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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended September 30, 2007

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 001-32661



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RASER TECHNOLOGIES, INC.

(Exact
name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 87-0638510                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

5152 North Edgewood Drive, Suite 375

Provo, Utah 84604

(Address, including zip code, of registrants
principal executive offices)

(801) 765-1200

(Registrants telephone number, including area code)



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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 is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated
filer  x    Non-accelerated filer ̈

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

There were 55,852,455 shares of the registrants common stock, par value $0.01, outstanding on November 8, 2007.



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##### Table of Contents

Raser Technologies, Inc.

SEC Form 10-Q

Table of Contents



|                                                                                              |  |         
|--------------------------------------------------------------------------------------------- |  | --------
|                                                                                              |  | Page No.
|Part I. Financial Information                                                                 |  | 3       
|                                                                                              | 
|Item 1.
Financial Statements                                                                  |  | 3       
|                                                                                              | 
|Condensed Consolidated Balance Sheets                                                         |  | 3       
|                                                                                              | 
|Condensed Consolidated Statements of Operations                                               |  | 4       
|                                                                                              | 
|Condensed Consolidated Statements of Cash Flows                                               |  | 5       
|                                                                                              | 
|Notes to Condensed Consolidated Financial Statements                                          |  | 6       
|                                                                                              | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20      
|                                                                                              | 
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                            |  | 32      
|                                                                                              | 
|Item 4.
Controls and Procedures                                                               |  | 33      
|                                                                                              | 
|Part II. Other Information                                                                    |  | 34      
|                                                                                              | 
|Item 1.
Legal Proceedings                                                                     |  | 34      
|                                                                                              | 
|Item 1A.
Risk Factors                                                                         |  | 34      
|                                                                                              | 
|Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 43      
|                                                                                              | 
|Item 6.
Exhibits                                                                              |  | 43      
|                                                                                              | 
|SIGNATURES                                                                                    |  | 44      



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RASER TECHNOLOGIES, INC. AND SUBSIDIARIES

(a development stage enterprise)

Condensed Consolidated Balance Sheets

(Unaudited)



|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                   |  | September 30, 2007 |             |   | December 31, 2006 |  
|Assets                                                                                                                             |  |                    |             |   |                   |   |             |  
|Current assets:                                                                                                                    |  |                    |             |   |                   |   |             |  
|Cash and cash equivalents                                                                                                          |  | $                  | 14,524,839  |   |                   | $ | 3,351,568   |  
|Restricted cash                                                                                                                    |  |                    | 100,000     |   |                   |   | 400,000     |  
|Accounts receivable                                                                                                                |  |                    | 69,150      |   |                   |   | 84,900      |  
|Unbilled receivable                                                                                                                |  |                    | 108,629     |   |                   |   |            |  
|Note receivable and accrued interest                                                                                               |  |                    |            |   |                   |   | 5,952,074   |  
|Other current assets                                                                                                               |  |                    | 459,944     |   |                   |   | 165,229     |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|Total current assets                                                                                                               |  |                    | 15,262,562  |   |                   |   | 9,953,771   |  
|Unproved property and prepaid delay rentals                                                                                        |  |                    | 1,565,776   |   |                   |   | 198,350     |  
|Geothermal well field development                                                                                                  |  |                    | 2,530,383   |   |                   |   |            |  
|Equipment, net                                                                                                                     |  |                    | 677,018     |   |                   |   | 681,029     |  
|Intangible assets, net                                                                                                             |  |                    | 526,824     |   |                   |   | 560,387     |  
|Deferred acquisition costs                                                                                                         |  |                    | 500,000     |   |                   |   |            |  
|Power project development deposits                                                                                                 |  |                    | 3,716,878   |   |                   |   |            |  
|Other assets                                                                                                                       |  |                    | 197,757     |   |                   |   | 11,910      |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|Total assets                                                                                                                       |  | $                  | 24,977,198  |   |                   | $ | 11,405,447  |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|                                                                                                                                   |  |                   
|Liabilities and Stockholders Equity                                                                                               |  |                    |             |   |                   |   |             |  
|Current liabilities:                                                                                                               |  |                    |             |   |                   |   |             |  
|Accounts payable                                                                                                                   |  | $                  | 1,933,259   |   |                   | $ | 439,413     |  
|Accrued liabilities                                                                                                                |  |                    | 677,778     |   |                   |   | 231,400     |  
|Unearned revenues                                                                                                                  |  |                    |            |   |                   |   | 24,433      |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|Total current liabilities                                                                                                          |  |                    | 2,611,037   |   |                   |   | 695,246     |  
|Contingencies and commitments, (see Note C and K)                                                                                  |  |                    |             |   |                   |   |             |  
|Stockholders equity:                                                                                                              |  |                    |             |   |                   |   |             |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued and outstanding                                     |  |                    |            |   |                   |   |            |  
|Common stock, $.01 par value, 250,000,000 shares authorized, 55,751,467 and 51,389,295 shares issued and outstanding,
respectively |  |                    | 557,515     |   |                   |   | 513,893     |  
|Additional paid in capital                                                                                                         |  |                    | 68,505,398  |   |                   |   | 45,669,956  |  
|Accumulated deficit                                                                                                                |  |                    | (30,972,177 | ) |                   |   | (30,972,177 | )
|Accumulated deficit after re-entry into development stage                                                                          |  |                    | (15,724,575 | ) |                   |   | (4,501,471  | )
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|Total stockholders equity                                                                                                         |  |                    | 22,366,161  |   |                   |   | 10,710,201  |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                                         |  | $                  | 24,977,198  |   |                   | $ | 11,405,447  |  
|                                                                                                                                   |  |                    |             |   |                   |   |             |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

RASER TECHNOLOGIES, INC. AND SUBSIDIARIES

(a development stage enterprise)

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|------------------------------------------------ | ---- | -------------------------------- | ---------- | ---- | ------------------------------- | - | ---------- | -------------------------------------------------------------------------------------------- |  | ---- | ----------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                 |      | Three months ended September 30, |            |      | Nine months ended September 30, |   |            | For the period afterre-entryinto developmentstage (October 1,2006
throughSeptember 30, 2007) | 
|                                                 | 2007 |                                  |            | 2006 |                                 |   | 2007       |                                                                                              |  | 2006 |             |  
|Revenue                                          |      | $                                | 49,887     |      |                                 | $ | 9,870      |                                                                                              |  | $    | 202,212     |   |  | $ | 78,015      |   |  | $ | 246,929     |  
|Operating expense                                |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Cost of sales                                    |      |                                  | 49,887     |      |                                 |   | 129,430    |                                                                                              |  |      | 543,679     |   |  |   | 393,561     |   |  |   | 588,396     |  
|General and administrative                       |      |                                  | 1,920,526  |      |                                 |   | 4,743,956  |                                                                                              |  |      | 7,353,982   |   |  |   | 11,382,589  |   |  |   | 11,021,474  |  
|Power project development                        |      |                                  | 708,010    |      |                                 |   |           |                                                                                              |  |      | 1,572,271   |   |  |   |            |   |  |   | 1,572,271   |  
|Research and development                         |      |                                  | 939,839    |      |                                 |   | 1,286,338  |                                                                                              |  |      | 2,521,610   |   |  |   | 2,951,081   |   |  |   | 3,464,069   |  
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Total operating expenses                         |      |                                  | 3,618,262  |      |                                 |   | 6,159,724  |                                                                                              |  |      | 11,991,542  |   |  |   | 14,727,231  |   |  |   | 16,646,210  |  
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Operating loss                                   |      |                                  | (3,568,375 | )    |                                 |   | (6,149,854 | )                                                                                            |  |      | (11,789,330 | ) |  |   | (14,649,216 | ) |  |   | (16,399,281 | )
|Interest income                                  |      |                                  | 195,856    |      |                                 |   | 231,751    |                                                                                              |  |      | 597,385     |   |  |   | 670,262     |   |  |   | 801,954     |  
|Loss on the sale of securities                   |      |                                  |           |      |                                 |   |           |                                                                                              |  |      |            |   |  |   | (8,512      | ) |  |   |            |  
|Series B warrant registration costs              |      |                                  |           |      |                                 |   |           |                                                                                              |  |      | (31,159     | ) |  |   |            |   |  |   | (127,248    | )
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Loss before income taxes                         |      |                                  | (3,372,519 | )    |                                 |   | (5,918,103 | )                                                                                            |  |      | (11,223,104 | ) |  |   | (13,987,466 | ) |  |   | (15,724,575 | )
|Income tax benefit (expense)                     |      |                                  |           |      |                                 |   |           |                                                                                              |  |      |            |   |  |   |            |   |  |   |            |  
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Net loss applicable to common stockholders       |      | $                                | (3,372,519 | )    |                                 | $ | (5,918,103 | )                                                                                            |  | $    | (11,223,104 | ) |  | $ | (13,987,466 | ) |  | $ | (15,724,575 | )
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Loss per common share-basic and diluted          |      | $                                | (0.06      | )    |                                 | $ | (0.12      | )                                                                                            |  | $    | (0.21       | ) |  | $ | (0.28       | ) |  |   |             |  
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  
|Weighted average common sharesbasic and diluted |      |                                  | 55,086,000 |      |                                 |   | 50,746,000 |                                                                                              |  |      | 53,641,000  |   |  |   | 50,611,000  |   |  |   |             |  
|                                                 |      |                                  |            |      |                                 |   |            |                                                                                              |  |      |             |   |  |   |             |   |  |   |             |  

See accompanying notes to condensed consolidated financial statements.



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RASER TECHNOLOGIES, INC. AND SUBSIDIARIES

(a development stage enterprise)

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|--------------------------------------------------------------------------- | ---- | ------------------------------- | ----------- | ---- | ------------------------------------------------------------------------------------------- | - | ----------- | - |  | - | ----------- | -
|                                                                            |      | Nine Months Ended September 30, |             |      | For the periodafter re-entryinto developmentstage (October 1,2006
throughSeptember 30, 2007 |  
|                                                                            | 2007 |                                 |             | 2006 |                                                                                             |  
|Cash flows from operating activities:                                       |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Net loss                                                                    |      | $                               | (11,223,104 | )    |                                                                                             | $ | (13,987,466 | ) |  | $ | (15,724,575 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Depreciation and amortization expense                                       |      |                                 | 200,148     |      |                                                                                             |   | 146,797     |   |  |   | 255,585     |  
|Impairment of abandoned patent applications                                 |      |                                 | 102,358     |      |                                                                                             |   | 29,268      |   |  |   | 121,675     |  
|Loss (gain) on disposal of assets                                           |      |                                 | (100        | )    |                                                                                             |   | 2,806       |   |  |   | 2,884       |  
|Loss on the sale of securities                                              |      |                                 |            |      |                                                                                             |   | 8,512       |   |  |   |            |  
|Common stock, stock options and warrants issued for services                |      |                                 | 3,892,113   |      |                                                                                             |   | 8,216,883   |   |  |   | 6,262,972   |  
|Withholding tax for net share issuance                                      |      |                                 |            |      |                                                                                             |   | (994,916    | ) |  |   |            |  
|Impairment of capitalized acquisition costs                                 |      |                                 |            |      |                                                                                             |   | 806,772     |   |  |   |            |  
|Decrease (increase) in accounts receivable                                  |      |                                 | 15,750      |      |                                                                                             |   | 119,085     |   |  |   | (53,400     | )
|Increase in unbilled receivable                                             |      |                                 | (108,629    | )    |                                                                                             |   |            |   |  |   | (108,629    | )
|Increase in other assets                                                    |      |                                 | (294,715    | )    |                                                                                             |   | (100,874    | ) |  |   | (271,344    | )
|Decrease (increase) in interest receivable                                  |      |                                 | 404,522     |      |                                                                                             |   | (248,418    | ) |  |   | 264,693     |  
|Increase in accounts payable                                                |      |                                 | 1,493,846   |      |                                                                                             |   | 99,349      |   |  |   | 1,673,334   |  
|Increase in accrued liabilities                                             |      |                                 | 446,379     |      |                                                                                             |   | 126,467     |   |  |   | 366,830     |  
|Decrease in unearned revenues                                               |      |                                 | (24,433     | )    |                                                                                             |   | (25,080     | ) |  |   |            |  
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Net cash used in operating activities                                       |      |                                 | (5,095,865  | )    |                                                                                             |   | (5,800,815  | ) |  |   | (7,209,975  | )
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Cash flows from investing activities:                                       |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Proceeds from the sale of short term investments                            |      |                                 |            |      |                                                                                             |   | 525,000     |   |  |   |            |  
|Decrease (increase) in notes receivable                                     |      |                                 | 5,547,552   |      |                                                                                             |   | (5,547,552  | ) |  |   | 5,547,552   |  
|Cost of attempted acquisition                                               |      |                                 | (500,000    | )    |                                                                                             |   | (806,772    | ) |  |   | (500,000    | )
|Increase in other assets                                                    |      |                                 | (185,847    | )    |                                                                                             |   | (800        | ) |  |   | (185,847    | )
|Decrease in restricted cash                                                 |      |                                 | 300,000     |      |                                                                                             |   |            |   |  |   | 300,000     |  
|Increase in intangible assets                                               |      |                                 | (89,192     | )    |                                                                                             |   | (294,441    | ) |  |   | (140,231    | )
|Purchase of equipment                                                       |      |                                 | (186,640    | )    |                                                                                             |   | (246,464    | ) |  |   | (262,174    | )
|Proceeds from the sale of equipment                                         |      |                                 | 5,000       |      |                                                                                             |   |            |   |  |   | 5,000       |  
|Increase in well field development                                          |      |                                 | (2,530,383  | )    |                                                                                             |   |            |   |  |   | (2,530,383  | )
|Increase in unproved property                                               |      |                                 | (897,640    | )    |                                                                                             |   |            |   |  |   | (897,640    | )
|Increase in power project development deposits                              |      |                                 | (3,716,878  | )    |                                                                                             |   |            |   |  |   | (3,716,878  | )
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Net cash used in investing activities                                       |      |                                 | (2,254,028  | )    |                                                                                             |   | (6,371,029  | ) |  |   | (2,380,601  | )
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Cash flows from financing activities:                                       |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Proceeds from exercise of common stock warrants                             |      |                                 | 6,404,788   |      |                                                                                             |   | 51,300      |   |  |   | 6,404,788   |  
|Proceeds from exercise of common stock options                              |      |                                 | 264,625     |      |                                                                                             |   | 194,150     |   |  |   | 315,725     |  
|Proceeds from the sale of common stock in private equity placement          |      |                                 | 11,853,751  |      |                                                                                             |   |            |   |  |   | 11,853,751  |  
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Net cash provided by financing activities                                   |      |                                 | 18,523,164  |      |                                                                                             |   | 245,450     |   |  |   | 18,574,264  |  
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Net increase (decrease) in cash and cash equivalents                        |      |                                 | 11,173,271  |      |                                                                                             |   | (11,926,394 | ) |  |   | 8,983,688   |  
|Cash and cash equivalents at beginning of period                            |      |                                 | 3,351,568   |      |                                                                                             |   | 17,467,545  |   |  |   | 5,541,151   |  
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  
|Cash and cash equivalents at end of period                                  |      | $                               | 14,524,839  |      |                                                                                             | $ | 5,541,151   |   |  | $ | 14,524,839  |  
|                                                                            |      |                                 |             |      |                                                                                             |   |             |   |  |   |             |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

RASER TECHNOLOGIES, INC. & SUBSIDIARIES

(a development stage enterprise)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

A. Basis of Presentation

The interim consolidated financial statements include the accounts of Raser Technologies, Inc. and its subsidiaries. Unless the context requires
otherwise, Raser, the Company, we, our or us refer to Raser Technologies, Inc. and its subsidiaries.

The accompanying condensed balance sheet as of December 31, 2006 has been derived from audited financial statements and the unaudited interim condensed financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles
in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of our
management, are necessary to present fairly the results of our operations for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto
included in our Form 10-K for the year ended December 31, 2006. The results of operations for the nine months ended September 30, 2007, are not necessarily indicative of the results that may be expected for the fiscal year ending
December 31, 2007, or any other period.

Development Stage Enterprise

We currently operate as a development stage enterprise as defined in Statement of Financial Accounting Standards (SFAS) No. 7,
Accounting and Reporting by Development Stage Enterprises. In 2005, we transitioned from a development stage to an operating stage enterprise for accounting purposes. In the fourth quarter of 2006, our management reassessed our
operations and determined that we should report as a development stage enterprise effective October 1, 2006. The decision was primarily based upon the fact that anticipated licensing revenue from the transportation and industrial technology
segment did not materialize as expected, and our determination that our efforts to license our technologies would take longer than originally anticipated.

Additionally, we are currently utilizing some of our resources to research and locate high probability areas for geothermal activity. We are developing relationships in order to acquire mineral and
geothermal rights, through long-term geothermal lease agreements, that enable us to explore, drill and construct geothermal power plants on leased property. To fund these and our other operations, we raised capital totaling $12.5 million in a
private placement of common stock that closed on March 30, 2007. Subsequently, we raised additional capital totaling $6.3 million from exercises of warrants issued in connection with the March 30, 2007 private placement. We also intend to
raise additional capital through monetization of certain tax benefits associated with these renewable energy plants and through other financial arrangements. Accordingly, the consolidated statements of operations and cash flows include cumulative
balances from the re-entry into the development stage date of October 1, 2006 to September 30, 2007.

Reincorporation in Delaware

On June 12, 2007, we completed our reincorporation in the State of Delaware (the Reincorporation) by merging Raser
Technologies, Inc., a Utah corporation (Raser Utah) with and into its wholly-owned subsidiary, Raser Technologies, Inc., a Delaware corporation. The Reincorporation was effected pursuant to an Agreement and Plan of Merger, dated
April 17, 2007, between Raser Utah and Raser. The shareholders of Raser Utah approved the Reincorporation and the Merger Agreement at our annual shareholders meeting held on June 1, 2007.

As a result of the Reincorporation, (i) each outstanding share of Raser Utah common stock was automatically converted into one share of Raser common
stock and (ii) all options and other rights to acquire Raser Utah common stock outstanding immediately before the Reincorporation were also automatically converted into options and rights to acquire the same number of shares of Raser common
stock, with the same terms and conditions. Upon the Reincorporation, each outstanding certificate representing shares of Raser Utah common stock was deemed, without any action by the stockholder, to represent the same number of shares of Raser
common stock. Stockholders did not need to exchange their stock certificates as a result of the Reincorporation.



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##### Table of Contents

Liquidity

The preparation of our consolidated financial statements is on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As discussed above, as of
September 30, 2007, we had cash and cash equivalents on hand of $14.5 million. Cash used in operations totaled approximately $5.1 million for the nine months ended September 30, 2007 and the accumulated deficit and deficit accumulated
after re-entry into development stage totaled $46.7 million. Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan to increase revenues and ultimately achieve profitable
operations.

To date, we have financed our operations principally through the sale of equity and equity related securities. We have
incurred losses since inception and we are not operating at cash flow breakeven. Our current cash balance is not sufficient to execute our business plan or to satisfy our cash requirements for the next twelve months.

The execution of our business plan and the funding of our capital expenditures are dependent on our ability to obtain additional financing for our
activities, including power plant development. In addition, the availability of such financing will affect the timing, pace, scope and amount of our capital expenditures. We believe we will be able to finance our activities through monetizing tax
benefits, debt or equity financing, project financing, or a combination of these sources. There can be no assurance, however, that we will be able to obtain additional financing, reduce expenses or successfully complete other steps to continue as a
going concern. If we are unable to obtain sufficient funds to satisfy our future cash requirements, we may be forced to curtail operations, dispose of assets or seek extended payment terms from our vendors. Such events would materially and adversely
affect our financial position and results of operations.

These financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Certain reclassifications have been made in the prior years consolidated financial statements to conform to the current year presentation.

Concentration of Credit Risk

We maintain our cash in deposit accounts in one bank in Utah. At times,
cash balances may exceed federally insured limits. We also maintain cash in one money market account, not affiliated with the bank, which earns a variable interest rate. The variable interest rate on September 30, 2007 was 5.15%. The average
variable interest rate for the quarter ended September 30, 2007 was 5.25%. We have not experienced losses in such accounts and believe we are not exposed to any significant credit risk on cash and cash equivalents.

We generated revenue in 2007 from one government contractor. We have not experienced losses from uncollected receivables since inception and believe that
we are not exposed to any significant credit risk on cash investments or accounts receivable.

B. Note Receivable

During the first and second quarters of 2006, we entered into promissory notes (the Notes) with a potential merger partner
(Debtor) pursuant to which we loaned approximately $5.5 million to Debtor. On September 2, 2006, we signed a new promissory note (Revised Note) with Debtor affirming the $5.5 million unsecured obligation. In addition, an
inter-creditor agreement was signed by us, Debtor and certain Debtor creditors on the same date. The entire unpaid principal balance and accrued, but unpaid, interest under the Revised Note was due and payable two business days after the earlier to
occur of March 1, 2007 or the achievement by Debtor of certain other milestones involving certain geothermal power production projects of the Debtor (the Geothermal Projects). The due date of the Revised Note was subsequently
extended from March 1, 2007 to March 22, 2007.

Through March 1, 2007, the Revised Note accrued interest at a rate of
10% per annum, compounded annually. Beginning March 2, 2007, the interest rate increased to 18% per annum.

On
March 19, 2007, we received $6,091,112, representing payment in full of the outstanding principal and accrued interest balance of the Revised Note. The payment comprised the principal balance of $5,547,552 and accrued interest through
March 19, 2007 of $543,560.

We recognized $139,038 and $264,694 of interest income on the Note Receivable in the nine months ended
September 30, 2007, and September 30, 2006, respectively. Interest receivable totaled $0 and $404,522 at September 30, 2007 and December 31, 2006, respectively.



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C. Unproved Property and Prepaid Delay Rentals

Since December 22, 2006, our wholly-owned subsidiary has entered into eleven geothermal lease agreements for certain properties in Nevada. Under
these lease agreements, we obtained the right to begin development and construction of geothermal power plants. The initial lease term is 50 years for six of these geothermal lease agreements and is 10 years for five of the geothermal lease
agreements, subject to extension for as long as we are actively pursuing or generating resources from the leased lands.

As of
September 30, 2007, our wholly-owned subsidiary had entered into 35 geothermal lease agreements for certain properties in Utah. Under these lease agreements, we obtained the right to begin development and construction of geothermal power
plants. The initial lease term for these Utah properties is 10 years, subject to certain extension provisions.

During the second quarter
of 2007, we paid $25,000 to a property owner in California who granted us an option to further pursue the acquisition of 640 acres of geothermal property. In August 2007, we exercised the option and paid $75,000 for the right to develop the
geothermal resources on 640 acres in California. Under our binding letter agreement with the property owner, upon exercise of the option, we agreed to create a joint venture agreement to hold permits and development rights that Raser will fully
control. The joint venture is expected to be created during the fourth quarter of 2007 or first quarter of 2008. We also agreed to pay another $1.2 million upon successful completion of an exploratory well, which is defined as the discovery of
commercial water quantities above 380 degrees Fahrenheit. Drilling is not expected to begin on the property until 2008 or later.

During
the third quarter of 2007, we participated in a United States Bureau of Land Management (BLM) auction to obtain the geothermal development rights for certain parcels of land in Nevada. We successfully won the bids for four parcels of
land and entered into four separate 10-year lease agreements with the BLM covering a total of approximately 15,325 acres. Our total payment obligation under these leases was $619,712, all of which was paid in the third quarter of 2007.

The following represent capitalized costs by project as of September 30, 2007:



|              |  |            |  |         |     |  |                                               |           |                         |   |                       |  |   |          
|------------- |  | ---------- |  | ------- | --- |  | --------------------------------------------- | --------- | ----------------------- | - | --------------------- |  | - | ---------
|Project       |  | State      |  | Acreage |     |  | CapitalizedAcquisitionCosts(UnprovedProperty) |           | PrepaidDelayRentalCosts |   | TotalCapitalizedCosts
|Lease Group A |  | Nevada     |  | 11,600  | (a) |  | $                                             | 650,620   |                         | $ | 56,000                |  | $ | 706,620  
|Lease Group B |  | Nevada     |  | 635     |     |  | $                                             | 32,350    |                         |   |                      |  | $ | 32,350   
|Lease Group C |  | Nevada     |  | 395     |     |  | $                                             | 17,450    |                         |   |                      |  | $ | 17,450   
|Lease Group D |  | Utah       |  | 68,344  |     |  | $                                             | 82,238    |                         |   |                      |  | $ | 82,238   
|Lease Group E |  | California |  | 640     | (b) |  | $                                             | 107,406   |                         |   |                      |  | $ | 107,406  
|Lease Group F |  | Nevada     |  | 15,325  |     |  | $                                             | 619,712   |                         |   |                      |  | $ | 619,712  
|              |  |            |  |         |     |  |                                               |           |                         |   |                       |  |   |          
|Total         |  |            |  | 96,939  |     |  | $                                             | 1,509,776 |                         | $ | 56,000                |  | $ | 1,565,776
|              |  |            |  |         |     |  |                                               |           |                         |   |                       |  |   |          

---

|(a) | We also have rights to pursue three million additional acres of land with respect to which the land owner may have geothermal rights.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(b) | Acreage excludes interest in approximately 11,000 acres of mineral rights in the State of California.
|--- | -----------------------------------------------------------------------------------------------------

As part of the overall consideration for the geothermal lease agreements, we issued 25,000, 5,000 and 2,500 restricted shares of our common stock in
connection with Lease Group A, Lease Group B and Lease Group C, respectively. We have also granted options to purchase 35,000 shares of our common stock to a property owner of Lease Group A. The fair value of these equity awards was $539,237,
$27,350 and $12,450 on the respective grant dates for the Lease Group A, Lease Group B, and Lease Group C projects, respectively. These costs have been capitalized and classified as unproved property. Certain legal fees incurred in connection with
the geothermal lease agreements were also capitalized as unproved property totaling $43,134. We also agreed to pay $50,000 as an advance against future delay rentals and/or royalties beginning in the second year of one of the lease agreements in
Lease Group A.

We also committed to issue to two separate parties (the owner of the geothermal rights on the land and the land owner) a
cumulative total of 50,000 restricted shares of our common stock, contingent upon successfully placing a geothermal power plant in operation upon the leased property in Lease Group A. When 25,000 of the shares become unrestricted and are sold by the
land owners, the total market value of the 25,000 shares will be credited as an advance against future rentals and



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##### Table of Contents

royalty payments. The other 25,000 restricted shares granted to the owner of the geothermal rights on the land will not apply towards or be credited against
royalties payable. Management assessed the likelihood of placing a geothermal power plant in operation in accordance with this lease and concluded that it remained reasonably possible and, accordingly has not recorded equity compensation
during the third quarter of 2007. Unproved property and prepaid delay rentals are not amortized. We are in the process of amending the geothermal lease agreement for the contingent grant that will apply against future rentals and royalties.

Once reserves are discovered, the unproved property is classified as proved property and capitalized costs will be amortized.
Management is currently assessing which generally accepted accounting principle method to use for depletion. As of September 30, 2007, all properties but one are still in the exploratory phase and none have been fully evaluated for viability,
generating capacity, or potential reserves.

D. Geothermal Well Field Development

In the second quarter of 2007, we received the appropriate permits and began developing a well field on certain leased land in Lease Group A. At
September 30, 2007, we capitalized tangible drilling costs for items such as pipes, wellheads, rings, and drilling pads totaling $336,778 and capitalized intangible drilling costs primarily relating to permit preparation and other services
totaling $2,193,605. Although we have begun well field development at one location, the property has not yet been fully evaluated for geothermal viability, generating capacity, or potential reserves.

E. Common Stock

Stock-Based Compensation

In March 2004, our Board of Directors (the Board) adopted the Raser Technologies, Inc. Amended and Restated 2004 Long-Term Incentive Plan (the
Plan), and in May 2004, the Board recommended and our stockholders approved the Plan. The Plan was adopted to facilitate (1) grants of a wider range of stock incentive awards, including restricted stock, stock appreciation rights,
performance shares and performance units, (2) an automatic annual increase to the number of shares of common stock reserved for issuance under the Plan beginning in 2005 equal to the lesser of 1,750,000 shares of common stock, 3% of the
outstanding shares of common stock on the first day of each fiscal year, or an amount determined by the Board, and (3) optional automatic, nondiscretionary annual stock option grants for employees and non-employee directors. As of
September 30, 2007, we were authorized to issue up to 6,265,462 shares of common stock pursuant to the Plan.

On July 3, 2006,
the Compensation Committee of the Board approved a new compensation plan for our outside directors. The standard equity package under the new plan consists of stock awards, each award having a nominal value of $95,000 as of the date of the Annual
Meeting of Shareholders (with the actual share award rounded to the nearest round lot of 100 shares). Current outside directors could elect to participate in the new plan by making an election within 30 days of the plans adoption by the
Compensation Committee or in subsequent years within 30 days of the Annual Meeting of Shareholders. Any director who elects to adopt the new plan retains all options vested up to that point under previous compensation arrangements and forfeits all
unvested options. During the year ended December 31, 2006, three of the eligible outside directors elected to adopt the new plan. Accordingly, the three outside directors forfeited a cumulative total of 156,667 unvested options and were granted
a total of 10,600 shares each to be delivered on June 27, 2007, one year after the 2006 Annual Meeting of Shareholders. During the second quarter of 2007, the same three outside directors elected to continue participating in the plan.
Accordingly, one outside director forfeited a total of 5,000 unvested options and the two other directors did not have unvested options. Each of the three directors electing to continue in the plan on or within 30 days of the June 1, 2007
Annual Meeting of Shareholders received 12,700 shares to be delivered on June 1, 2008, one year after the 2007 Annual Meeting of Shareholders.

We adopted SFAS No. 123R effective January 1, 2006. Under SFAS No. 123R, we recorded stock-option based compensation expense to employees for the three months and nine months ended September 30, 2007 totaling $662,175
and $2,421,545, respectively, and for the three and nine months ended September 30, 2006 totaling $762,181 and $2,518,338, respectively. Prior to fully adopting the standard, we had been expensing the fair value of stock options granted to
contractors, and the fair value of shares of common stock granted to contractors and employees. For the three months and nine months ended September 30, 2007 and 2006, we allocated stock-based compensation expense, including the amount recorded
for the effect of adopting SFAS 123R, the amount recorded for stock grants, and the amount recorded for options granted to contractors, to the following statement of operations captions:



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|                               |      |                                  |         |                                 |      |           |      |   |           |  |   |          
|------------------------------ | ---- | -------------------------------- | ------- | ------------------------------- | ---- | --------- | ---- | - | --------- |  | - | ---------
|                               |      | Three months ended September 30, |         | Nine months ended September 30,
|                               | 2007 |                                  | 2006    |                                 | 2007 |           | 2006
|General and administrative     |      | $                                | 529,015 |                                 | $    | 3,636,841 |      | $ | 3,052,060 |  | $ | 7,090,299
|Power project development      |      |                                  | 110,448 |                                 |      |          |      |   | 263,652   |  |   |         
|Research and development       |      |                                  | 170,410 |                                 |      | 537,118   |      |   | 576,400   |  |   | 1,126,584
|                               |      |                                  |         |                                 |      |           |      |   |           |  |   |          
|Total stock-based compensation |      | $                                | 809,873 |                                 | $    | 4,173,959 |      | $ | 3,892,112 |  | $ | 8,216,883
|                               |      |                                  |         |                                 |      |           |      |   |           |  |   |          

We granted common stock to our employees and directors totaling 5,000 and 43,100 shares during the
three and nine months ended September 30, 2007, respectively. We granted to our employees and directors options to purchase an aggregate of 110,000 and 895,000 shares of common stock during the three and nine months ended September 30,
2007, respectively. During the three and nine months ended September 30, 2006, we granted to our employees and directors 49,800 and 255,300 shares of common stock, respectively, and options to purchase an aggregate of 80,000 and 419,000 shares
of common stock, respectively. During the three and nine months ended September 30, 2007, 13,000 unvested options and 2,000 unvested shares were forfeited by employees and directors, respectively. During the nine months ended September 30,
2006, 265,467 unvested options and no unvested shares were forfeited by employees and directors. During the three and nine months ended September 30, 2007, 2,000 vested options were forfeited or expired. During the three and nine months ended
September 30, 2006, 40,000 vested options were forfeited or expired.

Stock options and warrants granted to non-employees for services
are accounted for in accordance with EITF No. 96-18, which requires expense recognition based on the fair value of the options/warrants. We calculate the fair value of options and warrants granted by using the Black-Scholes pricing model.
During the three and nine months ended September 30, 2007, we issued 52,500 and 72,500 shares of common stock, respectively, as a result of option exercises. During the three and nine months ended September 30, 2007, we issued 1,065,155
shares of common stock, as a result of warrant exercises. During the three and nine months ended September 30, 2006, we issued 14,000 and 52,000 shares of common stock, respectively, as a result of option exercises, and zero and 6,000 shares of
common stock, respectively, as a result of warrant exercises.

The maximum term of each option is ten years. With respect to stock options
granted during the three and nine months ended September 30, 2007 and 2006, the assumptions used in the Black-Scholes option-pricing model were as follows:



|                                  |      |                                  |   |      |                                 |   |      |           |   |      |           |  
|--------------------------------- | ---- | -------------------------------- | - | ---- | ------------------------------- | - | ---- | --------- | - | ---- | --------- | -
|                                  |      | Three months ended September 30, |   |      | Nine months ended September 30, |  
|                                  | 2007 |                                  |   | 2006 |                                 |   | 2007 |           |   | 2006 |          
|Risk-free interest rate           |      | 4.174.61                        | % |      | 4.704.75                       | % |      | 4.175.05 | % |      | 4.355.19 | %
|Expected dividend yield           |      | 0.0                              | % |      | 0.0                             | % |      | 0.0       | % |      | 0.0       | %
|Volatility                        |      | 99                               | % |      | 116117                         | % |      | 99101    | % |      | 109117   | %
|Expected exercise life (in years) |      | 6.0                              |   |      | 6.0                             |   |      | 6.0       |   |      | 6.0       |  

The risk-free interest rate is based on a yield curve of interest rates at the time of the grant
based on the contractual life of the option. Expected dividend yield is based on our dividend history and anticipated dividend policy. Expected volatility is based on historical volatility for our common stock. Expected exercise life is based on
management estimates of future attrition and early exercise rates, giving consideration to employee exercise behavior.

On
December 22, 2006, we issued 25,000 restricted shares of our common stock as part of the overall consideration for a 50-year geothermal lease agreement with the owner of three ranches in Nevada. The common stock had a fair value of $115,250 on
the grant date. During the first quarter of 2007, we issued 7,500 shares to certain owners of geothermal properties in Nevada. The common stock had a fair value of $39,800 on the grant date. These costs have been capitalized and classified as
unproved property and prepaid delay rentals.

During the first quarter of 2007, we granted 200,000 shares of restricted common stock to a
service provider to advise us on various matters. Pursuant to the terms of the agreement 150,000 shares were delivered in April 2007 and 50,000 shares were delivered in September 2007. Accordingly, the stock was valued on the grant date and was
recognized in the first quarter of 2007 as a non-cash general and administrative expense and an accrued liability totaling $990,000.

During the second quarter of 2007, we granted 15,000 shares of registered common stock to a service provider to advise us on engineering matters relating to geothermal drilling and power plant construction. The stock had a fair value on the
grant date totaling $110,250.

During the third quarter of 2007, we granted options to purchase 35,000 shares of our common stock to the
owner of three ranches in Nevada as consideration to secure certain surface rights to the land. The options have an exercise price of $15.10 per share which was established as the closing market price on the grant date. The options had a fair value
of $423,987 that was recorded as unproved property.



10



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##### Table of Contents

The activity for stock options and warrants during the first nine months of 2007 is summarized as
follows:



|                                   |  |                               |   |  |                                |       |                          |   |           
|---------------------------------- |  | ----------------------------- | - |  | ------------------------------ | ----- | ------------------------ | - | ----------
|                                   |  | Number of Optionsand Warrants |   |  | Weighted AverageExercise Price |       | Aggregate IntrinsicValue
|Outstanding at January 1, 2007:    |  | 2,007,780                     |   |  | $                              | 7.95  |                          |   |           
|Granted                            |  | 1,792,012                     |   |  |                                | 5.98  |                          |   |           
|Exercised                          |  | (20,000                       | ) |  |                                | 3.65  |                          |   |           
|Expired or forfeited               |  |                              |   |  |                                |      |                          |   |           
|                                   |  |                               |   |  |                                |       |                          |   |           
|Outstanding at March 31, 2007:     |  | 3,779,792                     |   |  | $                              | 7.02  |                          | $ | 1,317,321 
|Granted                            |  | 80,000                        |   |  |                                | 7.02  |                          |   |           
|Exercised                          |  |                              |   |  |                                |      |                          |   |           
|Expired or forfeited               |  | (13,000                       | ) |  |                                | 12.70 |                          |   |           
|                                   |  |                               |   |  |                                |       |                          |   |           
|Outstanding at June 30, 2007:      |  | 3,846,792                     |   |  | $                              | 7.00  |                          | $ | 6,233,171 
|Granted                            |  | 195,000                       |   |  |                                | 12.83 |                          |   |           
|Exercised                          |  | (1,117,655                    | ) |  |                                | 5.90  |                          |   |           
|Expired or forfeited               |  | (2,000                        | ) |  |                                | 17.19 |                          |   |           
|                                   |  |                               |   |  |                                |       |                          |   |           
|Outstanding at September 30, 2007: |  | 2,922,137                     |   |  | $                              | 7.80  |                          | $ | 16,632,935
|                                   |  |                               |   |  |                                |       |                          |   |           
|Exercisable at March 31, 2007:     |  | 2,489,643                     |   |  | $                              | 6.02  |                          | $ | 1,210,779 
|                                   |  |                               |   |  |                                |       |                          |   |           
|Exercisable at June 30, 2007:      |  | 2,602,551                     |   |  | $                              | 6.16  |                          | $ | 5,198,935 
|                                   |  |                               |   |  |                                |       |                          |   |           
|Exercisable at September 30, 2007: |  | 1,573,387                     |   |  | $                              | 6.69  |                          | $ | 10,740,367
|                                   |  |                               |   |  |                                |       |                          |   |           

The total intrinsic value of options exercised in the three and nine months ended
September 30, 2007 was approximately $461,369 and $533,294, respectively. The total intrinsic value of warrants exercised in the three and nine months ended September 30, 2007 was approximately $7,993,944. The cash received from exercises
of options and warrants during the three and nine months ended September 30, 2007 was approximately $6,596,413 and $6,669,413, respectively.

The following tables summarize certain stock option and warrant information at September 30, 2007:

Outstanding Options and Warrants Fully
Vested and/or Expected to Vest



|                       |  |           |  |                                  |  |                                |       |                 |   |           
|---------------------- |  | --------- |  | -------------------------------- |  | ------------------------------ | ----- | --------------- | - | ----------
|Range of
exerciseprice |  | Number    |  | Weighted averagecontractual life |  | Weighted averageexercise price |       | Intrinsic value
|$ 3.00  $ 5.75        |  | 1,482,304 |  | 6.46                             |  | $                              | 4.38  |                 | $ | 12,609,585
|$ 6.00  $ 9.10        |  | 752,500   |  | 8.94                             |  |                                | 7.77  |                 |   | 3,851,050 
|$11.01  $17.20        |  | 654,000   |  | 8.63                             |  |                                | 14.64 |                 |   | 172,300   
|$25.95                 |  | 33,333    |  | 7.55                             |  |                                | 25.95 |                 |   |          
|                       |  |           |  |                                  |  |                                |       |                 |   |           
|Total                  |  | 2,922,137 |  | 7.60                             |  | $                              | 7.80  |                 | $ | 16,632,935
|                       |  |           |  |                                  |  |                                |       |                 |   |           

Outstanding Options and Warrants Fully Vested and Exercisable



|                       |  |           |  |                                  |  |                                |       |                 |   |           
|---------------------- |  | --------- |  | -------------------------------- |  | ------------------------------ | ----- | --------------- | - | ----------
|Range of
exerciseprice |  | Number    |  | Weighted averagecontractual life |  | Weighted averageexercise price |       | Intrinsic value
|$ 3.00  $ 5.75        |  | 1,092,554 |  | 5.40                             |  | $                              | 4.15  |                 | $ | 9,544,425 
|$ 6.00  $ 9.10        |  | 241,375   |  | 8.49                             |  |                                | 8.06  |                 |   | 1,166,543 
|$11.01  $17.20        |  | 206,125   |  | 8.38                             |  |                                | 15.40 |                 |   | 29,400    
|$25.95                 |  | 33,333    |  | 7.55                             |  |                                | 25.95 |                 |   |          
|                       |  |           |  |                                  |  |                                |       |                 |   |           
|Total                  |  | 1,573,387 |  | 6.31                             |  | $                              | 6.69  |                 | $ | 10,740,368
|                       |  |           |  |                                  |  |                                |       |                 |   |           



11



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##### Table of Contents

The following table summarizes the non-vested stock options at September 30, 2007:

Non-Vested Option Grants



|                                  |  |                   |   |  |                                             |      
|--------------------------------- |  | ----------------- | - |  | ------------------------------------------- | -----
|                                  |  | Number of Options |   |  | Weighted averageper option fairmarket value
|Non-vested at January 1, 2007     |  | 684,558           |   |  | $                                           | 10.28
|Granted                           |  | 755,000           |   |  |                                             | 4.77 
|Vested                            |  | (149,409          | ) |  |                                             | 6.22 
|Forfeited                         |  |                  |   |  |                                             |     
|                                  |  |                   |   |  |                                             |      
|Non-vested at March 31, 2007:     |  | 1,290,149         |   |  | $                                           | 7.53 
|Granted                           |  | 80,000            |   |  |                                             | 5.67 
|Vested                            |  | (112,908          | ) |  |                                             | 8.13 
|Forfeited                         |  | (13,000           | ) |  |                                             | 10.80
|                                  |  |                   |   |  |                                             |      
|Non-vested at June 30, 2007:      |  | 1,244,241         |   |  | $                                           | 7.32 
|Granted                           |  | 195,000           |   |  |                                             | 10.30
|Vested                            |  | (88,491           | ) |  |                                             | 10.05
|Forfeited                         |  |                  |   |  |                                             |     
|                                  |  |                   |   |  |                                             |      
|Non-vested at September 30, 2007: |  | 1,350,750         |   |  | $                                           | 7.57 
|                                  |  |                   |   |  |                                             |      

The following table summarizes the non-vested stock awards at September 30, 2007:

Non-Vested Share Awards



|                                   |  |                  |   |  |                                            |      
|---------------------------------- |  | ---------------- | - |  | ------------------------------------------ | -----
|                                   |  | Number of Shares |   |  | Weighted averageper share fairmarket value
|Outstanding at January 1, 2007:    |  | 63,717           |   |  | $                                          | 9.79 
|Granted                            |  | 207,500          |   |  |                                            | 4.96 
|Vested                             |  | (15,917          | ) |  |                                            | 11.19
|Vested and undelivered (delayed)   |  | (212,500         | ) |  |                                            | 4.84 
|Forfeited                          |  |                 |   |  |                                            |     
|                                   |  |                  |   |  |                                            |      
|Outstanding at March 31, 2007:     |  | 42,800           |   |  | $                                          | 10.46
|Granted                            |  | 53,100           |   |  |                                            | 7.52 
|Vested                             |  | (47,716          | ) |  |                                            | 8.63 
|Forfeited                          |  | (2,000           | ) |  |                                            | 17.19
|                                   |  |                  |   |  |                                            |      
|Outstanding at June 30, 2007:      |  | 46,184           |   |  | $                                          | 8.67 
|Granted                            |  | 5,000            |   |  |                                            | 12.89
|Vested                             |  | (5,667           | ) |  |                                            | 12.93
|Forfeited                          |  |                 |   |  |                                            |     
|                                   |  |                  |   |  |                                            |      
|Outstanding at September 30, 2007: |  | 45,517           |   |  | $                                          | 8.61 
|                                   |  |                  |   |  |                                            |      

As of September 30, 2007, there was $9,035,974 (pre-tax) and $309,258 (pre-tax) of
unrecognized compensation expense related to non-vested stock option and stock award grants, respectively. This expense is expected to be recognized over a weighted average period of 2.22 years. The following table summarizes the unrecognized
compensation expense expected to be recognized in future periods as of September 30, 2007.



|                   |  |                                         |          
|------------------ |  | --------------------------------------- | ---------
|                   |  | Stock-basedcompensationexpense(pre-tax)
|Remainder of 2007: |  | $                                       | 810,608  
|2008               |  |                                         | 2,813,257
|2009               |  |                                         | 2,611,107
|2010               |  |                                         | 2,290,995
|2011               |  |                                         | 629,834  
|2012               |  |                                         | 189,431  
|                   |  |                                         |          
|Total:             |  | $                                       | 9,345,232
|                   |  |                                         |          



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##### Table of Contents

Net Share Issuance

During the second quarter of 2006, we satisfied an obligation to deliver 250,000 shares to a former employee pursuant to an employment arrangement by delivering 150,707 shares to the employee, and retaining the
remaining 99,293 shares to satisfy payroll withholding taxes. We then paid approximately $1 million in payroll taxes related to this transaction.

Contingent Options and Share Grants

During the third quarter of 2006, we committed to grant 50,000 options to a key
technical employee contingent upon attainment of certain performance objectives. During the third quarter of 2007, we granted the 50,000 options to the key technical employee upon the announcement of a license agreement with an alternator
re-manufacturer. The exercise price of $12.80 was established at the closing market price on the day after the announcement. Vesting of the options continues to be contingent upon the attainment of certain performance objectives. Management
continues to assess the likelihood of completing the contingent requirements for vesting as reasonably possible in accordance with definitions in SFAS No. 5, Accounting for Contingencies and, accordingly did not
recognize additional equity compensation relating to the contingent options during the nine months ended September 30, 2007.

On
December 22, 2006, we entered into a 50-year geothermal lease agreement to obtain the right to begin development and construction of geothermal power plants on properties in Nevada consisting of 11,600 acres. We also have rights to pursue
similar projects on 3.0 million additional acres of land with respect to which the land owner may have geothermal rights. As part of the consideration of the 50-year geothermal lease agreement, we committed to grant 25,000 restricted shares of
our common stock, contingent upon successfully placing a geothermal power plant in operation upon the leased lands. Management continues to assess the likelihood of completing the contingent requirements as reasonably possible in
accordance with the definition in SFAS No. 5, Accounting for Contingencies and, accordingly has not recognized equity compensation relating to the contingent shares during the first or second quarter of 2007. We are currently in the
process of amending the 50-year geothermal lease agreement that was originally executed on December 22, 2006.

On June 18, 2007,
we entered into a 10-year geothermal lease agreement to obtain the exclusive right to drill for, extract, produce, remove, utilize, sell and dispose of all forms of thermal energy on the same property we previously leased on December 22, 2006
in Nevada. This lease was necessary to more fully secure our interest in the property. As part of the consideration for the 10-year geothermal lease agreement we committed to grant 25,000 restricted shares of our common stock, contingent upon
successfully placing a geothermal power plant in operation upon the leased lands. During the third quarter of 2007, management assessed the likelihood of completing the contingent requirements and concluded that it remained reasonably
possible in accordance with the definition in SFAS No. 5, Accounting for Contingencies. Accordingly, we did not recognize equity compensation during the third quarter of 2007

On May 24, 2007, we entered into a geothermal project alliance agreement whereby the service provider agreed to provide engineering advice to us
relating to geothermal drilling and geothermal power plant construction. As part of the consideration for the agreement, we committed to grant 5,000 shares of common stock upon issuance of a certificate of completion with respect to each of the
first three specific projects. During the third quarter of 2007, management assessed the likelihood of completing the contingent requirements and concluded that it remained reasonably possible in accordance with the definition in SFAS
No. 5, Accounting for Contingencies, for each of the three specific projects. Accordingly, we did not recognize equity compensation during the third quarter of 2007.

On May 31, 2007, the Compensation Committee granted options to purchase 50,000 shares of our common stock to a key power systems executive. Vesting
of these options is contingent upon successfully placing each of our first three geothermal power plants in service. The options with respect to one third of the shares will vest upon the successful placement of each of the three geothermal power
plants in service. The option exercise price is $7.20 per share, which was the closing market price on the grant date. Failure to successfully place any of the first three geothermal power plants in service will result in the forfeiture of the
unvested contingent options specifically pro rated toward that geothermal power plant. During the third quarter of 2007, management assessed the likelihood of completing the contingent requirements and



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concluded that it remained reasonably possible in accordance with the definition in SFAS No. 5, Accounting for Contingencies for
each of the three specific projects. Accordingly, we did not recognize equity compensation during the third quarter of 2007.

Private Equity Placement

On March 30, 2007, we sold 2,693,552 shares of our common stock in a private placement to certain accredited investors, including
one member of our board of directors, at a price of $4.65 per share. The gross proceeds from the private equity placement totaled $12,525,001. Certain commissions and legal fees incurred in conjunction with the financing totaled $671,250, resulting
in net proceeds totaling $11,853,751.

F. Warrants

As part of the March 30, 2007 private placement, each investor, including one member of our board of directors, received warrants to purchase additional shares equal to approximately 35% of the shares of common
stock purchased by such investor. Accordingly, warrants to purchase 942,739 shares were issued to investors, including one member of our board of directors, at a cash-only exercise price of $6.05 per share.

On March 22, 2007, we entered into a twelve-month advisory agreement with a service provider to receive certain non-exclusive advisory services,
including general corporate finance, advisory, merger and acquisition and business development services. The twelve-month period of the advisory agreement commenced on October 31, 2006 and is renewable for twelve additional months unless
terminated in writing by us. We issued 94,273 warrants to the service provider for the purchase of common stock as partial compensation for assisting with raising the capital for the March 30, 2007 private placement. These warrants have an
exercise price of $6.05. The warrants issued in conjunction with the private placement were accounted for as a cost of equity, which was netted against the fair value of the warrants, resulting in offsetting entries to additional paid in capital.

Call Provision

The March 30,
2007 private placement warrant agreement contained a call provision. If the closing market price of our common stock exceeded $9.075 for 20 consecutive trading days, we could exercise the right to require all warrant holders to either exercise the
warrants or forfeit the warrants not exercised.

On August 9, 2007, our common stock price closed above $9.075 for the twentieth
consecutive trading day. Therefore, on August 9, 2007 we exercised the call provision to require the warrant holders to either exercise their warrants or allow us to cancel their warrants. During August 2007, the warrant holders exercised all
1,037,012 outstanding warrants at the exercise price of $6.05 per share and received an equal number of shares of unrestricted common stock. Proceeds received from these warrant exercises totaled $6.3 million.

Series B Warrants

In 2004, we issued shares of
Series B Preferred Stock in a private placement transaction. All shares of Series B Preferred Stock were subsequently converted to shares of our common stock. Purchasers of the Series B Preferred Stock were also issued warrants to purchase
additional shares of common stock equal to 25% of the common stock issuable to them upon conversion of the Series B Preferred Stock at a cash-only exercise price of $8.55 per share. During the year ended December 31, 2006, 6,000 warrants were
exercised by holders of Series B Preferred Stock, providing approximately $51,300 in cash to us. During the nine months ended September 30, 2007, 28,143 of warrants were exercised by holders of Series B Preferred Stock, providing approximately
$130,865 in cash to us. At September 30, 2007, 35,804 warrants were outstanding and unexercised. The outstanding warrants have expiration dates of October 2007 and October 2009.

Series B Warrant Price Reset Feature

In conjunction with issuing the Series B Convertible Preferred
Stock, we issued a total of 412,691 warrants. The warrants contained an exercise price reset feature that based upon certain conditions and events, results in the warrant exercise price being adjusted downward to fair value of the common stock on
the date the event occurred. In November 2006, we issued shares to a service provider. This issuance triggered the warrant re-pricing feature applicable to the 63,947 outstanding and exercisable warrants. Accordingly, the exercise price of the
outstanding warrants previously exercisable for $8.55 per share was reset to a new exercise price of $6.05 per share.

On March 30,
2007, we issued shares in connection with a private placement. This issuance also triggered the warrant re-pricing feature applicable to the 63,947 then outstanding and exercisable warrants. Accordingly, the exercise price of the outstanding
warrants previously exercisable for $6.05 per share was reset to a new exercise price of $4.65 per share.



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Based upon the price reset feature in the Series B warrant agreement, further warrant pricing resets may
occur given the occurrence of certain conditions and events.

The following table summarizes the warrants issued, outstanding and
exercisable at September 30, 2007:



|                                     |  |                   |                         
|------------------------------------ |  | ----------------- | ------------------------
|                                     |  | Series B Warrants
|Grant dates                          |  |                   | July Sept, 2004        
|Exercise price                       |  | $                 | 4.65                    
|Expiration date                      |  |                   | October 5, 2007 and 2009
|Warrants outstanding and exercisable |  |                   | 35,804                  
|Proceeds if exercised                |  | $                 | 166,489                 

G. Registration Rights Agreements

Private Placement Registration Rights Agreement

In conjunction with the March 2007 private
placement, the purchasers of the common stock and related warrants also entered into a registration rights agreement that contains certain rights to register shares of common stock purchased in the private placement pursuant to the exercise of
related warrants. We filed a registration statement on Form S-3 with the SEC. The registration statement became effective on June 7, 2007.

If we fail to maintain a continuously effective registration statement with respect to the resale of the shares described above, liquidated damages equal to 1.0% of the aggregate purchase price for each month up to a total of three months
will be paid to the purchasers. The outstanding balance is subject to interest payments of 18% per annum.

We are currently in
compliance with the requirements of the registration rights agreement and, as such, management believes that the likelihood that the registration statement for these shares will fail to remain continuously effective is remote as defined
in SFAS No. 5 Accounting for Contingencies. Accordingly, no accrued liability is deemed necessary by management.

Series B Registration
Rights Agreement

The Series B preferred stock securities purchase agreement and related agreements provide the purchasers of the Series
B preferred stock and the related Series B warrants with certain rights to register shares of common stock pursuant to a registration rights agreement. We are also obligated to cause the registration statement to remain continuously effective until
all Series B preferred shares and Series B warrants are exercised or expired. In September 2004, all of the outstanding Series B preferred shares and certain of the Series B warrants were converted into shares of common stock under the original
registration statement filed on September 20, 2005. We did not maintain a continuously effective registration for the common shares issuable upon exercise of Series B warrants as required by our agreements, resulting in liquidated damages and
interest totaling $96,000 for the year ended December 31, 2006, plus $31,000 for the six months ended June 30, 2007. We filed a registration statement on Form S-3 with the SEC. The registration statement became effective on June 8,
2007. In July 2007, we paid the amount owed in-full to the purchasers.

We are currently in compliance with the requirements of the
registration rights agreement and, as such, management believes that the likelihood that these shares will fail to remain continuously effective is remote as defined in SFAS No. 5 Accounting for Contingencies.
Accordingly, no additional accrued liability is deemed necessary.

H. Deferred Acquisition Costs

On September 27, 2007, we entered into a letter agreement (the Letter Agreement) with the members of GeoLectric Power Company NM, LLC
(GeoLectric), providing for the purchase of GeoLectric and its wholly-owned subsidiary, Lightening Dock Geothermal, Inc. GeoLectric has no other material assets or operations other than the geothermal leases with the Bureau of Land
Management (BLM) on approximately 2,500 acres of property and an existing 7,000 foot geothermal well with an established production history at temperatures and flow rates believed to be suited for power generation. The Letter Agreement
also provides both geothermal and surface access on related properties.

Under the terms of the purchase and upon execution of the Letter
Agreement, we agreed to make an initial cash deposit of $500,000. Costs incurred that are directly related to the completion of a proposed acquisition are deferred on the balance sheet and capitalized as part of the purchase price if the transaction
is completed. Accordingly, we recorded the initial cash deposit as a deferred acquisition cost. Such costs will be expensed if the potential acquisition is no longer considered viable by management.



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Upon completion of the purchase of GeoLectric, we will pay another $1,500,000 in addition to the initial
cash payment of $500,000 to the members of GeoLectric.

Under the terms of the purchase and the Letter Agreement, we also agreed to make
payments to the members of GeoLectric of (a) $750,000 upon the earlier of December 15, 2007 or the completion of certain conditions with respect to the geothermal well, (b) $1,000,000 upon the earlier of December 31, 2007 or the
execution of a power purchase agreement or other mutually acceptable event, and (c) $950,000 upon the earlier of December 31, 2008 or the commercial operation date of a facility on GeoLectrics property.

I. Net Loss Per Common Share

Basic net loss per
common share (Basic EPS) is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share (Diluted EPS) is computed by dividing net loss by
the sum of the weighted average number of common shares outstanding and the weighted average dilutive common share equivalents then outstanding. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an
anti-dilutive effect. Common share equivalents consist of shares issuable upon the exercise of options and warrants to purchase common stock, the conversion of any convertible debentures and related accrued interest, and shares issuable upon
conversion of any preferred stock. There were 35,804 shares of common stock issuable upon exercise of warrants that were in the money and outstanding on September 30, 2007. There were 63,947 shares of common stock issuable upon
exercise of warrants that were out of the money and outstanding on September 30, 2006. 247,000 stock options granted to a contractor were in the money and outstanding on September 30, 2007 and 2006 respectively.
35,000 stock options granted to a land owner of three ranches in Nevada were out of the money on September 30, 2007. Unvested and fully-vested and undelivered stock grants totaling 85,517 and 610,134 were outstanding on
September 30, 2007 and 2006, respectively. 2,209,000 and 841,000 employee and director options to purchase shares of common stock that were in the money and outstanding at September 30, 2007 and 2006, respectively. 677,333 and
1,421,082 employee and director options to purchase shares of our common stock were out of the money at September 30, 2007 and 2006, respectively. These warrants, options and share grants were not included in the calculation of
diluted net loss per share because their effect was anti-dilutive.

J. Business Segments

The basis for presenting segment information results generally is consistent with our overall operating practices. We report operating segment information
in accordance with Financial Accounting Standard Board Statement No. 131, Disclosure About Segments of an Enterprise and Related Information, which establishes reporting standards for disclosure of operating segments. All
consolidating items and corporate administrative costs are included in Corporate and Other in the table below.

Prior to 2006,
we operated in one business segment, Transportation and Industrial Technology. Beginning in 2006, we began to pursue opportunities to develop technologies in the Power Systems market to supplement the development of technologies targeted for the
Transportation and Industrial markets. The presentation below comprises comparative financial information relating to the three and nine months ended September 30, 2007 and 2006.



|                                                        |  |                                        |            |   |               |   |            |                    |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | -------------------------------------- | ---------- | - | ------------- | - | ---------- | ------------------ |  | - | ---------- | - |  | - | ---------- | -
|As of and for the Three Months Ended September 30, 2007 |  | Transportationand IndustrialTechnology |            |   | Power Systems |   |            | Corporate andOther |  |   | Total      |  
|Revenues                                                |  | $                                      | 49,887     |   |               | $ |           |                    |  | $ |           |   |  | $ | 49,887     |  
|Segment Operating Loss                                  |  |                                        | (984,772   | ) |               |   | (710,854   | )                  |  |   | (1,872,749 | ) |  |   | (3,568,375 | )
|Depreciation and Amortization                           |  |                                        | 44,934     |   |               |   | 2,844      |                    |  |   | 20,108     |   |  |   | 67,886     |  
|Fixed Asset Purchases                                   |  |                                        | 40,751     |   |               |   |           |                    |  |   | 37,253     |   |  |   | 78,004     |  
|Total Assets                                            |  | $                                      | 1,309,673  |   |               | $ | 8,533,706  |                    |  | $ | 15,133,819 |   |  | $ | 24,977,198 |  
|                                                        |  |                                        |            |  
|As of and for the Three Months Ended September 30, 2006 |  |                                        |            |   |               |   |            |                    |  |   |            |  
|Revenues                                                |  | $                                      | 9,870      |   |               | $ |           |                    |  | $ |           |   |  | $ | 9,870      |  
|Segment Operating Loss                                  |  |                                        | (1,445,927 | ) |               |   | (1,341,000 | )                  |  |   | (3,362,927 | ) |  |   | (6,149,854 | )
|Depreciation and Amortization                           |  |                                        | 35,657     |   |               |   |           |                    |  |   | 15,858     |   |  |   | 51,515     |  
|Fixed Asset Purchases                                   |  |                                        | 116,361    |   |               |   |           |                    |  |   | 14,451     |   |  |   | 130,812    |  



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|                                                        |  |                                        |            |   |               |   |            |                    |  |   |            |   |  |   |             |  
|------------------------------------------------------- |  | -------------------------------------- | ---------- | - | ------------- | - | ---------- | ------------------ |  | - | ---------- | - |  | - | ----------- | -
|As of and for the Three Months Ended September 30, 2007 |  | Transportationand IndustrialTechnology |            |   | Power Systems |   |            | Corporate andOther |  |   | Total      |  
|Total Assets                                            |  | $                                      | 976,328    |   |               | $ | 5,936,601  |                    |  | $ | 6,332,409  |   |  | $ | 13,245,338  |  
|                                                        |  |                                        |            |  
|As of and for the Nine Months Ended September 30, 2007  |  |                                        |            |   |               |   |            |                    |  |   |            |  
|Revenues                                                |  | $                                      | 202,212    |   |               | $ |           |                    |  | $ |           |   |  | $ | 202,212     |  
|Segment Operating Loss                                  |  |                                        | (3,100,746 | ) |               |   | (1,580,682 | )                  |  |   | (7,107,902 | ) |  |   | (11,789,330 | )
|Depreciation and Amortization                           |  |                                        | 135,311    |   |               |   | 8,411      |                    |  |   | 56,426     |   |  |   | 200,148     |  
|Fixed Asset Purchases                                   |  |                                        | 116,660    |   |               |   | 1,447      |                    |  |   | 68,533     |   |  |   | 186,640     |  
|Total Assets                                            |  | $                                      | 1,309,673  |   |               | $ | 8,533,706  |                    |  | $ | 15,133,819 |   |  | $ | 24,977,198  |  
|                                                        |  |                                        |            |  
|As of and for the Nine Months Ended September 30, 2006  |  |                                        |            |   |               |   |            |                    |  |   |            |  
|Revenues                                                |  | $                                      | 78,015     |   |               | $ |           |                    |  | $ |           |   |  | $ | 78,015      |  
|Segment Operating Loss                                  |  |                                        | (3,393,305 | ) |               |   | (1,341,000 | )                  |  |   | (9,914,911 | ) |  |   | (14,649,216 | )
|Depreciation and Amortization                           |  |                                        | 98,030     |   |               |   |           |                    |  |   | 48,767     |   |  |   | 146,797     |  
|Fixed Asset Purchases                                   |  |                                        | 213,015    |   |               |   |           |                    |  |   | 33,449     |   |  |   | 246,464     |  
|Total Assets                                            |  | $                                      | 976,328    |   |               | $ | 5,936,601  |                    |  | $ | 6,332,409  |   |  | $ | 13,245,338  |  

Included in total assets for the Power Systems segment was the Note Receivable from a potential
merger candidate totaling $5,547,552 and $0 at September 30, 2006 and September 30, 2007, respectively. Non-cash compensation expense included in the Transportation and Industrial Technology segment totaled $170,410 and $537,118 for the
three months ended September 30, 2007 and 2006, respectively and $576,400 and $1,126,584 for the nine months ended September 30, 2007 and 2006, respectively. Non-cash compensation expense included in the Power Systems segment totaled
$110,448 and $1,341,000 for the three months ended September 30, 2007 and 2006, respectively and $263,652 and $1,341,000 for the nine months ended September 30, 2007 and 2006, respectively.

K. Contingencies and Commitments

We lease our
corporate office located at 5152 North Edgewood Drive, Suite 375, Provo. The corporate office has approximately 7,600 square feet of office space with monthly rent of approximately $13,600. The lease expires on August 31, 2011. On
August 15, 2007, we entered into a sublease to expand our corporate offices by approximately 3,800 additional square feet with a monthly rent of $6,000. The sublease expires on July 31, 2008.

On June 1, 2006, we also expanded our testing facility in Utah County, Utah from 6,000 to 12,000 square feet and monthly rent increased from
approximately $2,700 to $6,050. The testing facility lease expires on June 1, 2009. We expect that these leases will be renewed or that alternative spaces will be obtained. The facilities are well maintained and in good condition.

As part of the consideration for our four 50-year geothermal lease agreements in the State of Nevada, we have agreed to pay approximately $42,000 per
year in rent beginning in year two of the leases. This payment obligation continues throughout the lease terms as an advance against royalties, and certain royalties on the sale of any geothermal resources produced from the leased lands. To date,
all but one of the properties are still in the exploratory phase and none have been fully evaluated for viability, generating capacity, or potential reserves. According to the geothermal lease agreements, we, at our sole discretion, may surrender
portions of the land or the land in its entirety that we do not intend to utilize thereby reducing the rent obligation.

On June 18,
2007, we entered into a 10-year geothermal lease agreement to obtain the exclusive right to drill for, extract, produce, remove, utilize, sell and dispose of all forms of thermal energy on the same property we previously leased on December 22,
2006 in Nevada. Since there previously existed a split estate, this lease was necessary to fully secure our interest in the property. As part of the consideration for the geothermal lease agreement we have agreed to pay annual rent beginning in year
two of the lease not to exceed $34,800. The payment obligation continues through the lease terms. To date, the property has not been evaluated for viability, generating capacity, or potential reserves. According to the geothermal lease agreement,
we, at our sole discretion, may surrender portions of the land or the land in its entirety that we do not intend to utilize thereby reducing the rent obligation. We are currently in the process of amending the 50-year geothermal lease agreement that
was originally executed on December 22, 2006.

As part of the consideration for our 10-year geothermal lease agreements in the State
of Utah, we have agreed to pay annual rent of approximately $68,300 beginning in year two of the respective lease agreements. The payment obligations continue throughout the lease terms.



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During the third quarter of 2007, we participated in a United States Bureau of Land Management
(BLM) auction to obtain the geothermal development rights for certain parcels of land in Nevada. We successfully won the bids for four parcels of land and entered into four separate 10-year lease agreements with the BLM totaling
approximately 15,325 acres. As part of the consideration for the 10-year BLM leases, we agreed to pay annual rental payments totaling approximately $46,000 beginning in year two of the lease.

Future minimum lease payments under non-cancelable operating leases as of September 30, 2007 were as follows:



|                         |  |                      |          
|------------------------ |  | -------------------- | ---------
|Year Ending December 31, |  | Minimum leasepayment
|2007                     |  | $                    | 78,449   
|2008                     |  |                      | 400,473  
|2009                     |  |                      | 318,546  
|2010                     |  |                      | 290,554  
|2011                     |  |                      | 233,496  
|Thereafter               |  |                      | 571,595  
|                         |  |                      |          
|Total minimum payments   |  | $                    | 1,893,113
|                         |  |                      |          

Total rent expense for the three months ended September 30, 2007, and 2006, was approximately
$73,149 and $59,707, respectively. Total rent expense for the nine months ended September 30, 2007, and 2006, was approximately $198,394 and $164,134, respectively.

As of September 30, 2007, we did not have any letters of credit or repurchase obligations.

We have
entered into a series of purchase and service agreements whereby a vendor has agreed to provide certain products and services to us. During the nine months ended September 30, 2007, we made payments to this vendor for these products and
services. We entered into the second purchase agreement on July 31, 2007. Under these agreements, we are obligated to pay the vendor $10.6 million in 2007; $14.8 million in 2008; and $1.6 million per year beginning in 2009 through 2012.

On September 2, 2006, we entered into a license and sublicense agreement for heat transfer technologies through our wholly owned
subsidiary, Raser  Power Systems, LLC. We also entered into a guaranty on behalf of the subsidiary to irrevocably and unconditionally guarantee full and prompt payment and performance of all the subsidiary obligations under the license and
sublicense agreement. The guaranty will remain in full force and effect until satisfaction in full of all the subsidiarys obligations under the agreement and is binding on any successors. The maximum potential amount of future payments under
this guarantee cannot be estimated, but payment obligations will be limited to the actual royalties payable arising from developed projects that utilize the heat-transfer license.

We have a contractual obligation to deliver 40,000 shares of our common stock ratably from December 4, 2007 to December 21, 2007 to a former
employee. The fair values of these shares totaled $122,000. $83,875 was expensed during the year ended December 31, 2006 and $38,125 was expensed during the first quarter of 2007.

On September 27, 2007, we entered into the Letter Agreement providing for the purchase of GeoLectric and its wholly-owned subsidiary, Lightning Dock
Geothermal, Inc. GeoLectric has no other material assets or operations other than the geothermal leases with the BLM on approximately 2,500 acres of property and an existing 7,000 foot geothermal well with an established production history at
temperatures and flow rates believed to be suited for power generation. The Letter Agreement also provides both geothermal and surface access on related properties.

Upon completion of the purchase of GeoLectric, we will pay another $1,500,000 in addition to the initial cash payment of $500,000 to the members of GeoLectric.

Under the terms of the purchase and the Letter Agreement, we also agreed to make payments to the members of GeoLectric of (a) $750,000 upon the
earlier of December 15, 2007 or the completion of certain conditions with respect to the geothermal well, (b) $1,000,000 upon the earlier of December 31, 2007 or the execution of a power purchase agreement or other mutually acceptable
event, and (c) $950,000 upon the earlier of December 31, 2008 or the commercial operation date of a facility on GeoLectrics property.



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L. Income Taxes

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in a companys financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 requires a company to determine whether it is more likely than not that a tax position will
be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The application of
income tax law is inherently complex. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations of and
guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.

At the adoption date of January 1, 2007, we had no unrecognized tax benefit which would affect the effective tax rate if recognized. There has been
no significant change in the unrecognized tax benefit during the nine months ended September 30, 2007.

We classify interest and
penalties arising from the underpayment of income taxes in the statement of income under general and administrative expenses. As of September 30, 2007, we had no accrued interest or penalties related to uncertain tax positions. The tax year
2006 federal return remains open to examination and the tax years 2004-2006 remain open to examination by other taxing jurisdictions to which we are subject. The Internal Revenue Service is currently examining our 2005 federal tax return and the
examination should be complete in 2007.

M. Supplemental Cash Information

For the nine months ended September 30, 2007:



| |  |  | No cash was paid for interest and $300 was paid for income taxes.
| | - |  | -----------------------------------------------------------------



| |  |  | We recorded a $39,800 non-cash payment of 7,500 shares of our common stock issued to acquire the geothermal rights on properties in Nevada. The non-cash payment was
equal to the fair market value of the shares on the date the 50-year geothermal leases were signed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We recorded a $990,000 non-cash payment of 200,000 shares of restricted common stock issued to a service provider for advisory services. The non-cash payment was
equal to the fair market value of the shares on the date the advisory services payment was approved by our Board of Directors.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We recorded an $110,250 non-cash payment of 15,000 shares of unrestricted common stock issued to a service provider for advisory services. The non-cash payment was
equal to the fair market value of the shares on the date the advisory services agreement was signed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the nine months ended
September 30, 2006:



| |  |  | No cash was paid for interest and $200 was paid for income taxes.
| | - |  | -----------------------------------------------------------------



| |  |  | On November 2, 2006, we recorded a $1,341,000 non-cash payment of 300,000 shares of restricted common stock issued to a service provider for advisory services.
The non-cash payment was equal to the fair market value of the shares on the date the advisory services payment was approved by our Board of Directors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

N. Recent Accounting Pronouncements

SFAS 157

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. SFAS 157 provides a
common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide information about
the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for our 2009 fiscal year, although early
adoption is permitted. We believe that adoption of SFAS 157 will not materially impact our financial statements.

SFAS 159

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 allows a company to
choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. Therefore, we are required to adopt SFAS 159 by the first quarter of 2008. We are currently evaluating the requirements of SFAS 159 and the potential impact on our financial statements.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Cautionary Statement Regarding Forward-Looking Statements

Certain information set forth in this
report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or
performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward-looking statements can be identified by terminology such as
believes, expects, may, should, anticipates, or intends or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional
forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including without limitation, managements examination of historical operating trends, are based upon our current
expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but, there can be no assurance that managements expectations, beliefs and
projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the
date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause our actual
results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be read in conjunction with our condensed consolidated financial statements and related notes
included elsewhere in this report and should be considered in light of the risks referenced in Part II. Item 1A. Risk Factors below.

Overview

Raser Technologies, Inc., a Delaware corporation
(Raser, the Company, we or our) is a technology licensing and geothermal development company. We operate in two business segments: Transportation and Industrial Technology, and Power Systems. The
Transportation and Industrial Technology segment focuses on improving the efficiency and power density of electric motors, generators and their associated power electronic drives and controls. This award-winning technology is known as SymetronTMtechnology.

In 2005, we began to
implement our strategy to develop geothermal electric power plants by acquiring heat-transfer technology, specifically, advanced binary cycle power generation technology, as well as geothermal resources. In 2006, we acquired a non-exclusive license
for certain patents, patents pending, and technical information relating to certain heat-transfer technologies, including geothermal, waste heat recovery and bottom-cycling applications.

We substantially added to the heat transfer technologies available to us during the second quarter
of 2007 through the establishment of a strategic alliance with UTC Power Corporation, a United Technologies company. The alliance agreements provide for the delivery of PureCycle®
geothermal power systems for the first three geothermal power plants we intend to develop. In total, these systems will generate approximately 30 megawatts (MW) of renewable electrical power. The modular UTC Pure Cycle power generation
equipment enables us to construct power plants utilizing heat from geothermal resources with cooler to lower temperatures than conventional equipment at a fraction of the time otherwise required. Our agreements with UTC Power contemplate a long-term
relationship in developing geothermal resources as well as potential exchanges of technology.

In the second quarter of 2007, we also
signed a Geothermal Project Alliance Agreement and a Consulting Services Agreement with Cummins & Barnard, Inc. (C&B), a full service engineering consulting company. Under these agreements, C&B will provide program
management and construction services in the development of the first three geothermal power plants we intend to develop.

We also expanded
our acreage to include geothermal resources in the northwestern United States. Through an agreement with International Paper that we signed in July 2007, we have secured an exclusive option on up to 229,000 acres of International Papers
geothermal resources in Oregon and Washington State. We also entered into a letter agreement to acquire a known and well-studied geothermal resource in New Mexico. These areas would expand our geothermal resource portfolio beyond our Nevada, Utah
and California resources, where we also added to properties and began drilling and conducting other well-field development activities for the first three power plants we intend to develop in Nevada and our first power plant in Utah. While we will
continue to expand this portfolio as circumstances permit, we believe that our current geothermal portfolio alone holds sufficient resources to meet our power plant development needs for more than ten years.



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We were recently selected as a successful power purchase bid candidate and therefore were short-listed on
several power purchase agreement negotiations with various utilities. We are currently in various stages of negotiations on the purchase agreements and we expect to complete negotiations over the next two quarters. The power purchase agreements will
likely vary in term from 15 to 20 years and will require us to sell and the utility to buy all of the power output from our designated power facility(s). We have also entered into negotiations outside of a formal request for proposal
(RFP) bid process with other utilities and with private non-utility purchasers and anticipate executing some of these agreements through bi-lateral negotiations. Should we successfully conclude these negotiations, a summary of their
details follows:



|                                             |  |       |  |  |  |                                       |  |                
|-------------------------------------------- |  | ----- |  |  |  | ------------------------------------- |  | ---------------
|RFP Power Purchase Agreement A               |  | 10 MW |  |  |  | delivered at plant site or CAISO site |  | 15-year term   
|                                             |  |       |  | 
|RFP Power Purchase Agreement B               |  | 10 MW |  |  |  | delivered at plant site or CAISO site |  | 15-year term   
|                                             |  |       |  | 
|RFP Power Purchase Agreement C               |  | 10 MW |  |  |  | delivered at plant site or CAISO site |  | 15-year term   
|                                             |  |       |  | 
|RFP Power Purchase Agreement G               |  | 40 MW |  |  |  | delivered at plant site               |  | 20-year term   
|                                             |  |       |  | 
|Non-RFP Potential Power Purchase Agreement D |  | 40 MW |  |  |  | delivered at 230 kv line              |  | 20-year term   
|                                             |  |       |  | 
|Non-RFP Potential Power Purchase Agreement E |  | 10 MW |  |  |  | delivered at 230 kv line              |  | 20-year term   
|                                             |  |       |  | 
|Non-RFP Potential Power Purchase Agreement F |  | 10 MW |  |  |  | delivered at plant site               |  | 10-20-year term

In addition to the above, we were chosen as a successful bidder in two other RFP processes;
however, we have withdrawn these bids since the purchase agreements listed above, would satisfy the demand for all of the power produced by the intended power plants in these locations. We continue to pursue other power purchase agreements for other
power plants we intend to develop.

We recognize that geothermal power generation, including exploration, drilling, power plant
construction and operation, is a capital intensive proposition. We are developing relationships with strategic alliance partners to help provide the necessary capital to fund the development of geothermal power plants. We believe that the tax
incentives available to such projects and the favorable economic environment for renewable energy should make it possible to develop geothermal projects that are economically feasible. Subject to obtaining adequate financing from our alliance
partners or other sources, we intend to initiate development of a number of geothermal power plants that have a combined generating capacity totaling approximately 100 megawatts of electricity per year for our first three years and 150 megawatts per
year thereafter.

We have developed several innovations in electric motors and their
associated power electronic drives and controllers that allow for increased torque, power and efficiency. Our electromagnetic machine and power electronic drive technology is trademarked under the name SymetronTM. The technologies can be applied to industrial AC induction motors and drives, permanent magnet synchronous motors, AC generators and automotive alternators for use in
industrial and transportation applications, hybrid-electric and electric vehicle propulsion systems, and other applications where the efficiency of electricity-to-motion or motion-to-electricity power conversions can be improved. We believe that
SymetronTMtechnologies can also be applied to our geothermal electric power generation applications.

We continue to advance our efforts for Symetron adoption in both the transportation and industrial markets. One of the key areas of focus for us in
the transportation market is to develop, with our partners, a plug-in hybrid electric vehicle (PHEV) propulsion system. PHEV systems are one of the primary areas of focus among many auto companies for the next generation of hybrid
vehicles and we continue to pursue these efforts.

In February 2007, we announced
the signing of two memorandums of understanding (MOUs) relating to the testing and mass-production qualification of our SymetronTMtechnology.
The first agreement was with one of the largest AC motor manufacturers in the world. The testing and validation process under this agreement is still progressing.

The second agreement was with Wilson Auto Electric Ltd. of Canada (Wilson), the largest independent re-manufacturer of automotive alternators and starter motors in North America. On September 6, 2007,
we completed the initial requirements of the MOU and signed a formal 5-year worldwide Symetron License Agreement with Wilson. Under this agreement Wilson will have the right to incorporate our Symetron technology into both 12-volt and 24-volt
high output brushless claw-pole alternators, including Rasers proprietary Intelligent Voltage Regulator (IVR). The primary use for these types of alternators is currently in medium and heavy duty trucks, buses, taxis, emergency
vehicles and agricultural



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equipment. The total market for high output vehicle alternators is estimated at $600 million annually, of which brushless alternators represent approximately
30%. At a 68% annual growth rate, the long life and low maintenance brushless market is expected to grow faster than the brushed market. Wilson plans to begin field testing the Symetron enhanced alternators in the fourth quarter of 2007
and anticipates completing this testing program in the second quarter of 2008.

We were awarded in the fourth quarter of 2006 a contract
with ARINC Incorporated, (ARINC), to complete follow-on tasks to our prior development work with the U.S. Army to develop an integrated starter alternator (ISA) for a military Humvee hybrid vehicle. We successfully completed
the first and second payment milestones of this follow-on task with ARINC and are progressing forward on our other milestones. However, we have been notified by ARINC that other subcontractors have not been able to complete their assigned tasks
within the contracted time. Thus, to allow other subcontractors enough time to complete their tasks, each contracted milestone and related payment date has been delayed for 90 additional days.

Corporate History

Raser Technologies Inc.,
originally a Utah corporation (Raser Utah), was formed on July 18, 2003 and organized under the laws of the State of Utah as a successor to Raser Technologies, LLC, a Utah limited liability company, formed on October 28, 2002.
On October 28, 2003, we became a publicly-traded company through a reverse merger with Wasatch Web Advisors, Inc.

On June 12,
2007, we completed our reincorporation in the State of Delaware (the Reincorporation) by merging Raser Utah with and into its wholly-owned subsidiary, Raser Technologies, Inc., a Delaware corporation (Raser ). The
Reincorporation was effected pursuant to an Agreement and Plan of Merger (the Merger Agreement), dated April 17, 2007, between Raser Utah and Raser. The Board of Directors and shareholders of Raser Utah approved the Reincorporation
and the Merger Agreement at the Annual Shareholders Meeting held on June 1, 2007.

Consistent with our limited operating history, we
have generated very limited revenues from operations and have not yet commercially licensed our transportation and industrial technologies. We are in an early stage of development and there is limited historical information upon which an evaluation
can be made regarding our business and prospects. We also have limited insight into how market and technology trends may affect our future business. The revenue and income potential of both our operating segments is unproven and the markets in which
we expect to compete are very competitive and rapidly evolving. Our business and prospects should be considered in light of the risks, expenses, cash requirements, challenges and uncertainties that exist in an early stage company seeking to develop
new technologies and products in competitive and rapidly evolving markets.

Business Segments

We are focused on a long-term strategy of targeting those markets that could significantly benefit from our technologies and our development experience.
Efforts relating to these areas are divided into two business segments (including applicable technology groupings):



| | 1) | Transportation and Industrial Technology (IMSEO, Alternator/IVR, EO line-driven motors and FTPM)
| | -- | ------------------------------------------------------------------------------------------------



| | 2) | Power Systems (licensed Heat transfer technologies and power plant development)
| | -- | -------------------------------------------------------------------------------

Since inception, 100% of our revenue has been generated from customer-sponsored research and development activities in the Transportation and Industrial Technology segment. To date, no revenue has been generated from
our Power Systems segment.

Research and Development

We are engaged in an ongoing process of researching, developing and demonstrating new applications for our technology, primarily in the Transportation and Industrial technology business segment. These include the
periodic introduction of new motor and generator-related technologies and drives, application of our technologies to manufacturers test applications, testing and performance evaluations of these technologies and participation in design and
engineering of related original equipment manufacturers projects.

We devoted
considerable effort throughout 2006 and the first nine months of 2007 to internally test, refine, characterize and further verify our technologies. Characterization of a technology is the process by which the performance levels that can be achieved
over a range of likely operating conditions are determined. This data provides a performance description that is useful to the customer in understanding the capabilities of a motor utilizing our technology without revealing the intellectual property
underlying the improved performance levels. We anticipate that the data and experience gained through this base-lining activity should result in an improved description of SymetronTMperformance benefits and make our Symetron technology more attractive to potential customers.



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Our research and development costs for the year
ended December 31, 2006 totaled $3,893,540. Our research and development costs for the three and nine months ended September 30, 2007 totaled $939,839 and $2,521,610, respectively. Future research and development expenditures are
anticipated in order to develop additional SymetronTMtechnologies primarily relating to integrated starter alternators (ISAs), AC electric
motors and power electric AC drives, hybrid and plug-in electric vehicles and propulsion systems. Research and development costs, relating to development of potential technologies, are expected to increase over time as milestones in the development
process are achieved.

Trends and Uncertainties

Power Generation Market

We are positioning ourselves to be one of the primary developers of geothermal and industrial waste
heat electric power in the United States. We intend to leverage our technology platform and power plant development skills to establish tax credit monetization payment streams from incentives available to renewable power plant projects. We believe
we are well positioned for entry into this market.

We are considering two potential applications for our heat transfer technologies:



| |  |  | Geothermal Power  Geothermal power plants use underground steam or hot water from wells drilled deep into the earth. The steam or hot water is piped up from
the well to drive a steam turbine directly or through the use of a working fluid, which powers an electric generator. Typically, the extracted hot fluid is returned to the ground to recharge the reservoir.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Waste Heat Bottom-Cycling  Many power plants and other industrial plants generate excess heat that is not utilized by the facility. In many cases, this waste
heat represents a significant portion of the heat value generated by the plant. It is possible to partially recover this waste heat through bottom cycling to generate additional electricity. The ability to bottom-cycle power plants and industrial
facilities affords the opportunity to generate additional electricity and take advantage of existing power generation and transmission infrastructure at a low incremental cost and no fuel cost or to use the additional electricity in the
facilitys own operations, reducing its power needs from the grid.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the United States, we expect to benefit from
the increasing demand for renewable energy as a result of favorable legislation adopted by 24 states and the District of Columbia. Renewable Portfolio Standards (RPS) adopted by these states require that an increasing percentage of
electricity supplied by utilities be derived from renewable energy sources. However, a change in legislation could reduce some of the current demand for renewable energy production.

The viability of geothermal resources depends upon such factors as the heat content in the geothermal reservoir, the useful life of the reservoir, and
operation factors relating to the extraction of geothermal fluids. Such factors, together with the possibility that we may fail to secure commercially viable geothermal resources in the future, represent significant uncertainties our power systems
operations.

The federal government currently encourages production of electricity from geothermal resources through certain tax
incentives. We are permitted to claim in our consolidated federal tax returns either an investment tax credit for approximately 10% of the cost of each new geothermal power plant or production tax credits of 2.0 cents (plus an inflation factor) per
kilowatt hour of energy sold during the first ten years of a plants operation. Currently, production tax credits can only be claimed on new plants put into service by December 31, 2008. Congress has historically extended the renewable
energy production tax credit before its expiration date and we believe that Congress will continue to extend the production tax credits into the future. However, there can be no assurances that future extensions will occur. Elimination of the
production tax credit would significantly impair our ability to monetize and finance the construction of geothermal power plants.

For tax
purposes, most of the construction cost of a power plant is depreciable as depreciation expense over five years on an accelerated basis. The fact that the deductions are accelerated means that most of the cost is deducted in the first few years
rather than during the remainder of the useful life of the power plant. There are also other tax incentives that we believe are available to geothermal power plant operations.

We believe that we have the ability to transfer the value of these tax incentives when we are not in a position to use them directly. For instance, we
believe the benefit of these incentives may be transferred by bringing in another company who can use them as a partner in the project. Additionally, other credits and environmental incentives exist that we may be able to sell or otherwise transfer
for value to other parties. However, there can be no assurance that we will be able to successfully transfer the benefit of these tax incentives and other incentives.



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Transportation Market

We continue marketing our SymetronTMenhanced alternator design to component manufacturers. We are seeking to enter licensing discussions with one or more additional potential customers during 2007 and 2008. However, we are dependent upon decisions made
by others in the automotive market and have limited experience with licensing our technologies. Therefore, our ability to increase licensing revenues is uncertain.

Our P-50 ISA is designed for a commercial hybrid-electric automobile, and we believe it can be scaled up for truck and military vehicle drive systems applications. We are currently building prototypes of our P-50
motors and controllers and are procuring cost estimates for production quantities.

We have completed the initial development work on a
larger ISA under our Cooperative Research and Development Agreement with the United States Army (ARMY) on the first task of a multi-year development proposal to create an AC Induction based ISA for a Military Humvee Hybrid Vehicle. We
have been awarded a contract with ARINC Incorporated, (ARINC), for the follow-on tasks under this development proposal. We successfully completed the second payment milestone in September 2007. We expect to continue to successfully
complete all milestones within the subcontracted time; however, unforeseen events or Army requested changes may result in delays in completing the subcontract.

Industrial Market

In 2006, we completed testing of our FLEXMODTMflexible, modular motor controller design with Advanced Energy under its STAC contract with the U.S. Department of Energy. Results obtained from dynamometer
testing demonstrated that efficiency gains of up to 10% could be obtained by applying SymetronTMconcepts to variable speed AC motor drive systems over
varying speed and of load conditions for motors ranging from 5 to 50 horsepower. An independent final report quantifying the benefit potential of the technology was issued by Advanced Energy, Washington State University and the U.S. Department of
Energy. Based upon the results, we intend to develop control software for commercial application in 2008. Although the test results are encouraging, the tests were conducted in a laboratory environment and we can give no assurance that similar
efficiency gains will be achieved in commercial applications.

Sources of revenue

To date, our primary source of revenue has been from research and development subcontracts, administered through contractors with certain government
agencies, in which we perform engineering design, development and testing activities to demonstrate that specific applications of our technologies are viable. We expect to continue generating modest revenues from research and development contracts
as we continue developing our technologies for commercial applications.

We anticipate additional revenues will be generated in the future
from transportation and industrial technology licenses and related royalty agreements, although we have not yet received revenue from our current license agreement. Once our technologies have become commercialized, we intend to market our technology
licenses to additional companies in North America, Asia and Europe.

Licenses of our
Symetron technology to potential customers will typically result from the entry of the potential customer into our Test Demonstration Program. Our Test Demonstration Program involves four phases described as follows: (1) Phase I Paper
Test  an initial indication of engineered value to the customer which is provided through our computer modeling capabilities; (2) Phase II Install Test  a customer-specific demonstration of the SymetronTMadvanced motor technology into a motor of the customers choosing; (3) Phase III System Test  an application-specific installation of our technology into the
customers product; and (4) Phase IV License  an agreement whereby the customer will acquire specified rights to manufacture or use the SymetronTMadvanced motor technology. Our intent is to continue developing relationships with current and potential customers and accelerate their progress through the Test Demonstration Program during 2007. As a result, we do not have an established
licensing revenue stream and our revenues to date have not been significant.

As described above, we are also seeking to
develop geothermal power plants on certain properties we have leased or in which we have otherwise acquired an interest. We believe that as we develop these and other properties, we will have the opportunity to generate revenue through various
means, including electric power sales and fees paid by development partners who are in a position to benefit from available tax benefits. We believe that development of geothermal power plants will typically involve an alliance partner with specific
power generation interests or a financial partner, both of which would have interests in the favorable tax attributes available to renewable energy projects. Through these alliance partners we intend to generate revenue streams by monetizing these
tax attributes and licensing our technologies. Development of our power plants will likely take a year or much more depending on the project, technology and equipment we use. Specific projects or portions of a project may be sold prior to
commissioning.



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We also intend to generate revenue from the sale of electricity generated by the geothermal power plants
we intend to develop. We expect these sales to be made pursuant to long-term power purchase agreements with electric utilities. Such revenue is subject to seasonal variations based upon electricity usage of the end-users. To date, the properties are
still in the exploratory phase and have had limited evaluation for viability, generating capacity, or potential reserves.

Significant Expenses

Transportation and Industrial

Since inception, we have incurred significant costs to develop our technologies and to build brand recognition for the transportation and industrial markets. However, we have not yet generated revenues from our
technology licensing activities. The principal expenses directly attributable to research and development are engineering salaries, equity based compensation, certain consulting contracts, operating costs of our testing facility, and purchases of
motors and parts for testing. Direct costs attributable to a contract or subcontract are included in costs of sales.

Selling and
administrative costs primarily consist of administrative salaries, equity based compensation to employees and non-employees, certain administrative consultants, legal and audit fees, and operating costs of our corporate headquarters.

Power Systems

We expect the
principal expenses related to developing geothermal power plants, including costs for property acquisition, exploration, drilling, construction and operation will either be financed by an alliance partner or incurred by us. Expenses include
salaries, equity based compensation, costs relating to third-party services, lease rentals and royalty payments, depletion and amortization for successfully implemented power plants, and other equipment and construction costs as deemed necessary to
advance projects to completion. Lease acquisition costs, lease bonuses, certain legal fees, drilling costs, and construction costs are capitalized. These costs will be written off if the project is abandoned.

Geothermal heat transfer license royalties and other geothermal lease payments will be included in the costs of sales when the plant is placed into
service.

Losses since inception

We have incurred significant losses since our inception. As of September 30, 2007, we had incurred an accumulated deficit and deficit accumulated after re-entry into the development stage of approximately $46.7
million on cumulative revenues of approximately $686,700. Our net losses before preferred stock dividends for the nine months ended September 30, 2007 and for the year ended December 31, 2006 totaled $11.2 million and $18.5 million,
respectively.

During the nine months ended September 30, 2007, the monthly cash expenditure rate for operations increased to $0.9
million per month from approximately $0.7 million per month in the twelve months ended December 31, 2006. The higher spending rate reflects expenditures relating to geothermal power development, geothermal well field consulting and prospecting,
increased insurance requirements, implementation of Sarbanes-Oxley Act of 2002 internal control documentation requirements, and increased employment levels. We may make more investments and pursue alliances that could increase our rate of cash
outlay in the future.

As a company heavily involved in research and development and without an established revenue stream, we have made
use of equity-based compensation in several instances to conserve cash. The three and nine months ended September 30, 2007 included non-cash equity-based compensation expenses to employees and service contractors of approximately $0.8 million
and $3.9 million, respectively. Of the equity-based employee compensation for the nine months ended September 30, 2007, approximately $0.4 million is related to stock grants to employees, approximately $1.1 million for stock grants and options
to service providers, and approximately $2.4 million is associated with the issuance of stock options to our employees.

Our limited
operating history makes the prediction of future operating results difficult. We believe that period-to-period comparisons of operating results should not be relied upon to predict future performance. Our ability to become profitable must be
considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly companies in rapidly evolving markets.



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Dividends

No dividends were paid relating to either common stock or preferred stock during the fiscal year 2006 or the nine months ended September 30, 2007. We do not expect to pay dividends on our common stock in the near
future.

Results of Operations



|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|------------------------------------------ | ---- | -------------------------------- | ---------- | ---- | ------------------------------- | - | ---------- | - |  | ---- | ----------- | - |  | - | ----------- | -
|                                           |      | Three months ended September 30, |            |      | Nine months ended September 30, |  
|                                           | 2007 |                                  |            | 2006 |                                 |   | 2007       |   |  | 2006 |            
|Revenue                                    |      | $                                | 49,887     |      |                                 | $ | 9,870      |   |  | $    | 202,212     |   |  | $ | 78,015      |  
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Operating expense                          |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Cost of sales                              |      |                                  | 49,887     |      |                                 |   | 129,430    |   |  |      | 543,679     |   |  |   | 393,561     |  
|General and administrative                 |      |                                  | 1,920,526  |      |                                 |   | 4,743,956  |   |  |      | 7,353,982   |   |  |   | 11,382,589  |  
|Power project development                  |      |                                  | 708,010    |      |                                 |   |           |   |  |      | 1,572,271   |   |  |   |            |  
|Research and development                   |      |                                  | 939,839    |      |                                 |   | 1,286,338  |   |  |      | 2,521,610   |   |  |   | 2,951,081   |  
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Total operating expenses                   |      |                                  | 3,618,262  |      |                                 |   | 6,159,724  |   |  |      | 11,991,542  |   |  |   | 14,727,231  |  
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Operating loss                             |      |                                  | (3,568,375 | )    |                                 |   | (6,149,854 | ) |  |      | (11,789,330 | ) |  |   | (14,649,216 | )
|Interest income                            |      |                                  | 195,856    |      |                                 |   | 231,751    |   |  |      | 597,385     |   |  |   | 670,262     |  
|Loss on the sale of securities             |      |                                  |           |      |                                 |   |           |   |  |      |            |   |  |   | (8,512      | )
|Series B warrant registration costs        |      |                                  |           |      |                                 |   |           |   |  |      | (31,159     | ) |  |   |            |  
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Loss before income taxes                   |      |                                  | (3,372,519 | )    |                                 |   | (5,918,103 | ) |  |      | (11,223,104 | ) |  |   | (13,987,466 | )
|Income tax benefit (expense)               |      |                                  |           |      |                                 |   |           |   |  |      |            |   |  |   |            |  
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  
|Net loss applicable to common stockholders |      | $                                | (3,372,519 | )    |                                 | $ | (5,918,103 | ) |  | $    | (11,223,104 | ) |  | $ | (13,987,466 | )
|                                           |      |                                  |            |      |                                 |   |            |   |  |      |             |   |  |   |             |  

Comparison of Three Months Ended September 30, 2007 and 2006

Revenue

During the three months ended
September 30, 2007, we recognized revenue totaling $49,887. Revenue increased over the prior year as a result of completing our second performance milestone of the ARINC subcontract for the Army that began in October 2006. We recognized revenue
totaling $9,870 for the three months ended September 30, 2006 as a result of our subcontract with Advanced Energy, which was completed in 2006. These subcontracts are accounted for on a percentage-of-completion basis.

Operating expenses

Cost of sales. We reported
cost of sales for the three months ended September 30, 2007 and 2006 totaling $49,887 and $129,430, respectively. Cost of sales includes the direct labor, materials and overhead expenses required to perform the work on our subcontracts with
Advanced Energy and the Army. The decrease from the prior year period is primarily related to additional resources required to complete our subcontract with Advanced Energy in 2006.

General and administrative.General and administrative expenses include expenses related to our marketing, sales, accounting, legal, investor
relations, human resources, and other administrative functions. Any expenses previously deferred as part of our previously anticipated business combination were expensed when the combination became no longer likely to occur.

General and administrative expense decreased from approximately $4.7 million for the three months ended September 30, 2006 to approximately $1.9
million for the three months ended September 30, 2007. The three months ended September 30, 2007 and 2006 included equity-based non-cash employee compensation expense of approximately $0.5 million and $2.3 million, respectively.
Equity-based non-cash compensation to service providers also decreased $1.3 million due to prior year fees arising from the prior year terminated merger with our former merger candidate. Other employment related costs increased by approximately $0.1
million from the third quarter of 2006. This increase reflects higher salaries and employment levels. Professional service expenses increased by approximately $0.1 million in the three months ended September 30, 2007 compared to the same period
in 2006 primarily due to advisory fees to a service provider relating to our exercise of the call provision contained in the March 2007 warrants.

Power project development.Power project development expenses primarily include professional services for mapping, environmental and geological studies, and other prospecting costs related to the exploration for geothermal power
resources. Power project development expenses prior to 2007 were considered immaterial and included in the general and administrative costs.



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Power project development expenses during the three months ended September 30, 2007 totaled $0.7
million. Equity-based non-cash employee compensation totaled $0.1 million. Employment related costs for power project development employees totaled $0.3 million and professional services relating to geological consulting totaled $0.3 million.

Research and development. All research and development expenditures are recognized and expensed in the period in which they occur.
Total engineering expenses are split between cost of sales and research and development based on the engineering time and expenses by project and the material expense incurred during the quarter.

Research and Development expenses decreased from $1.3 million for the three months ended September 30, 2006 to approximately $0.9 for the three
months ended September 30, 2007. The three months ended September 30, 2007 and 2006 included equity-based non-cash employee compensation expense of approximately $0.5 million and $0.2 million, respectively. Other employment related costs
decreased by approximately $0.2 million from the third quarter of 2006 primarily due to lower levels of employment.

Interest and other
income. Interest income for the three months ended September 30, 2007 remained relatively flat at approximately $0.2 million which was comparable to the same period in the prior year.

Comparison of Nine Months Ended September 30, 2007 and 2006

Revenue

During the nine months ended September 30, 2007, we recognized revenue totaling $202,212. Revenue increased
over the prior year as a result of progress towards completion of our ARINC subcontract that began in October 2006. We recognized revenue totaling $78,015 for the nine months ended September 30, 2006 as a result of our subcontract with Advanced
Energy, which was completed in 2006. These subcontracts are accounted for on a percentage-of-completion basis.

Operating expenses

Cost of sales. We reported cost of sales for the nine months ended September 30, 2007 and 2006 totaling $543,679 and $393,561, respectively.
Cost of sales includes the direct labor, materials and overhead expenses required to perform the work on our subcontracts with Advanced Energy and the U.S. Army. The increase over the prior year period was a $342,000 loss during the first quarter of
2007 resulting from anticipated budget overruns to complete the ARINC subcontract objectives.

General and administrative.General
and administrative expenses include expenses related to our marketing, sales, accounting, legal, investor relations, human resources, and other administrative functions. Power production segment operating costs are immaterial. Therefore,
non-capitalized costs associated with this segment primarily relate to exploration and are included in general and administrative expenses. Any expenses previously deferred as part of our previously anticipated business combination were expensed
when the combination became no longer likely to occur.

General and administrative expense decreased from approximately $11.4 million for
the nine months ended September 30, 2006 to approximately $7.4 million for the nine months ended September 30, 2007. The nine months ended September 30, 2007 and 2006 included equity-based non-cash employee compensation expense of
approximately $2.0 million and $5.7 million, respectively. Equity-based non-cash service provider compensation decreased by approximately $0.4 million compared to the same period in 2006 due to the granting of fewer shares of common stock in the
2007. Shares granted in the 2006 period included shares granted to a service provider engaged to perform financial advisory services that were not performed in 2007. Other employment related costs increased by approximately $0.2 million over the
same prior year period. This increase reflects higher salaries and employment levels. Professional service expenses decreased by approximately $0.4 million in the nine months ended September 30, 2007 compared to the same period in 2006
primarily due to a reduction of legal fees. The higher legal fees in the 2006 period were due primarily to a terminated merger agreement with a former merger candidate. Office expenses increased by approximately $0.1 million during the nine months
ended September 30, 2007 over the same prior year period due to the general increase in employment levels.

Power project
developments.Power project development expenses primarily include professional services for mapping, environmental and geological studies, and other prospecting costs related to the exploration for geothermal power resources. Power project
development expenses prior to 2007 were considered immaterial and included in the general and administrative costs.

Power project
development expenses during the nine months ended September 30, 2007 totaled $1.6 million. Equity-based non-cash employee and contractor compensation totaled $0.3 million. Employment related costs for power project development employees totaled
$0.6 million and professional services relating to geological consulting totaled $0.7 million.



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Research and development. All research and development expenditures are recognized and expensed in
the period in which they occur. Total engineering expenses are split between cost of sales and research and development based on the engineering time and expenses by project and the material expense incurred during the quarter.

Research and Development expense decreased to $2.5 million during the nine months ended September 30, 2007 from $3.0 million for the nine months
ended September 30, 2006. Equity based employee compensation decreased by approximately $0.6 million for the nine months ended September 30, 2007 compared to the same period in 2006. The decrease resulted from the timing of issuing share
grants to research and development employees. Other employment related costs decreased by approximately $0.1 million from the same prior year period. This decrease reflects lower employment levels. Material purchases for testing increased by $0.2
million over the same prior year period primarily due to anticipated testing requirements related to our ARINC subcontract and finalizing our Symetron license agreement.

Interest and other income. Interest income for the nine months ended September 30, 2007 decreased slightly from the prior year period from $0.7 million to approximately $0.6 million. The decrease is
primarily due to higher average monthly cash balances in prior year.

Liquidity and Capital Resources



|                                              |  |                   |            |                  |   |          
|--------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ---------
|Cash and Cash Equivalents                     |  | September 30,2007 |            | December 31,2006
|Cash                                          |  | $                 | 327,429    |                  | $ | 157,746  
|Certificate of Deposit (unrestricted portion) |  |                   | 300,000    |                  |   |         
|Money Market Account                          |  |                   | 13,897,410 |                  |   | 3,193,822
|                                              |  |                   |            |                  |   |          
|Total                                         |  | $                 | 14,524,839 |                  | $ | 3,351,568

The preparation of our consolidated financial statements is on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As discussed above, as of September 30, 2007, we had cash and cash equivalents on hand of $14.5 million. Cash used in
operations totaled approximately $5.1 million for the nine months ended September 30, 2007 and the accumulated deficit and deficit accumulated after re-entry into development stage totaled $46.7 million. Our ability to continue as a going
concern is dependent upon our ability to raise additional funds and implement our business plan to increase revenues and ultimately achieve profitable operations.

To date, we have financed our operations principally through the sale of equity and equity related securities. We have incurred losses since inception and we are not operating at cash flow breakeven. Our current cash
balance is not sufficient to execute our business plan or to satisfy our cash requirements for the next twelve months.

The execution of
our business plan and the funding of our capital expenditures are dependent on our ability to obtain additional financing for our activities, including power plant development. In addition, the availability of such financing will affect the timing,
pace, scope and amount of our capital expenditures. We believe we will be able to finance our activities through monetizing tax benefits, debt or equity financing, project financing, or a combination of these sources. There can be no assurance,
however, that we will be able to obtain additional financing, reduce expenses or successfully complete other steps to continue as a going concern. If we are unable to obtain sufficient funds to satisfy our future cash requirements, we may be forced
to curtail operations, dispose of assets or seek extended payment terms from our vendors. Such events would materially and adversely affect our financial position and results of operations.

We have entered into a series of purchase and service agreements whereby a vendor has agreed to provide certain products and services to us. During the
nine months ended September 30, 2007, we made payments to this vendor in relation to these products and services, and we are obligated to pay the vendor up to $25.4 million on or before September 30, 2008.

Our strategy for obtaining the necessary capital to fund the development of geothermal power plants is to develop strategic alliances with partners who
are in a position to take advantage of certain tax benefits associated with the geothermal power plants we intend to develop. We believe that with the tax incentives available for such projects and the favorable economic environment for renewable
energy, subject to obtaining adequate financing from our alliance partners or other sources, it will be possible to develop geothermal projects that are economically feasible. Although we believe that we will successfully implement our business
plan, management cannot give any assurances that we will be able to obtain financing on favorable terms or at all.

We also intend to
expand our revenue base through implementing our strategy to develop geothermal and bottom-cycling electric power generation projects. We intend to obtain revenues from these projects through power sales and payments from our partners in these
projects that are in a position to benefit from the favorable tax attributes available to these projects.



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Operating Activities. Cash consumed by operating activities for the nine months ended
September 30, 2007 consisted primarily of a net loss of approximately $11.2 million, adjusted for approximately $3.9 million of stock-based compensation and stock issued for services. Interest receivable at September 30, 2007 decreased by
approximately $0.4 million compared to September 30, 2006 as a result of collection of the note receivable in full from a former merger candidate. Accrued liabilities increased $1.9 million for the first nine months of 2007 due to the timing of
payments for certain professional services contracts relating to well field development. Other current assets at September 30, 2007 increased $0.3 million compared to September 30, 2006 due to increased prepaid software maintenance,
directors and officers insurance coverage and certain deposits to build research and development prototypes.

Cash consumed by
operating activities in the nine months ended September 30, 2006 consisted primarily of a net loss of approximately $14.0 million, adjusted for approximately $8.2 million of stock-based compensation and stock issued for services. Accounts
receivable increased $0.1 million in the first nine months of 2006 due to the timing of billing for the Advanced Energy subcontract and accrued liabilities decreased $0.8 million in the first nine months of 2006 due to the timing of payments for
certain professional services contracts. Approximately $0.8 million of cash expenditures during the first nine months of 2006 were related to an unsuccessful acquisition, and were consequently reclassified from an investing activity to an operating
activity.

Due to our research and development activities, since inception we have incurred substantial losses and we are not operating at
cash breakeven. Our continuation as a going concern is dependent on efforts to increase revenues, reduce expenses, finance development projects, and ultimately achieve profitable operations. If substantial losses continue, liquidity concerns may
require us to curtail operations, liquidate or sell assets or pursue other actions that could adversely affect future operations.

Investing Activities. We purchase investments in marketable debt securities as a means of temporarily investing the proceeds from financings until the funds are needed for operating purposes. Due to the nature of these investments,
we consider it reasonable to expect that their fair market values will not be significantly impacted by a change in interest rates, and that they can be liquidated for cash on short notice. Our investments are intended to establish a high-quality
portfolio that preserves principal, meets liquidity needs, avoids inappropriate concentrations and delivers an appropriate yield in relationship to our investment guidelines and market conditions. Concentration of credit risk is normally managed by
diversifying investments among a variety of high credit-quality issuers. However, cash in our money market account is currently invested with AIM Funds earning 5.15 percent interest. Cash in our money market account totaled $13.9 million at
September 30, 2007. Cash from our checking account totaled $0.3 million at September 30, 2007. Cash from our checking account is swept nightly into a variable rate interest bearing account earning 4.69 percent per annum.

Investing activities provided approximately $2.3 million of cash in the nine months ended September 30, 2007, reflecting collection in full of a
promissory note receivable of approximately $5.5 million and a change in the status of $0.3 million of a certificate of deposit from restricted to unrestricted. We have made deposits of $3.7 million towards the purchase of turbines to generate
electricity from geothermal resources and toward certain bonding requirements. We have also made deposits of $0.2 million toward the purchase of certain testing equipment. We have purchased certain equipment for development of a well field in Nevada
totaling $2.5 million. We also acquired leases for unproved geothermal properties totaling $0.9 million and made a down payment towards the purchase of a potential acquisition candidate totaling $0.5 million. Additionally, we spent approximately
$0.3 million on equipment and fees relating to filings for patents and trademarks.

Investing activities consumed approximately $6.4
million of cash during the nine months ended September 30, 2006. We loaned a potential merger partner $5.5 million and entered into a promissory note receivable that paid interest at a rate of 10% per annum. Expenditures of approximately
$0.8 million in 2006 were related to our unsuccessful acquisition, and were consequently reflected as an investing activity rather than an operating activity. We received cash from the sale of low risk short-term instruments totaling $0.5 million
during the nine months ended September 30, 2006. Additionally, we spent approximately $0.5 million on equipment and fees relating to filings for patents and trademarks.

Financing Activities. Financing activities provided approximately $18.5 million and $0.2 million of cash in the nine months ended
September 30, 2007 and 2006, respectively. Financing activity in the nine months ended September 30, 2007 provided approximately $0.3 million from the exercises of options to purchase shares of our common stock. We also closed our private
equity placement on March 30, 2007, which provided approximately $11.9 million in net proceeds. The March 30, 2007 private placement included 1,037,012 stock warrants. The warrants contained a call provision that allowed us, under certain
circumstances, to call the warrants if the closing market price of our common stock was above $9.075 for twenty (20) consecutive trading days. On August 9, 2007, our common stock price closed above $9.075 for the twentieth



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consecutive trading day. Therefore, on August 9, 2007 we exercised the call provision to require the warrant holders to either exercise their warrants
or allow us to cancel their warrants. During August 2007, the warrant holders exercised all 1,037,012 outstanding warrants at the exercise price of $6.05 per share and received an equal number of shares of unrestricted common stock. Proceeds
received from these warrant exercises and exercises of previous warrants totaled $6.4 million. Financing activity in the nine months ended September 30, 2006 provided approximately $0.2 million from the exercises of options to purchase shares
of our common stock.

As of September 30, 2007, we had stockholders equity of approximately $22.4 million and approximately
$14.5 million in cash and cash equivalents. We are pursuing various financing alternatives to meet our projected capital needs associated with developing our future geothermal power plant projects. We intend to raise capital through the monetization
of tax benefits associated with building and operating these power plants and through other financing arrangements which may include debt- or equity-related structures. Although we believe these arrangements are viable options, there can be no
assurance that we will be successful in structuring arrangements that are attractive to potential tax monetizers or other investors.

Off-Balance Sheet
Arrangements

As of September 30, 2007, we had the following off-balance sheet arrangements as defined by item 303(a)(4)(II) of
Securities and Exchange Commission (SEC) Regulation S-K.

On September 2, 2006, we entered into a License and Sublicense
Agreement for heat-transfer technologies through a wholly-owned subsidiary of Raser. We also entered into a guaranty on behalf of the subsidiary to irrevocably and unconditionally guarantee full and prompt payment and performance of all the
subsidiary obligations under the License and Sublicense Agreement. The guaranty will remain in full force and effect until satisfaction in full of all the subsidiarys obligations under the License and Sublicense Agreement and is binding on any
successors, and inures to the benefit of any third party successor or assignees. The maximum potential amount of future payments under this guarantee cannot be estimated, but payment obligations will be limited to a fraction of expected cash flows
from developed projects that utilize the heat transfer license.

On December 22, 2006, we entered into a 50-year geothermal lease
agreement through our wholly-owned subsidiary with a property owner in Nevada. Under the lease agreement, upon successful placement of an operating geothermal power plant into service, we will issue to the owner 25,000 restricted shares of our
common stock. Delivery of the 25,000 restricted shares shall be an advance against any royalty payable, or to become payable, to the owner. The value of the stock shall be determined at the time the owner sells the stock and that value shall
constitute the value for the advance against royalties, whether owing in the present or in the future. Additionally, the value of the stock shall also be applied against any rentals payable or to become payable to the owner. We are currently in the
process of amending the 50-year geothermal lease agreement that was originally executed on December 22, 2006.

On June 18, 2007,
we entered into a 10-year geothermal lease agreement to obtain the exclusive right to drill for, extract, produce, remove, utilize, sell and dispose of all forms of thermal energy on the same property we previously leased on December 22, 2006
in Nevada. This lease was necessary to more fully secure our interest in the property. As part of the consideration for the geothermal lease agreement, we committed to grant 25,000 restricted shares of our common stock, contingent upon successfully
placing a geothermal power plant in operation upon the leased lands. During the third quarter of 2007, management assessed the likelihood of completing the contingent requirements and concluded that it remained reasonably possible in
accordance with the definition in SFAS No. 5, Accounting for Contingencies and, accordingly has not recognized equity compensation relating to the contingent shares during the third quarter of 2007.

On May 24, 2007, we entered into a geothermal project alliance agreement whereby the service provider agreed to provide engineering advice to us
relating to geothermal drilling and geothermal power plant construction. As part of the consideration for the agreement, we committed to grant 5,000 shares of common stock upon issuance of a certificate of completion with respect to each of the
first three specific projects. During the third quarter of 2007, management assessed the likelihood of completing the contingent requirements for each of the three specific projects and concluded that it remained reasonably possible in
accordance with the definition in SFAS No. 5, Accounting for Contingencies. Accordingly, we have not recognized equity compensation relating to the contingent shares during the third quarter of 2007.

On May 31, 2007, the Compensation Committee agreed to grant to a key geothermal executive a total of 50,000 options to purchase shares of our common
stock that will contingently vest upon successfully placing each of the first three geothermal power plants in service. One third of the shares contingently granted will vest upon successful placement of each geothermal power plant in service.
Failure to successfully place any of the first three geothermal power plants into service will result in the forfeiture of the unvested contingent options specifically pro rated toward that geothermal power plant. During the third quarter of 2007,
management assessed the likelihood of completing the contingent requirements for each of



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the specific projects and concluded that it remained reasonably possible in accordance with the definition in SFAS No. 5, Accounting
for Contingencies. Accordingly, we have not recognized equity compensation relating to the contingent shares during the third quarter of 2007.

On September 6, 2007, we granted to a key transportation and industrial executive a total of 50,000 options to purchase shares of our common stock that will contingently vest upon third-party validation of the
commercial viability of certain technology developed by the executive. Failure to successfully commercialize the technology will result in the forfeiture of the unvested contingent options. Management has assessed the likelihood of completing the
contingent requirements as reasonably possible in accordance with the definition in SFAS No. 5, Accounting for Contingencies. Accordingly, we have not recognized equity compensation relating to the contingent shares
during the third quarter of 2007.

On September 27, 2007, we entered into a letter agreement (the Letter Agreement) with
the members of GeoLectric Power Company NM, LLC (GeoLectric), providing for the purchase of GeoLectric and its wholly-owned subsidiary, Lightening Dock Geothermal, Inc. GeoLectric has no other material assets or operations other than the
geothermal leases with the BLM on approximately 2,500 acres of property and an existing 7,000 foot geothermal well with an established production history at temperatures and flow rates believed to be suited for power generation. The Letter Agreement
also provides both geothermal and surface access on related properties.

Upon completion of the purchase of GeoLectric, we will pay another
$1,500,000 in addition to the initial cash payment of $500,000 to the members of GeoLectric.

Under the terms of the purchase and the
Letter Agreement, we also agreed to make payments to the members of GeoLectric of (a) $750,000 upon the earlier of December 15, 2007 or the completion of certain conditions with respect to the geothermal well, (b) $1,000,000 upon the
earlier of December 31, 2007 or the execution of a power purchase agreement or other mutually acceptable event, and (c) $950,000 upon the earlier of December 31, 2008 or the commercial operation date of a facility on GeoLectrics
property.

Contractual Obligations and Commitments

We have various contractual obligations that are recorded as liabilities in our condensed consolidated financial statements. We also have ongoing employment commitments.

We lease our corporate office located at 5152 North Edgewood Drive, Suite 375, Provo. The corporate office has approximately 7,600 square feet of office
space with monthly rent of approximately $13,600. The lease expires on August 31, 2011. On August 15, 2007, we entered into a sublease to expand our corporate offices by approximately 3,800 additional square feet with a monthly rent of
$6,000. The sublease expires on July 31, 2008.

On June 1, 2006, we also expanded our testing facility in Utah County, Utah from
6,000 to 12,000 square feet and monthly rent increased from approximately $2,700 to $6,050. The testing facility lease expires on June 1, 2009. We expect that these leases will be renewed or that alternative spaces will be obtained. The
facilities are well maintained and in good condition.

Our wholly-owned subsidiary has entered into eleven geothermal lease agreements in
Nevada. Pursuant to these lease agreements, we obtained the right to develop and construct geothermal power plants on properties consisting of approximately 27,955 acres. We also have rights to pursue similar projects on 3.0 million additional
acres of land with respect to which one of the land owners may have geothermal rights. The initial lease term of six of these leases is 50 years, subject to extension for another 50 years as long as we are actively pursuing or generating resources
from the leased lands. The initial term of five of the leases is 10 years, subject to extension for so long as the lessee is extracting or drilling, for geothermal resources. According to six of the eleven geothermal lease agreements, we, at our
sole discretion, may surrender portions of the land or the land in its entirety that we do not intend to utilize thereby reducing the rent obligation.

As part of the consideration for one of the Nevada geothermal leases, we have agreed to pay approximately $42,000 per year in rent beginning in year two of the lease which commences in December 2007. This payment
obligation continues throughout the lease term as an advance against royalties, and certain royalties on the sale of any geothermal resources produced from the leased lands. As part of consideration for four of our 10-year geothermal lease
agreements in Nevada with the BLM, we have agreed to pay approximately $46,000 per year in rent beginning in year two which continues until year ten of the lease.



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Through our wholly-owned subsidiary, we entered into 35 geothermal lease agreements for certain
properties in eight counties in Utah. Under these lease agreements, we obtained the right to begin development and construction of geothermal power plants. The initial lease term for the Utah properties is 10 years, subject to certain extension
provisions.

As part of the consideration for our geothermal lease agreements in the State of Utah, we have agreed to pay a cumulative
total of approximately $68,300 per year in rent beginning in year two of the respective lease agreements. The payment obligations continue throughout the lease terms.

We have entered into a series of purchase and service agreements whereby a certain vendor has agreed to provide certain products and services to us. During the nine months ended September 30, 2007, we made
payments to this vendor in relation to these products and services. We entered into the second purchase agreement on July 31, 2007. As of September 30, 2007, we are obligated to pay the vendor approximately $31.9 million over the next five
years as included in the table below.

The table below summarizes our operating lease obligations pursuant to our non-cancelable leases and
our executed purchase obligations as of September 30, 2007.



|                             |  |       |            |                  |   |              |  |              |            |  |   |          
|---------------------------- |  | ----- | ---------- | ---------------- | - | ------------ |  | ------------ | ---------- |  | - | ---------
|                             |  | Total |            | Less than 1 year |   | 1 to 3 years |  | 4 to 5 years
|Operating Leases Obligations |  | $     | 1,435,837  |                  | $ | 78,449       |  | $            | 1,009,573  |  | $ | 347,815  
|Purchase Obligations         |  | $     | 31,888,125 |                  | $ | 10,580,625   |  | $            | 18,067,500 |  | $ | 3,240,000
|                             |  |       |            |                  |   |              |  |              |            |  |   |          
|Total                        |  | $     | 33,323,962 |                  | $ | 10,659,074   |  | $            | 19,077,073 |  | $ | 3,587,815
|                             |  |       |            |                  |   |              |  |              |            |  |   |          

During the first quarter of 2005, we pledged a $400,000 certificate of deposit as collateral to
secure a corporate credit card program to facilitate employee travel and certain purchases necessary for our business operations. Effective March 9, 2007, we reduced the number of credit cards available under our corporate credit card program.
This action reduced our pledged amount on the same certificate of deposit to $150,000 and reduced the restricted cash balance in favor of our operating cash balance by $250,000. On April 27, 2007, our pledged amount on the certificate of
deposit was further reduced to $100,000. As of September 30, 2007, we did not have any other commercial commitments, such as letters of credit, guarantees, or repurchase obligations.

Recently issued accounting pronouncements

SFAS 157

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements. SFAS
157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide
information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for our 2009 fiscal year,
although early adoption is permitted. We are currently assessing the potential effect of SFAS 157 on our financial statements.

SFAS 159

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 allows us to
choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. Therefore, we are required to adopt SFAS 159 by the first quarter of 2008. We are currently evaluating the requirements of SFAS 159 and the potential impact on our financial statements.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

In addition to the risks inherent in our operations, we are exposed to financial, market, political and economic risks. The following discussion provides information regarding our exposure to the risks of changing interest rates.

As of September 30, 2007, we had approximately $14.5 million in cash and equivalents that are invested primarily in money market
accounts until needed for operating and other activities. Current money market rates are approximately 5.15%. If interest rates decline by 1%, the amount of interest earned on our money market balances would be approximately $145,000 lower over a
twelve month period.



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|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of disclosure controls and
procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure
controls and procedures, our 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. In addition, the design of disclosure
controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any
disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2007, our
disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to
allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

We continued to formalize documentation and perform testing of our financial processes during the period covered by this Quarterly Report on Form 10-Q.
Our former chief financial officer resigned effective December 4, 2006 and was not replaced by our current chief financial officer until January 8, 2007. During that time, we implemented certain measures, such as requiring executive level
approval for items previously approved by the chief financial officer, to ensure that the system of internal control remained effective. No other change in our internal control over financial reporting occurred during the nine months ending
September 30, 2007 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

We have applied to the United
States Patent and Trademark Office for federal trademark registration of our name, RASER, in connection with a number of goods and services including, among other things, electric motors for machines. In connection with our application no.
78/339,071, Razor USA LLC has initiated an opposition proceeding (Opposition) before the Trademark Trial and Appeals Board (TTAB). Currently the opposition is stayed upon stipulation of the parties to allow exploration of
settlement potential. We believe that the Opposition is without merit. Because the TTAB cannot award money damages, the Opposition does not present us with a presently existing material loss contingency.

We are not subject of any other legal proceedings and we are unaware of any proceedings presently contemplated against us by any federal, state or local
government agency.



|Item 1A. | Risk Factors
|-------- | ------------

The following risk factors, among
others, could cause our financial performance to differ significantly from the goals, plans, objectives, intentions and expectations expressed in this report. If any of the following risks and uncertainties or other risks and uncertainties not
currently known to us or not currently considered to be material actually occur, our business, financial condition or operating results could be harmed substantially.

We have limited operating experience and revenue, are not currently profitable, expect to continue to incur net losses for the foreseeable future, and may never achieve or maintain profitability. We will need to
raise additional capital in the future and if we are unable to secure adequate funds on terms acceptable to us, we will be unable to support our business requirements, build our business or, potentially be unable to continue as a going concern.

We are a technology licensing company with a limited operating history, and from our inception, we have earned limited revenue from
operations. We have not yet commercially licensed our technologies. Our early stage of commercialization provides limited historical information upon which an investor can base an evaluation of our business and prospects, and we have limited insight
into how market and technology trends may affect our business. The revenue and income potential of our business is unproven and the markets we seek to penetrate are very competitive and rapidly evolving. Our business and prospects must be evaluated
in light of the risks, expenses, challenges and uncertainty that we face as an early stage company seeking to develop new technology and products in a competitive and rapidly evolving market.

Since our inception, we have incurred significant net losses, including a net loss of approximately $11.2 million for the nine months ended
September 30, 2007. As a result of ongoing operating losses, we had an accumulated deficit and deficit after re-entry into development stage of approximately $46.7 million on cumulative revenues of approximately $0.7 million as of
September 30, 2007. Our losses have resulted primarily from the extensive research and development, power systems, and general and administrative expenses associated with our operations. We expect to incur additional losses for at least the
next few quarters. We may be unable to successfully develop new technology or products, and any technology or any products we develop may not be commercially viable. We expect to incur additional substantial operating losses as a result of increases
in expenses for research and product development, power systems and selling, general and administrative costs. In addition, we continue to incur significant expenses to comply with our obligations as a public company. We may never achieve
profitability. We will need additional funding for our operations and funding may not be available to us on commercially reasonable terms, or at all. Our ability to achieve profitability will depend upon many factors, including our ability to:



| |  |  | identify and secure productive geothermal sites that will produce energy using licensed geothermal heat-transfer technology;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | manage construction, drilling and operating costs relating to geothermal power production;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | acquire electrical transmission and interconnection rights for geothermal plants constructed;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | develop a successful marketing plan relating to the monetization of tax attributes relating to geothermal power production;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | develop commercially viable technology by designing and engineering the SymetronTMmotor, controller, alternator, integrated starter alternator and generator technologies to license on a commercial scale;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | convince our potential customers of the benefits of our technology or products;
| | - |  | -------------------------------------------------------------------------------



| |  |  | establish relationships with motor and power generator manufacturers, automobile manufacturers, producers or consumers of electricity and other forms of power, the
military, government, and other systems integrators for the license or sale of our technology or products, if any;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | avoid infringing and successfully defend any allegations of infringing the intellectual property rights of others;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | defend our intellectual property from infringement by others;
| | - |  | -------------------------------------------------------------



| |  |  | comply with applicable governmental regulations; and
| | - |  | ----------------------------------------------------



| |  |  | hire, train and retain qualified personnel.
| | - |  | -------------------------------------------

On September 30, 2007, we had cash and cash equivalents on hand of $14.5 million. Cash used in operations was approximately $7.9 million for the year ended December 31, 2006 and $5.1 million for the nine months ended
September 30, 2007.

If we are unable to generate revenue or raise additional capital when needed, we will be forced to reduce
expenditures to continue as a going concern. Raising additional capital could have a dilutive effect on or otherwise affect existing shareholders, as described in more detail below. Reduction of expenditures could have a negative impact on our
business as it may slow our development activities, reduce research and development of our products, sales and marketing activities, and other areas that we believe are essential to our ultimate success.

The amount and timing of our future capital needs depend on many factors, including the timing of
our development efforts, opportunities for strategic transactions, and the successful commercial licensing of our technologies. Given our current business strategy, regardless of whether the timing of our development and commercialization of
licensing our technologies is favorable, we will need to raise additional capital to build our geothermal power plants, further develop and market our SymetronTMtechnology, to develop our power projects, and to continue operations.

If we raise additional capital through the
issuance of equity or securities convertible into equity, our shareholders may experience dilution. Any new securities we issue may have rights, preferences or privileges senior to those of the holders of the common stock, such as dividend rights or
anti-dilution protections.

If we raise additional capital by incurring indebtedness, it could constrict our liquidity, result in
substantial cash outflows, and adversely affect our financial health and ability to obtain financing in the future. Any such debt would likely contain restrictive covenants that may impair our ability to obtain future additional financing for
working capital, capital expenditures, acquisitions, general corporate or other purposes, and a substantial portion of cash flows, if any, from our operations may be dedicated to interest payments and debt repayment, thereby reducing the funds
available to us for other purposes and could make us more vulnerable to industry downturns and competitive pressures. Any failure by us to satisfy our obligations with respect to these potential debt obligations would likely constitute a default
under such credit facilities.

Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain
financing, or to obtain financing with acceptable terms, and to implement our business plan to increase revenues, we may be unable to successfully support our business requirements and continue as a going concern.

Our business may be materially adversely affected if we are unable to successfully utilize heat-transfer technology.

Our ability to successfully utilize heat-transfer technology to enter into and compete in the geothermal and waste heat recovery electrical power
production market will depend on many factors and is subject to various risks, including but not limited to:



| |  |  | the future growth of the geothermal and waste heat recovery electrical power production market;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the economic and competitive environment of the geothermal and waste heat recovery area and the overall power generation industry;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to obtain strategic partners in the geothermal and waste heat area, including financial partners who would provide funding for development activities
using the licensed technology, and operational partners who would implement the licensed technology at geothermal and waste heat power plants; to date, we have not secured any such partners;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the level and quality of opportunities to develop power generation;
| | - |  | -------------------------------------------------------------------



| |  |  | our ability to raise sufficient capital to fund our operations and planned growth, including in the geothermal and waste heat power generation area; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to successfully utilize our heat-transfer technology and we are unable to acquire sufficient access to
comparable technology, it could harm our business, prospects, financial condition and results of operation.



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We may be unable to successfully license our intellectual property. If we cannot successfully license our intellectual
property, it could impair our ability to generate revenues.

Our current
long-term business strategy for our transportation and industrial business segment is based almost entirely upon the licensing of our SymetronTMtechnology
to electric motor, controller, alternator and generator manufacturers, suppliers and system integrators. We expect the sales cycle with respect to licensing our technology to be lengthy and there can be no assurance that we will achieve revenue from
our licenses in the time frames that we expect. If we are unable to successfully license our intellectual property or technology to these businesses or others, we will be unable to generate revenues under our current business model, and we may be
unable to continue operating or would be required to develop a new long-term business strategy.

We are currently focusing on
commercializing our technologies in the transportation and industrial markets. We cannot predict the rate at which market acceptance of our technologies will develop in these markets, if at all. Additionally, we may focus our product
commercialization activities on a particular industry or industries, which may not develop as rapidly as other industries, if at all. The commercialization of our products or the licensing of our intellectual property in an industry or industries
that are not developing as rapidly as other industries could harm our business, prospects, financial condition and results of operations.

We may enter
into strategic transactions that result in significant cost and expense, but do not produce additional revenues.

Our success depends on
our ability to execute our business strategy, including licensing our intellectual property to electric motor and controller manufacturers, suppliers and system integrators and developing geothermal electric power plants. Executing our strategy may
involve entering into strategic transactions. In executing these strategic transactions, we may expend significant financial and management resources and incur other significant costs and expenses. There is no assurance that the execution of any
strategic transactions will result in additional revenues. Any failure to enter into strategic transactions that lead to additional revenues could harm our business, prospects, financial condition and results of operations.

We may pursue strategic acquisitions that could have an adverse impact on our business

We may pursue the acquisition of new or complementary businesses or technologies. Acquisitions could result in difficulties assimilating acquired
operations and products, and result in the diversion of capital and managements attention away from other business issues and opportunities. Integration of acquired companies may result in problems related to integration of technology and
management teams. We may not successfully integrate acquisitions, personnel or products that we may acquire in the future. If we fail to successfully integrate acquisitions, our business could be materially harmed. Furthermore, acquisitions of new
or complementary businesses or technologies could also result in changes to our business or operating model, which may be difficult to execute. In addition, any acquisitions may not be successful in achieving our desired strategic objectives, which
would also cause our business to suffer. Acquisitions can also lead to large non-cash charges that can have an adverse effect on our results of operations as a result of write-offs for items such as acquired in-process research and development,
impairment of goodwill or the recording of stock-based compensation.

We may issue company stock as consideration for acquisitions, joint
ventures or other strategic transactions, and the use of common stock as purchase consideration will dilute each of our current stockholders interest. In addition, we may obtain debt financing in connection with an acquisition. Any such debt
financing could involve restrictive covenants relating to capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities, including
potential acquisitions. In addition, such debt financing may impair our ability to obtain future additional financing for working capital, capital expenditures, acquisitions, general corporate or other purposes, and a substantial portion of cash
flows, if any, from our operations may be dedicated to interest payments and debt repayment, thereby reducing the funds available to us for other purposes and could make us more vulnerable to industry downturns and competitive pressures.

We may be unable to successfully obtain research and development funding opportunities from military and government programs.

A substantial portion of our revenue to date has come from two government sponsored development
contracts. Our FLEXMODTMtechnology packaging contract with Advanced Energy, funded by the Department of Energy, through the State Technologies Advancement
Collaborative (STAC), was completed in the third quarter of 2006 and provided approximately $315,000 in revenue throughout 2006. Our SymetronTMenhanced
ISA subcontract with ARINC, funded by the U.S. Army, resulted in revenue totaling $44,717 during fiscal 2006 and $202,212 during the nine months ended September 30, 2007.

One of our near-term strategies for our transportation and industrial technology segment includes research and development funding opportunities from
military and government programs. If we cannot successfully obtain research and development funding from military and government programs, or meet deadlines imposed under those programs, we may have less funding which could make it more difficult to
sustain our long-term licensing strategy, our stock price could decline and we may be unable to continue operating or would be required to develop a new near-term business strategy.



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The market price for our common stock has experienced significant price and volume volatility in recent periods and is
likely to continue to experience significant volatility in the future. Such volatility may cause investors to experience dramatic declines in our stock price from time to time, may impair our ability to raise additional capital and may otherwise
harm our business.

The closing price of our common stock has fluctuated from a low of $7.12 per share to a high of $15.35 per share
during the three months ended September 30, 2007 and from a low of $4.89 per share to a high of $15.35 for the nine months ended September 30, 2007. Our stock price has in the past and is likely in the future to experience significant
volatility as a result of numerous factors, many of which are outside of our control, including, but not limited to the following:



| |  |  | changes in market valuations or earnings of our competitors or other technology companies;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | changes in market perception of our potential earnings, prospects or value;
| | - |  | ---------------------------------------------------------------------------



| |  |  | actual or perceived developments in our business or in the markets we seek to penetrate;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | fluctuations in our operating results;
| | - |  | --------------------------------------



| |  |  | changes in financial estimates or investment recommendations by securities analysts who follow our business;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | technological advances or introduction of new products by us or our competitors;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the degree of market acceptance of our technology and our ability to license such technology at rates favorable to us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | the loss of key personnel;
| | - |  | --------------------------



| |  |  | the high costs associated with transfer and relocation of new personnel;
| | - |  | ------------------------------------------------------------------------



| |  |  | our sale of common stock or other securities in the future;
| | - |  | -----------------------------------------------------------



| |  |  | additional dilution that could result from adopted employee compensation plans of acquired companies;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | public announcements regarding material developments in our business, including acquisitions or other strategic transactions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | public announcements regarding material transactions or other developments involving our strategic partners, customers or competitors that are perceived by the
market to affect our business prospects;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | intellectual property or litigation developments;
| | - |  | -------------------------------------------------



| |  |  | changes in business or regulatory conditions;
| | - |  | ---------------------------------------------



| |  |  | changes in law
| | - |  | --------------



| |  |  | drilling conditions incurred
| | - |  | ----------------------------



| |  |  | trading patterns of holders of our common stock;
| | - |  | ------------------------------------------------



| |  |  | the trading volume of our common stock;
| | - |  | ---------------------------------------



| |  |  | short-selling and similar activities with respect to our common stock; and
| | - |  | --------------------------------------------------------------------------



| |  |  | disruption in the geopolitical environment, including war in the Middle East or elsewhere or acts of terrorism in the United States or elsewhere.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

Moreover, the volatility in our stock price has been exacerbated by relatively limited trading volume, which can cause
significant price movements in our stock price to result from even modest volumes of trading activity. As such, our stock price could continue to be volatile and the market price of our stock may not reflect our intrinsic value. In addition,
following periods of volatility in a companys stock price, there may be increased risk of securities litigation, governmental investigations or enforcement proceedings may be initiated against that company. Any such litigation, and
investigation or other procedures, regardless of merits, could materially harm our business and cause our stock price to decline due to potential diversion of management attention and harm to our business reputation.

If we fail to comply with NYSE Arca listing standards and maintain our listing on NYSE Arca, our business could be materially harmed and our stock price could
decline.

In October 2005 we received approval to list shares of our common stock on ArcaEx and on November 3, 2005, shares of our
common stock began trading on ArcaEx (now NYSE Arca). Pursuant to the Sarbanes-Oxley Act of 2002, national securities exchanges, including NYSE Arca, have adopted more stringent listing requirements. Although we have been



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approved to list shares of common stock on NYSE Arca, we may not be able to maintain our compliance with all of the listing standards of the NYSE Group, or
that we will be able to maintain our listing with NYSE Arca as a member of the NYSE Group. Any failure by us to maintain our listing on NYSE Arca could materially harm our business, cause our stock price to decline, and make it more difficult for
you to sell your shares.

If we are unable to effectively and efficiently maintain our controls and procedures to avoid deficiencies, there could be a
material adverse effect on our operations or financial results.

As a publicly-traded company, we are subject to the reporting
requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002. These requirements may place a strain on our systems and resources. Our management is required to evaluate the effectiveness of our internal control over
financial reporting as of each year end, and we are required to disclose managements assessment of the effectiveness of our internal control over financial reporting, including any material weakness (within the meaning of Public
Company Accounting oversight Board (PCAOB) Auditing Standard No. 2) in our internal control over financial reporting. On an on-going basis, we are reviewing, documenting and testing our internal control procedures. In order to
maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required.

In connection with the audit of our 2004 financial statements, our management and Audit Committee were notified by our independent accountants, Tanner
LC, of deficiencies that existed in the design or operation of our internal control over financial reporting that it considered to be material weaknesses. The deficiencies related to internal control and disclosure control over
stock-based compensation, reporting of equity transactions and certain disclosures in the footnotes to the consolidated financial statements. The deficiencies in our internal control over stock-based compensation and equity transactions related to
the failure to properly record issuances of stock, the failure to timely report certain transactions on Forms 3, 4, or 5, and the failure to properly itemize equity transactions in the statement of stockholders equity. The deficiency in our
disclosure controls was related to the stock option disclosures required by Statement of Financial Accounting Standards (SFAS) No. 148.

The deficiencies detected in the audit process were appropriately documented and disclosed in our annual report on Form 10-KSB for 2004. We took several steps during 2005 to remedy, and subsequently in 2005 and 2006 to improve, our
disclosure controls and our internal controls over financial reporting, however we cannot assure you that the revised controls and procedures will be effective in remedying all of the identified deficiencies. If we fail to adequately address any
deficiencies, it could have a material adverse effect on our business, results of operations and financial condition. Ultimately, if not corrected, any deficiencies could prevent us from releasing our financial information and periodic reports in a
timely manner, making the required certifications regarding, and complying with our other obligations with respect to our consolidated financial statements and internal controls under the Sarbanes-Oxley Act. Any failure to maintain adequate internal
controls over financial reporting and provide accurate financial statements may subject us to litigation and would cause the trading price of our common stock to decrease substantially. Inferior controls and procedures could also subject us to a
risk of delisting by a national exchange and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

On September 13, 2006, our Audit Committee approved the selection of Hein & Associates LLP, to act as our independent registered public
accounting firm for the fiscal year ending December 31, 2006. At the same time, our Audit Committee approved the dismissal of Tanner LC effective as of September 13, 2006. The Audit Committees decision to retain Hein &
Associates, LLP was precipitated by Tanner LCs recommendation that we engage an accounting firm with expertise in the power generation industry. Based on discussions with Hein & Associates LLP and related inquiries regarding
Hein & Associates LLPs work and existing clients, our Audit Committee believes that Hein & Associates LLP has such expertise. Hein & Associates LLP conducted their first audit of our financial statements for the year
ended December 31, 2006, and did not identify any material weaknesses in our system of internal control over financial reporting in connection with such audit. However, in subsequent audits, it is possible that they may identify material
weaknesses of our system of internal control over financial reporting that would be reported accordingly.

We are deploying new technology and, to date,
we have not yet commercially licensed our technologies and we may not be able to successfully develop other technologies.

Our SymetronTMtechnologies are new and commercially unproven. We are still in the early stages of commercializing our technology in transportation, industrial and power generation applications. While we have completed some laboratory testing, our
technologies have not yet been durability tested for long-term applications. We can provide no assurance that our technologies will prove suitable for our target business segments. Our potential product applications require significant and lengthy
product development efforts, and to date, we have not developed any commercially available products. During our product development process, we may experience technological issues that we may be unable to overcome. Because of these uncertainties,
none of our potential technology may be commercially licensed. If we are not able to successfully license our technology, we will be unable to generate revenue or build a sustainable or profitable business.



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We will need to achieve commercial acceptance of our technology to obtain licensing revenue and achieve profitability.

Although our technology may be proven viable, we may not successfully develop licensing arrangements with potential customers on a
timely basis, if at all. Furthermore, it may be years before our technology is proven viable, if at all, and even longer before we have licensing arrangements in place. Superior competitive technologies may be introduced or potential customer needs
may change resulting in our technology or products being unsuitable for commercialization. Our revenue growth and achievement of profitability will depend substantially on our ability to introduce new technology into the marketplace that we are able
to successfully commercialize. We may need to incur additional expense to add to our sales force, engage sales agents or incur other selling expenses to license our technologies or sell our products. If we are unable to achieve commercial acceptance
of our technology at a reasonable cost, our business will be materially and adversely affected. In addition, although our potential technology achieves commercial acceptance, the size of the potential markets for our technology may prove to be
insufficient to permit us to generate significant revenue or achieve profitability.

Technological advances in our industry could render our technology
and products obsolete, which would harm our business.

Our failure to further refine our technology and develop and introduce new
products could cause our technology to become obsolete, which would harm our business. The industries in which we operate are rapidly evolving and competitive. We will need to invest significant financial resources in research and development to
keep pace with technological advances in the industry and to effectively compete in the future. Our development efforts may be rendered obsolete by the technological advances of others and other technologies may prove more advantageous than our
technology, including advances developed internally by our potential customers and partners.

We face competition from companies in multiple industries,
as well as from the internal efforts of potential partners and, if we fail to compete effectively, our business will suffer.

The
markets for electric motors, alternators, ISAs, motor controllers, and the development of geothermal power are intensely competitive. We believe our potential technology will face significant competition from existing manufacturers, including motor,
controller, alternator, and transportation vehicle companies many of which may be better capitalized. We may also face significant competition from potential partners that we will approach to fund the construction of geothermal power plants. Our
potential partners may decide to develop and construct geothermal power plants without our assistance. Additionally, we face significant competition from several companies who already have established operations in the geothermal power production
industry. We also face numerous challenges associated with overcoming the following:



| |  |  | Our competitors, as well as our potential partners, may have access to substantially greater financial, engineering, manufacturing and other resources than we do,
which may enable them to react more effectively to new market opportunities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Many of our competitors and potential partners have greater name recognition and market presence than we do, which may allow them to market themselves more
effectively to new customers or partners.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our potential partners may have better access to information regarding their own manufacturing processes, which may enable them to develop products that can be more
easily incorporated into the partners products.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We rely on key personnel and the loss of key personnel or the inability to
attract, train, and retain key personnel could have a negative effect on our business.

We believe our future success will depend to a
significant extent on the continued service of our executive officers and other key personnel. Of particular importance to our continued operations are our executive management and technical staff. We do not have key person life insurance for any of
our executive officers, technical staff or other employees. If we lose the services of one or more of our executive officers or key employees, or if one or more of them decide to join a competitor or otherwise compete directly or indirectly with us,
our business could be harmed. Since December 31, 2005, five officers have resigned; the former President, the former Chief Technical Officer, the former Vice President of Marketing, the former Vice President, General Counsel and Secretary, and
the former Chief Financial Officer. As of October 2007, we have filled the President, Chief Financial Officer and General Counsel positions.

Our future success also depends on our ability to attract, train, retain and motivate highly skilled technical and sales personnel. Since our Company has limited resources to attract qualified personnel, we may not be successful in
recruiting, training, and retaining personnel in the future, which would impair our ability to maintain and grow our business.



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Our limited cash resources have in the past required us to rely heavily on equity compensation to hire
and retain key personnel, and we expect this to continue in the future, which may result in significant non-cash compensation expenses and dilution to our shareholders.

We may be unable to realize our strategy of utilizing the tax and other incentives available for developing geothermal power projects to attract strategic alliance partners, which may adversely affect our ability
to complete these projects.

A significant part of our business strategy is to utilize the tax and other incentives available to
developers of geothermal power generating plants to attract strategic alliance partners with the capital sufficient to complete these projects. Many of the incentives available for these projects are new and highly complex. There can be no assurance
that we will be successful in structuring agreements that are attractive to potential strategic alliance partners. If we are unable to do so, we may be unable to complete the development of our geothermal power projects and our business could be
harmed.

We rely on our intellectual property rights, and any inability to protect these rights could impair our competitive advantage, divert
management attention, require additional development time and resources or cause us to incur substantial expense to enforce our rights, which could harm our ability to compete and generate revenue.

Our success is dependent, in part, upon protecting our proprietary technology. We rely primarily on a combination of copyright, patent, trade secret and
trademark laws, as well as confidentiality procedures and contractual provisions to protect our proprietary rights. These laws, procedures and provisions provide only limited protection. We have applied for patent protection on most of our key
technologies. We cannot be certain that our six (6) issued U.S. patents, five (5) pending U.S. patent applications, five (5) pending International patent applications, and five (5) pending foreign patent applications will result
in issued patents and/or that the claims allowed are or will be sufficiently broad to protect the inventions derived from our technology or prove to be enforceable in actions against alleged infringers. Also, additional patent applications that we
may file for our current and future technologies may not be issued. We have also applied for registration of trademarks which may never be granted registration.

The contractual provisions we rely on to protect our trade secrets and proprietary information, such as our confidentiality and non-disclosure agreements with our employees, consultants and other third parties, may be
breached and our trade secrets and proprietary information may be disclosed to the public. Despite precautions that we take, it may be possible for unauthorized third parties to copy aspects of our technology or products or to obtain and use
information that we regard as proprietary. In particular, we may provide our licensees with access to proprietary information underlying our licensed applications which they may improperly appropriate. Additionally, our competitors may independently
design around patents and other proprietary rights we hold.

Policing unauthorized use of our technology may be difficult and some foreign
laws do not protect our proprietary rights to the same extent as United States laws. Litigation may be necessary in the future to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of others.
Litigation could result in substantial costs and diversion of resources and management attention resulting in significant harm to our business.

If
third parties assert that our technologies or products infringe their intellectual property rights, our reputation and ability to license our technology or sell any products could be harmed. In addition, these types of claims could be costly to
defend and result in our loss of significant intellectual property rights.

We may be subject to infringement claims, whether the claims
have merit or not, as the number of products and competitors in our industry grows, and the functionality of products in different industry segments overlaps. If third parties assert that our current or future products infringe their proprietary
rights, there could be costs and damages associated with these claims, whether the claims have merit or not, which could significantly harm our business. Any future claims could harm our relationships with any existing customers and may deter future
customers from licensing our products. In addition, in any potential dispute involving our intellectual property, our potential customers or distributors of our products could also become the target of litigation, which could trigger indemnification
obligations in certain of our license and service agreements and harm our relationships with any such customers or distributors. Any such claims, with or without merit, could be time consuming, result in costly litigation, including costs related to
any damages we may owe resulting from such litigation, cause product shipment or development delays or result in loss of intellectual property rights which would require us to obtain licenses which may not be available on acceptable terms or at all.

We could incur significant expenses if products built with our technology contain defects.

Products such as those built with our technology are subject to product liability lawsuits for any defects that they may contain. Detection of any
significant defects may result in, among other things, loss of, or delay in, market acceptance and sales of our products, diversion of development resources, injury to our reputation, or increased service and warranty costs. A material product
liability claim could significantly harm our business, result in unexpected expenses and damage our reputation.



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The markets for our technologies are heavily influenced by federal, state and local government regulations and
policies.

The progress of our technologies may be dependent on government regulations and policies such as standards for Corporate
Average Fuel Economy (CAFE), Renewable Portfolio Standards (RPS), the Clean Air Act and Section 45 of the Internal Revenue Code. Any delays in implementing, relaxing or extending these standards or policies, as the case
may be, could have a negative impact on the demand for our products and services. Any new government regulations or policies pertaining to our technologies may result in significant additional expenses to us and our potential customers and could
cause a significant reduction in demand for our products and technologies and thereby significantly harm our business.

Our exploration, development,
and operation of geothermal energy resources is subject to geological risks and uncertainties, which may result in decreased performance, increased costs, or abandonment of our projects.

Our business involves the exploration, development and operation of geothermal energy resources. These activities are subject to uncertainties, which vary
among different geothermal reservoirs and are in some respects similar to those typically associated with oil and gas exploration, development and exploitation, such as dry holes, uncontrolled releases of pressure and temperature decline, all of
which can increase our operating costs and capital expenditures or reduce the efficiency of our power plants. In addition, the high temperature and high pressure in geothermal energy resources requires special reservoir management and monitoring.
Because geothermal reservoirs are complex geological structures, we can only estimate their geographic area. The viability of geothermal projects depends on different factors directly related to the geothermal resource, such as the heat content (the
relevant composition of temperature and pressure) of the geothermal reservoir, the useful life (commercially exploitable life) of the reservoir and operational factors relating to the extraction of geothermal fluids. Our geothermal energy projects
may suffer an unexpected decline in the capacity of their respective geothermal wells and are exposed to a risk of geothermal reservoirs not being sufficient for sustained generation of the electrical power capacity desired over time. In addition,
we may fail to find commercially viable geothermal resources in the expected quantities and temperatures, which would adversely affect our development of geothermal power projects.

Our geothermal power business utilizes water heated from magma deep in the Earth. We cannot be certain that these hot water resources will remain
adequate for the life of the power plants. The loss of adequate geothermal resources is possible and could result in our inability to perform under the power purchase agreement for the affected project, which in turn could increase our net loss and
materially and adversely affect our business, financial condition, future results and cash flow. If we suffer a degradation in our geothermal resources, our business interruption, property damage and other insurance coverage may not be adequate to
cover all losses sustained as a result thereof.

Our geothermal power production development activities may not be successful.

Our success in developing a particular geothermal project is contingent upon, among other things, locating a viable geothermal site, negotiation of
satisfactory engineering, procurement and construction agreements and power purchase agreements, receipt of required governmental permits, obtaining interconnection rights, obtaining transmission service rights, obtaining adequate financing, and the
timely implementation and satisfactory completion of construction. We may be unsuccessful in accomplishing any of these matters or doing so on a timely basis. Although we may attempt to minimize the financial risks attributable to the development of
a project by securing a favorable power purchase agreement, obtaining all required governmental permits and approvals and arranging adequate financing prior to the commencement of construction, the development of a power project may require us to
incur significant expenses for preliminary engineering, permitting and legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being financed.

We may be unable to obtain the financing we need to pursue our growth strategy in the geothermal power production segment, which may adversely affect our ability to
expand our operations.

When we identify a geothermal property that we may seek to acquire or to develop, a substantial capital
investment will be required. Our continued access to capital, through project financing or through a partnership or other arrangements with acceptable terms is necessary for the success of our growth strategy. Our attempts to secure the necessary
capital may not be successful or on favorable terms.

Market conditions and other factors may not permit future project and acquisition
financings on terms favorable to us. Our ability to arrange for financing on a substantially non-recourse or limited recourse basis, and the costs of such financing, are dependent on numerous factors, including general economic and capital market
conditions, credit availability from banks, investor confidence, the continued success of current projects, the credit quality of the projects being financed, the political



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situation in the country or state in which the project is located and the continued existence of tax and securities laws which are conducive to raising
capital. If we are not able to obtain financing for our projects on a substantially non-recourse or limited recourse basis, or if we are unable to secure capital through partnership or other arrangements, we may have to finance the projects using
recourse capital such as direct equity investments which will have a dilutive effect on our common stock. Also, in the absence of favorable financing or other capital options, we may decide not to build new plants or acquire facilities from third
parties. Any of these alternatives could have a material adverse effect on our growth prospects and financial condition.

Our financial performance in
the geothermal power production business segment is subject to changes in the legal and regulatory environment affecting our future projects.

The future geothermal heat recovery projects that we hope to develop will be subject to extensive regulation and, therefore, changes in applicable laws or regulations, or interpretations of those laws and regulations, could result in
increased compliance costs, the need for additional capital expenditures or the reduction of certain benefits currently available. The structure of federal and state energy regulation currently is, and may continue to be, subject to challenges,
modifications, the imposition of additional regulatory requirements, and restructuring proposals. We may not be able to obtain all regulatory approvals that may be required in the future, or any necessary modifications to existing regulatory
approvals, or maintain all required regulatory approvals. In addition, the cost of operation and maintenance and the operating performance of geothermal power plants may be adversely affected by changes in certain laws and regulations, including tax
laws.

The federal government currently encourages production of electricity from geothermal resources through certain tax subsidies. We
are permitted to claim in our consolidated federal tax returns either an investment tax credit for approximately 10% of the cost of each new geothermal power plant or production tax credits of 2.0 cents (plus an inflation factor) per
kilowatt hour for the first ten years of electricity output. Currently production tax credits can only be claimed on new plants put into service before December 31, 2008. We are also permitted to deduct most of the cost of the power plant as
depreciation over five years on an accelerated basis. The fact that the deductions are accelerated means that more of the cost is deducted in the first few years than during the remainder of the depreciation period. In addition, we
believe we have the ability to transfer the value of these tax incentives when we are not in a position to use them directly. For instance, investment credits can be transferred through lease financing, and production tax credits may be transferred
by bringing in another company that can use them as a partner in the project.

Tax reform has the potential to have a material effect on
our business, financial condition, future results and cash flow. It could reduce or eliminate the value that geothermal companies receive from the current tax subsidies. Any restrictions or tightening of the rules for lease or partnership
transactions, whether or not part of major tax reform, could also materially affect our business, financial condition, future results and cash flow.

Any such changes could significantly increase the regulatory-related compliance and other expenses incurred by the projects which, in turn, could materially and adversely affect our business, financial condition,
future results and cash flow.

The costs of compliance with environmental laws and of obtaining and maintaining environmental permits and governmental
approvals required for construction and/or operation, may increase in the future and could materially and adversely affect our business, financial condition, future results and cash flow; any non-compliance with such laws or regulations may result
in the imposition of liabilities which could materially and adversely affect our business, financial condition, future results and cash flow.

Our power generation projects will be required to comply with numerous federal, regional, state and local statutory and regulatory environmental standards and to maintain numerous environmental permits and governmental approvals required
for construction and/or operation. Environmental permits and governmental approvals typically contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited
terms. If we fail to satisfy these conditions or comply with these restrictions, or with any statutory or regulatory environmental standards, we may become subject to regulatory enforcement action and the operation of the projects could be adversely
affected or be subject to fines, penalties or additional costs.

We could be exposed to significant liability for violations of hazardous substances
laws because of the use or presence of such substances.

Our projects will be subject to numerous federal, regional, state and local
statutory and regulatory standards relating to the use, storage and disposal of hazardous substances. We may use industrial lubricants and other substances at our projects that could be classified as hazardous substances. If any hazardous substances
are found to have been released into the environment at or near the projects, we could become liable for the investigation and removal of those substances, regardless of their source and time of release. If we fail to comply with these laws,
ordinances or regulations (or any change thereto), we



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could be subject to civil or criminal liability, the imposition of liens or fines, and large expenditures to bring the projects into compliance. Furthermore,
we can be held liable for the cleanup of releases of hazardous substances at other locations where we arranged for disposal of those substances, even if we did not cause the release at that location. The cost of any remediation activities in
connection with a spill or other release of such substances could be significant.

The large number of shares eligible for public sale could cause our
stock price to decline.

The market price of our common stock could decline as a result of the resale of shares of common stock that
were previously restricted under Rule 144. If our officers, directors or employees sell shares for tax, estate planning, portfolio management or other purposes, such sales could be viewed negatively by investors and put downward pressure on our
stock price. Approximately 28.4 million shares were free of restrictive legend as of September 30, 2007, an increase from approximately 19.4 million at December 31, 2006. The occurrence of such sales, or the perception that such
sales could occur, may cause our stock price to decline.

Our reported financial results may be adversely affected by changes in U.S. generally accepted
accounting principles.

U.S. generally accepted accounting principles are subject to interpretation by the Financial Accounting
Standards Board, or FASB, the American Institute of Certified Public Accountants, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a
significant effect on our financial results. For example, prior to January 1, 2006, we were not required to record stock-based compensation charges if the employees stock option exercise price was equal to or exceeded the deemed fair
value of the underlying security at the date of grant. However, beginning January 1, 2006 we are required to record the fair value of stock options as an expense in accordance with recent accounting pronouncements.



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

None.



|Item 6. | Exhibits.
|------- | ---------



|              |  |                                                                                                                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                               
|10.10         |  | Offer to Lease and Lease for Geothermal Resources, effective September 1, 2007, between Raser Power Systems LLC and the BLM (incorporated by reference to Exhibit 10.1 to our current report on
Form 8-K filed September 7, 2007 (File No. 001-32661))
|              | 
|10.11         |  | Fourth Amended Restricted Stock Grant dated September 4, 2007, between the Company and Timothy Fehr (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed September
7, 2007 (File No. 001-32661))                        
|              | 
|10.12*       |  | Letter Agreement dated September 27, 2007, between Raser Technologies, Inc., and GeoLectric Power Company NM, LLC                                                                                                                                     
|              | 
|31.1*         |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                      
|              | 
|31.2*         |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                      
|              | 
|32.1*         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350                                                                                                                                               

---

|* | To be filed herewith.
|- | ---------------------

| | Confidential treatment has been requested for portions of this exhibit.
|- | -----------------------------------------------------------------------



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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.



|                 |  |                                                       
|---------------- |  | ------------------------------------------------------
|                 |  | RASER TECHNOLOGIES, INC. (Registrant)                 
|                 | 
|November 9, 2007 |  | /s/ Brent M. Cook                                     
|(Date)           |  | Brent M. Cook,                                        
|                 |  | Chief Executive Officer                               
|                 |  | (Authorized Signatory)                                
|                 | 
|November 9, 2007 |  | /s/ Martin F. Petersen                                
|(Date)           |  | Martin F. Petersen,                                   
|                 |  | Chief Financial Officer                               
|                 |  | (Authorized Signatory and Principal Financial Officer)



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                               
|10.10         |  | Offer to Lease and Lease for Geothermal Resources, effective September 1, 2007, between Raser Power Systems LLC and the BLM (incorporated by reference to Exhibit 10.1 to our current report on
Form 8-K filed September 7, 2007 (File No. 001-32661))
|              | 
|10.11         |  | Fourth Amended Restricted Stock Grant dated September 4, 2007, between the Company and Timothy Fehr (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed September
7, 2007 (File No. 001-32661))                        
|              | 
|10.12*       |  | Letter Agreement dated September 27, 2007, between Raser Technologies, Inc., and GeoLectric Power Company NM, LLC                                                                                                                                     
|              | 
|31.1*         |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                      
|              | 
|31.2*         |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                      
|              | 
|32.1*         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350                                                                                                                                               

---

|* | To be filed herewith.
|- | ---------------------

| | Confidential treatment has been requested for portions of this exhibit.
|- | -----------------------------------------------------------------------



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