for the balance of the remaining term of her agreement. As a result of the Arbitrator’s decision with respect to Ms. Anne Ramsey, the Company was awarded its attorneys’ fees to be determined at a future date.

Private Placements

On December 2, 2008, we completed the sale of 3.9 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to four investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $195,000. Each unit was sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.

On December 31, 2008, we completed the sale of $125,000 12% two month unsecured promissory note and common stock purchase warrants to two investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.26 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. We paid a 10% sales commission in connection with the sale of the note.

On January 5, 2009, we completed the sale of a 12% unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $25,000. The note entitles the unit holder to 50,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. We did not pay a sales commission or other remuneration in connection with the sale of the note.

On February 12, 2009, we entered into a promissory note extension agreement with the holder of the 18% convertible unsecured promissory note to amend the terms of the note issued on July 30, 2008. The unsecured note was originally issued for the principal amount of $500,000, convertible into common stock at $0.47 per share, accrued interest at the rate of 18% per annum, and was originally due on January 30, 2009. Pursuant to the promissory note extension agreement, the ~~principle~~principal on the note has been increased to $545,000 which includes the prior accrued interest. The conversion feature on the note was adjusted to $0.37 per share and the maturity date for the unsecured note was extended to July 30, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 310,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share. The holder of the note is a brother of Nicholas Troiano, a current member of the Board of Directors. Nicholas Troiano did not participate in the Board’s decision to extend the notes or the revised terms thereof.

30On February 26, 2009, we entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due February 19, 2009 to amend the terms of the note issued to him on December 19, 2008. The unsecured note was originally issued for the principal amount of $100,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $102,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder received an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share.

OnDuring ~~February 26,~~March 2009, we entered into a promissory note extension ~~agreement~~ agreements with ~~the~~four holders ~~holder~~ of the 1218% unsecured promissory note due ~~February~~March ~~19,~~ 2009 to amend the terms of the note issued to ~~him~~them on December 19, 2008. The unsecured note was originally issued for the principal amount of $100,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principle on the note has been increased to $102,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share.September

2008. The unsecured notes were originally issued for the aggregate principal amount of $100,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the aggregate principal on the notes has been increased to $109,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to September 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 50,000 shares of the Company’s common stock exercisable until March 31, 2014 at $0.54 per share.

On April 16, 2009, we entered into a promissory note extension agreement with a holder of the 18% unsecured promissory note due April 16, 2009 to amend the terms of the note issued to him on October 16, 2008. The unsecured note was originally issued for the principal amount of $25,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $27,250 which includes the prior accrued interest. The maturity date for the unsecured note was extended to October 16, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 12,500 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share.

On April 29, 2009, we entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due March 1, 2009 to amend the terms of the note issued to him on December 31, 2008. The unsecured note was originally issued for the principal amount of $25,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $25,500 which includes the prior accrued interest. The maturity date for the unsecured note was extended to July 1, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 25,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.10 per share.

During May 2009, we entered into agreements with five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933 for the sale of an aggregate $150,000 12% four month unsecured promissory note and common stock purchase warrants. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.35 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full four months from the date of issuance. The Company paid a 10% sales commission in connection with the sale of the note.

Appointment of New Director

On January 8, 2009, the Board of Directors elected Paul M. Belliveau to serve as a Class III member of the Board of Directors. Mr. Belliveau qualifies as an independent director within the meaning of NASDAQ Rule 4200 and has no material relationship or reportable transactions with us under Item 404(a) of Regulation S-K. Mr. Belliveau has not been appointed to any committees of the Board of Directors.

Mr. Belliveau is President of Cardo Americas, a subsidiary of Cardo AB, a provider of industrial doors and logistics systems, systems for water treatment, process equipment for the pulp and paper industry and garage doors, which is based in Malmo, Sweden. Mr. Belliveau is also the Vice President of ABS Group and President of ABS America, both Cardo AB subsidiaries. Previously, Mr. Belliveau was the President and CEO of Besam Entrance Solutions, the North American subsidiary of the world’s largest automatic door company, ASSA ABLOY. In addition, Mr. Belliveau has held several leading positions within ThyssenKrupp Elevator, completing his career at the company as President of the Northeast Region in the USA. Mr. Belliveau graduated from the University of Connecticut and holds a Bachelor degree in economics.

door company, ASSA ABLOY. In addition, Mr. Belliveau has held several leading positions within ThyssenKrupp Elevator, completing his career at the company as President of the Northeast Region in the USA. Mr. Belliveau graduated from the University of Connecticut and holds a Bachelor degree in economics.

In connection with the election of Mr. Belliveau to the Board of Directors, Mr. Belliveau will participate in the Company’s standard compensatory arrangements for its non-employee directors, including quarterly director fees of $3,000 and quarterly restricted stock grants of the Company’s common stock valued at $7,500.

Demand Note Payable

On May 15, 2009 RS Services, our wholly owned subsidiary, received a principal reduction demand payment in the amount of $258,486 from Liberty Bank, the holder of the demand note. Per the terms of the demand note, RS Services received the demand for payment as RS Services has exceeded its draw limits under the term of the note. Liberty Bank has requested payment of the amount in excess of the collateralized eligible accounts receivable balance immediately. RS Services entered into the note on July 31, 2008 and the note is secured by the receivables and inventory of the subsidiary.

Outlook

Our overall short term outlook is directly dependent on the success of immediate fundraising efforts, which are imperative for the Company to continue as a going concern. There is inadequate cash on the balance sheet to support the Company’s present obligations. We have suffered recurring losses from continuing operations, have had negative cash flows from operations, have had a working capital and stockholders’ deficiency at ~~December~~March 31, ~~2008~~2009 and are subject ~~currently~~to ~~involved in~~ litigation settlements that ~~could~~will have an adverse effect on our ~~operations.~~ ~~These conditions raise substantial doubt about our~~ ability to continue as a going concern.

We are currently having difficulty meeting unpaid vendors, debtholders principal and interest payments and other support obligations. In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to attempt to acquire the funds necessary to satisfy our short-term cash needs or may be forced to restructure operations. Our inability to address our debt maturities in a satisfactory fashion also raises substantial doubts as to our ability to continue as a going concern.

31We will continue to strive for new and innovative ideas to develop products that will provide electrical energy efficiency. Continuing development of new products such as daylight harvesting, electric heating, demand response, lighting ballast and lamps as well as energy efficiency for HID lighting will compliment our existing EnerLume│EM® product and help expand into a larger market presence. We aspire to develop a complete lighting system, including ballast, lamps and light fixture together with EnerLume│EM® which, when used together, will provide maximum energy savings. As new ideas emerge from new and existing technology for energy efficiency, we will research the feasibility of developing such technology to help reduce electrical demand to satisfy the global need for energy conservation.

We ~~will~~have ~~continue~~accomplished, tothrough ~~search~~independent ~~for~~channel ~~new~~partner deployment and ~~innovative ideas to develop products that~~through ~~will~~our ~~provide~~marketing ~~electrical~~efforts, ~~energy~~increased ~~efficiency. Continuing~~market ~~development~~awareness of ~~new~~ ~~products such as daylight harvesting, electric heating, demand response, lighting ballast and lamps as well as energy efficiency for HID lighting will compliment~~ our ~~existing~~ EnerLume│ | EM® ~~product~~ ~~and help expand into a larger market presence~~product. WePotential ~~aspire~~installations toinclude ~~develop~~apartment acommunities, ~~complete~~warehouse ~~lighting~~distribution ~~system~~centers, ~~including~~military ~~ballast,~~installations ~~lamps~~ and ~~light~~other ~~fixture~~commercial ~~together~~and ~~with~~industrial ~~EnerLume│EM® which, when used together, will provide maximum energy savings~~applications. AsThe ~~new~~product ~~ideas emerge~~has evolved from ~~new~~installation ~~and existing technology for energy efficiency, we will research the feasibility~~ of ~~developing such technology to help reduce electrical demand~~ ~~to satisfy~~ the ~~global~~product ~~need~~ for ~~energy~~demonstration ~~conservation.~~and

We have accomplished, through independent channel partner deployment and through our marketing efforts, increased market awareness of our EnerLume | EM® product. Potential installations include apartment communities, warehouse distribution centers, military installations and other commercial and industrial applications. The product has evolved from installation of the product for demonstration and verification purposes to more order-based installations. Independent tests of the product have verified an electrical energy consumption savings of up to 15%, and, as a result we have instituted a money back guarantee to the end user. We plan to grow our business and obtain eventual profitability mainly through sales derived from strategic alliances with our channel partner distributorships, including the channel partner network under the currently contracted independent master channel partner. Additionally, we believe in our plans for new product development to complement our existing technology and introduce new energy savings and efficiency products to the market.34

~~In the~~verification ~~annual~~purposes ~~report~~to ~~filed on Form 10~~more order-Kbased ~~for~~installations. Independent ~~the~~tests ~~fiscal year~~ of ~~2008~~the weproduct ~~disclosed~~have ~~that~~verified wean ~~had~~electrical ~~experienced~~energy ~~longer~~consumption ~~sales~~savings ~~cycles~~of ~~with~~up ~~our~~to ~~product~~15%, ~~than initially anticipated~~ and, ~~also~~as ~~disclosed~~a ~~that~~ result we ~~experienced~~have instituted a ~~more~~money ~~cautious~~back ~~approach~~guarantee ~~from public acceptance~~ to the ~~new~~end ~~technology~~user. ~~which~~We ~~was~~plan ~~unforeseen~~to ingrow our ~~prior~~ ~~forecasts~~business and ~~guidance. We~~obtain doeventual ~~not~~profitability ~~anticipate~~mainly ~~this~~through ~~trend~~sales toderived ~~continue~~from ~~into~~strategic ~~the~~alliances ~~fiscal~~with ~~year~~our ofchannel ~~2009~~partner distributorships, asincluding ~~we have adopted marketing outreach programs~~the ~~through~~ channel partner ~~relationships~~network ~~and~~under ~~potential~~the ~~third~~currently ~~party~~contracted ~~distribution channels~~independent ~~to both market and cross-market energy efficiency~~master ~~products~~channel partner. WeAdditionally, we believe ~~that~~in our ~~solution~~plans tofor ~~energy efficiency will be~~new ~~part~~product ofdevelopment anto ~~end-user~~complement ~~overall~~our ~~energy~~existing ~~reduction~~technology ~~plan~~and asintroduce ~~we can provide needed cost~~new ~~savings that~~ energy ~~conscious~~savings ~~retail~~ and ~~warehouse~~efficiency ~~chains~~products ~~demand~~to the market.

~~Our~~In ~~short-term~~the ~~cash~~annual ~~requirements~~report ~~have~~filed ~~steadily~~on ~~declined~~Form as10-K wefor ~~focus~~the onfiscal ~~cost~~year ~~cutting~~of 2008 we disclosed ~~initiatives~~that ~~for~~we ~~future~~had ~~costs. Our~~experienced longer ~~term~~sales ~~plan~~cycles iswith toour ~~improve~~product ~~our~~than initially ~~cash~~anticipated ~~flow~~and ~~through~~also ~~continued~~disclosed ~~focus,~~that ~~deployment~~we ~~and~~experienced ~~promotion~~a ofmore ~~our~~cautious ~~energy~~approach from ~~efficiency~~public ~~product,~~acceptance ~~EnerLume~~to |the ~~EM®.~~new Wetechnology ~~also plan~~which towas ~~continue~~unforeseen in our ~~efforts~~prior forecasts toand ~~identify~~guidance. We ~~ways~~do ofnot ~~reducing~~anticipate ~~operating~~this ~~costs~~product ~~and~~sales totrend ~~increase~~to ~~liquidity~~continue ~~through~~into ~~additional~~the ~~equity~~fiscal ~~and~~year ~~debt~~of ~~financings~~2009, ~~and~~as we have ~~entered~~ ~~into~~adopted anmarketing ~~agreement~~outreach programs ~~with~~through anchannel ~~institutional~~partner ~~investment~~relationships ~~firm~~and ~~that~~potential ~~could~~third party ~~provide~~distribution ~~additional~~channels ~~equity~~to both market and ~~debt~~cross-market ~~financings~~energy efficiency products. ~~The~~We ~~completion~~believe ~~of these~~that ~~financings~~our ~~and~~solution ~~the~~to ~~operational~~energy ~~initiatives~~efficiency ~~are~~will ~~imperative~~be part toof ~~improving~~an ~~our cash~~end-user ~~flow~~overall ~~and~~energy toreduction ~~help~~plan ~~foster~~as ~~the~~we ~~implementation~~can ofprovide ~~our~~needed ~~current~~cost savings ~~initiatives~~that energy conscious retail and ~~business~~ ~~plan~~warehouse chains demand.

WeOur ~~are~~longer ~~also~~term ~~currently~~plan ~~involved~~is into ~~litigation~~improve ~~that~~our ~~could~~cash ~~have~~flow anthrough ~~adverse~~continued ~~effect~~focus, ondeployment and promotion of our ~~operations~~energy efficiency product, EnerLume | EM®. If anWe ~~unfavorable~~also plan ~~ruling~~to ~~with~~continue ~~any~~our orefforts ~~all~~to identify ways of ~~these legal~~reducing ~~matters~~operating ~~occurs,~~costs weand ~~may~~to increase beliquidity ~~forced~~through toadditional ~~either~~equity ~~restructure~~and ~~operations,~~debt orfinancings ~~take~~and have ~~other~~entered ~~necessary~~into ~~and~~an ~~appropriate~~agreement ~~matters~~with an institutional investment firm that could provide ~~potentially~~additional ~~limit~~equity ~~our~~and ~~ability~~debt financings. The completion of these financings and the operational initiatives are imperative to ~~continue~~improving ~~operations~~our cash flow and to help foster the implementation of our current initiatives and business plan.

32We are also subject to litigation settlements that will have an adverse effect on our operations. If we are unable to meet any or all of these legal settlements, we may be forced to either restructure operations, or take other necessary and appropriate matters that could potentially limit our ability to continue operations.

Results of Operations

Three months ended ~~December~~March 31, ~~2008~~2009 (the “~~2008~~2009 Period”) vs. three months ended ~~December~~March 31, ~~2007~~2008 (the “~~2007~~2008 Period”)

The following are our net revenues from continuing operations for:

	2008 Period		2007 Period		Variance			% Variance
	2009 Period		2008 Period		Variance			% Variance
Energy Services	$	1449,~~093,150~~865	$	2919,~~103,010~~975	$	(1470,~~009,860~~110	)		-4851.01	%
Energy Products		4312,~~408~~952		~~119~~73,~~717~~486		(7660,~~309~~534	)		-6382.74	%
Total Revenues	$	1462,~~136,558~~817	$	2993,~~222,727~~461	$	(1530,~~086,169~~644	)		-4853.94	%

We have experienced an aggregate revenue decrease from continuing operations of 4853.94% as compared to the ~~2007~~2008 Period. The decrease in energy services revenue is a direct reflection of ~~the~~continued ~~absence~~shortfalls ofin revenue in the ~~2008~~2009 Period ~~associated with~~from ~~switchgear~~installation and ~~retrofit~~product ~~services~~servicing ~~from both multi-location contractor and subcontractor contract~~ revenues. This shortfall resulted in a revenue decrease of approximately $~~797~~765,000. ~~Additionally,~~Construction ~~installation~~related ~~and product~~revenue ~~servicing~~increased ~~services revenue decreased~~ by approximately $~~212~~295,000~~. We~~ ~~believe~~to ~~that~~partially offset the ~~lapse~~shortfall ~~of switchgear and retrofit~~from ~~services,~~installation ~~which include replacing older, less efficient equipment~~ and ~~similar electrical~~product ~~devices~~servicing ~~and~~services ~~replacing~~revenues ~~them~~The ~~with~~shortfall ~~new,~~in ~~and~~the ~~more updated energy~~2009 ~~efficient~~Period ~~devices such as circuit breakers and florescent lighting tubes and ballasts,~~ is a direct reflection of the overall downturn in the ~~macro-economic~~ environment which commenced in the 2008 Period. To this end, a major customer has decreased its overall capital spending and, as a result, has halted its switchgear installations. We anticipate this revenue decrease from the 2007 Period to continue until improvements in the macro-economic ~~environment take hold.~~

Our principal energy efficiency product, EnerLume | EM®, has experienced a longer sales cycle than initially anticipated. We have also experienced a more cautious approach from public acceptance and had to overcome a proof of concept stage with new energy efficiency technology from channel partner clients and prospects which was heretofore difficult to forecast. Additionally, current economic conditions that have negatively affected retail and other overall consumer confidence measurements have created a challenge to the timely execution of our business plan. We do not anticipate this trend to continue in the second half of fiscal year of 2009, as we have recently contracted with a retail chain to install our EnerLume | EM® product in 96 of the retail chain’s stores. Such installation will commence in the fourth quarter of the fiscal year of 2009. Revenues from technical service support of $43,408 in the 2008 Period include the services, as well as consulting and training of support for our channel partner network. Technical service support sales recorded in the 2007 Period were approximately $119,717. We also anticipate technical service support sales to increase with the anticipated increase in product sales. We continue to research new product line opportunities to support our energy products segment. Our EnerLume | EM® is a lighting energy efficiency device that is designed to reduce excess kilowatts ordinarily required for operating magnetic or electronic ballasts used in fluorescent lighting systems, and manages the incoming power so the ballasts draw energy when the power transmission is most efficient. This reduces energy costs while reducing light level by amounts virtually undetectable by the human eye. We intend to continue to market EnerLume | EM® via channel partners to market leaders in industry segments (retail, commercial, industrial, and institutional), which we believe will lend credibility and name brand recognition to our product. Since our fiscal year end June 30, 2008, we have signed agreements with35

33environment which commenced in the second quarter of the 2009 fiscal year. We anticipate this revenue decrease from the 2008 Period to continue until improvements in the macro-economic environment take hold.

~~three~~Revenues ~~direct~~from technical service support of $12,952 in the 2009 Period include the consulting and training of support for our channel ~~partners~~partner network. Technical service support sales recorded in the 2008 Period were $73,486. We do not anticipate this revenue decrease trend to ~~market~~continue, as we have recorded as deferred revenue a backlog billing of $210,000 in the 2009 Period and we have recently received the funds to produce the 60A EnerLume | EM® ~~and~~ units wethat have ~~recently~~not ~~signed~~been delivered during the 2009 Period. This order resulted from our channel partners’ contract with a 2retail chain to install our EnerLume | EM® product in 96 of the retail chain’s stores. Such installation will commence in the fourth quarter of the fiscal year ~~private~~of ~~brand~~2009. We anticipate ~~label~~technical ~~agreement~~service support sales to increase with the anticipated increase in product sales. However, the current economic conditions have negatively affected retail sales of our product which created a ~~global~~substantial ~~technology~~challenge ~~leader~~to inthe ~~electrical~~timely ~~systems~~execution of our business plan.

Our EnerLume | EM® is a lighting energy efficiency device that is designed to reduce excess kilowatts ordinarily required for operating magnetic or electronic ballasts used in fluorescent lighting systems, and manages the incoming power so the ballasts draw energy when the power transmission is most efficient. This reduces energy costs while reducing light level by amounts virtually undetectable by the human eye. We intend to continue to market EnerLume | EM® via channel partners to market leaders in industry segments (retail, commercial, industrial, and institutional), which we believe will lend credibility and name brand recognition to our product. Since our fiscal year end June 30, 2008, we have signed agreements with three direct channel partners to market EnerLume | EM® and we have recently signed a 2 year private brand label agreement with a global technology leader in electrical systems.

The following are our direct costs and margins from continuing operations for:

	2008 Period		2007 Period		Variance			% Variance
	2009 Period		2008 Period		Variance			% Variance
Cost of revenues from:
Energy Services	$	~~953~~532,~~482~~768	$	1833,~~108,758~~131	$	(~~155~~300,~~276~~363	)		-1436.01	%
Energy Products		~~27,995~~839		~~100~~27,~~964~~202		(7226,~~969~~363	)		-7296.39	%
Total costs of revenues	$	~~981~~533,~~477~~607	$	1860,~~209,722~~333	$	(~~228~~326,~~245~~726	)		-1838.90	%

	2008 Period			2007 Period			Variance
Direct cost margins from:
Energy Services		12-18.84	%		479.34	%		-3427.58	%
Energy Products		3593.5	%		1563.70	%		1930.85	%
Total direct cost margin		13-15.63	%		4513.64	%		-3228.07	%

The Company’s cost of revenues from continuing operations represent the direct cost of job materials, direct wages for electrical installations relating to energy services, direct product costs and labor associated with technical training and servicing our channel partners for our energy products segment. Energy services direct costs throughout the ~~2008~~2009 Period were reduced by approximately $~~250~~126,~~200~~000 directly related to subcontractor and other related cost reductions. ~~This~~ ~~savings~~Job ~~reduction~~material ~~was partially offset by increased direct wage~~ costs of approximately $77,300. Material costs also increased by approximately $29,600. Depreciation directly related to cost of goods sold decreased by $12,000 from the 2007 Period. Our energy products segment direct costs experienced a favorable variance from the 2007 period of $72,969, as we recorded cost savings in technical service support sales. The 2008 and ~~2007 Period~~ direct ~~cost margins reflect the out of pocket~~ labor ~~and technical training tools associated with the ramp up of~~costs ~~technical service support sales to support the growth in the energy products segment. We anticipate a higher margin trend from energy products to continue in the future as product sales increase.~~also

decreased by approximately $106,000 and approximately $56,000 respectively. Depreciation directly related to cost of goods sold decreased by $12,000 from the 2008 Period. Our energy products segment direct costs experienced a favorable variance from the 2008 period of $26,363, as we recorded cost savings in technical service support sales. The 2009 and 2008 Period direct cost margins reflect the out of pocket labor and technical training tools associated with the ramp up of technical service support sales to support the growth in the energy products segment. We anticipate a higher margin trend from energy products to continue in the future as product sales increase.

The following is our other operating costs from continuing operations for:

2008 Period

2007 Period

Variance

2009 Period

2008 Period

Variance

SG&A

1,~~196~~732,~~164~~132

21,~~368~~721,~~260~~506

(110,~~172,096~~626

)

Depreciation and amortization

4430,~~649~~648

4645,~~789~~727

(215,~~140~~079

)

Research and development

3511,~~038~~432

6121,~~946~~988

28(110,~~092~~556

)

Total other operating costs

1,~~275~~774,~~851~~212

21,~~421~~889,~~995~~221

(1115,~~146,144~~009

)

Selling, general and administrative expenses from continuing operations consist primarily of management and clerical salaries, legal, accounting and other professional fees, liability insurance, facility rentals, repairs, maintenance, utilities, commissions, travel and various other costs. The SG&A variance increase over the 2009 Period is primarily attributable to a one time settlement reserve attributable to the Ramsey decision of $700,000 being offset by the 2008 Period non-cash director compensation charge in the amount of $710,000, related to the issuance of stock compensation in January. Depreciation and amortization increased nominally by $15,079 in the 2009 Period. The balance of operating costs and expenses is related to the research and development costs of the EnerLume | EM® product. We recognized a decrease in research and development costs by $110,556 associated with our energy management product.

maintenance, utilities, commissions, travel and various other costs. The substantial SG&A decrease over the 2007 Period is primarily attributable to a 2007 Period one time charge relating to employee compensation of approximately $933,000 and compensation in professional fees of approximately $109,000 related to the issuance of stock and option compensation. Additionally, reductions in overall general and administrative costs and legal and other services netted additional cost savings of approximately $130,000. Depreciation and amortization increased nominally by $2,140 in the 2008 Period. The balance of operating costs and expenses is related to the research and development costs of the EnerLume | EM® product. We recognized an increase in research and development costs by $28,092 associated with our energy management product.

Other Costs:

The unfavorable ~~favorable~~ interest expense variance in the ~~2008~~2009 Period of approximately $172,000 is primarily attributable to the ~~aggregate conversion~~recording of ~~the~~beneficial ~~$300,000~~conversion expense ~~Secured~~associated ~~Promissory~~with ~~Notes~~the ~~and~~issuance ~~the~~of ~~$1,115,000~~convertible promissory note extension ~~12%~~agreements ~~Unsecured~~signed ~~Promissory~~in ~~Notes~~the 2009 Period. The ~~favorable~~unfavorable ~~deferred~~debt ~~financing~~discount amortization costs inare ~~the 2008~~primarily ~~Period~~attributable isto ~~the~~additional ~~direct~~warrants ~~result~~issued ofassociated with the ~~2007~~extension ~~Period~~agreements. The ~~write~~favorable ~~down~~deferred offinancing ~~the~~costs ~~Shelter~~in ~~Island~~the ~~loan,~~2009 ~~which~~Period ~~was~~are ~~recognized~~the asdirect anresult ~~expense,~~of asfully ~~the~~amortized ~~loan~~deferred ~~was~~financing costs ~~paid~~ in the ~~2007~~ 2009 Period.

Net Loss:

EnerLume incurred a net loss of $12,~~696~~414,~~723~~251 for the ~~2008~~2009 Period, as compared to a net loss of $1,~~946~~896,~~429~~743 for the ~~2007~~2008 Period. The net loss in the ~~2008~~2009 Period resulted largely from the loss from operations and the interest expense from the non-cash beneficial conversion charge of convertible debt issued and non cash debt discount charges. The net loss in the ~~2007~~2008 Period primarily resulted from the loss from operations, non cash charges of debt discount amortization, beneficial conversion charges and deferred financing costs associated with our debt financings.

Results of Operations

~~Six~~Nine months ended ~~December~~March 31, ~~2008~~2009 (the “~~2008~~2009 Period”) vs. ~~six~~nine months ended ~~December~~March 31, ~~2007~~2008 (the “~~2007~~2008 Period”)

The following are our net revenues from continuing operations for:

	2008 Period		2007 Period		Variance			% Variance
	2009 Period		2008 Period		Variance			% Variance
Energy Services	$	2,~~369~~818,~~014~~879	$	45,~~264~~184,~~929~~904	$	(12,~~895~~366,~~915~~025	)		-4445.56	%
Energy Products		7184,~~614~~566		~~134~~208,~~859~~345		(63123,~~245~~779	)		-4659.94	%
Total Revenues	$	2,~~440~~903,~~628~~445	$	45,~~399~~393,~~788~~249	$	(12,~~959~~489,~~160~~804	)		-4446.52	%

We have experienced an aggregate revenue decrease from continuing operations of 4446.52% as compared to the ~~2007~~2008 Period. The decrease in energy services revenue is directly related to the ~~absence~~decrease of ~~switchgear~~installation and ~~retrofit~~product ~~service~~servicing services revenue ~~from both~~by ~~multi-location~~approximately ~~contractor~~$1,750,000 ~~and~~from ~~subcontractor~~the ~~contracts~~2008 Period and ~~resulted~~the inabsence aof ~~decrease~~switchgear byand ~~approximately~~retrofit ~~$1,024,000.~~service ~~Additionally,~~revenue ~~installation~~from ~~and~~both ~~product servicing~~multi-location ~~services~~contractor ~~revenue~~and subcontractor ~~decreased~~contracts by approximately $~~986~~1,024,000 ~~from the 2007 Period~~. These variances were partially offset by a favorable revenue variance of approximately $~~114~~408,000 from the ~~2007~~2008 Period relating to ~~a one time~~ revenue ~~adjustment~~ ~~associated~~increases ~~with~~in ground-up construction ~~billing~~ ~~adjustments~~billing. We believe that the lapse of revenues associated with installation and services revenues as well as switchgear and retrofit services, which include replacing older, less efficient equipment and similar ~~electrical~~ electrical devices and replacing them with new, and more updated energy efficient devices such as circuit breakers and florescent lighting tubes and ballasts, is a direct reflection of the overall downturn in the macro-economic environment which commenced in the second half of calendar year 2008. To this end, a major customer has decreased its overall capital spending and, as a result, has halted its switchgear installations. We anticipate this revenue decrease from the 2008 Period to continue until improvements in the macro-economic environment take hold.

35Our principal energy efficiency product, EnerLume | EM®, has experienced a longer sales cycle than initially anticipated. We have also experienced a more cautious approach from public acceptance and had to overcome a proof of concept stage with new energy efficiency technology from channel partner clients and prospects which was heretofore difficult to forecast. Additionally, current economic conditions that have negatively affected retail and other overall consumer confidence measurements have created a challenge to the timely execution of our business plan. We do not anticipate this revenue decrease trend to continue, as we have recorded as deferred revenue a backlog billing of $210,000 in the 2009 Period and we have recently received the funds to produce the 60A EnerLume | EM® units that have not been delivered during the 2009 Period. This order resulted from our channel partners’ contract with a retail chain to install our EnerLume | EM® product in 96 of the retail chain’s stores. Such installation will commence in the fourth quarter of the fiscal year of 2009. Revenues from technical service support of $84,566 in the 2009 Period include the services, as well as consulting and training of support for our channel partner network. Technical service support sales recorded in the 2008 Period were approximately $208,345. We also anticipate technical service support sales to increase with the anticipated increase in product sales. We continue to research new product line opportunities to support our energy products segment. Our EnerLume | EM® is a lighting energy efficiency device that is designed to reduce excess kilowatts ordinarily required for operating magnetic or electronic ballasts used in fluorescent lighting systems, and manages the incoming power so the ballasts draw energy when the power transmission is most efficient. This reduces energy costs while reducing light level by amounts virtually undetectable by the human eye. We intend to continue to market EnerLume | EM® via channel partners to market leaders

circuit breakers and florescent lighting tubes and ballasts, is a direct reflection of the overall downturn in the macro-economic environment which commenced in the 2008 Period. To this end, a major customer has decreased its overall capital spending and, as a result, has halted its switchgear installations. We anticipate this revenue decrease from the 2007 Period to continue until improvements in the macro-economic environment take hold.38

Our principal energy efficiency product, EnerLume | EM®, has experienced a longer sales cycle than initially anticipated. We have also experienced a more cautious approach from public acceptance and had to overcome a proof of concept stage with new energy efficiency technology from channel partner clients and prospects which was heretofore difficult to forecast. Additionally, current economic conditions that have negatively affected retail and other overall consumer confidence measurements have created a challenge to the timely execution of our business plan. We do not anticipate this trend to continue in ~~the second half~~ of fiscal year of 2009, as we have recently contracted with a retail chain to install our EnerLume | EM® product in 96 of the retail chain’s stores. Such installation will commence in the fourth quarter of the fiscal year of 2009. Revenues from technical service support of $71,614 in the 2008 Period include the services, as well as consulting and training of support for our channel partner network. Technical service support sales recorded in the 2007 Period were approximately $134,859. We also anticipate technical service support sales to increase with the anticipated increase in product sales. We continue to research new product line opportunities to support our energy products segment. Our EnerLume | EM® is a lighting energy efficiency device that is designed to reduce excess kilowatts ordinarily required for operating magnetic or electronic ballasts used in fluorescent lighting systems, and manages the incoming power so the ballasts draw energy when the power transmission is most efficient. This reduces energy costs while reducing light level by amounts virtually undetectable by the human eye. We intend to continue to market EnerLume | EM® via channel partners to market leaders in industry segments (retail, commercial, industrial, and institutional), which we believe will lend credibility and name brand recognition to our product. Since our fiscal year end June 30, 2008, we have signed agreements with three direct channel partners to market EnerLume | EM® and we have recently signed a 2 year private brand label agreement with a global technology leader in electrical systems.

The following are our direct costs and margins from continuing operations for:

	2008 Period		2007 Period		Variance			% Variance
	2009 Period		2008 Period		Variance			% Variance
Cost of revenues from:
Energy Services	$	2,~~087~~620,~~401~~169	$	23,~~526~~359,~~713~~844	$	(~~439~~739,~~312~~675	)		-1722.40	%
Energy Products		5556,~~476~~315		~~168~~196,~~964~~166		(~~113~~139,~~488~~851	)		-6771.23	%
Total costs of revenues	$	2,~~142~~676,~~877~~484	$	23,~~695~~556,~~677~~010	$	(~~552~~879,~~800~~526	)		-2024.57	%

	2008 Period			2007 Period			Variance
	2009 Period			2008 Period			Variance
Direct cost margins from:
Energy Services		117.90	%		4035.82	%		-28.92	%
Energy Products		2233.54	%		~~-25~~5.38	%		4727.86	%
Total direct cost margin		127.28	%		3834.71	%		-26.53	%

The Company’s cost of revenues from continuing operations represent the direct cost of job materials, direct wages for electrical installations relating to energy services, direct product costs and labor associated with technical training and servicing our channel partners for our energy products segment. Energy services costs throughout the 2009 Period were reduced by approximately $772,000 directly related to subcontractor and other related cost reductions. This savings reduction was partially offset by increased direct wage costs of approximately $115,000. Material costs also increased by approximately $59,600. Depreciation directly related to cost of goods sold decreased by $36,000 from the 2008 Period. Our energy products segment direct costs experienced a favorable variance from the 2008 period of $139,851, as we recorded cost savings in technical service support sales. The 2009 and 2008 Period direct cost margins reflect the out of pocket labor and technical training tools associated with the ramp up of technical service support sales to support the growth in the energy products segment. We anticipate a higher margin trend from energy products to continue in the future as product sales increase.

The Company’s cost of revenues from continuing operations represent the direct cost of job materials, direct wages for electrical installations relating to energy services, direct product costs and labor associated with technical training and servicing our channel partners for our energy products segment. Energy services costs throughout the 2008 Period were reduced by approximately $646,500 directly related to subcontractor and other related cost reductions. This savings reduction was partially offset by increased direct wage costs of approximately $171,300. Material costs also increased by approximately $59,600. Depreciation directly related to cost of goods sold decreased by $23,700 from the 2007 Period. Our energy products segment direct costs experienced a favorable variance from the 2007 period of $113,488, as we recorded cost savings in technical service support sales. The 2008 and 2007 Period direct cost margins reflect the out of pocket labor and technical training tools associated with the ramp up of technical service support sales to support the growth in the energy products segment. We anticipate a higher margin trend from energy products to continue in the future as product sales increase.

The following is our other operating costs from continuing operations for:

2008 Period

2007 Period

Variance

2009 Period

2008 Period

Variance

SG&A

24,~~734~~466,~~834~~966

35,~~820~~541,~~411~~917

(1,~~085~~074,~~577~~951

)

Depreciation and amortization

89120,~~947~~595

89135,~~823~~550

~~124~~(14,955

)

Research and development

7182,~~243~~675

9131,~~310~~298

61(48,~~933~~623

)

Total other operating costs

24,~~896~~670,~~024~~236

35,~~919~~808,~~544~~765

(1,~~023~~138,~~520~~529

)

Selling, general and administrative expenses from continuing operations consist primarily of management and clerical salaries, legal, accounting and other professional fees, liability insurance, facility rentals, repairs, maintenance, utilities, commissions, travel and various other costs. The substantial SG&A decrease over the 2007 Period is primarily attributable to a 2007 Period one time charge relating to employee compensation of approximately $933,000 related to the issuance of stock and option compensation. Additionally, reductions in overall general and administrative costs and legal and other services netted additional cost savings of approximately $130,000. Depreciation and amortization increased nominally by $124 in the 2008 Period. The balance of operating costs and expenses is related to the research and development costs of the EnerLume | EM® product. We recognized an increase in research and development costs by $61,933 associated with our energy management product.

~~Other Costs:~~39

~~The~~insurance, facility ~~favorable~~rentals, ~~interest~~repairs, maintenance, utilities, commissions, travel and ~~expense~~various ~~variance~~other incosts. The substantial SG&A decrease over the 2008 Period is primarily attributable to ~~the~~a 2008 Period one time charge relating to ~~aggregate~~employee ~~conversion~~compensation of ~~the~~approximately $~~300~~933,000 ~~Secured~~related ~~Promissory~~to ~~Notes~~the issuance of stock and ~~the~~option ~~$1,115,000~~compensation. The ~~12%~~Company ~~Unsecured~~had ~~Promissory~~a one ~~Notes,~~time ~~being~~settlement ~~partially~~reserve ~~offset~~attributable ~~with~~to ~~beneficial~~the Ramsey ~~conversion~~decision ~~charges~~of to$700,000 ~~interest~~in ~~expense~~the ~~mainly~~2009 ~~associated~~Period ~~with~~as compared to the ~~repricing~~2008 Period of ~~all~~non-cash ~~our~~director ~~outstanding~~compensation ~~convertible~~charge ~~notes~~in tothe ~~$0.47~~amount ~~per~~of ~~share~~$710,000, ~~and~~related ~~with~~to the ~~issuance~~ issuance of ~~the~~stock ~~6 month~~compensation. Additionally, ~~18%~~reductions ~~convertible~~in ~~note~~overall general ~~during~~and ~~the~~administrative ~~2008~~costs ~~Period~~and legal and other services netted additional cost savings of approximately $141,000. ~~The~~ Depreciation and amortization increased ~~decrease~~nominally by $14,955 in the ~~2008~~2009 Period. ~~for~~The ~~deferred~~balance ~~financing~~of operating costs and expenses is ~~the~~related ~~direct~~to ~~result~~the ~~of a~~research ~~2007~~and ~~Period~~development ~~write~~costs ~~down~~ of the ~~Shelter~~EnerLume ~~Island~~| EM® product. ~~loan,~~We ~~which~~recognized ~~was~~an ~~reorganized~~increase asin ~~an expense,~~research asand ~~the~~development ~~loan~~costs ~~was~~by ~~paid~~$48,623 associated inwith ~~the~~our ~~2007~~energy ~~Period~~management product.

Other Costs:

The unfavorable interest expense variance in the 2008 Period of approximately $180,000 is primarily attributable to the beneficial conversion charges to interest expense mainly associated with the repricing of all our outstanding convertible notes to $0.47 per share, the issuance of the 6 month, 18% convertible notes and the extensions associated with these notes during the 2009 Period. The unfavorable variance of approximately $164,000 for debt discount amortization is primarily attributable to the issuance of warrants associated with promissory note extension agreements associated with the 18% bridge notes. The approximately $150,000 decrease in the 2009 Period for deferred financing costs is the direct result of deferred financing costs being fully amortized in the 2009 Period.

Net Loss:

EnerLume incurred a net loss of $46,~~040~~454,~~588~~839 for the ~~2008~~2009 Period, as compared to a net loss of $34,~~086~~983,~~505~~248 for the ~~2007~~2008 Period. The net loss in the ~~2008~~2009 Period resulted largely from the loss from operations and the interest expense from the non-cash beneficial conversion charge of convertible debt issued and the repricing of convertible debt and outstanding warrants associated with our prior debt financings and equity funding, as well as non cash debt discount charges. The net loss in the 2008 Period primarily resulted from the loss from operations, non cash charges of debt discount amortization, beneficial conversion charges and deferred financing costs associated with our debt financings.

of convertible debt and outstanding warrants associated with our prior debt financings and equity funding, as well as non cash debt discount charges. The net loss in the 2007 Period primarily resulted from the loss from operations, non cash charges of debt discount amortization, beneficial conversion charges and deferred financing costs associated with our debt financings.

Liquidity and Capital Resources

Our overall short term going concern outlook is directly dependent on the success of immediate fundraising efforts, which are imperative for the Company to continue as a going concern. There is inadequate cash ~~on the balance sheet~~ to support the Company’s present obligations. We have suffered recurring losses from continuing operations, have had negative cash flows from operations, have had a working capital and stockholders’ deficiency at ~~December~~March 31, ~~2008~~2009 and are ~~currently~~subject to ~~involved in~~ litigation settlements that ~~can~~will have an adverse effect on our operations. These conditions raise substantial doubt about our ability to continue as a going concern.

We are currently having difficulty meeting unpaid vendors, debtholders’ principal and ~~other~~interest ~~support~~payments and other support obligations. InOn ~~the~~May ~~event~~15, ~~that~~2009 weRS ~~are~~Services ~~unable~~received toa ~~extend or refinance~~principle ~~our~~reduction ~~debt~~demand orpayment ~~obtain~~in ~~additional~~the ~~capital~~amount onof a$258,486 ~~timely~~from ~~basis~~Liberty ~~and~~Bank, onthe ~~acceptable terms,~~holder weof ~~will~~the bedemand ~~required~~note. Per tothe ~~take~~terms ~~further~~of ~~steps~~the todemand ~~attempt~~note, toRS Services ~~acquire~~received the ~~funds necessary~~demand tofor payment ~~satisfy~~as ~~our~~RS ~~short-term~~Services ~~cash~~has ~~needs~~exceeded orits draw ~~may~~limits beunder ~~forced~~the toterm ~~restructure operations.~~of ~~Our~~the ~~inability~~note. Liberty toBank ~~address our debt maturities in a satisfactory~~has ~~fashion~~requested ~~also~~payment ~~raises~~of ~~substantial~~the ~~doubts~~amount asin toexcess ~~our ability to continue as a going concern.~~of the

Our cash flow had been mainly consumed by operational costs associated with general and administrative and legal and professional fees, as well as increasing costs pertaining to the deployment of our EnerLume | EM® energy efficiency product. We anticipate securing near term debt and/or equity financings to continue as a going concern until we can sustain positive free cash flow from operations.40

Incollateralized ~~the~~eligible ~~fiscal~~accounts ~~year~~receivable ofbalance ~~2008~~immediately. RS weServices ~~reported~~entered into ~~that~~the wenote ~~experienced~~on ~~longer~~July 31, ~~sales~~2008 ~~cycles~~and ~~with our~~the ~~product~~note ~~than~~is ~~initially~~secured ~~anticipated~~by the receivables and ~~also~~inventory ~~experienced~~of athe ~~more~~subsidiary. ~~cautious approach~~In ~~from~~the ~~public~~event ~~acceptance~~that ~~and~~we ~~had~~are unable to ~~overcome~~extend aor refinance ~~proof~~our ofdebt ~~concept~~or ~~stage with~~obtain ~~new~~additional ~~energy~~capital ~~efficiency~~on ~~technology~~a ~~from~~timely ~~channel~~basis ~~partner clients~~ and ~~prospects~~on ~~which~~acceptable ~~was difficult to forecast. Additionally~~terms, ~~current~~we ~~economic and~~will ~~credit~~be ~~market~~required ~~conditions~~to ~~have~~take ~~negatively~~further ~~affected~~steps ~~retail~~to ~~and~~attempt ~~other overall~~to ~~consumer~~acquire ~~confidence~~the ~~measurements~~funds ~~which~~necessary ~~in turn have created challenge~~ to ~~the timely~~satisfy ~~execution of~~ our ~~business~~short-term ~~plan.~~cash Weneeds door ~~not~~may ~~anticipate the impact of the~~be ~~macro~~forced ~~economic trends~~ to ~~continue,~~restructure ~~and~~operations. Our ~~our~~inability ~~ability~~ to ~~market~~address our ~~energy~~debt ~~efficiency~~maturities ~~has~~and ~~experienced~~interest apayments ~~favorable~~in ~~success~~a ~~rate~~satisfactory ~~with~~fashion ~~initial~~also ~~demonstration~~raises ~~sites. We~~substantial ~~feel~~doubts ~~confident~~as ~~that~~to our ~~solution~~ability to ~~energy~~continue ~~efficiency will be embraced~~ as a ~~part of an overall nationwide energy reduction plan that can~~going ~~provide cost efficiencies and savings to end users of electrical energy~~concern.

WeOur ~~plan to improve our operational~~ cash flow ~~through~~had ~~continued~~been ~~focus,~~mainly ~~deployment and~~consumed ~~promotion~~by ofoperational ~~our~~costs ~~energy management segment and the underlying technology~~ associated with ~~our~~general and ~~EnerLume~~administrative |and ~~EM® electrical~~legal ~~energy~~and ~~efficiency~~professional ~~product~~fees, as well as ~~introducing~~increasing ~~new~~costs pertaining ~~products~~to in the ~~electrical~~ ~~energy~~deployment ~~efficiency~~of ~~markets.~~our WeEnerLume ~~also~~| ~~plan~~EM® ~~to continue our efforts to~~energy ~~identify~~efficiency ~~ways~~product. We ofare ~~reducing~~attempting ~~operating costs and~~ to ~~increase~~secure ~~liquidity~~near ~~through additional~~term ~~equity and~~ debt ~~financings~~ and ~~have entered into an agreement with an~~/or ~~institutional investment firm that could provide additional~~ equity ~~and debt~~ financings~~. The~~ ~~completion~~to ofcontinue ~~these~~as ~~financings~~a ~~and~~going ~~the~~concern ~~operational initiatives~~until ~~are~~we ~~expected~~can tosustain ~~improve~~positive free ~~our~~ cash flow ~~and~~from ~~to help foster the implementation of our current initiatives and business plan~~operations.

WeIn ~~have~~the fiscal year of 2008 we reported that we experienced longer sales cycles with our product than initially anticipated and also experienced a ~~cash~~more ~~decrease~~cautious approach infrom ~~the~~public ~~2009~~acceptance ~~Period~~and had to overcome a proof of ~~$383,305~~concept stage with new energy efficiency technology from channel partner clients and prospects which was difficult to forecast. ~~The~~ Additionally, current economic ~~net~~and ~~cash~~credit ~~used~~market conditions have negatively affected retail and other overall consumer confidence measurements which in ~~operating~~turn ~~activities~~have created challenges to the timely execution of ~~continuing~~our ~~operations~~business ~~was~~plan. We do not anticipate the impact of the $1macro economic trends to continue,~~156,130~~ and our ability to market our energy efficiency has experienced a favorable success rate with initial demonstration sites. ~~Net~~We ~~cash~~feel ~~used~~confident inthat ~~investing~~our ~~activities~~solution to energy efficiency will be embraced as a part of an overall nationwide energy reduction plan that can ~~continuing~~provide cost efficiencies and savings to end users of electrical energy.

38We plan to improve our operational cash flow through continued focus, deployment and promotion of our energy management segment and the underlying technology associated with our EnerLume | EM® electrical energy efficiency product, as well as introducing new products in the electrical energy efficiency markets. We also plan to continue our efforts to identify ways of reducing operating costs and to increase liquidity through additional equity and debt financings and have entered into an agreement with an institutional investment firm that may provide additional equity and debt financings. The completion of these financings and the operational initiatives are expected to improve our cash flow and to help foster the implementation of our current initiatives and business plan.

We have experienced a cash decrease in the 2009 Period of $378,564. The net cash used in operating activities of continuing operations was $1,239,159. Net cash used in investing activities of continuing operations was $3540,~~764~~551 from purchases of equipment and improvements. Net cash provided by financing activities of continuing operations of $~~808~~901,~~589~~146 resulted largely from cash received from debt fundraisings net of payment of long-term debt.

We anticipate additional cash outflows in the fiscal year of 2009 to pay down current and past payable obligations associated with existing legal obligations, settlement payments as well as past vendor and other support obligations.

Our current ratio as of ~~December~~March 31, ~~2008~~2009 was .1913 and at June 30, 2008 was .33. Our current liabilities increased mainly as a result of the issuance of the short term ~~18%~~ bridge loan financing. We had due and payable a ~~short~~ short term obligation in January 2009 of $562,500 before unamortized debt ~~discount~~ discount associated with the holders of the 7.5% unsecured promissory note, for which most ~~we reached out to have their~~ maturities were extended. We also had due and payable a short term obligation in January 2009 of $500,000, associated with the 18% convertible bridge loan we entered into on July 30, 2008 for which we ~~also reached out to have that~~ maturity was also extended.

Our accounts payable obligations mainly comprise of aged legal and professional fees primarily associated with the events surrounding the July 12, 2005 press release of approximately $975,000. In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and on acceptable terms, we will be required to take further steps to attempt to acquire the funds necessary to satisfy our short-term cash needs. Our potential inability to address our January 2009 debt maturities in a satisfactory fashion raises substantial doubts as to our ability to continue as a going concern.41

AtOur ~~December~~accounts ~~31,~~payable ~~2008~~obligations ~~the~~are ~~Company~~mainly ~~had~~comprised aof ~~working~~legal ~~capital deficiency~~ and aprofessional fees ~~stockholders’~~primarily ~~deficiency~~associated with the events surrounding the July 12, 2005 press release of approximately $51,~~557~~618,~~658~~000. In the event that we are unable to extend or refinance our debt or obtain additional capital on a timely basis and ~~$7,796,578~~on acceptable ~~respectively~~terms, ~~and~~we awill ~~net~~be required to take further steps to attempt to ~~loss~~acquire ofthe ~~$4,040,588~~funds necessary to satisfy our short-term cash needs. Our inability ~~These~~to ~~matters~~address ~~raise~~our January 2009 debt maturities and interest payments in a satisfactory fashion raises substantial ~~doubt~~doubts ~~about~~as to our ability to continue as a going concern.

At March 31, 2009 the Company had a working capital deficiency and a stockholders’ deficiency of $7,427,917 and $9,890,936 respectively, and a net loss of $6,454,839. These matters raise substantial doubt about our ability to continue as a going concern.

Private Placements:

On July 30, 2008, we completed the sale of one unit consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933 (“Securities Act”). The total net proceeds to the Company were $500,000. The unit was sold for $500,000 and entitled the unit holder to 250,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full on January 30, 2009. The ~~Holder~~holder may convert the note and any accrued interest thereon, on January 30, 2009 into shares of common stock at a conversion rate of $0.47 per share. The Company did not pay a sales commission or other remuneration in connection with the sale of the note. The unit was purchased by the brother of Nicholas Troiano, a current director.

On September 30, 2008, we completed the sale of 2.5 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $125,000. The units were sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The ~~Holders~~holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.

39On December 2, 2008, we completed the sale of 3.9 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to four investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $195,000. Each unit was sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the dates of issuance. The holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.

~~at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.~~42

On December 2, 2008, we completed the sale of 3.9 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to four investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $195,000. Each unit was sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the dates of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.

On December 31, 2008, we completed the sale of a $125,000 12% two month unsecured promissory note and common stock purchase warrants to two investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. Each note entitled the holder to an aggregate 200% common stock purchase warrants which are exercisable for a five year period at $0.26 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. We paid a 10% sales commission in connection with the sale of the note.

On January 5, 2009, we completed the sale of a 12% unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $25,000. The note entitled the unit holder to 50,000 common stock purchase warrants which are exercisable for a five year period at $0.27 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. we did not pay a sales commission or other remuneration in connection with the sale of the note.

On February 26, 2009, we entered into a promissory note extension agreement with the holder of the 12% unsecured promissory note due February 19, 2009 to amend the terms of the note issued to him on December 19, 2008. The unsecured note was originally issued for the principal amount of $100,000, accrued interest at the rate of 12% per annum. Pursuant to the promissory note extension agreement, the ~~principle~~principal on the note has been increased to $102,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share.

40During March 2009, we entered into promissory note extension agreements with four holders of the 18% unsecured promissory note due March 2009 to amend the terms of the note issued to them in September 2008. The unsecured notes were originally issued for the aggregate principal amount of $100,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the aggregate principal on the notes has been increased to $109,000 which includes the prior accrued interest. The maturity date for the unsecured note was extended to September 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 50,000 shares of the Company’s common stock exercisable until March 31, 2014 at $0.54 per share.

maturity date for the unsecured note was extended to June 19, 2009 and shall continue to accrue interest at the rate of 12% per annum in accordance with the original terms of the unsecured note. In addition, the holder will receive an additional warrant to purchase 200,000 shares of the Company’s common stock exercisable until January 31, 2014 at $0.26 per share.43

The units and the underlying securities were offered and sold without registration under the Securities Act in reliance upon the exemption provided by Section 4(2) and Rule 506 of Regulation D promulgated thereunder, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act. An appropriate restricted legend was placed on the securities issued.

Critical Accounting Policies

There have been no major changes to the critical accounting policies as outlined in the Company’s June 30, 2008 Annual Report on Form 10-K.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is a small reporting company and is not required to provide this information.

ITEM 4(T). Controls and Procedures

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as the Company’s are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of this quarterly report on Form 10-Q for the ~~six~~nine months ended ~~December~~March 31, ~~2008~~2009, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of ~~December~~March 31, ~~2008~~2009.

To correct prior deficiencies, we had retained the services of a third party contractor to review our internal controls and recommend additional procedures. Our service provider had prepared, and we had initiated, recommendations to further improve our controls and devise systems to facilitate the segregation of duties and procedures with our existing accounting staff levels.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, under the supervision of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future period are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of ~~December~~March 31, ~~2008~~2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), referred to as the Internal Control- Integrated Framework. Based on this assessment, management, with the participation of our principal executive officer and principal financial officer, has determined that we have maintained effective internal controls over financial reporting as of December 31, 2008.

Framework. Based on this assessment, management, with the participation of our principal executive officer and principal financial officer, has determined that we have maintained effective internal controls over financial reporting as of March 31, 2009.

Changes in Internal Control over Financial Reporting

There have been no changes in internal controls over financial reporting during the Company’s last fiscal quarter that have materially affected, or are reasonable likely to materially affect, the Company’s internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

State Court Derivative Action

On September 28, 2005, the Company was named as a nominal defendant in a derivative action filed in the Connecticut Superior Court in Bart Hester v. Geoffrey W. Ramsey, et al., Docket No. UWY-CV-05-5001448-S (“Hester” action). The action named as defendants the Company’s then existing board, Geoffrey Ramsey and Roger Lockhart. The Hester complaint asserted claims based on a press release issued by the Company in July 2005 regarding its commercial relationship with a major retail chain. The Hester action essentially duplicated an earlier-filed derivative action in federal court. Following the settlement of the federal action, all parties in Hester filed a joint motion to dismiss the suit with prejudice, which the court granted on September 2, 2008.

State and Federal Court Individual Suits

On May 2, 2006, 47 plaintiffs who alleged that they had purchased the Company’s securities at artificially inflated prices in reliance on the July 2005 press release sued the Company in the Connecticut Superior Court in Enrique Jose Contreras, et al., v. Host America Corp., Docket No. No. UWY-CV-06-4013754-S (“Contreras” action). The Contreras amended complaint asserts claims under state law, including fraud and negligent misrepresentation. On June 25, 2007, the same plaintiffs’ group filed a separate complaint under the federal securities laws in the federal district court in Connecticut against David J. Murphy, Geoffrey Ramsey, Peter Sarmanian, and Roger D. Lockhart, in the matter Anil Sawant, et al. v. Geoffrey W. Ramsey, et. al., Civil Action No. 07-cv-980 (VLB). Plaintiffs in the two cases claim aggregate damages of approximately $2.93 million. The Company and its past and present officer and director defendants have tentatively agreed in principle with the plaintiffs to settle both actions. The tentative agreement is subject to various contingencies and will not become binding until the parties have executed a written settlement stipulation. There is no assurance that a settlement will be finalized. In the event a settlement is not concluded, the Company believes that it has substantial and meritorious defenses to the action. As of May 11, 2009, the Company’s counsel has informed the court it’s decision to withdrawal from the Contreras case. The Company is currently searching for replacement counsel to complete the case.

Anne and Debra Ramsey Arbitration

On December 2, 2005, a Demand for Arbitration was filed by Anne Ramsey and Debra Ramsey alleging that their employment was terminated in breach of employment agreements that they purportedly entered into with the Company. Anne Ramsey, the sister of Geoffrey Ramsey, was the Company’s former Human Resource Director and had served on the Board of Directors until June 18, 2007. Debra Ramsey is the wife of Geoffrey Ramsey and was a former administrative assistant for the Company. The Company terminated both individuals on November 23, 2005. On or about March 20, 2006, the Company instituted an injunction proceeding in the New Haven Superior Court to permanently enjoin this arbitration on the basis that the Company never authorized the employment agreements relied upon by Anne and Debra and therefore such contracts were void. The matter was tried in November, 2006 and the Court rendered a decision on January 8, 2007 denying a permanent injunction. On January 26, 2007 the Company filed an appeal of the Superior Court decision in the Connecticut Appellate Court and thereafter filed a Motion for Stay with the Superior Court which was granted. On July 5, 2007 the Company filed its brief with the Appellate Court and oral argument occurred on March 10, 2008. On May 20, 2008, the Connecticut ~~Appellate affirmed the Superior Court’s decision. Thereafter the Company filed a petition for certification on June 27, 2008 with the Supreme Court in the State of Connecticut which the Supreme~~

4347

Appellate affirmed the Superior Court’s decision. Thereafter the Company filed a petition for certification on June 27, 2008 with the Supreme Court in the State of Connecticut which the Supreme Court denied. An arbitration hearing occurred on March 3rd and 5th 2009, and briefs from both parties were filed on March 24, 2009. ~~The Company intends to continue to vigorously defend itself against the claims of Anne and Debra Ramsey.~~

On April 3, 2009, the Arbitrator ruled that the Company’s reasons for terminating Debra Ramsey did not constitute “cause” as that term was defined in her employment agreement and, therefore, the Company had breached Debra Ramsey’s employment agreement and was ordered to pay Ms. Debra Ramsey $545,931.50 in salary and fringe benefits which she would have been entitled to pursuant to her employment agreement until it terminated by its terms on April 21, 2016. Ms. Debra Ramsey was also awarded attorneys’ fees to be determined at a future date. Also on April 3, 2009, the Arbitrator further ruled that the Company had sufficient grounds to discharge Ms. Anne Ramsey for “cause” as that term was defined in her employment agreement and, accordingly, she was not entitled to any salary or benefits for the balance of the remaining term of her agreement. As a result of the Arbitrator’s decision with respect to Ms. Anne Ramsey, the Company was awarded its attorneys’ fees to be determined at a future date.

Wal-Mart Stores, Inc. v. Eaton Corp. & RS Services

On July 9, 2008, RS Services, Inc., was named as a co-defendant with Eaton Corp. in a lawsuit initiated by Wal-Mart arising from an industrial accident in ~~July~~ July 2006. The case is docket number 08CV1141and was filed in Adams ~~County~~ County District Court in the State of Colorado. Wal-Mart claims breach of contract and negligence against the defendants. It seeks damages for worker’s compensation benefits paid to its employees, property damage, lost profits, and other items. In accordance with the liability insurance policy, RS Services, Inc. has submitted the defense of this case to its liability carrier. Management believes that the liability carrier for RS Services, Inc. will cover all expenses, including damages, relating to this suit as part of the liability policy and without additional expense by RS Services, Inc.

Other

In addition, there exists routine litigation incidental to the Company’s business, none of which is anticipated to have a material adverse impact on our financial position, results of operations, liquidity or cash flows.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for fiscal year 2008.

Item 2. Unregistered Sales of Equity Securities

Set forth below are the sales of unregistered securities that occurred during the quarter ended ~~December~~March 31, ~~2008~~2009. Other than as described below, during the quarter ended ~~December~~March 31, ~~2008~~2009, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been reported in a Form 8-K.

On September 30, 2008, we completed the sale of 2.5 units consisting of an 18% convertible unsecured promissory note and common stock purchase warrants to five investors that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $125,000. The units were sold for $50,000 and entitled the unit holder to 25,000 common stock purchase warrants which are exercisable for a five year period at $0.54 per warrant. The note bears interest at a rate of 18% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full six months from the date of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.48

mature and be payable in full six months from the date of issuance. The Holders may convert the note and any accrued interest thereon after six months from the date of issuance into shares of common stock at a conversion rate of $0.47 per share. We did not pay a sales commission or other remuneration in connection with the sale of the note.

On January 5, 2009, we completed the sale of a 12% unsecured promissory note and common stock purchase warrants to one investor that met the definition of an “accredited investor” pursuant to Regulation D of the Securities Act of 1933. The total net proceeds to the Company were $25,000. The note entitled the unit holder to 50,000 common stock purchase warrants which are exercisable for a five year period at $0.27 per warrant. The note bears interest at a rate of 12% per annum, payable at maturity in arrears in cash. The note will mature and be payable in full two months from the date of issuance. We did not pay a sales commission or other remuneration in connection with the sale of the note.

~~The~~During ~~units~~March ~~and~~2009, we entered into promissory note extension agreements with four holders of the ~~underlying~~18% ~~securities~~unsecured ~~were~~promissory ~~offered~~note ~~and~~due ~~sold~~March ~~without~~2009 ~~registration~~to amend the terms ~~under~~of the ~~Securities~~note ~~Act~~issued to them in ~~reliance~~September ~~upon~~2008. The unsecured notes were originally issued for the ~~exemption~~aggregate ~~provided~~principal byamount ~~Section~~of ~~4(2)~~$100,000, accrued ~~and~~interest ~~Rule~~at ~~506~~the rate of ~~Regulation~~18% Dper ~~promulgated~~annum. ~~thereunder~~Pursuant to the promissory note extension agreement, ~~and~~the ~~may~~aggregate ~~not~~principal beon ~~offered~~the ornotes has been increased to $109,000 ~~sold~~which inincludes the ~~United~~prior ~~States~~accrued interest. The maturity date for the unsecured note was extended to September 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the ~~absence~~original terms of the unsecured note. In addition, the holder will receive an additional ~~effective~~warrant to purchase 50,000 shares of the Company’s common stock ~~registration~~exercisable until March 31, 2014 at $0.54 per share.

45On April 16, 2009, we entered into a promissory note extension agreement with a holder of the 18% unsecured promissory note due April 16, 2009 to amend the terms of the note issued to him on October 16, 2008. The unsecured note was originally issued for the principal amount of $25,000, accrued interest at the rate of 18% per annum. Pursuant to the promissory note extension agreement, the principal on the note has been increased to $27,250 which includes the prior accrued interest. The maturity date for the unsecured note was extended to October 16, 2009 and shall continue to accrue interest at the rate of 18% per annum in accordance with the original terms of the unsecured note. In addition, the holder will

~~statement or exemption from the registration requirements under the Securities Act. An appropriate restricted legend was placed on the securities issued.~~49

receive an additional warrant to purchase 12,500 shares of the Company’s common stock exercisable until January 31, 2014 at $0.54 per share.

Item 3. Defaults Upon Senior Securities

Not Applicable

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

Not Applicable

Item 5. Other Information

~~Not~~Demand ~~Applicable~~Note Payable

On May 15, 2009 RS Services, our wholly owned subsidiary, received a principle reduction demand payment in the amount of $258,486 from Liberty Bank, the holder of the demand note resulting from the recorded existing balance above the eligible accounts receivable balance as required by the note. RS services entered into the note on July 31, 2008 and the note is secured by the receivables and inventory of the subsidiary.

Item 6. Exhibits

	(a)	Exhibits
	31.1	Principal Executive Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002.*
	31.2	Principal Financial Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002.*
	32.1	Principal Executive Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002.*
	32.2	Principal Financial Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002.*

	* Filed herewith.

4651

SIGNATURES

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

	ENERLUME ENERGY MANAGEMENT CORP.
Date: March 25, 2009	By: /s/ David J. Murphy
Date: May 19, 2009	By: /s/ David J. Murphy
	David J. Murphy, President and Chief Executive Officer
Date: March 25, 2009	By: /s/ Michael C. Malota
Date: May 19, 2009	By: /s/ Michael C. Malota
	Michael C. Malota Chief Financial and Accounting Officer

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