**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





(Mark
      one)


x
      Quarterly Report
      Pursuant to Section 13 or 15(d) of


the
      Securities Exchange Act of 1934





For
      the
      quarterly period ended June 30, 2008





or





o
      Transition Report
      Pursuant to Section 13 or 15(d) of


the
      Securities Exchange Act of 1934





For
      the
      transition period from _________ to _________





*Commission
      File Number: 001-33681*





**HIGHLANDS
      ACQUISITION CORP.**





(Exact
      name of registrant as specified in its charter)




Delaware
            20-8924044(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                Number)




One
      Paragon Drive, Suite 125


Montvale,
      New Jersey 07645


(Address
      of principal executive offices)


(Zip
      code)





(201)
      573-8400


(Registrant's
      telephone number, including area code)








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 (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. YES x    NO
o





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


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





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





As
      of
      August 5, 2008, there were outstanding 17,250,000 shares of Common Stock, par
      value $0.0001.







**TABLE
                OF CONTENTS****Highlands
                Acquisition Corp.****(a
                corporation in the development stage)****PART
                I. FINANCIAL INFORMATION:**
            **Page**Item
                1. Financial StatementsCondensed
                Balance Sheets as of June 30, 2008 (Unaudited) and December 31,
                2007
            1Condensed
                Statements of Operations (Unaudited) - Three months and six months
                ended
                June 30, 2008 and for the period April 26, 2007 (inception) to June
                30,
                2008 and 2007
            2Condensed
                Statement of Stockholders’ Equity for the Period April 26, 2007
                (inception) to June 30, 2008 (Unaudited)
            3Condensed
                Statements of Cash Flows (Unaudited) - Six months ended June 30,
                2008 and
                for the period April 26, 2007 (inception) to June 30, 2008 and
                2007
            4Notes
                to Unaudited Condensed Financial Statements
            5Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            10Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            14Item
                4. Controls and Procedures
            15**PART
                II. OTHER INFORMATION**
            16Item
                1A. Risk Factors
            16Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            16Item
                4. Submission of Matters to a Vote of the Security Holders
            17Item
                6. Exhibits
            18**SIGNATURES**
            19









**PART
      I. FINANCIAL INFORMATION**




Item
      1.
      Financial Statements




**Highlands
      Acquisition Corp.**




**(a
      corporation in the development stage)**


**CONDENSED
      BALANCE SHEETS**





**June
                30, 2008**
            
            **December
                31, 2007**(Unaudited)**ASSETS**Cash
            
            $
            137,293
            
            $
            269,314Cash
                held in trust
            
            
            132,574,881
            
            
            132,258,345Cash
                held in trust from underwriter
            
            
            3,990,000
            
            
            3,990,000Prepaid
                expenses
            
            
            184,649
            
            
            66,585Deferred
                tax asset
            
            
            152,214
            
            
            59,998**Total
                assets**
            
            $
            137,039,037
            
            $
            136,644,242**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Accounts
                payable
            
            $
            9,931
            
            $
            10,945Accrued
                expenses
            
            
            32,661
            
            
            84,238Accrued
                offering costs
            
            
            -
            
            
            2,335Income
                taxes payable
            
            
            -
            
            
            538,847Deferred
                underwriting fee
            
            
            3,990,000
            
            
            3,990,000**Total
                liabilities**
            
            
            4,032,592
            
            
            4,626,365**Common
                Stock, subject to possible conversion of shares at conversion
                value**
            
            
            40,448,990
            
            
            40,448,990**Commitments
                (Note 4)****Stockholders’
                equity**Preferred
                stock, $.0001 par value Authorized 1,000,000 shares; none issued
                and
                outstanding
            
            
            -
            
            
            -Common
                stock, $.0001 par value; 50,000,000 shares authorized; 17,250,000
                and
                17,250,000 shares issued and 17,250,000 and 17,250,000 outstanding
                in 2008
                and 2007, respectively
            
            
            1,725
            
            
            1,725Additional
                paid-in capital
            
            
            90,847,090
            
            
            90,847,090Income
                accumulated during the development stage
            
            
            1,708,640
            
            
            720,072**Total
                stockholders’ equity**
            
            
            92,557,455
            
            
            91,568,887**Total
                liabilities and stockholders’ equity**
            
            $
            137,039,037
            
            $
            136,644,242





*See
      Notes to Unaudited Condensed Financial Statements*




1


**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**




**STATEMENTS
      OF OPERATIONS**


**(unaudited)**





**Three
                Months Ended**
              **June
                30, 2008**
            
            **Six
                Months Ended**
              **June
                30, 2008**
            
            **For
                the period April 26, 2007 (inception) to June 30,
                2007**
            
            **For
                the period April 26, 2007 (inception) to June 30,
                2008****Interest
                income**
            
            $
            821,613
            
            $
            2,037,446
            
            $
            -
            
            $
            3,455,791**General
                and administrative expenses**
            
            
            156,027
            
            
            345,995
            
            
            136
            
            
            564,419**Formation
                costs**
            
            
            -
            
            
            -
            
            
            1,000
            
            
            1,000**Income
                (loss) before provision for income taxes**
            
            
            665,586
            
            
            1,691,451
            
            
            (1,136
            )
            
            2,890,372**Provision
                for income taxes**
            
            
            292,878
            
            
            702,883
            
            
            -
            
            
            1,181,732**Net
                income (loss)**
            
            $
            372,708
            
            $
            988,568
            
            
            ($1,136
            )
            $
            1,708,640**Net
                income (loss) per common share - basic and diluted**
            
            $
            0.02
            
            $
            0.06
            
            
            ($0.00
            )
            $
            0.14**Weighted
                average common shares outstanding, basic and diluted**
            
            
            17,240,446
            
            
            17,242,038
            
            
            3,450,000
            
            
            11,906,499




*See
      Notes to Unaudited Condensed Financial Statements*





2


**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**




**STATEMENT
      OF STOCKHOLDERS’ EQUITY**





*For
      the period April 26, 2007 (inception) to June 30, 2008*


**Income****Additional**
              
              **Accumulated****Common
                  Stock**
              
              **paid-in**
              
              **During
                  the**
              
              **Stockholders’****Shares**
              
              **Amount**
              
              **capital**
              
              **Development Stage**
              
              **Equity**Issuance
                  of units to Founders on May 1, 2007 at approximately $0.007 per
                  unit
              
              
              3,450,000
              
              $
              345
              
              $
              24,655
              
              $
              -
              
              $
              25,000Sale
                  of Private Placement Warrants on October 9, 2007
              
              
              
              
              
              
              
              
              3,250,000
              
              
              
              
              
              3,250,000Sale
                  of 13,800,000 units at $10 per unit through public offering (net
                  of
                  underwriter’s discount and offering expenses) including 4,139,999 shares
                  subject to possible conversion on October 9, 2007.
              
              
              13,800,000
              
              
              1,380
              
              
              128,021,425
              
              
              
              
              
              128,022,805Proceeds
                  subject to possible conversion
              
              
              
              
              
              
              
              
              (40,448,990
              )
              
              
              
              
              (40,448,990
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              720,072
              
              
              720,072Balance
                  at December 31, 2007
              
              
              17,250,000
              
              $
              1,725
              
              $
              90,847,090
              
              $
              720,072
              
              $
              91,568,887UnauditedRepurchase
                  of 20,700 units at $0.007 per unit
              
              
              (20,700
              )
              
              (2
              )
              
              (148
              )
              
              
              
              
              (150
              )Issuance
                  of 20,700 units at $0.007 per unit
              
              
              20,700
              
              
              2
              
              
              148
              
              
              
              
              
              150Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              988,568
              
              
              988,568Balance
                  at June 30, 2008
              
              
              17,250,000
              
              $
              1,725
              
              $
              90,847,090
              
              $
              1,708,640
              
              $
              92,557,455





*See
      Notes to Unaudited Condensed Financial Statements*




3


**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**




**STATEMENTS
      OF CASH FLOWS**




**(unaudited)**





**Six
                Months Ended**
              **June
                30, 2008**
            
            **For
                the period April 26, 2007 (inception) to June 30,
                2007**
            
            **For
                the period April 26, 2007 (inception) to June 30,
                2008****Cash
                flows from operating activities**Net
                income/(loss)
            
            $
            988,568
            
            $
            (1,136
            )
            $
            1,708,640Adjustment
                to reconcile net income/(loss) to net cash used in operating
                activities:Income
                earned on trust account
            
            
            (2,037,410
            )
            
            -
            
            
            (3,455,755
            )Increase
                in prepaid expenses
            
            
            (118,064
            )
            
            -
            
            
            (184,649
            )Increase
                in deferred taxes
            
            
            (92,216
            )
            
            -
            
            
            (152,214
            )(Decrease)/increase
                in accounts payable
            
            
            (1,014
            )
            
            -
            
            
            9,931(Decrease)/increase
                in accrued expenses
            
            
            (51,577
            )
            
            1,000
            
            
            32,661(Decrease)
                in income taxes payable
            
            
            (538,847
            )
            
            -
            
            
            -**Net
                cash used in operating activities**
            
            
            (1,850,560
            )
            
            (136
            )
            
            (2,041,386
            )**Cash
                flows from investing activities**Cash
                placed in trust account
            
            
            -
            
            
            -
            
            
            (134,830,000
            )Disbursements
                from trust for working capital
            
            
            150,000
            
            
            -
            
            
            150,000Disbursements
                from trust to pay taxes
            
            
            1,570,874
            
            
            -
            
            
            1,570,874**Net
                cash provided by/(used in) investing activities**
            
            
            1,720,874
            
            
            -
            
            
            (133,109,126
            )**Cash
                flows from financing activities**Proceeds
                from sale of units to public
            
            
            -
            
            
            -
            
            
            138,000,000Proceeds
                from private placement of warrants
            
            
            -
            
            
            -
            
            
            3,250,000Proceeds
                from sale of units to Founders
            
            
            -
            
            
            25,000
            
            
            25,000Proceeds
                from borrowings under notes payable to affiliates
            
            
            -
            
            
            100,000
            
            
            100,000Payments
                of notes payable to affiliates
            
            
            -
            
            
            -
            
            
            (100,000
            )Payment
                of offering costs
            
            
            (2,335
            )
            
            (64,303
            )
            
            (5,987,195
            )Issuance
                of founder’s units
            
            
            150
            
            
            -
            
            
            150Repurchase
                of founder’s units
            
            
            (150
            )
            
            -
            
            
            (150
            )**Net
                cash (used in)/provided by financing activities**
            
            
            (2,335
            )
            
            60,697
            
            
            135,287,805**Net
                (decrease)/increase in cash**
            
            
            (132,021
            )
            
            60,561
            
            
            137,293**Cash
                at beginning of period**
            
            
            269,314
            
            
            -
            
            
            -**Cash
                at end of period**
            
            $
            137,293
            
            $
            60,561
            
            $
            137,293**Supplemental
                disclosure of noncash financing activities:**Accrual
                of offering costs
            
            $
            -
            
            $
            8,535
            
            $
            -Accrual
                of deferred underwriting fee
            
            $
            -
            
            
            -
            
            $
            3,990,000**Supplemental
                disclosure of cash flow information:**Cash
                paid for income taxes
            
            $
            1,489,000
            
            
            -
            
            $
            1,489,000





*See
      Notes to Unaudited Condensed Financial Statements*


4


**Highlands
        Acquisition Corp.**
 **(a
        corporation in the development stage)**
 **Notes
        to Unaudited Condensed Financial Statements**


**1.
      Organization and Business Operations**




Highlands
      Acquisition Corp. (“the Company”) was incorporated in Delaware on April 26, 2007
      for the purpose of effecting a merger, capital stock exchange, asset
      acquisition, stock purchase, reorganization or other similar business
      combination with one or more operating businesses (the “Business
      Combination”).




**Interim
      Financial Information**




The
      unaudited condensed interim financial statements as of June 30, 2008 and for
      the
      period from April 26, 2007 (inception) through June 30, 2008, have been prepared
      by the Company in accordance with accounting principles generally accepted
      in
      the United States of America for interim financial information and with the
      instructions to Form 10-Q. Accordingly, they do not include all of the
      information and footnotes required by accounting principles generally accepted
      in the United States of America for complete financial statements. In the
      opinion of management, all adjustments (consisting of normal recurring accruals)
      considered necessary for a fair presentation have been included. Operation
      results for the interim period presented are not necessarily indicative of
      the
      results to be expected for any other interim period or for the full year.




These
      unaudited condensed interim financial statements should be read in conjunction
      with the audited financial statements and notes thereto for the period ended
      December 31, 2007 included in the Company’s Annual Report on Form 10-K filed
      with the U.S. Securities and Exchange Commission on March 24, 2008. The December
      31, 2007 balance sheet has been derived from these audited financial statements.
      The accounting policies used in preparing these unaudited financial statements
      are consistent with those described in the December 31, 2007 audited financial
      statements.




The
      registration statement for the Company’s initial public offering (the
“Offering”) as described in Note 2 below was declared effective on October 3,
      2007. The Company sold 12,000,000 units (the “Units”) in the Offering at a price
      of $10 per Unit. Each Unit consists of one share of the Company’s common stock,
      par value $0.0001 per share (the “Common Stock”) and one warrant to purchase one
      share of Common Stock (the “Warrants”). The Company consummated the Offering on
      October 9, 2007 and the underwriters exercised their over-allotment option
      for
      an additional 1,800,000 units on October 10, 2007 and consummated it on October
      15, 2007. The Company received net proceeds of approximately $131,273,000,
      including $3,250,000 of proceeds from the private placement (“the Private
      Placement”) sale of 3,250,000 warrants (the “Sponsors’ Warrants”) to certain
      affiliates of the Company. The Sponsors’ Warrants are identical to the warrants
      sold in the Offering, except (i) if the Company calls its warrants for
      redemption, the Sponsors’ Warrants will not be redeemable by the Company as long
      as they are still held by the initial purchasers or their permitted transferees
      and (ii) the initial purchasers have agreed that the Sponsors’ Warrants will not
      be sold or transferred by them (subject to limited exceptions) until after
      the
      completion of the Company’s initial Business Combination.




The
      Company’s management has broad discretion with respect to the specific
      application of the net proceeds of the Offering and the Private Placement,
      although substantially all of the net proceeds of the Offering are intended
      to
      be generally applied toward consummating a Business Combination. There is no
      assurance that the Company will be able to successfully effect a Business
      Combination. Upon the closing of the Offering (including the exercise of the
      over-allotment option by the underwriters) and the Private Placement, an
      aggregate of $134,830,000, including $3,990,000 of the underwriters’ discounts
      and commissions as described in Note 2, was deposited in a trust account (“Trust
      Account”) and invested in United States “government securities,” within the
      meaning of Section 2(a)(16) of the Investment Company Act of 1940, having a
      maturity of 180 days or less or in money market funds meeting certain conditions
      under Rule 2a-7 promulgated under the Investment Company Act of 1940 until
      the
      earlier of (i) the consummation of an initial Business Combination or (ii)
      liquidation of the Company. At June 30, 2008, the funds are invested in money
      market funds. The placing of funds in the Trust Account may not protect those
      funds from third party claims against the Company. Although the Company will
      seek to have all vendors, providers of financing, prospective target businesses
      or other entities it engages, execute agreements with the Company waiving any
      right, title, interest or claim of any kind in or to any monies held in the
      Trust Account, there is no guarantee that they will execute such agreements.
      Two
      of the Company’s affiliates have agreed that they will be liable under certain
      circumstances to ensure that the proceeds in the Trust Account are not reduced
      by the claims of target businesses or vendors, providers of financing, service
      providers or other entities that are owed money by the Company for services
      rendered to or contracted for or products sold to the Company. There can be
      no
      assurance that they will be able to satisfy those obligations. The net proceeds
      not held in the Trust Account may be used to pay for business, legal and
      accounting due diligence on prospective acquisitions and continuing general
      and
      administrative expenses. Additionally, up to an aggregate of $2,100,000 of
      interest earned on the Trust Account balance may be released to the Company
      to
      fund working capital requirements and additional funds may be released to fund
      tax obligations. $150,000 has been released for working capital requirements
      and
      $1,570,874 has been released to fund tax obligations at June 30,
      2008.


5





**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**


**Notes
      to Unaudited Condensed Financial Statements—(Continued)**




The
      Company, after signing a definitive agreement for the acquisition of a target
      business, is required to submit such transaction for stockholder approval.
      In
      the event that stockholders owning 30% or more of the shares sold in the
      Offering vote against the Business Combination and exercise their conversion
      rights described below, the Business Combination will not be consummated. All
      of
      the Company’s stockholders prior to the Offering (the “Founders”), have agreed
      to vote their founding shares of Common Stock (the “Founders Common Stock”)
      included in the units sold to the Founders (the “Founders Units”) in accordance
      with the vote of the majority of the shares voted by all other stockholders
      of
      the Company (the “Public Stockholders”) with respect to any Business Combination
      and in favor of an amendment to our certificate of incorporation to provide
      for
      the Company’s perpetual existence.




With
      respect to a Business Combination which is approved and consummated, any Public
      Stockholder who voted against the Business Combination may demand that the
      Company convert his or her shares. The per share conversion price will equal
      the
      amount in the Trust Account, calculated as of two business days prior to the
      consummation of the proposed Business Combination, divided by the number of
      shares of common stock held by Public Stockholders at the consummation of the
      Offering. Accordingly, Public Stockholders holding 4,139,999 shares sold in
      the
      Offering may seek conversion of their shares in the event of a Business
      Combination. Accordingly, a portion of the net proceeds of the Offering has
      been
      classified as common stock subject to possible conversion of shares on the
      accompanying balance sheet. Such Public Stockholders are entitled to receive
      their per share interest in the Trust Account computed without regard to the
      shares of common stock held by the Founders prior to the consummation of the
      Offering.




The
      Company’s Certificate of Incorporation provides that the Company will continue
      in existence only until 24 months from October 3, 2007. If the Company has
      not
      completed a Business Combination by such date, its corporate existence will
      cease and it will dissolve and liquidate for the purposes of winding up its
      affairs. In the event of liquidation, it is likely that the per share value
      of
      the residual assets remaining available for distribution (including Trust
      Account assets) will be less than the initial public offering price per share
      in
      the Offering (assuming no value is attributed to the Warrants contained in
      the
      Units sold in the Offering).




**Net
      Income Per Common Share -** Income
      per common share is based on the weighted average number of common shares
      outstanding. The Company complies with SFAS No. 128, “Earnings Per Share,” which
      requires dual presentation of basic and diluted earnings per share on the face
      of the statement of operations. Basic income per share excludes dilution and
      is
      computed by dividing income available to holders of Common Stock by the
      weighted-average common shares outstanding for the period. Diluted income per
      share reflects the potential share dilution that could occur if Warrants were
      to
      be exercised or otherwise resulted in the issuance of Common Stock that then
      shared in the earnings of the entity.


6





**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**


**Notes
      to Unaudited Condensed Financial Statements—(Continued)**




The
      following table details the net income per share computations on a basic and
      diluted basis for the three and six months ended June 30, 2008.




**For
                the Three Months Ended June 30, 2008**
            
            **For
                the Six Months Ended June 30, 2008**Numerator
                for basic and diluted earnings per shareNet
                income available to common shareholders
            
            $
            372,708
            
            $
            988,568Denominator:Basic
                earnings per share weighted-average shares outstanding
            
            
            17,240,446
            
            
            17,242,038Effect
                of dilutive securities:Effect
                of shares issuable under warrants outstanding, based on the treasury
                stock
                method
            
            
            -
            
            
            -Diluted
                earnings per shareAdjusted
                weighted-average shares outstanding
            
            
            17,240,446
            
            
            17,242,038Basic
                and diluted earnings per share
            
            $
            0.02
            
            $
            0.06




*Other
      contingent shares:* The
      dilutive effect of shares issuable does not include 13,800,000 Warrants included
      in the Units sold in the Offering that are not exercisable until later of the
      completion of our initial Business Combination or January 3, 2009. Furthermore,
      3,450,000 warrants included in the Founders Units (the “Founders Warrants”) and
      3,250,000 Sponsors’ Warrants are also excluded from the dilutive effect since
      they are not exercisable until the Warrants included in the Units sold in the
      Offering are exercisable and, in addition with respect to the Founders Warrants,
      our Common Stock price equals or exceeds $14.25 per share for any 20 trading
      days within a 30-trading day period.




**New
      Accounting Pronouncements** —
In
      December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
      2007) (“SFAS 141(R)”), which changes many well-established business combination
      accounting practices and significantly affects how acquisition transactions
      are
      reflected in the financial statements. Additionally, SFAS 141(R) will affect
      how
      companies negotiate and structure transactions, model financial projections
      of
      acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company is currently evaluating the impact the adoption
      of this statement could have on its financial condition, results of operations
      and cash flows.




In
      December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
      establishes accounting and reporting standards for the noncontrolling interests
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interests and requires
      disclosure, on the face of the consolidated statement of income, of the amounts
      of consolidated net income attributable to the parent and to the noncontrolling
      interest. Previously, net income attributable to the noncontrolling interest
      was
      reported as an expense or other deduction in arriving at consolidated net
      income. SFAS 160 is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. The Company believes the adoption of this
      statement will not have a material impact on its consolidated financial
      statements.




The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying financial statements.


7


**Highlands
        Acquisition Corp.**
 **(a
        corporation in the development stage)**
 **Notes
        to Unaudited Condensed Financial Statements—(Continued)**


**2.
      Initial Public Offering**




On
      October 9, 2007, the Company sold 12,000,000 Units in the Offering at a price
      of
      $10 per Unit. The Offering generated net proceeds of approximately $114,600,000,
      which, together with $3,450,000 in deferred underwriters discounts and
      commissions, was placed in the Trust Account. On October 10, 2007, the
      underwriters exercised the full amount of their over-allotment option for an
      additional 1,800,000 Units, which closed on October 15, 2007. The exercise
      of
      the over-allotment generated additional net proceeds of approximately
      $16,740,000, which, together with $540,000 in deferred underwriters discounts
      and commissions, was placed in the Trust Account. After consummation of the
      Offering (including the exercise of the over-allotment option by the
      underwriters) and the Private Placement, an aggregate amount of $134,830,000
      was
      deposited in the Trust Account, which consisted of aggregate net proceeds of
      approximately $128,030,000 from the Offering and the over-allotment, plus
      $3,990,000 in deferred underwriting discounts and commissions and $3,250,000
      of
      proceeds from the Private Placement, but net of the proceeds from the offering
      held outside the Trust Account. Each Unit consists of one share of Common Stock
      and one Warrant. Each Warrant will entitle the holder to purchase from the
      Company one share of Common Stock at an exercise price of $7.50 commencing
      on
      the later of the completion of an initial Business Combination and 15 months
      from the October 3, 2007 and expiring five years from October 3, 2007. The
      Company may redeem all of the Warrants, at a price of $.01 per Warrant upon
      30
      days’ notice while the Warrants are exercisable, only in the event that the last
      sale price of the Common Stock is at least $14.25 per share for any 20 trading
      days within a 30 trading day period ending on the third day prior to the date
      on
      which notice of redemption is given. In accordance with the warrant agreement
      relating to the Warrants sold and issued in the Offering, the Company is only
      required to use its best efforts to maintain the effectiveness of the
      registration statement covering the Warrants. The Company will not be obligated
      to deliver securities, and there are no contractual penalties for failure to
      deliver securities, if a registration statement is not effective at the time
      of
      exercise. Additionally, in the event that a registration is not effective at
      the
      time of exercise, the holder of a Warrant shall not be entitled to exercise
      such
      Warrant and in no event (whether in the case of a registration statement not
      being effective or otherwise) will the Company be required to net cash settle
      the warrant exercise. Consequently, the Warrants may expire unexercised and
      unredeemed.




In
      connection with the Offering and over-allotment, the Company paid Citigroup
      Global Markets Inc. and William Smith Securities, the underwriters of the
      Offering, an underwriting discount of 7% of the gross proceeds of the Offering,
      of which 3% of the gross proceeds ($3,990,000) is held in the Trust Account
      and
      payable only upon the consummation of a business combination. This amount is
      included in deferred underwriting fee on the accompanying balance sheet. The
      underwriters have waived their right to receive such payment upon the Company’s
      liquidation if it is unable to complete a Business Combination. Additionally,
      Kanders & Company, an affiliate of Warren B. Kanders, one of the Company’s
      directors, purchased 500,000 Units in the Offering. The Company received the
      entire aggregate gross proceeds from this purchase and the underwriters did
      not
      receive any underwriting discounts or commissions on these Units.




Simultaneously
      with the consummation of the Offering, certain of the Company’s affiliates
      purchased the Sponsors’ Warrants at a purchase price of $1.00 per Sponsors’
Warrant, in a private placement. The proceeds of $3,250,000 were placed in
      the
      Trust Account. The Sponsors’ Warrants are identical to the Warrants underlying
      the Units sold in the Offering except that if the Company calls the Warrants
      for
      redemption, the Sponsors’ Warrants will not be redeemable by the Company as long
      as they are still held by the initial purchasers or their permitted transferees.
      The purchasers have agreed that the Sponsors’ Warrants will not be sold or
      transferred by them subject to (limited exceptions), until after the completion
      of an initial Business Combination. The purchase price of the Private Placement
      Warrants approximated the fair value of such warrants.




The
      Founders and the holders of the Sponsors’ Warrants and Co-Investment Units (as
      described in Note 4 below) will be entitled to registration rights with respect
      to their securities pursuant to an agreement signed prior to the effective
      date
      of the Offering. At any time and from time to time on or after the date that
      is
      30 days after the Company consummates a Business Combination, the holders of
      a
      majority-in-interest of the Founders Units (and underlying securities), the
      Sponsors’ Warrants (and underlying securities) or the Co-Investment Units (and
      underlying securities) may make a written demand that the Company register
      such
      securities under the Securities Act of 1933, as amended. The Company is not
      obligated to effect more than an aggregate of two such demand registrations.
      In
      addition, such holders have certain “piggy back” registration rights on
      registration statements filed subsequent to the Company’s consummation of a
      Business Combination. The Company will bear the expenses incurred in connection
      with the filing of any such registration statements.


8


**Highlands
      Acquisition Corp.**


**(a
      corporation in the development stage)**


**Notes
      to Unaudited Condensed Financial Statements—(Continued)**




**3.
      Commitments and Related Party Transactions**




The
      Company presently occupies office space provided by two affiliates of certain
      of
      the Founders. Such affiliates have agreed that, until the Company consummates
      a
      Business Combination, it will make such office space, as well as certain office
      and secretarial services, available to the Company, as may be required by the
      Company from time to time. The Company has agreed to pay such affiliates an
      aggregate amount of $10,000 per month for such services commencing on the
      effective date of the Offering. The accompanying condensed statements of
      operations for the three months ended June 30, 2008 and the period from April
      26, 2007 (inception) to June 30, 2008, includes $30,000 and $60,000,
      respectively of expense related to this agreement.




Pursuant
      to letter agreements that the Founders entered into with the Company and the
      underwriters, the Founders waived their right to receive distributions with
      respect to their shares of Founders Common Stock upon the Company’s
      liquidation.




Certain
      of the Company’s affiliates have agreed to purchase a total of 1,000,000 units
      (the “Co-Investment Units”) at a price of $10 per unit (an aggregate price of
      $10,000,000) from the Company in a private placement that will occur immediately
      prior to the Company’s consummation of a Business Combination. These
      Co-Investment Units will be identical to the units sold in the Offering. The
      purchasers have agreed that the Co-Investment Units will not be sold,
      transferred, or assigned (subject to limited exceptions) until at least one
      year
      after the completion of the Business Combination.




The
      Founders and the holders of the Sponsors’ Warrants (or underlying securities)
      and the holders of the Co-Investment Units (or underlying securities) will
      be
      entitled to registration rights with respect to their securities pursuant to
      an
      agreement signed prior to the effective date of the Offering. For a description
      of such registration rights agreement see Part II, Item 8, Note 2 of our 2007
      Annual Report on Form 10-K.




**4.
      Preferred Stock**




The
      Company is authorized to issue 1,000,000 shares of preferred stock with such
      designations, voting and other rights and preferences as may be determined
      from
      time to time by the Board of Directors. The agreement with the underwriters
      prohibits the Company, prior to a Business Combination, from issuing preferred
      stock which participates in the proceeds of the Trust Account or which votes
      as
      a class with the Common Stock on a Business Combination.




**5.
      Common Stock**




Effective
      July 16, 2007, the Company’s Board of Directors authorized a unit dividend of
      0.15 units for each outstanding unit. Effective October 3, 2007, the Company’s
      Board of Directors authorized a unit dividend of 0.2 units for each outstanding
      unit. All references in the accompanying financial statements to the number
      of
      shares of common stock have been retroactively restated to reflect these
      transactions.




On
      March
      3, 2008, the Company repurchased 20,700 Founders Units from William V. Campbell
      for the original purchase price of $150 and released Mr. Campbell from the
      obligation of continuing to serve as a Director of the Company until the earlier
      of a business Combination or the liquidation of the Company. The purchased
      units
      were subsequently cancelled.




On
      May
      12, 2008, the Company issued 20,700 units with certain service and vesting
      requirements to Ronnie P. Barnes for $150. In addition, the units sold to Ronnie
      P. Barnes are subject to the same rights and restrictions as the Founders Units,
      as more fully described in Item 2 of Part II below. Due to the rights and
      performance restrictions of the Founders units issued to Mr. Barnes, the Company
      will record a $194,844 non-cash charge when the Business Combination is
      consummated.


9


**Highlands
        Acquisition Corp.**
  **Item
        2. Management’s Discussion And Analysis Of Financial Condition And Results Of
        Operations**


The
      following discussion should be read in conjunction with our Condensed Financial
      Statements and footnotes thereto contained in this report.




**Forward
      Looking Statements**




All
      statements other than statements of historical fact included in this Form 10-Q
      including, without limitation, statements under “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations” regarding our
      financial position, business strategy and the plans and objectives of management
      for future operations, are forward looking statements. When used in this Form
      10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and
      similar expressions, as they relate to us or our management, identify forward
      looking statements. Such forward looking statements are based on the beliefs
      of
      management, as well as assumptions made by, and information currently available
      to, our management. Actual results could differ materially from those
      contemplated by the forward looking statements as a result of certain factors
      detailed in this Form 10-Q and our other filings with the Securities and
      Exchange Commission. All subsequent written or oral forward looking statements
      attributable to us or persons acting on our behalf are qualified in their
      entirety by this paragraph.




**Overview**




We
      were
      formed on April 26, 2007 to serve as a vehicle to effect a merger, capital
      stock
      exchange, asset acquisition, stock purchase, reorganization or other similar
      business combination with one or more operating businesses (the “Business
      Combination”). Our efforts in identifying a prospective target business are not
      limited to a particular industry, although we intend to focus our search for
      target businesses in the healthcare industry. The healthcare industry
      encompasses all healthcare service companies, including, among others, managed
      care companies, hospitals, healthcare system companies, physician groups,
      diagnostic service companies, medical device companies and other
      healthcare-related entities. We intend to utilize cash derived from the proceeds
      of our recently completed public offering, our capital stock, debt or a
      combination of cash, capital stock and debt, in effecting a business
      combination.





**Critical
      Accounting Policies and Use of Estimates**




*Deferred
      Income Taxes* —
      Deferred income taxes are provided for the differences between bases of assets
      and liabilities for financial reporting and income tax purposes. A valuation
      allowance is established when necessary to reduce deferred tax assets to the
      amount expected to be realized.




*Fair
      Value of Financial Instruments* -
      The
      fair values of the Company’s assets and liabilities that qualify as financial
      instruments under SFAS No. 107 “Disclosures about Fair Value of Financial
      Instrument”, approximate their carrying amounts presented in the balance sheet
      at June 30, 2008.




The
      Company accounts for derivative instruments, if any, in accordance with SFAS
      No.
      133 “Accounting for Derivative Instruments and Hedging Activities” as amended
      (“SFAS 133”), which establishes accounting and reporting standards for
      derivative instruments. We do not currently have any derivative
      instruments.




**Results
      of Operations - Three month period ended June 30, 2008**




**Interest
      Income**





For
      the
      three months ended June 30, 2008, we had interest income of approximately $0.8
      million. The average yield during this period was 2.40%. Due to the recent
      decline in interest rates, we expect our 2008 interest average yield to decline.
      On July 30, 2008, our yield on investments was 2.26 %.





On
      April
      30, 2008 the Federal Reserve Board met and lowered the federal funds rate from
      2.25% to 2.00%. We expect these interest rate reductions to negatively impact
      our reinvestment rate on our cash, cash equivalents and marketable securities
      for the year ended December 31, 2008. On June 25, 2008, the Federal Reserve
      Board met and maintained the federal funds rate at 2.00%.




10


**Highlands
      Acquisition Corp.**




**Item
      2. Management’s Discussion And Analysis Of Financial Condition And Results Of
      Operations -** **Continued**




**General
      and Administrative Expenses**





For
      the
      three months ended June 30, 2008, we had general and administrative expenses
      of
      $156,027, primarily consisting of legal expenses, administrative services fee,
      accounting fees, Delaware franchise taxes, travel expenses, and directors and
      officer’s liability insurance.





**Income
      Before Provision for Income Taxes**





For
      the
      three months ended June 30, 2008, income before provision for income taxes
      was
      $665,586 from interest income and general and administrative expenses discussed
      above.





**Income
      Taxes**





For
      the
      three months ended June 30, 2008, income tax expense was $292,878 (44.00%
      effective rate), consisting of $192,581 in federal taxes and $100,297 in state
      income taxes. Since it is not more likely than not we will be able to use our
      cumulative state tax losses in the future, no state deferred tax asset was
      recorded leading to a higher than normal effective tax rate. The trustee of
      the
      trust account will distribute funds to us to pay any taxes resulting from
      interest accrued on the funds held in the trust account.





**Net
      Income**





For
      the
      three months ended June 30, 2008, net income was $372,708, due to the factors
      discussed above.





**Results
      of Operations - Six month period ended June 30, 2008**




**Interest
      Income**





For
      the
      six months ended June 30, 2008, we had interest income of approximately $2.0
      million. The average yield during this period was 2.98%.





**General
      and Administrative Expenses**





For
      the
      six months ended June 30, 2008, we had general and administrative expenses
      of
      $345,995, primarily consisting of legal expenses, administrative services fee,
      accounting fees, Delaware franchise taxes, travel expenses, and directors and
      officer’s liability insurance.





**Income
      Before Provision for Income Taxes**





For
      the
      six months ended June 30, 2008, income before provision for income taxes was
      $1,691,451 from interest income and general and administrative expenses
      discussed above.





**Income
      Taxes**





For
      the
      six months ended June 30, 2008, income tax expense was $702,883 (41.56%
      effective rate), consisting of $510,197 in federal taxes and $192,686 in state
      income taxes. Since it is not more likely than not that we will be able to
      use
      our cumulative state tax losses in the future, no state deferred tax asset
      was
      recorded leading to a higher than normal effective tax rate. The trustee of
      the
      trust account will distribute funds to us to pay any taxes resulting from
      interest accrued on the funds held in the trust account.




11


**Highlands
      Acquisition Corp.**




**Item
      2. Management’s Discussion And Analysis Of Financial Condition And Results Of
      Operations -** **Continued**




**Net
      Income**





For
      the
      six months ended June 30, 2008, net income was $988,568, due to the factors
      discussed above.




**Results
      of Operations - April 26, 2007 (inception) to June 30,
      2008**





**Interest
      Income**





For
      the
      period from April 26, 2007 (inception) to June 30, 2008, we had interest income
      of approximately $3.5 million. The average yield during this period was 3.49%.





**General
      and Administrative Expenses**





For
      the
      period from April 26, 2007 (inception) to June 30, 2008, we had general and
      administrative and formation expenses of $564,419 and $1,000, respectively,
      primarily consisting of legal expenses, administrative services fee, accounting
      fees, Delaware franchise taxes, travel expenses, and directors and officer’s
      liability insurance.





**Income
      Before Provision for Income Taxes**





For
      the
      period from April 26, 2007 (inception) to June 30, 2008, income before provision
      for income taxes was $2,890,372 from interest income and general and
      administrative expenses discussed above.





**Income
      Taxes**





For
      the
      period from April 26, 2007 (inception) to June 30, 2008, income tax expense
      was
      $1,181,732 (40.89% effective rate), consisting of $881,143 in federal taxes
      and
      $300,589 in state income taxes. The trustee of the trust account will distribute
      funds to us to pay any taxes resulting from interest accrued on the funds held
      in the trust account.





**Net
      Income**





For
      the
      period from April 26, 2007 (inception) to June 30, 2008, net income was
      $1,708,640, due to the factors discussed above.




**Results
      of Operations - April 26, 2007 (inception) to June 30,
      2007**





**Interest
      Income**





For
      the
      period from April 26, 2007 (inception) to June 30, 2007, we had no interest
      income.





**General
      and Administrative Expenses**





For
      the
      period from April 26, 2007 (inception) to June 30, 2007, we had formation and
      general and administrative expenses of $1,000 and $136, respectively, primarily
      consisting of formation and printing costs.





**Loss
      Before Provision for Income Taxes**





For
      the
      period from April 26, 2007 (inception) to June 30, 2007, loss before provision
      for income taxes was $1,136 from formation and general and administrative
      expenses discussed above.




12


**Highlands
        Acquisition Corp.**
  **Item
        2. Management’s Discussion And Analysis Of Financial Condition And Results Of
        Operations -** **Continued**


**Income
      Taxes**





For
      the
      period from April 26, 2007 (inception) to June 30, 2007, there was no income
      tax
      expense recorded.





**Net
      Loss**





For
      the
      period from April 26, 2007 (inception) to June 30, 2007, net loss was $(1,136),
      due to the factors discussed above.





**Financial
      Condition and Liquidity**




On
      October 9, 2007 we consummated our initial public offering of 12,000,000 units
      and the private placement of 3,250,000 warrants (the “Sponsors’ Warrants”) to
      our founders and affiliates of our founders and on October 15, 2007 we closed
      on
      the exercise of the underwriters’ over-allotment option for an additional
      1,800,000 units, resulting in aggregate gross proceeds from our initial public
      offering (including the over-allotment option) and the private placement of
      the
      Sponsors’ Warrants of $141,250,000. We paid or incurred a total of $5,320,000 in
      underwriting discounts and commissions (not including $3,990,000 which was
      deferred by the underwriters until completion of a Business Combination) and
      approximately $667,000 for other costs and expenses related to our initial
      public offering. After deducting the underwriting discounts and commissions
      and
      the offering expenses, the total net proceeds, including $3,250,000 from the
      sale of the Sponsor’ Warrants to us, from the offering were approximately
      $135,263,000 (including $3.99 million in deferred underwriters commission),
      and
      an amount of $134,830,000 was deposited into a trust account (the “Trust
      Account”) at Morgan Stanley with Continental Stock Transfer & Trust as
      trustee. We intend to use substantially all of the net proceeds of our initial
      public offering and the private placement of the Sponsors’ Warrants to acquire a
      target business, including identifying and evaluating prospective acquisition
      candidates, selecting the target business, and structuring, negotiating and
      consummating the Business Combination. To the extent that our capital stock
      is
      used in whole or in part as consideration to effect a Business Combination,
      the
      proceeds held in the Trust Account, as well as any other net proceeds not
      expended, will be used to finance the operations of the target business. We
      believe we will have sufficient available funds outside of the Trust Account
      to
      operate through October 3, 2009, assuming that a Business Combination is not
      consummated during that time.





We
      expect
      our primary liquidity requirements during this period to include:




•
      $950,000 of expenses for the search for target businesses and for the legal,
      accounting and other third-party expenses attendant to the due diligence
      investigations, structuring and negotiating of a Business Combination;




•
      $330,000 of expenses for the due diligence and investigation of a target
      business by our officers, directors and existing stockholders;




•
      $195,000 of expenses in legal and accounting fees relating to our Securities
      and
      Exchange Commission (“SEC”) reporting obligations;




•
      $240,000 for the administrative fee payable to Kanders & Company, Inc. and
      Ivy Capital Partners, each an affiliate of certain of our officers and
      directors, ($10,000 per month for twenty four months); and




•
      $885,000 for general working capital that will be used for miscellaneous
      expenses and reserves, including approximately $150,000 for director and officer
      liability insurance premiums.




We
      do not
      believe we will need to raise additional funds following our initial public
      offering in order to meet the expenditures required for operating our business.
      However, we may need to raise additional funds through a private offering of
      debt or equity securities if funds are required to consummate a business
      combination that is presented to us. We would only consummate such a financing
      simultaneously with the consummation of a Business Combination.


13


**Highlands
      Acquisition Corp.**




**Item
      2. Management’s Discussion And Analysis Of Financial Condition And Results Of
      Operations -** **Continued**




Commencing
      on October 3, 2007 and ending upon the consummation of a Business Combination
      or
      our liquidation, we began incurring a fee from Kanders & Company, Inc. and
      Ivy Capital Partners, of $10,000 per month for office space, administrative
      and
      support services. In addition, in April 2007, Kanders & Company, Inc. and
      Ivy Capital Partners advanced an aggregate of $100,000 to us for payment on
      our
      behalf of offering expenses. These loans were repaid following our initial
      public offering from the proceeds of the offering.





See
      below
      for amounts transferred at our instruction from our trustee to pay for certain
      tax and working capital payments.








Taxes
            
            Working
                Capital
            
            TotalJanuary
                25, 2008
            
            $
            611,203
            
            $
            -
            
            $
            611,203April
                9, 2008
            
            
            130,000
            
            
            
            
            
            130,000June
                11, 2008
            
            
            829,671
            
            
            
            
            
            829,671June
                25, 2008
            
            
            
            
            
            150,000
            
            
            150,000Total
            
            $
            1,570,874
            
            $
            150,000
            
            $
            1,720,874




**New
      Accounting Pronouncements**




In
      December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
      2007) (“SFAS 141(R)”), which changes many well-established business combination
      accounting practices and significantly affects how acquisition transactions
      are
      reflected in the financial statements. Additionally, SFAS 141(R) will affect
      how
      companies negotiate and structure transactions, model financial projections
      of
      acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company is currently evaluating the impact the adoption
      of this statement could have on its financial condition, results of operations
      and cash flows.




In
      December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
      establishes accounting and reporting standards for the noncontrolling interests
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interests and requires
      disclosure, on the face of the consolidated statement of income, of the amounts
      of consolidated net income attributable to the parent and to the noncontrolling
      interest. Previously, net income attributable to the noncontrolling interest
      was
      reported as an expense or other deduction in arriving at consolidated net
      income. SFAS 160 is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. The Company believes the adoption of this
      statement will not have a material impact on its consolidated financial
      statements.




The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on the
      accompanying financial statements.




**Item
      3. Quantitative And Qualitative Disclosures About Market
      Risk.**




To
      date,
      our efforts have been limited to organizational activities and activities
      relating to our initial public offering and the identification of a target
      business; we have neither engaged in any operations nor generated any revenues.
      As the proceeds from our initial public offering held in trust have been
      invested in short term investments, our only market risk exposure relates to
      fluctuation in interest rates.




14


**Highlands
      Acquisition Corp.**




**Item
      2. Management’s Discussion And Analysis Of Financial Condition And Results Of
      Operations -** **Continued**




As
      of
      June 30, 2008, approximately $132,575,000 (excluding $3,990,000 of deferred
      underwriting discounts and commissions) was held in trust for the purposes
      of
      consummating a Business Combination. The proceeds held in trust (including
      approximately $3,990,000 of deferred underwriting discounts and commissions)
      have been invested in a money market fund that invests solely in short-term
      securities issued or guaranteed by the United States Government. Therefore,
      due
      to the conservative nature of our investments, our future interest income
      sensitivity and risk are limited.




We
      have
      not engaged in any hedging activities since our inception on April 26, 2007.
      We
      do not expect to engage in any hedging activities with respect to the market
      risk to which we are exposed.




**Item
      4. Controls and Procedures**




**Evaluation
      of Disclosure Controls and Procedures**




The
      Company's management carried out an evaluation, under the supervision and with
      the participation of the Company's Chief Executive Officer and Chief Financial
      Officer, its principal executive officer and principal financial officer,
      respectively, of the effectiveness of the design and operation of the Company's
      disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
      and 15d-15(e) under the Exchange Act) as of June 30, 2008, pursuant to Exchange
      Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive
      Officer and Chief Financial Officer concluded that the Company's disclosure
      controls and procedures as of June 30, 2008 are effective.




**Changes
      in Internal Control over Financial Reporting**




There
      have not been any changes in our internal control over financial reporting
      that
      have come to management’s attention during the fiscal quarter ended June 30,
      2008 that have materially affected, or are reasonably likely to materially
      affect the Company’s internal control over financial reporting.


15


**Highlands
      Acquisition Corp.**




**PART
      II. OTHER INFORMATION**




**Item
      1A. Risk Factors**




There
      are
      no material changes to the risk factors disclosed in the factors discussed
      in
“Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K
      for the year ended December 31, 2007, which could materially affect the
      Company’s business, financial condition or future results. The risks described
      in the Company’s Annual Report on Form 10-K are not the only risks facing the
      Company. Additional risks and uncertainties not currently known to the Company
      or that the Company currently deems to be immaterial also may materially
      adversely affect the Company’s business, financial condition and/or operating
      results.




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





On
      May
      12, 2008, Ronnie P. Barnes, a director of the Company, purchased 20,700 units
      (the “Barnes Units”), with each unit consisting of one share of common stock,
      par value $0.0001 per share, of the Company (the “Common Stock”) and one warrant
      to purchase one share of Common Stock, for an aggregate purchase price of $150.
      The Barnes Units were sold in a private placement pursuant to Section 4(2)
      of
      the Securities Act of 1933, as amended, and the proceeds from their sale were
      used by the Company for general corporate purposes. The Barnes Units are subject
      to the same rights and restrictions as the units (the “Founders Units”) sold to
      the Company’s founders. The Founders Units are identical to the units sold in
      the Company’s initial public offering, except that:





•
            the
                warrants (the “Founders Warrants”) included in the Founders Units will
                become exercisable after the public stockholders’ warrants become
                exercisable if and when (i) the last sales price of the Common Stock
                exceeds $14.25 per share for any 20 trading days within any 30-trading
                day
                period beginning 90 days after the consummation of the Company’s initial
                Business Combination and (ii) there is an effective registration
                statement
                covering the shares of Common Stock issuable upon exercise of the
                Founders
                Warrants;





•
            the
                Founders Warrants will not be redeemable by the Company as long as
                they
                are held by the Founders or their permitted transferees;





•
            the
                Founders have agreed to vote the shares of Common Stock included
                in the
                Founders Units (the “Founders Common Stock”) in the same manner as the
                majority of shares cast by the Public Stockholders in connection
                with the
                vote required to approve the Company’s initial Business Combination and
                for the proposal to amend the Company’s certificate of incorporation to
                provide for the Company’s perpetual existence;





•
            the
                Founders will not be able to exercise conversion rights with respect
                to
                the Founders Common Stock;





•
            the
                Founders have agreed to waive their rights to participate in any
                liquidation distribution with respect to the Founders Common Stock
                if the
                Company fails to consummate a Business Combination;
                and





•
            the
                Founders Common Stock and Founders Warrants are subject to the following
                transfer restrictions: (i) all of the Founders Units (including the
                Barnes
                Units) have been placed in escrow with Continental Stock Transfer
&
                Trust Company, as escrow agent. Subject to the limited exceptions
                described below, the Founders Common Stock will be held in escrow
                until
                one year after the consummation of the Company’s initial Business
                Combination and the Founders Warrants will remain in escrow until
                they
                become exercisable. All of the Founders Common Stock and Founders
                Warrants
                will be released from escrow earlier than described above if, subsequent
                to the Company’s initial Business Combination, (i) the last sales price of
                the Common Stock equals or exceeds $20.00 per share for any 20 trading
                days within any 30-trading day period beginning 90 days after the
                Company’s initial Business Combination or (ii) the Company’s consummates a
                subsequent liquidation, merger, stock exchange or other similar
                transaction which results in all of the Company’s stockholders having the
                right to exchange their shares of Common Stock for cash, securities
                or
                other property. The Founders have agreed, subject to certain exceptions,
                not to sell or otherwise transfer any of the Founders Common Stock
                or
                Founders Warrants until they are released from escrow. Furthermore,
                the
                interest holders of any Founder that is an entity have agreed not
                to
                transfer their ownership interests in such entity to anyone other
                than
                another Founder or an entity of which the Founders are the beneficial
                owners, or beneficiaries of, until termination of the transfer
                restrictions.


16


**Highlands
      Acquisition Corp.**





In
      addition, Ronnie P. Barnes has agreed that, in the event he resigns and
      terminates his service as a director of the Company or he refuses to stand
      for
      reelection as a director of the Company prior to the earlier to occur of (i)
      the
      expiration of the escrow periods for the Founders Common Stock and Founders
      Warrants described above, (ii) the liquidation of the Company or (iii) the
      expiration of his term as a director of the Company if the board of directors
      of
      the Company fails to re-nominate him for election as a director of the Company
      or the stockholders of the Company fail to re-elect him as a director, the
      Barnes Units shall be forfeited by him and sold, transferred, conveyed, assigned
      and delivered to the Company for cancellation.





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





We
      held
      our annual meeting of stockholders on June 4, 2008. Of the 17,229,300 shares
      of
      common stock entitled to vote at the meeting, 15,935,237 shares of common stock
      were present in person or by proxy and entitled to vote. Such number of shares
      represented approximately 92.5% of our outstanding shares of common stock.
      Listed below are the matters voted upon at our Annual Meeting of Stockholders
      and the voting results:




FOR
            
            WITHHELD------------
            
            -------------Proposal
                1. Election of Directors:Michael
                A. Henning
            
            
            15,926,637
            
            
            8,600William
                F. Owens
            
            
            15,926,637
            
            
            8,600




FOR
            
            
            AGAINST
            
            
            WITHHELDProposal
                2. Ratification of the appointment of McGladrey & Pullen, LLP as the
                Company’s independent registered public accounting firm for the fiscal
                year ending December 31, 2008:
            
            
            15,595,402
            
            
            259,815
            
            
            80,020


17


**Highlands
      Acquisition Corp.**


**Item
      6. Exhibits**




(a)
      Exhibits:




Exhibit
              Number
            Description31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Certification
                of Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.99.1
            Form
                of Ronnie P. Barnes Letter
                Agreement




18


**Highlands
        Acquisition Corp.**




**SIGNATURES**




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






**HIGHLANDS ACQUISITION
              CORP.**




Dated:
      August 7, 2008





*/s/Robert
                W. Pangia*
              ----------------------------
              Robert
                W. Pangia,
              Chief
                Executive Officer
              (Principal
                Executive Officer)*/s/
                Philip A. Baratelli*
              *---------------------------*
              Philip
                A. Baratelli,
              Chief
                Financial Officer
              (Principal
                Financial Officer)




19