**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





(Mark
      one)


xQuarterly
      Report
      Pursuant to Section 13 or 15(d) of


the
      Securities Exchange Act of 1934





For
      the
      quarterly period ended March 31, 2008





or





oTransition
      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  oNon-accelerated filer  x
(Do
              not check if a 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 May
      2, 2008, there were outstanding 17,229,300 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 March 31, 2008 (Unaudited) and December 31,
                  2007
              1Condensed
                  Statements of Income (Unaudited) - Three months ended March 31,
                  2008 and
                  for the period April 26, 2007 (inception) to March 31,
                  2008
              2Condensed
                  Statement of Stockholders’ Equity for the Period April 26, 2007
                  (inception) to March 31, 2008 (Unaudited)
              3Condensed
                  Statements of Cash Flows (Unaudited) - Three months ended March
                  31, 2008
                  and for the period April 26, 2007 (inception) to March 31,
                  2008
              4Notes
                  to Unaudited Condensed Financial Statements
              5Item
                  2 – Management’s Discussion and Analysis of Financial Condition and
                  Results of Operations
              11Item
                  3 – Quantitative and Qualitative Disclosures About Market
                  Risk
              14Item
                  4 – Procedures and Controls
              15**PART
                  II. OTHER INFORMATION**
              16Item
                  1A. Risk Factors
              16Item
                  6 - Exhibits
              17**SIGNATURES**
              18









**PART
      I. FINANCIAL INFORMATION**




Item
      1.
      Financial Statements




**Highlands
      Acquisition Corp.**




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


**CONDENSED
      BALANCE SHEETS**





**March 31, 2008**
            
            **December 31, 2007**(Unaudited)**ASSETS**Cash
            
            $
            163,691
            
            $
            269,314Cash
                held in trust
            
            
            132,862,966
            
            
            132,258,345Cash
                held in trust from underwriter
            
            
            3,990,000
            
            
            3,990,000Prepaid
                expenses
            
            
            55,126
            
            
            66,585Deferred
                tax asset
            
            
            125,409
            
            
            59,998**Total
                assets**
            
            $
            137,197,192
            
            $
            136,644,242**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Accounts
                payable
            
            $
            2,812
            
            $
            10,945Accrued
                expenses
            
            
            113,460
            
            
            84,238Accrued
                offering costs
            
            
            70
            
            
            2,335Income
                taxes payable
            
            
            457,263
            
            
            538,847Deferred
                underwriting fee
            
            
            3,990,000
            
            
            3,990,000**Total
                liabilities**
            
            
            4,563,605
            
            
            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; 17,229,300
                and
                17,250,000 shares issued and 17,229,300 and 17,250,000 outstanding
                in 2008
                and 2007, respectively
            
            
            1,723
            
            
            1,725Additional
                paid-in capital
            
            
            90,846,942
            
            
            90,847,090Income
                accumulated during the development stage
            
            
            1,335,932
            
            
            720,072**Total
                stockholders’ equity**
            
            
            92,184,597
            
            
            91,568,887**Total
                liabilities and stockholders’ equity**
            
            $
            137,197,192
            
            $
            136,644,242





*See
      Notes to Unaudited Condensed Financial Statements*


1


**Highlands
      Acquisition Corp.**


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


**STATEMENTS
      OF INCOME**


**(unaudited)**





**Three Months**
              **Ended**
              **March 31, 2008**
            
            **For the period**
              **April 26, 2007**
              **(inception) to**
              **March 31, 2008****Interest
                income**
            
            $
            1,215,833
            
            $
            2,634,178**General
                and administrative expenses**
            
            
            (189,968
            )
            
            (409,392
            )**Income
                before provision for income taxes**
            
            
            1,025,865
            
            
            2,224,786**Provision
                for income taxes**
            
            
            410,005
            
            
            888,854**Net
                income**
            
            $
            615,860
            
            $
            1,335,932**Net
                income per common share – basic and diluted**
            
            $
            0.04**Weighted
                average common shares outstanding, basic and diluted**
            
            
            17,243,631





*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 March 31, 2008*


**Common Stock**
              
              **Additional** **paid-in** **capital**
              
              **Income**
                **Accumulated**
                **During the**
                **Development Stage**
              
              **Stockholders’**
                **Equity****Shares**
              
              **Amount**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
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              615,860
              
              
              615,860Balance
                  at March 31, 2008
              
              
              17,229,300
              
              $
              1,723
              
              $
              90,846,942
              
              $
              1,335,932
              
              $
              92,184,597





*See
      Notes to Unaudited Condensed Financial Statements*


3


**Highlands
      Acquisition Corp.**


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


**STATEMENTS
      OF CASH FLOWS**


**(unaudited)**





**Three Months**
              **Ended**
              **March 31, 2008**
            
            **For the period**
              **April****26, 2007**
              **(inception)****to**
              **March 31, 2008****Cash
                flows from operating activities**Net
                income
            
            $
            615,860
            
            $
            1,335,932Adjustment
                to reconcile net income to net cash used in operating
                activities:Income
                earned on trust account
            
            
            (1,215,824
            )
            
            (2,634,169
            )Decrease/(increase)
                in prepaid expenses
            
            
            11,459
            
            
            (55,126
            )Increase
                in deferred taxes
            
            
            (65,411
            )
            
            (125,409
            )(Decrease)/increase
                in accounts payable
            
            
            (8,133
            )
            
            2,812Increase
                in accrued expenses
            
            
            29,222
            
            
            113,460(Decrease)/increase
                in income taxes payable
            
            
            (81,584
            )
            
            457,263**Net
                cash used in operating activities**
            
            
            (714,411
            )
            
            (905,237
            )**Cash
                flows from investing activities**Cash
                placed in trust account
            
            
            -
            
            
            (134,830,000
            )Disbursements
                from trust to pay taxes
            
            
            611,203
            
            
            611,203**Net
                cash provided by/(used in) investing activities**
            
            
            611,203
            
            
            (134,218,797
            )**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
            
            
            -
            
            
            25,000Proceeds
                from borrowings under notes payable to affiliates
            
            
            -
            
            
            100,000Payments
                of notes payable to affiliates
            
            
            -
            
            
            (100,000
            )Payment
                of offering costs
            
            
            (2,265
            )
            
            (5,987,125
            )Repurchase
                of founder’s units
            
            
            (150
            )
            
            (150
            )**Net
                cash (used in)/provided by financing activities**
            
            
            (2,415
            )
            
            135,287,725**Net
                (decrease)/increase in cash**
            
            
            (105,623
            )
            
            163,691**Cash
                at beginning of period**
            
            
            269,314
            
            
            —**Cash
                at end of period**
            
            $
            163,691
            
            $
            163,691**Supplemental
                disclosure of noncash financing activities:**Accrual
                of offering costs
            
            $
            -
            
            $
            70Accrual
                of deferred underwriting fee
            
            $
            -
            
            $
            3,990,000**Supplemental
                disclosure of cash flow information:**Cash
                paid for income taxes
            
            $
            557,000
            
            $
            557,000





*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 March 31, 2008 and for
      the period from April 26, 2007 (inception) through March 31, 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 Offering was declared effective on October 3,
      2007. The Company consummated the Offering on October 9, 2007 and the
      underwriters exercised their over-allotment option 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 March 31, 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. No funds have been released for working capital requirements
      and $611,203 has been released to fund tax obligations at March 31,
      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 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 month period March 31, 2008.


**March 31, 2008**Numerator
                  for basic and diluted earnings per shareNet
                  income available to common shareholders
              
              $
              615,860Denominator:Basic
                  earnings per share weighted-average shares outstanding
              
              
              17,243,631Effect
                  of dilutive securities:Effect
                  of shares issuable under warrants outstanding, based on the treasury
                  stock
                  method
              
              
              -Diluted
                  earnings per shareAdjusted
                  weighted-average shares outstanding
              
              
              17,243,631Basic
                  earnings per share
              
              $
              0.04Diluted
                  earnings per share
              
              $
              0.04




*Other
      contingent shares:* The
      dilutive effect of shares issuable does not include 13,800,000 Public Warrants
      that are not exercisable until later of the completion of our initial business
      combination or January 3, 2009. Furthermore, 3,429,300 Founders Warrants and
      3,250,000 Sponsors’ warrants are also excluded from the dilutive effect since
      they are not exercisable until the Public Warrants 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 142(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 (the “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 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”). 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 approximates 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




**3.
      Notes Payable, Affiliates of Stockholders**




The
      Company issued unsecured promissory notes in an aggregate principal amount
      of
      $100,000 to two affiliates of the Founders on April 30, 2007. The notes were
      non-interest bearing and were payable on the earlier of April 30, 2008 or the
      consummation of the Offering. Due to the short-term nature of the notes, the
      fair value of the notes approximated their carrying amount. On October 9, 2007,
      the Company repaid the notes in full.




**4.
      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 income
      for the three months ended March 31, 2008 and the period from April 26, 2007
      (inception) to March 31, 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 founding shares 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.




**5.
      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.


9


**Highlands
      Acquisition Corp.**


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




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




**6.
      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.


10


**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 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 March 31, 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 March 31, 2008**




**Interest
      Income**





For
      the
      three months ended March 31, 2008, we had interest income of approximately
      $1.2
      million. The average yield during this period was 3.57%. Due to the recent
      decline in interest rates, we expect our 2008 interest average yield to decline.
      On May 1, 2008, our yield on investments was 2.46%.





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.


11




**Highlands
      Acquisition Corp.**




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


**Operating
      Expenses**





For
      the
      three months ended March 31, 2008, we had general and administrative expenses
      of
      $189,968, 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 March 31, 2008, income before provision for income taxes
      was
      $1,025,865 from interest income and general and administrative expenses
      discussed above.





**Income
      Taxes**





For
      the
      three months ended March 31, 2008, income tax expense was $410,005, consisting
      of $317,615 in federal taxes and $92,390 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
      three months ended March 31, 2008, net income was $615,860, due to the factors
      discussed above.





**Results
      of Operations – April
      26, 2007
      (inception) to March 31, 2008**





**Interest
      Income**





For
      the
      period from April 26, 2007 (inception) to March 31, 2008, we had interest income
      of approximately $2.6 million. The average yield during this period was 4.06%.





**Operating
      Expenses**





For
      the
      period from April 26, 2007 (inception) to March 31, 2008, we had general and
      administrative expenses of $409,392, 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 March 31, 2008, income before
      provision for income taxes was $2,224,786 from interest income and general
      and
      administrative expenses discussed above.





**Income
      Taxes**





For
      the
      period from April 26, 2007 (inception) to March 31, 2008, income tax expense
      was
      $888,854, consisting of $688,560 in federal taxes and $200,294 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 March 31, 2008, net income was
      $1,335,932, due to the factors discussed above.


12




**Highlands
      Acquisition Corp.**




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


**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 Security
      and
      Exchange Commission (“SEC “) reporting obligations;




•
      $240,000 for the administrative fee payable to Kanders & Company 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.




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 and Ivy
      Capital Partners, of $10,000 per month for office space, administrative and
      support services. In addition, in April 2007, Kanders & Company 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.


13




**Highlands
      Acquisition Corp.**




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


On
      January 25, 2008, at our instruction, the trustee transferred $611,203 of
      interest earned on the trust account into our operating cash account for tax
      payments.




**New
      Accounting Pronouncements**




In
      December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
      2007) (“SFAS 142(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.




As
      of
      March 31, 2008, approximately $132,863,000 (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.


14




**Highlands
      Acquisition Corp.**




**Item
      4. Procedures and Controls**




**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 March 31, 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 March 31, 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 March
      31, 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.


16


**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.


17


**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:
                  May 9, 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)


18